Response to Climate Change

2024.10.31

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While climate change has a great impact on the global environment, society, and economy, it is a long-term and highly uncertain problem. We, Japan Steel Works Ltd., considers a climate change as one of the important management issues, and in June 2022, we have expressed our endorsement for TCFD (Task Force on Climate-related Financial Disclosures).
JSW Group analyzes and examines the impact of climate change as risks and profit opportunities on its business activities and is working for our disclosure of information in accordance with TCFD Disclosure Framework.

TCFD TCFD
TCFD: The Task Force on Climate-related Financial Disclosures launched by the Financial Stability Board (FSB)

Governance

The Board of Directors recognizes that it is one of the important subjects to respond to climate change issues and supervises the Group's efforts to address climate change issues in terms of both risks and opportunities.
Specifically, when the Board of Directors deliberates on management strategies and plans, its decisions are made based on risks and opportunities related to climate change issues as necessary.

In addition, since April 2021, the Executive Board has established the "ESG Promotion Committee" chaired by the director in charge of ESG promotion for the purpose of promoting ESG activities more smoothly, effectively, and crosse-organizationally.
The ESG Promotion Committee holds regular meetings in twice every year or more, if necessary, to discuss and decide climate change strategies and various ESG-related agendas. The Board of Directors appropriately supervises, including acceptance of reports on the activities of the ESG Promotion Committee.

In April 2022, we have established the "ESG Promotion Office" to promote ESG activities company wide. The ESG Promotion Committee plays a central role in promoting ESG activities through the ESG Promotion Office, including the Group's climate change response, in collaboration with the head office divisions, business divisions, plants, and group companies.

ESG activity promotion system

ESG activity promotion system ESG activity promotion system

Strategy

We conducted a scenario analysis to evaluate how the risks and opportunities of climate change affect our business strategy and to consider countermeasures. The assumptions used for this scenario analysis are as follows.
The target of the analysis is covering all businesses based on consolidated financial statements, and the analysis time axis is fiscal 2030. As for the based scenarios, IEA's SDS scenario (Sustainable Development Scenario) and IPCC's RCP2.6 etc. are used as "below 2℃ scenario", and STEPS scenario (Stated Policies Scenario) and IPCC's RCP8.5 etc. are used as "4℃ scenario".

Assumptions of Scenario Analysis

Items Subjects
Business
scope		 The Japan Steel Works Group
Boundary Consolidated Balance Sheet
Time Axis 2030
Selected
Scenario		 Temperature
Below 2℃		 Transition
Scenario
IEA*1
SDS		 Physical
Scenario
IPCC*2
RCP2.6 etc.
Temperature
4℃		 Transition
Scenario
IEA     
STEPS		 Physical
Scenario
IPCC     
RCP8.5 etc.

*1: IEA (International Energy Agency)
*2: IPCC (Intergovernmental Panel on Climate Change)

As a scenario analysis process, we first identified the risks and opportunities that climate change would bring, and extracted items that are expected to have a relatively large impact on operating income from among various items.
Next, we collected objective external data necessary for estimating the impact of these items, and estimated the impact as of fiscal 2030 based on the below 2℃ scenario and the 4℃ scenario.
Then, we considered countermeasures for the results of our estimates with appropriate parameters.
The extracted items and the estimated degree of impact, and countermeasures for them are as follows.

Financial "Risk" Impact Assumed for FY2030

Impact on Operating Income (Japanese Yen)/Year.

Minor: 0-100million, Moderate: 100million-1,000million, Major: 1,000million or more

