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Climate Change

View Sumitomo Corporation's Sustainability : Climate Change

Policies on Climate Change Issues

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, we regularly review our policies to align with changes in the external environment and our business portfolio.

Basic Policy

  • Aim to make the Sumitomo Corporation Group carbon neutral in 2050(*1).
    Develop technologies and business models for creating a sustainable energy cycle by reducing CO2 emissions and achieving negative emissions(*2) for society as a whole.
  • In addition to reducing and absorbing CO2 emissions from our business, we will contribute to the carbon neutralization of society through cooperative initiatives and recommendations made with business partners and public institutions.

Policy on Business Activities

  • Promote renewable energy, efficient energy utilization and fuel conversion that contributes to reducing CO2 emissions throughout society. We will also work to offer new energy management and mobility services utilizing renewable energy and also to materialize hydrogen technologies and applications.
  • In the power generation business, we provide a stable supply of the energy, essential for the economic and industrial development of local communities. At the same time, we continuously shift management resources to renewables and other energy sources with low environmental burden in the power generation portfolio.
  • Regarding the development of thermal power generation and fossil energy concession, we will work on the premise of carbon neutralization in 2050.
    • We will not be involved in any new coal-fired power generation business neither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction). For IPP business, we aim to reduce CO2 emissions by 60% or more by 2035 (compared to 2019) and we will end all the coal-fired power generation business in the late 2040s.
    • We will not make any further investment in the thermal coal mining interest and aim to achieve zero production from thermal coal mines by the end of the 2020s. We will only undertake upstream gas development that contribute toward society’s energy transition.
  1. The scope of business targeted for carbon neutralization is as follows
    [Scope1・2] Direct CO2 emissions from Sumitomo Corporation and its subsidiaries, as well as indirect CO2 emissions from the generation of energy used by each company (however, for power generation businesses, emissions from those affiliated companies under the equity method are also included)
    [Scope3] Indirect CO2 emissions associated with the use of energy resources produced by fossil energy concession of Sumitomo Corporation Group, its subsidiaries, and affiliated companies under the equity method.
    Carbon neutrality means net-zero CO2 emissions that combine CO2 emissions from our business and our contributions to CO2 emission reduction.
  2. Negative emission refers to the absorption, capturing, and removal of CO2 emitted in the past and accumulated in the atmosphere.
DFF Inc.

Governance

Disclosure Based on TCFD Recommendations

Governance

Structure for Responding to Climate Change Issues

  • With regard to the various opportunities and risks related to climate change issues involved in the Group‘s diverse business activities, the Board of Directors receives periodic reports on strategies in the Group's diverse activities each business field, their progress, and the status of risks affecting the company's entire business portfolio, and monitors whether appropriate management is being carried out. In addition, the Board of Directors adopts resolutions establishing policies on the Group's responses to climate change problems and discusses the handling of important issues related to policies on responses to climate change issues.
  • For example, our Management Council repeatedly discussed the path for achieving the Group‘s long-term goal of “Aim for carbon neutrality by 2050 and challenge to realize sustainable energy cycle,” the policies of our power generation and energy-related businesses, and the initiatives necessary to realize a carbon neutral society. Based on these discussions, the Board of Directors adopted a resolution to establish medium-term goals for "Climate change mitigation" and to review the "Policies on Climate Change Issues.” The Group holds biannual strategic conferences with the participation of Management Council members to discuss strategies in each business field including measures for addressing social problems such as climate change under the Medium-term Management Plan.
  • In addition to the measures taken by individual business units with regard to the opportunities and risks presented by climate change issues, the Corporate Sustainability Department, a dedicated organization for dealing with social problems, the Corporate Planning & Coordination Department, which creates the company's overall management plans and formulates key initiatives, and the risk management organizations work together, formulating company-wide policies and promoting necessary initiatives. Based on information provided by investigative organizations and sales organizations within the Group, overseas sites, and other parties, they deliberate on company-wide measures.
  • The Corporate Sustainability Committee (chairperson: Chief Strategy Officer, secretariat: Corporate Sustainability Department) follows global climate change mitigation trends and the Corporate Strategy Promotion Committee (chairperson: Chief Strategy Officer, secretariat: Corporate Planning & Coordination Department) deliberates on strategies and risk management measures related to climate change. The two committees provide reports and refer issues to the Management Council, which makes critical decisions regarding climate change-related measures.
  • In addition, we established the Sustainability Advisory Board in March 2023, which consists of external experts on ESG, to receive advice and recommendations from on overall sustainability management for further strengthened initiatives.
Structure for Responding to Climate Change Issues
DFF Inc.

