Integrated Index

Rates of return to natural and social capital

Integrated Index Sekisui Environment Sustainability Index

The Sekisui Environment Sustainability Index reflects the impact on the environment of the activities of SEKISUI CHEMICAL Group companies (the use of natural and social capital) and their degree of contribution to the environment (returns to natural and social capital) as a single indicator. The major items for implementation in the Environmental Medium-term Plan - reducing various impacts on the environment, expanding products and services that contribute to the natural and social environments, conserving the environment, and so forth - were integrated into this indicator; the Group has been running preliminary calculations since fiscal 2014. From fiscal 2017, this index is being used to monitor the overall progress of Group companies’ environmental management.
The Group has been aiming to achieve 90% over the three-year period of the Environmental Medium-term Plan (2017-2019) and achieved a return rate of 104.5% in fiscal 2019, the final year of the Plan.
As far as the Environmental Medium-term Plan is concerned, the Group is evaluating its impact on and contribution to not only the natural environment but also the social environment while declaring its intention to contribute to the return of natural and social capital for its Sekisui Environment Sustainability Index. In 2050, even as we expand our business, we will promote ESG management while maintaining a return of 100% or higher for both natural capital as well as social capital.

Calculation Results

The results of calculating the Sekisui Environment Sustainability Index, utilizing results from fiscal 2021, are as follows. Setting the use of natural and social capital (the impact on natural and social environment) at 100, the return of natural and social capital (contributions to natural and social environment) was 117.7% (a 13.2 percentage point increase over the 104.5% achieved in fiscal 2019 and a 4.2 percentage point decrease from the 121.9% achieved in fiscal 2020).

Trends in the return rate are analyzed as follows.

(1)

Regarding the use (impact) of natural and social capital, the influence of COVID-19 gradually dissipated, and the return to production to pre- pandemic levels was one of the causes of the increase in environmental impact. However, the impact on natural and social capital has decreased compared to FY2019 prior to the pandemic in terms of energy and the supply chain. This is considered to be the result of the conversion of renewable energy for electric power, cooperation by our suppliers, and sales of products that lower energy consumption at the time of use (Zero Energy Housing [ZEH]-specification housing).
(2)

Regarding the return (contributions) of natural and social capital, the returns (contributions) due to Products to Enhance Sustainability are steadily increasing. From an environmental conservation activity perspective, however, contributions are decreasing. This reflects restrictions on the implementation and content of activities due to various policies including efforts to address any further spread of COVID-19 at business sites.

Going forward, we will maintain the rate of return to natural and social capital at 100% or higher while growing the company and expanding our businesses. By 2050, we aim to realize the sustainable use of the earth’s natural capital and the social capital generated by human society.

In this index, promoting solving issues by means of products will contribute to improving the sustainability of the earth and society. We also believe that bringing about improvements in the returns on natural and social capital will link to improvements in the sustainability of SEKISUI CHEMICAL Group and its products.

11-05

After compiling the raw data in (1), above, the damage calculation-based impact assessment method LIME2, developed for use in Japan by Professor Norihiro Itsubo of Tokyo City University, was employed for the calculations in stages (2) and (3).

