Carbon prices will be a factor in increasing our costs. The impact of carbon prices on society as a whole is a risk that will result in lower revenue if GHG emissions reductions are delayed or not passed on to our product prices.
On the issue of climate change, the IPCC 6th Assessment Report in 2023 noted that there is “no room for doubt” that human activities have caused global warming, emphasizing the urgent need to reduce GHG*1. The world has been pursuing initiatives since 2020 under the Paris Agreement, and in response to the Glasgow Climate Pact established at the 2021 United Nations Climate Change Conference (COP26), the international community has made a significant change in direction toward the 1.5ºC goal – namely to achieve carbon neutrality by 2050.
At the Mitsubishi Materials Group, we also take the issue of climate change seriously, in keeping with our corporate philosophy of “For People, Society and the Earth.” We have set our target year for achieving carbon neutrality to fiscal 2046, five years ahead of Japan’s national target year of fiscal 2051. Additionally, by fiscal 2051 we aim to achieve renewable energy generation comparable to the power we consume internally, resulting in an effective 100% self-sufficiency rate for renewable energy. In these ways, we will continue to pursue business activities aimed at realizing a decarbonized society.
In March 2020, the Group decided to endorse the recommendations of the TCFD*2 and participate in the TCFD Consortium, which consists of companies, financial institutions and other organizations which support those recommendations. We will appropriately disclose the impact (risks and opportunities) of climate change on the Group’s business operations and the results of analyzing that impact in line with the TCFD recommendations.
The Group answers questionnaires for the CDP (a non-profit organization) on a yearly basis. On an 8-step scoring from A to D-, in fiscal 2023, we have achieved an “A-” in the CDP Climate Change assessment. Also, in CDP water security assessment, we have successfully achieved the highest rank "A" for the first time, and selected as an A List company.
For details, please see the following link.
We have appointed Executive Officers to segregate our management strategies, including responding to the issue of climate change. We have also established a Sustainable Development Department as a dedicated department in the Strategic Headquarters to plan and promote the Group’s strategic initiatives for risks and opportunities related to climate change. The Sustainable Development Department conducts scenario analyses based on the TCFD recommendations, evaluates and manages risks and opportunities related to climate change, formulates and manages action plans to reduce GHGs, and engages in other discussion and information sharing concerning climate change. In addition, activities are reported to the Strategic Management Committee and the Board of Directors for appropriate monitoring. (Matters for deliberation by and reporting to the Strategic Management Committee and Board of Directors)
The Board of Directors goes beyond the monitoring of sustainability initiatives. The Sustainability Committee, an advisory body to the Board of Directors, was established to actively consider the direction of sustainability efforts from different perspectives and present its findings internally. The committee monitors the Company’s action related to climate change, considers the methods and issues involved, and reports its findings to the Board of Directors.
In March 2021, based on the recommendations of the TCFD, we conducted scenario analyses to ascertain the impact (risks and opportunities) that climate change has on the Group’s business operations and consider measures aimed at mitigating the risks and capitalizing on the opportunities.
With regard to transition risks and opportunities, in February 2023 we updated our scenario analyses while maintaining consistency with the Medium-term Management Strategy FY2031, and set business indicators and targets. Setting 1.5ºC and 4ºC scenarios, we estimated the financial impact on the Group in the event that policies and legislation on climate change were stepped up, and carbon pricing was introduced and strengthened. We also analyzed the impact on our business operations in terms of risks and opportunities with regard to the shift in EV demand, changing forms of energy use, and changing demand for the recycling business due to the shift to a recycling-oriented society. Further, in terms of physical risks, in our Group-wide risk management activities we also manage water risks including damage from acute and chronic risks including torrential rain, flooding, storm surges and droughts thought to have materialized in relation to climate change.
For details about our scenario analysis results, please refer to the section on Climate Change-related Risks and Opportunities
The Mitsubishi Materials Group recognizes that climate change risks are one of the key risks that could have a significant impact on the Group’s business performance and financial condition, and drives initiatives to address these risks within its risk management activities.
For more details about the Group’s risk management system, operating status and the selection process for major risks, please refer to the section on Risk Management
We set the Mitsubishi Materials Group's GHG emissions reduction targets (Scope 1 and Scope 2) to a reduction of 45% in GHG emissions by fiscal 2031 compared to the fiscal 2021 level, with the medium- to long-term target of achieving net zero GHG emissions, or carbon neutrality, by fiscal 2046.