Strategy: Climate Change-Related Risks and Opportunities

Steady Advancement of the Business Portfolio SHIFT

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.

Steady Advancement of the Business Portfolio SHIFT

Use of Internal Carbon Pricing (ICP)

[Purpose]

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.

[Outline of Utilization]
  • Using the carbon price in the 1.5°C scenario (NZE scenario*), the carbon emission cost for the amount of CO2 emissions from the Group's businesses subject to the goal of becoming carbon neutral, the environmental value associated with measures such as CO2 capture, storage and utilization through businesses, and businesses that contribute to CO2 reduction are all visualized in an integrated manner and monitored annually.
  • For individual investment projects, we also assess whether or not there is any impact on future business and corresponding measures through visualization of carbon emission costs, environmental value, and CO2 reduction contribution, and analysis based on the 1.5°C scenario, etc., for new and existing investment projects with large potential future risks and opportunities.
  • Net Zero Emission Scenario
    A scenario by the International Energy Agency that assumes global net zero emissions by 2050 (1.5°C increase since the Industrial Revolution).

Steady Advancement of the Business Portfolio SHIFT
( Achieving Carbon Neutrality across the Group )

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.

Steady Advancement of the Business Portfolio SHIFT

News① <Basic agreement with state-owned electric company in Indonesia to accelerate energy transition>

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.

News② <Upward revision of renewable energy supply expansion target for 2030>

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.

Contribute to Realization of a Carbon Neutral Society
(Creation of Next Generation Businesses Centered Around 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.

Development of business foundation in the three focused areas

Development of business foundation in the three focused areas

Major Initiatives and Progress

Development of business foundation in the three focused areas
  • The problem of climate change can be broadly classified into two categories: transition risks posed by changes in policies and regulations, technological developments, market trends, and market evaluation, etc., and physical risks posed by an increase in natural disasters and extreme weather conditions due to climate change.
  • For transition risks, various regulations may be introduced in the future to encourage carbon emissions reductions and decarbonization in the long term, and advances in international deliberations, revisions to the greenhouse gas reduction plans of individual countries, and changes in the technologies and markets of diverse industrial fields may bring about various changes in our Group's business environment. We are analyzing the impact on businesses including power generation/energy and resource-related businesses, automobiles, aircraft, shipping business, steel, chemicals, cement, aluminum smelting, real estate, and forestry, which are presumed to be fields that face a relatively high risk of change in the business environment. It is assumed that there are risks that affect business activities in these fields. By recognizing the magnitude of the risks through regular scenario analysis and considering appropriate countermeasures, we are working to keep the negative impact on business performance to a minimum. We are also strengthening initiatives that contribute to the development of business opportunities, such as the construction of carbon-free and recyclable energy systems.
  • 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 focus on power generation business including renewable energy, upstream resources and energy business, real estate business, agriculture, and forestry business as areas where risks are relatively high and analyze their impact on our business. We manage 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.

