Preventing Global Warming

Support for the TCFD

In May 2019, the DIC Group declared its support for the Task Force on Climate-related Financial Disclosures (TCFD). Recognizing climate change as a critical factor affecting its businesses, the Group pledges to disclose related information in line with TCFD recommendations going forward.

A New Target for the Reduction of CO2 Emissions

In June 2021, the DIC Group revised its target for the reduction of CO2 emissions. The Group now aims to achieve carbon neutrality—net zero CO2 emissions—by fiscal year 2050 and will seek to reduce CO2 emissions 50% from the fiscal year 2013 level by fiscal year 2030. (The range of this target is Scope 1 and 2 emissions.)
The DIC Group will also continue working to expand its portfolio of products and services that contribute to decarbonization with the goal of playing an active role in lowering CO2 emissions in markets and across society.

Disclosures in Line with TCFD Recommendations

With the aim of helping institutional investors grasp climate-related risks and opportunities and make investment decisions, the TCFD has structured its recommendations around four thematic areas that represent core elements of how organizations operate—governance, strategy, risk management, and metrics and targets.
Having acknowledged the disclosure of information on efforts to address climate change as an imperative for companies today, the DIC Group has resolved to do so in line with the TCFD’s recommendations. Accordingly, the Group is enhancing its efforts to respond appropriately to risks and capitalize on opportunities associated with climate change with the objective of earning the trust of stakeholders through improved resilience and the proactive dissemination of information.

TCFD Recommendations for Financial Disclosures

Governance Governance around climate-related risks and opportunities
Strategy Actual and potential impacts of climaterelated risks and opportunities on businesses, strategy and financial planning
Risk Management Processes used to identify, assess and manage climate-related risks
Metrics and targets Metrics and targets used to assess and manage relevant climate-related risks and opportunities

01Governance

The DIC Group recognizes climate change as a key management challenge. Important matters, including the setting of medium- and long-term targets for the reduction of CO2 emissions, are deliberated and determined by the Sustainability Committee, which meets a minimum of four times annually and answers directly to the president and CEO, and the details are reported to the Board of Directors, in line with the rules governing the Board of Directors. (In principle, the Sustainability Committee reports to the Board of Directors on all of its deliberations.) A system is thus in place that ensures appropriate supervision of the Sustainability Committee is provided to the Board of Directors.
To appropriately assess and manage climate change–related risks and opportunities, thereby ensuring the effective management of its operations, the Sustainability Committee consists of the president and CEO, the general managers of the Production Management Unit and Technical Management Unit, and the heads of the Corporate Strategy Unit, General Affairs and Legal Unit, Finance and Accounting Unit and ESG Unit, as well as the presidents of the business groups and the general managers of the product divisions.

Governance
Principal Issues Deliberated by the Sustainability Committee in Recent Years
  • After deliberation by the Sustainability Committee, medium-term sustainability policies are discussed and determined by the Board of Directors.
  • “Response to climate change” was newly identified as a priority materiality theme in fiscal year 2019. Deliberations continued in fiscal year 2020.

02Strategy

DIC is promoting sustainable business strategies, recognizing the importance of risks and opportunities associated with climate change. Because the impacts of climate change are likely to surface over the medium to long term, the Company is working to enhance its understanding of the principal climaterelated risks and opportunities (transition as well as physical) that are likely to have a financial impact over the medium to long term.
Based on scenario analysis conducted in fiscal year 2020, the Company will work to raise its awareness of foreseeable opportunities and risks from a medium- to long-term perspective and at the same time to formulate and execute effective strategies on an appropriate time line. In fiscal year 2020, DIC also established the Climate Change Working Group, which is tasked with helping facilitate the achievement of net zero CO2 emissions by fiscal year 2050. The activities of the working group are reported to and debated by the Sustainability Committee.

Type Description
Emerging regulations (Transition) There is a risk that emerging regulations (e.g., the introduction of carbon pricing) will increase direct costs and impact on the operating environment/profitability (e.g., facility costs and raw materials prices).
Technology (Transition) With technological innovations, there is a risk of products and services becoming obsolete and demand declining.
Market (Transition) There is a risk that an insufficient grasp of evolving customer/consumer preferences will mean the loss of market opportunities.
Reputation (Transition) If DIC’s attitude toward and ability to respond to climate change are seen by external observers as insufficient for a manufacturer of fine chemicals, there is a risk that its reputation will suffer.
Acute (Physical) Should extreme weather events become more frequent, there is a risk that the operations of production sites will be affected.
Chronic (Physical) If temperatures remain persistently high, there are risks of increased production site maintenance and operating costs and of damage to health.
Upstream (Physical) In addition to a risk of uncertainty regarding the supply of raw materials monopolized by certain suppliers, there are BCP risks.

Principal Climate-Related Opportunities

Type Description
Emerging regulations (Transition) With emerging regulations, there is an opportunity to establish new business models that demonstrate the superiority of DIC’s businesses.
Technology (Transition) Technological innovation provides opportunities to create new low-carbon/decarbonized businesses that respond to climate change and to increase product cost competitiveness through the use of revolutionary technologies to improve processes.
Market (Transition/physical) Accurately grasping evolving customer/consumer preferences—e.g., shift to low-carbon business models, chance that certain existing businesses will be avoided—provides the opportunity to develop new products and services that anticipate lifestyle changes.
Upstream/downstream(Transition/physical) Addressing climate change (adaptation and mitigation) over products’ entire life cycles through organic collaboration with customers and suppliers provides the opportunity to create new businesses and systems.

