Sustainability

Climate Change Initiatives (Disclosure Based on TCFD Recommendations)

In Medium-Term Management Plan 2020-2022, the Group has designated "climate change mitigation and adaptation" as an important issue (materiality). Accordingly, the Group is leveraging lightweight and energy-efficient technologies to contribute to the transition to a carbon-free society. At the same time, the Group is making efforts to reduce greenhouse gas emissions from its business activities.

Governance

Under the guidance and supervision of the Board of Directors, the Teijin Group is making efforts to address climate change-related issues as part of its efforts toward sustainability and risk management, and has put the Chief Social Responsibility Officer (CSRO) in charge of these efforts. The direction, planning, and progress of the Group's climate change efforts are deliberated by the organizations as mentioned below. The Board of Directors provides instruction on these efforts.

  • Deliberations on basic plans and reports of their progress take place at the Total Risk Management (TRM) Committee. The details of these discussions are then reported to the Board of Directors (twice a year).
  • Reports on executive functions are provided to the Board of Directors by the CSRO (once a year).

Strategy

Risks and opportunities related to climate change

Toward the realization of a sustainable society, the Teijin Group is striving to contribute to climate change mitigation through the supply of “Environmental value solutions” utilizing our technologies for reducing weight and increasing efficiency that we have fostered so far and to climate change adaptation through the supply of “Safety, security, and disaster mitigation solutions” that will be useful in reducing and promptly restoring from the damage by natural disasters.

In addition, since the Teijin Group engages in wide-ranging business globally, we recognize that our business activities do place a considerable burden on the global environment. Premising our approach on the ensuring of safety, we endeavor to reduce this environmental load with the aim of achieving the sustainable growth of both society and the company.

When formulating the Medium-Term Management Plan 2020-22, we analyzed the opportunities and risks relating to the Sustainable Development Goals (SDGs) by thinking backwards on how to achieve our vision in 2030. During this analysis, we identified climate change-related opportunities for each business and incorporated them into our business strategies. We have decided to allocate resources (capital expenditures and other investments) to Environmental Value Solutions (including solutions for climate change mitigation such as lightweight solutions) and Safety, Security, and Disaster Mitigation Solutions (including solutions for climate change adaptation) with the aim of expanding our businesses.

In addition, we analyzed the impact of climate change risks on our operations from the three perspectives listed below. Based on this analysis, we have established long-term environmental targets and are making efforts to reduce our CO2 emissions accordingly. In FY2020, we formulated a road map for achieving these targets. We also raised our target for CO2 emissions reduction in Scope 1 and Scope 2 in July 2021 and formulated a new target for CO2 emissions reduction in Scope 3.

Climate change-related opportunities and risks

Category Major opportunities Time frame Major initiatives
Opportunities concerning products and services ・Increase in profits through the provision of solutions that contribute to "climate change mitigation and adaptation" Short term-long term ・Provision of Environmental Value Solutions that leverage lightweight and energy-efficient technologies
Opportunities concerning resilience Short term-long term ・Provision of Safety, Security, and Disaster Mitigation Solutions that help reduce damage and facilitate a prompt recovery in the event of a natural disaster
Category Major risks Time frame Major initiatives
Transitional risks Policies and legal regulation ・Increase in costs due to the introduction of a carbon tax, EU Emissions Trading Scheme, etc. Short term-long term ・Monitoring of trends in various policies and regulations
・Introduction of internal carbon pricing system targeting capital expenditures that can lead to an increase/decrease in CO2 emissions
Market and reputation ・Decrease in corporate value and worsening of reputation due to an increase in Group CO2 emissions Medium term-long term ・Management of CO2 emissions of Group companies both in Japan and overseas, including affiliated companies
・Formulation of road map for achieving long-term environmental targets
Physical risks Acute and chronic risks ・Suspension of business activities as a result of climate change, including increased intensity of natural disasters such as typhoons and floods, long-term temperature increases, and rising sea levels Short term-long term ・Regular review of BCP and implementation of various disaster prevention drills

Roadmap for reducing CO2 emissions

The Teijin Group seeks to achieve net zero CO2 emissions by 2050 through the early phase-out of all coal-fired power generation facilities and a transition to renewable energy sources for electricity.