Scenario Analysis

  • We see climate change as a major issues faced by the entire world, and we identify businesses on which climate change will have a significant impact and perform scenario analysis based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
Target sector
  • The forestry business was added as a new business that is more susceptible to climate change and has a large sales scale.
  • In addition, in order to strengthen our response measures, the energy and resources business has been broken down into smaller segments, and more detailed environmental changes have been made.
Scenarios for consideration and temperature range
  • The scenarios set by the IEA have been reviewed in light of the progress of policies and technological innovations in various countries to date.
  • In order to inspect the risks and opportunities in line with the global situation, the following updated scenarios have been adopted. SDS has been excluded from the last year's list and STEPS has been added. In addition, PRI scenarios are newly referenced in response to the addition of the forestry business.
    • STEPS: Stated Policies Scenario (2.5°C rise by 2100*)
    • APS: Announced Pledges Scenario (1.7°C rise by 2100*)
    • NZE: Net Zero Scenario (1.5°C rise by 2100*)
    • FPS: Forecast Policy Scenario (less than 1.8°C rise by 2100*)
    • RPS: 1.5° Required Policy Scenario (1.5°C rise by 2100*)
  • Since the Industrial Revolution

Strategy: Climate Change-Related Risks and Opportunities

Climate scenario selection

  • In the event of significant changes to the business environment from the perspective of objectively evaluating new business opportunities and business resilience, we are analyzing the impact on business by 2050 using the below scenarios. In doing so, we primarily reference the IEA (International Energy Agency) and PRI (Principles for Responsible Investment). These scenarios are referenced as examples of possible changes in the business environment of each sector for long-term trends in global climate change mitigation, and do not necessarily represent assumptions for our management policies or business strategies.
Climate scenario selection
  • Analysis Conducted Based on Changes in the External Environment Related to the Entire Group
    In November 2022, the Sharm el-Sheikh Implementation Plan and the Mitigation Work Programme, which call for increased efforts to achieve the 1.5°C target, were adopted at COP27 (the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change). The plan follows last year's Glasgow Climate Pact, which called for strengthening climate change measures by the member countries in areas such as mitigation, adaptation, loss and damage, and climate finance. For initiatives aimed at achieving a carbon-neutral society at an early stage, decarbonization of individual industries in each country and region, reduction of emissions throughout the supply chain including Scope 3, expansion of decarbonized products based on LCA (Life Cycle Assessment), as well as carbon pricing and promotion of sustainable finance, and other cross-industry decarbonization measures are promoted.
    The introduction or strengthening of national and regional emissions trading schemes and carbon taxes, coupled with the Carbon Border Adjustment Mechanism being considered in Europe and other regions, may have an impact on the entire supply chain of various industries beyond national and regional boundaries. The carbon price outlook varies from region to region and is projected to be $29~113/t-CO2 under the STEPS scenario, $47~200/t-CO2 under the APS scenario, and $180~250/tCO2 under the NZE scenario in 2050. The carbon tax and carbon price levels for emission trading in the future will have a significant impact on the performance of businesses, especially in carbon-intensive industries. In addition, countries and regions are developing guidelines for sustainable finance, such as the EU taxonomy, to encourage the use of low-carbon and decarbonizing technologies in financial aspects. 
    Because the weight of carbon-intensive manufacturing businesses is limited in our business portfolio, the direct impact of the aforementioned developments is expected to be limited. However, we monitor the latest trends in climate change risks and opportunities, referring to the international disclosure standards by ISSB (International Sustainability Standards Board) and other relevant organizations, and attention will be directed to the impact of these decarbonization promotion measures and policies on the supply chains that are linked to our business operations in order to explore into new business opportunities with attention to changes in technologies and business models that help minimization of risks and decarbonization.

