Shin-Etsu Group and Climate Change

The Group is addressing climate change by contributing to the reduction of global greenhouse gas emissions through its business activities.

Structure of dealing with climate change

In the Group, the ESG Promotion Committee is working together with our business divisions and the entire Group to address climate change.

The ESG Promotion Committee is positioned as one of the "committees for each material management task" in the corporate governance system. The Committee is chaired by the president and consists of about 50 members, including the directors and general managers of divisions of Shin-Etsu Chemical and ESG officers of Group companies. The mission of the committee is to promote ESG activities in an effective and appropriate manner in all aspects of the Group's corporate activities.

SustainabilityーManagementーESG Promotion Structure

The Committee held 8 meetings on climate change in FY 2019. At the general meeting of the Committee held in November 2019, we discussed addressing climate change. In addition, the Committee reports on the Group's efforts to deal with climate change at the Managing Directors' Meeting which reviews and makes decisions on the execution of business operations each year, and the contents of its activities are detemined.

Strategies for addressing climate change

The Group aims to develop society and people’s daily lives while keeping down environmental impact. To this end, we will contribute to maximizing efficiency through our products and technologies. The specific strategies and implementation methods are as follows.

Strategies

  1. 1) Reduction of greenhouse gas emissions production intensity through thorough improvements in production efficiency
  2. 2) Through development, production, and supply of environment-contributing products, contributing to the efficiency of customers’ production processes, expecting to spread throughout society
  3. 3) Promoting the utilization of renewable energy
  4. 4) Promoting logistics rationalization

1) Reduction of greenhouse gas emissions production intensity through thorough production efficiency improvements

①Promotion of efficient manufacturing activity
The G Committee, one of the "committees for each material management task", promotes efficient production activities and works to conserve energy and reduce greenhouse gas emissions. The Committee monitors the progress and results of strategy implementation, and twice a year reports to the Managing Directors' Meeting on the results and specific initiatives.
For many years, the Group has continuously worked to improve production technologies, in order to realize reduction of greenhouse gas emissions per product unit. We are constantly striving to put new production technologies to practical use in order to further raise production efficiency and build a track record.

Examples of the G Committee Initiatives

  1. 1. reduce energy and raw material use
  2. 2. reduce greenhouse gas emissions
  3. 3. enhance productivity

②Reduction of greenhouse gases through capital investment
We are introducing a new high-efficiency gas turbine. In addition, we set greenhouse gas reduction effects as an indispensable issue in the planning of capital investment. Having greenhouse gas emissions reductions in mind at the investment proposal stage helps each to understand that this is an important management issue.

2) Through development, production, and supply of environment-contributing products, contributing to the efficiency of customers’ production processes, expecting to spread throughout society

The R&D, manufacturing, and sales divisions work together to develop, produce, and supply products that contribute to the environment. The Group has a wide range of products that contribute to the reduction of greenhouse gas emissions. Each research center is responsible for developing products that meet customer needs. The reseach centers have the ability to develop new products at an early stage, which contributes to the expansion of the Group's business.

Products that contribute to climate change mitigation
Product Applications
PVC resins PVC pipes that can be used for a long period of time
PVC windows frames that contribute to energy conservation
Silicones Encapsulating materials for solar cell modules
Eco-tire materials that contribute to higher fuel efficiency in vehicles
Semiconductor silicon Semiconductor devices installed in consumer products contribute to the efficient use of energy.
Inverters and other electronic devices that enable substantial power savings
Rare earth magnets Various types of motors, including drive motors for hybrid vehicles, electric vehicles, and fuel cell vehicles, that contribute to the electrification and energy conservation of vehicles as well as improvements in safety
Compressor motors for energy-saving air conditioners and high-efficiency motors for wind power generators
LED encapsulating materials Major components of the optical modules of energy-saving, long-life LEDs

Sustainabilityー The Shin-Etsu Group and SDGs

3) Promoting the utilization of renewable energy

We are working to reduce purchased electricity by introducing renewable energy. This also contributes to reducing scope 2 emissions.

Examples of Renewable Energy Utilization
Example Details
Installation of solar panels Installation on the rooftop of a building in Shin-Etsu Handotai’s Shirakawa plant (scheduled for completion in July 2020)
Shin-Etsu Chemical’s Gunma complex plans to install on the rooftop of the building

4) Reduction of Greenhouse Gas Emissions in Logistics

We are reducing greenhouse gases during product transportation. This will contribute to the reduction of scope 3 emissions of greenhouse gases.

Example of logistics rationalization
Examples Scope 3 emissions categories contributing to reductions
Modal shift 1 in methanol transport
(switching from tank truck to railcar)
Category 4: "Emissions from product transport"
Modal shift in silicon wafer transport
(switching from aircraft to ocean vessel)
Category 4: "Emissions from product transport"
Promoting the reuse of wafer cases Category 5 "Waste disposal-related emissions"
  • 1 Modal shift
    Shifting from trucks and other freight transport to railways and ships with less environmental impact.

