Climate Change

Goals and Achievements of Major Initiatives

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

Reference:CO₂ emissions per unit of production in fiscal year 2023 for the DIC Group in Japan: 134.7 kg/tonne

• Down 29.3% from fiscal year 2022 (190.6 kg/tonne)
• Down 43.6% from fiscal year 2013 (238.7 kg/tonne)

• Evaluations are based on self-evaluations of current progress.
  Key: ★★★ = Excellent; ★★ = Satisfactory; ★ = Still needs work

Framework for Promotion

The DIC Group works to reduce CO₂ emissions through its business activities in four regions: Japan, the Americas and Europe (overseen by Sun Chemical), the Asia–Pacific region and Greater China. Despite differences in energy requirements and access to renewable energy depending on region and site location, the Group is committed to working as one to ensure it achieves its target of reducing its Scope 1 and 2 CO₂ emissions by 50% from the fiscal year 2013 level by fiscal year 2030.

Recognizing climate change as a key social imperative, the DIC Group is working to reduce CO₂ emissions from its sites. Important measures are proposed to the Sustainability Committee to be deliberated and determined. In Japan, an Energy-Saving Promotion Committee has been established at each Group company site. Committee activities include confirming the progress of initiatives, engaging in discussions and conducting patrols. An Energy-Saving and Decarbonization Working Group has also been set up at each site comprising members selected by the site itself to foster the exchange of information and research pertaining to new energysaving measures, as well as to advance the horizontal deployment of effective measures across domestic Group sites. This combination of site- and Group-level initiatives forms the framework under which the DIC Group endeavors to reduce its CO₂ emissions.

In the Americas and Europe, Sun Chemical is promoting efforts to reduce its CO₂ emissions in North, South and Central America, as well as in Europe. In the Asia–Pacific region and Greater China, Group companies are encouraging a variety of independent energy-saving initiatives that align with related Group policies. DIC’s Production Management Unit provides support on multiple fronts, including managing overall progress.

Sustainability-Related Disclosure

Owing to amendments to Japan’s Cabinet Office Ordinance on Disclosure of Corporate Affairs, a section was created in the annual securities report that Japanese companies are required to file titled “Approach to Sustainability and Our Initiatives” and compelled the disclosure of sustainability-related information. Climate change is an issue of particular concern to the DIC Group structures its disclosure using a framework comprising four thematic areas: Governance, strategy, risk management, and metrics and targets. The Group is striving to improve its sustainability-related disclosure in the countries and territories in which it operates, reviewing its approach as required to reflect changes in its operating environment.

Framework for Sustainability-Related Disclosure

Based on required disclosure items in the Amendment to the Cabinet Office Order on Disclosure of Corporate Affairs, promulgated in response to the June 2022 report of the Working Group on Corporate Disclosure of the Financial System Council.

01Governance

02Strategy

With pressure on the global community to achieve carbon neutrality by 2050 intensifying rapidly, changes to rules governing competitiveness are expected to transform the socioeconomic system going forward. The DIC Group 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 Group is working to enhance its awareness of the principal climate-related risks and opportunities (transition as well as physical) that are likely to have a financial impact over the medium to long term based on a scenario analysis it conducted in early fiscal year 2024. In addition to improving the Group’s understanding of foreseeable risks and opportunities from a medium- to long-term perspective, this will also enable it to formulate and execute effective strategies on an appropriate time line.

The DIC Group recognizes achieving net zero CO₂ emissions by fiscal year 2050 as a material issue. The Group will continue to promote decarbonization not only by reducing its own energy use but also by providing information on the carbon footprint of its products.

Strategies for Reducing CO₂ Emissions

As an organization with a CO₂ emissions reduction target, the DIC Group will promote a variety of related initiatives as outlined below. The Group currently plans to make environmental investments of approximately ¥13 billion in Japan between fiscal years 2022 and 2030.

Notes:
• In Japan, Scope 1 CO₂ emissions are calculated using emissions factors set by the country’s Ministry of the Environment. In other regions, Scope 1 emissions are calculated using emissions factors set by the United States Environmental Protection Agency (EPA).
• In Japan, Scope 2 emissions—attributable to the consumption of purchased electric power—are calculated using emissions factors set by the Ministry of the Environment. Scope 2 emissions in North America are calculated using the EPA’s Emissions & Generation Resource Integrated Database (eGRID), while those in other regions are calculated using emissions factors in the International Energy Agency (IEA)’s Emissions Factors 2023 database.