CLASS TYPE CONTENTS IMPACT OUR COUNTER MEASUREMENTS
2℃ 4℃
Transition Risks Policies and Regulations Introduction of carbon pricing (imposition of a carbon tax) Moderate -
  • To be achieved CO2 emission reduction target for 2030 (60% reduction compared to 2013) by introducing renewable energy-derived power, equipment energy saving measures (lighting LED, equipment electrification, etc.), solar power generation, etc. at each factory (Scope1, 2).
Introduction of border adjustment tax Minor Minor
  • In addition to reducing CO2 emissions in Scope1 and 2, we will grasp the status of Scope3 at an early stage, develop energy-saving technologies and products, bring them to the market, and promote activities to reduce CO2 emissions in the supply chain.
Technology Cost of refurbishing/updating facilities and R&D to support a shift to the use of non-fossil fuels used in production facilities Moderate Moderate
  • Identification (priority) of equipment subject to repair/renewal.
  • Early establishment and introduction of technology through R&D collaboration with other companies and universities.
Markets Decrease in demand for thermal power related products due to the reduction in the construction of conventional thermal power plants Minor -
  • Shift to products for power generation equipment that have introduced CO2 removal technologies like ultra-high temperature, super-critical efficiency power plants, etc..
Increased procurement costs due to increased demand for steelmaking raw materials as a result of the shift from blast furnaces to electric furnaces in the steel industry (CO2 reduction measures) Moderate Moderate
  • Cost reduction by diversifying suppliers and improving the recycling rate.
Reputation Damage to our ESG evaluation and reputation due to delays in CO2 emission reduction measures at the product manufacturing stage Moderate Moderate
  • Execution and acceleration of plans for increasing application of renewable energy and shift to non-fossil fuels (repair and renewal of production facilities) (Scope1, 2).
Physical Risks Acute Increased costs incurred by the restoration of damaged production and supply chain facilities due to severe natural disasters such as typhoons and torrential rains caused by extreme weather change Minor Minor
  • Maintenance and management of measures against wind and rain disasters at each factory (expansion of rainwater ditches, introduction of water stop plates, etc.).
  • Multiple manufacturing bases for core parts.
  • Regular review and optimization of insurance.
    (If the intensification of disasters becomes more pronounced, consider parallel production of major products at bases with strong disaster tolerance.)
Chronic Increased costs (capital investment) to cope with rising sea levels Minor Minor
  • As a result of our requested investigation from an external organization, it is assumed that the risk will be low until the latter half of this century at our main manufacturing Plants, so we will give priority to measures against acute disasters such as typhoons with high sudden risk.

Financial "Opportunity" Impact Assumed for FY2030

Impact on Operating Income (Japanese Yen)/Year.

Minor: 0-100million, Moderate: 100million-1,000million, Major: 1,000million or more

CLASS TYPE CONTENTS IMPACT OUR COUNTER MEASUREMENTS
2℃ 4℃
Opportunities Markets Expansion of the EV market Major Major
  • The production Lines/System for separator manufacturing equipment for lithium-ion batteries installed in EVs will be expansion and strengthened to capture the expansion of the EV market.
Expansion of high-efficiency, energy-efficient power electronics market and 5G infrastructure market Moderate Moderate
  • Full-scale commercialization and mass production of products such as gallium nitride (GaN) substrates, composite substrates for optical communication, and titanium copper products for the market on the left.
Energy Sources Increased demand for renewable energy power generation Moderate Moderate
  • We will capture market expansion by improving the productivity of the relevant products and responding to the demand for larger product sizes.
Increase in hydrogen stations for fuel cell vehicles Minor Minor
  • Accelerate sales expansion of hydrogen accumulators and hydrogen storage alloy tanks for hydrogen stations.
Resource Efficiency Tax relief after the introduction of carbon pricing on CO2 emissions from production facilities Major -
  • Electrification of production equipment and introduction of electricity derived from renewable energy.
  • Examination of conditions suitable for manufacturing products using non-fossil fuels such as ammonia and hydrogen, and promotion of measures to reduce CO2 emissions such as equipment repairs and renewals.
Reduction of CO2 emissions due to the introduction of photovoltaic installations (Scope 1, 2) Minor -
  • Completion and acceleration of plans for expansion and introduction of solar power generation to factories.
Products and Services Expansion of products and services that contribute to the demand for the reduction of CO2 emissions Major Major
  • Strengthen the production system and expand sales of electric drive type injection molding machines that realize significant energy saving compared to hydraulic drive type.
  • Expanding the lineup of injection molding machines to meet the demand for larger in-vehicle magnesium parts that contribute to improved fuel efficiency by reducing car-body weight.
  • Strengthen the after-sales service system to extend the life and improve energy efficiency of delivered machines.
  • Social implementation of DX, telework, automatic operation, etc. and contributes to CO2 reduction by strengthening the differentiation of electronic device-related manufacturing equipment for IT panels (PC monitors, etc.), 5G-related communication equipment, data centers, etc., and developing and launching next-generation semiconductor-related equipment.
Response to the demand for plastic recycling, contribution to social implementation of non-fossil fuel-derived plastics and coal alternatives Minor Minor
  • Product development with customers utilizing the Chemical Recycling Center (Hiroshima) and expansion of the equipment lineup to capture the demand for chemical recycling.
  • Advancing technologies of resin manufacturing and upsizing molding equipment for manufacturing/molding of bioplastics (non-fossil fuel-derived, biodegradable plastics).
  • Research for advanced technology and upsizing of twin-screw extruder for producing biomass fuel that realizes low carbon emission.
Response to the demand for nuclear power plants that emit less CO2 and are a stable source of electricity Moderate Moderate
  • Maintaining and improving manufacturing technology for nuclear power application products.

