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View Sumitomo Corporation's Sustainability : Climate Change
Climate change is a critical issue that the world must work as one to overcome in order to realize a sustainable society. Companies are being called on to play a major part in tackling this issue.
In 2019, the Board of Directors adopted a resolution concerning the Group's policies on climate change issues and clarified the Group's roles we play in solving the issues.
Given the growing importance of global initiatives for overcoming climate change problems, the Company has revised its policies in 2021 after the revision in 2020.
Mitigating climate change is a serious challenge that must be overcome to realize a sustainable society. As such, we must make the transition to a society that emits as little CO2, methane, and other greenhouse gases as possible by converting to renewable energy and other forms of clean energy and conserving energy in industries and households. It will also be necessary to balance residual emissions and absorption of CO2 to create a sustainable energy cycle by maintaining and recovering CO2 absorbed by forests, marine plants, and other natural capital and capturing, storing, and utilizing CO2 through new technologies and business models that consider it a resource.
The Sumitomo Corporation Group has set forth a long-term goal of realizing carbon neutrality within the Group by 2050. In addition to setting milestones to achieve this goal, we are steadily promoting the use of internal carbon pricing and the creation of next-generation businesses centered on the Energy Innovation Initiative (EII).
The decarbonization movement is spreading to diverse industries with a global presence. We will steadily shift our business portfolio by addressing the risks brought about by the accompanying changes in technology and business models while at the same time cultivating the business opportunities presented by the social needs created by those same changes.
ICP is a measure to support our climate change initiatives. We regularly monitor the companywide impact of potential climate change-related risks and opportunities, as well as the status of responses to them. The results of such monitoring are reported and discussed at the Corporate Sustainability Committee and other groups, reported to the Management Council and the Board of Directors, and additional measures are considered and introduced as necessary. In individual businesses, we identify medium- and long-term risks and opportunities related to climate change to ensure that countermeasures can be promptly considered.
Toward the Group‘s goal of becoming carbon neutral by 2050, we have established specific milestones for CO2 emission reduction as shown in the chart below and are steadily promoting them. In FY2022, we sold a part of the fossil fuel upstream business and pursued a shift in our business portfolio through measures such as the promotion of the renewable energy business, while also studying ways to decarbonize the existing coal-fired power generation business and shift it to a low-carbon business.
Demand for electricity is expected to increase fivefold to sevenfold by 2060 in Indonesia as the country’s economy and population continue to grow. At the same time, however, it aims to achieve net-zero greenhouse gas emissions, which currently stand at approximately 1.8 billion tons. The Group is accelerating the new development of renewable energy power generation projects and promoting studies on the early transfer or shutdown of existing coal-fired power plants in order to support stable energy supply and carbon neutrality in Indonesia. We will co-create a comprehensive ecosystem, including attracting investment from green industries that require renewable energy.
Based on the fact that the number of highly feasible pipeline projects is on the rise, we updated our target for net ownership generation capacity from 3 GW or more to 5 GW or more. We will establish businesses that will form the foundation for a sustainable energy cycle through the expansion of the renewable energy power generation business of the Infrastructure Business Unit and the creation of next-generation businesses in a decarbonization and recycling energy system sought by the EII.
We are promoting business development in the EII’s three focused areas and cross-organizational efforts with existing business units to build decarbonized, recycling energy businesses. We are globally advancing various stages of business development to create next generation businesses that contribute to the realization of a carbon neutral society.
In FY2022, we launched an overseas organization to establish a global system and established three new business lines, including the Indonesia Energy Transition Dept. We aim to build a future revenue base for the group with diverse insights from both internal and external sources and promoting business development through cross-organizational collaboration that goes beyond conventional regional and divisional boundaries.
| Target sector |
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| Scenarios for consideration and temperature range |
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：Significant increase to increase
：Increase to Slightly increase
：Neutral
：Slightly decrease to decrease
：Decrease to Significant decrease
| Referenced scenarios (Macro Environment) |
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|---|---|---|---|---|
| Sector | Business | 2030 | 2050 | |
| Energy | Thermal power generation (coal) | |
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| Thermal power generation (gas) | |
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| Renewable energy power generation | |
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| Next generation energy | Hydrogen, ammonia, synthetic fuels | |
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| Storage battery, energy management | |
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| CCUS | |
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| Resources | Thermal coal | |
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| Coking coal | |
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| Iron ore | |
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| Natural gas and LNG | |
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| Nickel | |
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| Copper | |
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| Transportation | Vehicles | |
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| Shipping | |
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| Aviation | |
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| Material industry sector | Steel | Steel sheets | |
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| Tubular products | |
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| Cement | |
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| Chemicals | |
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| Aluminum | |
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| Real estate sector | Office buildings / residential building sales business | |
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| Other | Forestry | |
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The business environment for our business is positioned as neutral or increase for about 90% of the entire business in the year 2050 under NZE/APS/STEPS. In addition, we recognize that future supply and demand forecasts for the markets related to our businesses are generally stable or growing. Based on this, we have confirmed that we are steadily advancing our Portfolio SHIFT by identifying and responding to our business risks and opportunities. Below are the main policies and initiatives of our business with “sharp increase to increase” and “decrease to sharp decrease” in supply and demand change trends for the referenced scenarios (see the Strategy: Transition Risks and Opportunities Related to Climate Change〈Scenario Analysis〉for details).
In addition, we are not only promoting existing businesses but also working to create new businesses in the businesses indicated as “neutral”, “increase to moderate increase”, or “moderate decrease to decrease". We see increasing value in sustainable forest management and timber supply, so we are working to expand our forestry business. Regarding the thermal coal and coking coal business, tubular products business, and real estate business, all of which have differing trends in supply and demand changes around 2030 in the transition toward 2050, we will continue to closely monitor market trends and other factors while steadily advancing our portfolio shift.
Energy sector: Thermal power generation(coal・gas)
Thermal power generation (coal and gas) businesses
Regarding coal-fired power generation, there is a gradual decline starting in developed countries and in all scenarios, there is a significant decline by 2040 or 2050. While gas-fired power generation as a percentage of total power generation will decline over the medium to long term, we expect that investigations will continue into reducing CO2 emissions through the use of hydrogen, CCUS, and other new technologies. However, to advance the energy transition, we expect gas to remain an important power generation source because, from the perspective of stability of power supply, a certain level of gas-fired power generation will be required. Under the STEPS scenario to the left, gas-fired power generation output is forecast to increase, albeit slightly, even in 2050.
We will shift our allocation of management resources from thermal power to power generation businesses with low environmental impact, such as renewable energy. In terms of coal-fired power, we will not be involved in any new power generation businesses, neither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction). Furthermore, we plan to finalize all of our businesses and withdraw from the coal-fired power generation business in the late 2040s*1. We believe that gas-fired power generation is an important power generation method that will play a bridging role in the energy transition, and a dispatchable power supply role to support power supplies as renewable energy power generation spreads. We also have high expectations, and are implementing initiatives, for innovative low-carbon technologies, including the use of green hydrogen, to help to achieve carbon neutrality. While contemplating the development of local communities and economies and our obligation to supply electric power as stabilized power supply, we will pursue various options, without eliminating the possibility of accelerated withdrawal from the business to realize decarbonization of our company and society as a whole. And we will pursue the decarbonization and low-carbonization of existing facilities and providing maximum support for host countries to shift power sources to renewable energy and other sources. We are utilizing our extensive know-how in power generation businesses to deliver high-efficiency, high-quality power supplies with outstanding environmental performance in countries around the world.
| Coal-fired power generation business | As of Mar. 31, 2023 | Estimate for 2035 | Latter half of the 2040s |
|---|---|---|---|
| Outstanding investments, loans and guarantees*2 | 310 billion yen | 150 billion yen | Zero |
| Net ownership generation capacity | 5.2GW | About 2GW | Zero |
Energy sector: Renewable energy power generation
Renewable energy power generation
With an increasing trend toward carbon neutrality, the use of renewable energy as a main source of power is accelerating around the world. In addition to renewable energy such as solar, wind, and geothermal power generation, the demand for renewable energy to produce green hydrogen is also increasing. In each of the scenarios to the left, renewable energy power generation output increases dramatically by 2050, while it is forecast to increase roughly eightfold from the current output in the NZE scenario.
