Measures against Climate Change

Basic ideas and policies

TCFD
The Showa Denko Group uses air, water and energy in its product manufacturing processes and regards dealing with climate change as both a management priority and a precondition to ensure its business continuity.。
In May 2019, we took part in the Task Force on Climate-related Financial Disclosures (TCFD) Consortium to evaluate the risks and opportunities provided by climate change to the Group, enhance our resilience through climate change scenario analysis and promote sound dialogue with our stakeholders.。
In January 2020, we also introduced the internal carbon pricing (ICP) system to add “greenhouse gas (GHG) emissions” reduction to our investment decision criteria and track anti-climate change measures.


Materiality KPI

For 2030, reduce GHG emissions from the Group’s sites in Japan by 11% relative to the 2013 level

In order to achieve the KPI target, we are reviewing the production processes, fostering energy conservation activities and remodeling equipment to reduce our GHG emissions on a continuous basis. In addition, we are working to reduce our CO2 emissions throughout the life cycles of our products, including at the stages of procurement of materials, use, disposal and reuse, as well as across our supply chain. We also own hydroelectric power stations, which generate about 29% of the electricity used by Showa Denko and thus contribute to reducing our GHG emissions.

Governance and risk management

For the Showa Denko Group, its Sustainability Promotion Council, which is under the direct control of the Management Committee, makes assumptions about climate change-related risks and opportunities, and the Management Committee makes final decisions on those risks and opportunities. Details of the decisions are regularly reported to the Board of Directors for its oversight and the Board gives relevant instructions as necessary.


Climate change-related risks and opportunities and responses to them

For impacts (risks and opportunities) of climate change on the Showa Denko Group’s businesses, we assumed the following risks for 2040 based on the framework set by the TCFD: (1) risks related to a shift to a low-carbon economy under the two-degree scenario and (2) risks related to the physical impact of climate change caused by the failure to achieve the world’s CO2 emission reduction targets under the four-degree scenario. In the examination process, we referred to the Sustainable Development Scenario (SDS) and Stated Policies Scenario (STEPS) announced by the International Energy Agency (IEA) among others.

 Major risks and opportunitiesMajor measures for risks and opportunities
Risks and opportunities related to the shift to a low-carbon economy
(Two-degree scenario)
[Risks]
  • Increase in tax and manufacturing cost due to the introduction of carbon pricing
  • Loss of sales opportunities due to delayed technological development for low-carbon products/services
  • Changes in investor and consumer evaluations of climate change initiatives
[Opportunity]
  • Increase in sales due to expanded supply of low-carbon products/services
  • Sales promotion and new development of products that meet the needs of a low-carbon economy, and enhancement of product competitiveness
  • Energy conservation and equipment renewal at manufacturing sites
  • Proactive information disclosure and communication in response to the concerns of investors and the market
  • Regular risk identification and reduction activities, and enhancement of business continuity planning (BCP)
Physical risks and opportunities
(Four-degree scenario)
[Risks]
  • Decrease in electricity generated by the hydroelectric power stations due to water shortage
  • Suspended operation of manufacturing bases due to serious flooding, and decrease in profit caused by an increase in the equipment repair cost

Risks and opportunities, and measures for them in the transportation domain

In the Showa Denko Group’s current medium-term business plan, “The TOP 2021,” we assume that climate change will have a tremendous impact on the following business domains: transportation, energy and construction/infrastructure. For this fiscal year, we made a particular analysis of the aforementioned two scenarios for the transportation domain. We will further examine the impact of climate change on our businesses, including the businesses of Showa Denko Materials  (former Hitachi Chemical), which has joined the Showa Denko Group.

In the transportation domain, operating cost will increase due to the introduction of ICP under the two-degree scenario. However, business opportunities will also expand, driven by the need for energy conservation and the spread of electric vehicles (EVs), which will boost demand for the related components. As a result, we have concluded that Showa Denko has sufficient resilience against the climate change-related risks.

