Climate Change and Energy Management

Climate change and energy management policies

KIOXIA Group treats initiatives addressing climate change as one of our most important management issues and aims to reduce energy consumption and greenhouse gas emissions, both in terms of our business activities and our product lifecycles.

Regarding greenhouse gas emissions at our manufacturing sites, we have set the goal of reducing by 1% each year the previous year's total energy consumption (SCOPE 2: indirect emissions from business activities) based on a policy of reducing emissions through energy-saving activities in Japan in line with the Act on Rationalizing Energy Use (hereinafter, “the Energy-Saving Act”).

 

Moreover, in FY2020 we formulated a long-term goal of ensuring that by FY2040, 100% of all energy we use will be from renewable sources.

 

In our product development, we endeavor to reduce indirect emissions of greenhouse gases by promoting the efficient use of energy, ascertaining the volume of greenhouse gases emitted by our suppliers, and taking steps to contribute to the reduction of those emissions.

Endorsing the Recommendations of the Task Force on Climate-Related Financial Disclosures

In June 2021, KIOXIA Group announced our endorsement of the recommendations released by the Task Force on Climate-Related Financial Disclosures (TCFD).1 We believe that accurately ascertaining the climate-related impact of our business, disclosing information to stakeholders and deepening mutual understanding are indispensable for sustainable corporate growth, and we proactively disclose information in accordance with the TCFD recommendations.

 

1 TCFD: A task force established by the Financial Stability Board which devises methods to disclose climate-related financial information; an initiative to promote the disclosure of information related to climate-related risks and opportunities.

Governance

At Sustainability Strategy Meetings chaired by the CEO, executive officers formulate our Company strategies and policies on climate change and check the level of achievement before submitting recommendations to the Board of Directors. The Sustainability Committee, chaired by the Executive Officer in charge of sustainability, discusses key themes and sets KPIs based on the strategies and policies formulated at the Sustainability Strategy Meetings. We also set up task forces reporting to these organizations to tackle important sustainability issues; they report on progress and confirm direction. In the first half of FY2021, analysis of climate-related risks and opportunities and scenario analysis were examined, based on the recommendations of the TCFD.

Climate-Related Risks and Opportunities

KIOXIA Group assesses, as shown in the table below, the risks and opportunities arising from the external environment likely to prevail in 2030 under the 2℃ Scenario (2DS)2 assumed by the International Energy Agency (IEA) and other organizations. We have identified transitional risks such as the introduction of a carbon tax, stricter energy conservation standards, reduced demand for products with high carbon content, and the increased cost of capital investment and research and development. In addition we are aware of physical risks such as climate change, extreme weather and water shortages. KIOXIA Group is proceeding to address these risks. In terms of opportunities, we envisage increased demand for low-carbon, low-power consumption products as society’s awareness of climate change heightens.

 

2 The 2℃ Scenario and 4℃ Scenario are common terms for climate-related scenarios depicted by the IEA and other organizations. Each scenario includes specification of the economic measures needed to suppress rising temperatures and the envisaged environmental damage in the event such increases in temperature occur.