Risks and opportunities posed by climate change to our businesses

In the Group, the Risk Management Committee, one of the "committees for each material management task", is responsible for the overall management of business risks, including those arising from climate change. The committee is chaired by a managing director and consists of about 20 members, including directors and general managers of divisions of Shin-Etsu Chemical.
The Committee stipulates the comprehensive risks that the Group considers when conducting its business activities in its Risk Management Regulations. It stipulates specific risks and risk management systems from a long-term perspective, as well as responses to emerging risks. The Committee reports important issues in risk management, including climate change, to the Board of Directors, the Managing Directors’ Meeting, and the Audit & Supervisory Board.

SustainabilityーManagementーRisk Management

In identifying and analyzing the risks and opportunities that climate change poses to our business activities, we have adopted two climate change scenarios which are temperatures increase by 2 degrees Celsius and 4 degrees Celsius respectively from today's level at the end of the 21st century. Currently, we are conducting identification and analysis of the risks and opportunities.
Factors that may affect the Group are as follows.

1. Possibility of introduction of strict regulations to reduce greenhouse gas emissions
2. Possibility of introduction of environmental taxes and other new taxes
3. Changes in the supply-demand balance and prices of energy and raw materials
4. Increasing corporate social responsibility for climate change mitigation
5. Greater business opportunities to provide products and technologies that contribute to climate change mitigation

The risks and opportunities identified so far are as follows.

Risks and mitigation measures that climate change will affect our operations
Factors Risks Mitigation measures
1.Introduction of carbon taxes and carbon emissions trading systems The carbon tax and carbon emissions trading systems are already in place in the EU, where our production bases are located. They may also be introduced in Japan and the U.S. Through further improvements in production efficiency by the G Committee and the implementation of new production technologies, we are promoting energy savings and reductions in greenhouse gas emissions.
2.Changes in precipitation and precipitation areas Floods and storms occur all over the world. On the other hand, droughts and water shortages due to the decline in precipitation have occurred in some regions, and it is essential to secure stable water supply there.
The group has production bases around the world, including in Asia, where floods and storms frequently occur. While each site implements flood countermeasures, it is possible that floods and storms will far exceed expectations. In either case, there is a possibility that recovery cost for production facilities failure and opportunity costs associated with the shutdown of production activities will occur.
In addition, there is a possibility that we may not be able to procure raw materials originating from natural sources or materials whose production areas are concentrated in specific areas.
We are working to diversify production sites and raw material suppliers. In addition, based on past flood records, we have installed plant control rooms and other important facilities in locations with low risk of flooding, as well as have surrounded with waterproof walls. After implementing these measures, the Company buys property and casualty insurance coverage necessary for business continuity.
To conserve the water resources, we are actively working to reduce the amount of water intake and promote the water recycling.
3.Loss of reputation The Group's greenhouse gas emissions per unit of production have declined significantly. However, there is a possibility of concern that the absolute volume of greenhouse gas emissions will increase as the business expands.
In addition, it is possible that our stakehokders do not understand that our products are contributing to the reduction of greenhouse gas emissions.
We proactively disclose the Group's initiatives from various perspectives through publications such as sustainability reports and annual reports, as well as case studies from the Keidanren’s "Challenge Zero." We also actively engage in dialogue with investors on climate change.
Opportunity that climate change will have for our operations
Factors Opportunities
1.Opportunities arising from tighter regulations

Movements to promote energy conservation, such as standards for vehicle fuel efficiency and demand for energy consumption of electrical products, will be strengthened more and more. Our products contribute to energy saving in our customers manufacturing processes and the performance improvement of energy saving can be seen at the use of the end products.
For example, rare earth magnets are used for motors in hybrid cars and electric vehicles as well as for motors in energy-saving air conditioners. Silicone resin is used as a packaging material for LED lighting.

Shin-Etsu Group Products and Technologies that Contribute to Environmental Conservation

Comparison and analysis of greenhouse gas emissions1 over the life cycle of products using competing products against products using PVC and silicones reveals that products using PVC and silicones emit less and are superior. Semiconductor silicon is also used in home appliances, automobile inverters, and information and communications equipment, contributing significantly to energy conservation.

2.Chances of changing temperature As greenhouse gas emissions increase, the average temperature rises and the fluctuation range of the temperature changes, and expectations for energy-saving products such as automobiles and home appliances increase.
For example, power consumption can be reduced by using rare earth magnets for various motors. Semiconductor silicon is indispensable for electronic devices that manage energy use.
In addition, our products, such as PVC resins and silicones, are used and sold in a variety of energy-saving products.
3.Improving the reputation As greenhouse gas emissions increase, the average temperature rises and the lowest temperatures fluctuate. Demand for energy-saving products is rising, as they are increasingly regarded for health and comfort. Our products, such as PVC resins for plastic windows, silicone resins for LED packaging materials, and rare earth magnets used in hybrid cars and electric vehicles' motors, are used in a variety of energy-saving products. As a result, we expect to increase profits by increasing sales of existing products and expanding opportunities to expand sales of new products.
In addition, by deepening investors' understanding of our contribution to energy conservation, better evaluation will be given to us and our shares.
  • 1 GHG emissions over the entire life cycle
    Emissions of greenhouse gases throughout the product lifecycle, from the procurement of raw materials for products and services through disposal and recycling