Transition Risks

TYPE : Policies and Regulations
CONTENTS Introduction of carbon pricing
(imposition of a carbon tax)
IMPACT: 2℃ Moderate
IMPACT: 4℃ -
OUR
COUNTER
MEASUREMENTS
  • To be achieved CO2 emission reduction target for 2030 (60% reduction compared to 2013) by introducing renewable energy-derived power, equipment energy saving measures (lighting LED, equipment electrification, etc.), solar power generation, etc. at each factory (Scope1, 2).
CONTENTS Introduction of border adjustment tax
IMPACT: 2℃ Minor
IMPACT: 4℃ Minor
OUR
COUNTER
MEASUREMENTS
  • In addition to reducing CO2 emissions in Scope1 and 2, we will grasp the status of Scope3 at an early stage, develop energy-saving technologies and products, bring them to the market, and promote activities to reduce CO2 emissions in the supply chain.
TYPE : Technology
CONTENTS Cost of refurbishing/updating facilities and R&D to support a shift to the use of non-fossil fuels used in production facilities
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • Identification (priority) of equipment subject to repair/renewal.
  • Early establishment and introduction of technology through R&D collaboration with other companies and universities.
TYPE : Markets
CONTENTS Decrease in demand for thermal power related products due to the reduction in the construction of conventional thermal power plants
IMPACT: 2℃ Minor
IMPACT: 4℃ -
OUR
COUNTER
MEASUREMENTS
  • Shift to products for power generation equipment that have introduced CO2 removal technologies like ultra-high temperature, super-critical efficiency power plants, etc..
CONTENTS Increased procurement costs due to increased demand for steelmaking raw materials as a result of the shift from blast furnaces to electric furnaces in the steel industry (CO2 reduction measures)
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • Cost reduction by diversifying suppliers and improving the recycling rate.
TYPE : Reputation
CONTENTS Damage to our ESG evaluation and reputation due to delays in CO2 emission reduction measures at the product manufacturing stage
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • Execution and acceleration of plans for increasing application of renewable energy and shift to non-fossil fuels (repair and renewal of production facilities) (Scope1, 2).

Physical Risks

TYPE : Acute
CONTENTS Increased costs incurred by the restoration of damaged production and supply chain facilities due to severe natural disasters such as typhoons and torrential rains caused by extreme weather change
IMPACT: 2℃ Minor
IMPACT: 4℃ Minor
OUR
COUNTER
MEASUREMENTS
  • Maintenance and management of measures against wind and rain disasters at each factory (expansion of rainwater ditches, introduction of water stop plates, etc.).
  • Multiple manufacturing bases for core parts.
  • Regular review and optimization of insurance.
    (If the intensification of disasters becomes more pronounced, consider parallel production of major products at bases with strong disaster tolerance.)
TYPE : Chronic
CONTENTS Increased costs (capital investment) to cope with rising sea levels
IMPACT: 2℃ Minor
IMPACT: 4℃ Minor
OUR
COUNTER
MEASUREMENTS
  • As a result of our requested investigation from an external organization, it is assumed that the risk will be low until the latter half of this century at our main manufacturing Plants, so we will give priority to measures against acute disasters such as typhoons with high sudden risk.

Financial "Opportunity" Impact Assumed for FY2030

Impact for Operating Income (Japanese Yen)/Year.