To overcome the issue of climate change and bring about a carbon neutral society, the Sumitomo Corporation Group is engaged in various renewable energy businesses such as wind, solar, geothermal, hydroelectric, and biomass. While providing the stable supply of energy essential for the development of economies and industries in local societies, we are putting forward a policy of continuing to shift management resources to a power generation portfolio with low environmental impact, such as renewable energy. We also aim to achieve net generation capacity of 5 GW or more for renewable energy by 2030. In addition to growing our solar and wind power generation businesses, we are also promoting hydroelectric power generation businesses in Southeast Asia, where there is an abundance of water resources, and we are promoting operation and development of geothermal power generation businesses in Indonesia, a country with the world’s second-largest reserves of geothermal resources.
Please see here for more details on Biomass energy development business.
Energy sector: Next generation energy （Hydrogen・ammonia・synthetic fuels）
Carbon-free energy (hydrogen, ammonia, synthetic fuels, etc.) development businesses
Demand for next-generation energies as fossil fuel alternatives that contribute to reduced lifecycle CO2 is increasing. In IEA’s NZE scenario, investment in hydrogen, ammonia, synthetic fuels and other alternatives increases tenfold or more from the current value by 2030. On the supply side, in areas where natural gas and renewable energy are rich and available, global investment plans are already in place for development of hydrogen and ammonia plants. On the demand side, governments in Europe, Japan and Asia are formulating plans to use hydrogen and ammonia to realize decarbonization in industry. Government support frameworks, technology development, and social acceptance are essential to establish successful business.
In FY2021, we launched the Energy Innovation Initiative to promote the development of businesses related to hydrogen, ammonia, synthetic fuels, and other next-generation energies as an important focus area. We aim to expand our earnings while realizing a decarbonized society through the stable supply of next-generation energies. We will build supply chains based on optimal technologies, cost, and timeframes while supplementing functions and sharing risks with partner alliances and consortia, including investing in related infrastructure and technologies, to ensure our businesses have a competitive edge.
Energy sector: Next generation energy (Energy management businesses and storage battery)
Storage battery and energy management businesses, etc.
If current government targets and policies around the world are promoted, electric vehicles will apparently reach market share of 35% globally, and 50% or higher in the major markets of the United States, China, and Europe, in 2030. With an increase in renewable energy, there will be a much greater need for storage batteries that have high energy and storage efficiency, so from the perspective of energy management as well, the market is forecast to expand. In line with this, European battery regulations are moving to require storage battery recycling, carbon footprint disclosure, and traceability. In addition, with an uneven geographical distribution of mining for the critical mineral resources used in batteries, there is a risk that increased prices for cobalt, lithium, and nickel will cause the price of storage batteries to increase.
To secure stability of power networks, which is a major challenge for greater spread of renewable energy, we are commercializing new energy management technologies that use storage batteries. As another key to mitigating climate change, we are also promoting businesses that reduce energy consumption and utilize renewable energy on the energy demand side, such as the car sharing business. Specifically, we collaborated with an automaker to establish 4R Energy Corporation in 2010 to focus on reuse of EV batteries. As a result, we have realized systems for reusing batteries, which is much more effective at reducing CO2 emissions than using new batteries. By developing businesses ourselves, we can conduct strict cost management and improve revenues from our electricity service businesses. In this way, we are strategically ensuring commercial viability of those businesses and promoting trials of new ideas in society. Going forward, we will also consider contributing to the creation of recycling models for storage battery dismantling and resource reuse with a view to further utilization of vehicle storage batteries around the world.
Please see here for more details on Large-scale energy storage business.
Energy sector: Next generation energy (CCUS)
CCUS* adoption business
CCUS is a new technology, so the spread of the technology is limited at present. However, treaties for the import/export of CO2 are being reviewed around the world, with a range of support in Europe, the United States, and other developed countries including subsidies and tax deductions, resulting in increased investment. In the NZE scenario, a high need for CO2 capture is forecast for 2030 due to new construction and refurbishment of hydrogen manufacturing equipment, coal-, gas-, and biomass-fired power plants, and cement, steel, chemicals and other industrial facilities. Thus, CCUS adoption globally is forecast to increase. On the other hand, unlike the referenced scenarios, if there is a global softening of CO2 reduction initiatives, potential risks include shrinking markets, cessation of subsidy schemes, and increasing costs associated with capital investment.
The existence or otherwise of subsidy schemes in the future will greatly impact the economic efficiency of the business and the feasibility of establishing it. Therefore, in countries and regions that are already starting to develop frameworks for subsidies, we aim to actively utilize those frameworks, participate in projects at an early stage, and build up a track record. On the other hand, in countries and regions that are establishing carbon emission targets and considering related policies, we aim to develop market environments, and create projects from a superior position, by collaborating with governments and being involved in the establishment of legislative systems as much as possible. In the area of CO2 capture, which is forecast to see more technical innovation going forward, we will identify competitive technologies and use them optimally to create new businesses. Recently, we invested in the direct air capture (DAC) technologies of Global Thermostat, and we are developing businesses together.
Resources sector: Thermal coal
Upstream
The energy policies of many countries, especially developed countries, include plans to shift from coal-fired power generation to gas-fired power generation and then renewable energy, so demand for the thermal coal used in coal-fired power generation is forecast to decline.
We will not acquire new interests in the thermal coal mine development, and we plan to aim for zero equity production volume from thermal coal mines by 2030. The weight of thermal coal interests in our resource portfolio is relatively small. Going forward, mines of currently owned interests are scheduled to reach the end of their mine life in the near future. Also, the concession produces high-grade coal, which is in relatively high demand, and is cost-competitive, making it resistant to price declines even when there is a drop in demand.
Resources sector: Coking coal
Upstream
In the long term, many countries and regions will develop policies for adopting or strengthening carbon taxes, so demand for coking coal is forecast to decline as low-carbon iron-making processes with fewer CO2 emissions are put to practical use and the ratio of electric furnace use increases.
In combination with CCUS and other CO2 capture and storage technologies, it is predicted that steel businesses that use blast furnaces will be preserved for the time being. In addition, we believe that a certain level of demand will be maintained for the interests we hold as they produce hard coking coal, which is considered rare among coking coals.
Resources sector: Iron ore
Upstream
Despite a forecast gradual increase in global demand for steel, an increase in the ratio of electric furnace steel as a result of moves toward decarbonization may lead to a portion of raw materials being replaced with steel scrap and a decline in demand for iron ore. On the other hand, demand and production of direct reduced iron is forecast to increase as a way to reduce CO2 emissions in both the blast furnace method and the electric furnace method, so demand for the high-grade iron ore used as raw materials for direct reduced iron may increase.
Regarding our iron ore-related businesses, through our projects in South African and Brazilian mines, we contribute to stable supply of resources to Asia, with a focus on China and Japan. We will continue to take actions for stable supply while paying close attention to the impact on demand due to changes in the iron-making and steel-making methods in response to decarbonization in the steel industry, and also to the impact of an increase in the ratio of electric furnace steel.
Resources sector: Natural gas and LNG
Upstream, midstream and downstream, trading
Despite a significant gap in demand increase/decrease between each of the scenarios, natural gas will be used as an alternative power fuel for coal in the transition phase to a low-carbon society. In addition, it will continue to play an important role as a raw material for petrochemical products, ammonia, and fuel for transportation.
