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Sustainability

Sustainability

Information Disclosure in Line with TCFD Recommendations

Support for TCFD

Due to consumption of large amounts of fossil fuels such as oil and coal since the Industrial Revolution, greenhouse gas (GHG) emissions, including carbon dioxide emissions, are increasing and global warming is progressing. With the progression of climate change due to global warming, there is concern that various adverse effects on people's lives and the ecosystem will increase, such as increases in natural disasters including heavy rains and floods, reduction of food and water resources, and occurrences periods with intense heat and outbreaks of infectious diseases due to heat waves.

The Paris Agreement, which went into effect in 2016, aims to reduce the rise in average temperature well below 2°C (2°C target) as a long-term international goal in order to slow the progress of climate change and shift to a decarbonized society. In addition, it is stated that further efforts will be made to suppress the rise in average temperature up to 1.5°C.

We support the Paris Agreement, position "mitigation of climate change" as one of the materiality factors, we have set a mid-term target (Scope1, 2) of “reducing GHG emissions by 30% from FY2018 level by FY2027” aiming for achievement of carbon neutrality in 2050 and have implemented. In addition, we announced our support for recommendations of Task Force on Climate-related Financial Disclosures (TCFD). The TCFD recommendations set four disclosure recommendation items: "Governance," "Strategy," "Risk Management," and "Metrics and Targets". By disclosing our climate change-related information to all stakeholders, including investors, and promoting dialogue, we will ensure the transparency of information as well as continue to deepen exchanges of opinions with stakeholders, strive to further improve our efforts and disclosure, and further contribute to the realization of sustainable society.

Governance

Our Group considers that the corporate philosophy “Contribute to the protection of the global environment and the existence/development of humanity, offering the value sought by society.” is the basis of our business activities. We recognize that practicing this corporate philosophy is an activity that leads to the sustainability of society and our company, and is the basis of our business activities. Therefore, Sustainability Promotion Committee, Risk Management & Compliance Committee and the Environment, Safety & Quality Assurance Committee have been established under the Board of Directors meeting as sustainability promotion structure, and Board of Directors meeting supervise the initiatives of each committee by discussing and resolving the content of deliberation at each committee.

As we have identified "mitigation of climate change" as one of the materiality factors, we plan to newly establish a committee for climate change in FY2022 where issues focused on climate change are discussed and examined.

We have also identified “supply of environmentally friendly products and services" as one of the materiality factors, and we are committed to the development of products that contribute to zero emission initiatives and lead to the popularization of bioplastics. Sales plans and investment plans for these products are submitted to the management meeting by the division in charge, and after approval, submitted to the Board of Directors meeting.

Sustainability Promotion Committee

As an organization that considers and deliberates important matters in order to strategically tackle global social issues including climate change-related issues, Sustainability Promotion Committee, which is chaired by the officer in charge of the Sustainability Promotion & IR Department and composed of managing executive officers responsible for divisions and departments, has been established under the Board of Directors meeting. This committee meets twice a year on a regular basis to deliberate policies related to sustainability including climate change, materiality identification and KPI setting / progress management, mid- and long-term plans, and evaluation of the results of annual activities and targets for the next fiscal year based on the evaluation, etc.

At least once a year, the contents of deliberation are validated and reviewed at the management meeting. After approval by the management meeting, the following matters are submitted to the Board of Directors meeting.

  • Policy planning related to sustainability
  • Mid- and long-term plans and annual plan for sustainability

Risk Management & Compliance Committee

Risk Management & Compliance Committee, which is held twice a year, has been established as an organization to enhance the effectiveness of risk management, and to maintain and promote compliance.

The committee is chaired by the Chief Risk Management Officer (CRO), who is appointed at the Board of Directors meeting, and is composed of the Risk & Compliance Managers of each division / department, plant / laboratory, and domestic consolidated subsidiary appointed by the CRO.

The Risk & Compliance Managers periodically conduct risk identification and assessment including climate change-related risk, formulate countermeasure plans, conduct self-assessment for status of implementation of the countermeasure plan and subject, formulate improvement plan, and regularly perform education and training at each division / department, plant / laboratory, and domestic consolidated subsidiary.

At Risk Management & Compliance Committee, above risk management activities and activity plans of next fiscal year are deliberated. Contents of deliberation are validated and reviewed at the management meeting. After approval by the management meeting, the following matters are submitted to the Board of Directors meeting.

