Addressing Climate Change Risks
To strengthen our response to climate-related risks, The Sumitomo Heavy Industries Group endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD*1) in October 2021. In May 2022, following approval by the Board of Directors, we established a carbon neutrality target of achieving net-zero CO2 emissions across our group by 2050, as well as CO2 emissions reduction targets for 2030, and are advancing initiatives to address climate change.
- *1TCFD (Task Force on Climate-related Financial Disclosures)
The TCFD was a private-sector-led task force established by the Financial Stability Board (FSB) at the request of the G20. It developed recommendations for companies to assess and disclose the financial impacts of climate-related risks and opportunities. The recommendations are structured around four core areas: governance, strategy, risk management, and metrics and targets.
Response to Recommendations of the Task Force on Climate-related Financial Disclosures
We disclose information in accordance with the TCFD disclosure framework, covering governance, strategy, risk management, and metrics and targets related to climate-related risks and opportunities.
Governance
Among the seven Sustainability Material Issues approved by the Board of Directors in 2020, our group identified “Reduction of Environmental Impact” as a key issue. In the Medium-Term Corporate Management Plan 2026, which commenced in FY2024, we also continued to identify climate change as one of the social issues to which our group should contribute solutions.
Climate-related risks are positioned as one of our group’s priority risks and are overseen by the Risk Management Committee. Since FY2024, the Sustainability Committee, chaired by the President, has discussed climate change together with other non-financial risks as a priority issue, recognizing that addressing these challenges can also create business opportunities for our group.
Matters discussed by the Sustainability Committee, including climate-related issues, are reported to the Board of Directors twice a year. Under the Board’s oversight and direction, we promote initiatives to address these issues.
- References:
Strategy
The Paris Agreement, which entered into force in November 2016, seeks to hold the increase in the global average temperature to well below 2°C above pre-industrial levels and to pursue efforts to limit warming to 1.5°C. In response, our group has developed a long-term plan and is advancing initiatives aligned with the goals of the Agreement.
Risk Assessment for Each Scenario
Climate change could have a significant impact on our group’s business activities. We therefore analyzed climate-related risks and opportunities under the following two scenarios:
- (1) 1.5°C scenario: Effective climate action is taken and global warming is limited to 1.5°C.
- (2) 4°C scenario: Effective climate action is not taken and global warming continues.
| Definition | ||
|---|---|---|
| High | Serious impact on business, requiring a review of business strategy | |
| Medium | Limited impact on business, requiring future action | |
| Low | Minimal impact on business | |
| Period | ||
|---|---|---|
| Short-term | Through 2026 (final year of the MTMP26) | |
| Medium-term | Through 2030 (interim carbon neutrality target) | |
| Long-term | Through 2050 (final carbon neutrality target) | |
| Scenarios (risks and opportunities) |
Descriptions | Impact Level | Period | Major Initiatives | |||
|---|---|---|---|---|---|---|---|
| Short- term | Medium- term | Long- term | |||||
| 1.5℃ | Risks | [Higher electricity and renewable energy prices] Rising electricity and renewable energy prices increase production costs | High | ● | ● | ·Increase the efficiency of production, transportation, etc. ·Promote energy and resource conservation |
|
| [Carbon tax] Higher carbon taxes increase the tax burden on subsidiaries and affiliates in Japan and overseas | Medium | ● | ● | ● | ·Improve efficiency in production and transportation and promote energy and resource conservation ·Introduce internal carbon pricing to promote energy-saving capital investment and purchase renewable energy to facilitate decarbonization |
||
| [Higher development costs and delays in technology development] Delays in technology development lead to increased costs, reduced sales, and lower profits | High | ● | ● | ● | ·Accelerate collaboration within the Group and restructure businesses, including by establishing development centers ·Standardize technologies to facilitate development |
||
| [Rising in raw material costs] Higher raw material procurement and manufacturing costs erode price competitiveness | High | ● | ● | ● | ·Promote energy and resource conservation ·Strengthen profitability by consolidating models and revising pricing |
