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Target Corporation - Climate Change 2020
C0. Introduction
C0.
(C0.1) Give a general description and introduction to your organization.
Minneapolis-based Target Corporation (NYSE:TGT) serves guests at 1,868 stores and via Target.com. Since 1946, Target has given 5 percent of its profit to communities. For more information about Target’s commitment to corporate responsibility, visit https://corporate.target.com/corporate-responsibility/.
CDP system functionality only allows for 365 days to be reflected in the start and end date fields below. The results contained in this CDP survey are for Target's fiscal year 2019 (Feb. 3, 2019 through Feb. 1, 2020), which consisted of only 364 days.
Target considers multiple factors in evaluating risk. Target considers risks substantive when they are assessed to be high or critical using proprietary criteria. Importantly, something that has a "substantive financial or strategic impact on our business" is not necessarily "material" to investors as defined by the SEC.
Target’s answers to this questionnaire contain forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words "expect," "may," "could," "believe," "would," "might," "anticipates," or similar words. All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended February 1, 2020, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
C0.
(C0.2) State the start and end date of the year for which you are reporting data.
Start date End date Indicate if you are providing emissions data for past reporting years
Select the number of past reporting years you will be providing emissions data for Reporting year
February 3 2019
February 2 2020
No
C0.
(C0.3) Select the countries/areas for which you will be supplying data. United States of America
C0.
(C0.4) Select the currency used for all financial information disclosed throughout your response. USD
C0.
(C0.5) Select the option that describes the reporting boundary for which climate-related impacts on your business are being reported. Note that this option should align with your chosen approach for consolidating your GHG inventory. Operational control
C1. Governance
C1.
(C1.1) Is there board-level oversight of climate-related issues within your organization? Yes
C1.1a
(C1.1a) Identify the position(s) (do not include any names) of the individual(s) on the board with responsibility for climate-related issues.
Position of individual(s)
Please explain
Board-level committee
Target's Board of Directors retains oversight responsibility over the Corporation's key strategic risks including those relating to corporate responsibility matters. The Nominating and Governance Committee of the Board of Directors has overall oversight responsibility over corporate responsibility matters. Target recognizes that environmental, social and governance issues are of increasing importance to many investors. The Vice President of Corporate Responsibility (CR) and the CR team work with functional leaders across the company to determine strategies, policies, and goals related to sustainability and regularly report to and seek input from the Nominating and Governance Committee on those matters, including climate-related issues.
C1.1b
(C1.1b) Provide further details on the board’s oversight of climate-related issues.
Frequency with which climate- related issues are a scheduled agenda item
Governance mechanisms into which climate- related issues are integrated
Scope of board- level oversight
Please explain
Scheduled – some meetings
Reviewing and guiding strategy Reviewing and guiding major plans of action Reviewing and guiding risk management policies Monitoring implementation and performance of objectives
The Board of Directors’ review of environmental and social topics is obtained through the updates it receives from the Nominating and Governance Committee. The Nominating and Governance Committee reviews environmental and social topics at least semi-annually. This happens independently of our financial reporting process, which includes economic topics, and is overseen throughout the year by the Audit and Finance Committee, which provides regular reports to the Board of Directors. Target’s Vice President of Corporate Responsibility presents to the Nominating and Governance Committee semi-annually on corporate responsibility related topics.
C1.
(C1.2) Provide the highest management-level position(s) or committee(s) with responsibility for climate-related issues.
Name of the position(s) and/or committee(s) Reporting line
Responsibility Coverage of responsibility
Frequency of reporting to the board on climate- related issues Other, please specify (VP Corporate Responsibility)
Both assessing and managing climate-related risks and opportunities
Half-yearly
Other, please specify (VP Property Management)
Both assessing and managing climate-related risks and opportunities
Half-yearly
Other, please specify (VP Responsible Sourcing & Sustainability)
Both assessing and managing climate-related risks and opportunities
Half-yearly
C1.2a
(C2.1a) How does your organization define short-, medium- and long-term time horizons?
From (years) To (years) Comment Short-term 0 5 Medium-term 5 10 Long-term 10 20
C2.1b
(C2.1b) How does your organization define substantive financial or strategic impact on your business?
Target considers multiple factors in evaluating risk. Target considers risks substantive when they are assessed to be high or critical using proprietary criteria. Importantly, something that has a "substantive financial or strategic impact on our business" is not necessarily "material" to investors as defined by the SEC.
Target’s answers to this questionnaire contain forward-looking statements, which are based on our current assumptions and expectations. These statements are typically accompanied by the words "expect," "may," "could," "believe," "would," "might," "anticipates," or similar words. All such forward-looking statements are intended to enjoy the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, as amended. Although we believe there is a reasonable basis for the forward-looking statements, our actual results could be materially different. The most important factors which could cause our actual results to differ from our forward-looking statements are set forth in our description of risk factors in Item 1A of our Form 10-K for the fiscal year ended February 1, 2020, which should be read in conjunction with the forward-looking statements in this report. Forward-looking statements speak only as of the date they are made, and we do not undertake any obligation to update any forward-looking statement.
C2.
