Strategy for Addressing Climate Change

Strategy for Addressing Climate Change

The Hitachi High-Tech Group has analyzed climate-related impacts with 1.5°C and 4°C scenarios and identified issues on its business which may emerge during the transition to a decarbonized economy. We classify the impact on management as large, medium, and small. We also categorize the period which the issues affect our business into long term (targeting FY2050, which is the final fiscal year of Hitachi Environmental Innovation 2050), medium term (targeting FY2030), and short term (targeting FY2027, which comes under the Mid-Term Management Plan).

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.

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

Scenarios used and analysis targets, time frame
In order to realize a decarbonized society, which is one of the components of the society that the Hitachi Group aspires to, Hitachi High-Tech and its subsidiaries have set a long-term environmental goal called “Hitachi Environmental Innovation 2050,” which is shared with our parent company, Hitachi, Ltd. in FY2021. In Hitachi Environmental Innovation 2050, we have adopted the IEA's NZE 2050 scenario, which limits temperature rise to 1.5°C, and other scenarios as transition scenarios to meet the goal of carbon neutrality in FY2050. On the other hand, since it is undeniable that global climate change mitigation efforts may not proceed smoothly, we have adopted a combination of RCP8.5 and SSP5 scenarios, which assume a fossil fuel-dependent economy and society, as our 4°C scenario with the largest temperature increase assumed by the IPCC in order to examine our resilience in a world where natural disasters are expected to be more severe.

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.

The results of the transition scenario analysis confirm that, with the transition to a 1.5℃ world, customer requirements for decarbonizing and regulations in different countries will increase, and any delay in response will lead to lost sales opportunities for future market growth, with potentially significant financial impacts, including the following:

• Semiconductor manufacturing equipment and inspection/analysis equipment markets
  It is assumed that the demand to reduce environmental impact that already exists today will further increase in the future, and R&D expenditures to respond to environmental technologies will increase, but the opportunity impact amount due to increased demand for environmentally friendly products will significantly exceed the risk impact amount.
• EV-related and LiB businesses
  We expect the EV-related and lithium-ion battery (LiB) business areas to grow significantly, driven by the introduction of the carbon tax and stricter environmental regulations. The risk of increased costs associated with the introduction of a carbon tax on direct business is expected to avoid a major impact, as the shift to renewable energy is already underway.
  Response measures to the analysis results
  We will promote the reduction of CO₂ emissions from our own business sites (Scope 1 and 2) and from the use of our customers' products (Scope 3).
  Specifically, we will monitor the progress of the following measures and consider how to achieve carbon neutrality.
  • Scope 1 and 2
    We have set a goal of zero CO₂ emissions at all of our business sites by FY2027. We have already achieved carbon neutrality at seven sites, including the Naka-Marine Site and Hitachi High-Tech Kyushu, which was established as a BCP site.
  • Scope 3
    Since FY2016, we have introduced a product development process for semiconductor manufacturing equipment and inspection/analysis equipment that takes into account design for environment (eco-design) and life cycle assessment. To reduce CO₂ emissions in the value chain (raw material procurement, product applications, etc.), we are planning and promoting the expansion of eco-design products. In addition, since it is important to speed up and improve the accuracy of battery residual performance assessment for the reuse and remanufacturing of LiBs, for which demand is expected to increase in the future, we will work to increase the amount of contribution to reduction by continuously providing solutions using the service of remote degradation diagnostic systems for on-board automotive lithium-ion batteries developed in cooperation with Hitachi, Ltd.

The results of the physical scenario analysis identified the following potential increased risks under the 4°C scenario.

• There is an increased risk of sales declines due to disruptions in product manufacturing as a result of damage to our own or our suppliers' manufacturing or logistics bases caused by severe wind or flood damage.
  
  Response measures to the analysis results
  We conduct risk assessments on an ongoing basis, and in FY2023 there were no significant losses at any of our major locations. However, in the future, climate change may cause greater-than-expected risks to materialize. Therefore, based on our BCP measures, we will strengthen and duplicate our own and our suppliers' manufacturing and logistics bases to enhance their resilience to business interruption risks.
• There is a possibility of an increase in the prevalence of infectious diseases and epidemics as temperatures rise and precipitation increases.
  
  Response measures to the analysis results
  As with natural disasters, there is a possibility of business interruption, but on the other hand, we will take this as an opportunity for our inspection solutions and other products to contribute to countermeasures against epidemics and diseases.

Major Risks and Opportunities Related to Our Business (All are high impact)