 Business environment in the transportation domain

Two-degree scenario

  • Expanded demand for EV batteries with larger capacity and for lighter vehicles, which will foster the development of aluminum-based composite materials for automobiles
  • Expansion of government support measures to promote the spread of EVs, and expansion of demand for EVs due to an increase in the number of customers who prefer low-carbon products
  • Demand for recyclable plastic/aluminum parts due to the enhancement of environmental regulations
  • Demand for more environmental measures from investors
  • Expanded introduction of carbon pricing due to the enhancement of environmental policies and regulations
Four-degree scenario
  • Demand for lighter vehicles (and for the development of aluminum-based composite materials for automobiles) will mildly increase.
  • Gasoline-powered vehicles will retain dominance, with the fuel efficiency regulations and support measures for the spread of EVs remaining at the present level.
  • Damage caused by serious flooding to production bases and its impact on supply chains will become apparent.

Research and development to make use of the opportunities offered in the transportation domain

As the sales volume of automobiles increases across the world, demand for composite materials and batteries to be used in EVs will also increase. According to the R&D policy set in the medium-term business plan, “The TOP 2021,” for 2019 to 2021, Showa Denko plans to invest its R&D resources intensively in ten technical fields corresponding to seven business domains with a view to setting up pipelines to create new businesses in an accelerated manner. The ten technical fields include those related to xEVs as well as the use of multiple materials and the bonding of heterogeneous materials, and we are promoting the setting of specific research themes for these fields. As for lithium-ion batteries used in EV batteries, they need to be installed at a high density to prolong the running distance and must also be kept at a low temperature to ensure their product life and output. Showa Denko is developing light and compact battery cooling devices that provide the efficiency and safety required of automotive battery cooling systems. For the development we are applying our aluminum laminate film, which has a proven record as a packaging material for automotive batteries, as well as our heat exchanger technology.

Indicators and targets

■ GHG emissions (Group companies in Japan)
[Results of the KPI] GHG emissions in fiscal 2019:
Down 6.9% relative to fiscal 2013

GHG emissions
  • * Emission amounts were calculated in line with the GHG Protocol.
In order to attain the long-term targets set for Responsible Care, including climate change-related targets, the Showa Denko Group has been setting and implementing a medium-term Responsible Care action plan every two or three years as well as an annual action plan. In line with the action plan for 2020, we will review the medium- to long-term plans made for each of our sites toward the creation of a low-carbon economy and set the medium-term targets for our overseas Group companies. In order to achieve our GHG emission reduction targets for 2030, we will further reduce our GHG emissions and promote energy conservation. For logistics operations, we are working to reduce our per-unit energy consumption. We will review the reduction plan and analyze change factors to make further improvements.


■ Transportation sector's CO2 emissions and energy consumption rate (Showa Denko)Transportation sector's CO2 emissions and energy consumptuion rate
■ Scope 3 GHG emissions (FY2019)
Scope3(kt/YEAR)
 CategoryThe amount of emission
1 Purchased goods and services 3,539
2 Capital goods 251
3 Fuel- and energy-related activities not include in Scope1 and 2 585
4 Upstream transportation and distribution 35
5 Waste generated in operations 18
6 Business travel 5
7 Employee commuting 2
  Other (down stream) 41,200
■ Freight ton-km(Showa Denko)
Freight ton-km
■ Ratios for use of various modes of transport (FY2019, Showa Denko)
Ratios for use of varous modes of transport

In order to reduce the environmental impact associated with logistics, we are promoting a modal shift from truck to rail and ship transportation as well as making efficient use of large trucks and increasing their loading efficiency to reduce our CO2 emissions. In fiscal 2019, in addition to promoting a modal shift, we also strove to reduce energy consumed for transportation by increasing the shipment amount to minimize the frequency of transportation and by increasing the number of storage sites to reduce long-distance transportation. As a result, we succeeded in reducing the transportation volume and thereby CO2 emissions. We also improved per-unit energy use for transportation year on year, mainly by increasing the ratio of marine transportation, which is more energy efficient, to truck transportation (on a ton-kilo basis).

 

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