(C2.2) Describe your process(es) for identifying, assessing and responding to climate-related risks and opportunities. Value chain stage(s) covered Direct operations Upstream Downstream
Risk management process A specific climate-related risk management process
Frequency of assessment Annually Time horizon(s) covered Short-term Medium-term Long-term
Description of process In 2017, we introduced a new climate policy and goals, based on the latest climate science. We have set goals to reduce our greenhouse gas footprint, and continue to work with our industry partners, policymakers and other stakeholders to accelerate the transition to a low-carbon economy. While we are implementing projects in our owned brand manufacturing facilities that will result in the avoidance of Scope 3 emissions, in 2019, we also developed and received approval on our Scope 3 goal. This approved Scope 3 goal, coupled with our Scope 1 and 2 goal, will fulfill our commitment to the Science-Based Targets initiative. This initiative provides guidance for and champions science-based target setting as a powerful way of boosting companies’ competitive advantage in the transition to the low-carbon economy. In December 2019, Supply Chain Dive awarded Target the 2019 Sustainability Plan of the Year, in recognition of our leadership in setting carbon-reduction goals for the entire supply chain. We will continue to evaluate both our climate risk mitigation plans & related goals and also look to the future as we build our climate resilience business plans, based on TCFD climate risk findings and as we fulfill our commitment to the Science Based Targets initiative.
C2.2a
(C2.2a) Which risk types are considered in your organization's climate-related risk assessments?
Relevance & inclusion
Please explain
Current regulation
Relevant, always included
Target operates in 50 states and the District of Columbia. As an end user of energy, we pay for existing renewable energy standard and carbon regulation policies that are implemented through regulated utility programs. Current regulations are the foundation of IEA’s WEO Current Policies Scenario, which was included in our scenario analysis.
Emerging regulation
Relevant, always included
Target is tracking carbon regulation and related energy policy proposals at the U.S. federal and state levels. As a large consumer of energy, we evaluate how these proposals may impact energy pricing, both negatively and positively. Emerging regulations are a key component of IEA’s WEO Sustainable Development Scenario, which was included in our scenario analysis. We looked at emerging regulation both in the near term and long term to help identify climate-related risks. Technology Relevant, always included
As a retailer, Target plays a key role in the roll out of potential carbon reducing consumer projects such as smart thermostats, efficient lighting, and other types of products. Target is also installing direct current (DC) fast electric vehicle charging stations at 100 sites by 2020. Target believes the retail sector can play a key role in developing the electric vehicle infrastructure needed to transition the transportation sector to run on clean energy. Included in the pathways we used in our scenario analysis is an analysis of the various kinds of technology that will be needed to achieve the end results. E.g. for IEA’s WEO Sustainable Development Scenario, various technologies are analyzed and assumed to be implemented in order to achieve 2 degrees or lower of average temperature increase. The implications of these technologies on society, i.e. the cost to implement and changes in energy prices, is considered. Target also examined technologies that may become more prevalent as climate change progresses, e.g. window air conditioners and fans in areas that are expected to see a high rise in average temperatures. These are areas that present an opportunity to Target to meet the increase in demand. Legal Not relevant, explanation provided
Included in the scenario analysis was an examination of legal-related risks. However, it was found at this time that although Target is subject to regulatory and policy-related risks, Target does not have strictly legal-related climate risks.
Market Relevant, always included
We aim to leverage our size, scale and reach to positively impact the communities in which we serve and operate. Going beyond what we can achieve in our own operations and with our suppliers, we collaborate with NGOs, governments, industry organizations and other businesses to innovate solutions to the most pressing issues we face today. Examining market risks was a large part of the scenario analysis. We analyzed how the market would play out in different climate scenarios, e.g. the cost of energy (oil, natural gas, electricity) as well as how the overall economy would react to climate change in the long-term. Through this process we were able to identify market-related climate risks. Reputation Relevant, always included
Since the company's formation in 1962 Target has invested in the communities we operated in and serve. Target's corporate responsibility team evaluates how our climate mitigation goals, policy, and resiliency efforts impact our standing with local communities where we operate, with our NGO stakeholders and partners, and with third party industry analysts. Target's existing climate policy and goals are designed to set a leadership example within the retail industry and are accompanied by internal execution strategies and management plans to hold our team accountable to meeting the goals and maintaining our credible reputation in this space. Target commits to publicly reporting annually on our goal progress. Target understands that falling short of what climate science says is needed to mitigate the worst of the warming scenarios will damage our reputation. Reputational risks were considered in the scenario analysis from both a consumer standpoint and investor standpoint. Target identified both reputational risks and opportunities associated with climate change. Acute physical
Relevant, always included
Target operates in many communities impacted by extreme weather events. In the past few years Target has experienced facility damages from extreme weather events such as Hurricanes Harvey, Irma, and Maria, and wildfires across California. Repairing damaged stores and other facilities has direct costs to Target. Acute physical risks played a large role in the scenario analysis, as Target is already prone to climate-related acute weather events. As described above, Target has already experienced financial damage from weather-related events. Chronic physical
Relevant, always included
Rising temperatures require longer run times on HVAC equipment in impacted stores. Longer HVAC run times incur additional energy costs to Target. Chronic physical risks played a large role in the scenario analysis, as it is very likely that chronic risks associated with climate change will impact Target.
C2.
(C2.3) Have you identified any inherent climate-related risks with the potential to have a substantive financial or strategic impact on your business? Yes
C2.3a
(C2.3a) Provide details of risks identified with the potential to have a substantive financial or strategic impact on your business.