Scenario Analysis

In fiscal year 2020, the DIC Group conducted scenario analysis using both the 2°C scenario and the 4°C scenario for core businesses, as shown in the following table:

Scenario information 2ºC Scenario 4ºC Scenario
Scenario details Based on the International Energy Agency (IEA)’s World Energy Outlook (WEO) Sustainable Development Scenario and Energy Technology Perspectives (ETP) 2017 2ºC Scenario Based on the Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) 8.5
Time frame 2030 2030
Carbon price assumption ¥8,000/tonne

Results of Scenario AnalysisOpportunity Risk

Implications for society and the business environment Risk and opportunity assessment DIC Group countermeasures
2ºC scenario: Strengthening of policies and regulations Introduction of carbon pricing (direct implications for manufacturing and the procurement of raw materials) Possible direct impact on manufacturing costs: ¥5.03 billion (Annual CO2 emissions in fiscal year 2018: 617,964 tonnes)

Reference: Possible impact on procurement costs: ¥11.8 billion (Annual CO2 emissions (Scope 3, Category 1) in fiscal year 2018: 1,480,561 tonnes)
Opportunity Risk
Opportunity Risk
  • Take steps to maintain cost competitiveness, assuming global introduction.
  • Promote enhanced functionality to minimize the impact of carbon pricing in key businesses, including products for automotive, electronics and display applications and for healthcare, as well as pigments for cosmetics.
Opportunity Risk
  • Use the DIC Sustainability Index to promote products that help reduce CO2 emissions (i.e., are sustainable).
  • Capitalize on rising demand for PPS compounds underpinned by expanded automobile production and the shift to electric vehicles (EVs).
2ºC scenario: Changes in demand attributable to circular economy Global movement to minimize use of oneway plastics and efforts by brand owners seeking to reduce packaging Demand for some plastics (one-way plastics) will decrease, but increased demand for plastic alternatives will mean only a negligible impact on materials suitable for applications other than plastics. Opportunity Risk
  • Promote core products as appropriate for use with both plastics and plastic-alternative materials; differentiate with barrier and other functions.
  • Foster businesses that respond to demand for materials that are biodegradable and/or use bioderived raw materials.
Increase in production and sales of recycled plastics While it is unclear what will happen vis-à-vis demand changes, a failure to launch commercial distribution will mean the loss of future market opportunities. Opportunity Risk
  • Seek tie-ups with customers and step up exploration of chemicals and materials recycling.
Opportunity Risk
  • Focus on adding value, including by advancing innovations in materials and formulations that enhance recyclability.
2ºC scenario: Reduction of CO2 emissions attributable to manufacturing Introduction of energy-saving and renewable energy equipment Annual investment in energy-saving and renewable energy equipment is estimated at ¥2.0 billion (direct impact on manufacturing costs).

Ongoing efforts to reduce CO2 emissions attributable to production will also be necessary.
Opportunity Risk
  • Continue investing in energy-saving and renewable energy equipment with the aim of achieving target for reducing Scope 1 and 2 emissions by 30% from the fiscal year 2013 level by fiscal year 2030.
  • The reduction of CO2 emissions is expected to reduce costs by an average of ¥2.31 billion annually between fiscal years 2013 and 2030 (estimated annual emissions reduction: 289,000 tonnes).
Shift of focus to the achievement of net zero CO2 emissions by fiscal year 2050 Efforts to reduce CO2 emissions enough to keep the increase in global average temperature over the current century to 1.5ºC from the preindustrial level are already underway. There is an increased risk that this target will be imposed across entire supply chains. Opportunity Risk
  • Consider the setting of a new science-based target conducive to keeping the increase in global average temperature to 1.5ºC.
  • Apply internal carbon pricing system to increase investment in energy savings and improve CO2 emissions reduction performance.
4ºC scenario: Risk that supply chains will be interrupted due to an increase in climate-related disasters Suspension of production at suppliers’ facilities due to frequent climate-related disasters

Suspension of supplies of plant-derived raw materials
  • Stable procurement risks affect certain businesses, i.e., those dependent on raw materials procured overseas or monopolized by certain suppliers.
  • For most products, coordination among departments will facilitate the use of alternative raw materials.
Opportunity Risk
  • For key raw materials, promote two-company shared procurement in multiple regions and enhance BCP responses.
  • For key products, ensure ample inventories of raw materials and products.
4ºC scenario: Risk that operations at production facilities will be interrupted due to an increase in climate-related disasters Suspension of production at own facilities due to frequent climate-related disasters

Depletion of groundwater resources
  • Production sites are scattered across the globe, so impact on overall operations is limited. Certain products for which production is concentrated at certain facilities may be affected.
  • Countermeasures are required in areas where there are concerns that water-related risks will increase.
Opportunity Risk
  • Locate printing inks and other production facilities around the world to ensure complementary capabilities and cooperate with other companies to minimize the impact in the event port facilities are damaged due to storm surges or flooding.
  • Strengthen measures for sites located in coastal areas. Reinforce the effectiveness of BCPs by providing related training.
  • Implement measures to address water-related risks.
Increases in non-life insurance fees Insurance premiums may increase. Opportunity Risk
  • Bolster profitability by reinforcing and expanding portfolio of sustainable products.
4ºC scenario: Response to changes in lifestyles attributable to rising temperatures Changes in lifestyles and consumption patterns attributable to rising temperatures and resulting changes in demand
  • Demand for certain products may be affected by changing consumption patterns attributable to rising temperatures, but because demand sources are diverse the risk to overall business is low.
  • The potential for increases in new demand as a consequence of changes in lifestyles attributable to rising temperatures is high.
Opportunity Risk
Opportunity Risk
  • Rising temperatures present an opportunity in the form of increased demand for thermal barrier–related products.
  • Given that dietary preferences are also expected to change, capitalize on expanding demand from beverage manufacturers and for materials used in frozen foods.
  • Take advantage of higher demand in the health foods and life sciences fields attributable to increasing health consciousness.
  • Note: Figures are based on 2018 results at the time of scenario analysis. As CO2 emissions in fiscal year 2019 amounted to 577,056 tonnes, the impact of carbon pricing under this condition would be as much as ¥4.62 million.

