Report in Line with the Recommendations of the TCFD

In October 2018, Mitsubishi Chemical Holdings Corporation announced its support for the final recommendations prepared by the Task Force on Climate related Financial Disclosures (TCFD*).
 Within the framework of enhanced climate change-related measures, the MCHC Group is working for improved solutions in GHG reduction and the carbon cycle, which are among the growth businesses identified in its medium-to long-term basic management strategy, KAITEKI Vision 30 (KV30), as well as progressing with measures toward achieving the strategy’s target for GHG reduction.
Progressive enhancement of information disclosure is another initiative which we are targeting to increase our corporate value.

In June 2017, TCFD announced the final recommendations concerning disclosure of information to encourage companies to voluntarily disclose to investors the impacts of climate change-related risks and business opportunities on corporate finances.

Governance

At MCHC, we have identified GHG reduction, environmental impact reduction, and circular economy as the material issues to be addressed in our medium-term management plan, APTSIS 25. In parallel, we have set management indicators and targets (see Metrics and Targets) to measure progress with these initiatives to mitigate and adapt to climate change. Going forward, we will continue to monitor progress against the target values set for each operating company, acting in line with the KAITEKI Initiative Structure, centered on the KAITEKI Promotion Committee, a body under the advisory control of the MCHC president.

Structure Rolls Content of report
Board of Directors

・Formulation of the basic management policy
・Supervision of overall management

・Supervision through the execution reports of executive officers

Outside Director Liaison Committee

・Provision to outside directors of important information on management
・Frank exchange of views on management issues

KAITEKI Promotion Committee
[Structure]
・President, MCHC
・Corporate Executive Officers, MCHC
・CSO* of each operating company
・Members of the Audit Committee, etc. MCHC

・Deliberations on basic policy, etc. concerning the KAITEKI initiatives
・Monitoring through the activity reports of operating companies

・Monitoring based on the management indices
(MOS Indices) (July and February)

Operating Companies

・Overseeing the progress of KAITEKI initiatives
by the CSO of each company
・Reporting the progress of KAITEKI initiatives and
MOS Indices, etc.

・Reporting the progress of MOS indices, etc.
at the KAITEKI Promotion Committee (July and February)

Chief Sustainability Officer

Recommended Disclosures of TCFD

Governance
a) Describe the board’s oversight of climate-related risks and opportunities.
b) Describe management’s role in assessing and managing climate-related risks and opportunities.

Strategy and risk management

Business opportunities and risks from perceived social issues

Content of report

In its formulation of KV30, the MCHC Group identifies the business opportunities and risks relating to social issues that it faces in the period up to 2030. It also quantitatively assesses the risk of leaving social issues unmanaged.
A climate change-related risk that we recognize as having a particularly large impact is decrease in product demand and profitability due to factors such as increased carbon tax burden and regulation of the use of plastic products.

We aim to achieve a safe and secure society by minimizing damage and ensuring business continuity in the event of a large-scale natural disaster while providing solutions that contribute to disaster prevention and mitigation.

The MCHC Group recognizes business opportunities in solutions that contribute to resolving social issues, including the climate change-related items below, and has identified a group of relevant businesses as growth businesses, where it intends to progressively expand business scale and strengthen profitability.

Recommended Disclosures of TCFD

Strategy
a) Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

Related pages in KAITEKI Report

Impact on business scale and risks from perceived social issues

Content of report

・By fiscal 2030, we aim to expand GHG reduction-related areas and other growth businesses to account for over ¥4 trillion in sales revenue, and over 70% of the total.
・By fiscal 2022, the target period for Step 1 of the medium-term management plan APTSIS 25, we aim to expand the GHG reduction and carbon cycle areas to account for 12% of total sales revenue.
・We estimate risk associated with social issues and structural change in 2030 at around ¥1 trillion.

Recommended Disclosures of TCFD

strategy
b) Describe the impact of climate related risks and opportunities on the organization’s businesses, strategy, and financial planning.

Portfolio management

Content of report
・Based on the risk impact evaluation in KV30, we have carried out a review of the basic policy for portfolio reform to switch from the previous MOE-based evaluation to an overall evaluation based on factors including sustainability contribution (MOS) and innovation potential (MOT). Going forward, with a keen eye for businesses that contribute to medium-term growth, we will undertake continuous business portfolio reform using new evaluation criteria that take into account factors such as the scale of the environmental impact.

Risk management

Content of report

・We will strive to avoid the occurrence of major risks and minimize losses when they occur under our risk management system.
・We are aware that climate change risk is expected to increase further in the medium to long term, and we have factored this prediction into KV30 and the medium-term management plan. We are also exploring additional risk management methods.

Recommended Disclosures of TCFD

Risk management
a)Describe the organization’s processes for identifying and assessing climate-related risks.
b)Describe the organization’s processes for managing climate-related risks.
c)Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

For the Future

Content of Report

We will strive to minimize risk through a risk management system, and based on the medium-term management plan, APTSIS25, we will promote portfolio transformation with making social issues such as GHG reduction business opportunities, thereby aiming to maintain sustainable growth.
In addition, our insights and corporate approach for the year 2050, which was envisioned when formulating KAITEKI Vision 30, envisions a future image in which society and policies have advanced positively toward climate change. We recognize that its perspectives meet climate-related scenarios, including a 2℃. In the future, we plan to proceed with analysis so that sustainable growth can be achieved through business portfolio reform under the business environment such as the 2℃ or lower scenario.

Recommended Disclosures of TCFD

Strategy
c) Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2℃ or lower scenario.

Metrics and targets

Metrics and targets to assess risks and opportunities

Content of report

Of the management indicators used to measure progress with material issues (MOS Indices), we have set medium-term targets in two selected items: the percentage reduction in GHG emissions and the percentage contribution of the GHG reduction and carbon cycle business areas to total sales revenue. We will carry out annual evaluation of the state of progress.
Regarding the percentage reduction in GHG emissions, we will aim for reductions in line with the target levels of the respective national and regional governments. In Japan, we are taking forward concrete measures aimed at meeting the KV30 fiscal 2030 target of a 26% reduction in domestic emissions compared to fiscal 2013. Going forward, we are committed to exploring further emissions reduction in line with the approach adopted by the respective national and regional governments.

Recommended Disclosures of TCFD

Metrics and Targets
a)Disclose the metrics used by the organization to assess climate related risks and opportunities in line with its strategy and risk management process.
c)Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

Scope 1 to 3 GHG emissions

Content of report

Please see GHG emissions in “Non-Financial Highlights” for the performance in fiscal 2020. We have received independent assurance for GHG emissions, and are working to disclose highly reliable information.

Recommended Disclosures of TCFD

Metrics and Targets
b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

Related pages in KAITEKI Report

Director remuneration

Content of report

The performance-based evaluation of the remuneration of corporate executive officers and executive officers is determined based on the degree of achievement of the targets for each fiscal year. The evaluation is determined by using indices* including those associated with the improvement of sustainability in addition to economic and capital efficiencies, such as indices associated with climate change through the promotion of energy-saving activities. For details, please refer to the Securities Report.
* From fiscal 2021, we will shift to new MOS Indices.

Securities Report.

Recommended Disclosures of TCFD

Metrics and Targets
a) Disclose the metrics used by the organization to assess climate related risks and opportunities in line with its strategy and risk management process.

Related pages in KAITEKI Report