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Endeavor to create a circular economy

Implementing the recommendations of the TCFD

The Mitsui Chemicals Group announced its support of the recommendations of the Task Force on Climate-related Disclosures (TCFD) in January 2019 and continues to disclose information on its efforts to tackle climate change.
Recently, we expanded our efforts to assess materiality of climate-related risks and quantify business impacts to all of our business segments and implemented a review accordingly.

Disclosure item 1: Governance

The responsible officer for the Corporate Sustainability Committee oversees our efforts to address climate change.
Policy, strategy, and planning to address climate change are discussed at the Corporate Sustainability Committee. Results of discussions are reported to the Management Committee. Particularly important matters are decided and supervised by the Board of Directors upon discussion at the Company-wide Strategy Committee and deliberation by the Management Committee.
Furthermore, we have established the Circular Economy Center of Excellence (CoE) under the Corporate Sustainability Committee.
The Circular Economy CoE comprises the steering committee and three working groups (biomass, recycling, and climate change). It conducts detailed discussion on climate change, and it is structured so that matters for discussion by management are raised to the Corporate Sustainability Committee.

Disclosure item 2: Risk management

The Mitsui Chemicals Group has established a Group-wide risk management system, which also covers climate-related risks.

Regarding climate-related risks in particular, as part of risk management under VISION 2030 and the carbon neutral strategy, risks are identified and assessed by all divisions under the Group-wide risk management system, and these risks are managed centrally on a Group-wide basis.
We reflect our efforts to develop and execute responses in our budget and medium-term business plan, and we implement a steady PDCA cycle.

Disclosure item 3: Strategy

The Mitsui Chemicals Group works to understand risks posed by and opportunities arising from climate change by conducting scenario analyses with reference to the United Nations Intergovernmental Panel on Climate Change scenario (IPCC RCP8.5) and the 2022 International Energy Agency World Energy Outlook (NZE2050).
We also reflect the results of the analyses in VISION 2030—our transition plan for achieving a low-carbon society—and our carbon neutral strategy to guide progress.

1. Identifying and defining the range of scenarios

We have created views of potential worlds (scenarios) based on predictions of how climate change may affect the Group’s business environment.

3-4°C world (A world where responses to abnormal weather are crucial)	1.5-2°C world (A world where bringing about a carbon-free society is the top priority)
Implementation of current climate change policies only Existing carbon taxes unchanged and applied to certain developed countries only Expansion in demand for fossil energy and raw materials Continuing sales of gasoline vehicles	Implementation of ambitious climate change policies Large increase in carbon tax Suspension of sales of gasoline vehicles/switch to EVs Increases in expenses for policy compliance Increases in business opportunities for products that contribute to a carbon-free society
A society dependent on fossil resources Rises in prices of coal, gas, and oil Rises in the price of fossil-fuel generated electric power	Circular economy society Renewable energies in the mainstream Decarbonization of raw materials (Spread of recycled raw materials and bio-based/CO₂-based chemicals)
Catastrophic worsening of natural disasters caused by abnormal weather Changes in vegetation distribution and migration ranges	Worsening of natural disasters caused by abnormal weather Higher-level, farther-reaching disaster countermeasures

3-4°C world (A world where responses to abnormal weather are crucial)
Implementation of current climate change policies only Existing carbon taxes unchanged and applied to certain developed countries only Expansion in demand for fossil energy and raw materials Continuing sales of gasoline vehicles A society dependent on fossil resources Rises in prices of coal, gas, and oil Rises in the price of fossil-fuel generated electric power Catastrophic worsening of natural disasters caused by abnormal weather Changes in vegetation distribution and migration ranges
1.5-2°C world (A world where bringing about a carbon-free society is the top priority)
Implementation of ambitious climate change policies Large increase in carbon tax Suspension of sales of gasoline vehicles/switch to EVs Increases in expenses for policy compliance Increases in business opportunities for products that contribute to a carbon-free society Circular economy society Renewable energies in the mainstream Decarbonization of raw materials (Spread of recycled raw materials and bio-based/CO₂-based chemicals) Worsening of natural disasters caused by abnormal weather Higher-level, farther-reaching disaster countermeasures

