Climate Change

The Board of Directors receives regular reports from management on material sustainability issues, including climate-related risks and opportunities, and oversees our response policies as well as the progress and effectiveness of related initiatives. At Zeon Corporation, important sustainability-related matters, including the status of climate change initiatives, are deliberated and decided by the Sustainability Committee and the Management Committee, and are then reported to the Board twice a year as part of our sustainability reporting. The Board provides comments and advice on these reports, which we reflect in our various initiatives, including our response to TCFD. Through this process, the Board continuously monitors our responses to climate-related risks and opportunities.

Management positions responses to climate-related risks and opportunities as one of its material sustainability issues. Response policies and key initiatives are deliberated and decided at the Management Committee chaired by the Representative Director. The Sustainability Committee identifies and assesses climate-related risks and opportunities and examines and promotes response measures based on frameworks such as the TCFD. Based on these deliberations, the Management Committee makes decisions on the Company's responses. Through this governance structure, management is involved throughout the entire process of assessing and managing climate-related risks and opportunities.

The Sustainability Committee and its subordinate TCFD Subcommittee play a central role in identifying and assessing climate-related risks and opportunities from short-, medium-, and long-term perspectives, taking into account the impacts of climate change on our business. As part of this process, during FY2020, our Rubber Business Division conducted a 2°C/4°C scenario analysis (RCP2.6/RCP8.5) and identified climate-related risks and opportunities. In FY2021, we expanded these efforts company-wide and analyzed the impacts across all of our businesses through the same scenario analysis. In FY2023, we conducted a 1.5°C scenario analysis to examine medium- to long-term transition risks and opportunities. In addition, in FY2024, we expanded the scope of the 4°C scenario (RCP8.5) analysis, which had previously covered the Takaoka Plant, Kawasaki Plant, Tokuyama Plant, and Mizushima Plant, to include the Himi Futagami Plant and Tsuruga Plant, for a total of six plants. Based on this scenario, we identified and assessed risks with a primary focus on long-term physical risks. Based on the results of these analyses, we organize climate-related risks and opportunities from the perspectives of their short-term impacts on business activities, medium-term impacts on business structure and investment decisions, and long-term impacts on business continuity and changes in the competitive environment, and utilize these findings in formulating our business strategy.

We assess the impacts of climate change on our business and strategy through multiple climate change scenarios, including scenarios of 2°C or lower, while evaluating the resilience of our strategy. In March 2024, Zeon received SBT certification for its science-based greenhouse gas emissions reduction target aligned with the 1.5°C pathway. As a basis for setting this target, in FY2023, we implemented a 1.5°C scenario analysis under a company-wide system, and identified climate-related risks and opportunities under this scenario and established the direction of our response measures. Through these initiatives, we aim to enhance the sustainability and resilience of our business and strategy by taking into account future changes under climate change scenarios, including scenarios of 2°C or lower. In addition, in our assessment based on climate change scenarios, including the 1.5°C scenario, we consider not only our business strategy but also the physical impacts on our plants, supply chain, and overseas Group companies. In recent years, we have assessed these physical impacts across our sites and supply chain and evaluated the sustainability and resilience of our business and strategy in light of future climate change impacts.

Based on the TCFD framework, we use 4°C and 1.5°C climate change scenarios to identify transition and physical risks associated with climate change out to 2030 and beyond. Identified risks are evaluated and classified according to their potential impacts and significance, and we conduct regular reviews of these assessments to continuously monitor climate-related risks and reassess their priorities. In FY2024, we added two more plants to the four previously analyzed, where we identified and distinguished transition and physical risks and conducted impact assessments.

Climate-related risks are identified and evaluated based on the TCFD framework. Based on the results of these assessments, significant risks are discussed by the Sustainability Committee and deliberated and decided by the Management Committee, which is chaired by the Representative Director. The departments responsible for the relevant risks then proceed with measures to reduce and manage those risks, taking into account the likelihood of occurrence and the extent of their potential impact on the business. Through these processes, we continuously monitor climate-related risks and maintain a system for appropriately managing their impact on our business operations.

We have established a system whereby the Risk Management Committee identifies and assesses company-wide risks, including climate-related risks, and reports the results to the Management Committee, which is chaired by the representative director. These risks are reported to the Board of Directors and are managed under the oversight of management. In FY2024, the TCFD Subcommittee incorporated climate-related risks identified through its assessments, such as heatstroke due to extreme heat and water shortages, into the company-wide risk management framework and evaluated them in an integrated manner together with other enterprise risks. In FY2025, we also conducted assessments of physical climate-related risks covering our business sites, Zeon Group companies outside Japan, and our supply chain. As described below, these assessments were carried out through a phased process combining screening and detailed assessments for each scope.

The results of these assessments are reviewed and evaluated within our company-wide risk management framework and are managed in an integrated manner together with other management risks. We treat climate-related risks as part of our business operations and monitor and review them on a continuous basis.

Zeon formulated its first Carbon Neutrality Master Plan in April 2022. In this plan, we have set the target to reduce Zeon Corporation’s Scope 1 and 2 CO₂ emissions 50% from FY2019 levels by FY2030. We have adopted three approaches to reduce Scope 1 and 2 emissions: 1) Energy conservation; 2) Process innovation; and 3) Energy conversion.

