Climate change
Basic ideas
Tokai Carbon Group recognizes that addressing climate change is an
important management issue. In November 2021, by resolution of the Board of the Directors, the
Group expressed its support the Task Force on Climate-related Financial Disclosure (TCFD).
We
will take appropriate measures toward achieving a low-carbon and carbon-neutral society by
understanding the impact of climate change on our business based on TCFD recommendations.
Initiatives
Information disclosure in line with TCFD recommendations
Traditionally, we have implemented measures such as flood-control
measures for high-priority offices, diversifying risks in main businesses by establishing
multiple bases, and incorporating natural disasters into business continuity plans (BCPs). In
order to better understand the risks and opportunities of climate change for the Group, we made
the initial calculation of business impact through scenario analysis, which is a requirement of
the TCFD recommendations, in December 2020, and reviewed the calculation in May 2023.
The
TCFD recommendations call for disclosure of governance, strategy, risk management, targets, and
indicators related to climate change. In line with the TCFD recommendations, we are analyzing
the impact of climate change on our business and taking measures to address it.
■Governance
At Tokai Carbon, the Board of Directors controls the climate change risk within the Company-wide risk management system. Under the umbrella of Board of Directors, the Risk Management and Compliance Committee conducts assessments of material risks affecting the Company, including climate change risk, and reports the findings to the Board of Directors. In addition, following the policies made by Board of Directors, Carbon Neutral Committee led by the President, formulates policies for low-carbon/carbon-neutral and reports quarterly to Board of Director safter discussing the CO2 emission reduction targets and plans to achieve. We continue to monitor the progress under the supervision of the Board of Directors and focus on achieving targets by planning and executing measures according to the progress.
■Risk management
To mitigate the risk of losses in business operations, each department implements daily risk management in accordance with rules and policies related to accounting and financial, business partner, export, environmental and disaster prevention, quality, information security, and investment management. In addition, the Risk Management and Compliance Committee meets in principle every quarter to discuss important matters related to risk and compliance. Based on the results of these discussions, the Committee provides advice to relevant parties and reports to the Board of Directors and other management bodies in an effort to identify risks and improve risk management. Climate change risk was identified by the Risk Management and Compliance Committee as one of the material risk for the company. Following the policies made by Board of Directors, Carbon Neutral Committee led by the President, formulates policies for low-carbon/carbon-neutral and reports quarterly to Board of Directors after discussing the CO2 emission reduction targets and plans to achieve.
■Analysis of strategy, risks, and opportunities
To analyze the impact of climate change on our business (risks and opportunities), we selected 1.5℃ and 4℃ scenarios* as climate change scenarios and conducted scenario analyses with the time axis set to 2030 and 2050.
*1.5℃ scenario: A control scenario in which the necessary measures are
taken to limit the temperature rise to 1.5℃ above pre-industrial levels.
4℃ scenario: A
scenario in which the average temperature rises by 4℃ above pre-industrial levels. This is a
business as usual scenario where economic measures and additional measures against climate
change are not taken.