Identifier Risk 1
Where in the value chain does the risk driver occur? Upstream Risk type & Primary climate-related risk driver
Market Uncertainty in market signals
Primary potential financial impact Increased indirect (operating) costs
Climate risk type mapped to traditional financial services industry risk classification Company-specific description Changing prices for electricity and other fuels could significantly impact Target’s business. For example, higher fuel costs will lead to higher logistics costs. With almost 2,000 stores in the US and nearly 40 distribution centers, Target relies heavily on a complex supply chain and logistics network. An increase in higher fuel costs will lead to a higher logistics cost for Target. Both the IEA WEO 2018 and the EIA Outlook 2019 project increases in fossil fuels costs under the BAU scenario through 2040. The 2025 global oil price is projected at $101/ barrel and the 2025 US oil price is projected at $80/ barrel. The 2040 global oil price is projected at $137/ barrel and the 2040 US oil price is projected at $105/ barrel.
Time horizon Long-term
Likelihood Very likely Magnitude of impact High
Are you able to provide a potential financial impact figure?
Identifier Risk 3
Where in the value chain does the risk driver occur? Direct operations
Risk type & Primary climate-related risk driver
Technology Substitution of existing products and services with lower emissions options
Primary potential financial impact Increased capital expenditures
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description We aim to build and remodel intentional spaces that are designed with our long-term impact on the environment in mind. Target has built an energy efficient portfolio of stores by continuously adopting new technologies and operating procedures. Building and equipment codes will continue to evolve toward higher efficiency and more sustainable operational models, which will lead to increased capital costs for new and existing stores. For example, increased CAPEX tied to local renewable energy requirements and increased energy efficiency requirements will factor into future building decision-making.
Time horizon Short-term
Likelihood Very likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? Yes, an estimated range
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency) 40000000
Potential financial impact figure – maximum (currency) 60000000
Explanation of financial impact figure By the end of this year Target will remodel more than 1,000 stores across the country. Target continues to open new stores, many of which will be part of existing building stock and in urban locations. Both projects require investments to comply with current and evolving energy efficiency codes. Code compliance is a requirement and Target's investments in energy efficiency projects produce financial value to the company. Target also partners with utility energy efficiency programs, where available, to maximize the impact and value of the company's energy efficiency projects. Our investments in both energy efficiency and renewable energy have positive paybacks and are a direct financial benefit. Over the last seven years, we have invested over $290 million dollars in energy efficiency projects, many of which have a payback of fewer than three years.
Cost of response to risk 0
Description of response and explanation of cost calculation We believe that one way to address energy price risk is by making investments that will reduce our demand for high-carbon energy sources over time. Over the past decade, we made significant investments which reduced our energy-related expenditures on a pro-rata basis. We are working to reduce the carbon footprint of our organization through two primary means - energy efficiency and renewable energy; and will continue to do so to manage these risks. As a means to drive renewable energy, we have installed solar energy systems at 516 locations across the U.S. At present, we are also exploring a number of ways to expand our renewable energy programs as a key component of our carbon reduction strategy. These energy efficiency and renewable energy investments help us to mitigate the risk associated with the potential for rising energy costs associated with increased legislation including a carbon tax, a cap and trade system, fuel taxes, and higher building efficiency standards. Target's Property Management teams partner on remodel and store design projects to meet energy codes and make smart efficiency investment decisions that go beyond code where feasible. Target's Energy team works with internal asset teams and Target's electric utilities to maximize utility energy efficiency rebates where available.
Comment Our investments in both energy efficiency and renewable energy have positive paybacks and are a direct financial benefit. Over the last seven years, we have invested over $290 million dollars in energy efficiency projects, many of which have a payback of fewer than three years.
Identifier Risk 4
Where in the value chain does the risk driver occur? Upstream
Risk type & Primary climate-related risk driver
Acute physical Increased severity and frequency of extreme weather events such as cyclones and floods
Primary potential financial impact Decreased revenues due to reduced production capacity
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Changes in acute climate events will impact our suppliers and the products they provide. Increased flood occurrence can cause infrastructure damage, disrupt the supply
chain and cause delays in distribution. Heat waves introduce negative impacts on livestock, leading to increase cost of beef and milk, e.g. higher cost to keep animals cool during heat waves, reduced productivity in milking cows, livestock die offs, etc. Increased wildfire occurrence can cause infrastructure damage, disrupt the supply chain and cause delays in distribution.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure Uncharacteristic or significant weather conditions can affect customer shopping patterns, particularly in apparel and seasonal items, which could lead to lost sales or greater than expected markdowns. Natural disasters in states where our sales are concentrated could result in significant physical damage to our stores or distribution centers, and cause delays in the distribution of merchandise, which could adversely affect our sales.
Cost of response to risk 0
Description of response and explanation of cost calculation Target monitors forecasts for extreme weather events and works with supply chain entities and store logistics teams to ensure necessity products (e.g. bottled water, non- perishable foods, baby supplies) are in stock for guests preparing for impending extreme weather events.
Comment Uncharacteristic or significant weather conditions can affect consumer shopping patterns, particularly in apparel and seasonal items, which could lead to lost sales or greater than expected markdowns and adversely affect our short-term results of operations. In addition, our three largest states by total sales are California, Texas and Florida, areas where natural disasters are more prevalent. Natural disasters in those states or in other areas where our sales are concentrated could result in significant physical damage to or closure of one or more of our stores, distribution centers or key suppliers, and cause delays in the distribution of merchandise from our suppliers to our distribution centers, stores, and guests, which could adversely affect our results of operations by increasing our costs and lowering our sales.