Identifying the Businesses for Which to Perform Scenario Analysis

  • Our scenario analysis scope encompasses all of our business sectors which will be highly affected by business environment changes related to climate change mitigation, regardless of the scale of the business.
  • This fiscal year, we have conducted scenario analysis for businesses in energy, resources, transportation, materials industry, real estate, and other (forestry) fields after referencing documents such as the Climate-related Disclosure Standards*1 by the International Sustainability Standards Board (ISSB), the World Energy Outlook 2022 and Energy Technology Perspectives 2023 by the International Energy Agency (IEA), and the Inevitable Policy Response 2021 by the Principles for Responsible Investment (PRI), and referencing and confirming trends in technological changes and the introduction of regulations.
  • We referred to the standards released on June 26, 2023.
シナリオ分析

Business sectors selected for scenario analysis

  • Energy : Thermal power generation (coal, gas), Renewable energy power generation, Next generation energy ( hydrogen, ammonia, synthetic fuels, energy management, storage battery, CCUS)
  • Resources :Thermal coal and coking coal, Iron ore, Natural gas and LNG, Metals and rare metals (nickel, copper)
  • Transportation: Vehicles (automobile parts manufacturing & sales/finished vehicles sales business), Shipping (shipbuilding business/ship trading business/ship owning business), Aviation (lease business/parts manufacturing)
  • Material industry sector: Steel (steel products & tubular products manufacturing & sales business), Cement (distribution business), Chemicals (manufacturing/trade business), Aluminum (smelting business)
  • Real estate sector: Office buildings/residential building sales business
  • Other: Forestry

Results of Scenario Analysis

  • For the trends in supply and demand changes related to the sectors identified for scenario analysis, energy, resources, transportation, materials industry, real estate, , and other (forestry), the future market trends for each sector listed in the main scenarios presented by the IEA are evaluated on five levels for 2030 and 2050: “sharp increase to increase”, “increase to moderate increase”, “neutral”, “moderate decrease to decrease” and “decrease to sharp decrease”. The forecasts for demand trends and the business environment shown by these scenarios include many potential risks and uncertainties.
  • Our business environment, policies and initiatives related to each sector describe the policies and initiatives that consider the factors and certainty of various changes in the business environment shown in these scenarios and the circumstances unique to our business. Furthermore, we are working on the development of thermal power generation and fossil energy concession businesses with the aim of achieving carbon neutrality by 2050. Also provided are quantitative indicators, including our profit levels and exposure*2, for power generation (coal), thermal coal, and natural gas and LNG, which include these businesses.
  • After performing scenario analysis, we have confirmed the resilience of our businesses because we are able to respond to any of the three scenarios for 2030 and 2050. Examples of the main business environments for each scenario are detailed on the next page together with a summary of our policies and initiatives.
  • consolidated total assets and guarantee for investments accounting for using the equity method

Display of referenced scenarios (macro environment)]

照シナリオ(マクロ環境)の表示

Trends of Supply and Demand Changes in Referenced Scenario (Macro Environment)

  • :Significant increase to increase
  • :Increase to Slightly increase
  • :Neutral
  • :Slightly decrease to decrease
  • :Decrease to Significant decrease

Quantitative indicator

事業における定量指標

Results of Scenario Analysis (Summary)

Referenced scenarios
(Macro Environment)
Sector Business 2030 2050
Energy Thermal power generation (coal) Slightly decrease to decrease Decrease to Significant decrease
Thermal power generation (gas) Neutral Slightly decrease to decrease
Renewable energy power generation Significant increase to increase Significant increase to increase
Next generation energy Hydrogen, ammonia, synthetic fuels Significant increase to increase Significant increase to increase
Storage battery, energy management Significant increase to increase Significant increase to increase
CCUS Significant increase to increase Significant increase to increase
Resources Thermal coal Slightly decrease to decrease Decrease to Significant decrease
Coking coal Neutral Slightly decrease to decrease
Iron ore Neutral
Natural gas and LNG Neutral Neutral
Nickel Significant increase to increase Significant increase to increase
Copper Increase to Slightly increase Increase to Slightly increase
Transportation Vehicles Increase to Slightly increase Increase to Slightly increase
Shipping Increase to Slightly increase Significant increase to increase
Aviation Significant increase to increase Significant increase to increase
Material industry sector Steel Steel sheets Neutral Neutral
Tubular products Increase to Slightly increase Neutral
Cement Neutral Neutral
Chemicals Neutral Neutral
Aluminum Neutral Neutral
Real estate sector Office buildings / residential building sales business Neutral Increase to Slightly increase
Other Forestry Increase to Slightly increase Increase to Slightly increase
  • No 2050 trend for iron ore because of insufficient data for the scenario

Our business environment, policies and initiatives

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).