Indicator	Calculation Method
Sekisui Environment Sustainability Index	Sekisui Environment Sustainability Index: Overall of returns of natural capital by the Group / Overall of use of natural capital by the Group Calculating the use and return of natural capital Employing LIME2 (a damage calculation-based impact assessment method developed for use in Japan by Professor Norihiro Itsubo of Tokyo City University) and covering all the criteria for conservation defined by LIME2, the impacts on each of human health (including the effects of global warming), societal assets (including the effects of global warming), the effects on plants (reducing interference on growth), and the effects on life (restricting the extinction of living species) were evaluated and then made into a single indicator. The amount of return to natural capital is calculated assuming that the risk of damage to natural capital has been reduced by various environmental contribution efforts of the entire group compared to the case without such efforts. ・ Items included in the calculation of the amount of natural capital used Direct use: Use of land, greenhouse gases, amounts of emissions into the air of PRTR substances and air pollutants, the COD discharged into bodies of water Indirect use: Purchased raw materials^1, energy use, water intake volume, amount of waste material emitted, amount of GHGs emitted indirectly in supply chains (Scope 3) ・ Items included in the calculation of returns to natural capital Amount of contributions to reducing use of natural capital through Environment-Contributing Products, the amount of contribution from environmental conservation activities, environmentrelated donations, mega-solar power generation output (solar farms that produce over 1,000 kilowatts (1 megawatt) of energy each year) 1 Until fiscal 2017, the Group gained an understanding of environmental impact, including the volume of greenhouse gasses emitted, by making calculations using MiLCA, the database provided by the Japan Environmental Management Association For Industry. However, from fiscal 2018, the Group is reflecting the actual GHG emissions of its raw material suppliers with regard to four principal resins (PP, PE, PVC and PVA). Scope of Calculation / Listing by category of calculation: Estimated calculations were conducted using the following assumed conditions: ・Raw materials: Purchased raw materials covered; estimates incorporated into calculations Concerning housing, the calculation includes the constituent raw materials for one structure multiplied by the number of structures manufactured ・Manufacturing / Emissions of harmful chemical substances: <Japan> emissions of 1 t per year or more of substances covered under PRTR are included in the calculation. <Overseas> Not included ・Manufacturing / Land maintenance: Domestic plants and research facilities were incorporated into the calculation using the area of the premises, generally considered in terms of the land used for buildings^2. The areas of the premises of overseas plants were estimated. The effects of land use are included in the calculation based on the 30-year period after the purchase of the land 2 Concerning land use, starting with fiscal 2017, improvements to land quality in the JBIB Land Use Score Card^® system promoted in Japan were deemed as reductions of the impact of land use, weighted accordingly, and included in the calculation. Others: Capital goods in supply chains, other fuel- and energy-related activities, transport and shipping, waste, business trips, commuting by employees, leased assets (downstream), processing/use/disposal of sold products ・Business trips and commuting by employees: Covers consolidated numbers of employees and includes some estimation ・Use of sold products: Covers housing sold during the fiscal year, and included in the calculation with assumed energy use for 60 years into the future. Until fiscal 2017, the Group calculated the amount of greenhouse gas reduction achieved through solar power generation as the amount of reduced environmental impact. From fiscal 2018, however, we are also calculating the effect of reduction in energy used in residences built to zero energy house (ZEH) specifications. ・Processing of sold products: Energy use by customers while processing our products anticipated to consume large amounts of energy was estimated and included in the calculation ・Disposal of sold products: Major raw materials for each fiscal year were covered and included in the calculation based on the assumption that they would be made into products and disposed of during that fiscal year ・Product contributions: (1) The differences in contribution to the environment between the relevant products and previous technologies were evaluated qualitatively for each criterion, based on the contribution to the natural and social environments for each life-cycle (the five stages of procurement of raw materials, manufacturing, distribution, use/maintenance, disposal, and recycling) in terms of CO₂ reductions and energy savings, reductions in waste materials, resource savings, water-savings and the water cycle, preventing pollution, direct preservation of biodiversity, QOL improvements, and other factors. For factors for which a significant difference was estimated, data per product unit was investigated. (2) Based on the results^3 of these investigations, a coefficient for calculating the impact on the environment for each series of data was multiplied by the data, yielding a calculation of the degree of contribution to the environment of each product unit. (3) The sales amount for products in each fiscal year were multiplied by the results found in (2) to calculate the degree of contribution to the environment for each product, and the results were included in the calculation. Trial calculation was performed on the effects of products equivalent to around 67% of Environment-contributing Products. *3 Based on individual standards of the divisional companies ・Direct contribution / Contribution from activities reducing environmental impacts: The effects on the environment relating to production for each fiscal year were compared to [the effects on the environment relating to manufacturing in fiscal 2016 × (revenue in that fiscal year / revenue in fiscal 2016)], and the difference was included in the calculation. There was a proportional relationship between revenue and the effects on the environment relating to manufacturing, based on the idea that the difference was the result of efforts undertaken in the Group’s activities. ・Direct contribution / Conservation of the natural environment: The Group keeps track of the number of participants and the amount of time spent on each activity. In the case of planting cedar trees, a fixed coefficient of CO₂ (1.1 t-CO₂ /person-hour) was multiplied by the number of people and the amount of time spent and incorporated into the calculation. Regarding activities in cooperation with local communities which were promoted in Japan, because improving the sustainability of activities through local cooperation and making them conduct the activities on their own (autonomous) were made targets from fiscal 2017, the Group’s ability to work toward this target was weighted against the growth axis and included in the calculation ・Direct contributions / donations: The amount intended to be paid for conservation was deemed equal to the amount of money calculated for damage caused and included in the calculation. ・Direct contribution / Mega-solar: Amount of electricity generated included in the calculation as generated energy converted to a CO₂ basis

Indicator

Calculation Method

Sekisui Environment Sustainability Index

Sekisui Environment Sustainability Index: Overall of returns of natural capital by the Group / Overall of use of natural capital by the Group

Calculating the use and return of natural capital
Employing LIME2 (a damage calculation-based impact assessment method developed for use in Japan by Professor Norihiro Itsubo of Tokyo City University) and covering all the criteria for conservation defined by LIME2, the impacts on each of human health (including the effects of global warming), societal assets (including the effects of global warming), the effects on plants (reducing interference on growth), and the effects on life (restricting the extinction of living species) were evaluated and then made into a single indicator.

The amount of return to natural capital is calculated assuming that the risk of damage to natural capital has been reduced by various environmental contribution efforts of the entire group compared to the case without such efforts.