To achieve the target, we will invest 10.5 billion yen chiefly in energy saving and an improvement of facilities at production bases by fiscal 2031 and reduce GHG emissions. To achieve carbon neutrality by fiscal 2046, we will strive to develop renewable energy, primarily geothermal power generation in which we excel, and expand the use of renewable energy. We will set a target of renewable energy power accounting for 100% of power used internally and renewable energy power generated in-house accounting for 66% by fiscal 2036. To this end, we will invest 30.0 billion yen in the renewable energy business by fiscal 2031. Specifically for Metalworking Solutions business, ahead of other businesses, we set a target to switch all power used in manufacturing to practically CO2 emission-free electricity by fiscal 2031, and to promote manufacturing activities to contribute to our customers as their "Global Craftsman Studio." As for Scope 3 that includes business partners' GHG emissions, which is the emissions of the entire supply chain excluding Scopes 1 and 2, we started to collect and disclose actual data from emissions in fiscal 2021. Moving forward, we will improve the accuracy of the calculation by sharing information with suppliers. At the same time, we will reduce the emissions over the long term based on suppliers' GHG reduction plans and others. To achieve this, we will aim to decarbonize the supply chain related to our products, and have set the target of reducing Category 1, 3 and 15 emissions, which together account for roughly 88% of all Scope 3 emissions, by at least 22% compared with fiscal 2021 levels by fiscal 2030.
In March 2023, Mitsubishi Materials Corporation obtained SBT*3 certification, indicating that it has established greenhouse gas emissions reduction targets that are scientifically consistent with the targets established by the Paris Agreement.
For the numerical results for fiscal 2023 in relation to these targets, please refer to the section on Climate Change-related Risks and Opportunities.
In addition, we have initiated efforts towards the assessment and utilization of Carbon Footprint (CFP)*4, and are progressing in tracking the GHG emissions of products using recycled materials such as tungsten and copper scrap.
(This target has been reclassified to Scope 3 Category 15 because the cement business became an equity method affiliate as Mitsubishi UBE Cement Corporation, and PT Smelting is scheduled to become an equity method affiliate, so the results and targets for Scope 1 and 2 have been reclassified to Scope 3 Category 15, respectively. The company has been reclassified to Scope 3, Category 15. In addition, other businesses and subsidiaries that were excluded from the scope of consolidation by fiscal 2023 due to business transfers or other reasons have been excluded from the results and targets.)
In terms of plans for executing initiatives aimed at achieving our targets for the reduction of greenhouse gas emissions, in addition to energy-saving and utilization of existing technologies, we are also advancing considerations and discussions - primarily through our Climate Change and Energy Panel - including those regarding R&D and capital expenditure for driving new innovation.
The financial impact on the Group will be in the form of additional costs incurred in depending on the amount of greenhouse gas emissions, such as when policies and legal regulations on climate change are toughened, and carbon pricing systems (the emissions trading system and carbon tax) are introduced and strengthened. With the global shift to decarbonized societies, certain product markets in which the Group has traditionally been participating are expected to shrink. Any delay in taking action in new expanding markets could adversely affect the Group's results and financial position. The world is currently transitioning rapidly toward a carbon-neutral society based on the Paris Agreement. We believe we need to provide new value by responding quickly to these changes in the social environment.
Specifically, we will continue to steadily reduce greenhouse gas emissions from Group business activities by setting greenhouse gas reduction targets, introducing energy-saving equipment, and expanding the use of renewable energy. Furthermore, in order to improve the market competitiveness of Group products, we are enhancing our production processes and developing environmentally friendly products.
Physical risks - including damage from intensified acute water risks thought to be related to climate change such as superstorms, floods, storm surges, or drought, as well as chronic risks - are covered by Group-wide risk management activities.
Meanwhile, opportunities arising due to climate change include an expected increase in demand for technologies, products and services that contribute to energy saving and the reduction of greenhouse gas emissions due to the toughening of climate change policies and other measures. The Group takes initiatives such as the manufacturing of materials and products that contribute to decarbonization, the recycling of nonferrous metal resources, the development and promotion of the use of renewable energy such as geothermal power, the development of technologies related to CO2 capture and effective utilization, and conservation activities for the forest land we own. Through these initiatives, we aim to create both economic and social value.