Initiatives for Fiscal Years 2020 and 2021 (Following Scenario Analysis)

  • Introduce internal carbon pricing
    Quantify climate change risk and provide economic incentives for reducing CO2 emissions to accelerate the promotion of investments and innovations to further advance emissions reductions.
  • Promote full-scale collaboration with FP Corporation (FPCO) in the practical implementation of a closed-loop recycling system for polystyrene, used in plastic containers for food products, among others.
  • Establish the Climate Change Working Group and begin considering an approach to achieving net zero CO2 emissions by fiscal year 2050.

Scenario Analysis: A Message from the Head of the ESG Unit

Executive Officer, Head of ESG Unit, DIC Corporation Taihei Mukose

Having acknowledged responding to climate change as a key challenge, the DIC Group positioned this as a priority materiality issue in its fiscal year 2019 analysis of materiality. For the first time, the Group also conducted a scenario analysis, in line with the recommendations of the TCFD, recognizing the importance of a cautious yet appropriate approach to sustainable growth. In addition to enhancing our understanding of carbon pricing and physical risks, this process underscored our awareness of the importance of ensuring that many of the Group’s core packaging materials products are compatible with multiple different media, rather than only with plastic or with paper, is key to the resilience of this business. We will continue to strengthen our business to respond to changes in lifestyles and take appropriate measures to address risks. We will also work to deepen stakeholders’ understanding by ensuring effective disclosure.

Executive Officer, Head of ESG Unit, DIC Corporation Taihei Mukose

03Risk Management

Processes used to identify and assess climate-related risks

The Sustainability Working Group, which was established in June 2018 as a subsection of the Sustainability Committee, is charged with identifying and assessing priority risks and opportunities from the perspective of potential to negatively impact the DIC Group’s financial standing, that is, with identifying and assessing materiality. The assessment of priority risks and opportunities (materiality assessment) is deliberated and determined by the Sustainability Committee, which reports its findings to the Board of Directors. In fiscal year 2019, as part of its newly revised process for assessing and abstracting material issues, DIC identified climate change as one of four priority materiality themes, recognizing it as a critical challenge from the perspective of both adaptation and mitigation.
Pressure on the global community to achieve carbon neutrality by fiscal year 2050 continues to intensify rapidly and changes to rules governing competitiveness are expected to transform the socioeconomic system. While the Group has set a target for reducing CO2 emissions 30% from the fiscal year 2013 level by fiscal year 2030 and is promoting a variety of emissions reduction measures, it recognizes the following climate change–related risks as having the potential to negatively impact its performance:

  • Should carbon pricing or carbon border taxes be introduced in the future, there is a risk that raw materials and fuel prices will rise and/or that taxes will be imposed on exported products, making CO2 emissions a factor that directly affects costs;
  • Should the Group be unable to respond to any sudden changes in demand resulting from the shift to a circular economy to advance decarbonization, there is a risk of a significant decline in profits generated by its businesses (climate change–related transition risk); and,
  • Should climate-related disasters arising from the increasing seriousness or frequency of extreme weather events occur, resulting in product supplies becoming impossible or being delayed due to the suspension of operations at production facilities and the instability of raw materials supplies, there is a risk that it will cause a significant decline in profits generated by Group businesses or threaten business continuity (extreme physical risk).
These three risks are seen as highly likely to manifest over the medium term (three to four years) or the long term (five years or more). They are also recognized as being in one of two categories, namely, externally caused risks that are beyond the Group’s control or business risks that should be handled by the relevant divisions/departments.

Processes used to manage climate-related risks

The DIC Group has identified “Response to climate change” as one of four priority materiality themes. Accordingly, the progress of initiatives is deliberated periodically by the Sustainability Working Group, with the results of deliberations reported to and approved by the Sustainability Committee. The working group looks at success in reducing CO2 emissions compared with the target set, the evolution of efforts to manage risk compared with TCFD requirements and grasp of Scope 3 emissions. As part of its effort to satisfy TCFD requirements, the Group conducts scenario analysis using both the 2°C scenario and the 4°C scenario to assess transition and physical risks.

04Metrics and Targets

The DIC Group’s DIC111 medium-term management plan includes a commitment to reducing emissions of greenhouse gases from its sites. The Group discloses the results of such initiatives and obtains third-party verification of its CO2 emissions data.

Environmental Targets Set Forth in DIC111

Climate Change

Goals and Achievements of Major Initiatives

Reduce emissions of CO2 at sites (Scope 1 and 2).

