Climate-related disclosures in line with the Recommendations of the TCFD

In December 2020, Kobe Steel announced that it supports the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

TCFD

TCFD Consortium

Our climate-related disclosures in line with the Recommendations of the TCFD is as follows.

Climate-related Governance

In our company, as an organization specialized in issues related to climate-related risks and opportunities, the CO2 Reduction Promotion Subcommittee (Chairperson: Officer in charge of Corporate Planning Department) was established in the CSR Committee (Chairperson: Director, Senior Managing Executive Officer) to conduct strategic studies related to climate change, and the CO2 Reduction Technology Working Group was established in the Research and Development Committee to conduct technical studies related to climate change. This put into place a structure for facilitating Companywide activities to reduce CO2 emissions.

Assessment and management of climate-related risks and opportunities are regarded as important management issues, and important decisions of the CO2 Reduction Promotion Subcommittee are subject to the approval of the relevant Executive Steering Committee. The Steering Committee consists of directors and executive officers , as knowledge from a wide range of perspectives and viewpoints is required for climate-related issues, including business, management, legal, and technological development.

The results and activities of the CO2 Reduction Promotion Subcommittee and the CO2 Reduction Technology Study Working Group are reported to the Board of Directors once a quarter through the CSR Committee (Chairperson: Director, Senior Managing Executive Officer) and are supervised by the Board of Directors. In addition, important climate-related decisions are proposed to the Exectutive Council and the Board of Directors through the CSR Committee, deliberated by the Executive Council, and approved by the President and the Board of Directors.

Climate-Related governance structure

Climate-Related governance structure

Climate-Related Strategy

Kobe Steel analyzes the medium- to long-term risks and opportunities associated with climate change based on consideration for the socio-economic scenarios proposed by the International Energy Agency; the long-term visions formulated and announced by the Japan Iron and Steel Federation, the Japan Aluminium Association, and other industry organizations; and the energy policies of Japan.

Short-to-Medium- and Long-Term Climate-Related Risks and Opportunities

Short-to-Medium- and Long-Term Climate-Related Risks and Opportunities

Responses to Risks and Opportunities (R&D)

Reduction of CO<sub>2</sub> Emissions in Production Processes

Impacts on businesses, strategy and financial planning

According to the "Mandatory Greenhouse Gas Accounting and Reporting System of FY2016 (Ministry of the Environment)" Kobe Steel is the 3rd largest emitter of greenhouse gases in Japan.Our company also pays the Tax for Climate Change Mitigation (CO2 emissions from the use of coal, oil, LPG and LNG: \289 per 1 ton), and in the future, if the Tax for Climate Change Mitigation is increased or a new carbon pricing is imposed, it is expected to have a significant impact on our business, so we always keep a close eye on these trends. If regulations or taxes are imposed on CO2 and other emissions in the future, our group's business activities, particularly those related to steel, will be restricted, and there is a possibility that our group's business results will be affected by a decrease in sales or an increase in costs.

The KOBELCO group has been promoting energy conservation efforts as a measure to mitigate the impact of carbon pricing. Our group invested approximately 4.2 billion yen in energy conservation capital investments in fiscal 2019.

Examples of investments in fiscal 2019 included an increase in the output of a top pressure recovery turbine power plant (TRT) at the Kakogawa Works, the introduction of the latest high-efficiency compressors, and the strengthening of thermal insulation at the Moka Works. For other initiatives, please refer to the following link.

The KOBELCO group is also engaged in the development of various technologies related to "Reduction of CO2 Emissions in Production Processes" and "Contribution to Reduction of CO2 Emissions through Technologies, Products, and Services" in order to contribute to the reduction of CO2 emissions by society as a whole. In fiscal 2019, we spent approximately 5.8 billion yen on research and development related to climate change.

Scenario Analysis

In fiscal 2019, the Company began examining measures based on socio-economic scenarios. Examinations will be advanced in conjunction with medium- to long-term strategies, and the appropriate analysis results will be disclosed.

Climate-Related Risk Management

In accordance with Risk Management Regulations, risk management activities identify factors that obstruct the sustainable development and the improvement of the corporate value of the KOBELCO Group, and we take measures accordingly against them. In terms of the scope of Companywide risk management, Top Risks and Significant Risks are defined as risks that would require a Groupwide action and that have a major impact on the Group and its stakeholders. Under this framework, the President is the person ultimately responsible for the Group's overall risk management, and the Director in charge of the Corporate Planning Department is the person responsible for overseeing risk management across the Group. Meanwhile, individual risks are managed by the relevant Directors in charge (the Risk Owners) as the persons responsible for Groupwide management activities, and the countermeasures to these risks are executed by the heads of businesses and the Directors in charge of the head offices to establish a risk management system that encompasses the entire organization.