3-4°C world
(A world where responses to abnormal weather are crucial)

Implementation of current climate change policies only

Existing carbon taxes unchanged and applied to certain developed countries only
Expansion in demand for fossil energy and raw materials
Continuing sales of gasoline vehicles

A society dependent on fossil resources

Rises in prices of coal, gas, and oil
Rises in the price of fossil-fuel generated electric power

Catastrophic worsening of natural disasters caused by abnormal weather

Changes in vegetation distribution and migration ranges

1.5-2°C world
(A world where bringing about a carbon-free society is the top priority)

Implementation of ambitious climate change policies

Large increase in carbon tax
Suspension of sales of gasoline vehicles/switch to EVs
Increases in expenses for policy compliance
Increases in business opportunities for products that contribute to a carbon-free society

Circular economy society

Renewable energies in the mainstream
Decarbonization of raw materials (Spread of recycled raw materials and bio-based/CO₂-based chemicals)

Worsening of natural disasters caused by abnormal weather

Higher-level, farther-reaching disaster countermeasures

2. Quantifying business impacts

We have quantitatively estimated the anticipated impact in the context of implementing decarbonization measures toward VISION 2030, including the carbon neutral strategy.

Group-wide risks

Risk classification	Events	Impact calculation target	Calculation approach	Impact
Risk classification	Events	Impact calculation target	Calculation approach	Medium-term (2030)	Long-term (2050)
3-4°C world
Physical risks	Catastrophic worsening of natural disasters	Increase in damage at production sites due to river and coastal flooding	Calculated asset damage at production sites due to flooding, taking into account the probability of occurrence ^12*3	¥-5bn	¥-40bn
1.5-2°C world
Transition risks	Strengthened laws and regulations	Increased costs due to introduction of carbon tax*⁴	Cost increases calculated assuming that no decarbonization measures are taken	¥-90bn	¥-160bn
	Strengthened laws and regulations	Increased costs due to introduction of carbon tax*⁴	Cost increases calculated assuming that decarbonization measures are taken ^*5	¥-67bn (GHG emissions reduction rate (Scopes 1 and 2) compared to FY2013: 40%)	¥0 (GHG emissions reduction rate (Scopes 1 and 2): 100%)
	Market changes	Increased cost of fuel and electricity	Cost of fuel and electricity calculated based on inflation rate ^67	¥-60bn	¥-70bn ^*2040

*1 FY2020 baseline.

*2 Does not include operational impact. We plan to consider this in future.

*3 Reference: IPCC RCP8.5

*4 Carbon tax calculated based on predicted carbon price (with reference to IEA NZE2050) and FY2021 GHG emissions.

*5 Investments related to the carbon neutral strategy up to 2030 are estimated at 140 billion yen.

*6 FY2018 baseline for fuel and electricity costs.

*7 Reference: IEA WEO, EIA, and Agency for Natural Resources and Energy forecasts

Group-wide opportunities

Opportunity classification	Events	Impact calculation target	Calculation approach	Impact
Opportunity classification	Events	Impact calculation target	Calculation approach	Medium-term (2030)	Long-term (2050)
3-4°C world
Transition opportunities	Increased demand for products and services that contribute to adaptation	Increased sales revenue of Rose Value™ products, which contribute to disaster prevention/mitigation measures and prevention of infectious disease	Set as a non-financial metric ^12	Rose Value™ products sales revenue ratio of 40%	-
1.5-2°C world
Transition opportunities	Increased demand for products and services that contribute to mitigation	Increased sales revenue of Blue Value™ products, which contribute to reduction of GHG emissions	Set as a non-financial metric ^34	Blue Value™ sales revenue ratio: 40%	Blue Value™ sales revenue ratio: 70%

*1 FY2022 Rose Value™ product results: sales revenue of 390.0 billion yen, sales revenue ratio of 21%

*2 Reference: the Group’s VISION 2030

*3 FY2022 Blue Value™ product results: sales revenue of 410.0 billion yen, sales revenue ratio of 22%

*4 Reference: the Group’s VISION 2030

Risks and opportunities for individual business segments

We examined business risks and opportunities in the 1.5-2°C world, 3-4°C world, and scenario-independent market environment, accounting for changes in related markets.

