Initiatives Toward Carbon Neutrality in FY2050

As the impact of climate change becomes more apparent, reducing CO₂ emissions is an urgent issue for Tokuyama, because thus far we have been operating captive coal-fired power plants. Under the Medium-Term Management Plan 2025 published in February 2021, we made helping to fight global warming one of the Company's priority issues. We set a target of reducing GHG emissions by 30% by fiscal 2030 (compared to fiscal 2019) and declared our aim to achieve carbon neutrality in fiscal 2050.

In February 2021, we announced our support for the TCFD recommendations, and we disclosed the Group's initiatives to combat climate change based on the disclosure requirements in the recommendations, which are governance, strategy, risk management, and metrics and targets, in March 2022.

Initiatives to Achieve GHG Emissions Reduction Target

At Tokuyama, the Carbon Neutral Strategy Division is responsible for planning strategy to achieve the CO₂ emissions reduction targets.
The Carbon Neutral Strategy Division works with each business unit and the Tokuyama Factory to establish and implement specific plans, including those related to the best energy mix.
The basic policy for fulfilling our plan for reducing CO₂ emissions is to convert the Tokuyama Factory's captive power plants from coal to non-fossil fuels. In terms of non-fossil fuels, we will mainly use agricultural waste biomass, such as palm kernel shells (PKS). In February 2022, we obtained third-part certifications, including GGL* certification, in the conviction that PKS sourced from overseas must be traceable, environmentally friendly and legally compliant. We have decided to secure adequate supplies of PKS in fiscal 2022 and generate power from one of the Tokuyama Factory's four power plants using biomass mono-fired generation starting as early as fiscal 2023. We plan to decide the appropriate action for the remaining three power plants in light of the state of development of ammonia-firing technologies and other relevant considerations.

*Stands for Green Gold Label certification, which was launched in 2002 and is the certification with the longest history. GGL is a specialized certification for biomass, which encompasses the manufacture, processing, transportation, and final use of sustainable biomass and ensures independent tracking and record keeping. As with RSB certification, it is a third-party certification recognized under the business planning guidelines of Japan's Agency for Natural Resources and Energy.

We are also pursuing the establishment of production technology for black pellets, which are a semi-carbonized form of biomass that can be handled in the same manner as coal. Ultimately, we expect to be able to improve boiler efficiency and reduce facility modification, transport, and storage costs by switching from biomass to black pellets. We established a Biomass Commercialization Center to work on development of biomass fuels, within the New Business Center, which was set up in April 2022 independently from business units and the Research & Development Division to drive the startup of new businesses.
Meanwhile, hydrogen and ammonia are also options for reducing CO₂ emissions. Ammonia, which is easier to both transport and store than hydrogen, has been attracting attention as a low-cost hydrogen carrier in recent years. The Shunan Industrial Complex Decarbonization Council is currently discussing ammonia fuel. The Council comprises companies with operations at the Shunan Complex, the Society of Chemical Engineers, Japan, and the City of Shunan. Entities participating in the Council as observers include the Ministry of Economy, Trade and Industry, the Ministry of Land, Infrastructure, Transport and Tourism, the Ministry of the Environment, Yamaguchi Prefecture, and Yamaguchi University. In August 2022, four companies with operations at the Shunan Complex launched a joint study on establishment of the shared infrastructure required to develop an ammonia supply chain.

Disclosures Based on TCFD Recommendations

Calculating and Managing Supply Chain Emissions

Based on the Scope 3 Standard of the GHG Protocol,* Tokuyama accounts for supply chain emissions for Category 1 through 7 and Category 9 emissions under Scope 3. The emissions from these categories were calculated at 1.78 million metric tons, an increase of 40,000 metric tons from fiscal 2020. The increase was mainly due to an increase of 30,000 metric tons in Category 1 emissions.
*The Greenhouse Gas Protocol (GHG Protocol) was jointly formulated by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD), and the Scope 3 Standard was issued in November 2011 as a standard for calculating GHG emissions throughout supply chains.