Minor: 0-100million, Moderate: 100million-1,000million, Major: 1,000million or more

Opportunities

TYPE : Markets
CONTENTS Expansion of the EV market
IMPACT: 2℃ Major
IMPACT: 4℃ Major
OUR
COUNTER
MEASUREMENTS
  • The production Lines/System for separator manufacturing equipment for lithium-ion batteries installed in EVs will be expansion and strengthened to capture the expansion of the EV market.
CONTENTS Expansion of high-efficiency, energy-efficient power electronics market and 5G infrastructure market
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • Full-scale commercialization and mass production of products such as gallium nitride (GaN) substrates, composite substrates for optical communication, and titanium copper products for the market on the left.
TYPE : Energy Sources
CONTENTS Increased demand for renewable energy power generation
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • We will capture market expansion by improving the productivity of the relevant products and responding to the demand for larger product sizes.
CONTENTS Increase in hydrogen stations for fuel cell vehicles
IMPACT: 2℃ Minor
IMPACT: 4℃ Minor
OUR
COUNTER
MEASUREMENTS
  • Accelerate sales expansion of hydrogen accumulators and hydrogen storage alloy tanks for hydrogen stations.
TYPE : Resource Efficiency
CONTENTS Tax relief after the introduction of carbon pricing on CO2 emissions from production facilities
IMPACT: 2℃ Major
IMPACT: 4℃ -
OUR
COUNTER
MEASUREMENTS
  • Electrification of production equipment and introduction of electricity derived from renewable energy.
  • Examination of conditions suitable for manufacturing products using non-fossil fuels such as ammonia and hydrogen, and promotion of measures to reduce CO2 emissions such as equipment repairs and renewals.
CONTENTS Reduction of CO2 emissions due to the introduction of photovoltaic installations (Scope 1, 2)
IMPACT: 2℃ Minor
IMPACT: 4℃ -
OUR
COUNTER
MEASUREMENTS
  • Completion and acceleration of plans for expansion and introduction of solar power generation to factories.
TYPE : Products and Services
CONTENTS Expansion of products and services that contribute to the demand for the reduction of CO2 emissions
IMPACT: 2℃ Major
IMPACT: 4℃ Major
OUR
COUNTER
MEASUREMENTS
  • Strengthen the production system and expand sales of electric drive type injection molding machines that realize significant energy saving compared to hydraulic drive type.
  • Expanding the lineup of injection molding machines to meet the demand for larger in-vehicle magnesium parts that contribute to improved fuel efficiency by reducing car-body weight.
  • Strengthen the after-sales service system to extend the life and improve energy efficiency of delivered machines.
  • Social implementation of DX, telework, automatic operation, etc. and contributes to CO2 reduction by strengthening the differentiation of electronic device-related manufacturing equipment for IT panels (PC monitors, etc.), 5G-related communication equipment, data centers, etc., and developing and launching next-generation semiconductor-related equipment.
CONTENTS Response to the demand for plastic recycling, contribution to social implementation of non-fossil fuel-derived plastics and coal alternatives
IMPACT: 2℃ Minor
IMPACT: 4℃ Minor
OUR
COUNTER
MEASUREMENTS
  • Product development with customers utilizing the Chemical Recycling Center (Hiroshima) and expansion of the equipment lineup to capture the demand for chemical recycling.
  • Advancing technologies of resin manufacturing and upsizing molding equipment for manufacturing/molding of bioplastics (non-fossil fuel-derived, biodegradable plastics).
  • Research for advanced technology and upsizing of twin-screw extruder for producing biomass fuel that realizes low carbon emission.
CONTENTS Response to the demand for nuclear power plants that emit less CO2 and are a stable source of electricity
IMPACT: 2℃ Moderate
IMPACT: 4℃ Moderate
OUR
COUNTER
MEASUREMENTS
  • Maintaining and improving manufacturing technology for nuclear power application products.

As described above, we conducted a scenario analysis for each of our business fields and verified the response to risks and opportunities.

The risks of the below 2℃ scenario include, in addition to increased costs due to the introduction of carbon pricing, a decrease in sales of products for coal-fired power stations, increased costs for the non-fossilization of fuel for production facilities, and a decrease in sales due to reputation damage if the company's CO2 emissions reduction measures prove to be insufficient.
In response, we are promoting the reduction of CO2 emissions at major manufacturing plants and are also working on the introduction of renewable energy-derived power, research, and development for the shift to non-fossil fuels, and equipment refurbishment/renewal. Regarding the decline in reputation, ESG Promotion Committee will continue discussion with a view to accelerating the plan, as well as ensuring the execution of plans such as increasing the amount of electricity derived from renewable energy and shifting (repair and renewal of production facilities) to non-fossil fuels.