Transitional Risks: Risks related to transition to low-carbon economy
Attributes Potential Financial Impact Background/impact
Government policies, laws and regulations Increased cost of power resulting from introduction of a carbon tax. Power consumption expected to grow until FY2030; carbon tax to have impact.
Increased cost of materials and transportation resulting from a rise in fossil fuel costs. Continued investment in clean room buildings; rising material costs to have impact.
Increased cost of high-carbon intensive building materials during construction of new facilities. Continued investment in clean room buildings.
Costs incurred through installation of PFC gas3 abatement equipment during construction of new buildings. PFC gas abatement equipment installed during construction of new buildings, incurring initial investment.
Costs incurred in connection with installation of renewable energy facilities (solar power generators, storage batteries, etc.). Initial investment and operational costs incurred.
Technology Increased R&D costs incurred as a result of our response to customer requirements, government regulations, etc. Expected rise in R&D costs due to changes in customers’ specifications.
Unstable power grid due to expansion of renewable energy usage. Supply of renewable energy influenced by nature. There will be impact on operations if stable, high-quality power supplies are not available, or if no capital investment is made in renewable energy power transmission or distribution networks.
Markets Impact on GHG emission reduction requirements and on business due to increasing environmental awareness among customers. Impact on business transactions due to increased customer demand for renewable energy.
Reputation Reputational risk and fundraising risk if response to our stakeholders is insufficient. Impact on KIOXIA’s reputation, fundraising, sales, etc., if unable to support ESG to level required by stakeholders such as our customers and ESG investors.
Physical risks: Risks related to physical changes related to climate change.
Attributes Potential Financial Impact Background/impact
Chronic Increased air-conditioning costs due to rising temperatures. Air-conditioning accounts for a significant proportion of KIOXIA's electricity usage.
Operations halted due to inability to secure sufficient water supply, causing a decline in sales. Operation halts possible in worst-case scenario.
Acute Extreme weather conditions (flood damage), incurring suspension of operations and a decline in sales. Potential suspension of operations due to flooding of facilities during typhoons, torrential rains, etc.
Transitional opportunities: Opportunities related to transition to low-carbon economy
Attributes Potential Financial Impact Background/impact
Energy sources
Reduce GHG emissions and boost reputation by promoting effective renewable energy procurement. Customer demand for renewable energy is increasing every year; this could be an opportunity to maintain and expand business.
Obtain government support (subsidies, tax breaks, etc.) for introduction of renewable energy (building renewable energy facilities and acquiring renewable energy power certificates). Enables proactive promotion of renewable energy usage.
Resource efficiency Reduce costs by building efficient transportation systems and procuring materials with high resource efficiency. Continued investment in normal procurement as well as for clean room buildings and equipment.
Reduce costs through deployment of energy-saving production equipment. Power consumption expected to grow until FY2030, with accompanying impact.
Products and services Expand business opportunities by reducing power consumption and developing low-carbon products and services that help provide communications infrastructure. Customer demand increasing for products incorporating energy-saving features.
Markets Respond to requests to reduce GHG emissions; positive impact on our business operations of increasing environmental awareness among customers. Customer demand rising for renewable energy procurement and energy-saving during manufacturing.
Increased customer trust levels due to strengthened business continuity processes leading to stronger branding power and higher corporate value. Impact of climate change on supply chain a serious concern for customers, and strengthening our business continuity provisions expected to improve their level of trust.
Increased corporate value and fundraising capabilities arising from strengthened activities in line with ESG guidelines. Ratio of ESG investment rising in Japan and overseas, with investors placing more emphasis on ESG.

3 PFC gas: Alternative to CFC gas used in manufacture of semiconductors. PFC gas has high greenhouse effect coefficient.

Scenario Analysis

KIOXIA Group carried out an impact analysis of the effects of climate change on our business for each stakeholder and each business using two scenarios: the IEA’s stipulated 2℃ Scenario and the 4℃ Scenario2.

Under the 2℃ Scenario, we believe there will be a significant impact from government provisions and strengthening of regulations, as well as changes in the preferences of customers and other stakeholders. For example, we have ascertained that there will be rising costs involved in the decarbonizing of manufacturing sites and the risk of an impact on sales due to the lack of low-carbon and low-power consumption support.

Under the 4℃ Scenario, we project rising material costs and the emergence of physical risks to our Company bases. KIOXIA Group has aggressively employed energy-saving and reviewed renewable energy measures to address these risks and is moving forward with product development, anticipating such needs as low-carbon products.

Strategies, Metrics and Targets

Our Environmental Policy formulated in 2020 stipulates that we will help to prevent global warming by reducing greenhouse gas emissions and reducing the impact of our products on the environment. As mentioned earlier, with regard to energy consumption (SCOPE 2), we are promoting energy-saving activities with the stated goal of reducing the volume of emissions by 1% compared to the previous fiscal year. Moreover, we have set the long-term goal of using 100% renewable energy by FY2040.

 

(For details, please refer to Climate Change-related Targets and Results)

CO2 emissions from business operations (FY2020)

Greenhouse gases (SCOPE 1, 2, 3: CO2 equivalent) emissions from KIOXIA’s business operations in FY2020 are shown in the chart below.