・
Items included in the calculation of the amount of natural capital used
- Direct use:
  
  Use of land, greenhouse gases, amounts of emissions into the air of PRTR substances and air pollutants, the COD discharged into bodies of water
- Indirect use:
  
  Purchased raw materials^*1, energy use, water intake volume, amount of waste material emitted, amount of GHGs emitted indirectly in supply chains (Scope 3)
・
Items included in the calculation of returns to natural capital
Amount of contributions to reducing use of natural capital through Environment-Contributing Products, the amount of contribution from environmental conservation activities, environmentrelated donations, mega-solar power generation output (solar farms that produce over 1,000 kilowatts (1 megawatt) of energy each year)
- *1
  
  Until fiscal 2017, the Group gained an understanding of environmental impact, including the volume of greenhouse gasses emitted, by making calculations using MiLCA, the database provided by the Japan Environmental Management Association For Industry. However, from fiscal 2018, the Group is reflecting the actual GHG emissions of its raw material suppliers with regard to four principal resins (PP, PE, PVC and PVA).

Scope of Calculation / Listing by category of calculation: Estimated calculations were conducted using the following assumed conditions:

・Raw materials:

Purchased raw materials covered; estimates incorporated into calculations
Concerning housing, the calculation includes the constituent raw materials for one structure multiplied by the number of structures manufactured
・Manufacturing / Emissions of harmful chemical substances:

<Japan> emissions of 1 t per year or
more of substances covered under PRTR are included in the calculation. <Overseas> Not included
・Manufacturing / Land maintenance:

Domestic plants and research facilities were incorporated into the calculation using the area of the premises, generally considered in terms of the land used for buildings^*2. The areas of the premises of overseas plants were estimated. The effects of land use are included in the calculation based on the 30-year period after the purchase of the land

2 Concerning land use, starting with fiscal 2017, improvements to land quality in the JBIB Land Use Score Card^® system promoted in Japan were deemed as reductions of the impact of land use, weighted accordingly, and included in the calculation.

Others:
Capital goods in supply chains, other fuel- and energy-related activities, transport and shipping, waste, business trips, commuting by employees, leased assets (downstream), processing/use/disposal of sold products
- ・Business trips and commuting by employees:
  
  Covers consolidated numbers of employees and includes some estimation
- ・Use of sold products:
  
  Covers housing sold during the fiscal year, and included in the calculation with assumed energy use for 60 years into the future. Until fiscal 2017, the Group calculated the amount of greenhouse gas reduction achieved through solar power generation as the amount of reduced environmental impact. From fiscal 2018, however, we are also calculating the effect of reduction in energy used in residences built to zero energy house (ZEH) specifications.
- ・Processing of sold products:
  
  Energy use by customers while processing our products anticipated to consume large amounts of energy was estimated and included in the calculation
- ・Disposal of sold products:
  
  Major raw materials for each fiscal year were covered and included in the calculation based on the assumption that they would be made into products and disposed of during that fiscal year

・Product contributions: (1)

The differences in contribution to the environment between the relevant products and previous technologies were evaluated qualitatively for each criterion, based on the contribution to the natural and social environments for each life-cycle (the five stages of procurement of raw materials, manufacturing, distribution, use/maintenance, disposal, and recycling) in terms of CO₂ reductions and energy savings, reductions in waste materials, resource savings, water-savings and the water cycle, preventing pollution, direct preservation of biodiversity, QOL improvements, and other factors. For factors for which a significant difference was estimated, data per product unit was investigated.
(2) Based on the results^*3 of these investigations, a coefficient for calculating the impact on the environment for each series of data was multiplied by the data, yielding a calculation of the degree of contribution to the environment of each product unit.
(3) The sales amount for products in each fiscal year were multiplied by the results found in (2) to calculate the degree of contribution to the environment for each product, and the results were included in the calculation. Trial calculation was performed on the effects of products equivalent to around 67% of Environment-contributing Products.
*3 Based on individual standards of the divisional companies

・Direct contribution / Contribution from activities reducing environmental impacts:

The effects on the environment relating to production for each fiscal year were compared to [the effects on the environment relating to manufacturing in fiscal 2016 × (revenue in that fiscal year / revenue in fiscal 2016)], and the difference was included in the calculation. There was a proportional relationship between revenue and the effects on the environment relating to manufacturing, based on the idea that the difference was the result of efforts undertaken in the Group’s activities.
・Direct contribution / Conservation of the natural environment:

The Group keeps track of the number of participants and the amount of time spent on each activity. In the case of planting cedar trees, a fixed coefficient of CO₂ (1.1 t-CO₂ /person-hour) was multiplied by the number of people and the amount of time spent and incorporated into the calculation. Regarding activities in cooperation with local communities which were promoted in Japan, because improving the sustainability of activities through local cooperation and making them conduct the activities on their own (autonomous) were made targets from fiscal 2017, the Group’s ability to work toward this target was weighted against the growth axis and included in the calculation
・Direct contributions / donations:

The amount intended to be paid for conservation was deemed equal to the amount of money calculated for damage caused and included in the calculation.
・Direct contribution / Mega-solar:

Amount of electricity generated included in the calculation as generated energy converted to a CO₂ basis