With regard to climate-related risks, we identify and identify "Migration risks: Policy and legal regulations" and "Physical Risks — Natural Disaster Preparedness and Recovery" as risks that have a significant impact on our group and its stakeholders and that need to be addressed across the Group "Top Risk". Each risk owner is assigned to strengthen risk management.

Types and Definitions of Risk

Types and Definitions of Risk

Framework of Risk Management Activities across the Group

Framework of Risk Management Activities across the Group

Climate-Related Metrics and Targets

Metrics

The KOBELCO Group sets specific metrics for CO2 reduction activities, such as Reduction of CO2 Emissions in Production Processes (Metric A) and Contribution to Reduction of CO2 Emissions through Technologies, Products, and Services (Metric B), and sets and manages targets for each.

Kobe Steel positions these 2 metrics as non-financial KPIs of and manages them. non-financial KPIs including CO2 reduction are discussed at the Executive Council as important items in the budget once a year, and then discussed and approved by the Board of Directors.

Greenhouse gas Emissions (Scope 1, 2, 3)

In response to global warming, the KOBELCO Group promotes rationalization and R&D to reduce energy consumption throughout its operations in an effort to decrease greenhouse gas emissions.

In fiscal 2019, the KOBELCO Group’s businesses generated 16.5 Mt of CO2 emissions from Energy Use in total.

KOBELCO Group worldwide CO2 emission data over the past three years

Unit FY 2017 FY 2018 FY 2019
CO2 emissions from Energy Use (Scope 1 + 2) Million t-CO2 18.7 17.4 16.5 (16.3*1 ✔)
CO2 emissions from Energy Use (Scope1) Million t-CO2 17.7 16.4 15.6 (15.5*1 ✔)
CO2 emissions from Energy Use (Scope2) Million t-CO2 1.0 1.0 0.9 (0.8*1 ✔)
Net sales Million yen 1,881,158 1,971,869 1,869,835
CO2 emission intensity from Energy Use per Net sales t-CO2/ Million yen 9.9 8.8 8.8
Compared to FY2017 - -11% -11%
Products (crude steel, aluminum rolled products, copper rolled products) Million t 8.1 7.5 7.0
CO2 emission intensity from Energy Use per t-Product t-CO2/ t-Product 2.3 2.3 2.3
  • *1 Kobe Steel, Ltd. and group companies in Japan

    *2 The data above covers 99% of the environmental impact of the KOBELCO Group. Emissions from offices are not included.

    *3 Emissions from the Iron & Steel Business include those from coke production.

    *4 As emission factors from purchased power in fiscal 2019 have yet to be announced, results for fiscal 2018 were used.

    *5 Emissions for past years have been recalculated due to revisions to electric power coefficients, etc.

    ✔: Items covered by third-party assurance. In order to improve the reliability and transparency of CO2 emissions data, Kobe Steel receives a third-party assurance.

Estimated GHG Emissions (Kobe Steel, Ltd.) (Scope1)

Item FY 2017 FY 2018 FY 2019
1. Energy-derived CO2 emissions*1 17,700,000 t-CO2 16,400,000 t-CO2 15,600,000 t-CO2
2. Non-energy derived CO2 emissions 624,000 t-CO2 565,000 t-CO2 574,000 t-CO2
3. Methane (CH4) 6,230 t-CO2 5,750 t-CO2 5,570 t-CO2
4. Nitrous oxide (N2O) 43,700 t-CO2 40,500 t-CO2 43,600 t-CO2
5. Hydrofluorocarbons (HFCs) 0 t-CO2 0 t-CO2 0 t-CO2
6. Perfluorocarbons (PFCs) 0 t-CO2 0 t-CO2 0 t-CO2
7. Sulfur hexafluoride (SF6) 12,900 t-CO2 15,600 t-CO2 16,900 t-CO2
8. Nitrogen trifluoride (NF3) 0 t-CO2 0 t-CO2 0 t-CO2
  • *1 Includes emissions of Group companies in and outside Japan

Kobe Steel, Ltd. Scope 3 emissions over the past three years (unit: thousand t-CO2) (Amended December, 2020)

