Climate Change

Policy
Reducing GHG Emissions
Efforts to Reduce CO₂ Emissions
Asahi Kasei green bond

Click here to read our response concerning CDP Climate Change 2022

Asahi Kasei Group's Carbon Neutrality Policy

In accordance with its Group Mission, the Asahi Kasei Group is committed to contributing to life and living for people around the world. The Asahi Kasei Group has long been aware that climate change is a global issue that will have a significant impact on both the natural environment and society, and we see it as our mission to use the scientific expertise we have cultivated since our founding to deal with this issue leveraging our combined strength.
In May 2021, the Asahi Kasei Group adopted a policy for carbon neutrality.

Greenhouse gas (GHG) emission targets for the Asahi Kasei Group

2050: Carbon neutral

2030: Emissions reduction of 30% or more (from fiscal 2013)*

*Scope 1 (direct GHG emissions) and
Scope 2 (indirect emissions use of electricity, heat, and steam supplied by other companies), absolute quantity

Initiative Policy

In addition to reducing GHG emissions from our own business activities, we believe that it is also important to help to reduce GHG emissions in society through our diverse array of technologies and businesses to deal with climate change. In April 2021, we launched a Green Solution Project reporting directly to the President, and we are working to create new businesses for a carbon neutral society.
Regarding "Care for Earth," we are committed to addressing climate change issues group-wide, both in terms of (1) reducing the amount of GHGs emitted by our own business activities and (2) helping to reduce GHGs throughout society through our businesses and technologies.

Key Points of Effort for Carbon Neutrality

Two Initiatives for GHG Reduction

Reducing GHG Emissions

Concrete GHG reduction measures and their projected impacts

We are targeting a reduction in GHG emissions by at least 30% by 2030 as compared to fiscal 2013, with a goal of becoming carbon neutral by 2050. Measures will be advanced as described below.
In the first stage, by 2030 we aim to reduce our GHG emissions by approximately 300 thousand tons by adopting low-carbon methods for in-house power generation, by 100 to 200 thousand tons through the purchase of non-fossil fuel power, and by 100 to 200 thousand tons by curtailing emissions from our manufacturing processes. We will also promote GHG emissions reductions through transformation of our business portfolio, etc.
In the second stage through 2050, we will work toward greening both electricity and steam and the introduction of innovative processes through practical application of technologies developed by Asahi Kasei, such as alkaline water electrolysis and CO₂ separation and recovery. In addition, we will promote further transformation of our business portfolio, etc., and move forward with reductions toward attainment of our objectives.

GHG emissions

Scope 1 and 2 GHG emissions

All production sites of Asahi Kasei Corp. and its consolidated subsidiaries under management control are subject to calculation of Scope 1 and Scope 2 GHG emissions of the Asahi Kasei Group, and GHG emissions from generation of electricity and steam sold outside the Asahi Kasei Group are included.
In fiscal 2021, our Scope 1 GHG emissions were 3.10 million tons of CO₂-eq, and Scope 2 GHG emissions were 0.94 million tons of CO₂-eq, bringing the total of Scope 1 and 2 to 4.03 million tons of CO₂-eq. This is a reduction in GHG emissions of approximately 21% compared to the 5.11 million tons of CO₂-eq released in the baseline year of 2013.

*Figures withhave received independent assurance by KPMG AZSA Sustainability Co., Ltd. (March 2023 updated)

GHG emissions^*
^* 74.6% coverage (Our company sales included in GHG emissions / Consolidated sales of our group × 100)

Global Scope 3 emissions^*

Global Scope 3 emissions

*Figures withhave received independent assurance by KPMG AZSA Sustainability Co., Ltd. (March 2023 updated)
* Scope 3 emissions: Greenhouse gases emitted indirectly by a company throughout its supply chain. The methods for calculating Scope 3 emissions from Category 1, 5, 11 and 12 are described in Environmental data.