In addition, in FY2023 we established the following Scope 1 + 2 and Scope 3 reduction targets for Zeon Group as a whole.

In March 2024, we obtained SBT certification and consolidated the Group-wide targets into the reduction targets shown in the table above, which were set in FY2023. The method used to calculate GHG emissions complies with the GHG Protocol.

Trends in Zeon Group Scope 1, 2, and 3 emissions

In FY2023, Zeon introduced a performance-linked stock compensation system for directors and corporate officers. The indicators used to calculate this compensation include both financial and non-financial indicators (including ESG-related indicators) that are linked to the target values for the final year of each phase of the Medium-Term Business Plan.

At four of our production sites in Japan (Takaoka Plant, Himi Futagami Plant, Tsuruga Plant, and Tokuyama Plant), we have converted purchased electricity to electricity effectively derived from renewable energy^*.

Furthermore, at the Takaoka Plant, we have concluded a purchase agreement for carbon-neutral LNG with effectively zero CO₂ emissions.
At the Tokuyama and Kawasaki Plants, we have entered into purchase agreements for green heat certificates to reduce CO₂ emissions from steam.
In addition, at the Kawasaki Plant, we have adopted Tokyo Gas Co., Ltd.’s carbon-offset city gas and have also joined the Carbon Offset City Gas Buyers Alliance.

We are developing technologies to efficiently produce butadiene and isoprene, which are key chemical materials for synthetic rubber, from renewable carbon resources such as used tires and biomass as feedstocks. This initiative contributes to carbon neutrality by reducing our dependence on fossil resources and advancing resource circulation, with social implementation targeted for the 2030s. In February 2025, we decided to introduce bench-scale equipment for a technology that efficiently produces butadiene from ethanol, including plant-derived ethanol. We are currently advancing technological verification and scale-up toward social implementation. This initiative has been selected for the Green Innovation Fund Project of the New Energy and Industrial Technology Development Organization (NEDO).

We, as a designated shipper under the revised Energy Conservation Act, position the reduction of CO₂ emissions in the logistics sector as an important environmental issue. In cooperation with logistics partners involved in the transportation of products and raw materials, we are working to optimize energy use. Specifically, we are promoting the optimization of the entire transportation process, including improving load efficiency, reviewing transportation routes and frequencies, and shifting to rail and maritime transport. We began these initiatives in earnest in FY2022 and have reduced CO₂ emissions across our domestic transportation by 13% (Zeon estimate). Going forward, we will continue our efforts to achieve both environmental impact reduction and improved logistics efficiency and stability, with the aim of building a more sustainable logistics system.

As a first step, Zeon has calculated the GHG emissions reduction contributions of the following two products, certified under the Zeon SDGs Contribution Products Certification Program. These products have the potential to reduce GHG emissions more than conventional technologies by improving customers' manufacturing processes and product performance.

To give a clear picture of our efforts toward a decarbonized society, we manage and disclose the following two indicators separately, with the aim of clearly demonstrating both our contribution to society through our products and services and our own decarbonization efforts.

GHG Emissions Reduction Contributions

This indicator represents the amount of GHG emissions avoided or reduced across society through the adoption of our products and services, measured against conditions prior to their adoption or against conventional products. It is distinct from the GHG emissions generated through our own business activities (GHG inventory) and reflects the contribution our products and services make to reducing GHG emissions across society.

We set certain assumptions, such as the following, for each product and application. In calculating GHG emissions reduction contributions, we use external databases, including the Inventory Database for Environmental Analysis (IDEA), a life cycle assessment (LCA) database developed by the National Institute of Advanced Industrial Science and Technology (AIST).

The calculation results for the selected products are shown below.

Zeon’s GHG Emissions Reduction Contributions and Actual GHG Emissions Reductions

To enhance the validity and transparency of its GHG emissions reduction contribution calculations, Zeon Corporation convened a GHG Emissions Reduction Contribution Review Panel comprising external experts. The panel reviewed the carbon footprint (CFP) calculations conducted in accordance with ISO 14067:2018, as well as the methodology used to calculate GHG emissions reduction contributions based on the Guidelines for Assessing Contribution to GHG Emission Reduction published by the Institute of Life Cycle Assessment, Japan. The panel confirmed the appropriateness of the underlying concepts and assumptions used in the calculations. The personnel responsible for each product presented the calculation methodologies and received expert advice on matters including baseline setting, calculation logic, and data handling. Zeon has incorporated these comments into its GHG emissions reduction contribution calculations.
Going forward, we will continue to leverage these expert insights to further improve our calculation methodologies and internal processes.

Zeon regards not only the steady reduction of GHG emissions from its own operations, but also contributing to GHG emissions reductions by customers and society through its products and services, as one of its key sustainability strategies.
Going forward, we will continue to refine our methodologies for calculating GHG emissions reduction contributions and improve the quality of the underlying data. At the same time, we will work to enhance the validity and transparency of our calculation processes by incorporating the expertise of external specialists.
We will also continue to provide stakeholders with clear, reliable information on our approach to GHG emissions reduction contributions and the results of our calculations, thereby further strengthening our contribution to the decarbonization of society.