In the short to medium term in particular, demand is forecast to increase in the ASEAN nations, and it is expected that business opportunities will increase in the Asian Pacific (including India) and China. The main supply-side countries and regions for LNG in the future may be the Middle East and United States and, with the impact of the conflict between Russia and Ukraine, LNG trade opportunities with demand-side countries and regions may increase.
In the long term, the spread of renewable energy will offset increased demand in emerging countries, so demand is forecast to trend downward. However, a certain level of demand for natural gas is forecast to remain in some countries and regions where the use of renewable energy is not suitable, so natural gas will continue to play an important role in the best mix of renewable energy, such as a balancing function when renewable energy is not available.
We will focus on strategic regions from the medium to long-term perspective, and we will work to maximize opportunities by creating a natural gas and LNG value chain in combination with upstream LNG projects, LNG trading, and midstream and downstream businesses. Furthermore, we will contribute to the stable supply of energy to the appropriate countries and regions while securing demand for transition fuels while introducing environmental technologies such as CCS/CCUS and promoting the best mix of renewable energy sources.
Resources sector: Nickel
Upstream
With the spread of renewable energy, EVs, and storage batteries, which are essential in the expansion of low-carbonization and decarbonization, demand for the nickel used in rechargeable batteries is forecast to increase dramatically in the medium to long term.
We are proceeding with projects as a producer in the Republic of Madagascar. We sell the products to Japan, Europe, North America, and Asia, and we are aiming to create further business opportunities. While continuing to conserve biodiversity, including reforestation of quarries, and conserve the environment surrounding mines and plant sites, we will also continue to find and implement CO2 emission reduction measures, and work to stabilize production and increase production volumes.
Resources sector: Copper
Upstream
With the spread of renewable energy and EVs, demand for copper is forecast to increase in the medium to long term. On the other hand, increasing supplies is forecast to be difficult due to increasing risks and difficulty of operating newly developed mines, and impacts of things like a tightening of environmental protection regulations.
We will continue to contribute to stable procurement of copper products by acquiring new concessions and expanding production at existing concessions through investment in copper mines overseas, and by strengthening our operations on the copper production value chain. These include our upstream copper concentrate production business and midstream copper bullion production and sales business. We will also continue working to conserve the environment around our mines.
Transportation sector: Vehicles
Sales of automobiles, manufacture and sales of automobile components, automobile finance, automobile leasing, car sharing, parking lot operation, etc.
Sales of passenger cars are forecast to increase, especially in emerging countries, and the ratio of EV sales in new car sales are forecast to increase in all the scenarios as fuel efficiency regulations tighten. In terms of automobile components, demand for internal combustion engine parts expected to decline with the spread of EVs, but demand for tires is expected to increase with the associated increase in automobile body weight. If car prices increase as a result of the introduction of carbon tax and so on, there is a risk that new car sales will decline. At the same time, however, demand for automobile finance and leasing businesses is forecast to increase.
In addition to manufacturing and selling automobiles and automobile components, we are engaged in a wide range of businesses in the MaaS field. We see the spread of EVs and developments in MaaS as business opportunities. For example, as part of our parking lot operation business in Northern Europe, we are expanding the charging networks essential for the spread of EVs and the EV subscription services using our parking lots, to secure new revenue stream. In Japan, we are working on new business opportunities such as providing fleets of EVs for commuter use, workplace charging facilities, and solar power generation services. Demand for internal combustion engine parts is expected to decline with the spread of EVs, but we consider ourselves to have a limited financial exposure as these parts account for less than a few percent of our parts manufacturing business. We are investigating and implementing a range of initiatives, such as use of carbon-free energy and low-carbon and carbon-free technology to contribute OEM’s supply chain carbon neutrality.
Transportation sector: Shipping
Shipbuilding, trading, ship owning and operation, sales of energy storage systems for ships, etc.
Shipping demand is expected to increase steadily over the medium to long term due to the development of modal shift and other factors. While the cost of investment in low-carbon technologies and the cost of operation could both increase as a result of GHG emission regulations and taxes by IMO*2 and authorities in each country, the need for zero-emission and low-emission ships*3 and energy storage systems for ships are also forecasted to increase.
While monitoring the legal regulations and markets in each country, as well as trends in zero-emission and low-emission ships technologies and costs, we are working to increase the ratio of low-emission ships in our shipbuilding business product lineup and ship owning portfolio in expectation of future adoption of regulations. In addition, we will strengthen sales of energy storage systems for ships in Japan through a joint venture with Corvus Energy which boasts a high global market share, as the systems expected to improve the fuel efficiency of large ocean-going ships, and also to contribute to realize zero emissions for small coastal ships. In this way, we will create new business opportunities for achieving decarbonization and low-carbonization in society.
Transportation sector: Aviation
Commercial aviation and engine leasing, manufacturing aircraft components, aircraft part-out and recycling, carbon credit trading, etc.
Aviation demand is forecasted to increase over the medium to long term. There is a shift toward fuel-efficient aircraft due to ICAO*2 and IATA*3 regulations, and the start of the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). At the same time, fuel prices are expected to rise with increased adoption of SAF*4 and other low-carbon fuels and increased demand for carbon credits.
In our mainstream commercial aviation and engine leasing businesses, we are working to achieve sustainable revenue growth by replacing aircraft and engine portfolio with better fuel-efficient ones and capturing leasing demand for addition and replacement of airline customers. We are also contributing to customer (airline) initiatives toward decarbonization. By shifting our portfolio while monitoring market and technology trends and legal legislations regarding aircraft fuel efficiency, we will respond flexibly to changes in the business environment and manage the risk of decrease in leasing fees and prices of our owned aircraft.
In 2022, we have entered the aircraft part-out and recycling business, dismantling and selling parts from retired aircraft. Our aim is to build a circular economy by effectively utilizing limited resources and energy and reducing waste. In addition, we are striving to capture business opportunities for a carbon neutral-oriented society by responding to strongly increasing demand for SAF and other biofuels through enhancing initiatives in the manufacture and supply of such SAF and other biofuels.
Material industry sector: Steel
Processing and sales of steel sheets, tubular products, and other steel products.
Led by emerging countries, demand for steel products is forecast to increase. For tubular products, demand trends and investment in oil and natural gas differ significantly among scenarios, but tubular demand is expected to grow in the short term as oil and natural gas investment increases in all scenarios. However, in the NZE scenario, oil and natural gas investment is forecast to decline by approx. 48% through 2050.
If climate change becomes more serious and demands from society for decarbonization increase, demand for some steel products with a high environmental impact will decline. On the other hand, demand is expected to increase for steel products that utilize low-carbon and decarbonization technologies, such as hydrogen direct reduction steelmaking and CCUS. In addition, new infrastructure (manufacturing equipment, storage facilities, etc.) and transportation methods will be introduced as green energy spreads, which could lead to increase in demand for various steel products, Tubular demand for other decarbonization, such as CCUS, and renewable energy development is also expected to increase.
Because our business operation does not include steel manufacturing processes, CO2 emissions are limited. For steel products, while steadily connecting the growth in demand from emerging countries to our earnings, we will develop new businesses in collaboration with leading customers and business partners, in fields such as engineering, ship building, and heavy industries, to capture the shift in demand to low-carbon and carbon-free steelmaking.
For tubular products, in the NZE scenario, tubular demand in oil and natural gas development will decline. On the other hand, as stated above, steel demand for carbon reduction and decarbonization technologies is forecast to increase, so we will adjust our portfolio to respond to this demand shift. In addition, we will promote energy transition-related business not only on our own but also with our strategic partners such as the integrated energy companies and contribute to improving efficiency in oil and gas well drilling operations to help reduction of CO2 emissions.