• The benefits of three initiatives implemented to reduce CO₂ emissions are calculated by estimating fiscal year 2023 emissions based on production volume and CO₂ emissions in fiscal year 2022 and production volume in fiscal year 2023.
• CO₂ emissions in fiscal year 2030 is an estimate for CO₂ emissions in fiscal year 2022 if no initiatives had been implemented and business had expanded.

TCFD Scenario Analysis

In fiscal year 2024, DIC revised the results of its previous scenario analysis, conducted in fiscal year 2020, taking into account shared socioeconomic pathway (SSP) scenarios SSP1–1.9, SSP2–4.5 and SSP5–8.5 in the Sixth Assessment Report (AR6), published by the United Nations Intergovernmental Panel on Climate Change (IPCC) in March 2023, and the environmental scenarios explored in World Energy Outlook (WEO) 2023, released by the IEA in October 2023. While the time frame of the previous analysis concluded in 2030, this was extended to 2050. Based on the outlook for the situation surrounding climate change and energy, DIC established three scenario groups, which it calls “transition,” “adaptation” and “limits to adaptation,”^*1 and has analyzed risks and opportunities, as well as formulated measures for each.

・Three Scenario Groups

Transition: Countries immediately and decisively implement measures to reduce CO₂ emissions with the goal of limiting the rise in global temperature to 1.5°C above preindustrial levels. The efficient use of energy is required, including through energy conservation and the joint transport of goods. The use of carbon pricing^*2 will begin and expand in many countries and territories and the prices used will continue to increase.
Adaptation: Global warming continues through the mid 2040s, with the rise in global temperature to above preindustrial levels exceeding 1.5°C but remaining below 2.0°C. Adapting to rising global temperatures requires strategies and actions to strengthen resilience. Insulation and heat shielding are effective approaches. The frequency of extreme climate events may go from once in a century to once in a decade or even once a year.

Limits to adaptation: Global warming persists and the rise in global temperature to above preindustrial levels exceeds 2.0°C in 2050 and approaches 5.0°C in 2100. Unpredictable weather and climate extremes increase, leading to food insecurity and supply instability, and forcing people to migrate from the places people have lived for centuries. Changes are complex and cascading, and have negative impacts on quality of life across borders. Pandemics, conflicts and other non-climate risks may be amplified by these impacts.

• Relationship between adaptation and limits to adaptation: As temperatures rise, limits to the capacity to adapt—key vulnerabilities—emerge. It is assumed that this will trigger an unremitting shift from the adaptation scenario to the limits to adaptation scenario.
• International carbon price forecast (per tonne of CO₂ emitted): $135 in 2030, $200 in 2050

Results of Scenario Analysis for the Three Scenario Groups

Post-Scenario Analysis Initiatives (Fiscal Years 2020–2023)

03Risk Management

Processes Used to Identify and Assess Climate Change– Related Risks

DIC recognizes risks related to its response to climate change— a key component of its framework of sustainability themes, the foundation of its sustainability activities—and works to evaluate, address and manage them effectively.

The Sustainability Working Group, a subordinate entity of the Sustainability Committee, is charged with identifying and debating priority risks. Risks designated as priorities are submitted for consideration to the Sustainability Committee.

04Metrics and Targets

The DIC Group uses Scope 1 and 2 emissions as Key performance indicators (KPIs) to evaluate transition risks. In light of accelerated global efforts to decarbonize, the Group pledges to work actively to help decarbonize society. DIC has set a long-term target for reducing CO₂ emissions (Scope 1 and 2) by 50% from the fiscal year 2013 level by fiscal year 2030 and has pledged to step up related efforts. The Group also aims to achieve carbon neutrality—net zero CO₂ emissions—by fiscal year 2050.

Principal Initiatives in Fiscal Year 2023

01Energy Consumption and CO₂ Emissions by the Global DIC Group (Scope 1 and 2)

Energy consumption by the global DIC Group in fiscal year 2023 amounted to 12,799,823 GJ, while CO₂ emissions totaled 534,889 tonnes. CO₂ emissions per unit of production were 233.0 kg/tonne. The Group achieved its target for reducing its consumption and CO₂ emissions were down from fiscal year 2022, owing to the expanded use of green power in Japan and a switch from a coal-fired to a low-carbon LNG-fired boiler at the Karawang Plant in Indonesia. These results also reflect the promotion of more ambitious energy-saving and decarbonization initiatives, including the adoption of internal carbon pricing.