Identifier Risk 5
Where in the value chain does the risk driver occur? Upstream
Risk type & Primary climate-related risk driver
Chronic physical Changes in precipitation patterns and extreme variability in weather patterns
Primary potential financial impact Decreased revenues due to reduced production capacity
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Changes in chronic climate events will impact our suppliers and the products they provide. Increased frequency and length of droughts can cause infrastructure damage, disrupt the supply chain and cause delays in distribution. Water stress can lead to decreased agriculture production, leading to an increase in material cost such as cotton, and an increase in food and produce costs. Global sea-level rise can cause infrastructure damage, disrupt the supply chain and cause delays in distribution.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure Uncharacteristic or significant weather conditions can affect customer shopping patterns, particularly in apparel and seasonal items, which could lead to lost sales or
Acute physical Increased severity and frequency of extreme weather events such as cyclones and floods
Primary potential financial impact Increased capital expenditures
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Increased severity of extreme weather events may increase weather-related damage to Target stores and distribution centers, increasing Target's capital and insurance costs. Increased flood occurrence can cause infrastructure damage of owned facilities, potential incurred costs for transporting workers post impacts, and temporary closures resulting in lost sales. Florida is a key market for Target. In this region, the combined effects of changing extreme rainfall events and sea level rise are already increasing flood frequencies, which impacts property values and infrastructure viability, particularly in coastal cities. Aqueduct shows that key locations for target are at risk for flood occurrence: Miami, Minneapolis, Los Angeles (medium to high risk); Houston (high risk); Chicago (extremely high risk). Increased storms/ hurricane occurrence can cause infrastructure damage of owned facilities, potential incurred costs for transporting workers post impacts, and temporary closures resulting in lost sales. Wildfires could cause infrastructure damage of owned facilities, potential incurred costs for transporting workers post impacts, and temporary closures resulting in lost sales. The cumulative forest area burned by wildfires has greatly increased between 1984 and 2015, with analyses estimating that the area burned by wildfire across the western United States over that period was twice what would have burned had climate change not occurred. In Southwest (CA, AZ) Wildfire can threaten people and homes, particularly as building expands in fire-prone areas. Wildfires around Los Angeles from 1990 to 2009 caused $3.1 billion in total economic damages (unadjusted for inflation).
Time horizon Long-term
Likelihood Likely
Magnitude of impact Medium-low
Are you able to provide a potential financial impact figure? Yes, an estimated range
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency) 8000000
Potential financial impact figure – maximum (currency) 55000000
Explanation of financial impact figure Target tracks its costs in inventory and property damages from extreme weather events, such as hurricanes, lightning strikes, cyclones, rain and hail storms, wildfires, earthquakes, etc. Since 2011 through 2018, the cost to Target of inventory and property damage due weather-related events has been more than $170 million, with annual losses ranging from about $8 million to about $55 million per year. The most significant costs have been the result of hurricanes, floods, and rain and hail storms. As the frequency and severity of these types of extreme weather events are expected to increase in both the 2⁰C and 4⁰C scenarios, Target can expect that these costs will increase over time.
Cost of response to risk
Description of response and explanation of cost calculation Target monitors weather forecasts and works with store teams and Target's emergency management team to prepare the stores and prioritize team member and guest safety.
Comment
Identifier Risk 8
Where in the value chain does the risk driver occur? Direct operations
Risk type & Primary climate-related risk driver
Chronic physical Changes in precipitation patterns and extreme variability in weather patterns
Primary potential financial impact Increased insurance claims liability
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Increased severity of chronic changes in climate may increase damage to Target stores and distribution centers, increasing Target's capital costs. Global sea-level rise can cause infrastructure damage of owned facilities and permanent closure of Target distribution centers and stores. Prolonged heat waves and overall higher average temperatures can cause higher cooling costs at owned facilities. Florida is a key market for Target. Warm nights associated with heat waves currently occur only a few times per year across most of the region but are expected to become common events across much of the Southeast under a higher scenario.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact
High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure Across a chain of over 1,800 stores the overall magnitude of extreme events may be small but at a local market level the impacts may be larger.
Cost of response to risk
Description of response and explanation of cost calculation Target monitors weather forecasts and works with store teams and Target's emergency management team to prepare the stores and prioritize team member and guest safety.
Comment
Identifier Risk 9
Where in the value chain does the risk driver occur? Upstream
Risk type & Primary climate-related risk driver
Market Increased cost of raw materials
Primary potential financial impact Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Higher material costs from global suppliers due to slowing of global economy is a risk to Target's supply chain. Climate change is expected to cause substantial losses to infrastructure and property and impede the rate of economic growth over this century. The continued warming that is projected to occur without significant reductions in global greenhouse gas emissions is expected to cause substantial net damage to the U.S. economy, especially in the absence of increased adaptation efforts. The potential for losses in some sectors could reach hundreds of billions of dollars per year by the end of this century. Additionally, the impacts of climate change beyond our borders are expected to increasingly affect our trade and economy, including import and export prices and U.S. businesses with overseas operation and supply chains.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure
Cost of response to risk
Description of response and explanation of cost calculation Target’s major suppliers are spread out geographically across the globe. Having a diverse supply chain geographically reduces Target’s risk of a localized climate-change related event greatly impacting our business.