 

(Hyphenated cells indicate “not applicable,” and we have not calculated “use of sold products”)

SCOPE 1 (Direct emissions)

CO2 Emissions in FY2020 (t-CO2) Category Outlines
651,900 Direct greenhouse gas emissions from our own operations

SCOPE 2 (Indirect emissions, electricity)

CO2 Emissions in FY2020 (t-CO2) Category Outlines
1,713,400 Emissions associated with purchased energy supplies

SCOPE 3 (Indirect emissions through value chain, excluding those outlined in SCOPE 1, 2)

Category CO2 Emissions in FY2020 (t-CO2) Category Outlines
1. Purchased goods and services 3,421,396 Emissions from activities up to the manufacturing of raw materials
2. Capital goods 930,391 Emissions from the construction and manufacturing of capital goods
3. Fuel- and energy-related activities not included in SCOPE 1 or 2 160,292 Upstream emissions of purchased fuels/electricity, etc.
4. Upstream transport and delivery 164 Emissions arising from the transportation of products and waste in Japan (excluding overseas transportation and suppliers' transportation)
5. Waste generated in operations 17,391 Emissions from the treatment of waste
6. Business travel 56 Emissions arising from employees’ business travel
7. Employee commuting 14,341 Emissions arising from employees’ commuting
8. Leased assets (upstream) - -
9. Downstream transportation and delivery - -
10. Processing of sold products - -
11. Use of sold products - -
12. End-of-life treatment of sold products - -
13. Downstream leased assets - -
14. Franchises - -
15. Investments - -
SCOPE 3 (Total) 4,544,031  

Breakdown of emissions from SCOPE 1 (FY2020)

Breakdown of emissions from SCOPE 1 (FY2020)
Breakdown of emissions from SCOPE 1 (FY2020)

Climate change and energy management policies

We plan and implement capital expenditure to secure the production capacity that will allow us to respond to the dramatic increase in the volumes of data circulating in everyday life. In so doing we risk increasing our energy consumption.

The graph below shows KIOXIA’s energy consumption and greenhouse gas (SCOPE 1 + 2) emissions.

Volume of Energy Used (MWh)

Volume of Energy Used (MWh)

SCOPE 1 + SCOPE 2 Emissions (t-CO2)

SCOPE 1 + SCOPE 2 Emissions (t-CO₂)

Climate Change-related Targets and Results

KIOXIA manufacturing sites have the stated goal of reducing energy consumption by 1% compared to the previous year's total energy consumption (SCOPE 2), based on the aforementioned Energy Saving Act.

 

In FY2020 we achieved our goal of reducing energy use through various energy-saving activities, recording an actual reduction of 19,691 tons of CO2 emissions per year against a target reduction of at least 17,686 tons of CO2 emissions. Last 10 years, the result of our energy conservation programs was approximately 180,000 tons of CO2 emissions as a cumulative reduction.

 

We also set the goal of using 100% renewable energy by FY2040. To help achieve this target, we gather intelligence by such means as participating in industry groups and make proposals to the government. As an initial step toward attaining this goal, we plan to promote the introduction of electricity derived from renewable energy sources in our development and test centers, and further the installation of renewable energy facilities at our manufacturing sites.

Efforts to adapt to climate change

KIOXIA is progressing with efforts to adapt to climate change in the course of our product development, the establishment of our supply chains, and the operation of our manufacturing sites.

Product Development

In the storage market, the need for low-power consumption-type products is growing extremely rapidly, and we expect to expand our supply by further developing these products. KIOXIA regards the research and development of highly integrated technologies aimed at improving energy-saving performance as a priority management issue.

Supply Chains

As climate change continues in the form of global warming, the risk to component manufacturers’ production or distribution posed by disasters like flooding or large-scale typhoons is becoming more apparent every year. We have accordingly set up a Business Continuity Plan Committee whose job it is to anticipate a variety of climate change-related risks, and to implement measures to prevent them from materializing, or to respond promptly in the event they do arise.

Operation of Manufacturing Sites

KIOXIA is proactive in the installation of abatement equipment to deal with PFC gases – greenhouse gases with high global warming potential. The installation of 96 items of PFC abatement equipment in FY2020 led to a reduction of 360,000 tons of CO2 emissions. The cumulative result of PFC abatement from 2017 is installation of 712 items of PFC abatement equipment, 12.3 billion yen investment, and reduction of 3,050,000 tons of CO2 emissions.

Taking Part in External Initiatives Related to Climate Change

KIOXIA is involved in the addressing of energy and global warming issues as a member of the Environmental Working Group of the Japan Electronics and Information Technology Industries Association (JEITA), a group representing the electronic device industry.

Since FY2020 we have been a supporting member of the Japan Climate Leaders’ Partnership (JCLP), a corporate group that aims to achieve a decarbonized society. We have collaborated in measures aimed at achieving the 1.5℃ reduction target stipulated under the Paris Agreement, as well as in discussions about proposals to be made to the government. Moreover, in 2021, KIOXIA Holdings announced its endorsement of the Recommendations of the TCFD.