〇Scenario analysis process
(1) Decide the scope of analysis
(2) Identify risks and opportunities
from climate change
(3) Specify key risks and opportunities (key drivers)
(4) Calculate
the financial impact of material risks and opportunities specified
(5) Formulate response
policies and concrete strategies
〇Set scenario
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| Scenario category | Scenario summary | Reference scenario |
|---|---|---|
| 1.5℃ scenario | A control scenario in which the necessary measures are taken to limit the temperature rise to 1.5℃ above pre-industrial levels. |
・Net Zero Emissions by 2050 Scenario(IEA, WEO2022) ・Sustainable Development Scenario(IEA, ETP2020) ・Beyond 2℃ Scenario(IEA, ETP2017) ・RCP 2.6/4.5 (IPCC, AR5) |
| 4℃ Scenario | A Scenario in which the average temperature rises by 4℃ above pre-industrial levels. This is a business as usual scenario where economic measures and additional measures against climate change are not taken. |
・RCP 8.5 (IPCC, AR5) ・Stated Policies Scenario(IEA, WEO2022) |
〇Scenario analysis targets
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| Target businesses | Four major businesses (Graphite Electrodes, Carbon Black, Fine Carbon, and Smelting and Lining) accounting for approximately 90% of Tokai Carbon's sales as of 2022 |
|---|---|
| Timeline | 2030 and 2050 *2040 if there is no reference data for 2050 |
〇Results of scenario analysis
4℃ scenario: High physical risk, relatively low transition risk
1.5℃
scenario: High transition risk, relatively low physical risk
4℃
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| Business | Factors | Opportunities/risks | Envisioned financial impact on the Company | Strategy & response |
|---|---|---|---|---|
| Common to all four businesses | Production stoppages and supply chain disruptions due to increased typhoons, flooding, and torrential rains | Physical risk | Our BCP measures have limited the risk of serious impact on operations, but our businesses may be affected if an unexpected event occurs in the future. | Implementation and periodic review of BCP measures from a medium- to long-term perspective |
1.5℃
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| Business | Factors | Opportunities/risks | Envisioned financial impact on the Company | Strategy & response |
|---|---|---|---|---|
| Common to all four businesses | Increased burden due to expanded introduction of carbon pricing | Transition risk | Most of the raw materials used in our businesses are derived from fossil fuels, and if we include not only the CO2 emissions from the combustion of fossil fuels and the use of electricity, which are energy sources, but also the CO2 emissions emitted in the production process, the burden of introducing carbon pricing is enormous. | Reduction of CO2 emissions, through fuel conversion, use of renewable energy, CO2 capture, product recycling, etc. |
| Common to all four businesses | Compulsory use of renewable energy (use is unavoidable) | Transition risk | Electricity accounts for a high percentage of the energy used in the production processes of our businesses. Purchasing electricity generated from renewable energy sources will lead to increased operating costs. | ・Reduction of CO2 emission coefficient due to the spread of renewable energy
in society ・Consider the efficient procurement of renewable energy |
| Common to all four businesses | ・Dissemination of technologies that do not use fossil fuel-derived raw
materials ・Increasing demand for low-carbon products, changing consumer attitudes toward fossil fuel-derived materials |
Transition risk | ・Decrease in sales due to increased pressure to use alternative materials for products that use fossil fuel-derived raw materials. In addition, R&D expenses for product development using alternative raw materials increased. | ・In the CB business, promote development of technologies for use of raw materials other than fossil fuel-derived, reuse of used tires, and recovery and reuse of energy. We aim to increase the added value of products by reducing CO2 emissions during product manufacturing, and to minimize risk factors by reducing the burden of carbon pricing. |
| Electrodes | Increasing advantages of electric furnaces | Opportunities | Increased demand for graphite electrodes | ・Pursuing the production of even higher quality graphite
electrodes ・Stable supply in response to increased demand |
Carbon-neutral initiatives
In May 2021, we launched a Carbon Neutral Project led by the President.
This was to propel the group’s efforts for low-carbon/carbon neutral. In January 2022, the
project was re-formulated as Carbon Neutral Committee to become a high level command tower of
carbon neutral efforts of the entire organization. The committee will monitor the progress under
the supervision of the Board of Directors and focus on achieving targets by planning and
executing measures according to the progress.
→Carbon neutral initiatives
■Indicators and targets
Tokai Carbon Group target to reduce CO2 emissions by 25% (VS 2018) before 2030 and achieve carbon-neutral in 2050.
* Scope of the targets: Scope 1 and Scope 2
Membership in external organizations
【Japan Chemical Industry Association (JCIA)】
We participate in the activities of the Association as the member of the
JCIA. The purpose of the JCIA is to conduct surveys and research for production, distribution,
consumption and other aspects and on various issues related to technology, labor, the
environment, safety, etc., related to the chemical industry. It also conducts planning and
promotion of various countermeasures for the sound development of the chemical industry and to
contribute to the prosperity of Japan’s economy and daily life. Above all, the Association
participates in the Carbon neutral action plan (formally, Low carbon society implementation
plan) sponsored by the Japan Business Federation, and has published a target of a 32% reduction
in CO2 emissions by FY2030, with a view to achieving carbon neutrality by FY2050. Tokai Carbon,
as a member of the Association shall promote the reduction of CO2 emissions and energy
conservation towards achieving this goal.