  • Identification of Group Major Risks and their countermeasures
  • Mid-term plan and annual plan for risk and compliance

Environment, Safety & Quality Assurance Committee

Responsible Care (RC) activities, which are voluntary activities, aim to ensure environment, health and safety (EHS) throughout the entire processes from development of chemical products to manufacturing, distribution, use, final consumption, disposal and recycling. These activities also serve as a form of communication with society through the announcement of their results. Environment, Safety & Quality Assurance Committee, which is chaired by the officer responsible for the Environment, Safety & Quality Assurance Department, have been established as the organization in charge of promoting these activities and are held annually. At this Committee, while sharing information with the Sustainability Promotion Committee, mid- and long-term plans including the response to climate change, annual activities in each plant / laboratory, summary of company-wide activities, and the targets, goals, and action plans for RC in the next fiscal year, etc. are deliberated.

At least once a year, the contents of deliberation are validated and reviewed at the management meeting. After approval by the management meeting, the following matters are submitted to the Board of Directors meeting.

  • Policy planning related to RC
  • Mid- and long-term plans and annual plan for RC

Risk Management

Overall Risk Assessment Process

In the framework of the Risk Compliance Committee, we clarified risks including climate-change related risk taking into account the business characteristics of each division and the surrounding businesses, including global political, economic and social conditions.

Subsequently, risk assessment was conducted from the viewpoint of probability and impact on the business. By following the assessment, risk map was created and Group Major Risks were identified. The contents of Group Major Risks were deliberated at the Risk Management & Compliance Committee and approved at the Board of Directors meeting.

Management Process of Group Major Risks

The department in charge and the risk owner are decided for each selected Group Major Risk, the Group Major Risks countermeasure plan is formulated mainly by the Risk & Compliance Manager of the department in charge, and after deliberation at the Risk Management & Compliance Committee, and countermeasure plan is resolved at the Board of Directors meeting. Implementation status of countermeasures will be deliberated at the Risk Management & Compliance Committee, and the results of the deliberation will be reported to the Board of Directors meeting.

Regarding typhoon and torrential rain, which are one of the Group Major Risks, we set the KPI of “formulating BCP where products account for 50% of ordinary income by FY2021” as a response to the risk of increasing equipment restoration costs and reducing production at major plants, and formulated BCP where products account for 76% of ordinary income as of the end of FY2021.

Identification of risks and assessment of the impact on the business and the probability are conducted on a regular basis, and the Group Major Risks are reviewed periodically.

Please see the following web page for risk map, Group Major Risks and countermeasures against risks.

Strategy

The TCFD Recommendations require a scenario analysis to understand how the risks and opportunities caused by climate change give impact on companies’ finances. Scenario analysis is a method for anticipating the effects of climate change and changes in the business environment caused by long-term policy trends related to climate change, and for examining the impact that such changes may have on the company's business and management.

Referring both 2°C scenarios in which transition to decarbonized society realizes (mainly transition risk and opportunity) and 4°C scenarios in which climate change progress (mainly physical risk and opportunity), we identified business risk and opportunity, examined their importance, and summarized impact on the Company and our strategies.

The scope of analysis is the entire business of the Company, and analysis period is up to 2030, which is the final year of our previous long-term business plan.

At the 16th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP16) held in 2021, it was agreed to pursue efforts to suppress the rise in average temperature within 1.5 °C. In order to understand the impact of policy trends and social changes to achieve the 1.5 °C target on our business, we plan to review the scenario analysis including the implementation of scenario analysis using the 1.5 °C scenario during FY2022.