Category FY 2017 FY 2018 FY 2019 Calculation method
1. Purchased goods and services 5,805 5,353 5,214 ✔ Annual amount of iron ore, coking coal, aluminum and copper multiplied by CO2 emissions unit values*1
2. Capital goods 289 273 263 ✔ Capital investment cost multiplied by CO2 emissions unit values*1
3. Fuel- and energy-related activities 295 278 302 ✔ Annual consumption of electricity, steam and fuel etc. multiplied by CO2 emissions unit values*1
4. Upstream transportation and distribution 211 201 192 ✔ Using the calculation method for energy-derived CO2 emissions related to freight transportation by shippers as stipulated in the Act*2.
5. Waste generated in operations 41 34 39 ✔ The amount of industrial waste for each type multiplied by CO2 emissions unit values*1
* Figures for FY 2017 are estimated based on data from 2018.
6. Business travel 1 1 2 ✔ Number of employees multiplied by CO2 emissions unit values*1
7. Employee commuting 5 5 5 ✔ Number of employees multiplied by CO2 emissions unit values*1
8. Upstream leased assets N/A N/A N/A CO2 emissions associated with the operation of assets leased to Kobe Steel are included in Scope 1 and Scope 2 emissions.
9. Downstream transportation and distribution N/A N/A N/A We have no applicable business activities.
10. Processing of sold products 3,131 2,946 2,713 ✔ Calculated by multiplying the volume of major steel products by the CO2 emissions per unit of production for each type of steel product.
11. Use of sold products - - 24,702 ✔ Covers major products sold by Machinery business of Kobe Steel.
Calculated based on the emissions associated with use for the duration of the service life.
12. End-of-life treatment of sold products 71 66 62 ✔ Calculated by multiplying CO2 emissions unit values*1 by the production volume of crude steel, aluminum and copper products
13. Downstream leased assets N/A N/A N/A We have no applicable business activities.
14. Franchises N/A N/A N/A We do not have franchises.
15. Investments N/A N/A N/A We have no applicable business activities.
Total*3 9,850 9,157 33,494 ✔
  • *1 Green Value Chain Platform of Ministry of the Environment (Used Ver 2.6 for FY 2017 and FY 2018, and Ver 3.0 for FY 2019), etc.

    *2 Act on the Rational Use of Energy

    *3 As each category is rounded off to a whole number, the total of each category and the sum of categories 1 to 15 may not match.

    ✔: Items covered by third-party assurance. In order to improve the reliability and transparency of CO2 emissions data, Kobe Steel receives a third-party assurance.

Energy Usage during Manufacturing Processes

In fiscal 2019, the KOBELCO Group worldwide used a total of 196 PJ of energy (equivalent to 5.06 million kl of crude oil) in all of its business divisions.

KOBELCO Group worldwide energy data over the past three years

Unit FY 2017 FY 2018 FY 2019
Energy usage PJ 218 206 196
Net sales Million yen 1,881,158 1,971,869 1,869,835
Energy intensity per Net sales GJ/ Million yen 116 104 105
Compared to FY2017 - -10% -10%
Products (crude steel, aluminum rolled
products, copper rolled products)
Million t 8.1 7.5 7.0
Energy intensity per t-product GJ/ t-Product 27.1 27.5 27.8
  • Note:

    1. Emissions for past years have been recalculated due to revisions to electric power coefficients, etc.

    2. The data above covers 99% of the environmental impact of the KOBELCO Group.

Targets and Results on Risk and Opportunity

Metric A: Reduction of CO2 Emissions in Production Processes

Targets:
In terms of CO2 reduction in production processes, We aim to reduce 1.1 million tons of CO2 by FY2030 (vs.BAU in FY2013).
Performances:
  • In fiscal 2019, CO2 emissions from production processes decreased by 1.17 million tons (vs. BAU in fiscal 2013)*1*2*3*4 due to reductions associated with temporary factors, such as the COVID-19 pandemic. Excluding these temporary factors, we achieved a reduction of 0.68 million tons of CO2 (vs. BAU in fiscal 2013)*1*2*3*4.
  • *1 Total of Scope 1 and Scope 2
  • *2 Scope: Business locations of Kobe Steel, Ltd., and Kobelco Construction Machinery Co., Ltd. (covers approximately 95% of CO2 emissions of the entire Group)
  • *3 BAU (Business as usual): Emissions of greenhouse gases assuming no additional measures are taken
  • *4 Emission coefficients for fiscal 2018 used, as the emission coefficients for fiscal 2019 have yet to be published
Initiatives:
  • Following the oil crisis, which spanned from the 1970s to the 1990s, Japan’s steel industry moved to utilize energy more effectively by installing waste heat collection systems and conserving energy by switching to continuous processes and shorter processes. From the 1990s, the steel industry focused on upgrading waste heat collection systems and increasing the efficiency of equipment while taking steps to effectively use waste materials. In recent years, industry players have installed highly efficient gas turbine power plants.
  • Kobe Steel has maintained a consistent approach in advancing various energy conservation and CO2 reduction measures through proactive capital investments. For example, highly efficient gas turbine power generation facilities that use gas from blast furnaces were installed at Kakogawa Works over the period from fiscal 2009 to fiscal 2014, resulting in a substantial reduction of CO2 emissions.
  • With the goal of accomplishing its targets for fiscal 2030, the KOBELCO Group is engaging in thorough energy conservation efforts and capital investments. To this end, the Group is working to build and achieve a steelmaking industry with low CO2 emissions through collaboration between the Steel & Aluminum Business, which belongs to the materials businesses, and the Engineering Business, which is part of the machinery businesses.

