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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.

TCFD

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.

Endeavor to create a circular economy

Disclosure item 2: Risk management

We deploy the risk management system throughout the Group, and identify “key Group-wide risks” that require precise implementation of the PDCA cycle in the management planning system. These key Group-wide risks, together with the series of processes involving confirmation and improvement of the monitoring status, are set twice a year.

We manage risks posed by climate change across the entire Group by integrating such risks into our Group-wide risk management system. In FY2023, we identify climate change-related risks as our key Group-wide risks and reflect them in the management planning system, such as rolling strategic plans, annual budgets, and action plans, thereby implementing the PDCA cycle.

* Rolling strategic plans:

Review of business plans for the next three years to be conducted annually based on the long-term business plan.

Risk Management

Disclosure item 3: Strategy

We analyzed risks posed by and opportunities airing from climate change based on views of potential worlds (scenarios) that reflect predictions of how climate change may affect our Group’s business environment. 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 selected the scenarios of a “3–4°C world” and a “1.5–2°C world” by referencing scenarios from the United Nations Intergovernmental Panel on Climate Change (IPCC), the IEA World Energy Outlook (2022 edition), and other sources. These scenarios were used to anticipate changes in our business environment associated with climate change.

Time horizon

Present day to 2050 (references data through 2100 on physical risks and opportunities)

External data used

Data on transition to low-carbon economy: IEA SDS, 2DS, B2DS, NZE2050, The Future of Petrochemicals

Data on physical aspects: IPCC RCP2.6, RCP8.5

Potential worlds

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

2. Quantifying business impacts

We have estimated the anticipated Group-wide impact upon implementing decarbonization measures toward VISION 2030, including the carbon neutral strategy.

Group-wide risks
Risk classificationEventsImpact calculation targetCalculation approachImpact
Medium-term
(2030)		Long-term
(2050)
3-4°C world
Physical risksCatastrophic worsening of natural disastersIncrease in damage at production sites due to river and coastal floodingCalculated asset damage and economic losses from suspended operations at production sites due to flooding, taking into account the probability of occurrence*1*2¥-10bn¥-33bn
1.5-2°C world
Transition risksStrengthened laws and regulationsIncreased costs due to introduction of carbon tax*3Cost increases calculated assuming that no decarbonization measures are taken¥-104bn¥-185bn
Cost increases calculated assuming that decarbonization measures are taken*4


¥-78bn

(GHG emissions reduction rate (Scopes 1 and 2) compared to FY2013: 40%)

¥0
(GHG emissions reduction rate (Scopes 1 and 2): 100%)
Market changesIncreased cost of fuel and electricityCost increases of fuel and electricity calculated based on inflation rate*5*6¥-15bn¥-23bn *2040

*1 FY2020 baseline.

*2 Reference: IPCC RCP8.5

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

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

*5 FY2018 baseline for fuel and electricity costs.

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

Group-wide opportunities

Opportunity classificationEventsImpact calculation targetCalculation approachImpact
Medium-term
(2030)		Long-term
(2050)
3-4°C world
Transition opportunitiesIncreased demand for products and services that contribute to adaptationIncreased sales revenue of Rose Value™ products, which contribute to disaster prevention/mitigation measures and prevention of the spread of infectious disease, etc.Set as a non-financial metric *1*2Rose Value™ products sales revenue ratio: 40%-
1.5-2°C world
Transition opportunitiesIncreased demand for products and services that contribute to mitigationIncreased sales revenue of Blue Value™ products, which contribute to reduction of GHG emissionsSet as a non-financial metric *3*4Blue Value™ sales revenue ratio: 40%Blue Value™ sales revenue ratio: 70%

*1 FY2023 Rose Value™ product results: sales revenue of 410.0 billion yen, sales revenue ratio of 24%

*2 Reference: our Group’s VISION 2030

*3 FY2023 Blue Value™ product results: sales revenue of 420.0 billion yen, sales revenue ratio of 24%

*4 Reference: our 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.

