Efforts to Reduce Greenhouse Gas Emissions throughout the Supply Chain

Management Approach

Basic ConceptReducing Emissions Throughout the Entire Supply Chain

The Sekisui Chemical Group has formulated a medium-term greenhouse gas emission reduction plan to help ensure that the rise in the global temperature is limited to below 2℃, as called for by the Paris Agreement. Based on a scenario in accordance with the Science Based Targets (SBTs), we identify and disclose the risks and opportunities from the impact of climate change on business continuity under the scenario of keeping the rise in the global temperature under 2℃. Moreover, we reflect these factors into our business plans and emission reduction targets. Concerning emissions, Sekisui is engaged in reducing greenhouse gas emissions in all stages from the procurement of raw materials to development, manufacturing, transport, and use. We monitor these emissions throughout the entire supply chain, including not just our own business sites but also raw material suppliers and the use of our products after being sold, and publish our findings.

Combating Climate ChangeSteadily Reducing Greenhouse Gases in All Business Activities

Under the Environmental Medium-term Plan that we have been implementing since fiscal year 2017, we have widened the scope for setting targets for greenhouse gas emissions to extend beyond production to encompass all aspects of our business activities; we have set a reduction target of 6% reductions for emissions from business activities versus fiscal year 2013 levels by fiscal year 2019. Sekisui Chemical is also actively engaged in environment-contributing investments that contribute to reducing greenhouse gas emissions from its production divisions.
Looking ahead, we will continue reducing greenhouse gases at every stage of our business activities, with the COP 21 (Paris Agreement) objectives at the forefront of our decision-making.

Climate Change and Our BusinessRisks and Opportunities Presented by Climate Change for Our Businesses

The Sekisui Chemical Group recognizes that global warming and other forms of climate change are a global problem for society. The Sekisui Environment Sustainability Vision 2030 created in fiscal 2013 aims to realize “a planet where biodiversity is preserved.” Our concept of “a planet where biodiversity is preserved” is a vision where the earth has achieved a state of having solved global-scale social issues, such as climate change, resource depletion and ecosystem degradation.

We also strive to understand the risks and opportunities that climate change presents to the operations of the Sekisui Chemical Group, in terms of their magnitude, scope of impact and other matters. For identified risks, the Sekisui Chemical Group examines measures to mitigate the risks, and for identified opportunities, it considers the creation of new businesses by developing products and services. Through this kind of management, we believe it is possible to remain a company that meets the demands of society through sustainable business development.

An Example of Risks and Opportunities Recognized by the Sekisui Chemical Group

Business Risks from Climate Change
  • Higher costs in procurement, production, facilities and distribution from regulations designed to prevent and lessen the effects of climate change
  • Costs to replace cooling equipment, vehicles and substances used in order to comply with changes in regulations for coolants
  • Higher costs for building facilities and systems in order to calculate the emission of substances such as CO2 that cause climate change
  • New taxes, such as carbon tax, for restricting the greenhouse gas emissions and costs to acquire emission credits
  • Higher energy costs due to the greater use of renewable energy
  • Additional costs in manufacturing and R&D from new standards or tougher standards for insulation and energy-saving functions of housing products
  • Changes in market needs alongside climate change (fluctuations in demand for smart houses, insulation, agricultural film and other Environment-contributing Products)
  • Costs to calculate and disclose environmental performance required by regulations, such as the energy-saving performance of products and disclosing our carbon footprint
  • Decline in relative cost competitiveness as a result of higher production costs from the tightening of environmental regulations in regions where production sites are located
  • Loss of advantages in the Company’s Environment-contributing Products in regions lacking relevant environmental regulation
  • Decline in advantages of the Company’s products due to weaker demand for high-insulation properties due to changes in average temperatures
  • Increase in energy costs in regions that have regulated targets for introducing renewable energy
  • A worsening in employment conditions if temperatures increase due to global warming (increased risk of heatstroke, etc.)
  • Inability to operate factories located in low-lying regions due to flooding and rising sea levels
  • Loss of business operations due to increase in employees unable to commute to work due to severe weather such as typhoons, heavy rainfall and strong winds
  • Temporary suspension of procurement and logistics due to severe weather such as typhoons, heavy rainfall and strong winds
  • Decline in number of available construction days at housing construction sites and waterworks infrastructure projects due to sharp increase in rainfall
Business Opportunities from Climate Change
  • Expand world market for Environment-contributing Products as environmental awareness increases in emerging countries
  • Increase demand for Environment-contributing Technologies and Environment-contributing Products in tandem with changes in temperatures and rainfall and more frequent occurrence of natural disasters
  • Stronger demand for Environment-contributing Products as regulations and tax codes are established to prevent and mitigate climate change
  • Growth in Environment-contributing Products from stronger needs to reduce energy costs and greater awareness of energy conservation among consumers around the world
  • Increase in sales opportunities for the Company’s products for which information can be provided via labeling that assesses the use of natural capital as a result of the introduction of environmental labeling system, such as for energy-saving performance
  • Competitive advantages from being able to produce at minimal cost even if tighter environmental regulations are made, thanks to ongoing efforts to reduce environmental load at production sites
  • Improvement in corporate image from environmental activities and availability of Environment-contributing Products
Risks brought on by climate change can be broadly put into three categories: higher costs to address climate change, changes in market needs alongside climate change, and deterioration in plant operation and working conditions from an increase in temperatures and natural disasters. Meanwhile, the main opportunity presented by climate change is stronger demand for Environment-contributing Products.