Note	Opportunity for Blue Value™ products
	Opportunity for Rose Value™ products
	Risk

Changes in related markets	Risks and opportunities
3-4°C world
(1) Stable food supply	Creation of agrochemical active ingredients and expansion of overseas operations
(2) Infrastructure service-life extension and disaster prevention/mitigation	National resilience: Expanded green-infrastructure demand for nonwovens
(3) Public health and hygiene	Development and marketing of new insecticides for malaria vector mosquitoes to help eradicate the disease
	Provision of high-performance antibacterial and anti-mold agents
	Expanded demand for hygiene supplies (masks, gowns, etc.) resulting from pandemics
	Growing needs and expanded demand for simple testing and diagnosis solutions to prevent the spread of infectious diseases
1.5-2°C world
(1) Reduction of environmental impact in the supply chain	Expanded demand for lens materials using plant-derived raw materials (Do Green™)
	Sales promotion for highly active biocatalysts (acrylamide, etc.)
	Hollow, thin products (AIRYFA™) to meet demand for weight reduction
	Establishment of recycling business and development of products meeting recycling needs
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countries	Further spread of high-refractive-index ophthalmic lens materials (MR™)
	Expanded demand for oral care and oral diagnostics
	Expanded demand for disposable diapers
	Pursuit of higher quality medical care and longer healthy life expectancy: Entry into new business areas (orthopedics, testing and diagnosis, nucleic acid medicine CDMO, nutrition)
(2) Changes in the mobility market	-
(3) Consideration of environmental impact	Expanded demand for agrochemicals derived from natural materials
(3) Consideration of environmental impact	Waste reduction/labor saving by producing dental prosthetics through 3D printing and related products
Approaches to risks and opportunities
-	Improve production and supply capacity to cope with market changes and meet expanding demand
	Further increase the resilience of global supply chains
	Create new products and businesses that help address social challenges
Financial information
Rose Value™ products sales revenue ratio	82% (FY2022) 85% (FY2030 target)
Strong business areas (based on FY2022 information)	Ophthalmic lens materials: 45% share of the global market (market growth rate: 3% per year)
Strong business areas (based on FY2022 information)	Agrochemical products: 180 billion yen in sales revenue (FY2030 target)
Financial target (FY2030 operating income before special items)	90 billion yen Significant contributions from Rose Value™ products

Changes in related markets	Risks and opportunities
3-4°C world
(1) Stable food supply	-
(2) Infrastructure service-life extension and disaster prevention/mitigation	Expanded demand for concrete surface reinforcement agent
(3) Public health and hygiene	-
1.5-2°C world
(1) Reduction of environmental impact in the supply chain	Expanded demand for parts for renewable-energy applications (highly durable TAFMER™)
	Expanded demand for products contributing to reductions in painting processes (PP compounds)
	Creation of products utilizing renewable raw materials
	Expanded demand for lithium-ion battery components
	Expanded demand for the development of materials to reduce the weight of EVs, extending their driving range (rigid and lightweight PP)
	Expanded demand for E-Axle
	Difficulties in passing on the costs of decarbonization measures
	Reduced demand for components for gasoline vehicles as the shift to EVs continues
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countries	Development of module concepts for vehicle interiors, etc. that help enhance comfort in mobile spaces
	Decline in number of new vehicles being manufactured
(2) Changes in the mobility market	-
(3) Consideration of environmental impact	-
Approaches to risks and opportunities
-	Improve production and supply capacity to cope with market changes and meet expanding demand
-	Further increase the resilience of global supply chains
Financial information
Blue Value™ products sales revenue ratio	54% (FY2022) 80% (FY2030 target)
Strong business areas (based on FY2022 information)	PP compounds: Second-largest share in the world and second-largest share in the Asia
	Lighter/paintless bumpers, instrument panels, etc.
	Raw materials for battery components
Financial target (FY2030 operating income before special items)	80 billion yen Significant contributions from Blue Value™ products

