Implementing the recommendations of the TCFD

In January 2019, the Mitsui Chemicals Group announced its support of the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD*). As a chemical company, we intend to earnestly tackle climate change, deepen our understanding of the opportunities and risks that affect our businesses, and endeavor to actively disclose our initiatives.

Implementing the recommendations of the TCFD

*TCFD:
The TCFD was set up by the Financial Stability Board. In June 2017 it announced recommendations calling for financial institutions, corporations, and governments to disclose the business impacts of climate change in their financial reports. According to the TCFD, 1,027 institutions worldwide have expressed their support for the recommendations (as of February 2020).

The recommendations of the TCFD urge companies to disclose information about climate change-related governance, business strategy, risk management, and metrics and targets. In line with the TCFD’s recommendations, the Group will take the following approach.

1. Assessing materiality of climate-related risks

Qualitatively analyze risks and opportunities concerning climate change in our key businesses

2. Identifying and defining range of scenarios

Forecast the changes in our business environment concerning climate change (scenarios) and examine their impacts

3. Quantifying business impacts

Quantify impacts on future business strategies and financials based on our scenarios and reflect them in strategies

4. Identifying potential responses

Determine the measures for climate change strategy and select management control indicators

1. Assessing materiality of climate-related risks

As a first step, we assessed the impacts of climate change on the Group’s businesses.

1)Assessment scope

Selected key business areas in the Group susceptible to the impacts of climate change.

(1) Mobility, (2) Petrochemical feedstocks, (3) Agriculture, (4) Health Care, (5) Electricals and electronics, (6) Packaging, (7) Energy solutions

2) Assessment method

1. Identification of climate change risks and opportunities

Identify risks (both physical and those pertaining to the transition to a low-carbon society) and opportunities based on the information disclosure framework presented in the TCFD’s Final Report.

2. Picking out major risks and opportunities

Pick out the particularly major risks and opportunities from those identified above in light of their potential occurrence and impact on business (human loss, financial impacts, etc.). When doing so, take into account factors such as trends in international discussions, the Group’s business regions, and case examples at other companies.

3)Assessment results (denotes risks; denotes opportunities)

This table is scrollable.

Assessment items Group-wide Specific business areas
Physical risks/
opportunities
Acute Heightened risk of wind or rain damage (floods/storms)  
Chronic Heightened risk of rising sea levels (high tides)
Heightened risk of freshwater scarcity
Changes in arable land and development of new agricultural technology (3)
Wider distribution of pests, weeds, and bacteria (3)
Wider prevalence of infectious diseases caused by climate change (4)
Risks/opportunities related to
transition to low-carbon economy
Policy and legal Risks from introduction of, and increases in, carbon pricing
Increase in litigation risks
Impacts on business from shift to EVs (1)(5)
Restrictions on use of synthetic chemical fertilizers (3)
Technology Uptake of renewable energies
Accelerated development of CCU technology and advanced recycling technology
Uptake of biomass plastics (1)(2)(6)
Faster transition to low-GHG emissions technology (2)(5)(6)
Market Spread of circular economy
Transition to renewable raw materials
Calls for manufacturers to use renewable energy
Higher prices for scarce resources due to shift to EVs and transition to a hydrogen-fueled low-carbon society
Decrease in auto manufacturing and sales volume owing mainly to increase in ridesharing and carsharing (1)
Shortage of naphtha due to decline in oil production output (2)
Increased demand for renewable energy (7)
Reputation Increased investor approaches  

*External data used include IPCC RCP2.6, RCP8.5, IEA B2DS, and SDS.

2. Identifying and defining range of scenarios

Based on our materiality assessment, we selected a "3–4°C world" scenario and a "1.5–2°C world" scenario. We amended our previous scenarios when we made our Carbon Neutral Declaration in November 2020.

Global Average Surface Temperature Change

Global Average Surface Temperature Change

Source: IPCC AR5 SYR Fig. SPM.6

Scope of scenario analysis

Business areasAll business areas (priority on the following areas due to significant impact on finances and GHG emissions)

Mobility business

✔ Mobility business sales revenue ratio
✔ Mobility business operating income before special items ratio

Scope of scenario analysis

Petrochemicals business

✔ Related to fossil fuel and energy (electric power) which is essential for manufacturing products
✔ In-house energy production and product manufacturing account for approximately 75% of our GHG emissions

Time horizonPresent 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

Negative on decarbonization due to prioritizing of economic activity
◆ Implementation of current climate change policies only
  • Introduction of carbon tax
◆ Catastrophic worsening of natural disasters caused by abnormal weather
◆ Expansion in demand for fossil energy and raw materials
  • Rise in prices of coal, gas, and oil
  • Rise in the price of fossil-fuel generated electric power
◆ GHG emissions to rise around 1.3 times (2050)

1.5–2°C world

Realization of carbon-free society being the top priority
◆ Implementation of ambitious climate change policies
  • Large increase in carbon tax
  • ICE sales suspended, switch to EVs
◆ Gradual worsening of natural disasters
◆ Shift to carbon-free energy and raw materials
  • Renewable energies become mainstream
  • Cut backs on chemical usage due to recycling
  • Production of chemicals from bio-based and CO2 raw materials
◆ Carbon neutrality achieved (2050)

3. Quantifying business impacts

We conducted an impact assessment on events related to risks and opportunities under the selected scenarios (the "3–4°C world" and "1.5–2°C world" scenarios), and identified large business impacts for the Group.

Identified business impacts

This table is scrollable.

Scenarios Events Business impacts (denotes risks; denotes opportunities)
3–4°C world Catastrophic worsening of natural disasters Increased damage to production sites due to flooding along coasts and rivers (property damage, decreased operating rate, supply chain disruptions)
Increased demand for products to adapt to global warming Increased sales revenue of Rose Value™ products (contribute to disaster prevention/mitigation measures and prevention of infectious disease)
1.5–2°C world Strengthened regulations to stimulate transition to a carbon-free society Increased manufacturing costs and deteriorating profits due to taxes placed on fossil fuels by the introduction of a carbon tax
Avoiding deterioration in earnings by taking steps to prepare for a possible carbon tax and other regulations, and increasing sales revenue of products that comply with regulations
Market changes brought about by decarbonization Increased raw materials costs due to decreased naphtha production volume driven by decreased consumption of fossil fuels
Increased sales revenue of Blue Value™ products, which contribute to GHG emissions reduction across the value chain, arising from the use of biomass materials, non-fossil fuels, and renewable energy
Accelerating growth of the circular economy Creation of new business opportunities by introducing the recycling (mechanical and chemical recycling) and CCUS technology that stakeholders are calling for
Responding to demands from stakeholders Declining valuation and reduced opportunities to secure investment due to insufficient response to demands by customers and investors to reduce GHG emissions
Increasing corporate value and growing opportunities to secure investment due to proactive disclosure of information about how we are addressing climate change (strategy/progress)

4. Identifying potential responses

Considering the results of impact assessments under the selected scenarios, we have incorporated our carbon neutral strategy into VISION 2030. In our carbon neutral strategy, we have formulated a roadmap for reducing our Group's Scope 1 and Scope 2 GHG emissions to achieve carbon neutrality by 2050. We have also set GHG emissions reduction targets for 2030. Going forward, we plan to incorporate our carbon neutral strategy into the individual strategies of each business domain, and consider concrete action plans, key performance indicators, and the like.

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