Every effort is being made to avoid risk through effective management. The Sekisui Chemical Group also recognizes the importance of continuously carrying out the three missions stipulated under the Sekisui Environment Sustainability Vision 2030, namely expanding and creating markets for Environment-contributing Products, reducing environmental impact, and conserving the natural environment in order to steadfastly grasp opportunities.

Higher Costs to Address Climate Change Can Be Met with Reductions in Environmental Impact

As an initiative to reduce environmental impact, the Sekisui Chemical Group aims to visualize its energy usage and reduce the volume used through its Manufacturing Development Innovation Center, which was established for the purpose of greatly increasing energy efficiency in production processes. We also created a system where employees can select an eco-car from the list of company-owned vehicles and conduct environmental impact assessments and energy conservation assessments when installing new equipment in our plants. Through these and other efforts, the Sekisui Chemical Group has put in place a structure that allows it to meet new environmental regulations around the world at minimal cost.

Changes in Market Needs and Stronger Demand for Environmental Products Can Be Addressed by Improving Environment-contributing Products

We manage risks that arise from climate change and other global social issues by continuing to develop Environment-contributing Products and disclosing and distributing detailed data on outcomes, and this also allows us to precisely identify opportunities arising from strengthening demand.

In particular, we believe it is possible to magnify the impact of the products and services we create by quantifying as much as possible the size of their contribution to solving social issues, which leads to opportunities to create and transform markets in ways that help solve global issues and change the awareness of consumers.

Deterioration in Operating and Working Conditions Can Be Addressed on a Case-by-Case Basis

If climate change becomes a grave problem and significantly increases the highest and lowest temperatures, it is possible that people in manufacturing and construction would be unable to work as much. Since climates vary by region, it may be possible to minimize the effects of climate change by proposing to do construction work and projects during the more favorable seasons in the region. Each company division and Group company has formulated its own BCP based on their unique situation as a means of avoiding as much as possible the risk of loss in operations and work availability due to natural disasters.

Major Initiatives

Acquisition of SBT CertificationAcquisition of Certification Under the SBT* Initiative (a World-First in the Chemistry Industry) Relating to Greenhouse Gas Reduction Targets

To commit, before society, its stance of actively engaging in corporate efforts to resolve issues of climate change, the Sekisui Chemical Group publicly releases CSR reports and other materials relating to its targets. Additionally, in fiscal year 2017, the Group applied for certification under the SBT Initiative to demonstrate that its medium-term targets announced for its overall business and for its supply chains reach a scientifically grounded, ambitious level aimed at helping to achieve the Paris Agreement’s 2℃ target. The group then became the first in the chemical industry worldwide to receive this certification.