Material industry sector: Cement
Cement distribution business
Global demand for cement is forecast to increase mainly due to urbanization and industrialization in India and African countries, and increased adoption of new infrastructure for green energy in developed countries in particular. If moving toward climate change mitigation, focused measures to use more efficient materials will reduce the rate of increase in cement demand, but overall demand is forecast to remain stable.
There are risks of increased costs and reduced demand with adoption of decarbonization regulations for conventional clinker-based cement, which has a high CO2 emission rate. However, there are also opportunities in the increased demand for cement manufactured using low-carbon manufacturing methods.
Because the business operation excludes all of the cement production process, CO2 emission is limited. We will implement sales strategies tailored to changes in the market to capture the transition of fuel used in the cement production process to clean energy sources, and the growth in use of low-carbon cement that replaces the limestone used as the principal raw ingredient with other materials. In collaboration with cleantech companies as well, we are verifying clean cement production technologies and verifying development of related products using those technologies.
Material industry sector: Chemicals
Manufacturing, trading
Chemical demand is expected to increase with the expansion of renewable energy and energy-related infrastructure. On the other hand, naphtha produced by refining petroleum and gas is used as the principal raw material, but in the long-term process of energy decarbonization, the supply of naphtha used as raw material is expected to decline. In addition, CO2 is emitted in huge volumes from fossil fuel energy used in the synthesis and decomposition processes of petrochemical product manufacturing, so demand for low-carbon manufacturing processes, including shifting energy used in the processes to renewable energy, is expected to grow.
We will monitor customer demand for decarbonization, and trends in relevant technologies, and will explore business opportunities in chemical product manufacturing using biomass materials and CCU (CO2 capture and utilization). In addition, we will continue our global trading by adjusting to changes in supply and demand in petrochemical product raw materials and finished product markets.
Material industry sector: Aluminum
Smelting
Because of its lightness and excellent recyclability, aluminum is an essential metal for decarbonization of society, including improving fuel efficiency of automobiles by reducing vehicle weight, so demand is forecast to increase. On the other hand, large amounts of electricity are consumed in the primary smelting process, so in a future society promoting low-carbonization and decarbonization, demand for green aluminum, manufactured using electricity from renewable energy and other methods to reduce CO2 emissions, is forecast to increase.
Our aluminum smelting business in Southeast Asia chiefly utilizes renewable energy derived from hydroelectricity, so future risks pertaining to carbon pricing is expected to be limited, and the business is likely to remain competitive in the medium to long term. . For this reason, future demand for decarbonization in the supply chain from end-users is expected to present business opportunities where Sumitomo Corporation is able to utilize its strengths. Therefore, we will work toward strengthening our competitiveness by further expanding our interests in green aluminum and increasing volumes we handle.
Real estate sector: Office buildings/residential building sales business
Office buildings, commercial facilities, residential housing, distribution facilities and real estate funds
Demand in the real estate sector is forecast to increase in light of population increases and urbanization in emerging and developing countries and increasing refurbishment of existing buildings. On the other hand, a major challenge for buildings is to reduce CO2 emissions by reducing energy consumption.
In Japan, in order to achieve carbon neutrality by 2050, energy-saving performance equivalent to the ZEH/ZEB standards will be required for new properties after 2030 as part of demand for CO2 emission reductions through improved energy efficiency. If unable to meet these requirements, the risks are that real estate prices will fall, and demand will decline due to increased operating costs. However, meeting the requirements offers opportunities for increased earnings as demand for ZEH/ZEB-compliant building increases and property values increase.
We are involved in development and operation of a range of real estate properties. We will continue efforts to improve energy efficiency and introduce renewable energy by adopting the latest equipment, including smart meters and EMS, in new properties and updating equipment in existing properties, based on trends in customer demand and technologies. In addition, we are cooperating with tenants to implement environmentally friendly initiatives. We will also work on acquiring environmental certification and developing properties to the ZEH/ZEB standards.
Other：Forestry business
Forestry business
With the trend toward carbon neutrality, the United Nations, COP26, and national governments are establishing many targets for such objectives as stopping forest destruction and land degradation, and increasing forest protection and the size of forest areas. In each of the scenarios to the left, forest area is forecast to increase in size by 2050.
Under these circumstances, while monitoring of illegal logging and activities that can lead to deforestation will be strengthened, we believe that sustainable forest management and timber supply will increase in value.
Also in the future, demand is forecast to increase for carbon removal credits that recognize absorption of CO2 in forest cultivation processes, and for alternatives to petrochemical products by using low environmental impact forest products from sustainable logging. We therefore expect competition around investment and development will intensify among countries and companies in this field.
We established the Forest Management Policy and the Sourcing Policy for Forest Products in 2022 as part of efforts toward sustainable forest management and sourcing of forest products.
In line with these policies, we will expand our forestry business on the assumption of sustainable forest management. While supplying conventional forest products, we will also work to develop new products and businesses that contribute to the capture, storage, and utilization of CO2.
Please see here for more details on the Forestry business in New Zealand.
The projections and forecasts contained here are based on information available as of the date of this announcement, and on certain assumptions and projections. Therefore, actual results and performance may differ significantly due to various uncertainties, including future economic trends and market prices. Neither the company nor the information providers assume any responsibility for any errors in the information posted or for any damages incurred based on the information presented.
Each year, we identify the Group's sectors and businesses affected by physical risks and inspect the status of their response to these risks. In particular, for businesses with large outdoor sites or those that require large amounts of natural resources for operations, we use assessment tools to analyze the degree of impact of physical risks and individually check the status of their response.
Since the Group operates in a wide range of sectors around the world, we refer to UNEP FI reports describing the impact of physical risks on major sectors, as well as other reports. We identify the major risk characteristics for each of our sectors that are likely to have a significant impact, as well as the major businesses we are involved in, as shown in the table below. This year, we have added forestry to this list.
Physical risks are largely divided into chronic risks that have continuous and chronic impacts on business activities, (e.g., rise in average temperatures, change in rainfall patterns, rise in sea level, etc.) and acute risks caused by unforeseen damage (e.g., escalation of extreme weather conditions such as huge rainstorms, flooding, drought, and forest fires, etc.). The impact is wide-ranging, including direct impact on production site facilities and working conditions, and indirect impact on a broad range of supply chains of raw materials and products. For our business in a broad range of fields and regions, we manage such risks by assessing the impact of local weather and geographical factors on our business at the time of investment, conducting continued assessments after participation in the business, clarifying the scope of contractual responsibility, and concluding nonlife insurance policies.
| Sector | Awareness of the impact of physical risks in each sector | Principal business related to the risk described at left | |
|---|---|---|---|
| Chronic | Acute | ||
| Energy | Water shortage resulting in decline in production efficiency and in operation efficiency, risk of submergence due to sea level rise, etc. | Damage on facilities, disruption of operation, etc., caused by flooding and huge rainstorms | Thermal power generation in Southeast Asia, Middle East and Africa, Wind power generation in Japan and overseas, biomass power generation in Japan, solar power generation, and other renewable energy generation businesses, etc. |
| Resource & Interest | Rise in temperature & water shortage resulting in decline in production efficiency, disruption in operation, risk of flooding with rise in sea level, etc. | Damage on facilities, disruption of operation, etc., caused by flooding and huge rainstorms | Mining operations in North America, South America, Australia, Africa, etc.; energy interests in Southeast Asia, Middle East & Europe; and sales of such resources and energy |
| Raw materials | Rise in temperature & water shortage resulting in decline in production efficiency, disruption in operation, etc. | Damage on facilities, disruption of operation, delay in raw materials/product shipment, etc., caused by flooding and huge rainstorms | Manufacturing, processing, sales, etc., of metal products, transportation equipment and parts, chemical products, materials, etc. |
| Transportation systems | Water shortage resulting in decline in production efficiency, disruption of operation, etc. | Damage on facilities, disruption of operation, delay in raw materials/product shipment, etc., caused by flooding and huge rainstorms | Manufacturing and sales, etc., of transportation equipment and parts |
| Real estate | Delay in project schedule, rise in utility cost, decline in property value with a rise in sea level, etc., resulting from rising temperature | Delay in project schedule, decline in property value caused by structural damage & flooding, etc., caused by flooding and huge rainstorms | Office building business, retail facilities business, residential business, logistics facility business, etc. |
| Agriculture | Rise in temperature & climate change resulting in decline in production efficiency, etc. | Disruption in operation, etc., caused by huge rainstorms, flooding or drought | Agriculture & import and wholesale of food products, retail sales business, etc. |
| Forestry | Temperature change resulting in changes in the growth environment, etc. | Decline in asset value of forest resources, etc., caused by natural disasters | Forestry business in Russia, New Zealand, etc. |
While physical risk includes a variety of risks, we have conducted a more detailed risk analysis of the sectors and businesses identified on the previous page as being susceptible to physical risk based on the factors such as having large outdoor locations or requiring a large amount of natural resources for operations.