Changes in related markets	Risks and opportunities
3-4°C world
(1) Stable food supply	Expanded demand for ICT products with spread of industrial farming (semiconductor components/gas-permeable films)
(2) Infrastructure service-life extension and disaster prevention/mitigation	Expanded demand for components for solar panels and stationary-storage batteries as corresponding needs grow (MILLET™, SOLAR ASCE™, etc.)
	Expanded demand for drinking-water filters (MIPELON™)
(3) Public health and hygiene	-
1.5-2°C world
(1) Reduction of environmental impact in the supply chain	Expanded demand for eco-friendly packaging materials (coating materials and paper replacements for plastic)
	Horizontal recycling (mono-material packaging)
	Expanded demand for EV batteries/semiconductors and calls for their improved functionality
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countries	Expanded semiconductor & assembly solutions market
	Imaging solutions: Expanded smartphone and XR markets
(2) Changes in the mobility market	Expanded demand for automotive lenses, sensors, and high-frequency materials
(3) Consideration of environmental impact	-
Approaches to risks and opportunities
-	Transition to solutions business
Financial information
Blue Value™ products sales revenue ratio	40% (FY2022) 56% (FY2030 target)
Rose Value™ products sales revenue ratio	53% (FY2022) 60% (FY2030 target)
Strong business areas (based on FY2022 information)	ICROS™ Tape: Largest share of the global market (market growth rate: 7% per year)
	APEL™ (cyclic olefin copolymer): Largest share of the global market at over 50%
	Pellicles: Largest share of the global market (market growth : 9% CAGR, 2019-2027)
Financial target (FY2030 operating income before special items)	70 billion yen Significant contributions from Blue Value™ and Rose Value™ products

Changes in related markets	Risks and opportunities
3-4°C world
(1) Stable food supply	Expanded demand for packaging raw materials that help maintain food quality
(2) Infrastructure service-life extension and disaster prevention/mitigation	Expanded demand for raw materials for polyethylene pipes, etc.
(3) Public health and hygiene	-
1.5-2°C world
(1) Reduction of environmental impact in the supply chain	Expanded demand for the development of materials to reduce the weight of EVs, extending their driving range (rigid and lightweight PP, polyurethane materials)
	Expanded demand for eco-friendly packaging materials
	Difficulties in passing on the costs of decarbonization measures
	Expanded demand for lithium-ion battery components for EVs
	Reduced demand for components for gasoline vehicles as the shift to EVs continues
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countries	Expanded market for ICT- and mobility-related products, including photoresists and liquid-crystal materials
	Development of module concepts for vehicle interiors, etc. that help enhance comfort in mobile spaces
	Decline in number of new vehicles being manufactured
(2) Changes in the mobility market	-
(3) Consideration of environmental impact	-
Approaches to risks and opportunities
-	Provide reliable supplies of raw materials to growing businesses
	Enhance efforts in green chemicals
	Expand provision of products with high added value
Financial information
Blue Value™ products sales revenue ratio	6% (FY2022) 12% (FY2030 target)
Strong business areas (based on FY2022 information)	Manufacturing of derivatives using bio-based raw materials, technological development for advanced recycling
	Provision of green materials to other business segments
	Synergy with Honshu Chemical Industry
Financial target (FY2030 operating income before special items)	50 billion yen

Toward minimizing risks

While the medium-term asset damage from catastrophic worsening of natural disasters is not that great, we will assess its impact, including the impact on operations, and where necessary incorporate it into the Basic Strategy of VISION 2030, “Management and business transformation,” in order to respond.
The business impact of increased costs due to introduction of carbon tax and increased cost of fuel and electricity will become large over the medium- to long-term. As part of our carbon neutral strategy measures, we will promote carbon-free raw materials and fuels and energy efficiency, while also pushing forward with introducing renewable energy by fiscal 2030. Furthermore, we will progress with steady reductions of GHG emissions through further considerations.
We are projecting 140 billion yen in investments for our carbon neutral strategy through 2030. Considering that the carbon tax burden would amount to 90 billion yen per year if no carbon-neutrality measures were taken, we believe that the investment amount is appropriate in light of the impact on carbon reduction.