<Certified targets>
SCOPE 1+2: Reduce greenhouse gas emissions by 26%, relative to fiscal year 2013, by 2030
SCOPE 3: Reduce greenhouse gas emissions by 27%, relative to fiscal year 2016, by 2030


The Group will continue to affirm its growing responsibility to play its role as an industry leader and will strive to engage in activities leading and imploring society as a whole to work on measures to combat climate change.

  • SBT: Short for Science Based Targets Called for by joint initiatives, including the UN Global Compact, in response to the adoption of the Paris Agreement. Through the SBT Initiative, greenhouse gas reduction targets established by companies are certified as science-based targets (SBTs) that contribute to long-term measures combating climate change.

Environment-contributing InvestmentsEnvironment-contributing Investment Framework Newly Created to Advance Measures for Combating Global Warming

It will first be necessary to steadily achieve the backcasting-based targets set forth in the Environmental Medium-term Plan that the Group has been implementing since fiscal year 2017 to achieve the Group’s 2030 targets for reducing greenhouse gas emissions.
The Group is already implementing extremely high-level initiatives for reducing emissions at its production sites. To achieve its targets of wide-ranging reductions, the Group believes that bold capital expenditures, in addition to mere changes to its operations in production sites, will be essential. To promote capital expenditures that contribute to energy savings, the Group has set a new Environment-contributing Investment Framework, and has established internal systems that support production sites upgrade or replace equipment to reduce greenhouse gas emissions.
In fiscal year 2017, the effectiveness of these initiatives steadily emerged, as demonstrated, for instance, by our undertaking of capital expenditures that had been previously delayed because of unprofitableness. By upgrading older types of manufacturing equipment and utilities, switching lighting to LEDs, and making other investments, the Group is on track to reduce the greenhouse gas emissions from projects already ordered by 20,000 metric tons, and, with the further spending based on this support system, we aim to achieve total reductions of 40,000 metric tons.

Supply Chain Initiatives (Scope 3)Reducing Greenhouse Gases at the Supply Chain Stage

In the case of Sekisui, we were able to determine that greenhouse gas emissions falling under SCOPE 3 are highest at the raw materials procurement and product usage stages. The reason that emissions are high in the raw materials procurement stage is understood to be due to the characteristics of our business as a chemicals manufacturer. Meanwhile, the emissions from the product-usage stage arise from the large volumes of greenhouse gases emitted as the result of energy consumed in the houses that we sell.
Concerning raw materials, going forward, we will revise our selection criteria for new materials at the time of their adoption and reduce the use of four resins known to be raw materials that result in high levels of emissions to reduce the amount of greenhouse gases that are emitted. Thus, we will act to include the entire supply chain, achieving reductions of 20%, relative to fiscal year 2016.
In terms of emissions at the stage of product usage, we will contribute to energy usage reductions from occupied housing by increasing the proportion of net-zero energy houses (ZEH) among the housing units that we sell, achieving 50% reductions, relative to fiscal year 2016, by fiscal year 2030.

Renewable Energy UsePromoting Household Use of Solar Panels

Sekisui Chemical has been promoting the use of renewable energy by installing solar power generators at our domestic and overseas production sites. In fiscal year 2017, solar-derived energy usage amounted to 1,173 MWh, which is equivalent to 0.17% of our total energy usage, including purchased electricity.

Sekisui will continue to monitor the proportion of renewable energy out of its total amount of electricity consumed, including purchased electricity, and to strive to increase that proportion to help achieve its Environmental Sustainability Vision 2030 targets.

Performance Data

Starting with the current Environmental Medium-term Plan (2017-2019) we have revised the CO2 emissions coefficient and amount of heat generated per unit of output, resulting in revisions to figures for previous fiscal years.

