Strategy for Addressing Climate Change

Hitachi High-Tech Group has analyzed climate-related impacts with 1.5°C and 4°C scenarios and identified issues on our business which may emerge during the transition to a decarbonized economy. Those scenarios were applied to our three businesses. We classified the consequence of issues in three categories based upon the impact on management: large, medium, and small. We also categorized the period which the issues affect our business into three terms: long term (targeting FY2050, which is the final fiscal year of Hitachi Environmental Innovation 2050), medium term (targeting FY2030), and short term (targeting FY2024, which comes under the Mid-Term Management Plan).

＊Please refer to the followings for details (business environment forecasts, initiatives) about the scenario analyses of the three businesses.

Nano-Technology Solutions Business

Analytical & Medical Solutions Business

Industrial Solutions Business

Short-Term, Medium-Term, and Long-Term Periods

When analyzing climate change risks and opportunities, there are three classifications of period: short term, medium term, and long term. These are defined as follows.

Classification	Period	Definition
Short term	3 years	Three years between FY2022 and FY2024 (management period according to the 2024 Environmental Action Plan, which defines the three-year period for environmental activities to match the 2024 Mid-Term Management Plan)
Medium term	To FY2030	Up to FY2030, to match the Hitachi long-term environmental targets for FY2030
Long term	To FY2050	Up to FY2050, to match the Hitachi long-term environmental targets for FY2050

Impact of Risks and Opportunities

When analyzing climate change risks and opportunities, there are three classifications of impacts: large, medium, and small. These are defined as follows.

Impact	Definition
Large	Impact leads to cessation of business or significant contraction or expansion of business
Medium	Business is impacted in some extent; however, impact does not lead to significant contraction or expansion of business
Small	Little or no impact

Selected Climate Scenarios (Transition Risks)

We referred various scenarios to study how societal demand and government regulations will progress toward climate change mitigation, and eventually selected three scenarios.

Category	Scenario name	Explanation
1.5°C scenario	IEA SDS	Sustainable Development Scenario (SDS) is one of the main IEA scenarios. It addresses climate change while taking stable energy supply into consideration.
4°C scenario	IEA STEPS	Stated Policies Scenario (STEPS) is another main IEA scenarios. It is based on national commitments for reduction targets and climate change measures from 2020 under the Paris Agreement.
4°C scenario	IEA CPS	This scenario considers only those policies that had implementation measures officially adopted as of mid-2015 and hypothesizes that these policies are maintained without being strengthened.

IEA: International Energy Agency

Selected Climate Scenarios (Physical Risks)

The scenario introduced for physical risks was the shared socioeconomic pathways (SSP) scenario by the Intergovernmental Panel on Climate Change (IPCC) on the matter of what changes would occur in the frequency and impact of meteorological disasters that come with climate change. Two scenarios were selected for 1.5°C and 4°C scenarios.

Category	Reference value	Envisioned future environment
1.5°C scenario	SSP1-1.9	Climate policy is adopted that holds warming down below 2°C (median value) with reference to pre-industrialization under sustainable development conditions. The prospect is for net zero CO₂ emissions in the last half of the 21st century.
4°C scenario	SSP5-8.5	A high-level reference scenario in which climate policy is not adopted under conditions of fossil fuel-dependent development.

global average temperature change relative to 1850-1900

Main Risks and Opportunities Related to Climate Change

Climate change risks were analyzed based on the scenario conditions defined above with a reference to the Practical Guide for Scenario Analysis in Line with the TCFD Recommendations from the Ministry of the Environment.

Risks related to the transition to a decarbonized economy, which occur in the 1.5°C scenario
Risks related to the physical impact accompanying climate change, which occur in the 4°C scenario

Transition risks toward a decarbonized economy (1.5°C)
Category	Main risks	Period when risk emerges	Main responses to the risk
Policy and regulation	Risk of increasing cost of dealing with more stringent GHG emissions controls and adoption of carbon taxes	Short term to long term	Renewable energy utilization at business sites and verification by third-party organization of disclosed CO₂ emissions figures Progress with energy conservation due to promotion of environmental capital investment at business sites and process improvements, and adoption of Hitachi internal carbon pricing (calculated at 14K¥/t-CO₂)
Technology	Risk of lost sales opportunities when products with high environmental performance cannot be developed Risk of increased product development costs due to investment in technology development for reduction of environmental impact	Short term to long term	Strengthen environmentally conscious design (eco-design), develop product which is energy saving and highly efficient by technology development for reduction of product's environmental impact Cost reduction by improved design and development efficiency by means of commonization of fundamental technology and expanded adoption of already-certified components
Market reputation	Risk of lost sales opportunities due to delayed response to transition of customer demand to products with high environmental performance Risk of lost sales opportunities due to delayed response to customer needs for CO₂ emissions reduction in manufacturing	Short term Medium term	Grasp market needs accurately and promote environmentally friendly products on that basis Achieve carbon neutrality at business sites Work with component suppliers to promote measures for disclosure of CO₂ emissions reductions and expansion of clean energy ratio

Physical risks triggered by climate change (4°C)
Category	Main risks	Period when risk emerges	Main responses to the risk
Acute Chronic	Risk that sales will decrease when product manufacturing is delayed due to the impact of damage in business sites and supply chain from meteorological disasters	Short term Medium term	Take damage from meteorological disasters into account for the evaluation of new factory sites Taking disaster risk to supply chain into account, create business continuity plans (BCP) together with partner corporations

Opportunities based on climate change scenarios
Category	Main opportunities	Responses to main opportunities
Products and services	Opportunity to increase sales by providing new products and services based on energy saving to reduce energy consumed by customers in using products, increased speed, increased compactness, etc. Opportunity to increase sales by working with partners to develop and provide solutions that enhance customer value Opportunity to increase sales by providing solutions that satisfy needs to address climate change, new pandemics, etc.	Promote environmentally conscious design (eco-design) based on medium- to long-term perspectives Continuously grasp market needs and develop products and services adapted to those needs
Resource efficiency	Opportunity to reduce business operating costs by streamlining production at business sites, conducting digital transformation, etc.	Promote environmental capital investment and circular economy at business sites
Energy	Opportunity to reduce business operating costs by investment in energy-saving facilities and renewable energy facilities at business sites and by process improvement	Promote environmental capital investment by adopting the Hitachi internal carbon pricing system Promote energy management