Goals for fiscal year 2019 DIC Group (global): Reduce CO2 emissions at DIC Group sites (Scope 1 and 2) by 30% from the fiscal year 2013 level by fiscal year 2030 (average annual decrease of 2.1%).
Achievements in fiscal year 2019 CO2 emissions: 577,056 tonnes
  • Down 6.6% from fiscal year 2018 (617,964 tonnes)
  • Down 20.2% from fiscal year 2013 (722,955 tonnes)
Evaluation ★★★
★★★
Goals for fiscal year 2020 Reduce CO2 emissions at DIC Group sites (Scope 1 and 2) by 30% from the fiscal year 2013 level by fiscal year 2030 (average annual decrease of 2.1%).
Goals for fiscal year 2019 DIC Group (Japan):
In line with the global target, reduce CO2 emissions at DIC Group sites (Scope 1 and 2) by 30% from the fiscal year 2013 level by fiscal year 2030 (average annual decrease of 2.1%).
Achievements in fiscal year 2019 1. CO2 emissions: 220,776 tonnes
  • Down 4.8% from fiscal year 2018 (231,820 tonnes)
  • Down 9.7% from fiscal year 2013 (244,377 tonnes)

2. Energy consumption per unit of production: 3.706 GJ/tonne

  • Down 5.1% from fiscal year 2018 (3.094 GJ/tonne)
  • Down 11.1% from fiscal year 2013 (4.170 GJ/tonne)
Evaluation ★★★
Goals for fiscal year 2020
  • In line with the global target, reduce CO2 emissions at DIC Group sites (Scope 1 and 2) by 30% from the fiscal year 2013 level by fiscal year 2030 (average annual decrease of 2.1%).
  • Reduce energy consumption per unit of production by 17% from the fiscal year 2013 level by fiscal year 2030 (average annual decrease of 1.0%). (Comply with Japan’s Act on the Rational Use of Energy.)

Reference:
CO2 emissions per unit of production (global DIC Group) in fiscal year 2019: 270.0 kg/tonne

  • Down 7.4% from fiscal year 2018 (291.5 kg/tonne)
  • Down 17.4% from fiscal year 2013 (327.0 kg/tonne)

CO2 emissions per unit of production (DIC Group in Japan) in fiscal year 2019: 195.6 kg/tonne

  • Down 8.1% from fiscal year 2018 (212.7 kg/tonne)
  • Down 15.6% from fiscal year 2013 (231.7 kg/tonne)
  • Evaluations are based on self-evaluations of current progress.
    Key: ★★★ = Excellent; ★★ = Satisfactory; ★ = Still needs work

Basic Approach

The DIC Group works to reduce CO2 emissions over the entire life cycle of its products and, through its business activities, to lower risks associated with climate change.

Initiatives Aimed at Preventing Global Warming

Recognizing climate change as an issue of the utmost importance to society and a critical factor affecting its businesses, the DIC Group is working as one to reduce energy consumption and promote decarbonization and in its DIC111 medium-term management plan, announced in fiscal year 2019, has pledged to reduce greenhouse gas emissions from its sites. As a manufacturer of fine chemicals with a global presence, the Group is also leveraging its technological capabilities to develop products that will contribute to the realization of a low-carbon society.
At the 2015 United Nations Climate Change Conference (the 21 annual session of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC), participants adopted the Paris Agreement, a move aimed at accelerating efforts to tackle this urgent challenge. In May 2019, the DIC Group declared its support for the TCFD, which was established under the auspices of the Financial Stability Board (FSB) and announced in June 2017, pledging to disclose climate-related information in line with TCFD recommendations going forward.

Initiatives Aimed at Preventing Global Warming

With global warming, a principal cause of climate change, an increasingly pressing issue for the entire world, the DIC Group is actively promoting related initiatives as outlined below.

  • Undertake energy-saving initiatives worldwide
  • Deploy effective strategies through working group activities
  • Operate energy-saving cogeneration systems (combined heat and electric power generating facilities)
  • Employ energy from renewable sources (biomass boilers, wind power and solar power) at suitable sites
  • Extend energy-saving initiatives to DIC Group companies overseas
  • When installing or expanding facilities, purposefully select energy-efficient equipment and formulate related rules (investment in environmental value)
  • Note: A total of 16 of the DIC Group’s 32 sites and 20 offices and research facilities in Japan have earned certification under the country’s Designated Energy Management Factory system.

Framework for Promotion

DIC and DIC Group companies in Japan have established an Energy-Saving Promotion Committee at each site. Committee activities include confirming the progress of initiatives, engaging in discussions and conducting patrols. DIC has also set up an Energy-Saving Working Group at each site, comprising members chosen by the site, to foster the exchange of information and research pertaining to new items and to promote the horizontal deployment of effective measures across the Group. This combination of site- and Group-level initiatives forms the framework under which the DIC Group endeavors to reduce its CO2 emissions. Overseas, DIC Group companies promote a wide range of independent energy-saving initiatives that align with the Group’s policy. The Production Management Unit provides support on multiple fronts, including the deployment of management systems and the training of employees. Critical initiatives are debated by and the progress thereof is reported on by the Sustainability Committee, which answers directly to the president and CEO.