Scope 3 emissions by fiscal year (ESG Data)

Efforts to Reduce CO₂ Emissions

Renewable energy

The Asahi Kasei Group has 9 hydroelectric power generation plants in the Nobeoka Region, which provided approximately 6% of the total electricity we used both in Japan and overseas in fiscal 2020. Generation of the equivalent amount of power at thermoelectric plants would result in approximately 70 thousand tons* of CO₂ emissions annually.
We also have a biomass power generation facility.

* Using Japan's Ministry of Economy, Trade and Industry and Ministry of the Environment, Order No. 3 of 433g CO₂/kWh.

Electricity sources, FY2021* (global)

Using Renewable Electricity in the Homes Business

As part of its efforts to address climate change, Asahi Kasei Homes joined the RE100 Initiative in 2019, aiming to achieve sustainable urban living with both decarbonization and resilience.
Asahi Kasei Homes has a target of procuring 100% of the electricity consumed for its business activities from renewable energy sources, and is on track to achieve this in 2025, significantly sooner than the initial outlook of 2038.

Asahi Kasei Homes Sustainability

Domestic energy saving in logistics

The Asahi Kasei Group promotes environmentally friendly railway shipment.
Product shipments for our operations in Japan amounted to some 1.1 billion ton-kilometers in fiscal 2021―an 5% decrease from fiscal 2020―generating approximately 85 thousand tons of CO₂ emissions―a 4% decrease. In cooperation with the transport firms contracted for shipment, a wide range of measures are employed to reduce energy consumption and alleviate the environmental effects of physical distribution.
We have received Eco-Rail Mark certification in recognition of our preferential shipment of products by rail, an ecological mode of transport which results in lower CO₂ emissions for a given weight and distance than many other means of transportation.

The Asahi Kasei Group promotes environmentally friendly railway shipment. Eco-Rail Mark

The Eco-Rail Mark

CO₂ emissions from product shipment (ESG Data)

Domestic promotion of low emission vehicles

The Asahi Kasei Group is phasing in low-pollution vehicles for use in marketing and within plant grounds. In fiscal 2021, some 95% of company-owned vehicles were low-pollution vehicles.

Low-pollution vehicles (ESG Data)

Asahi Kasei green bond

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Climate Change Initiatives (Disclosure based on TCFD^※1 Recommendations)

Carbon dioxide emissions have increased significantly since the industrial revolution, and in particular during the 20th century with its major population growth. The global scientific consensus is that carbon dioxide accumulation is causing climate change, and the IPCC’s Sixth Assessment Report and other publications have clarified the gravity of this situation. Climate change is progressing slowly but steadily, and we recognize that worldwide cooperation and the implementation of specific measures to address it are urgent issues.

In the century since our founding, we have developed our business in response to the needs of society. Now that climate change measures have become a social necessity, we are committed to Care for Earth as part of our management strategy to contribute to the global environment. As the impact of climate change on business is of great concern to investors and other related parties, companies need to be clear about its potential impact and maintain an ongoing dialogue with them. Based on TCFD recommendations, we have examined the changes potentially arising as a result of climate change and their impact on our business from a variety of perspectives. While climate change presents risks for Asahi Kasei, it also offers us opportunities, and we are currently advancing a Medium-term Management Plan (MTP) formulated with these in mind.

Using our diverse technologies and businesses, we will contribute to a sustainable society while proactively developing measures for climate change mitigation and adaptation as growth opportunities.

※1TCFD: Task Force on Climate-related Financial Disclosures, established and announced by the Financial Stability Board (FSB) in 2017.

Governance

Measures to tackle climate change are an important management issue and we consider it one of the central themes of our management strategy. Our climate change policy and high priority concerns are deliberated on and determined by the Board of Directors, while specific matters relating to these areas are deliberated on and determined by the Management Council, our decision-making body for business execution. Specific operations of these bodies are listed below.

Setting targets for greenhouse gas (GHG) emissions reduction and confirming progress toward them
Deliberating, determining, and following up on the progress of our MTP, which takes climate change into account
Determining investment plans that take GHG emissions into account, etc.