In terms of opportunities provided by the below 2℃ scenario, we possess multiple product groups that could potentially provide opportunities for us as environmental regulations become stricter, such as manufacturing equipment for separator film used in EVs and electrically driven injection molding machines with superior energy efficiency. To increase sales of those products, we are working to strengthen our production system, expand product substantiality that meet market needs, and strengthen our technology. In addition, we will promote resource efficiency by taking the opportunity of introducing carbon prices, such as electrification of manufacturing facilities and promotion of the use of electricity and non-fossil fuels derived from renewable energy.

Risks posed by the 4℃ scenario include physical damage to production facilities and other property caused by events such as typhoons, torrential rains, floods and storm surges, costs incurred by countermeasures, and consequences such as the impact on business performance due to the shutdown of operations.
We asked an external organization to scrutinize the location conditions of our main manufacturing bases, forecasted changes in weather, existing disaster prevention facilities in and around the manufacturing bases, and damage records in the past. As a result, it was confirmed that disaster prevention measures have been strengthened not only in the manufacturing bases but also in the surrounding area such as raising the embankment. In addition, as the estimated amount of damage is expected to be covered by insurance, the impact of physical risks (acute and chronic) on business performance is expected to be minimal by the middle of this century. We will continue to monitor climate trends, and if the tendency for intensifying disasters becomes even more pronounced, we will consider parallel production of major products at bases with stronger disaster tolerance.

Based on the above, we believe that our strategy for climate change is resilient.

Risk Management

The ESG Promotion Committee and the Environmental Management Committee carry out the identification and evaluation of risks related to the environment and climate change. Specifically, we comply with environment-related regulations by operating the environmental management system (ISO14001).
The Twice-Yearly Environmental Management Committee, which specializes in the "environment," holds discussions on management and response to changes in regulations. We also monitor and evaluate CO2 emissions, resource conservation / recycling trends / status, and response status to risks and opportunities related to climate change.
In addition, these activities are reported to the Board of Directors as the activities of the ESG Promotion Committee and are supervised by the Board of Directors. The ESG Promotion Office will play a central role in efforts to reduce the identified risks and will promote it in cooperation with the head office department, business divisions, factories, and group companies.
We have established rules regarding risk management and clarified the company-wide risk management system, and the Board of Directors or the Executive Board discusses important risks. Important risks related to climate change identified by the ESG Promotion Committee and the Environmental Management Committee will be deliberated by the Board of Directors or the Executive Board as appropriate.

ESG Promotion Committee ･ Environment Management Committee Execution System

ESG推進委員会・環境マネジメント委員会実施体制図 ESG推進委員会・環境マネジメント委員会実施体制図

Risk Management System

Risk Management System Risk Management System
  • The Liaison Council of Outside Officers was established as a venue to provide outside officers with advance explanations about the agenda for Board of Directors meetings, and as a forum for outside directors and executive officers to verify, report on, and exchange opinions about business execution.

Indicators and Targets

The "Indicators and Targets" that measure and manage risks and opportunities related to climate change have set the following targets for a carbon-neutral decarbonized society. We are engaged in environmentally friendly business activities that aim for improvement in terms of both "decarbonization by products" and "decarbonization of production processes."
Regarding the CO2 emission reduction target, we have initiatives underway from Scope 1 and Scope 2. As Scope 3 is being calculated, we are proceeding with efforts toward setting publication and management indicators.

Classification Management Indicator Target
(by end of year)
2025 2030
Reduction of CO2 emissions in production activities (Scope1, 2) CO2 emissions reduction target (compared with fiscal 2013) 45%
Reduction		 60%
Reduction
Promotion of the introduction of renewable energy Percentage of renewable energy among all energy used (Scope1, 2) 25% or
More		 40% or
More
CO2 Emission (Scope1, 2) & Renewable Energy Introduction Rate CO2 Emission (Scope1, 2) & Renewable Energy Introduction Rate

CO2 emission (Scope1, 2) reduction and renewable energy introduction plan

*In terms of the scope covered, the CO2 emissions calculation includes the total of the head office and the Group's main manufacturing sites (Hiroshima Plant, Yokohama Plant, Meiki Plant, Japan Steel Works M&E, JSW Aktina System).

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