(Japan Chemical Industry Association
(JCIA) website https://www2.nikkakyo.org/english)
【Japan Carbon Association】
Japan Carbon Association is an organization of carbon products
manufacturers to further develop the carbon products and the industries. President of Tokai
Carbon has been appointed as a chairman of this association. In March 2022, as a response to
climate change, the association announced its “Policy on Carbon Association Initiatives to
Achieve Carbon Neutral by 2050”, to clarify its aim to achieve carbon neutral by 2050 through
energy conservation, fuel conversion, power conversion and use of energy sources that are not
dependent on fossil fuels. President of Tokai Carbon has taken the roll to lead this initiatives
as the chairman of the association.
As we had announced our commitment to achieve carbon
neutral by 2050 prior to the association, we will work on reducing CO2 emissions as an
industry-wide effort based on the association policy.
(Japan Carbon Association
website https://tansokyoukai.org/)
Performance
Environmental data
Energy consumption
| Unit | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||
|---|---|---|---|---|---|---|---|---|
| Non-renewable energy consumption |
Electricity | MWH | 1,169,635 | 999,935 | 855,232 | 845,256 | 938,079 | 799,244 |
| steam | MWH | 2,251 | 4,004 | 5,358 | 1,045 | 546 | 571 | |
| Fuels | MWH | 925,532 | 998,431 | 1,122,098 | 1,020,462 | 1,239,842 | 1,350,829 | |
| Total | MWH | 2,097,418 | 2,002,370 | 1,982,688 | 18,666,762 | 2,178,467 | 2,150,643 | |
| Renewable energy consumption |
Electricity | MWH | 3 | 3 | 3 | 180,090 | 203,747 | 240,265 |
| Total energy consumption | MWH | 2,097,421 | 2,002,373 | 1,982,691 | 2,046,852 | 2,382,215 | 2,390,908 | |
[Boundary]
Emissions from all the consolidated production bases, head
office, branches, and laboratories, are calculated.
[Period covered]
| Japan | Overseas |
| 2018-2020:April to March(Tokai Konetsu Kogyo: January to December) 2021: January to December |
January to December |
GHG emissions(Scope1、Scope2）(consolidated)
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| CO2 emissions （thousand tCO2e） |
3,056 | 2,687 | 2,232 | 2,409 | 2,408 | 2,219 |
| Scope1（thousand tCO2e） | 2,430 | 2,164 | 1,825 | 2,070 | 2,018 | 1,900 |
| Scope2（thousand tCO2e） | 626 | 523 | 406 | 339 | 391 | 318 |
Calculation of Scope 1 and Scope 2 GHG emissions
[Scope of coverage]
| CO2 | All the consolidated production sites, head office, branches, and laboratories (Tokai Carbon (Dalian) Co., Ltd., Tokai Carbon (Suzhou) Co., Ltd., Shanghai Tokai Konetsu Co., Ltd., Tokai Konetsu (Suzhou) Co., Ltd., and Tokai Carbon Europe Ltd. Italia Branch were added in 2022) |
| CH4、N2O | Starting in 2022, major production sites that account for approximately 98% of consolidated CO2 emissions have been added to the scope of the calculation |
[Period covered]
| Japan | Overseas | ||
| CO2 | Energy sources | Until 2020: April to March (Tokai Konetsu Kogyo: January to December) 2021 and after: January to December |
January to December |
| Non-energy sources | January to December | January to December | |
| CH4、N2O | - | January to December (*calculation period from 2022) | |
- Indirect CO2 emissions associated with use of energy in corporate activities
- The market-based method in the GHG Protocol is used. For emissions in Japan, the emission coefficient by electricity utility under the Act on Promotion of Global Warming Countermeasures applies. For overseas emissions, emission coefficients published by electricity utilities are used, although the latest emission coefficients published by IEA or national and regional authorities are used for emissions from some plants.
[Calculation Method]
CO2 equivalent emissions are calculated using the global warming potentials of CO2, CH4, and N2O gases. HFCs, PFCs, SF6, and NF3 are excluded from calculations because these emissions are negligible.
Scope 1: Direct GHG emissions from corporate activities, including energy-derived GHG emissions and non-energy-derived GHG emissions (emissions from industrial processes) are calculated. In principle, GHG emissions from non-energy sources are calculated from the amount of raw and auxiliary materials used and the balance of products and waste.