Comment
Identifier Risk 10
Where in the value chain does the risk driver occur? Downstream
Risk type & Primary climate-related risk driver
Reputation Increased stakeholder concern or negative stakeholder feedback
Description of response and explanation of cost calculation Target is developing its ecommerce services. National online sales could dampen any disproportionate negative effect on income in one region of the US.
Comment
Identifier Risk 12
Where in the value chain does the risk driver occur? Upstream
Risk type & Primary climate-related risk driver
Market Increased cost of raw materials
Primary potential financial impact Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description Changes in global electricity and oil prices would impact Target’s business. For example, increased electricity costs globally will lead to increased prices from suppliers. 81% of Target's imports are from China, 5% from Vietnam, 5% from India, and the remaining 9% from other countries in Asia, Europe, Africa, and Central America. Suppliers are likely to pass their increased costs to customers. Global electricity prices are expected to rise by 15% in the EU and 13% in China by 2040 according to the IEA WEO 2018. Global oil prices impact the prices of materials that use petrochemicals as feedstocks, such as plastics, detergents, solvents, nylon, and polyester. Plastic packaging affects the majority of Target's products, while textiles account for ~ 20% of sales on average.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure
Cost of response to risk
Description of response and explanation of cost calculation Target is working with our suppliers to transition to renewable energy sources and implement our own emissions reductions projects. We are using post-consumer recycled plastic, such as in our Everspring brand product packaging. We are using recycled plastic for polyester in Target owned-brand apparel. Target is working to eliminate expanded polystyrene from our owned-brand packaging by 2022, and we are pursuing the goals of the New Plastics Economy commitment by 2025.
Comment
Identifier Risk 13
Where in the value chain does the risk driver occur? Upstream
Risk type & Primary climate-related risk driver
Market Increased cost of raw materials
Primary potential financial impact Increased direct costs
Climate risk type mapped to traditional financial services industry risk classification
Company-specific description A potential decrease in supply of raw materials due to climate change could lead to an increase in competition and prices. Globally, changes in the suitability of agriculture, increases in fire frequency and extent, the loss or migration of coastal wetlands, and the spatial relocation of natural vegetation will disrupt material supplies and their costs. Competition for resources will cause an increase in raw material prices and pose a risk to Target's supply chain.
Time horizon Long-term
Likelihood Very likely
Magnitude of impact High Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency) Explanation of financial impact figure
Cost of response to risk Description of response and explanation of cost calculation Target is focused on taking the circular economy mainstream. Target established a goal that by the end of 2020 we would invest $1 million USD in textile recycling technologies and as of March 2020 that goal was reached. Comment
C2.
(C2.4) Have you identified any climate-related opportunities with the potential to have a substantive financial or strategic impact on your business? Yes
C2.4a
(C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact on your business.
Identifier Opp
Where in the value chain does the opportunity occur? Direct operations
Opportunity type Energy source Primary climate-related opportunity driver Use of lower-emission sources of energy Primary potential financial impact Reduced indirect (operating) costs
Company-specific description Multiple federal and regional efforts have emerged that seek to put a price on carbon. Included in these proposals are federal and regional cap-and-trade programs, carbon taxes, and other proposals. The end objective of policymakers is to reduce the price disparity between carbon-based and alternative energy sources, establish increased certainty for future energy prices and regulations, reduce U.S. dependence on foreign energy sources, and incentivize organizations and individuals who act to reduce their energy use. In addition to the certainty that would come from the establishment of significant carbon regulations, we believe Target could benefit in two other ways. First, more than 10 years of substantial investments in energy efficiency will position Target to compete in an economy where energy costs increase. Strategies that de-couple our business operations from carbon-based energy sources will reduce our exposure to price fluctuations and help the organization manage expense. Second, as we continue to invest in energy efficiency and renewable energy – there may be opportunities for Target to further monetize the value we create by reducing GHG emissions through the sale of renewable energy certificates.
Time horizon Long-term Likelihood Very likely Magnitude of impact Medium-low
Are you able to provide a potential financial impact figure? Yes, an estimated range
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency) 35000000 Potential financial impact figure – maximum (currency) 112000000
Explanation of financial impact figure Based on carbon pricing proposals introduced at the U.S. federal level, which have the price of carbon ranging between $15 and $52 per metric ton and covering various sectors of the economy, Target estimates that a carbon price that is completely passed through by upstream energy providers could cost between $35 million and $ million per year.
change and health and well-being, we see an opportunity to offer our guests additional choices within our product assortment that will drive top-line sales. We constantly revamp our assortment to make sure we're giving guests what they want. We are rethinking the design of products and packaging we sell to incorporate sustainable attributes - because it's the right thing to do and because it creates additional value for our guests. We measure our guests' preferences through surveys, trend research, sales patterns and product tests. In many departments within our stores, guests will find product choices that incorporate recycled materials, nontoxic chemicals or organic ingredients, and packaging designs that minimize waste and incorporate recyclable or other preferable materials. In addition to top-line sales growth opportunities – there are opportunities to drive improved margin through a greater focus on product and packaging design. The elimination of excess material and energy costs from product manufacturing and transportation can translate into lower cost of goods sold.