Principal Initiatives in Fiscal Year 2020

01Energy Consumption and CO2 Emissions by the Global DIC Group

Energy consumption by the global DIC Group in fiscal year 2020 declined 3.1% from fiscal year 2019 and 16.9% from the fiscal year 2013 base year. CO2 emissions by the global DIC Group amounted to 552,123 tonnes, down 4.3% from fiscal year 2019 and 23.6% from fiscal year 2013, while CO2 emissions per unit of production, at 271.7 kg/tonne, edged up 0.6% from fiscal year 2019 but fell 16.9% from the base year.
The DIC Group’s diverse product portfolio includes printing inks, polymers, pigments, LCs, engineering plastics and compounds. Recent years have seen an uptrend in the output of energy-intensive fine chemicals and a downtrend in the output of general-purpose items, the production of which is comparatively energy efficient. Against this backdrop, the Group’s success in achieving a reduction in the volume of CO2 it emits worldwide in excess of its target for the year included a decline in production volume due to COVID-19, as well as efforts by companies worldwide to break down the target—an annual average decrease of 2.1% from fiscal year 2018, set forth in the DIC111 medium-term management plan to ensure achievement of its long-term target of a 30% reduction from the fiscal year 2013 level by fiscal year 2030. This achievement also reflected the promotion of energy-saving and decarbonization initiatives beyond what had been necessary to achieve its previous annual reduction target of 1.0%. Some of these initiatives are outlined below.
Going forward, the Group will continue to implement a variety of energy-saving measures, including introducing highly efficient facilities, promoting process improvements and boosting capacity utilization rates, while at the same time further advancing its use of renewable energy by shifting to biomass and other clean fuels and installing solar power facilities.

Factors Contributing to Change in Global CO<sub>2</sub> Emissions
Reduction in Global CO<sub>2</sub> Emissions Attributable to the Use of Renewable Energy

02Energy Consumption and CO2 Emissions by the DIC Group in Japan

Energy consumption by the DIC Group in Japan—the 52 sites in Japan operated by DIC and domestic Group companies—in fiscal year 2019 edged down 1.7% from fiscal year 2018 and 4.9% from the fiscal year 2013 base year. Energy consumption per unit of production totaled 3.706 GJ/tonne, down 5.1% from fiscal year 2018 and 11.1% from the base year. In contrast, CO2 emissions by the Group in Japan amounted to 220,776 tonnes, down 4.8% from fiscal year 2018 and 9.7% from fiscal year 2013, while CO2 emissions per unit of production amounted to 195.6 kilograms, down 8.1% from fiscal year 2018 and 15.6% from the base year.
Principal factors behind the decline in CO2 emissions by the Group in Japan included the implementation of 551 energy-saving initiatives at sites, as well as the start of operations of solar power facilities at five sites, including the Tatebayashi Plant, with a combined annual generating capacity of 1,440 kW. As of December 31, 2019, the total generating capacity of solar power facilities at DIC Group sites in Japan was 3,040 kW (all for internal consumption).
Other contributing factors included the fact that the change in CO2 emissions attributable to a decrease in production volume was essentially level, despite a 3.4% decline in production volume, owing to an increase in the production of comparatively energy-intensive products. In addition, at the Chiba Plant, a decrease in the incineration of waste oil and waste plastics using a rotary kiln resulted in a decline in emissions attributable to the incineration of waste equivalent to 2.0% of the Group’s fiscal year 2018 production volume.
The DIC Group in Japan purchases a total of 201 million kWh of electric power from domestic electric power companies annually (contract volume: 50,000 kWh) and when renewing annual electric power supply contracts selects suppliers based not only on costs but also low CO2 emissions factor. In fiscal year 2019, the Group was able to purchase a greater amount of low-carbon electric power than in the previous period, which accounted for a 1.4% decrease in domestic CO2 emissions. Looking ahead, the Group will continue working to expand its purchases of low-carbon electric power.

Factors Contributing to Change in CO<sub>2</sub> Emissions in Japan
Key Energy-Saving Initiatives in Japan in Fiscal Year 2019

03Efforts to Promote the Use of Renewable Energy in Japan Renewable Energy as a Percentage of Total Energy Used in Japan: 11.0%

The bulk of renewable energy used by DIC Group companies in Japan is natural energy generated by a biomass boiler and wind and solar power facilities at the Kashima Plant. In fiscal year 2019, DIC Group companies in Japan used 519,000 GJ of renewable energy (equivalent to 13,391 kl of crude oil), down 11.5% from fiscal year 2018 and representing 11.0% of total energy (heat and electric power) consumed by these companies. The decrease in renewable energy use was attributable to a variety of factors, including a sharp drop in the amount of electric power generated by the Kashima Plant’s wind power system (two 2,300 kW–capacity wind turbines) as a result of repairs, which required close to three months to complete, and a decline in the positive impact of biomass boiler performance.
In fiscal year 2019, DIC completed the installation of solar power systems at five sites in Japan (the Tatebayashi, Chiba, Saitama and Yokkaichi plants and the Central Research Laboratories) with a combined annual generating capacity of 1,440 kW. As a consequence, the total generating capacity of solar power facilities at DIC Group sites in Japan as of December 31, 2019, was 3,040 kW. Solar power generated by the DIC Group in Japan in fiscal year 2019 soared 71.0%, to 3,364,000 kWh, from 1,968,000 kWh in fiscal year 2018.
The use of renewable energy by DIC Group companies in Japan in fiscal year 2019 accounted for a reduction in CO2 emissions of 32,146 tonnes, or 12.7%, from the previous fiscal year.
In fiscal year 2020, DIC will install solar power facilities at an additional six sites in Japan (the Sakai and Komaki plants, the Central Research Laboratories and Group companies DIC Kyushu Polymer Co., Ltd., and DIC Kitanihon Polymer Co., Ltd. (the Hokkaido and Tohoku plants)), which will add 1,277 kW (all for internal consumption) to the Group’s domestic solar power generating capacity, began operating in January 2020. Going forward, DIC will continue to take decisive steps to advance its use of renewable energy with the aim of achieving its long-term target for reducing emissions of CO2 from DIC Group sites by 30% from the fiscal year 2013 level by fiscal year 2030.