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| Opportunities | [Mechatronics] Electrification of customersʼ production equipment; rising demand for energy-saving, high-efficiency products; and growing demand for precision positioning equipment and vacuum robots, driven by semiconductor miniaturization and advances in 3D packaging | Low | ● | ● | ● | ·Expand sales territories and strengthen production and supply capacity in each market ·Expand application-specific sales, maintain our competitive edge, and strengthen profitability ·Strengthen the installed-base business |
|
| [Mechatronics] Rising demand for energy-efficient and helium-saving cryogenic and superconducting technologies | Low | ● | ● | ● | ·Accelerate the development of next-generation models and make effective use of the US assessment and development center ·Maintain competitive edge by expanding sales of energy-efficient refrigeration systems and accelerated cooling solutions for low-helium applications |
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| [IM] Expansion of applicable models through the development of new materials and processes, and increased demand driven by process development and process advancement with leading global customers | Low | ● | ● | ● | ·Strengthen competitiveness by developing differentiated products ·Create synergies through business integration and enhance global operations ·Consolidate models and reform business processes |
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| [IM] Rising demand for products that reduce the weight of end products or contribute to carbon neutrality, along with market growth driven by increased electrification | Low | ● | ● | ● | ·Keep the development of the next flagship models on schedule ·Improve profitability through business restructuring |
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| [L&C] Electrification of construction machinery and logistics systems; government support for electric and ICT construction machinery; advances in battery technology; accelerating carbon-neutrality efforts; and investment in forest resources | Medium | ● | ● | ·Achieve differentiation and improve profitability through introduction of new models ·Promote the development of standardized technologies for electrification, remote control, automation, and DX, and establish a development center |
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| [L&C] Increased demand for higher productivity, improved safety, and labor-saving solutions, including automation and improvements to the work environment | Medium | ● | ● | ● | ·Increase the added value of services through DX ·Enhance production capacity ·Promote the development of standardized technologies (electrification/remote, automation/DX) and establish a development center |
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| [E&L] Expansion of the biomass power generation, energy conversion, and energy storage markets | High | ● | ● | ·Demonstrate CO2 separation and capture, and carbon-negative technologies ·Develop LAES business models, and advance proposals for existing boilersʼ fuel switching and conversion ·Strengthen the service business through closer coordination within the segment and increased resources ·Establish CCU and gasification technologies ·Participate in studies on regional collaborative carbon management projects |
[E&L] Development of biomass fuels | ||
| 4.0℃ | Risks | [Damage and relocation of manufacturing sites and supply chains] Costs associated with restoring equipment damaged by increasingly severe natural disasters and relocating facilities due to impacts such as sea-level rise | High | ● | ● | ·Enhance business continuity plans (BCPs) for manufacturing sites and supply chains | [Rising raw material costs, procurement difficulties] Higher raw material procurement and manufacturing costs erode price competitiveness |
| Opportunities | [L&C] Machinery and equipment for disaster recovery | Low | ● | ● | ● | ·Develop high-value-added products and brands differentiated by performance and quality ·Provide responsive, high-value-added services |
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| [E&L] Growing demand for resilient public infrastructure and facilities | Medium | ● | ● | ·Operation and maintenance services leveraging accumulated expertise | |||
Risk Management
Climate-related risks are managed through our group-wide risk management process.
- References:
Metrics and Targets
In May 2022, our Board of Directors adopted a target of achieving carbon neutrality, defined as net-zero CO2 emissions across our group, by 2050. We also established an interim emissions reduction target for 2030 and are implementing specific initiatives to achieve these targets.
Aim to achieve carbon neutrality throughout the entire our group by 2050
・CO2 emissions during product manufacturing (Scopes 1 and 2) : 50% reduction by 2030 (compared to FY2019)
・CO2 emissions during product use (Scope 3, Category 11) : 30% reduction by 2030 (compared to FY2019)
SBTi Validation
In February 2026, SBTi Services validated our groupʼs reduction targets by 2030.