  • Greenhouse Gas (GHG) Emissions That Arise from Business Activities

  • Greenhouse Gas (GHG) Emissions During Manufacturing / Japan

  • Energy Usage and per Unit of Output* (Index) During Manufacturing / Japan

  • Greenhouse Gas (GHG) Emissions During Manufacturing / Overseas

  • Energy Usage and per Unit of Output* (Index) During Manufacturing / Overseas

  • Breakdown of Greenhouse Gas (GHG) Emissions During Manufacturing / Japan

  • Breakdown of Energy Usage During Manufacturing / Japan

  • Breakdown of Greenhouse Gas (GHG) Emissions During Manufacturing / Overseas

  • Breakdown of Energy Usage During Manufacturing / Overseas

  • Amount of Electricity Purchased During Manufacturing / Japan and Overseas

  • Amount of Solar Power Generated for In-House Use During Manufacturing / Japan and Overseas

  • GHG Emissions at Research Facilities

  • Energy Usage and per Unit of Output* (Index) at Research Facilities

  • Energy Usage and per Unit of Output* (Index) at Offices

    • Note:
      For Japan, electricity and fuel for company cars are tabulated, while only electricity is tabulated for overseas.
Indicator Calculation Method
Greenhouse Gas Emissions GHG emissions = Σ[fuel usage, purchased electricity, purchased steam × CO2 emissions coefficient] + greenhouse gas emissions not arising from energy consumption
Greenhouse gas emissions not arising from energy consumption = CO2 emissions not arising from energy consumption* + Σ[emissions of non-CO2 greenhouse gases × global warming coefficient]
*Includes CO2 emissions from the burning of non-fuel matter based on the Act on Promotion of Global Warming Countermeasures, both inside Japan and overseas
[CO2 Emissions Coefficient]
  • Purchased Electricity:
    In Japan, the coefficient provided in notices pursuant to the Act on Promotion of Global Warming Countermeasures is applied to the latest data at the start of each fiscal year
    Overseas, coefficients obtained from suppliers are applied to the latest data at the start of each fiscal year
    If a coefficient cannot be obtained in this manner, it is based on the GHG Protocol and EPA eGRID 2014
  • City Gas and Purchased Steam:
    Coefficients obtained from suppliers are applied to the latest data
    at the start of each fiscal year
    If a coefficient cannot be obtained in this manner, it is based on the Act on Promotion of Global Warming Countermeasures
  • Fuel Other than the Above:
    Based on the Act on Promotion of Global Warming Countermeasures
  • Global warming coefficient:
    An emissions coefficient determined based on a system of greenhouse gas emission calculations, reports, and official disclosures
Energy Usage Energy usage = Σ[amount of fuel used, amount of electricity purchased, amount of steam purchased × amount of heat generated per unit]
[Amount of Heat Generated per Unit]
  • Purchased Electricity:
    3.60 MJ/kWh
  • Fuel, Purchased Steam:
    Based on the Act on the Rational Use of Energy
  • Transportation Volumes and Energy per Unit of Output* (Index) During Transportation / Japan

  • CO2 Emissions During the Transport Stage / Japan

Indicator Calculation Method
CO2
Emissions During the
Transport
The calculation is the CO2 emissions yielded by combining the fuel method (transport of housing
units, etc.) and the metric ton-kilo method (other than transport of housing units, etc.)
CO2 emissions = Σ[fuel usage × CO2 emissions coefficient] + Σ[amount transported (metric tons)
× distance transported (km) × fuel usage per unit of output × CO2 emissions coefficient]
Fuel usage per unit of output is the value used in the reporting system for specified freight
carriers under the Act on the Rational Use of Energy
Domestic distribution (shipment of products) is covered

Greenhouse Gas Emissions Throughout Supply Chain (Scope 3)

    • Note:
      Since the 2016 fiscal year, the scope of tabulation of purchased products and services has been expanded; this resulted in the emissions increasing substantially from the previous fiscal year following review of the values for the 2016 fiscal year.
  • Greenhouse Gas Emissions Throughout Supply Chain as a Whole
    (Classified by Scope)

