Measures Against Climate Change

Policies

Although it uses fossil raw materials and fuels in its product manufacturing processes and emits a considerable amount of greenhouse gases (GHG), the Group has many products that contribute to energy conservation and the carbon cycle. We regard measures to combat climate change as a management priority in terms of both risks and opportunities. In May 2019, we announced our endorsement of the recommendations of the Task Force on Climate- related Financial Disclosures (TCFD). In accordance with these recommendations, we are promoting dialogue with our stakeholders while evaluating risks and opportunities related to climate change, conducting scenario analysis to inform initiatives that enhance our resilience, and disclosing information based on the TCFD framework.

Related link

• Initiatives for Carbon Neutrality

Governance

Role of the Board of Directors and monitoring system

The CEO supervises the risks and business opportunities, targets, and specific initiatives associated with the environment including climate change, while the CSuO takes responsibility for promoting actions. These issues are deliberated at the Sustainability Promotion Council and the Management Committee. The progress of each initiative is regularly monitored, and remedial measures are discussed when needed.
The Board of Directors receives periodic reports of what the Sustainability Promotion Council and the Management Committee discussed, and on which points they made decisions and deliberates and supervises them from the perspective of maximizing corporate value. From 2022, we have aligned the evaluation indexes for inside directors and executive officers with the initiatives in the long-term vision and countermeasures against sustainability issues, including climate change, with the aim to strongly incentivize them to manage the Group from a long-term perspective and promote the sustainable growth of the Group. In March 2024, we revised our Corporate Governance Basic Policies to clarify the role of the Board of Directors in addressing climate change and protecting biodiversity.
The Carbon Neutrality Project is led by the Sustainability Department and involves all CXOs and business units.

Monitoring system for environmental initiatives by the Board of Directors
(as of June 30, 2024)

Strategies

Short-, medium- to long-term climate change-related risks and opportunities and responses to them

Amid the successful transition to a carbon-neutral society, the Group sees climate change as both a risk and opportunity. The Group will exercise its social responsibility as a company and build further competitive advantages to reduce GHG emissions across the value chain by providing products and services that contribute to decarbonization, achieving co-creation with partners, improving energy efficiency, and increasing usage of renewable energy. Given the above, the Group analyzes risks and opportunities to evaluate the impact of climate change on the Group businesses under the following two scenarios: (1) The average global temperature will increase by 4°C or more and (2) The average global temperature rise can be kept well below 2°C and continue efforts to limit it to 1.5°C based on the Paris Agreement, which were released by the Intergovernmental Panel on Climate Change (IPCC) or the International Energy Agency (IEA). Based on the analysis, we determine the necessary countermeasures. Business impact assessments were conducted in the Semiconductor and Electronic Materials segments in 2023, followed by the Mobility and Innovation Enabling Materials segments in 2024. Assessments are scheduled to be completed for all businesses by 2025. We will make disclosures on this front starting with the segments for which impact assessments have been completed.

Transition risks affecting the Group businesses include increased operating costs due to a rise in energy taxes including carbon pricing. We aim to reduce CO2 emissions to about 3.24 million t-CO2 by 2030, or a 30% reduction from 4.63 million t-CO2 in 2013. Assuming that Scope 1 and 2 emissions in fiscal 2030 resulting from sales growth are estimated to be about 5 million t-CO2, the carbon pricing is set at ¥10,000/t-CO2 based on the IEA’s 2°C scenario (SDS)* and others, and we need to offset the portion that falls short of reduction target through emission trading. In that case, if we fail to reduce emissions by 30%, the operating cost will increase by about ¥18 billion per year, implying that hitting the reduction target will lead to reducing operating costs. As a company that interrelates with society, we will continue to use other scenario analyses to contribute to realization of a carbonneutral society in various ways, take measures against climate risks, and achieve a sustainable growth.

• * *2°C scenario (SDS): Sustainable development scenario

• ※1 The financial impact of climate-related opportunities and risks is being calculated sequentially, and will thus be disclosed in stages. Impact indicates the scale of impact on the Group should we address the identified climate
  change opportunities and risks.
  Large: We expect regulations and policies to tackle climate change to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to be ¥10.0 billion or higher.
  Medium: Moves to address climate change are already underway, and we expect this to continue impacting the Group going forward. As a result, we estimate the annual impact on our operating income to range from ¥3.0
  billion to less than ¥10.0 billion.
  Small: There are moves to address climate change. As a result, we estimate the annual impact on our annual operating income to be less than ¥3.0 billion.
• ※2 Physical risks were analyzed using hazard maps and AQUEDUCT at 36 major sites in Japan. In the event of a once-in-a-century disaster, it was discovered that 13 sites are exposed to risks. However, we set the impact as “small”
  because the annual impact taking into account the recurrence interval is small for both the 1.5/2°C and 4°C scenarios. Going forward, we will gradually move forward with the analysis of overseas sites and supply chains.

Risk Management

Process to assess, identify, and manage risks

The Group conducts climate change and biodiversity risk assessments for each business, assesses “transition risks” and “physical risks” arising from climate change, as well as dependency, impact, and risks related to nature. We then identify material risks for the Group and develop countermeasures against them. Material issues in identifying risks and developing countermeasures are reported to the Board of Directors. We will continue to conduct the risk assessments to update risks and countermeasures, along with monitoring the progress of the existing countermeasures.

Integration into enterprise risk management

Given the importance of building an enterprise risk management system, the Group pursues integrated risk management using a common framework across the Group. Information on climate change, biodiversity and other risks with the potential to impact the Group’s management is registered in an integrated manner into our risk management system via companywide risk identification activities (as part of risk assessment procedures). Key risks, which are deemed to have a particularly high frequency or degree of impact, are deliberated by a dedicated committee (Risk Management Committee). Important matters examined by the Sustainability Promotion Council and the Risk Management Committee are submitted to the Management Committee for deliberation and decision before being reported to the Board of Directors.
 

Indicators and Targets 

Toward carbon neutrality in 2050, upon the formation of the new company, we reviewed our GHG emissions reduction targets for 2030 in 2021 and set the target of a 30% reduction relative to the 2013 level. We will review medium- to long-term plans for each business, aiming to create a low-carbon economy. To achieve our GHG emissions reduction targets for 2030, we will further reduce our GHG emissions and promote energy conservation. Carbon neutrality will also be pursued leading up to 2050, to accomplish the goal of becoming a company that contributes to a sustainable global society as put forth by our long-term vision. In 2023, Resonac Graphite Austria GmbH switched 100% of its electricity usage to electricity derived from wind power, and the entire Resonac Group purchased 115,355 MWh of electricity derived from renewable energy. We reduced GHG emissions by 8.8% compared to 2013 by switching to non-fossil fuel energy sources such as solar power generation.

Non-financial KPI Results and Targets

Resonac regards sustainability as the basis for its companywide strategies and has set three material issues for sustainability. Accordingly, for environment , we will work on the non-financial KPIs and measures that were set to “Gain credibility through responsible business management” toward the achievement of our long-term vision.