[Trends in Supply and Demand Changes in Reference Scenario: Businesses Indicated as "decrease to sharp decrease"]
  • Thermal power generation (coal and gas): Rather than being involved in any new coal-fired power generation businesses, neither IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction), our policy is to shift the allocation of management resources to power generation businesses with low environmental impact, such as renewable energy. Most of the existing thermal power generation businesses are based on long-term contracts with governments of host countries, thus the risk of a significant deterioration in the commercial viability of individual projects is not considered high, but we will continue to monitor changes in the business environment.
[Trends in Supply and Demand Changes in Reference Scenario: Businesses Indicated as "sharp increase to increase"]
  • Renewable energy power generation: The Sumitomo Corporation Group is engaged in various renewable energy businesses such as wind, solar, geothermal, hydroelectric, and biomass. We aim to expand the scale of our renewable energy supply, on the basis of net generation capacity, from the current 1.8 GW to 5 GW or more by 2030. 
  • Next generation energy: We will promote the development of businesses related to carbon-free energy such as hydrogen, ammonia, and synthetic fuels for which demand is expected to grow in the future, and work to expand earnings. In our storage battery and energy management businesses, we are promoting the utilization of renewable energy, car sharing to help reduce CO2 emissions, and various businesses that contribute to reuse of storage batteries. In terms of CCUS, we are driving new business creation and development in response to increasing needs in energy, materials, and other sectors.
  • Vehicles: Seeing the spread of EVs and trend toward MaaS, we are working on seizing a new business opportunity such as deployment of parking business with EV charging stations.
  • Shipping/Aviation: We are promoting the development and introduction of ships and aircraft aimed at improving fuel efficiency and utilizing decarbonized and low-carbon fuels.

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.

Strategy: Transition Risks and Opportunities Related to Climate Change〈Scenario Analysis〉

Energy sector

Energy sector: Thermal power generation(coal・gas)

Referenced scenarios (Macro environment: changes in thermal power generation(coal・gas) output)

Our business environment, policies and initiatives

Our Applicable Businesses

Thermal power generation (coal and gas) businesses

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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
  1. Regarding coal-fired power generation, we aim to reduce CO2 emissions by 60% or more by 2035 (compared to 2019) and will end all the coal-fired power generation business in the late 2040s.
  2. Includes all outstanding balances of investments, loans, and guarantees (assumed amount at the peak for a project before completion) for all coal-fired power generation projects, regardless of investment scheme or contract type. Calculations are based on the exchange rate at the end of March 2023 <YEN/US$>; 133.5 yen.

Energy sector: Renewable energy power generation

Referenced scenarios (Macro environment: changes in renewable energy power generation output)

  • If the rate of change exceeds 100%, the change is expressed as the increased amount only. For instance, a 120% rate of change is expressed as an increase of 20%.

Our business environment, policies and initiatives

Our Applicable Businesses

Renewable energy power generation

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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)

Referenced scenarios (Macro environment: changes in hydrogen and ammonia supplies)

  • Hydrogen, etc. supplies include hydrogen and ammonia supplies, and low-carbon hydrogen, ammonia, and synthetic fuels, in the electricity and heating sector.
      1 EJ (1018 joules) is equivalent to the heat value of approximately 25.8 million kL of crude oil.(EJ:Exajoules)

Our business environment, policies and initiatives

Our Applicable Businesses

Carbon-free energy (hydrogen, ammonia, synthetic fuels, etc.) development businesses

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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)

Referenced scenarios (Macro environment: changes in stationary storage battery production capacity)

Our business environment, policies and initiatives

Our Applicable Businesses

Storage battery and energy management businesses, etc.