Time horizon Short-term
Likelihood Likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure Target has seen success with lower-carbon products in the past. We are using recycled content in our polyester sourcing as well as in our Everspring product line. Everspring paper products use at least 50 percent recycled pulp, and Everspring bottle packaging uses 100 percent post-consumer recycled content for Everspring room spray, foaming hand soap, liquid hand soap, dish soap and spray cleaning products and 50 percent post-consumer recycled content in laundry bottles. All of the post- consumer recycled plastic is sourced domestically. In total, we estimate we will use almost 700,000 lbs. of recycled plastic annually. There are several additional initiatives underway to expand the provision of goods with a reduced carbon footprint. Target has not yet conducted a full analysis of the opportunity and its magnitude.
Cost to realize opportunity
Strategy to realize opportunity and explanation of cost calculation Target has measures & plans to offer sustainable products and reduce life-cycle impacts of products (e.g. water efficient products, sustainable cotton, New Plastics Economy Global Commitment, circular fashion design, forest products policy, sustainable seafood, etc.). Yet consumer's sustainability awareness / willingness to pay / boycott could vary across product types (e.g. necessities vs luxury products; healthcare / food), it remains unclear how Target's current measures and policies are well placed against the "consumer awareness hotspots" and also against various age groups of consumers. Target is actively working on a number of projects to understand evolving guest attitudes and how our merchandise assortment meets those needs. For example, we have teams across the enterprise focused on understanding and improving attributes (including environmental) of our owned- and national-brand product assortment. This team is comprised of representatives from key departments within our merchandising, sourcing, and marketing divisions. The work of this team is helping to inform and guide our merchandise strategy. In addition, the CR team works with hundreds of partners across the company to set goals, develop initiatives and monitor and report progress. LINK: https://corporate.target.com/_media/TargetCorp/csr/pdf/2019_corporate_responsibility_report.pdf
Comment
Identifier Opp
Where in the value chain does the opportunity occur? Upstream
Opportunity type Products and services
Primary climate-related opportunity driver Other, please specify (Employee Recruitment and Retention)
Primary potential financial impact Other, please specify (Increased employee recruitment, engagement, and retention)
Company-specific description We recognize that environmental sustainability is important to both our current and prospective team members and guests. We communicate with team members throughout the year and involve them in generating new ideas and sharing their environmental efforts. We also launched an interactive, internal web portal for team members that houses suggested volunteer activity organized around social and environmental themes. As we pursue significant growth in the coming years, we believe our sustainability efforts will position us to retain our current top performers, and attract the best talent, by differentiating Target from other potential employers.
Time horizon Medium-term
Likelihood Virtually certain
Magnitude of impact Medium-low
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure Attracting and retaining talent has direct cost implications for Target. While climate strategy and Target’s overall corporate responsibility initiatives are known to be linked to talent attraction and retention, Target has not yet conducted a full analysis of the opportunity and its magnitude.
Cost to realize opportunity
Strategy to realize opportunity and explanation of cost calculation Target is striving to be a leader in sustainability. In 2017, we introduced a new climate policy and goals to guide our process, based on the latest climate science. Then in 2019 we announced our approved Science Based Target goals to reduce our Scope 1, 2 and 3 carbon emissions by 30 percent below 2017 levels by 2030. To reduce our Scope 1 and 2 emissions, we’ll continue to ramp up investments in renewable energy and energy saving initiatives across our business. Scope 3 accounts for 94 percent of our GHG emissions. That is why we have committed to having 80 percent of our suppliers set their own carbon reduction targets by 2023. We will work with our suppliers to transition to renewable energy sources and implement their own emissions reduction projects. We will expand our implementation of manufacturing performance improvement programs through initiatives such as Apparel Impact Institute’s programs to scale performance improvements in energy use and emissions in in our manufacturing supply chain.
Comment
Identifier Opp
Where in the value chain does the opportunity occur? Downstream
Opportunity type Markets
Primary climate-related opportunity driver Other, please specify (Increased financial backing from investors)
Primary potential financial impact Other, please specify (Increased financial backing from investors)
Company-specific description 827 investors are now requesting data from companies through CDP's climate change program. These investors represent over US $100tn. The expectation for corporate responsibility reporting has grown significantly in the past 30 years. Over 93% of the G250 (world’s 250 largest companies by revenue based on the Fortune 500 ranking of
- reported on corporate responsibility in 2016. Target has the opportunity to potentially increase investor backing if we can demonstrate a progressive transition to a low-carbon business.
Time horizon Medium-term
Likelihood Likely
Magnitude of impact High
Are you able to provide a potential financial impact figure? No, we do not have this figure
Potential financial impact figure (currency)
Potential financial impact figure – minimum (currency)
Potential financial impact figure – maximum (currency)
Explanation of financial impact figure
Cost to realize opportunity
Strategy to realize opportunity and explanation of cost calculation Target is striving to be a leader in sustainability. In 2017, we introduced a new climate policy and goals to guide our process, based on the latest climate science. Then in 2019 we announced our approved Science Based Target goals to reduce our Scope 1, 2 and 3 carbon emissions by 30 percent below 2017 levels by 2030. To reduce our Scope 1 and 2 emissions, we’ll continue to ramp up investments in renewable energy and energy saving initiatives across our business. Scope 3 accounts for 94 percent of our GHG emissions. That is why we have committed to having 80 percent of our suppliers set their own carbon reduction targets by 2023. We will work with our suppliers to transition to renewable energy sources and implement their own emissions reduction projects. We will expand our implementation of manufacturing performance improvement programs through initiatives such as Apparel Impact Institute’s programs.