In addition to power generation, upstream resources and energy, real estate, and agriculture businesses, we also conducted a risk analysis of forestry businesses this year using assessment tools such as the RCP8.5 scenario*1 based on the IPCC*2 scenario of a 4°C rise by 2100, mainly in terms of water stress, flooding and sea level rise, temperature rise, and forest fires, based on information such as the geographical information of major business sites, while considering the actual conditions of the businesses. For these businesses, we also confirmed that risk management was being conducted appropriately by assessing the impact of local weather and geographical factors on our business at the time of investment, conducting continued assessments after participation in the business, clarifying the scope of contractual responsibility, and concluding nonlife insurance policies.
| Sector | Analysis Results and Status |
|---|---|
| Energy | Analysis of water stress on power generation business showed there areregions with possible water shortage. However, water used in our thermal power generation business, which uses large amounts of water for cooling, is supplied by seawater, water production facilities within the power plant, etc., leading to the conclusion that the risk of operation disruption caused by water shortage, etc., is not significant. |
| Resource & Interest | In the study of the resource & interest business in terms of water stress and continual temperature increase risk, there are regions found to have relatively high risk of long-term increase in the number of days when temperature reaches 35°C or higher and possibility of water shortage. Sumitomo Corporationplans to execute risk control through assessment of disaster risks vis-à-vis geographical conditions, etc., definition of working conditions with sufficient attention to temperature and other conditions, subscription to nonlife insurance, etc. |
| Real estate | In the real estate business, sufficient research and analysis are being conducted on flooding risks for various locations during the development studies stage. Property projects are being selected through conservative assessment of risks based on information from hazard maps and specific conditions of each property site, etc. In promoting project development, measures are being taken on physical risks in order to minimize them. For this reason, risks in the business portfolio as a whole are not considered significant. |
| Agriculture | In the analysis of temperature rise and water stress for major agricultural sites in each country, there are regions with a possible increase in the number of days when temperature rises to 35°C or higher andpossible water shortage. Although adverse impact is anticipated on such agricultural operations if such risks affect agricultural product quality, output, etc., Sumitomo Corporation has diversified crops and regions in the business and has therefore built risk resistance to a certain degree in terms of total performance. |
| Forestry | In the analysis of forest fire risk in the forestry business, it was confirmed that the risk is low for the forest assets currently owned by the Company. For our forests, we are taking measures in accordance with fire prevention plans, etc. In the risk analysis based on TNFD*3framework, our forest assets in New Zealand were analyzed as a whole for natural disaster risk, including floods, etc. (For details of the analysis results, please refer to the Trial Analysis Based on TNFD’s Beta Framework). |
The Group has adopted the following as its basic policy on climate change issues.
The Group uses carbon emissions cost, environmental value, and CO2 reduction contribution as indexes in order to assess the impact of climate change on potential future business risks and opportunities and to take early action in order to promote initiatives to achieve carbon neutrality for the Company and society.
(Thousand t-CO2e)
| Index | Result of FY2019 （The base year） | Result of FY2022 | Percentage of change | Reduction targets of 2035 | |
|---|---|---|---|---|---|
| Entirety | 59,939 | 52,572 | ▲12.3% | 50％ or more | |
| Power generation business * | 43,126 | 42,613 | ▲4.0% | 40％ or more | |
| Of which, coal-fired power generation *2 | 34,452 | 34,853 | 1.2% | 60％ or more | |
| Fossil energy concession | 15,808 | 9,203 | ▲41.8% | 90％ or more | |
Figures for active power generation projects and fossil energy interests are calculated with the advice of a third party.
(MW)
| Index | Result of March 31, 2020 （The base year） | Result of March 31, 2023 |
|---|---|---|
| Coal | 5,240 | 5,208 |
| Gas | 3,011 | 2,994 |
| Renewable energy * | 1,397 | 1,771 |
| Total | 9,651 | 9,974 |
(MW)
| Index | Result of March 31, 2020 （The base year） |
Result of March 31, 2022 | Targets of 2030 |
|---|---|---|---|
| Renewable energy * | 1,397 | 1,771 | 5,000 or more |
Among power stations sourced by renewables such as solar, wind, biomass and geothermal energies, solar (photovoltaic) power plants generate the greatest amount of electricity in Japan. So called "mega-solar (far-over-MW photovoltaic)" power plants started to be constructed across the country in 2012, after the introduction of the Feed-in Tariff system.
In the 1990s, Sumitomo Corporation began importing polysilicon and other materials for Japanese photovoltaic panel manufacturers, while exporting their products to overseas markets. We subsequently started the development of mega-solar power plants in Europe and the United States, and from 2012, in Japan. Today, we own and operate mega-solar projects at six locations nationwide.
Construction of wind power plants came into full swing in Japan in the early 2000s, before mega-solar projects gathered momentum. Sumitomo Corporation started the commercial operation of its first wind power plant in 2004, when wind power generation had just begun to take off. We then launched several projects, including those in Kashima, Ibaraki Prefecture and Oga, Akita Prefecture, which are well into the operational stage today.
Our latest initiative in solar power generation is the development of a mega-solar power plant with a generation capacity of 92,000 KW in Minamisoma, Fukushima Prefecture, which suffered devastating damage from the Great East Japan Earthquake. In 2012, one year after the earthquake disaster, we began drawing up a plan to build a solar power plant with cooperation from the local municipality with the aim of making use of coastal land that subsided due to the tsunami. After overcoming numerous challenges, commercial operation commenced in March 2018 for the first phase of construction, and in December 2018 for the second phase of construction.
Fukushima Prefecture aims to expand its renewable energy power generation capacity to meet 100% of the prefecture's demand by around 2040. Installed on a vast plot of 150 ha land, which is 32 times the size of the Tokyo Dome stadium, the two solar power plants will not only contribute to achieving this target, but also stand as a symbol of restoration from the disaster for the regional people.
Sumitomo Corporation has the vision of operating its plants over the long term, even after the Feed-in Tariff period has ended, to continue supplying environmentally friendly and cost-competitive electricity to society. The prerequisite for fulfilling this vision is to build a relationship of trust with the local communities. The only way our facilities can sustain operations over decades to come is to be accepted and loved by the local people.
Solar and wind power generation is susceptible to weather conditions. As a means of compensating for this weakness and ensuring stable electricity supply, Sumitomo Corporation is looking to use the storage batteries in its renewable energy business in pursuit of optimal electricity management. Furthermore, we are seeking to supply the electricity continuously and stably to consumers, in cooperation with Summit Energy Corporation, a subsidiary engaged in electricity retail business, who own and operate large-scale biomass power plants within the Group.
