Environment

Environmental Management

Our Company Group's Environmental Vision for 2050 (CO2 reduction)

Our Group relies upon the earth’s natural resources and energy in order to do business. However, doing business will generate garbage and air and water emissions. For this reason, we believe it is important for our Group to adhere to environmental laws and regulations, conduct business in an environmentally friendly manner, and engage in initiatives that reduce the environmental impact on the entire society through our products and services.

In fiscal 2018 our Group established a plan with mediumto long-term targets ending in fiscal 2030, and has been promoting activities based on this. However, in light of the environmental challenges that will only grow more severe from this year on, we felt it was necessary to promote activities from an even longer-term perspective. Therefore, we formulated our Environmental Vision for 2050 (CO2 reduction) ending in 2050.

For the future, we will continue to promote activities aimed at our challenges for the year 2050 by using SBT^*1 as one of the indicators for this.

Striving to achieve zero CO2 emissions and SBT

Environmental Vision for 2050 (CO2 reduction)

^*1 SBT: Abbreviation for “science-based targets.” It refers to an initiative that aims to achieve the Paris Agreement target of “keeping a global temperature rise this century well below 2 degrees Celsius” through the public declaration, setting, and implementation of a greenhouse gas emissions reduction target by corporations that is consistent with science. It is a joint, international initiative. The target level was raised in October 2019 and has become a greenhouse gas reduction target consistent with the requirements of the Paris Agreement (Aiming to keep a global temperature rise well below 2 degree Celsius and 1.5 degree Celsius below pre-industrial levels).

Initiatives for the Climate Change Program

CDP (headquartered in London)^*2 is an international NGO established in 2000 in partnership with institutional investors from around the world. It carries out projects in which it sends out questionnaires to major companies and municipal governments around the world on issues such as climate change, water security, and forests, and that seek climate change strategies and specific declarations related to emissions of greenhouse gases.

With the CDP's 2019 survey, survey activities were conducted on behalf of 525 institutional investors with net invested assets totaling 96 trillion U.S. dollars. More than 8,400 companies, accounting for over 50% of global market capitalization, disclose environmental data on their initiatives for climate change programs via the CDP.

We complied with the CDP's request to respond to its 2019 climate change survey, and we were awarded a "B" rating on January 20, 2020. For fiscal 2020, we have been requested to reply to the survey on water security in addition to the one on climate change, and we intend to respond.

We will continue to reduce our environmental impact, conserve resources and energy, control chemical substances, develop products that contribute to the environment, and contribute to countering climate change, while also promoting the disclosure of environmental information in the future.

^*2 This was formerly known as The Carbon Disclosure Project, but now its official name is the CDP.

Environmental Management System

Under our newly established Environmental Vision for 2050, our Group will work to address environmental conservation across the entire Group based on our Policy on Responsible Care Activities in aiming to contribute to the sustainable development of society.

To actively reduce environmental impacts, conserve biodiversity, and prevent soil and groundwater pollution, our Responsible Care Committee and Environmental Impact Reduction Committee take the lead in checking compliance with environmental laws and regulations as well as conducting environmental assessments throughout the entire life cycle, from R&D to raw materials procurement, production, sales and final disposal. Based on the results, each workplace and work site take appropriate actions.

From January 2020, our Responsible Care Committee and Environmental Impact Reduction Committee began carrying out activities as subordinate committees under the Sustainability Promotion Committee. We will continue to promote environmental management under this sustainability promotion structure.

^*1 The Sustainability Promotion Committee is a committee that is chaired by the president, and was launched in April 2019.

^*2 The above system diagram is just an excerpt of our committees related to environmental management. See page 39 regarding our Responsible Care Committee and Environmental Impact Reduction Committee.

Material Flows and Investments in Environmental Protection

The figure below shows inputs, including raw materials and energy, and outputs that are products and emissions released into the environment.

The Group is working to minimize its impact on the environment by means of waste reduction and resource savings through promoting more efficient use of raw materials, energy, and water. For fiscal 2019, we reduced both our emissions of CO2 and the amount of water used compared with the previous year through reduction efforts at our business sites. In addition, in light of the impact that the coronavirus (COVID-19) pandemic has had in terms of bringing economic activity to a standstill in the latter part of the fiscal year as a separate causal factor, we saw reductions across numerous items such as the volumes of inputs of raw materials and sales of products. Conversely, our amount of recycled waste has increased. This can be attributed to import restrictions on waste plastics in the China / Southeast Asian region, which in turn has led to an increase in waste plastics being disposed of as waste, whereas before these had been traded as a valuable good.

^*1 The ratio of renewable raw materials to total raw materials used is small at the current point in time, but we will continue to work on ways to increase this ratio.
^{*2, 3, 4, 6} See the glossary on page 108. SOx, NOx, and soot and dust are calculated using the company’s own formula based on exhaust gas readings and fuel usage amount, among other variables. Since methods of calculating emissions of soot and dust differ among countries, this figure is compiled solely for business sites in Japan at present. COD is calculated based on the measured concentration and drainage volume. Data on overseas COD covers sites that measure COD within drainage. Data for overseas sites are stated separately because the types of oxidant (potassium dichromate is mainly used overseas) used for measurement differ from those used in Japan.
^*5 Drainage volume is determined by calculating drainage into sewages based on the breakdown of total usage. Drainage into public water areas is calculated using readings from flow meters installed at business sites; while water usage volume is used for business sites without flow meters.
^*7 The volume of hazardous waste found in our total waste volume came to 8,226 t (based on the definitions used by each country). The volume of hazardous waste is not subject to assurance.
^*8 The volume of products shipped and value of products sold are not subject to assurance.

