Basic Stance

Sumitomo Chemical considers climate change a social issue on which chemical companies should take the lead. To swiftly address this problem, we are actively working to respond to risks and to seize opportunities by utilizing the technology we have cultivated to date. In addition, regarding disclosure related to climate change, we will continue gaining the trust of society by actively raising awareness of our initiatives using the framework of the TCFD recommendations.
Furthermore, with movements aimed at achieving carbon neutrality picking up steam in recent years, the chemical industry is being strongly called upon to create innovation and contribute to the achievement of carbon neutrality for society at large through its businesses. In December 2021, Sumitomo Chemical formulated and publicized its “grand design to achieve carbon neutrality,” setting out a direction for its initiatives aimed at realizing carbon neutrality by 2050. In line with this, we will push ahead with initiatives that address both our obligation to bring our own greenhouse gas (GHG) emissions close to zero and the contribution we can make to promoting carbon neutrality for society as a whole through our technologies and products.
To fulfill our obligation, we have committed ourselves to reducing our GHG emissions by 50% by FY2030 (compared to the level of emissions in FY2013), and to achieving net zero GHG emissions by 2050. We will also contribute to the reduction of GHG emissions throughout society by engaging in external collaboration and otherwise facilitating innovation to develop products and technologies that serve this end, along with pursuing their social implementation, with the aim of helping communities around the world realize carbon neutrality.

Grand Design Toward Achieving Carbon Neutrality

Disclosure in Line with TCFD Recommendations

Sumitomo Chemical expressed its support for the TCFD recommendations when they were published in June 2017. In line with the four recommended disclosure items, “Governance,” “Risk Management,” “Strategy,” and "Metrics and Targets,” the Group’s efforts to address climate change issues are introduced.

Governance

Sumitomo Chemical has established meetings and committees to deliberate important matters related to the management of the Group from a broad and diverse perspective in order to enhance its business execution and supervisory functions. Through these meetings and committees, the Company reports to the Board of Directors at least once a quarter on issues related to the promotion of sustainability, including climate change.

Structures for Responding to Climate Change

A wide range of specific issues related to energy and greenhouse gases (GHGs) are taken up for detailed discussion at Companywide Science Based Targets (SBT) GM Meetings, SBT Promotion Working Groups, Company-wide Energy Manager Meetings, Department Liaison Meetings on Global Warming, Group Company Information Exchange Meetings, and other gatherings. Through the establishment of these various meetings, we have created our system capable of steadily and swiftly sharing important information in addition to managing energy and GHGs for Works, research laboratories, business sectors, and Group companies.

Meeting	Coordinator	Members	Content
Company-wide SBT GM Meeting	Executive officer responsible for Responsible Care	General managers in charge of SBT at individual worksites	Discussing various measures aimed at achieving SBT
SBT Promotion Working Group	Process & Production Technology & Safety Planning Department general manager	Corporate Planning Office, Research Planning and Coordination Department, Process & Production Technology & Safety Planning Department, Responsible Care Department, and Environmental Burden Reduction Technology Development Group	Proposing various multi-faceted measures to achieve SBTs
Company-wide Energy Manager Meeting	Responsible Care general manager	Section managers in charge of Energy and GHGs at their worksites	Sharing and spreading information on initiatives at each worksite
Department Liaison Meeting on Global Warming	Responsible Care general manager	Section managers in charge of climate change action at the departmental and corporate levels	Sharing Company-wide policies and ESG issues
Group Company Information Exchange Meeting	Executive officer responsible for Responsible Care	Managers in charge of climate change action for Group companies	Sharing Group policies and issues and promoting best practices

Risk Management

To achieve sustainable growth, Sumitomo Chemical makes an effort to detect, at an early stage, various risks that may hinder the achievement of its business objectives, and takes proper measures. We focus on building and expanding a system relating to risk management so that we can promptly and properly address risks when they emerge.
Climate change issues are positioned as one of the Group’s major medium- to long-term risks through, for example, an assessment from the perspective of the likelihood of their occurrence and impact, and are integrated into the Group’s overall risk management process.

Specific Procedures

Each organization, including Group companies in Japan and overseas, conducts risk evaluations from the perspectives of probability of emergence (frequency) and financial impact in the event of emergence. The Internal Control Committee, which is chaired by the President, deliberates and identifies Company-wide material risks that need Group-wide initiatives, which may later be approved. The seriousness of each risk is determined by multiplying the probability of the individual risk by the financial or strategic impact on the Group’s businesses.
Based on these processes, we have identified climate change-related risks and opportunities as detailed in the following table.

Risks and Opportunities

Strategy

In December 2021, Sumitomo Chemical formulated a grand design for achieving carbon neutrality by 2050. We will promote efforts to mitigate climate change from the perspectives of both “Obligation” (to bring the Group’s GHG emissions close to zero) and “Contribution” (to reduce global GHG emissions through the Group’s products and technologies).
In addition, as part of our efforts to adapt to climate change, we are striving to provide solutions adapted to global environmental changes, in such areas as agriculture and infectious diseases, and to strengthen new product development.

Investments to Achieve Carbon Neutrality

Starting in FY2019, in order to contribute to the realization of carbon neutrality for society as a whole, we calculate economic indicators reflecting internal carbon pricing (10,000 yen per ton) when GHG emissions are expected to increase or decrease for individual investment projects, and make investment decisions.

Investment Scale

We expect to invest a total of approximately 200 billion yen between FY2013 and FY2030 in carbon neutral-related investments.