The Japanese government has revised upward the 2030 target for the proportion of renewable energy in the domestic energy consumption mix to up to 38%. The Sumitomo Corporaton Group meanwhile, has a medium-term goal of increasing its renewable energy power supply capacity to at least 3 GW in combined total by 2030 and, toward this end, is expanding the development of carbon-free energy projects. These include a number of new projects started in Japan, namely: a biomass energy plant in Sendai, Miyagi Prefecture (March 2021); an onshore wind farm extending across Tamura, Okuma, Namie and Katsurao, Fukushima Prefecture (April 2022); and another onshore wind farm in Tosashimizu and Mihara, Kochi Prefecture.
Also eyed are new business areas such as domestic offshore wind power generation, which is currently the subject of global attention, and district energy management businesses that provide renewable energy for local consumption.
Drawing on our long years of operational experience in solar, wind and biomass power generation, we are confident that we can contribute to the development of Japan's renewable energy power generation industry and the realization of a sustainable society.
Geothermal power generation is a method used to generate electricity with a renewable energy source. The mechanism itself is simple: ground water is heated by deep underground magma near volcanoes, and the resulting steam turns the turbine of a generator that produces electricity. As it requires no fossil fuel consumption, geothermal power generation has a low environmental impact. Also, the cost of generating electricity is unaffected by fuel market fluctuations. Compared to other renewable energy sources such as solar and wind power, geothermal energy is undisturbed by climate conditions. Accordingly, this generation method can deliver electricity on a stable basis.
However, geothermal power generation entails some risks. It is unclear to know if enough hot water or steam (i.e. geothermal fluid) can be obtained for power generation until after a deep well has been drilled. In fact, some projects must be aborted as a result of drilling 2,000 to 3,000 meters in depth. Developing geothermal energy projects requires know-how of surface level surveys, ability to fund wells for drilling, ample time, and even a certain amount of luck.
Business models for power generation infrastructure are generally grouped into two main categories: EPC and IPP. EPC refers to construction contracts where the Engineering, Procurement, and Construction of a power plant are contracted. Under EPC arrangements, the contract is typically fulfilled when the completed facility is delivered to the local government or company. IPP stands for Independent Power Producer, where the operator becomes the owner of the generating facility and sells electricity on an ongoing basis.
With a view to the diversification of power sources in the future, Sumitomo Corporation has kept a keen eye on geothermal power generation since the early days when these projects were becoming larger in scale and more practical, and began delivering related equipment in the 1970s. Indonesia has the second highest number of geothermal resources in the world. We began our work in geothermal power generation there in 1995, and won our first EPC contract for a geothermal power plant in 1997. To date, we have been involved in a total of 12 projects (17 units totaling approximately 900 megawatts of power generation capacity). This represents 43 percent of the total geothermal capacity in the country and is the highest among Japanese integrated trading and business investment companies.
Our success with numerous geothermal EPC projects has been built on the productive partnerships we have forged. Our partners include Fuji Electric Co., Ltd. the world's leading manufacturer of steam turbines for geothermal power stations, and an Indonesian company PT. Rekayasa Industri, which take charge of civil construction, installation and local procurement. Among our recent geothermal EPC projects are the Lahendong power station in north Sulawesi and the Ulubelu power station in south Sumatra.
Our first geothermal IPP project in Indonesia was the Muara Laboh project, launched in west Sumatra in 2011.
Geothermal power stations are generally developed and built in untouched mountainous areas near volcanoes. Development of a geothermal project beings with construction works which consists of clearing and leveling the ground at the project site. Muara Laboh is located in a remote area, requiring four to five hours of overland travel from the nearest airport. In March 2012, the Project Company which Sumitomo Corporation along with its partners invests in entered into a long-term power purchase agreement over 30 years with the Indonesian state-owned electricity utility. After obtaining a Government Guarantee Letter from the Ministry of Finance of the Republic of Indonesia, the Project Company embarked on trial well drilling.
However, as a result of drilling exploration wells, the need to downscale power generation capacity became clear. We renegotiated with the Indonesian government and the Indonesian state-owned electricity utility regarding the terms and conditions of the project. It took nearly two years before all parties reached a unanimous agreement. The next step was to make financial arrangements for the actual power station construction. After five years of concluding the initial long-term power purchase agreement, we were able to achieve finance close and start the construction work in March 2017.
We were also contracted to provide EPC services for the construction of this plant. To achieve our goal of completing our first geothermal IPP project in Indonesia on time and contributing to the country's electricity supply, we not only leveraged our expertise as an operator that we have cultivated through other IPP projects, but also our extensive experience in geothermal EPC projects and the comprehensive strengths of our electric power infrastructure business as well. Finally, we were able to commence commercial operation in December 2019.
It was unprecedented for a Japanese company to be involved in the development of an Indonesian geothermal power project from the earliest stage, even prior to test drilling. Systemic difficulties made negotiations on project terms and conditions as well as financial arrangements a prolonged endeavor. Despite this obstacle, the successful completion of the power plant was achieved, helping us build a foothold for our next projects in Indonesia. Our projects currently underway include expansion work for the Muara Laboh power plant and the construction of our next geothermal IPP project, the Rajabasa power plant, on Sumatra Island
With the fourth largest population in the world at more than 270 million people, and an economy that continues to grow at around 5 percent per year, shifting to renewable energy and ensuring a stable supply of electricity have been national challenges for Indonesia. Geothermal power generation, which utilizes Indonesia's abundant geothermal resources, has been recognized as an effective means to simultaneously solve both of these issues, and the Indonesian government plans to increase its geothermal power generation capacity from the current 2,400 megawatts to 5,800 megawatts by 2030. The government is looking to Sumitomo Corporation, with its 20-plus years of experience in the construction of geothermal power plants and its experience in Muara Laboh geothermal IPP project, for support in this endeavor.
Geothermal power projects entail unique risks that other power sources do not. Building on our accumulated knowledge and expertise, we will contribute to the realization of a low-carbon society in Indonesia by managing those risks in cooperation with government agencies and financial institutions.
The European Union ("EU") aims to increase its use of renewable energy to at least 32% of the EU's total energy consumption by 2030. In July 2021, the European Commission announced policy packages containing a proposal for raising the target ratio to 40%. Under this circumstance, the development of offshore wind power generation projects is growing rapidly in Europe. This technology involves large turbines installed in the sea that harness the power of the wind to produce electricity. Wind farms are currently being constructed in earnest, mainly in the North Sea, which borders Norway, Denmark, Germany, the Netherlands, Belgium, France and the United Kingdom ("UK").
The greatest advantage of offshore wind power generation is the absence of physical obstacles to wind, such as mountains and buildings. This increases efficiency in energy conversion and facilitates output projection. The vast open spaces of the sea are also convenient for the transportation of turbine blades, a headache for onshore wind power projects situated on restrictive land sites. The North Sea is particularly suited to wind farms since shallow waters stretch out for over 40 kilometers off the coast.
Sumitomo Corporation entered the offshore wind power business in 2014. Under a strategic partnership with Parkwind, a Belgian offshore wind company, we participated in Belwind, Northwind and Nobelwind wind farm projects, then in operation, under construction or in development in the North Sea.
Since August 2018, Sumitomo Corporation has also participated in Northwester 2, the fourth joint project with Parkwind. Construction was completed in May 2020. Recently, the European offshore wind power market has been shifting toward ever larger turbines driven by technology innovation. Northwester 2 is running the world's largest turbines currently in commercial operation. Constructing and operating these huge wind turbines requires stable funding, management skills to see the project through, and operational expertise. Having already accumulated considerable related experience through building and running conventional power plants and participating in onshore wind power projects in North America, China and South Africa, Sumitomo Corporation has been able to bring about successful outcomes in the Belgian projects.