In March 2021, the Group established and analyzed scenarios to ascertain the impact of climate change on the Group's business operations (risks and opportunities) and consider measures for reducing risks and securing opportunities. In February 2023, we updated the scenario analysis and set indicators and targets, while ensuring consistency between transition risks and opportunities and the Medium-term Management Strategy FY2031. We will monitor the situation based on the indicators and targets. We are updating the analysis of physical risks and examining indicators and targets.
Identify risks and opportunities |
Identify transition risks and opportunities and physical risks as climate change risks and opportunities relating to business operations |
|---|---|
| Identify key risk and opportunity factors |
Consider the impact of identified risks and opportunities on business operations, their relationship to business strategies and their level of interest to stakeholders, etc., and identify risks and opportunities with a high degree of importance |
| Analyze impact on business operations |
Analyze the degree of impact of key risks and opportunities on business operations In analyses and evaluations, we use a 1.5 ℃ scenario and a 4 ℃ scenario.
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| Examine measures, indicators and targets | Consider measures to reduce risks and secure opportunities Set the indicators and targets (such as GHG emissions reduction targets) to be monitored |
| 1.5 ℃ Scenario (the world moving toward carbon neutrality in 2050) | 4 ℃ Scenario (the world as it is and the world in which things are allowed to take their course) |
|---|---|
| A scenario that charts out a path for the world's energy sector to follow to achieve net zero CO2 emissions by 2050. The scenario envisages the world where the social changes necessary for the establishment of a carbon free society and holding the rise in the global average temperature to 1.5 ℃ or less until the end of this century will impact business operations. | A scenario reflecting present the policies formulated based on an evaluating specific policies being implemented and policies announced by governments around the world by country or by sector. The scenario envisages the world as described below where the achievement of targets is not required and the global average temperature will rise about 4 ℃ by the end of the this century. |
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With regard to transition risks and opportunities related to climate change, we conducted scenario analysis for one theme across the Company and for three major themes for each business (total of nine minor themes). The external and internal data used in the analysis were updated.
Increase in production costs due to introduction/strengthening of carbon price system
Carbon prices will be a factor in increasing our costs. The impact of carbon prices on society as a whole is a risk that will result in lower revenue if GHG emissions reductions are delayed or not passed on to our product prices.
Risk: Large
As the cement business became an equity method affiliate as Mitsubishi UBE Cement Corporation, and since PT Smelting plans to transition to an equity method affiliate, each of their Scope 1 and Scope 2 emissions results and targets have been re-categorized under Scope 3 Category 15. Figures related to the aluminum business, in addition, other businesses and subsidiaries that will be removed from the scope of consolidation due to business transfers by fiscal 2023 have been excluded from the results and targets. The greenhouse gas emissions for the fiscal year 2023 were reduced by 4.5% compared to the fiscal year 2021.
Rapid growth in demand for EV-related products for decarbonization
A significant increase in sales of xEVs, which use more copper products, is expected to significantly lift demand for our rolled copper products. This will be an opportunity to expand sales by strengthening production of related products and capturing demand.
Opportunity: Large
Sales volume of pure copper strips for vehicles in fiscal 2023 increased by 9.5% compared with fiscal 2022, reflecting an increase in bus bars for batteries and electronic equipment aimed at automotive component manufacturers and larger sizes driven by increased production of electric vehicles by auto manufacturers.
Decrease in demand for cutting tools for engines due to increase in EV ratio
The projected increase in demand for tools for difficult-to-machine materials due to the growth of markets related to electrification and weight reduction may provide opportunities to expand sales by reviewing the product mix and tapping into demand. On the other hand, there is a risk that sales of cutting tools for engine-powered vehicles, a current mainstay product, will decline.
Risk: Medium
Sales of cutting tools in fiscal 2023 increased 10.0% from fiscal 2022, reflecting higher demand from aircraft and medical device manufacturers, primarily in Europe and the United States.
Rapid growth in copper demand due to increased EV sales aimed at decarbonization
A significant increase in sales of xEVs, which use more copper, is expected to significantly lift global copper demand. This will be an opportunity to increase sales by capturing demand through the expansion of our electrolytic copper production capacity.