The DIC Group continues to implement a variety of energysaving 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. Some of these initiatives are outlined below.

In addition, the Sustainability Committee has made the decision to adopt CO₂-free electric power at all DIC Group sites in Japan. In November 2022, the DIC Building (DIC’s corporate headquarters) and the No. 2 DIC Building in Tokyo switched fully to CO₂-free purchased electric power. Remaining sites began gradually changing over in April 2023, with a total of 34 sites having completed this switch. Looking ahead, the Group will also advance the use of green power at sites in other countries and territories. The Group has obtained third-party verification of its CO₂ emissions (Scope 1 and 2).

Regional Initiatives

Japan

The bulk of renewable energy used by DIC Group companies in Japan is natural energy generated by a biomass boiler, as well as the use of wind and solar power (including through power purchase agreements PPAs.) In fiscal year 2023, the DIC Group in Japan used 549,000 GJ of renewable energy (equivalent to 14,171 kl of crude oil), or 12.4% of total energy (steam and electric power) used by these companies. The use of renewable energy by DIC Group companies in Japan in fiscal year 2023 accounted for a reduction in CO₂ emissions of 38,069 tonnes, equivalent to 21.8% of the total reduction achieved by the Group in Japan.

Total energy consumption by the DIC Group’s 20 offices and research sites (excluding the Central Research Laboratories) in Japan in the period under review was down 1.6% from the previous fiscal year. A key factor behind this decrease was the implementation of energy-saving initiatives by these facilities, including replacing aged light fixtures and air conditioning equipment with newer high-efficiency models that comply with the standards set by the Energy Conservation Center, Japan (ECCJ) for its Top Runner program; turning off lights when not needed and implementing mandatory air conditioning temperature settings; and working with facility management companies to promote diligent measures to reduce energy use. In addition, a year-round no-jacket/no-tie dress code was instituted under the WSR 2020 project.

The use of electric power generated using energy from renewable sources at an additional 33 sites had a significant positive impact on CO₂ emissions by the DIC Group, which were down 100,601 tonnes, or 34.5%, from fiscal year 2022. Looking ahead, the Group will continue taking decisive steps to advance its use of renewable energy with the aim of meeting the goals of DIC NET ZERO 2050.

Europe

In an investment aimed at helping ensure sustainability by reducing greenhouse gas emissions, Sun Chemical’s plant in Vienna replaced two older steam-generating boilers with smaller, more efficient units. The integration of the new boilers into the plant’s existing heat recovery infrastructure resulted in a decrease in CO₂ emissions of 300 tonnes. Other initiatives to reduce CO₂ emissions include projects to improve energy efficiency that have helped curb environmental impact and lower costs. Sun Chemical will continue to focus on the recovery and reuse of waste heat as a particularly effective approach at many of its facilities.

Asia–Pacific Region

The coal-fired boiler at PT. DIC Graphics’ Karawang Plant in Indonesia was replaced with a low-carbon LNG-fired unit. The lower carbon content of the fuel used to fire this boiler contributed significantly to a decline in regional CO₂ emissions. The plant also has a biomass boiler fueled partially by palm kernel shells.

Reduction in Global CO₂ Emissions Attributable to the Use of Renewable Energy

Reduction in Global CO₂ Emissions Attributable to the Use of Renewable Energy (Tonnes/%)

	Unit	2020	2021	2022	2023
Reduction attributable to the use of heat generated using renewable energy (biomass)	t-CO2	35,578	37,512	39,742	36,192
Reduction attributable to the use of renewable energy (electric power generated on-site)	t-CO2	18,332	17,418	12,568	6,874
Reduction attributable to the use of (green power)	t-CO2	0	0	6,009	64,554
Total reduction attributable to the use of renewable energy	t-CO2	53,909	54,929	58,319	107,620
CO2 emissions by the global DIC Group	t-CO2	551,049	588,985	720,444	534,889
Total reduction attributable to the use of renewable energy + CO2 emissions by the global DIC Group	t-CO2	604,959	643,914	778,763	642,509
Total reduction attributable to the use of renewable energy (%)	%	8.9%	8.5%	7.5%	16.7%
Reduction attributable to the use of electric power generated using renewable energy (biomass)	t-CO2	7,739	6,542	7,277	1,100
Reduction attributable to the use of solar power	t-CO2	8,165	8,054	2,320	3,072
Reduction attributable to the use of wind power	t-CO2	2,025	2,451	2,683	928
Reduction attributable to the use of small hydroelectric power	t-CO2	403	371	288	1,774
Reduction attributable to the use of renewable energy (electric power generated on-site)	t-CO2	18,332	17,418	12,568	6,874