Scope 2:
CO2 emissions（Scope3） Unit : thousand tCO2e
| 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|
| Scope3 | 3,322 | 1,619 | 1,599 | 1,805 | 1,659 |
| Category1 Purchased goods and services | 469 | 189 | 341 | 1,343 | 1,188 |
| Category2 Capital goods | 20 | 23 | 22 | 51 | 99 |
| Category3 Fuel-and energy-related activities not included in Scope1 or Scope2 | N/A | N/A | N/A | 82 | 74 |
| Category4 Upstream transport and delivery | 5 | 5 | 6 | 6 | 7 |
| Category5 Waste generated in operations | 0.5 | 0.4 | 0.7 | 0.5 | 0.6 |
| Category6 Business travel | N/A | N/A | N/A | 0.4 | 0.5 |
| Category7 Employee commuting | 0.4 | 0.4 | 0.4 | 0.4 | 0.4 |
| Category8 Upstream leased assets | N/A | N/A | N/A | N/A | N/A |
| Category9 Downstream transportation and delivery | N/A | N/A | N/A | N/A | 0.7 |
| Category10 Processing of sold products | N/A | N/A | N/A | N/A | 0.9 |
| Category11 Use of sold products | 2,827 | 1,402 | 1,228 | 321 | 288 |
| Category12 End-of-life treatment of sold products | - | - | - | - | - |
| Category13 Downstream Leased Assets | N/A | N/A | N/A | N/A | N/A |
| Category14 Franchises | N/A | N/A | N/A | N/A | N/A |
| Category15 Investments | N/A | N/A | N/A | N/A | N/A |
- The reporting boundary from 2019 to 2021 is Tokai Carbon Co., Ltd. That for Categories 1, 2, 3, 11 and 12 is Tokai Carbon Co., Ltd. and its consolidated subsidiaries.
- However, Categories 9, 10, 11 and 12 cover only some businesses and products.
- References used in calculation of Scope 3 include “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain Ver 2.5” and “The Emissions Unit Database for Accounting of Greenhouse Gas Emissions, etc., by Organizations Throughout the Supply Chain (Ver. 3.3)” from the Ministry of the Environment and the Ministry of Economy, Trade and Industry; emission coefficients by electrical utility published by the Ministry of the Environment; and emissions factor specified in LCI Database IDEA v3.3.
- Category 1: Through 2021, calculated as total value of procurement of major raw materials multiplied by emission factor. From 2022, it is calculated for the top 80% or more of the value of purchased raw materials and auxiliary materials by multiplying the annual purchase for each target item by the emission factor.
- Category 2: Calculated by multiplying the purchase value of capital goods by emission factor.
- Category 3: Calculated by multiplying the amount of energy totaled in Scope 1 and 2 by emission factor.
- Category 4: Calculated by multiplying the fuel consumption and transport ton-kilometers by emission factor.
- Category 5: Calculated by multiplying type-specific amount of waste disposal and recycling by emission factor.
- Category 6: Calculated by means-of-transportation-specific value of transportation expenses by emission intensity, and adding the number of accommodation stays multiplied by the emission factor of the accommodation facilities.
- Category 7: Calculated by multiplying the number of employees by number of business days and by emission factor.
- Category 9: The scope of this report is the Fine Carbon Division. Calculations were made by multiplying the transportation ton-kilometers by the emissions intensity for the logistics of products sold by the Fine Carbon Division to the final consumer.
- Category 10: The scope of this report is the Fine Carbon Division. Calculated by multiplying the sales volume of intermediate products from the Fine Carbon Division by the emissions intensity per processed amount.
- Category 11: The scope of reporting through 2021 is the Graphite Electrode Division. Calculated by multiplying products’ energy consumption and sales volume by emission factor, and adding the CO2 generated from the products themselves during use. The scope from 2022 is the Graphite Electrode Division and the S&L Division. CO2 generated from the products themselves during use is calculated.
- Category 12: The scope of reporting is the Graphite Electrode Division.
Scope 3 calculation method
[Boundary]
[Period of tabulation]
Category 1–3, 5–15: January–December
Category 4: April–March of the following year
[Calculation method]