NoteOpportunity for Blue Value™ products
Opportunity for Rose Value™ products
Risk
Changes in related marketsRisks and opportunities
3-4°C world
(1) Stable food supplyCreation of agrochemical active ingredients and expansion of overseas operations
(2) Infrastructure service-life extension and disaster prevention/mitigationNational resilience: Expanded green-infrastructure demand for nonwovens
(3) Public health and hygieneDevelopment 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) 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 chainExpanded 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
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countriesFurther 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 impactExpanded demand for agrochemicals derived from natural materials
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

76% (FY2023)
85% (FY2030 target)

Strong business areas (based on FY2023 information)Ophthalmic lens materials: 45% share of the global market (market growth rate: 3% per year)
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 marketsRisks and opportunities
3-4°C world
(1) Stable food supply-
(2) Infrastructure service-life extension and disaster prevention/mitigationExpanded demand for concrete surface reinforcement agent
(3) Public health and hygiene-
1.5-2°C world
(1) Reduction of environmental impact in the supply chainExpanded 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 countriesDevelopment 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 ratio47% (FY2023)
80% (FY2030 target)
Strong business areas (based on FY2023 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 marketsRisks and opportunities
3-4°C world
(1) Stable food supplyExpanded demand for ICT products with spread of industrial farming (semiconductor components/gas-permeable films)
(2) Infrastructure service-life extension and disaster prevention/mitigationExpanded demand for components for solar panels and stationary-storage batteries as corresponding needs grow
Expanded demand for drinking-water filters
(3) Public health and hygiene-
1.5-2°C world
(1) Reduction of environmental impact in the supply chainExpanded demand for eco-friendly packaging materials (coating materials and paper replacements for plastic)
Growing needs for recycling (mono-material packaging)
Improved functionality of semiconductor components and expanded demand for such components
(Reference) Scenario-independent market environment
(1) Economic growth, population growth, and urbanized, health-conscious lifestyles in emerging countriesExpanded semiconductor & assembly solutions market
Expanded smartphone and XR markets
(2) Changes in the mobility marketExpanded demand for automotive lenses, sensors, and high-frequency materials
Expanded demand for EV batteries
(3) Consideration of environmental impact-
Approaches to risks and opportunities
-Transition to solutions business
Financial information
Blue Value™ products sales revenue ratio39% (FY2023)
56% (FY2030 target)
Rose Value™ products sales revenue ratio54% (FY2023)
60% (FY2030 target)
Strong business areas (based on FY2023 information)ICROS™ Tape: Largest share of the global market (market growth rate: 7% per year)
Pellicles: Largest share of the global market (2020-2028 market growth CAGR: 7%)
APEL™ (cyclic olefin copolymer): Largest share of the global market at over 50%
Financial target (FY2030 operating income before special items)70 billion yen
Significant contributions from Blue Value™ and Rose Value™ products
Changes in related marketsRisks and opportunities
3-4°C world
(1) Stable food supplyExpanded demand for packaging raw materials that help maintain food quality
(2) Infrastructure service-life extension and disaster prevention/mitigationExpanded 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 chainExpanded 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 countriesDevelopment 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 ratio8% (FY2023)
12% (FY2030 target)
Strong business areas (based on FY2023 information)Manufacturing of derivatives using bio-based raw materials, technological development for advanced recycling
Provision of green materials to other business segments
Financial target (FY2030 operating income before special items)50 billion yen
Toward minimizing risks
  • We assessed the business impact of catastrophic worsening of natural disasters not only from the perspective of asset damage but also from a new perspective of economic losses from suspended operations. We will incorporate the business impact identified through the assessment into the Basic Strategy of VISION 2030, “Accelerating management and business transformation,” in order to respond thereto.
  • 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 104 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 tax burden 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 our Group.
  • Reductions in GHG emissions are deeply related to expanding the revenue of our 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 our 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

Our 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.

 ClassificationMetricFY2023 resultsTarget (FY2030)Target (FY2050)
MitigationGHG emissions reduction (Scopes 1 and 2)GHG emissions reduction rate (vs. FY2013)25%40%100%
Maximization of avoided emissionsBlue Value™ products sales revenue ratio24%40%70%
AdaptationContribution to disaster prevention/mitigation measures and prevention of infectious disease, etc.Rose Value™ products sales revenue ratio24%40%-

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

(1) GHG emissions
  • Scope1: 3.68 million tCO2e (FY2023)
  • Scope2: 0.91 million tCO2e (FY2023)
  • Scope3: 11.69 million tCO2e (FY2022) *1
  • Per unit of sales revenue for Scopes 1 and 2: 26.2 tCO2e /billion yen (FY2023)
(2) Transition risksOutlined in “Disclosure item 3: Strategy”
(3) Physical risksOutlined in “Disclosure item 3: Strategy”
(4) Climate-related opportunitiesOutlined 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 FY2024, investments related to Blue Value™ and Rose Value™ products account for 41%, or approximately 211.1 billion yen.
(6) Internal carbon pricing (ICP)ICP is set at 15,000 yen/tCO2e, 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 FY2024–2026