Roadmap for Reducing CO<sub>2</sub> Emissions

Introduction of internal carbon pricing system*

The Teijin Group established and introduced an internal carbon pricing (ICP) system* targeting capital expenditure plans throughout the Group that can lead to an increase/decrease in CO2 emissions in FY2020 and began application starting with capital expenditures in FY2021. Under the new ICP system, we apply a uniform internal carbon price (€50/t-CO2) Groupwide and globally, thereby quantifying CO2 emissions as costs that we can consider when making investment decisions. Through the launch of this system, we will promote capital expenditure plans that help reduce CO2 emissions with the aim of achieving our long-term goals for CO2 emissions reduction and prepare the Company for expected future rises in global carbon prices.

  • *A system that creates economic incentives to reduce CO2 emissions by establishing internal carbon prices to quantify CO2 emissions as costs, thereby promoting internal efforts to respond to climate change
  • インターナルカーボンプライシング制度の仕組み

Scenario analysis related to climate-change

After identifying businesses and industries that have the potential to be significantly impacted by climate change, the Teijin Group has been conducting an analysis of the level of this impact based on the 2ºC scenario and the 4ºC scenario,* referencing World Energy Outlook, published by the International Energy Agency (IEA).

  • *2ºC scenario: IEA WEO Sustainable Development Scenario/IEA WEO 450; 4ºC scenario: IEA WEO Stated Policies Scenario

Regarding trends in the aviation industry and the automobile industry, which are the customers of our carbon fiber and composites businesses and could be significantly impacted by climate change, we carried out an analysis of the 2℃ and 4℃ scenarios in FY2019. The results of the analysis showed that in the 2℃ scenario, although there was a drop in demand compared with the 4℃ scenario in the aviation industry, the impact on business strategy and earnings was slight since the use of lightweight materials can be assumed to be increased. Also, in the automobile industry, in the 2℃ scenario, while the demand for electric vehicles and the need for lighter weight increased, the rising trend of car sharing limited the increase in car sales. In the 4℃ scenario, while there was a rise in the number of car sales, the need for lighter weight was limited, and the positive and negative impacts on demand cancelled each other out. In both scenarios, it was confirmed that the impact of the difference on demand was either slight or fifty-fifty, so there would be no serious impact on business strategy or earnings.

In FY2020, we reviewed our base scenario in light of the changing trends in the aviation industry due to the COVID-19 pandemic and revised our plans for profits in the carbon fibers business following the decline in demand for carbon fiber intermediate materials for aircraft. We will keep a close eye on trends and consider the appropriate timing of investments and resource distribution.

Risk Management

Groupwide management methods for climate change risks

The Teijin Group has in place a Total Risk Management (TRM) system targeting both strategic and operational risks, as a preventative measure against the uncertainty that the Company may face.

Physical risks and transitional risks due to climate change are managed under our TRM system and analyzed along with other risks through TRM risk assessment. In this way, we identify important risks. In addition to formulating BCPs to respond to physical risks, we are monitoring the status of CO2 emissions both in Japan and overseas, including at affiliated companies.

Risk management structure

  1. 1.Each business implements risk management in accordance with the frontline operations.
  2. 2.CSRO confirms and makes instructions on the risk management status of each business at the CSR Committee and the CSRO review.
  3. 3.CSRO reports and makes proposals related to Groupwide risk management at the TRM Committee, followed by discussions and instructions.
  4. 4.CSRO reports the contents of discussions at the TRM Committee to the Board of Directors. The Board of Directors deliberates on basic TRM plans.

Indicators and Targets

Under Medium-Term Management Plan 2020-2022, the Teijin Group has established long-term targets for reducing its environmental impact. To accelerate efforts to realize net zero CO2 emissions, in July 2021 we raised the FY2030 target for Groupwide greenhouse gas (GHG) emissions from a 20% reduction compared with FY2018 to a 30% reduction. We also established a new target for reducing GHG emissions in the supply chain*--a 15% reduction by FY2030 compared with FY2018. With the aim of having these targets approved by the Science Based Targets initiative, we adopted calculation methods based on the GHG Protocol as opposed to the calculation methods previously used, which were based on the Law Concerning the Promotion of the Measures to Cope with Global Warming.