Toward maximizing opportunities

The impact assessment identified many potential opportunities for Blue Value™ and Rose Value™ products.
Reflecting the opportunities in our Group-wide strategy, we will work to contribute to the building of a sustainable society and seize more opportunities for the Group.
Reductions in GHG emissions are deeply related to expanding the revenue of the Group, and it is therefore necessary to not only execute the announced carbon neutral strategy measures but also continually examine and add further measures.
In addition to further increasing the resilience of our global supply chain by adding to the number of our raw-materials suppliers and production sites, we will also improve our production and supply capacity to cope with market changes and meet market needs as we look to successfully seize business opportunities.
As capturing the opportunities listed in the table links into the growth of the Group, we have set them as VISION 2030 business targets (non-financial targets) and will continue to manage their progress.

Improving resilience

The results of the scenario analyses validated the resilience of our strategies for the 1.5–2°C and 3–4°C worlds.
We will continue to enhance the precision of our impact assessments.
In our Group-wide strategies, including our business strategies and site strategies, we will work to improve the Group’s resilience in the aim of minimizing risk and maximizing opportunities.

Disclosure item 4: Metrics and targets

The Group sets metrics and targets for use in managing climate-related risks and opportunities.

We have positioned these as non-financial metrics and business targets for VISION 2030 and are managing their progress.

	Classification	Metric	FY2022 results	Target (FY2030)	Target (FY2050)
Mitigation	GHG emissions reduction (Scopes 1 and 2)	GHG emissions reduction rate (vs. FY2013)	27%	40%	100%
Mitigation	Maximizing avoided emissions	Blue Value™ products sales revenue ratio	22%	40%	70%
Adaptation	Contribution to disaster prevention/mitigation measures and prevention of infectious disease	Rose Value™ products sales revenue ratio	21%	40%	-

In addition, information in accordance with the climate-related metrics categories is as follows.

(1) GHG emissions	Scope 1: 3.55 million tCO₂e (FY2022) Scope 2: 0.96 million t₂e (FY2022) Scope 3: 10.81 million t₂e (FY2021) ^*1 Per unit of sales revenue for Scopes 1 and 2: 24.0 t₂e/billion yen (FY2022)
(2) Transition risks	Outlined in “Disclosure item 3: Strategy”
(3) Physical risks	Outlined in “Disclosure item 3: Strategy”
(4) Climate-related opportunities	Outlined in “Disclosure item 3: Strategy”
(5) Capital deployment	Investments related to carbon neutral strategy up to 2030 are expected to be on the scale of 140 billion yen. Of large-scale investment projects^*2 in FY2023, investments related to Blue Value™ and Rose Value™ products account for 53%, or approximately 262.4 billion yen.
(6) Internal carbon pricing (ICP)	ICP is set at 15,000 yen/t₂e, and IRR that takes ICP into account (c-IRR) is used as a factor in decision-making for large-scale investments.
(7) Executive compensation	The attainment levels for the target GHG emissions reduction rate and Blue Value™ and Rose Value™ products sales revenue ratios, which are non-financial indicators in VISION 2030, are reflected in the bonuses for inside directors and executive officers as an “evaluation of non-financial indicators.” Executive officers are assigned to be in charge of progress in their respective areas on the GHG emissions reduction rate and Blue Value™ and Rose Value™ products sales revenue ratios, which are non-financial indicators in VISION 2030. The attainment levels for those targets are reflected in the bonuses for each executive officer in charge as an “evaluation of the performance of the division in charge.” The Blue Value™ and Rose Value™ products sales revenue ratios for each business segment are part of the business segments’ budget targets for each fiscal year. The attainment levels for those targets are reflected in the bonuses for each executive officer in charge as an “evaluation of the performance of the division in charge.”

*1 Mitsui Chemicals non-consolidated

*2 Not including alliances, M&A, financial assistance, etc. For FY2023–2025