Reduction in CO<sub>2</sub> Emissions in Japan Attributable to the Use of Renewable Energy
Reduction in CO<sub>2</sub> Emissions in Japan Attributable to the Use of Renewable Energy
Installation of Solar Power Facilities in Japan(Fiscal Years 2017–2019)

04Independent Electric Power Generation in Japan

In fiscal year 2019, electric power consumption by the DIC Group in Japan declined 2.9% from the previous fiscal year, to 270,970,000 kWh, approximately 25.1% of which was generated independently, with electric power generated using renewable energy accounting for 8.3% and that generated using cogeneration systems representing 16.8%. While independently generated solar power was up from fiscal year 2018, wind power edged down 0.9%.

DIC Wins New Energy Foundation Chairman’s Award in the Adoption and Application Category of the 2018 New Energy Awards

In December 2018, DIC won a New Energy Foundation Chairman’s Award in the Adoption and Application Category of the 2018 New Energy Awards in recognition of the expanded use of renewable energy at the Kashima Plant. The awards program, which was presented by the New Energy Foundation, was established with the aim of encouraging the introduction of new energy and promoting awareness by commending particularly excellent initiatives.
The Kashima Plant has installed multiple renewable energy–powered generating facilities, including biomass and methane gas boilers, as well as wind power and solar power systems. As a consequence, 50% of electric power and 80% of heat consumed annually by the site is generated by using renewable energy. These facilities also contributed to a reduction in annual CO2 emissions in fiscal year 2018 of more than 36,000 tonnes. Looking ahead, the department responsible for the plant’s energy supply will continue working to enhance the combustion efficiency of generating facilities, including biomass and methane gas boilers, by upgrading maintenance and management technologies and accumulating know-how.
The Chairman’s Award recognizes the positive results of these steadfast efforts. DIC will deploy know-how accumulated by the Kashima Plant at sites both in Japan and overseas with the aim of increasing its use of renewable energy and reducing its emissions of greenhouse gases around the world.

Reductions in Annual CO<sub>2</sub> Emissions Attributable to the Use of Renewable Energy at the Kashima Plant

05Protecting the Ozone Layer

Hydrofluorocarbons (HFCs) are used widely as refrigerants in equipment and facilities. While not an ozone-depleting substance (ODS), HFCs have a warming potential 100–10,000 times that of CO2 and their use is expected to account for a 0.5°C increase in the global average temperature by the end of the 21st century. At the 28th Meeting of the Parties in Kigali, Rwanda, held in October 2016, the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer reached an agreement to phase out the production and use of HFCs (the Kigali Amendment). Japan subsequently amended its Act on the Protection of the Ozone Layer Through the Control of Specified Substances and Other Measures in line with the amendment, which as of January 10, 2019, had been ratified by 65 Parties. Having surpassed the condition of ratification by at least 20 Parties, the Kigali Amendment entered into force on January 1, 2019.
In April 2015, Japan also revised its Fluorocarbons Recovery and Destruction Law. The same month, the Act on Rational Use and Proper Management of Fluorocarbons entered into force, compelling stakeholders to ascertain and report leaks of fluorocarbons from commercial equipment and facilities.
In fiscal year 2019, leaked fluorocarbons from DIC sites amounted to 886 tonnes of CO2. (Leaks in excess of 1,000 tonnes per site or per company must be reported to the Japanese authorities.) The Company has worked to effectively manage fluorocarbons since the Act on Rational Use and Proper Management of Fluorocarbons entered into force in 2015 and has managed to keep leaks below the level requiring reporting. Leaked fluorocarbons in fiscal year 2019 were higher than in an average year as a consequence of the replacement of a substantial number of chillers. (Leaked fluorocarbons are calculated as the difference between amount filled into new equipment and amount recovered when equipment is dismantled.) The DIC Group will continue to select air conditioning and other equipment using nonfluorocarbon and other refrigerants that do not negatively impact the environment with the aim of reducing the amount of leaked fluorocarbons for which it is responsible.

06Energy Consumption and CO2 Emissions by the DIC Group Overseas

With production volume by the DIC Group overseas in fiscal year 2019 down 2.1% from fiscal year 2018, CO2 emissions declined 7.7%, or 25.6% from the fiscal year 2013 base year, and CO2 emissions per unit of production declined 5.7%, or 14.7% from fiscal year 2013. Energy consumption edged down 1.7%, or 19.2% from the base year.
Factors contributing to the decrease in CO2 emissions included efforts by individual DIC Group companies to break down the Group’s emissions reduction targets and promote decarbonization initiatives, the installation of solar power facilities with an annual generating capacity of approximately 800 kW by Sun Chemical in the United States, and the improvement of the CO2 emissions factors of electric power consumed by overseas Group companies in line with the factors published by the International Energy Agency (IEA).

Laws and regulations, as well as infrastructure, differ between countries and regions. The DIC Group strives to promote energy savings and efficient operations wherever it is active and in so doing sets precedents for the global chemicals industry.
DIC Group companies overseas continue to implement a broad range of energy-saving initiatives, including improving production efficiency, reducing base load energy consumption, choosing high-efficiency models when replacing equipment and switching to LED lighting. The Group is also promoting the increased use of renewable energy. In fiscal year 2019, Sun Chemical, based in the United States, installed solar power facilities with an annual generating capacity of approximately 800 kW. In addition, corporate headquarters continued stepping up collaboration with overseas Group companies through energy-saving analyses and support for individual projects. During the period, energy-saving analyses were conducted at two sites in the Asia–Pacific region (DIC Compounds (Malaysia) and DIC Epoxy (Malaysia) Sdn. Bhd.) and one site in Greater China (DIC Synthetic Resins (Zhongshan)). At the same time, a project was promoted whereby effective initiatives are awarded “Good Job” accreditation and deployed horizontally at Group companies in Japan. This initiative also involves using the process of introducing best practices at production facilities as an opportunity to foster young employees.