Referenced Scenarios
  2°C Scenario *1 4°C Scenario *2
Transition Risk and Opportunity ・IEA-WEO*3 Sustainable Development Scenario (SDSs)
・IEA-ETP*4 2°C Scenario (2DS)
・IEA-WEO New Policies Scenario (NPS)
Physical Risk and Opportunity ・IPCC*5 RCP2.6
・MEXT*6 d2PDF
・IPCC RCP8.5
・MEXT d4PDF
  • *1Scenarios when necessary measures will be implemented to keep global average temperature rise below 2°C compared to pre-Industrial Revolution era.
  • *2Scenarios in which the global average temperature will rise by 4°C at the end of the 21st century compared to pre-Industrial Revolution era.
  • *3International Energy Agency “World Energy Outlook” (2019)
  • *4International Energy Agency “Energy Technology Perspectives” (2017)
  • *5Intergovernmental Panel on Climate Change
  • *6Ministry of Education, Culture, Sports, Science and Technology
Process of Risks and Opportunities Identification
Step1 Clarify the value chain and stakeholders, and sort out the factors that impact our business
Step2 Identify risks and opportunities based on the above scenarios and other external data
Step3 Identify particularly important risks and opportunities from those of Step2, considering the likelihood of occurrence and the impact on our business (human loss, financial impact, etc.)
Scenario Analysis Results (Climate Change Risks and Opportunities)
Scenario Factors Social Change Relevant
Business
Impact on Business Degree
of
Impact
Measures
2℃
Scenario
・Strengthening regulations on GHG emissions ・Introduction of carbon pricing All Risk ・Increase in operating costs due to introduction of carbon pricing, such as carbon taxes (If the same conditions meet worldwide including China, maintaining competitiveness is possible.)
(Large)
・Fuel and feedstock conversion at plants
・Optimization of nitric acid production capacity
・Update to energy-saving equipment, etc.
・Changes in energy policy
・Changes in energy demand and supply
・Price change in fuel and feedstock
・Change in transportation costs
All Risk ・Increase in costs due to higher fuel and feedstock prices
・Increase in transportation costs

(Moderate)
・Market changes due to increasing demand for environmental consideration ・Increased need for low-carbon products R&D Opportunity ・Increase in demands for products related to electric energy such as battery materials and photoelectric conversion materials due to changes in energy policies
(Moderate)
・Development of environmentally friendly products and services
・Appropriate information disclosure
・Increased demand from investors for addressing climate change ・Expansion of ESG investment All Risk
Opportunity
・Deterioration of ESG evaluation and reputation due to increasing criticism of bulk use of fossil fuels 
・Improvement of ESG evaluation and reputation through advanced initiatives and information disclosure

(Moderate)
4℃
Scenario
・Increase in abnormal weather ・Increase in frequency and enhanced intensity of heavy rain / flooding All Risk ・Increase in risk of impacts on plant operations and supply chains due to escalation of natural disasters
(Moderate)
・Formulation of business continuity plan (BCP) for major products at each plant
・Enhancement of intensity and frequency of typhoons
(Moderate)
・Heavy snowfall
(Moderate)
・Market changes caused by rising temperature and abnormal weather ・Decline in the available water (freshwater) resources Chem Opportunity ・Increase in sales of disinfectants due to increase in global demand for drinking water
(Moderate)
・Development of environmentally friendly products and services
・Reduction of planted area Agri Risk ・Reduction of planted area due to increase in frequency and enhanced intensity of heavy rain / flooding
・Reduction of planted area due to difficulties in securing irrigation water

(Moderate)
・Increase in pests, weeds, and pathogens Opportunity ・Increase in opportunity to develop new agrochemicals
・Influence on sales of existing agrochemicals due to resistance expression

(Moderate)
・Increase in mass infection and diseases R&D Opportunity ・Increase in demand for related products and services due to growing medical needs for tropical infections and diseases
(Moderate)

All: All business Agri: Agricultural Chemica business Chem: Chemicals business

Scenario Analysis Results (Climate Change Risks and Opportunities)

For the introduction of carbon pricing, which is identified as an important risk in the 2°C scenario as a result of scenario analysis, we plan to introduce internal carbon pricing to further promote investment that takes into account the reduction of GHG emissions (decarbonization investment). In addition, in response to market changes due to increasing demand for environmental considerations, we assume that we are able to expand business opportunities in the Environment & Energy field, which is one of the main business domains of our previous long-term business plan “Progress 2030” launched in 2016 and new long-term business plan “Atelier2050” announced in 2022. Moreover, our decarbonization investment and product characteristics have made us more carbon-efficient compared to whole chemical industry. We believe this will benefit from increasing demand for initiatives to address climate change from investors and other stakeholders.

Meanwhile, we will respond to the risks of impacts on plant operations and supply chains due to increase in abnormal weather, which was identified in the 4°C scenario, by formulating and revising BCPs (Business Continuity Plan) for our main products and by multiple sourcing of several key raw materials, etc. In regard to market changes caused by rising temperature and abnormal weather, we assume that we will be able to accrue business opportunities for such as agricultural chemicals and disinfectant for drinking water due to water shortages and infectious diseases.