In order to promote these Board of Directors and Management Council decisions at a business level, we have a Sustainability Committee chaired by the President, where members of executive management share and discuss issues concerning sustainability, including climate change. Results of Sustainability Committee meetings are reported to the Board of Directors, which discusses topics including appropriate company-wide initiatives. In fiscal 2022, Asahi Kasei assigned an Executive Officer for achieving our GHG reduction targets, and established a Carbon Neutrality Project to formulate a specific roadmap.

Board of Directors, (Management Council) President, Administrative staff, Strategic Business Units, Core Operating Companies, Sustainability Committee, Global Environment Committee, Other subcommittees, Risk Management & Compliance Committee, ESH & QA Committee, Carbon Neutral Project

Sustainability Committee

Sharing, discussion, and alignment of all aspects of ESG, including climate change
Chair: Asahi Kasei President
Committee members: Executive Officer for Technology Functions, Executive Officer for Business Management Functions, Executive Officers for the 3 business sectors

Global Environment Committee

Sharing, discussion, and alignment of all aspects of the E (Environment) of ESG
Chair: Executive Officer for Technology Functions (Environment & Safety)
Committee members: Presidents of SBUs, Senior General Manager of the Production Center, Senior General Manager of Corporate Production Technology, Senior General Manager of Corporate Research and Development, and others

Carbon Neutrality Project

Sharing, discussion, and developing plans for a specific roadmap and initiatives aimed at achieving our 2030 GHG reduction targets and 2050 carbon neutrality goal
Project oversight: Executive Officer for Carbon Neutrality, dedicated Project General Manager

Strategy

Underlying assumptions

While a variety of scenarios can be envisaged, depending on the progress of measures to counter global warming, we have analyzed the following two representative scenarios.

A scenario in which measures to counter global warming make insufficient progress and temperatures rise by 4°C compared with pre-industrial levels (IPCC SSP3-7.0^※2)
— We consider extreme weather events and changes to society and ecosystems as the baseline physical risk scenario
A scenario in which CO₂ emissions are strictly controlled in order to limit the temperature increase to 1.5°C (WEO: Net Zero Emissions by 2050 Scenario [NZE]^※3)
— We consider strengthening of regulations and significant transformation of society and markets as the baseline transition risk scenario

With reference to each of these scenarios, we explored impacts on our current business toward 2050, as well as new opportunities.

Note:These analyses are based on a variety of assumptions, and changes to these assumptions may result in actual risks and opportunities differing significantly.

※2One of the scenarios in the sixth report of the Intergovernmental Panel on Climate Change (IPCC). “SSP” stands for “Shared Socioeconomic Pathway” and the SSP3-7.0 is a scenario in which regional rivalry results in climate policies not being adopted, and temperatures rise by up to 4°C in 2100.
※3One of the scenarios listen in World Energy Outlook (WEO) 2021 by the International Energy Agency (IEA). NZE is a scenario for achieving net-zero emissions worldwide in 2050 in order to limit the temperature rises to 1.5°C by 2100.

Risks

Based on these scenarios, we have considered the climate change risks to Asahi Kasei from various perspectives.

In a scenario in which global temperatures rise by 4°C, we primarily anticipate physical risks such as intense heat, heavy rain, and flooding. In particular, we perceive damage to production sites caused by the effects of increasingly severe storms and floods and the resultant cost of such damage to be a risk for our major sites in Japan and overseas.
In a scenario in which global temperatures rise by 1.5°C, we primarily anticipate risk in the form of a shift in demand toward materials conducive to decarbonization, alongside strengthening of regulations through carbon pricing and other policies aimed at decarbonization. We also anticipate risk in the form of changes in market structures brought about by an accelerating transition to a circular economy and the advent of innovative technologies aimed at decarbonization.

While the above risks vary in their intensity, we view all of them as having the potential to arise amid the climate change to come, and we will continue to pursue risk reduction initiatives.