Energy Mix

02Grasping CO₂ Emissions Across the DIC Group’s Supply Chains (Scope 3)

Procurement Initiatives

ased on the DIC Group Sustainable Procurement Guidelines, DIC formulated and promotes awareness of the DIC Group Sustainable Procurement Guidebook, encouraging suppliers to reduce their emissions of greenhouse gases. The Group also surveys suppliers to assess the status of their emissions reduction efforts and their reduction targets, and to enhance understanding. With the objective of better grasping and lowering the carbon footprint of DIC products, the Group is also making provisional calculations of the carbon footprint of the raw materials it uses, as well as seeking to expand its used of bioderived and recycled raw materials. (For more information, please see “Ensuring the Sustainable Procurement and Use of Raw Materials” in “Sustainable Procurement”.)

Logistics Initiatives

In Japan, DIC Group companies are using fewer, larger trucks and taking decisive steps to improve loading efficiency, as well as promoting the use of modal shift and the efficient combination of truck, rail and marine transport. Group companies in other countries and territories are advancing initiatives tailored to local circumstances. Over the long term, the Group will explore diversifying the transportation methods it uses with a view to reducing emissions of greenhouse gases by advancing the use of next-generation modes of transport.

Calculating PCF

To achieve carbon neutrality, it is crucial to reduce CO₂ emissions across the supply chain. To this end, it is necessary to calculate and reduce the CO₂ emissions of each DIC Group company and product. Despite the existence of international standards for calculating product carbon footprint (PCF), including those provided by ISO 14067:2018 and the GHG Protocol, certain aspects of these standards are vague, so companies trying to calculate PCF must make their own interpretations and determine their own specific method for calculation. The DIC Group has shared information, including on guidelines from the European nonprofit Together for Sustainability (TfS) and Japan’s Ministry of Economy, Trade and Industry and Ministry of the Environment, to develop a consistent Groupwide method for calculating PCF. In fiscal year 2023, the DIC Group calculated PCF for 1,809 products (DIC: 179, Sun Chemical: 1,630) and provided this information to customers.

Avoided Emissions

The term “avoided emissions” refers to CO₂ emissions that can be avoided through the use of a product. Examples include products that contribute to improving fuel efficiency by reducing vehicle body weight and products that help reduce energy used for heating and cooling by improving insulation. In recent years, avoided emissions have attracted attention as a way to envisage the positive impact of corporate activities on climate change. While there remains room for improvement in terms of the precision of calculation methods and the reliability of calculations, DIC is promoting the use of avoided emissions as a way for it to clarify its contributions to decarbonization across its supply chains.

Innovation

By capitalizing on open innovation to promote the chemical recycling of its products, as well as the recycling and conversion of recovered CO₂ into new raw materials, the DIC Group is working to realize manufacturing that does not rely on fossil fuels, thereby helping contribute to sustainability for the global environment and for society, as set forth in DIC Vision 2030.

Protecting the Ozone Layer

Hydrofluorocarbons (HFCs) are used widely as refrigerants in equipment and facilities. While not an ozone-depleting substance, 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). As of January 11, 2024, the Kigali Amendment had been ratified by 156 Parties, including Japan.

In April 2015, Japan 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 April 2020, a revised version of the Act on the Rational Use and Proper Management of Fluorocarbons came into effect, introducing direct penalties for violations in instances where fluorocarbons are not recovered by users.

In fiscal year 2023, leaked fluorocarbons from DIC Group sites in Japan were equivalent to 452 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 fiscal year 2015, when the Act on Rational Use and Proper Management of Fluorocarbons entered into force, and has managed to keep leaks below the level requiring reporting. In fiscal year 2023, the Group’s efforts to comply with laws governing leaked fluorocarbons were recognized in the Japan Refrigerant and Environmental Organization’s third JRECO Fluorocarbon Rating. DIC has earned an A rank every year since this program began.

Going forward, the DIC Group will continue working to ensure compliance with pertinent laws and regulations, as well as to reduce leaked fluorocarbons from its sites by, among others, choosing air conditioning equipment with low environmental impact refrigerants, including those containing no fluorocarbons.