Scenario Analysis

Scenario analysis, with regard to climate change, is a method in which we consider multiple scenarios, predict the impact of climate change and changes in the business environment due to long-term policy trends, and study the potential impact of these changes on our business and management. Currently, Sumitomo Chemical analyzes risks and opportunities with respect to both a scenario in which a variety of measures are taken to limit average global temperature increase to 1.5°C above the pre-industrial revolution levels, and a scenario in which countermeasures are not taken and temperatures increase by 4°C, evaluating the impacts of the two scenarios on our businesses and future actions that need to be taken.

Summary of the Scenario Analysis

Metrics and Targets (Risk)

As a metric for climate-related risks, we are the first diversified chemical company in the world to utilize GHG emission reduction targets certified as Science Based Targets (SBT).The Sumitomo Chemical Group's^*1 GHG emissions (Scope 1 + 2) reduction target for 2030 is 50%^*2, and has been certified under SBT's Well Below 2.0°C standard. Until 2030, we aim to achieve this goal by utilizing the best available technology (BAT) in the manufacturing process at existing plants and by making thorough energy conservation and fuel switching in the manufacturing process.
On the other hand, to reach net-zero emissions by 2050, it will be difficult to respond only with existing technologies, and innovative technologies such as carbon-negative emissions and CCUS^*3 will be necessary. We will continue to study the development of them and their early implementation.

1. Sumitomo Chemical + domestic and overseas consolidated subsidiaries
2. Compared to FY2013
3. Capture, effective utilization, and storage of CO2 emitted from plants, etc.

GHG Emissions Trends and Reduction Targets (Scope 1+2)

FY2022 Energy Consumption and Greenhouse Gas Emissions

The Group’s greenhouse gas emissions for fiscal 2017 onward are calculated based on the GHG Protocol (refer to “Calculation Standards for Environmental and Social Data Indicators”). The boundary of calculation has been expanded to include principal consolidated Group companies, which account for up to 99.8% of consolidated net sales.

Greenhouse Gas Emissions

(Thousand tons of CO_2e)

	Sumitomo Chemical and Group Companies in Japan	Overseas Group Companies	Total
Scope1	5,231	442	5,673
Scope2	187	718	905
Total	5,418	1,161	6,578

Note: Biomass-derived emissions were 50 thousand tons of CO_2e

GHG Emission Reduction Targets (Scope 3)

Status of Scope 3 GHG Emissions

(Thousand tons of CO2e/year)

Category	Emissions
	FY2019	FY2020	FY2021	FY2022
1. Purchased goods and services	2,276	2,346	2,441	2,261
2. Capital goods	151	164	141	146
3. Fuel- and energy-related activities not included in Scopes 1 and 2	581	585	559	550
4. Upstream transportation and distribution	60	53	55	53
5. Waste generated in operations	35	41	58	37
6. Business travel	10	2	3	7
7. Employee commuting	11	11	9	9
8. Upstream leased assets	<1	<1	<1	<1
9. Downstream transportation and distribution	<1	<1	<1	<1
10. Processing of sold products	̶	̶	̶	̶
11. Use of sold products	40	42	45	34
12. End-of-life treatment of sold products	879	806	788	772
13. Downstream leased assets	̶	̶	̶	̶
14. Franchises	̶	̶	̶	̶
15. Investments	̶	̶	̶	̶

Notes:

• For Scope 3 data, indirect greenhouse gas emissions from business activities throughout the supply chain are calculated separately by category and then added together.
• Calculated for Sumitomo Chemical and Group companies listed on stock indices in Japan (Sumitomo Pharma Co., Ltd.; Koei Chemical Co., Ltd.; Taoka Chemical Co., Ltd.; and Tanaka Chemical Corporation).
• Category 4 does not include Taoka Chemical Co., Ltd., but includes Nippon A&L Inc.
• Category 11 figures are N2O converted into CO2

Metrics and Targets (Opportunities)

Sumika Sustainable Solutions (SSS) is used as a metric for climate-related opportunities. SSS is an initiative in which we designate those of our Group’s products and technologies that contribute to the fields of addressing climate change, reducing environmental impact, and effective use of resources in order to promote their development and spread.
In FY2022, sales revenue from SSS-certified products totaled 682.8 billion yen, making steady progress toward the FY2030 goal of 1.2 trillion yen.

Science Based Contributions (SBC)
Avoided GHG emissions through products and technologies

Specific Initiatives for “Obligation”

• Major Sources of GHG Emissions from Chemical Plants
• Initiatives Aimed at Reducing GHG Emissions at Each Worksite
• State of Installing LED Lighting
• Logistics Initiatives

Specific Initiatives for “Contribution”

• Establishment of Carbon Resource Recycling System
• Challenges to Carbon Negative Emissions
• Response to Methane Gas
• External Cooperation Initiatives
• Development of Hydrochloric Acid Oxidation Process Technology
• JCIA Responsible Care Award

Looking Ahead

In line with the Grand Design aimed at achieving carbon neutrality by 2050, which was released in December 2021, Sumitomo Chemical will leverage the technological capabilities and insights it has cultivated as a diversified chemical company to continue promoting initiatives to “fulfill its obligation” to realize zero Group GHG emissions and to “contribute” to the promotion of carbon neutrality throughout society via Group products and technologies.
Going forward, under Sumitomo Chemical’s Business Philosophy of “working to contribute to society through our business activities,” we will continue actively working to solve climate change problems and achieve carbon neutrality.