Sumitomo's European bases for its offshore wind power business are Dusseldorf in Germany (European hub), Leuven in Belgium, London in the UK, and Paris in France. We have been exploring new business possibilities, working locally as an IPP firmly anchored in each locale and utilizing our global network as an integrated trading and business investment company to gather information.
In fact, it was due to our steady local efforts, in addition to our highly acclaimed role in the Belgian projects, that we were able to successively take part in two British offshore wind farm projects, Galloper in 2016 and Race Bank in 2017. Wind farms of Race Bank and Galloper, far larger in scale than their Belgian projects, were completed in March and September 2018, respectively. Sumitomo Corporation's experience and know-how accumulated through the Belgian projects is utilized in the operation of these British wind farms. Following them, we have started the new project Five Estuaries, an extension of Galloper.
In 2018, we took part in the Le Tréport and Noirmoutier offshore wind projects in France, following our participation in Belgium and the UK. Le Tréport project is being developed in the English Channel about 15 kilometers off the coast of France and Noirmoutier project is being developed in the Bay of Biscay about 12 kilometers off the coast of France. We are currently working to achieve financial close*. The two projects have a total power generation capacity of 992 megawatts, enough to meet the consumption needs of 1.64 million people.
As evidenced here, the European offshore wind power market is expanding year by year. Our goal is to expand our business in this field by increasing our participation in projects in European countries, including for floating offshore wind turbine farms, an area for which growth is expected going forward. Today, the renewable energy business, which thus far has largely been supported by government subsidies, is quickly transitioning to a self-supporting model. Sumitomo Corporation is also moving in this direction, pursuing greater stability in power generation and higher cost competitiveness, so as to ensure continuity of power supply in Europe.
Outside Europe, Asia, Oceania, and North America are attracting global attention for their lofty potential in offshore wind power generation.
In Asia, Japan, Vietnam and other countries are whose who draw much attention, not only because of its abundant wind resources over spacious oceans but also thanks to the government's commitment to renewable energy. Although there are obstacles to be overcome, such as frequent typhoons and less extensive shallows than in the North Sea, Sumitomo Corporation believes that it will be able to apply the expertise acquired through the European projects to initiatives in Japan and the rest of Asia and Oceania in the near future.
In April 2018, Sumitomo Corporation integrated its conventional power and renewable energy business segments and established a global system to enable it to work on power generation projects in a seamless fashion. The company's objective in this area is to establish a robust energy business that contributes to society and preserves the global environment for future generations.
In 2019, Sumitomo Corporation, Sumitomo Mitsui Banking Corporation and the Development Bank of Japan established the first fund through Spring Infrastructure Capital (SIC), a fund management company jointly established by the three companies. The fund—the first fund in Japan to invest in offshore wind power projects overseas—has acquired the UK-based Race Bank and Galloper offshore wind farm as seed assets (assets for investment by the fund). In 2022, SIC established a second fund to acquire solar power generation projects in Japan as seed assets.
Through SIC, we will provide institutional investors with opportunities to invest in renewable energy assets both in Japan and overseas, and contribute to the development of global infrastructure centered on renewable energy.
To protect our planet while guaranteeing the day-to-day comfort and convenience that electricity provides, Sumitomo Corporation continues to vigorously promote its renewable energy business.
Wood represents a recyclable resource because trees can be systematically planted, grown and harvested repeatedly. In addition, wood is one of our most familiar resources. Sumitomo Corporation started wood business by importing logs, lumber and veneer into Japan to support the high economic growth of the country. Since the 2000s, the Company has also expanded the business to include forest management, with a view to securing and utilizing forest resources in a more sustainable manner. We are also supplying wood products coming from the forests that we manage, targeting not only Japan's matured market, which does not have much room for remarkable growth, but also markets with high growth potential around the world.
Forests, which absorb and store CO2, can contribute to carbon neutrality across the globe through proper management and harvesting. Sumitomo Corporation also conducts sustainable forest management by practicing environment-friendly harvesting in the forests owned and managed by the Company. Looking ahead, we are committed to further expanding forest resources on a global scale while leveraging the expertise we have built in forest management.
In March 2013, Sumitomo Corporation acquired forest in New Zealand and subsequently began to manage it through Summit Forests New Zealand. The foreset extends over about 50,000 hectares on the North Island, where Radiata pine is grown and harvested to be exported to China and other Asian countries.
Forest management entails much labor, such as thinning out and pruning. There are also management risks to consider, including damage caused by fires and storms. Moreover, it might also be necessary to establish roads, ports and other infrastructure to transport harvested trees. Despite these challenges, Sumitomo Corporation is engaged in forest management in order to ensure a stable supply of wood on a long-term basis.
In Summit Forests New Zealand, trees are planted, grown and harvested in a cycle of 30 years to supply wood resources in an environment-friendly manner. For this forest, Sumitomo Corporation employs local inhabitants. They have long been engaged in and have vast knowledge of forestry. They are therefore efficiently sharing the work of planting, growing and harvesting trees in the plantation. On an annual basis, trees are hauled from the forest in the volume of about 600,000 m3 (equivalent to the volume of 900 25-meter pools). Nature is preserved in the forest, with wild horses running free.
Sumitomo Corporation is thus managing the forest in harmony with the local environment, instead of just trading wood from the forest, and this approach is highly evaluated by the local people. Also, we are applying advanced technologies to the industry, particularly to support harvesting operations. This involves employing drone and satellite photography systems to grasp the topographic features of plantation areas and to confirm the dimensions of harvesting areas.
We have entered power generation business using renewable energy, which is expected to grow as a medium- to long-term energy source, contributing to mitigating climate change.
As of March 31, 2023
| Fuel | Power plant | Country | Generation Capacity （MW） |
|---|---|---|---|
| Solar power | Osaka Hikarinomori Project | Japan | 10.0 |
| Solar Power Saijo | Japan | 29.0 | |
| Solar Power Kitakyushu | Japan | 16.0 | |
| Solar Power Tomakomai | Japan | 15.0 | |
| Solar Power Minamisoma/Kashima | Japan | 59.9 | |
| Solar Power Minamisoma/Haramachi | Japan | 32.3 | |
| EVM/EVM2 | Spain | 14.0 | |
| Thang Long Industrial Park (TLIP)/TLIPⅡ/TLIPⅢ | Vietnam | 25.1 | |
| Wind power | Oga Wind Power Plant | Japan | 28.8 |
| Summit Wind Power (Kashima) | Japan | 20.0 | |
| Abukuma Wind Power Plant | Japan | 147.2 | |
| Datang Sino-Japanese (Chifeng) New Energy | China | 50.0 | |
| Stanton Wind Energy | USA | 120.0 | |
| Cimarron Ⅱ Wind | USA | 131.1 | |
| Ironwood Wind | USA | 167.9 | |
| Dorper Wind | South Africa | 100.0 | |
| Mesquite Creek Wind | USA | 211.2 | |
| Amunet | Egypt | 500.0 | |
| Offshore wind power | Northwind | Belgium | 216.0 |
| Nobelwind | Belgium | 165.0 | |
| Northwester2 | Belgium | 219.0 | |
| Galloper | UK | 352.8 | |
| Race Bank | UK | 573.3 | |
| Woody biomass | Summit Handa Power | Japan | 75.0 |
| Summit Sakata Power | Japan | 50.0 | |
| Summit Myojo Power | Japan | 50.0 | |
| Sendai-ko Biomass Power | Japan | 112.0 | |
| Geothermal Power | Muara Laboh | Indonesia | 85.0 |
| Hydraulic power | CBK | Philippines | 792.0 |
In our real estate business, we have formulated and implemented basic policies related to environmental, social and governance (ESG) issues. As a real estate management company, Sumisho Realty Management Co., Ltd. (“SRM”) believes that incorporating ESG elements into investment decisions and operation processes is essential to maximizing value of medium- to long-term investor. For SOSiLA Logistics REIT, Inc. (“SLR”) and other fund properties under the company’s management, it has had its real estate performance evaluated by CASBEE, DBJ Green Building, LEED, BELS, and so on. Also, SOSiLA Logistics REIT Inc. has been awarded “5 Stars” in the 2022 GRESB Real Estate Assessment and the second highest “A Level” for the GRESB Public Disclosure, which measures the quality of ESG disclosure.