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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)

Referenced scenarios (Macro environment: changes in CO2 absorption through introduction of CCUS)

Our business environment, policies and initiatives

Our Applicable Businesses

CCUS* adoption business

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

  • Carbon Capture, Utilization and Storage: Technologies for sequestration and effective utilization of high- concentration CO2 emitted from industrial activities, and direct air capture technologies for capturing CO2 directly from the atmosphere
Resources sector

Resources sector: Thermal coal

Referenced scenarios (Macro environment: changes in thermal coal production

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

As of March 31, 2023 Thermal / coking coal Exposure: 120 billion yen

Resources sector: Coking coal

Referenced scenarios (Macro environment: changes in coking coal production)

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

As of March 31, 2023 Thermal / coking coal Exposure: 120 billion yen

Resources sector: Iron ore

Referenced scenarios (Macro environment: changes in iron ore production)

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: changes in natural gas demand)

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream, midstream and downstream, trading

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

As of March 31, 2023 Gas, LNG Exposure: 50 billion yen

Resources sector: Nickel

Referenced scenarios (Macro environment: changes in nickel demand)

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: changes in copper demand)

Our business environment, policies and initiatives

Our Applicable Businesses

Upstream

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Transportation sector: Vehicles

Referenced scenarios (Macro environment: Changes in Sales of passenger vehicles and EVs’ share)

Our business environment, policies and initiatives

Our Applicable Businesses

Sales of automobiles, manufacture and sales of automobile components, automobile finance, automobile leasing, car sharing, parking lot operation, etc.

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: Changes in shipping demand and the ratio of low-carbon fuels in marine and aviation fuel consumption)

 
  1. Because the data has not been updated in the scenario, last year's ratings and figures are quoted.

Our business environment, policies and initiatives

Our Applicable Businesses

Shipbuilding, trading, ship owning and operation, sales of energy storage systems for ships, etc.

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

  1. International Maritime Organization:International Maritime Organization
  2. LNG-, methanol-, and ammonia-fueled ships, etc.

Transportation sector: Aviation

Referenced scenarios (Macro environment: Changes in aviation demand and the ratio of low-carbon fuels in marine and aviation fuel consumption)

 
  1. Because the data has not been updated in the scenario, last year's ratings and figures are quoted.

Our business environment, policies and initiatives

Our Applicable Businesses

Commercial aviation and engine leasing, manufacturing aircraft components, aircraft part-out and recycling, carbon credit trading, etc.

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

  1. International Civil Aviation Organization
  2. International Air Transport Association
  3. Sustainable Aviation Fuel:Fuel made from plants and waste oil

Please see here for more details on Aircraft aftermarket business (including the aircraft part-out and recycling business).

Material industry sector

Material industry sector: Steel

Referenced scenarios (Macro environment: Changes in steel production and oil and gas investment amount)

 
  • Because the data has not been updated in the scenario, last year's ratings and figures are quoted.

Our business environment, policies and initiatives

Our Applicable Businesses

Processing and sales of steel sheets, tubular products, and other steel products.

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: changes in cement production)

Our business environment, policies and initiatives

Our Applicable Businesses

Cement distribution business

External Environment, Risks and Opportunities

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. 

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: changes in chemical production)

Our business environment, policies and initiatives

Our Applicable Businesses

Manufacturing, trading

External Environment, Risks and Opportunities

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. 