Comment
Identifier Opp
Where in the value chain does the opportunity occur? Downstream
Opportunity type Products and services
Primary climate-related opportunity driver Development of climate adaptation, resilience and insurance risk solutions
Primary potential financial impact
(C3.1b) Provide details of your organization’s use of climate-related scenario analysis.
Climate- related scenarios and models applied
Details
RCP 4. RCP 8. IEA Sustainable development scenario Other, please specify (IEA Current Policies Scenario, SSP2, SSP3, US Fourth National Climate Assessment)
In keeping with this best practice we chose well-established third-party scenarios to look at both physical and transition risks and opportunities over three timeframes (2025, 2030, and 2040). For physical risks and opportunities, we drew on IPCC RCP 4.5 and RCP 8.5. For transition risks and opportunities, we used IEA’s WEO Sustainable Development Scenario and Current Policies Scenario. We also used the WRI Aqueduct tool to investigate water-related risks under different decarbonization pathways. In addition to the IPCC scenarios already mentioned, the tool uses socioeconomic assumptions from the Shared Socioeconomic Pathways (e.g. SSP2 and SSP3). Inputs: We also reviewed the U.S. Government’s Fourth National Climate Assessment to incorporate relevant U.S. region-specific findings. For internal data sources we analyzed: historical financial results e.g. sales, Target Scope 1 & 2 emissions, energy use across our physical locations (stores, distribution centers, headquarters, etc.), relevant supply chain information (e.g. raw ingredients in products), etc. Coverage: The scenario analysis covered Target’s owned buildings, logistics, and three product lines: apparel & accessories, beauty & household essentials, and food & beverage. For these lines, we considered supply chain, operations, and sales. Time-horizons: We considered scenarios on our business in 2025 and in 2030 as this is in line with our current GHG emission targets, and to 2040 to capture physical impacts. While Target business strategy does not extend to 2040, we felt that this was an appropriate time frame for trying to capture physical risks, as differences in climate impacts in the scenarios may not become apparent before this time. Assumptions: In the 2°C (RCP 4.5, IEA SDS, SSP2) scenario, we assume in the period to 2025 and to 2030, society acts rapidly to limit emissions & puts in place measures to restrain deforestation & discourage emissions (e.g. implementing a carbon price). In the 4°C scenario to 2025 and to 2030, we assume climate policy is less ambitious with emissions remaining high. For this time period, there is not a significant difference in physical impacts between the two scenarios. For the period to 2040, the transition assumptions remain the same for both scenarios, however the physical manifestations become more apparent in the 4°C scenario. Results: We identified material impacts on our business arising from each scenario based on existing internal & external data (see inputs above). Examples of impacts of the 2°C scenario: federal, state or local efforts to regulate fuel-efficiency would impact Target’s business most significantly through changing prices for transportation costs; zero net deforestation requirements introduced & shifts to sustainable agriculture pressures agricultural production, raising the price of key raw materials; a higher carbon price applied in more geographies could increase Target’s operational costs, as well as supply chain costs through pass-through. Examples of impacts of the 4°C scenario: chronic & acute water stress, reducing agricultural productivity in some regions, raising prices of raw materials such as cotton, which is crucial to Target’s apparel products; increased frequency of extreme weather causing increased incidences of disruption to manufacturing & distribution networks; temperature increase & extreme weather events reducing economic activity, and is more pronounced in Target’s planned expansion areas. Since completing our TCFD Climate risk analysis for the first time in 2019 we have joined other companies in the BSR Value Chain Risk to Resilience working group to best determine our strategy to more comprehensively integrate climate risk into our core business practices. Although we have taken many steps on our journey of climate risk mitigation, we are working to better understand how to most efficiently implement more resilient business strategies going forward.
C3.1d
(C3.1d) Describe where and how climate-related risks and opportunities have influenced your strategy.
Have climate-related risks and opportunities influenced your strategy in this area?
Description of influence
Products and services
Yes Target tracks weather-related events and natural disasters that trigger an emergency response. From 2007 through 2018, the number of these types of events has steadily risen from 2 in 2007 to 13 in 2018. Damages to property and inventory have increased to the tens of millions of USD, with it being the highest in 2017, mainly due to major hurricanes. Hurricanes, rain storm/hail, and tornadoes/wind cause the most damage to Target’s property and inventory. Supply chain and/or value chain
Yes Although Target understands that our suppliers and vendors have felt the effects of climate-related issues in some forms to date, we have yet to see the major impacts of that trickle down to our enterprises. Thus, we have no specific impacts to report for this past year. We expect that if business continues as usual and we reach above a 2-degree warming by 2030 we will see that risk impact significantly increase in tandem.
Investment in R&D
Not evaluated Target’s investment in R&D has not yet been impacted enough to pivot our current strategy. We foresee this will continue to stay unimpacted in the short-term future.
Operations Evaluation in progress Target’s operations team is evaluating which locations are more at risk for energy supply interruptions, including from climate-related disruption events, in order to prioritize sites for energy resiliency investments.