    • Note:
      Since fiscal year 2016, the scope of tabulation of purchased products and services has been expanded in relation to SCOPE 3; this resulted in the emissions known increasing substantially from the previous fiscal year.
Indicator Calculation Method
Greenhouse Gas Emissions throughout Supply Chain Purchased Products and Services CO2 emissions = Σ[(amount of major raw materials used as listed in Material Balance section of this report + estimated values for other raw materials) × emission coefficient (IDEA v 2.2 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))]
Capital Goods CO2 emissions = Σ[(amount of spending on capital expenditures authorized for the given fiscal year for buildings, structures, mechanical equipment, and transport vehicles) × emissions coefficient (per unit emissions database for calculating organizational greenhouse gas emissions, etc., arising from supply chains (Ver. 2.0) (Ministry of the Environment and Ministry of the Economy, Trade and Industry))]
Fuel and Energy-Related Activities Not Included in Scopes 1 and 2 CO2 emissions = Σ[(fuel usage, amount of purchased electricity, and amount of purchased steam) × emissions coefficient]
The emissions coefficients used are as follows. For fuel, IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry); for purchased electricity and steam, per unit emission database for calculating greenhouse gas emissions by organizations, etc., arising from supply chains (Ver. 2.0) (Ministry of the Environment and Ministry of the Economy, Trade and Industry).
Applicable to production sites, laboratories, and offices both inside Japan and overseas
Transport (Upstream) CO2 emissions = Σ[amount of major raw materials used as listed in the Material Balance section of this report × transport distance × emission coefficient (IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))]
(Calculated assuming that the uniform transport distance was 200 km)
Waste Material Generated as Part of Business CO2 emissions = Σ[amount of waste materials generated (by type) × emission coefficient (IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))] Covers major production sites and research facilities in Japan and overseas
Business Trips CO2 emissions = Σ[transportation costs by method of transport × emissions coefficient (per unit emissions database for calculating organizational greenhouse gas emissions, etc., arising from supply chains (Ver. 2.0) (Ministry of the Environment and Ministry of the Economy, Trade and Industry))]
(Includes estimates of transportation costs for group companies) Covers group companies in Japan and overseas
Commuting by Employees CO2 emissions = Σ[amount spent on commuting assistance × emissions coefficient (per unit emissions database for calculating organizational greenhouse gas emissions, etc., arising from supply chains (Ver. 2.0) (Ministry of the Environment and Ministry of the Economy, Trade and Industry))]
(Calculated based on the assumption that all commuting is done by passenger train)
(Group company commuting costs include estimates) Group companies in Japan and overseas all covered
Transport (Downstream) The calculation is the total amount of CO2 emissions yielded by combining the fuel method (transport of housing units, etc.) and the metric ton-kilo method (other than transport of housing unit, etc.)
CO2 emissions = Σ[fuel usage × CO2 emissions coefficient] + Σ[amount transported (metric tons) × distance transported (km) × fuel usage per unit of output × CO2 emissions coefficient (value used in the reporting system for specified freight carriers under the Act on the Rational Use of Energy)] (Estimates used for overseas)
Covers shipments of products by group companies in Japan and overseas
Processing of Sold Products CO2 emissions = Σ[production volume of relevant products × emission coefficient at the time of processing the relevant products (IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))]
Covers products for the automotive industry by group companies in Japan and overseas
Usage of Sold Products CO2 emissions = Σ[number of structures sold as housing during the relevant fiscal year × amount of electricity purchased from power companies throughout a year × 60 years × electricity-based emissions coefficient]
The effects of solar power-generation systems are included in the calculation The amount of electricity purchased from power companies throughout a year is based on the Sekisui Chemical Co., Ltd. press release (March 13, 2014) “A Survey of Electric Power Input-Output Balance of Actual Residences Equipped with Solar Power-Generation Systems (2013).” The electricity-based emissions coefficient employed is the emissions coefficient from the 2018 report produced by the Act on Promotion of Global Warming Countermeasures reporting system (alternate value), equal to 0.512 metric tons-CO2/MWh. The calculation is performed under the assumption that housing will be used for 60 years.
Housing sold within Japan for the fiscal year relevant to the calculation is covered
Disposal of Sold Products CO2 emissions = Σ[amount of major raw materials used in the products sold during the relevant fiscal year × emission coefficient (IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))] The calculation assumes that products sold during a given fiscal year are disposed of during the same fiscal year
Leased Assets (Downstream) Calculated to cover construction related to the installation of machinery leased by Sekisui
CO2 emissions = Σ[relevant installation units × emission coefficient (IDEA v 2.1 (a GHG emissions database by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry))]