Opportunity: Large
Electrolytic copper sales volume in fiscal 2023 was 590,000 tons, on par with fiscal 2022.
Decrease in the number of scrapped vehicles due to the decline in the Japanese population and the advance of car sharing in a decarbonized society
The number of vehicles processed in Japan is expected to decline, and there is a risk that automobile recycling sales will decline.
Risk: Small
The annual number of vehicles processed in fiscal 2023 increased 7.0% from fiscal 2022 to 9,100, despite the sharp rise in prices of used cars and a reduction in vehicles received from dealerships.
Growing demand for tungsten powder due to increase in EV batteries and stationary storage batteries
The growing demand for EVs and the rapid increase in demand for storage batteries are expected to significantly increase demand for high-performance powders for rechargeable batteries. This will be an opportunity to increase sales by capturing demand through the expansion of our production capacity for tungsten-based high-performance powder.
Opportunity: Large
Production volume of high-functional powder for rechargeable batteries in fiscal 2023 increased 8.4% compared with fiscal 2022, reflecting expanded demand for cathode materials due to growth in the rechargeable battery market.
Increase in recycling demand due to emissions of automotive LIBs and PVs
Due to increased demand for EVs and solar power generation, it is anticipated that the emissions of automotive LIBs and PVs will increase in the future, and that the demand for recycling will increase accordingly. This will be an opportunity to increase sales by promoting commercialization based on demonstration tests currently underway.
Opportunity: Large
Fiscal 2023 performance against target State of development of LIB recycling technologies A demonstration test (running from 2020 to 2022) of LIB recycling at Kitakyushu Eco-Town commissioned by the Ministry of the Environment has been completed. The demonstration test involved considering a consistent LIB recycling process of removing automotive LIB units from vehicles, automating the discharge and disassembly of the removed LIB units, thermally cracking, crushing and sorting the LIB modules, and recovering Co and Ni from the active materials, identifying the current issues in each process, and conducting LCA and economic assessments of LIB recycling overall. In fiscal 2024 and beyond we will continue to pursue the development of these technologies, build the business foundations for LIB removal, disassembly processing and BM recovery , and establish the technologies for the safe, efficient and appropriate processing of automotive LIBs that will increase as waste products in the future, thereby making progress in considering ways to help build a recycling-oriented society.
Medium- and long-term expansion of the renewable energy market toward a net-zero society
While the unit price of electricity sold and the price of non-fossil certificates fluctuate according to environmental policies and technological advances, the demand for renewable energy itself will grow, especially for wind and geothermal power generation. Investigating and developing new power generation sites will provide an opportunity to expand our Renewable Energy business.
Opportunity: Large
Fiscal 2022 generating capacity was lower as the year coincided with the periodic inspection of the Sumikawa Geothermal Power Plant. As a result, our share of renewable energy sales for fiscal 2023 increased by 5.9% compared with that year.
Increase in demand for recycling waste electronic equipment in line with economic growth in each country
Global E-Scrap generation in fiscal 2031 will be 1.4 times higher than in Fiscal 2021. There is a risk of a decline in the grade of valuable metals in E-Scrap leading to a decrease in the amount recovered, and a risk of difficulties in collecting E-Scrap due to successive entries into the E-Scrap market by competitors and international moves to lock in resources. However, increasing our recycling capacity will increase our E-Scrap processing volume and provide an opportunity to increase our sales.
Opportunity: Medium
E-Scrap processing capacity in fiscal 2023 marked no change from fiscal 2021, standing at 160,000 tons. To reach our target of 240,000 tons by fiscal 2031, we plan to construct a new recycling yard in Onahama in fiscal 2024, and will engage in construction work to increase processing capacity in Naoshima in fiscal 2025.
Increased frequency of replacement with more energy-efficient appliances due to global warming and rising energy costs
The amount of waste home appliances is expected to increase due to rising temperatures, changes in the number of households, and stricter carbon and recycling regulations. This will result in an increase in our appliance processing volume, which, based on our business size projections, will provide an opportunity to increase sales by 1.4 by fiscal 2031 compared to fiscal 2021.