Asia–Pacific Region

The 22 DIC Group sites in the Asia–Pacific region account for roughly 18% of the Group’s total global CO2 emissions. Production volume in fiscal year 2019 was down 3.2% from fiscal year 2018, although it was up 1.9% from the fiscal year 2013 base year. Energy consumption by Group companies across the region decreased 6.6% from the previous fiscal year, but was 4.5% higher than in the base year, while CO2 emissions declined 10.9% from fiscal year 2018, or 7.8% from fiscal year 2013. Indonesia is home to the Group’s mother plant for pigments, production of which is comparatively energy intensive. The pigments business accounts for more than 50% of energy consumption and CO2 emissions in the Asia–Pacific region, underscoring its influence on results for the region as a whole. Accordingly, the Group continues to promote a variety of initiatives to reduce the business’ CO2 emissions by reducing energy consumption, including by replacing a portion of the coal used to fire boilers with palm kernel shells (PKS), a biomass fuel, an effort that began in fiscal year 2016 and earning certification under ISO 50001, the International Organization for Standardization’s benchmark for energy management systems.
Since fiscal year 2014, the DIC Group has conducted energy-saving analyses overseas as well as in Japan. In fiscal year 2019, energy-saving analyses were conducted at two companies in the Asia–Pacific region: DIC Epoxy (Malaysia) and DIC Compounds (Malaysia). As part of its effort to ensure achievement of the CO2 emissions target set for the global DIC Group, corporate headquarters assists regional Group companies by formulating and implementing energy-saving plans; promoting ongoing energy-saving analyses to support the identification of energy-saving themes and the implementation of remedial measures; deploying a practical energy management manual and best practice case study materials to establish management practices and promote horizontal deployment; and launching and providing support for energy-saving and carbon-reduction projects at suitable sites.

Energy-saving analysis at DIC Epoxy (Malaysia)

Energy-saving analysis at DIC Epoxy (Malaysia)

Energy-saving analysis at DIC Compounds (Malaysia)

Energy-saving analysis at DIC Compounds (Malaysia)

Greater China

The DIC Group’s 18 sites in Greater China account for approximately 9% of the Group’s total global CO2 emissions. Production volume in fiscal year 2019 was essentially level with fiscal year 2018, but up 7.5% from the fiscal year 2013 base year. Nonetheless, energy consumption by Group companies across the region was down 5.5% from the previous fiscal year, although it was 6.0% higher than in the base year, while CO2 emissions declined 10.8% from fiscal year 2018, or 3.8% from fiscal year 2013. The fact that energy consumption declined 5.5% despite a higher production volume was attributable primarily to significant improvements in energy consumption per unit of production at manufacturers Nantong DIC Color (pigments and inks) and Changzhou Huari New Material (synthetic resins), both of which operate large-scale production facilities in the region, underpinned by the implementation of energy-saving measures.
Qingdao Liquid Crystal, which manufactures LC materials, installed solar power facilities with an annual generating capacity of 400 kW in April 2017 and has implemented energy-saving measures in the years since—namely, the systematic replacement of existing air conditioning equipment and light fixtures—that have contributed to a sharp improvement in energy consumption per unit of production. As a consequence, the company’s CO2 emissions in fiscal year 2019 were down 10.8% from fiscal year 2018.
As in the Asia–Pacific region, the DIC Group has conducted energy-saving analyses in Greater China since fiscal year 2014. In fiscal year 2019, an energy-saving analysis was conducted at DIC Synthetic Resins (Zhongshan), located in the southern part of the PRC.

Energy-saving analysis at DIC Synthetic Resins (Zhongshan)

Energy-saving analysis at DIC Synthetic Resins (Zhongshan)

Americas and Europe

The DIC Group has 122 sites in the Americas and Europe (this category also includes sites in Africa), which account for roughly 34% of the Group’s CO2 emissions. In fiscal year 2019, production volume was down 2.4% from the previous fiscal year and 1.7% from the fiscal year 2013 base year. Energy consumption by DIC Group companies across the region rose 1.3% from the previous period, but was down 21.0% from fiscal year 2013, while CO2 emissions declined 5.4% from fiscal year 2018 and 27.3% from the base year.
DIC Group companies in the Americas and Europe promote a variety of measures with the aim of lowering CO2 emissions. These include making use of biomass energy (landfill biogas), solar and small hydroelectric power; employing outsourcing to contract energy-efficiency consultants, among others, to advance the reduction of energy consumption; and integrating and enhancing the efficiency of regional production facilities. These initiatives have yielded consistently positive results since fiscal year 2014.
In fiscal year 2019, the Group’s regional headquarters, Sun Chemical, installed solar power facilities with an annual generating capacity of approximately 800 kW with the goal of expanding its use of renewable energy. Going forward, companies in the Americas and Europe will continue to implement ambitious initiatives that contribute to the reduction of its global CO2 emissions.