Risks
	Important Changes	Main Risks	Major Initiatives
+4°C scenario	Serious storm and flood damage	"Physical" production risks ・Suspension of production due to plant damage ・Disruption of raw material supply network due to suppliers suffering from disasters	・Continuous revision of BCP and reinforcement of preemptive response (review inventory levels, consider switching to multiple suppliers/locations, etc.)
+4°C scenario	Rise in temperature	"Human" production risks ・Deterioration of working environment and productivity at construction sites	・Promotion of industrialization and utilization of IT in housing construction ・Promotion of heat stroke prevention measures at construction sites
+1.5°C scenario	Decarbonization	・Rise in cost due to stricter regulations (manufacturing and raw material costs) ・Changes in materials needs (decarbonization requirements, necessary specifications)	Promotion of action for carbon neutrality ・Expansion in utilization of renewable energy, etc. ・More efficient energy use; development and commercialization of industrial processes for decarbonization ・Decarbonization of raw materials ・Acceleration of product decarbonization by ascertaining carbon footprints^※4
+1.5°C scenario	Changes in market structures	・Contraction of existing markets due to transition to a circular economy ・Contraction of existing markets due to the advance of alternative technologies	・Development of material and chemical recycling technologies, promotion of their practical application ・Adoption of biomass feedstock ・Review of management resource allocation

※4 A product’s GHG emissions from material extraction to production

Reference: Estimated cost of CO₂ under the +1.5°C scenario

Asahi Kasei currently emits approximately 4 million tons of CO₂ equivalent annually (Scopes 1 and 2). Assuming a CO₂ price of \10,000 per ton, the annual cost would be \40 billion. As we are reducing our emissions toward the goal of carbon neutrality by 2050, this cost will decrease. Under a trial calculation of total costs up to 2050 based on the required carbon price^※5 and our CO₂ emission reduction targets, our cumulative total cost would be approximately \530 billion (using a present value discount rate of 5%).

On the other hand, our net income (forecast at \164.5 billion in fiscal 2022) is raising our net assets (approximately ¥1.7 trillion as of March 31, 2022) year by year. While appropriately recognizing climate change risks, we are also pursuing business opportunities and evolving our business portfolio, and striving to expand net assets and enhance stakeholder returns through strategic investments in businesses that contribute to the environment.

※5Carbon price under NZE in WEO 2021 ($/t-CO₂): $130 in 2030, $205 in 2040, $250 in 2050

Increase in CO2 price, projected to be $250/t in fiscal 2050. We plan to reduce CO2 emissions by fiscal 2050.

Opportunities

The "10 Growth Gears" (GG10), set out in our MTP as high-priority businesses for resource allocation to achieve growth, present business opportunities within climate change scenarios. We plan to invest approximately \600 billion in these businesses over a three-year period. We recognize that our business expansion and direction can provide business opportunities in the form of a variety of products and services for a changing climate.

- ※6Items judged highly relevant, including those directly addressed in the IPCC’s Sixth Assessment Report and WEO 2021, indicated by double circle: ◎
- Items not covered by the above but estimated to be broadly related indicated by single circle: ○

For example, to achieve carbon neutrality by 2050, it is expected that the battery market will expand significantly and that hydrogen demand will increase significantly. These two areas are among Asahi Kasei’s highest priority business fields.