Our Policies, Strategies, and Initiatives

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

Referenced scenarios (Macro environment: changes in aluminum production)

Our business environment, policies and initiatives

Our Applicable Businesses

Smelting

External Environment, Risks and Opportunities

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 Policies, Strategies, and Initiatives

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

Real estate sector: Office buildings/residential building sales business

Referenced scenarios (Macro environment: changes in floor space in commercial and residential buildings and renovation ratio of buildings)

Our business environment, policies and initiatives

Our Applicable Businesses

Office buildings, commercial facilities, residential housing, distribution facilities and real estate funds

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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

Other:Forestry business

Referenced scenarios (Macro environment: changes in size of forest area)

  • Temperature ranges used in PRI’s FPS and RPS scenarios are similar to those used in IEA’s APS and NZE scenarios respectively.
    ー The temperature range in PRI’s FPS scenario (rise of less than 1.8°C by 2100) is similar to the temperature range in IEA’s APS scenario (rise of 1.7°C by 2100).
    ー The temperature range in PRI’s RPS scenario (rise of 1.5°C by 2100) is similar to the temperature range in IEA’s NZE scenario (rise of 1.5°C by 2100).

Our business environment, policies and initiatives

Our Applicable Businesses

Forestry business

External Environment, Risks and Opportunities

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.

Our Policies, Strategies, and Initiatives

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.

[Disclaimer regarding forecasts]

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.

Strategy: Physical Risks Related to Climate Change and Countermeasures

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.

[Identification of Risks and Status of Response at Sumitomo Corporation]

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.

[Results of Risk Analysis of Susceptible Businesses and Status of Response]

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).
  1. Representative Concentration Pathway: A scenario in which the temperature rises by 4°C by 2100
  2. Intergovernmental Panel on Climate Change:Intergovernmental Panel on Climate Change
  3. Taskforce on Nature-related Financial Disclosures: A global initiative aimed to develop and deliver a risk management and disclosure framework for organizations to report and act on evolving nature-related risks.
DFF Inc.

Risk Management

  • Our Group's activities cover businesses across a broad range of fields and regions and involve various social issues. We always attach great importance to these social issues, and in order to appropriately control the social and environmental impact of the entire Group's business activities, establish policies such as the Environmental Policy, Human Rights Policy, CSR Action Guidelines for Supply Chain Management, Anti-Corruption Policy, and Compliance Guiding Principles, and publicize and thoroughly enforce them within the Group.
  • We evaluate social and environmental risk and confirm response measures as part of our deliberation processes when considering and implementing new business from a broad perspective. In particular, with regard to climate change, we confirm the following with regard to risks (and opportunities) related to business continuity being impeded by the inability to appropriately respond to changes in the business environment resulting from social and environmental problems such as climate change.
    • The impact of climate change such as the frequent occurrence of natural disasters and abnormal weather
    • The impact of the introduction of regulations
    • The impact of technology changes, etc.
    • The potential for the expansion of business or the improvement of business performance through advances in climate change mitigation and adaptation to climate change
  • With regard to our existing business, as well, we regularly monitor the overall management status of these risks to each business, including social and environmental risks. In addition to managing risk related to individual businesses, we assess the status of companywide social and environmental risks and develop systems that enable these assessments to be used to make strategic management decisions.
  • We have newly introduced an internal carbon pricing system to strengthen climate change risk management for these new and existing businesses. When considering and conducting new businesses, we conduct analysis using 1.5°C scenarios, etc. (NZE scenario, etc.*) to identify potential risks and opportunities in a more decarbonized society and to consider measures to respond to them. In addition, we use the results to understand our overall CO2 emissions and their potential costs, as well as CO2 reductions and absorption and their potential benefits, in order to make management decisions.
  • With regard to the handling of the risks of climate change, each business organization assesses the introduction of regulations and market changes for related business sectors and conducts business activities, and as a part of companywide portfolio management, the Corporate Sustainability Department summarizes the status of major risks to the Group, taking into consideration global efforts relating to climate change and regulatory trends. The results are periodically reported to the Management Council and the Board of Directors. If there are any unacceptable risks from the perspective of the portfolio as a whole, measures including reduction of exposure are investigated with organizations responsible for risk management.
  • Net Zero Emission Scenario: A scenario by the International Energy Agency in which a net zero emission is achieved by 2050 (1.5°C above pre-industrial levels by 2100).
DFF Inc.