  • *Covers Scope 3 emissions in Category 1 (purchased goods and services) except trading businesses

Avoided CO2* emissions

The Teijin Group aims to reduce CO2 emissions throughout the entire supply chain by using its long-cultivated technologies for reducing weight and increasing efficiency. Also, we calculate the impact of using our products on reducing CO2 emissions in the downstream supply chain as “avoided emissions.” By fiscal 2030, we aim to make the amount of our avoided emissions larger than our total emissions, which comprise our Groupwide CO2 emissions and CO2 emissions from the upstream supply chain (Scopes 1 and 2 and upstream Scope 3).

  • * Includes CO2, methane, and N2O

The Group’s targets

Achieve goal of making the amount of avoided CO2 emissions larger than total CO2 emissions by fiscal 2030

Group CO2 emissions

We aim to reduce our greenhouse gas emissions by 30% compared to the FY2018 level by FY2030 and to achieve net zero emissions by FY2050.

The Group’s targets (KPI)

FY2030: 30% reduction (vs. 1.48 million tons-CO2* in FY2018)
FY2050: Net zero emissions

  • *Comparisons with data from the base year, FY2018, that have been recalculated based on the GHG Protocol

Supply chain CO2 emissions

In FY2020, we set the supply chain CO2 emissions targets for the period until FY2030. The target for supply chain CO2 emissions covers Scope 3 emissions in Category 1 (purchased goods and services) except trading businesses.

Group target (KPI)

FY2030 Reduction of 15% compared with FY2018

Efforts to Reduce CO2 Emissions

Avoided CO2 emissions

In FY2020, our avoided emissions decreased 50% compared with the previous year, to 1.65 million t-CO2, as demand declined primarily for automobile and aircraft applications due to the impact of the COVID-19 pandemic.

Total CO2 emissions and avoided CO2 emissions

Total CO2 emissions* Avoided CO2 emissions
FY2019 5.35 million t-CO2 3.28 million t-CO2
FY2020 5.18 million t-CO2 1.65 million t-CO2
  • *Total CO2 emissions are calculated for Scope 1, Scope 2, and Category (C)1 (Purchased goods and services), C2 (Capital goods), C3 (Fuel- and energy- related activities (not included in scope1 and scope 2), C4 (Upstream transportation and distribution), C5 (Waste generated in operations), C6 (Business travel), C7 (Employee commuting) in Scope 3.

Group CO2 emissions

In FY2020, Group CO2 emissions decreased 4% compared with the previous year, to 1.37 million t-CO2, due to a decrease of about 0.15 million t-CO2 resulting from our low operating rate caused by the COVID-19 pandemic and the transfer of the film business, which offset an increase of 0.09 million t-CO2 following our transition to emission calculation methods based on the GHG Protocol. This result represented a 7% decrease* in emissions compared with FY2018. In FY2020, Scope 1 emissions were 0.71 million t-CO2, and Scope 2 emissions were 0.66 million t-CO2.

Toward the realization of a carbon-free society, we are working to abolish all in-house power facilities that use coal-fired thermal power as early as possible and gradually replace our current source of electricity with renewable energy sources. By doing so, we are working to decouple our business growth with greenhouse gas emissions.

  • *Comparisons with data from the base year, FY2018, that have been recalculated based on the GHG Protocol

Trends in Group CO2 Emissions

  • * Includes CO2, methane, and N2O. CO2 emissions data for FY2019 and earlier was calculated based on the Law Concerning the Promotion of the Measures to Cope with Global Warming, while data for FY2020 was calculated based on the GHG Protocol. Although we deducted the amount of CO2 emissions equivalent to the amount of energy sold to other companies from the data for FY2019 and earlier, this amount has not been deducted from the data for FY2020. In addition, the scope of calculation for FY2020 includes non-energy-derived CO2 emissions from carbon fiber production, calculated based on the chemical reaction balance.

Supply Chain CO2 Emissions

In FY2020, Scope 3 emissions in Category 1 were 3.31 million t-CO2*保証対象指標.

The target indicator for supply chain CO2 emissions (Scope 3 emissions in Category 1 except trading businesses) for FY2020 was a 5% reduction compared to FY2018, mainly due to a decrease in production activities as a result of effects from COVID-19.