Estimated market size for various clean energy technologies (2020–2050)^※7
Demand for hydrogen in each scenario (2030)^※7

※7 Graphs by Asahi Kasei based on the IEA’s World Energy Outlook 2021
※8 EJ stands for exajoule, one quintillion (10¹⁸) joules

Opportunities
	Important changes	Main opportunities	Principal initiatives
+4°C scenario	Serious storm and flood damage	・Increasing need for disaster-resilient housing	Enhancing resilience of homes and communities, including Hebel Haus™ and Hebel Maison™
+4°C scenario	Higher incidences of heat stroke and infectious diseases	・Increased demand for existing medicines, new medicines, and the critical care business	・Provision of emergency medicines and medical equipment for infectious diseases and heat stroke ・Provision of consumables, equipment, and services for biopharmaceutical manufacturing processes
+1.5°C scenario	Decarbonization	・Promotion of the spread of Net Zero Energy Houses (ZEH^※9 and ZEH-M^※9) through government policies ・Increased demand for decarbonized products	・Decarbonization of homes and communities through expansion of ZEH-compatible Hebel Haus and Hebel Maison ・Promoting decarbonization and enhancing competitiveness by ascertaining the carbon footprint of products ・Decarbonization of energy ・Energy conservation and process innovation ・Decarbonization of raw materials (use of biomaterials, etc.) ・Development of chemicals using CO₂ as material
	Spread of electric vehicles (EVs)	Increase in EV-related demand (Battery components, materials for reducing vehicle weight)	・Development and provision of components and systems for next generation mobility ・Strengthening of collaboration with automobile and battery manufacturers
	Advent of a hydrogen society	・Increased demand for water electrolysis that utilizes renewable energy	・Development and commercialization of green hydrogen production systems (alkaline water electrolysis)
	Transition to a circular economy	・Growing demand for components compatible with a circular economy ・Development of circular economy infrastructure	・Development of material recycling and chemical recycling technologies, promotion of their practical application ・Use of biomass feedstock
	Expansion of the digital market	・Digital decarbonization solutions in society, life, and industry	・Promotion of business in electronic devices, such as current sensors and CO₂ sensors, and semiconductor and substrate-related electronics materials

※9 ZEH (Net Zero Energy House) and ZEH-M (ZEH-Mansion): Houses and apartment buildings with a net energy consumption of zero or less as a result of advanced insulation and energy saving combined with power generation such as solar

In our MTP, we have positioned Environment & Energy, Mobility, Life Material, Home & Living, and Health Care as fields in which we will provide value. These fields were identified considering climate change and other megatrends, including reference to the latest IPCC and WEO reports, as fields in which we can provide value within climate change mitigation and adaptation.

Risk management

Asahi Kasei evaluates its GHG emissions performance once annually, including independent assurance. Performance figures, together with progress toward our targets, are shared with the Sustainability Committee and its subcommittee the Global Environment Committee, and future initiatives are discussed.

In addition, tracking of our GHG emissions reductions, consideration of our business strategy, reporting to the Board of Directors, and other tasks are also carried out as part of the formulation and annual reviews of our MTP. Related matters are also assessed on a quarterly and monthly basis.

Capital investment is considered and proposed as needed, with its profitability evaluated and implementation decided in light of our internal carbon pricing system.

Metrics and goals

Asahi Kasei considers the following metrics to be related to climate change risks and opportunities.

GHG emissions^※10	Target By 2030, reduction of 30% or more (compared to fiscal 2013) By 2050, achieve carbon neutrality
GHG emissions^※10/operating income	(Fiscal 2021 result: 0.20 tons CO₂-eq/¥100 million) Interpreting this metric: a decrease indicates a lower carbon tax risk
ROIC	By around 2030, 10% or more Interpreting this metric: an increase indicates progress toward becoming a high-earnings enterprise capable of adapting to change
Operating income of the GG10	By around 2030, 70% or more of total operating inocme (fiscal 2021 results: 35%) Interpreting this metric: indicates expansion of related businesses able to contribute to tackling climate change

Others

Internal carbon pricing	¥10,000/ton of CO₂, utilized in our investment decision-making, awards program, etc.
Incorporation of climate change issues into remuneration of executives	Attainment of “promoting sustainability,” including climate change-related initiatives, reflected in performance-linked remuneration

※10 Includes Scope 1 GHG emissions directly linked to Asahi Kasei business activities (our own direct GHG emissions) and Scope 2 emissions (indirect emissions arising from use of electricity, heat, and steam supplied by other companies)