The validated near-term targets we have set are as shown below.
(The base year is FY2019 for both targets.)
- Reduce absolute Scope 1 and 2 GHG emissions 50.0% by 2030
- Reduce absolute GHG emissions by 30% by 2030. The target covers Category 11, use of sold products.
Reduction of CO2 emissions during product manufacturing (Scope 1 and 2)
In order to reduce CO2 emissions from our business activities, we will continue to implement and strengthen existing energy-saving measures, install solar power generation equipment, and begin procuring renewable energy from fiscal 2022.
In FY2025, CO2 emissions totaled 125,000 t-CO2 (34% reduction compared to FY2019) as a result of the continued implementation of existing energy-saving measures, the installation of solar power generation facilities, and the purchase of renewable electricity.
| Index | Unit | Base year (2019) |
FY2021 | FY2022 | FY2023 | FY2024 | FY2025 |
|---|---|---|---|---|---|---|---|
| CO2 emissions during manufacturing (Scope1 and 2) | 千t-CO2 | 189 | 194 | 190 | 157 | 133 | 125 |
Initiatives to Reduce CO2 Emissions
Our group plans to increase the share of renewable energy in our electricity procurement to achieve our emissions reduction targets.
● Installation of Solar Power Generation Facilities
We aim to install solar power generation facilities with an expected combined annual output of 40 GWh by 2030. Under MTMP26, we plan to invest ¥3.0 billion in these facilities.
● Purchase of Renewable Electricity
To achieve our emissions reduction targets, we are systematically expanding our procurement of renewable electricity worldwide. In FY2025, we purchased 105 GWh of such electricity, bringing the share of renewable electricity, including electricity generated by our solar power systems, to 39%.
In April 2026, Sumitomo Heavy Industries Modern, Ltd. established a scheme to share surplus electricity within our group, in addition to installing solar power systems for on-site consumption and balancing the supply and demand of renewable electricity. Through these initiatives, the company became the first manufacturing site in our group to achieve net-zero CO2 emissions associated with electricity use.
Furthermore, on April 1, 2026, the company joined the Japan Climate Leadersʼ Partnership (JCLP), a coalition committed to achieving a sustainable decarbonized society, as a supporting member.
Reducing CO2 Emissions during Product Use (Scope 3, Category 11)
In FY2025, the CO2 emissions during product use (Scope 3, Category 11) totaled 113 million t-CO2.
Emissions had declined significantly since 2020, due to a decrease in deliveries of coal-fired boilers. In FY2025, however, two coal-fired boilers were delivered.
In FY2025, we received an order for coal-fired boiler design support services in the Philippines. Following this order, our group adopted a policy of restricting the acceptance of new orders related to coal-fired boilers.
We will continue our services to propose conversion geared to reduce the use of coal to zero or to cut the co-firing ratio in the future, in addition to design support for orders that our subsidiaries and affiliates receive as licensees.
We anticipate an increase in our CO2 emissions toward 2030 because of our business growth. We will continue developing products that contribute to a decarbonized society.
Cross-Group Initiatives
The Carbon Neutral Project launched in January 2025 works to meet our group-wide challenge of achieving carbon neutrality.
In FY2025, the project focused primarily on the following initiatives:
- CO2 emissions data visualization: Exploring the introduction of a calculation system and ways to improve calculation
- Target setting and disclosure: Obtaining SBTi validation
- Product-related initiatives: Incorporating eco-design criteria into the Quality Management System (QMS) and expanding the calculation of avoided emissions
We will continue to raise awareness of climate change across our business divisions and accelerate our efforts to achieve our targets.
Climate change response targets in the medium-term environmental plan
The SHI Group recognizes that protecting the global environment and engaging in recycling-oriented economic activities are corporate social responsibilities, and sets targets for the next three years in the medium-term environmental plan it formulates every three years, and is working to reduce its environmental impact. Please refer to the Environmental Management page for details.