  • *The calculation criteria for Category 1 are as follows:
    Category 1 emissions are calculated by multiplying the purchased weight or purchased value of purchased goods and services by the emissions intensity in units of weight or value. Products procured through the Teijin Group's trading businesses are also included in the Category 1 calculation. Also, emissions intensity data for monetary units is from the Ministry of the Environment's Emissions Unit Values for Accounting of Greenhouse Gas Emissions, etc., by Organizations Throughout the Supply Chain (Ver. 3.1) (March 2021) (Emissions Unit Values Database V. 3.1). Emissions intensity data for weight units is based on the intensity data of the Ecoinvent Database (operated by Ecoinvent Association) or the GaBi Database (operated by Sphera).

Reducing CO2 emissions associated with use of company vehicles

In Japan, the Teijin Group set independent numerical reduction targets by business site for CO2 emissions associated with the use of company vehicles. Common measures include updating vehicles used for sales activities to eco-cars and recommending fuel-efficient driving. These measures have achieved a reduction in CO2 emissions per distance traveled.

Due in parts to effects from the COVID-19 pandemic, total CO2 emissions related to the use of company vehicles in FY2020 were 5,137 tons (20% reduction compared to FY2019).

Efforts to reduce CO2 emissions from offices

We are taking measures to improve the efficiency of energy use at Teijin Limited, group company head offices, sales branches and other business sites. A particular measure in summer/winter, besides encouraging suitable operation of office air-conditioning, is the Teijin Cool Biz/Warm Biz initiative, which encourages clothing appropriate for the season (dress code) to facilitate less power consumption and comfortable office environments.

In FY2020, the total CO2 emitted was 5,391 tons (a 1% reduction compared to FY2019) due to energy-saving measures implemented at our business sites.

Reducing CO2 emissions in logistics

In FY2020 CO2 emissions in logistics amounted to 5,886 tons , down 1,193 tons from FY2019.

Against the backdrop of lower shipments due to effects from the COVID-19 pandemic in FY2020, the overall volume of freight transportation declined (down by 509,000 t-km/year). As part of our portfolio transformation, the transfer of our film business subsidiary to Toyobo Co., Ltd. in October 2019 was also a major factor.

As an ongoing measure to reduce the environmental load, in FY2020 we also improved our truck loading rate and implemented a modal shift (utilizing Japan Railway transportation and shipping). For example, we shifted from trucks to ship and rail transportation. We also decreased transportation using small trucks, increased bundled transportation using large trucks, and took other measures to increase transportation efficiency.

As a result of the steady implementation of these measures even during the COVID-19 pandemic, CO2 emissions have decreased. In the entire Group’s logistics, CO2 emissions per unit of transportation was flat compared with FY2019. The standard basic unit per 1,000 t-km (tons-CO2/1,000 t-km) was 1.053 (against 1 in FY2011).

In FY2021 we will continue our efforts to lower emissions per unit by increasing vehicle size (expanding bulk transportation), improving the truck loading rate, and promoting a modal shift.

Trends in CO2 Emissions in logistics and CO2 Emissions per unit of transportation amount

  • *The scopes for calculating CO2 emitted by logistics for each fiscal year are as follows.
    FY2011: Teijin Limited (excluding the aramid fiber business), Teijin Film Solutions Ltd., and the former Teijin Fiber Co., Ltd.'s apparel business that was consolidated with Teijin Frontier Co., Ltd.
  • *FY2017: Teijin Limited, Teijin Film Solutions Ltd., Teijin Frontier Co., Ltd., Teijin Pharma Limited, Toho Tenax Co., Ltd., Teijin Cordley Limited, and Teijin Engineering Ltd.
    FY2018 and FY2019: Teijin Limited, Teijin Film Solutions Ltd., Teijin Frontier Co., Ltd., Teijin Pharma Limited, Teijin Cordley Limited, and Teijin Engineering Ltd.
  • *In FY2018, the former Toho Tenax was transferred and integrated into Teijin Limited.
  • *FY2020: Teijin Limited, Teijin Frontier Co., Ltd., Teijin Pharma Limited, and Teijin Cordley Limited
  • *Teijin Film Solutions Ltd. and Teijin Engineering Ltd. are not included.