Opportunity: Medium
The annual number of home appliances processed in fiscal 2023 declined by 4.2% compared with fiscal 2022 to 3.65 million units, reflecting a fall in the number of units received in a reactionary decline from higher home appliance replacements due to the pandemic-driven expansion of stay-at-home demand in the previous years.
Total greenhouse gas emissions (non-consolidated + main consolidated subsidiaries) for the Group in fiscal 2023 was 1,916 thousand tons★. Which was a decrease of 21 thousand tons compared to fiscal 2022.
In fiscal 2023, our non-consolidated greenhouse gas emissions from energy sources were 470 thousand tons. It decreased by 27 thousand tons compared to fiscal 2022.
The non-consolidated GHG emissions were reduced by 26,000 tCO2 (-5%) from the fiscal 2022 level. emissions per unit of production deteriorated slightly due to the Naoshima Smelter & Refinery's furnace repair year and a decrease in production at some plants.
Energy consumption on a non-consolidated basis decreased by 4.9% compared to fiscal 2022. Unit energy consumption deteriorated by 1.1% due to the Naoshima Smelter & Refinery's furnace repair year and a decrease in production at some plants. Business Classification Evaluation: Class S (Class S: Unit requirement improved by 1% or more on average over the past five years)
| Category | Non-consolidated | Domestic group companies | Overseas group companies | Total | ||
|---|---|---|---|---|---|---|
| Scope1 (direct) |
From energy sources (fuel, etc.) |
109 | 337 | 149 | 595 | |
| From non-energy sources | From processes | 0 | 0 | 0 | 1 | |
| From waste | 60 | 225 | 0 | 285 | ||
| Greenhouse gases other than CO2 | 7 | 31 | 0 | 38 | ||
| (Reference) Total from non-energy sources |
67 | 256 | 0 | 323 | ||
| Subtotal | 176 | 593 | 149 | ★919 | ||
| Scope2 (indirect)*1 |
From energy sources (power, etc.) |
361 | 203 | 433 | ★997 | |
| (Reference) Total from energy sources | 470 | 540 | 582 | 1,592 | ||
| Total | 537 | 796 | 582 | ★1,916 | ||
| Item | Object | Non-consolidated | Group | Total | Approach to determining the amount of activity | |
|---|---|---|---|---|---|---|
| Category 1 |
Purchased goods and services | Same as organizations covered by environmental data other than greenhouse gas emissions | 1,075 | 2,921 | 3,995 | The use of raw materials accepted from outside the Group (excluding waste as raw materials and by-products as raw materials) and water intake in terms of physical quantity |
| Category 2 |
Capital goods | Same as consolidated financial statements | 125 | 159 | 284 | Capital expenditure in the reportable fiscal year |
| Category 3 |
Fuel and energy-related activities not included in Scopes 1 and 2 | Same as organizations covered by data on greenhouse gas emissions | 94 | 135 | 229 | Fuel consumption by type and volume of electric power and steam purchased from outside the Group |
| Category 4 |
Upstream Transportation and Distribution | Same as organizations covered by environmental data other than greenhouse gas emissions | 241 | 510 | 751 | 1) Emissions from the physical distribution of products and services, which were purchased in the reportable fiscal year, from suppliers to the company ・A transportation scenario was set for each major raw material (excluding waste as raw materials and by-products as raw materials). ・Distances between countries were set using the IDEA database on distances between countries, and other distances were set using a distance search site (with distance given by an in-house company in a questionnaire adopted in some cases). 2) Emissions from the physical distribution of products that were shipped and transported in the reportable fiscal year at the expense of the company ・A transportation scenario was set for each major shipped product. ・Distances between countries were set using the IDEA database on distances between countries, and other distances were set using a distance search site. |
| Category 5 |
Waste generated from operations | Same as organizations covered by environmental data other than greenhouse gas emissions | 4 | 20 | 25 | The amount of industrial waste (waste recycled into resources and landfilled waste) was included. |
| Category 6 |
Business Travel | Consolidated | 0 | 2 | 3 | For Mitsubishi Materials (non-consolidated), the number of employees at each base (plants and offices) was used for the calculation. For consolidated subsidiaries, the number of employees of each in-house company from human resources information given in the securities report was used for the calculation. |
| Category 7 |