SLR is the first J-REIT to formulate a green finance framework since IPO. It is promoting ESG-oriented asset management through green finance. In June 2023, SLR issued 3,000 million yen Green Bonds with aims to strengthen the funding platform by expanding the ESG investor base, along with promoting ESG initiatives. Proceeds procured through Green Finance are used for the acquisition of existing or new assets (including scheduled acquisition) of Eligible Green Assets that satisfy any of the following eligible criteria, used for the renovation of Eligible Green Assets, or repayment and redemption of loans (including Green Loan) and Investment Corporation Bonds (including Green Bonds) required for these.
| Certification Obtained | Property Name | Evaluation |
|---|---|---|
| CASBEE: 9 properties | SOSiLA Yokohama Kohoku | Rank A |
| SOSiLA Sagamihara | Rank A | |
| SOSiLA Kasukabe | Rank A | |
| SOSiLA Kawagoe | Rank A | |
| SOSiLA Nishiyodogawa I | Rank A | |
| SOSiLA NishiyodogawaⅡ | Rank A | |
| SOSiLA Ebina | Rank S | |
| LiCS Narita | Rank A | |
| SOSiLA Itabashi | Building (New Building) A Rank | |
| LEED: 2 properties | 203 North LaSalle | PLATINUM |
| Atlanta Financial Center | SILVER | |
| BELS：10 properties | SOSiLA Yokohama Kohoku | ☆☆☆☆☆ |
| SOSiLA Sagamihara | ☆☆☆☆☆ | |
| SOSiLA Kasukabe | ☆☆☆☆☆ | |
| SOSiLA Kawagoe | ☆☆☆☆☆ | |
| SOSiLA Nishiyodogawa I | ☆☆☆☆☆ | |
| SOSiLA Ebina | ☆☆☆☆☆ | |
| SOSiLA NishiyodogawaⅡ | ☆☆☆☆☆ | |
| LiCS Narita | ☆☆☆☆ | |
| SOSiLA Itabashi | ☆☆☆☆☆ | |
| SOSiLA Amagasaki | ☆☆☆☆☆ |
To realize carbon neutrality, companies need to develop a green transformation (GX) management cycle for the ongoing process of assessing their current greenhouse gas (GHG) emissions, formulating GX strategies and measures, adopting GX solutions, and evaluating and revising the process. Sumitomo Corporation, ABeam Consulting, and group company SCSK are working together on a project called "GX Concierge" to mitigate climate change to carbon neutrality for society. Specifically, GX Concierge provides various GX-related consulting services, including support for measuring GHG emissions, support for developing a GHG reduction roadmap, and support for making disclosures under the Task Force on Climate-related Financial Disclosures (TCFD). It acts as a one-stop service for all the customer’s needs, from adoption of various Sumitomo Corporation Group’s GX solutions, such as solar power generation and EV leasing businesses, to GHG emission management cloud services for visualizing GHG emissions. With climate change disclosures in line with TCFD recommendations becoming mandatory from FY2022 for companies listed on the Prime Market of the Tokyo Stock Exchange, we have already been providing GX consulting and other support services to our suppliers.
Sumitomo Corporation Group is deeply involved in the supply chains of a wide range of industries, so we aim to work with our suppliers and business partners to tackle climate change mitigation head-on and help realize a carbon neutral society through GX Concierge.
Sumitomo Corporation is working with business partners to develop the Hatchobori 1-chome Office Building Project. In June 2023, this project received ZEB Ready certification (for net zero energy buildings) in a first for office buildings that we have developed. The ZEB Ready certification is given to non-residential buildings that are able to reduce primary energy consumption by 50% or more compared to base energy consumption through various energy-saving measures.
This office building achieved a BEI value of 0.48 (52% reduction compared to the standard) by adopting Low-E glass and light shelves on the exterior, high-efficiency air conditioning equipment, changes in room illumination, and the addition of lighting control equipment, thereby realizing an energy-saving building with a low environmental impact.
To assist efforts toward decarbonization, we have used GX Concierge to calculate and visualize GHG emissions from at our own logistics facilities that we have developed and that we, and other Group companies and SOSiLA Logistics REIT, Inc. To date, the SOSiLA series has been actively pursuing environmental certification in order to provide logistics facilities with high environmental performance to its tenant companies and JLF‘s SOSiLA Logistics REIT, Inc. investors.
As part of efforts to further reduce our GHG emissions, we will work to reduce the full life-cycle of GHG emissions by securing green power for facilities that are currently operating through installation of rooftop solar panels and other initiatives, and by adopting materials with high environmental performance for future facilities.
SCSK Group plays a central role in the IT business of Sumitomo Corporation Group. SCSK conduct management aimed at resolving social issues through business and achieving sustainable growth together with society.. SCSK specified the issues that it views as particularly important and that it should prioritize taking action on to achieve growth together with society as material issues. As an initiative to contribute to their materiality, Global Environmental Contributions” they issued a 5 billion yen green bonds in June 2021 to fund the construction, refurbishment, acquisition, and operation of an eco-friendly data center (netXDC Chiba Center No. 3) through energy-saving measures. The data center is designed to dramatically reduce electricity consumption through the use of LED lighting, exterior insulation, and other measures including use of high-efficient air-cooled free-cooling chillers f (air conditioners with cooling systems that use the outside air). The center has been in service since May 2022.
SCSK Group has been working on power saving to reduce greenhouse gas emissions, mainly at its data centers. Going forward, the SCSK Group will continue its ambitious efforts to reduce greenhouse gas emissions by promoting further power conservation and the use of natural energy. And will contribute to the realization of a decarbonized society and the development of a sustainable society through the practice of environmentally friendly business activities and the creation of business opportunities.
Sumitomo Corporation is working with Nishi-Nippon Railroad Co., Ltd. (Nishitetsu) to develop a retrofitted EV bus business that converts existing diesel buses into electric vehicles. With reducing CO2 emissions being an important challenge for the bus industry as well, EV buses have become increasingly important in recent years. However, only limited numbers of EV buses have been put into operation so far due to the high price of the vehicles. Focusing on this challenge, we have successfully deployed the Retrofitted EV Bus scheme, together with Nishitetsu Auto Body Tech Co ltd, with practical cost using EV kits powered by RAC Electric vehicles Inc. which is the leading EV bus manufacturer in Taiwan.
This business is an initiative that contributes to various social issues, including development of local society and economy, the circular economy, and mitigation of climate change. By introducing and expanding use of these domestic retrofitted EV buses by Nishitetsu and other domestic bus businesses, we will contribute to decarbonization of the bus industry in Japan.
Sumitomo Corporation has established Hakobune Inc. to provide “EV x energy management” services. Hakobune will provide companies with commuter EVs for employees and workplace charging (WPC) facilities on a monthly subscription basis. If required by the companies, solar power generation equipment can be added to the package. To help employees update their commuting options and help companies decarbonize, Hakobune will provide commuter EV vehicles and WPC equipment for solar charging at workplaces to companies and their employees in areas where cars are critical for commuting. Sumitomo Corporation will make full use of its experience in the automotive and electric power businesses to accelerate its efforts to become carbon neutral through Hakobune's business while providing workers with a comfortable mobility lifestyle, thereby realizing the development of local communities and economies.