As a “future-creating enterprise that responds to social needs with unique, innovative technologies”, we will further refine the core technologies that we have cultivated over the years and continue to work to provide new value that contributes to people's lives.

Metrics and Targets

We have identified "mitigation of climate change" as one of the materiality factors, and in the Responsible Care Mid-Term Plan (FY2016-2021), we set mid-term targets for GHG emissions (Scope1 + 2), GHG emission rate, and energy consumption rate. In addition, from the results of the scenario analysis, we recognize that the introduction of the carbon pricing system is the largest climate change-related risk. From the viewpoint that reducing the GHG emissions (Scope1 + 2) of Nissan Chemical Corporation, which accounts for about 95% of consolidated GHG emissions, is important for reducing this risk, in January 2021, we newly set Nissan Chemical Corporation's long-term target of “reducing GHG emissions by 30% from FY2018 level by FY2030, while we moved it forward three years (“reducing GHG emissions by 30% from FY2018 level by FY2027”) in the mid-term business plan "Vista2027" announced in 2022. The degree of progress for this reduction target is reflected in the ESG-linked portion of officers' performance-related remuneration.

Responsible Care Mid-Term Plan (FY2016-2021) Mid-term Targets and Long-term Target

Category Metrics Scope FY2021 Targets FY2027 Target
Reduction of GHG emissions GHG Emissions (Scope1 + 2) Absolute Emissions non-consolidated Reducing by 20% from FY2011 level Reducing by 30% from FY2018 level
GHG Emission rate per unit to sales (Scope1+2) Intensity non-consolidated Improving by 40% from FY2011 level
Energy Consumption Energy consumption rate per unit to sales Intensity non-consolidated Improving by 30% from FY2011 level

Fuel and feedstock (naphtha and heavy oil) conversion for ammonia (FY2016), fuel (heavy oil) conversion for melamine heating furnace (FY2017), heating furnaces for the manufacturing plant of cyanuric acid, and auxiliary boiler of ammonia (FY2020) to natural gas, and reduction of dinitrogen monoxide (N2O) emissions generated from reactors by optimizing production capacity of nitric acid, energy saving by improving the equipment capacities and renewal of aging facilities, etc., contributed to consistent GHG emissions reduction. By these initiatives, in FY2020, we achieved all of our mid-term targets up to 2021 one year ahead of target year. In addition, GHG emissions and energy consumption have been subject to third-party verification since FY2018.

Going forward, we will continue to consider reducing GHG emissions and strive to reduce environmental burdens as well as disclose highly reliable information.

  Scope Unit FY2011 FY2017 FY2018 FY2019 FY2020 Target
(Target year)
Scope1 non-consolidated t-CO2e 369610 265014 245469 221264 216276 -
Scope2 non-consolidated t-CO2e 79451 114865 117926 105390 102182 -
Scope1+2 non-consolidated t-CO2e 449061 379879 363395 326654 318458 359248 (2021)
254377 (2027)
GHG Emission rate per unit to sales※1
(Scope1+2)
non-consolidated t-CO2e/
million yen
4.06 2.58 2.33 2.04 1.96 2.44 (2021)
Scope3※2 non-consolidated t-CO2e - 763271 703562 759574 762047 -
Energy consumption rate※3 non-consolidated ※4 100 75.5 73.8 70.8 67.9 70 (2021)
Scope1 consolidated※5 t-CO2e   272954 253785 228791 220243 -
Scope2 consolidated※5 t-CO2e   124460 128647 116724 116516 -
Scope1+2※6 consolidated※5 t-CO2e   397414 382432 345514 336759 -
Non-consolidated /
consolidated
(Scope1 + 2)
  % - 95.5 95.0 94.5 94.6  
  • 1 Amount of emissions (t-CO2e) / non-consolidated sales (million yen)
  • 2 Data of each category : https://www.nissanchem.co.jp/eng/csr_info/index/esg_data.html
  • 3 Energy consumption / non-consolidated sales
  • 4 FY2011 as a base of 100
  • 5 Nissan Chemical Corporation and consolidated subsidiaries with manufacturing facilities. (Nihon Hiryo Co., Ltd., Nissan Chemical America Corporation, NCK Corporation)
  • 6 Due to rounding off figures, there are places where the sums of above scope1 and scope2 do not match the total.

Sustainability

 

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