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 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.
Performance
Environmental data
Energy consumption
| Unit | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | ||
|---|---|---|---|---|---|---|---|---|
| Non-renewable energy consumption |
Electricity | MWH | 1,169,635 | 999,935 | 855,168 | 845,256 | 938,079 | 799,244 |
| steam | MWH | 2,251 | 4,004 | 5,358 | 1,045 | 546 | 571 | |
| Fuels | MWH | 923,936 | 996,538 | 1,121,613 | 1,020,462 | 1,239,842 | 1,350,979 | |
| Total | MWH | 2,095,822 | 2,000,477 | 1,982,138 | 18,666,762 | 2,178,467 | 2,150,793 | |
| Renewable energy consumption |
Electricity | MWH | 3 | 3 | 3 | 180,090 | 203,747 | 240,104 |
| Total energy consumption | MWH | 2,095,825 | 2,000,480 | 1,982,141 | 2,046,852 | 2,382,215 | 2,390,897 | |
[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 | 2,204 |
| Scope1（thousand tCO2e） | 2,430 | 2,164 | 1,825 | 2,070 | 2,018 | 1,884 |
| Scope2（thousand tCO2e） | 626 | 523 | 406 | 339 | 391 | 320 |
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, and SF6 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:
Greenhouse gas emissions（Scope3）（non-consolidated）
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| Scope3（thousand tons） | 7 | 3,322 | 1,619 | 1,599 | 1,689 |
| Category1 Purchased goods and services | － | 469 | 189 | 341 | 448 |
| Category2 Capital goods | － | 20 | 23 | 22 | 14 |
| Category3 Fuel-and energy-related activities not included in Scope1 or Scope2 | － | N/A | N/A | N/A | N/A |
| Category4 Upstream transport and delivery | 6 | 5 | 5 | 6 | 6 |
| Category5 Waste generated in operations | 0.7 | 0.5 | 0.4 | 0.7 | 0.5 |
| Category6 Business travel | － | N/A | N/A | N/A | 0.4 |
| Category7 Employee commuting | － | 0.4 | 0.4 | 0.4 | 0.4 |
| Category8 Upstream leased assets | － | N/A | N/A | N/A | N/A |
| Category9 Downstream transportation and delivery | － | N/A | N/A | N/A | N/A |
| Category10 Processing of sold products | － | N/A | N/A | N/A | N/A |
| Category11 Use of sold products | － | 2,827 | 1,402 | 1,228 | 1,219 |
| Category12 End-of-life treatment of sold products | － | － | － | － | － |
| Category13 Downstream Leased Assets | － | N/A | N/A | N/A | N/A |
| Category14 Franchises | － | N/A | N/A | N/A | N/A |
| Category15 Investments | － | N/A | N/A | N/A | N/A |
- References for the calculation of Scope 3 include “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain (ver. 2.4)” (Ministry of the Environment and Ministry of Economy, Trade and Industry (METI)) and “Database on Emissions Intensities for Calculating Greenhouse Gas Emissions, etc. through a Supply Chain (Ver. 3.3)” (Ministry of the Environment and METI), as well “Greenhouse Gas Emission Factors by Power Operators” released by the Ministry of the Environment.
- (Category 1) Purchased goods and services: Calculated by multiplying the total amount of main raw materials purchased by the applicable emission intensity.
- (Category 2) Capital goods: Calculated by multiplying the purchasing price of capital goods by the applicable emission intensity.
- (Category 5) Waste generated in operations: Calculated by multiplying the volume of waste disposal by type and the volume of recycling by the applicable emission intensity.
- (Category 6) Calculated by adding the value obtained from multiplying the number of overnight stays by the emission intensity of the accommodation facility to the value obtained from multiplying the amount of transportation allowance for each means of transportation by the emission intensity.
- (Category 7) Employee commuting: Calculated by multiplying the number of employees by the number of operating days and the applicable emission intensity.
- (Category 11) Use of sold goods: The scope of reporting is the Graphite Electrodes Segment. The figure was calculated by multiplying the energy consumption of products and the sales volume by the applicable emission intensity and adding CO2 emission from the products in use.
- (Category 12) End-of-life treatment of sold products: The scope of reporting is the Graphite Electrodes Segment.
[Period covered]
Category1-3, 5-15: January to December
Category4: April to March
[Calculation Method]