Sun Chemical’s Approach to Sustainability

Sun Chemical promotes innovation with the aim of improving the sustainability of its manufacturing processes and products, maintaining a constant awareness of environmental impact. The company strives to use manufacturing processes that demonstrate environmental excellence through reduced waste generation, lower energy and water use, and a strong safety performance as measured using key metrics such as greenhouse gas emissions, energy and water consumption, carbon footprint and safety record. Sun Chemical is also committed to meeting local regulatory requirements in the countries and territories in which it operates and to working proactively with government, industry organizations and business partners in its value chain to better define, measure and promote sustainability.
Product stewardship and risk management are important components of Sun Chemical’s sustainability policy. The company continues to take a responsible, analytically based approach to fulfilling its role as a steadfast leader in this area. Through such ongoing efforts, the company increases environmental efficiency by helping its customers enhance the sustainability of their manufacturing processes and products. Sun Chemical’s longstanding reputation for quality, service and innovation and its dedication to improving sustainability influences both its daily operations and its global strategic direction.
Along with DIC, Sun Chemical has committed to a long-term strategic target for CO2 emissions, which is to achieve a reduction of at least 30% by fiscal year 2030, with fiscal year 2013 as the base year, following the Paris Agreement, which succeeded the Kyoto Protocol (1990–2012) as the global framework for addressing the challenge of dealing with greenhouse gas emissions. This level, if implemented across all industries, would limit the increase in global average temperature due to climate change to below 2.0°C above pre-industrial levels. To achieve this target, Sun Chemical will focus on investments in sustainable energy, as well as on measures to improve the efficiency of its manufacturing processes.

Sun Chemical Steps Up Investment in Renewable Energy by Introducing Solar Panels

Sun Chemical has concluded a solar power purchase agreement (PPA) with Onyx Renewable Partners and installed solar panels on the roof of the parking structure at its R&D site in Carlstadt, in the U.S. state of New Jersey. The use of clean energy thus generated was expected to reduce the facility’s carbon footprint. Installation of the panels began in fall 2017 and was completed in January 2018. The system came on line in March 2018.
Sun Chemical has since completed a year-round solar panel operating configuration at the site that makes it possible to generate enough solar power on sunny days to satisfy 90% of the site’s needs. Between May 14, 2018 and May 13, 2019, the system generated a total of 871 MWh of power, reducing CO2 emissions by an estimated 1,358,092 pounds (616 tonnes) over the same period.

Solar panels installed on the roof of the Carlstadt facility’s parking structure

Solar panels installed on the roof of the Carlstadt R&D site’s parking structure

Adoption of Renewable Energy by DIC Group Companies Overseas

Against a global trend toward decarbonization, including by popularizing the use of renewable energy, DIC Group companies in the Asia– Pacific region, Greater China, and the Americas and Europe are making use of government subsidies and support to, for example, install biomass boilers and solar power facilities. In fiscal year 2019, new solar power facilities with a combined annual generating capacity of 2,320 kW (1,440 kW in Japan and 800 kW in the United States) commenced operation. In January 2020, additional new facilities with an annual generating capacity of 1,277 kW came on line. Accordingly, as of January 2020 the Group’s global solar power generating capacity (for internal consumption) was 6,445 kW, comprising 4,341 kW in Japan and 2,104 kW overseas. The Group will continue to promote efforts to expand its solar power generating facilities worldwide.
In contrast, owing to the suspension of operations of the Kashima Plant’s wind power system (two 2,300 kW–capacity wind turbines) for approximately three months for repairs, wind power generated in fiscal year 2019 fell 34.0%, to 3,530,000 kWh, from 5,379,000 kWh in the previous fiscal year. In addition, renewable energy generated by the Kashima Plant’s biomass boiler (maximum steam produced: 30 tonnes/ hour; annual generating capacity: 4,000 kW) declined 12%, to 451,751 GJ, from 514,466 GJ in fiscal year 2018.
In fiscal year 2019, the DIC Group’s use of PKS, a biomass fuel, at its pigments production facility in Indonesia declined 16%, to 48,738 tonnes, from 58,308 tonnes in fiscal year 2018. This was commensurate with a decrease in the amount of mainstay fuel coal used (because the percentage of coal in the fuel mix is fixed). As a consequence, the global DIC Group used a total of 650,996 GJ of renewable energy in fiscal year 2019, down 10.6% from 728,183 GJ in fiscal year 2018. The use of renewable energy accounted for a reduction in the Group’s global CO2 emissions of 40,611 tonnes.

Initiatives in Areas Other than Production (Offices and Research Facilities)

In fiscal year 2019, energy consumed by the DIC Group’s 21 offices and research facilities in Japan (excluding the Central Research Laboratories) declined 6.0%. Of particular note, DIC’s headquarters, the most energy intensive of the 21 domestic sites, achieved a decrease of 3%. Energy consumption by the eight offices and research facilities of DIC Group company Seiko PMC Corporation declined 13%, owing primarily to the replacement of air conditioning equipment and light fixtures at its Chiba Research Laboratory with high-efficiency units. Principal energy-saving initiatives implemented include replacing aged light fixtures and air conditioning equipment with newer, highefficiency models that satisfy standards set by the Energy Conservation Center, Japan (ECCJ) for its Top Runner program, turning off lights when not needed and implementing mandatory 22°C winter and 28ºC summer air conditioning settings, working with facility management companies to implement diligent energy-saving measures and promoting efforts in line with Japan’s Cool Biz and Warm Biz campaigns.

Grasping CO2 Emissions Across the Supply Chain

Regarding CO2 emissions across its supply chain (Scope 3* emissions), in fiscal year 2017 DIC participated in a lecture on the Science Based Targets (SBT) initiative organized by Japan’s Ministry of the Environment. As a consequence, DIC now reports global data for all categories of Scope 3. The Company also obtains third-party verification for its data for waste generated in operations.

  • Scope 3 emissions are indirect emissions from production, transport, shipment, commuting and other activities in the supply chain.