Medium- to Long-term Environmental Targets and Performance

We have established a medium- to long-term environmental plan starting from fiscal 2018 and ending in fiscal 2030, and are promoting activities based on this. In particular, we have formulated targets for reducing greenhouse gases that are based on the following.

Response to sustainable development needs shared by the international community with 2030 as the target year established in the SDGs approved at the UN Summit in September 2015.
Response to the greenhouse gas reduction target for fiscal 2030 indicated in the Japanese government’s INDC in COP21.
Response to the Act on the Rational Use of Energy and the Act on Promotion of Global Warming Countermeasures.

In addition, we are focusing our efforts on the reduction of greenhouse gas (CO2 emissions) linked with the Japan Business Federation (Keidanren)’s Commitment to a Low Carbon Society, which we have participated in through the Japan Chemical Industry Association. Furthermore, as we have done in the past, the amount of material loss (waste and valuable materials) generated is suppressed. By controlling it, we will improve the resource utilization rate and promote the effective use of raw materials. We will also set targets for reducing chemical substance emissions and systematically promote efforts to reduce environmental impact.

Environmental Performance

Disclosure of Scope 3 Data

In 2015, our Group began calculating and disclosing Scope 3 emissions in the supply chain of business sites belonging to Group companies in Japan because of the growing importance of understanding CO2 emissions covering the entire supply chain. In fiscal 2018, we enlarged the scope to cover overseas business sites. The scope of said disclosures cover a total of eight categories including Category 1 “Purchased goods and services.” In addition, we confirmed that three categories including Category 8 “Upstream leased assets” are not applicable.

Similar to past years, Category 1 “Purchased goods and services” accounted for a large portion of CO2 emissions, and this includes the portion from overseas. However, emissions have been declining since fiscal 2018 due to the drop in purchase volumes, primarily at overseas business sites. Moving forward, we will continue to calculate and disclose data on other categories and work to increase the accuracy of the data for each category, while also promoting ongoing efforts to reduce CO2 emissions across the entire supply chain.

CO2 Emissions in Certain Categories of Scope 3 and Other Scopes (In Japan and Oversea Sites)

Data covers all the business sites in Japan and Oversea listed on page 3.
Calculation method:
We calculated the amount of emissions in accordance with the Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain Ver. 3 issued by the Ministry of the Environment and the Ministry of Economy, Trade and Industry of Japan, using the emission coefficient stated in the basic database IDEA Ver. 2.3 Carbon Footprint Communication Program developed jointly by the National Institute of Advanced Industrial Science and Technology and the Japan Environmental Management Association for Industry as well as the Emissions Intensity Database for Calculating Greenhouse Gas Emissions of Organizations through the Supply Chain

Conservation of Water Resources

When it comes to the water used at our Group's locations, in Japan a large share of the water used comes from groundwater, while overseas a large share of this comes from waterworks. The water used in our plants in Japan accounts for 84% of the water used by the entire Group.

The Group has worked to reduce the amount of water it uses. In particular, we are promoting ongoing reductions of water usage at our Shizuoka Plant, which accounts for a large percentage of the Group’s water usage in Japan, and have achieved substantial decreases in its water usage for two years in a row. Overall, water usage by the Group in Japan and overseas has been reduced by 47% compared to fiscal 2005. Moving forward, we will promote internal reviews in order to set company-wide targets for reducing our water usage. As it had come to light that our Shizuoka Plant had been aggregating its water usage on a January–December basis, this was revised so that it was being aggregated on an April– March basis the same as our other locations, with this applied retroactively back to 2005. There were no changes to the overall trends from this. Furthermore, it also came to light that there were errors in the method by which water was being aggregated at Vaupell's Ballard & Everett Plant, and so this was corrected starting from the aggregation of fiscal 2019 figures.

See the business sites listed on page 3 about the boundary.

201Assessment of Water-Related Risk in Fiscal 2019

Since fiscal 2015, we have been continuously surveying the regional watershed risk of all major plants in the Group (11 sites in Japan and 24 sites overseas). Continuing on from fiscal 2018, in fiscal 2019 there were significant changes to the WRI Aqueduct tool. While the risk level for our business sites in Japan fell, conversely the risk level for districts in China worsened.

Our Group revised risk levels based on the results of WRI studies and independent studies performed on each business site. We compiled the results into a table that contains the risks facing each of the regions in which the Group operates. Using these results, going forward, we will continue working to preserve water resources more effectively.

Assessment of Water-Related Risk in Fiscal 2019

Initiatives for resource recycling

Marine plastics

When it comes to the problem of marine plastics, we are moving ahead with activities to contribute to reducing plastic marine waste via a number of initiatives based on the Japanese government’s Plastic Resource Recycling Strategy. These initiatives include managing the raw materials used and the plastic products we manufacture, promoting the recycling of said products, and developing new products.

We are currently taking part in the Japan Initiative for Marine Environment (JaIME), which was established by major companies and industry organizations in the chemical industry, as well as the Clean Ocean Material Alliance (CLOMA), which was established by a broad range of business operators related to supply chains for plastic products, including those in the chemical industry and distribution/retail industries, with the goal of forming cross-industry partnerships. Through this, we are working to address a variety of challenges by aiming to curb plastic waste across our supply chain as a whole and promoting recycling via 3R activities for plastic products.

Recycling

Our Group promotes recycling as a means to make effective use of resources. This recycling includes the recovery and recycling of phenol from waste liquid produced by phenolic resin reactions during the product production process, fine grinding of offcuts from phenolic laminated sheets and decorative melamine resin laminate for use as a filler in phenolic resin molding compounds reuse of molded article by-products (sprues and runners) as raw material for molding materials, as well as reuse of excess sludge from activated sludge effluent treatment equipment as compost (organic fertilizer).