C3.1e
(C3.1e) Describe where and how climate-related risks and opportunities have influenced your financial planning.
Financial planning elements that have been influenced
Description of influence
Row 1
Indirect costs Capital expenditures Assets
Indirect Costs: Warmer climate zones may require longer HVAC run times, increasing Target's energy costs. Target's energy team works with internal asset teams to evaluate equipment run strategies and their associated costs. These costs are reflected in Target's long-range planning process for operating cost forecasts. Revenues from the sale of Renewable Energy Credits generated from behind-the-meter solar installations at select Target stores help reduce operating costs. Target's solar, offsite renewable energy, and energy efficiency programs produce energy cost savings that reduce overall operating costs. Capital Expenditures: Increased capital costs from extreme weather event-impacted stores are included in corporate financial planning. Target is evaluating improving the energy resiliency at stores and distribution centers in areas of the country that are likely to experience more extreme weather events. Resiliency measures are likely to require additional capital expenditures, and these costs are evaluated by Target's Property Management team in store planning and long-range financial planning. Assets: Chronic changes to temperature, humidity, and dew points may reduce the expected lifespan of store equipment that was installed under different condition expectations, requiring more frequent replacement. Asset aging and turnover is monitored and included in financial planning. Target's Property Management team is also evaluating how to use Target's existing store and distribution center footprint to create additional opportunities in onsite solar, energy efficiency, and electric vehicle charging stations for guests. The financial value of these programs is evaluated in long term planning and capital request processes.
C3.1f
(C3.1f) Provide any additional information on how climate-related risks and opportunities have influenced your strategy and financial planning (optional).
In 2015, Target announced a set of energy-related goals as part of signing on to the White House’s American Business Act on Climate Pledge. These include energy efficiency, renewable energy, and refrigeration emission management goals. Senior leadership is updated on progress against these goals quarterly, and teams are responsible for ensuring progress toward the goals. In the short term, GHG emissions reductions from operations are the primary climate-related driver for changing our business strategy. Both reputational and potential regulatory/financial impacts of climate change have also influenced our short-term strategy. This is evident in our allocation of capital specifically for sustainability projects. These projects include energy efficiency projects, onsite solar, and projects that reduce our high global warming potential refrigerants. Our formal innovation process has been designed to bring together partners in engineering, architecture, operations, energy management, and sustainability to identify and test new technologies or processes. Innovation funds small tests and pilots and helps make the business case to implement successful projects across the chain. In 2016, we expanded programs engaging manufacturing suppliers in our supply chain to implement energy and water efficiency projects. Initially partnering with the Natural Resources Defense Council’s Clean by Design program (now managed by the Apparel Impact Institute), we have expanded to additional facilities outside of the scope of that program. We continue to pursue additional opportunities to scale the learnings from that program. We also recognize the long-term impacts climate change and potential carbon regulations have on our business. We are developing processes and technologies that enable us to track and monitor the impact of extreme weather events on our facilities, team members, and guests. The current and evolving tools prepare us to address any possible increases in extreme weather events associated with climate change. In addition, we began to examine the environmental impacts embedded within our supply chain to understand our exposure to climate change within our supply chain. Our combination of operational efficiency, energy management, reputation management, and our evolving tools and technology provide a strategic advantage encompassing climate change. Short-term operational efficiencies enable improvements in expenses while we continue to pursue our public goals. In 2017, we introduced a new climate policy and goals to guide our progress, based on the latest climate science. We have set goals to reduce our greenhouse gas footprint, and continue to work with our industry partners, policymakers and other stakeholders to accelerate the transition to a low-carbon economy. We have begun implementing projects in our owned-brand manufacturing facilities that will result in the avoidance of Scope 3 emissions. In 2019, we also developed and received approval of our Scope 3 goal that, coupled with our Scope 1 and 2 goal, has fulfilled our commitment to the Science-Based Targets initiative. This initiative provides guidance for and champions science-based target setting as a powerful way of boosting companies’ competitive advantage in the transition to the low-carbon economy. In December 2019, Supply Chain Dive awarded Target the 2019 Sustainability Plan of the Year, in recognition of our leadership in setting carbon-reduction goals for the entire supply chain.
In 2019, we also performed a scenario analysis in line with TCFD recommendations. In addition, we have joined other companies in the BSR Value Chain Risk to Resilience working group to best determine our strategy to more comprehensively integrate climate risk into our core business practices. Although we have taken many steps on our journey of climate risk mitigation, we are working to better understand how to most efficiently implement more resilient business strategies going forward.
C4. Targets and performance
C4.
(C4.1) Did you have an emissions target that was active in the reporting year? Absolute target
C4.1a
(C4.1a) Provide details of your absolute emissions target(s) and progress made against those targets.
Target reference number Abs 1
Year target was set 2019
Target coverage Company-wide Scope(s) (or Scope 3 category) Scope 1+2 (market-based) Base year 2017
Covered emissions in base year (metric tons CO2e) 2567880
Covered emissions in base year as % of total base year emissions in selected Scope(s) (or Scope 3 category) 100
Target year 2030 Targeted reduction from base year (%) 30 Covered emissions in target year (metric tons CO2e) [auto-calculated] 1797516
Covered emissions in reporting year (metric tons CO2e) 2298450
% of target achieved [auto-calculated]
Target status in reporting year