Metric B: Contribution to Reduction of CO2 Emissions through Technologies, Products, and Services

The KOBELCO Group contributes to reduction of CO2 emissions in various areas of society through its distinctive technologies, products, and services.

Targets:
In terms of our contribution to reduction of CO2 emissions through technologies, products, and servicescontribution to reducing CO2 emissions through technology, products and services, we aim to reduce 49 million tons of CO2 emissions by 2030.
Performances:
The CO2 Reduction Promotion Subcommittee estimates that the KOBELCO Group’s technologies, products, and services contributed to a reduction of CO2 emissions totaling 32.62 million tons.

Past Contribution to Reduction of CO<sub>2</sub> Emissions

Initiatives:
Regarding the contributions to reduction of CO2 emissions through technologies, products, and services, the Group has instituted an internal accreditation system. For the formulas used in accreditations, we receive advice from Kiyotaka Tahara, the laboratory leader of the Research Laboratory for IDEA at the Research Institute of Science for Safety and Sustainability at the National Institute of Advanced Industrial Science and Technology.

Accreditation Flow

Progress in qualitative and quantifiedquantitative targets, including the 2030 targets for indicatorsMetric A and B

Initiatives for Implementation Long-Term Policies Medium-Term Targets Fiscal 2019 Results
Self-assessment
○: Progressing as planned / △: Some issues remaining / ×: Plan not achieved
Initiatives for Fiscal 2020
Measures against global warming Save energy, reduce CO2 emissions, and combat global warming in every aspect of the Group’s operations Continue implementing energy-saving initiatives, working toward achievement of each industry’s Commitment to a Low Carbon Society

Established CO2 Reduction Promotion Subcommittee and CO2 Reduction Technology Study Working Group; set fiscal 2030 target for reducing CO2 emissions from production processes

Steadily implemented energy conservation initiatives while conducting energy-saving investments to achieve targets

  • Target for reducing CO2 emissions from production processes:
    Fiscal 2030 target: Reduction of 1.1 million tons of CO2 (vs. BAU in fiscal 2013)
    Fiscal 2019 performance: Reduction of 0.68 million tons of CO2 (actual value, vs. BAU in fiscal 2013)
Begin formulating a long-term vision centered on the CO2 Reduction Promotion Subcommittee and CO2 Reduction Technology Study Working Group
Steadily continue energy conservation initiatives while conducting energy-saving investments to achieve targets
Contributing to the environment through technologies, products, and services Keep all product and technical development environmentally friendly, and create environmentally sustainable products and new businesses Contribute to the creation of a low-carbon society through the efforts of the entire KOBELCO Group by working on issues in the environment and energy fields, such as weight reduction of transportation vehicles, the creation of a hydrogen-based society, and the diversification of power sources

Established CO2 Reduction Promotion Subcommittee and CO2 Reduction Technology Study Working Group; set fiscal 2030 target for contribution to reduction of CO2 emissions through technologies, products, and services

Helped reduce CO2 emissions by providing MIDREX® Process, which uses raw materials with low CO2 emissions, and by improving fuel economy with ultra-high-strength steel

  • Targets for contribution to reduction of CO2 emissions through technologies, products, and services:
    Fiscal 2030 target: Contribution to reduction of 49 million tons of CO2 emissions
    Fiscal 2019 performance: Contribution to reduction of 32.62 million tons of CO2 emissions
By expanding sales of technologies, products, and services and conducting technical development of multi-materials, undertake measures to reach targets for reduction of CO2 emissions and help reduce CO2 emissions in society
Links:

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