Employee commuting | Consolidated | 2 | 7 | 8 | For Mitsubishi Materials (non-consolidated), the number of employees at each base (plants and offices) was used for the calculation. For consolidated subsidiaries, the number of employees of each in-house company from human resources information given in the securities report was used for the calculation. |
| Category 8 |
Upstream Leased Assets | ー | ー | ー | ー | While there are leased assets, they were excluded from the calculation because they are included in Scope 1 and Scope 2. |
| Category 9 |
Downstream Transportation and Distribution | Same as organizations covered by environmental data other than greenhouse gas emissions | 47 | 136 | 183 | Emissions from physical distribution of products that were shipped and transported to sales destinations at the expense of other companies Transportation from sales destinations to final consumers was excluded. Distances between countries were set by using the IDEA database on distances between countries, and other distances were set by using a distance search site (with the distance given by an in-house company in a questionnaire adopted in some cases). |
| Category 10 |
Processing of sold products | Same as organizations covered by environmental data other than greenhouse gas emissions | 116 | 334 | 449 | For products sold, the value for the amount of products shipped by each in-house company to companies other than group companies was regarded as the value for the amount of activity. Emissions from processing were calculated by setting the primary processing assumed for each product. |
| Category 11 |
Use of sold products | ー | ー | ー | ー | Products sold were excluded from the calculation because they are materials and parts that are used by a wide range of users and it is therefore difficult to follow their paths to final products. |
| Category 12 |
End-of-Life Treatment of Sold Products | Same as organizations covered by environmental data other than greenhouse gas emissions | 2 | 3 | 5 | For products sold, the value for the amount of products shipped by each in-house company to companies other than group companies was regarded as the value for the amount of activity. Emissions from disposal were calculated by setting a disposal method assumed for each product. |
| Category 13 |
Downstream Leased Assets | ー | ー | ー | ー | Leased assets were excluded because virtually no such asset is owned. |
| Category 14 |
Franchises | ー | ー | ー | ー | Franchising business was excluded because the company does not operate such a business. |
| Category 15 |
Investments | Affiliates accounted for by the equity method |
6,038 | 0 | 6,038 | Scope 1+2 emissions and share of Scope 1+2 emissions of equity method affiliates in the reporting year |
| Total | ★7,745 | 4,227 | ★11,972 | |||
We regard it as a top priority to save energy wherever possible at our manufacturing facilities and plants. That is why we are so committed to energy saving activities. Specific activities include switching fuels, making effective use of untapped energy, upgrading processes and equipment, installing high-efficiency equipment, optimizing device specifications, and reviewing equipment controls and operating practices. We are constantly working to save energy at smaller facilities, too, including Head Office, branches, sales offices and research facilities, through measures such as installing LED lighting.
CO2 emissions from transportation in fiscal 2023 were 18,109 tons (down 425 tons from the previous fiscal year) for the parent Company and 12,564 tons (up 859 tons from the previous fiscal year) for the Group companies in total due to an increase in transportation volume mainly by ship. The total CO2 emissions of the parent Company and Group companies amounted to 30,673 tons (up 434 tons from the previous year). On the other hand, unit energy consumption* for the parent Company was 22.47 kℓ/million ton-kilometer (down 4.65% from the previous year), while the combined total of the parent Company and Group companies was 20.47 kℓ/million ton-kilometer (up 5.31% from the previous year). We will continue to strive to save energy in transportation by promoting modal shifts and improving loading rates, and through Group-wide logistics optimization, we aim to build a logistics system that reduces environmental impact through the use of non-fossil energy.
| FY 2022 | FY 2023 | |||||||
|---|---|---|---|---|---|---|---|---|
| Mitsubishi Materials | Group companies | Total | Mitsubishi Materials | Group companies | Total | |||
| CO2 emissions from logistics | Total | 18,533 | 11,704 | 30,237 | 18,109 | 12,564 | 30,673 | |
| Breakdown | Road | 10,666 | 4,989 | 15,655 | 11,103 | 4,936 | 16,039 | |
| Ocean | 7,809 | 6,712 | 14,521 | 6,960 | 7,625 | 14,585 | ||
| Rail | 20 | 3 | 23 | 12 | 3 | 15 | ||
| Air | 38 | 0 | 38 | 35 | 0 | 35 | ||