Metrics and Targets

Metrics and Targets

Targets:Effort for carbon neutrality

The Group has adopted the following as its basic policy on climate change issues.

  • Reduce CO2 emissions 50% or more by 2035 (compared to 2019)
    [ Power generation business ] CO2 emissions: Reduce 40% or more (of which 60% reduction or more for coal-fired power generation business)Net ownership generation capacity: coal 20%, gas 50% renewables 30%
    [ Fossil fuel upstream business ]CO2 emissions *: Reduce 90% or more
  • For coal-fired power generation business, no further involvement in IPP (Independent Power Producer) nor EPC (Engineering, Procurement, Construction) business and will end all the coal-fired power generation business in the late 2040s. For thermal coal mine interest, no additional investment and aim to achieve zero equity production from thermal coal mines by 2030
  • Increase supply of renewable energy (5GW or more by 2030)
  • Indirect CO2 emissions by others associated with the use of energy resources produced

Index: Internal carbon pricing utilization index for achieving carbon neutrality

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.

See here for details.

Targets:Effort for carbon neutrality (As of 2022)

Results

CO2 Emissions

(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.

  • Includes estimates for projects under construction.

Net ownership generation capacity portfolio(Figures noted in brackets indicate net ownership generation capacity)

(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
  • Includes capacity held by a fund whose management company is 51% owned by Sumitomo Corporation.

Net ownership generation capacity of Renewable energy

(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
  • Includes capacity held by a fund whose management company is 51% owned by Sumitomo Corporation.
DFF Inc.

Contributing to the sustainable development of local communities and the global environmental protection through the renewable energy business in Japan

Operating six solar and two wind power plants in Japan

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.

The wind power plant in Kashima stands on a landfill site facing the Kashima-nada Sea. The nacelles of wind turbines bear the logos of the local football team (Kashima Antlers) and other local corporations. (Summit Wind Power Kashima Wind Farm)
Oga is an ideal site for wind power generation, with average annual wind velocity exceeding 6 m/sat many points. (Oga wind power plant)
Oga is an ideal site for wind power generation, with average annual wind velocity exceeding 6 m/sat many points. (Oga wind power plant)

Solar power plants in Minamisoma stand as a symbol of restoration from the earthquake disaster

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.

First-phase construction; Mano Migita Ebi solar power plant
Second-phase construction; Haramachi higashi solar power plant

Realizing optimal electricity management through Group-wide collaboration

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.

Our affiliate conducts panel inspections at periodical local meetings. (Second-phase construction; Haramachi higashi solar power plant)

Developing new renewable energy power generation projects

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.

DFF Inc.

Sustaining Indonesia’s power supply with geothermal power generation

Renewable energy that is less susceptible to climate conditions

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.

Steamfield Above-Ground System (SAGS) extending from the Ulubelu production well (Ulubelu power station [left] and Lahendong power station [right])

Abundant geothermal resources in Indonesia

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.

Most geothermal power stations are located deep in rural mountainous areas. Encountering Sumatran tigers posed a threat during construction work for the Ulubelu power station on in Sumatra. (Ulubelu power station [left] and Lahendong power station [right])

Demonstrating persistence in geothermal IPP project development

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

Production well drilling at the Muara Laboh power station (left) and a panoramic view of the entire site

Indonesia to increase geothermal power generation capacity by 2.5 times by 2030

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.

Good communication is essential among project staff. We also value communication with local community members and promote local hiring.
DFF Inc.

Participation in European offshore wind power projects

Rapid development of offshore wind power generation in Europe

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.

An offshore wind farm is often likened to a flock of egrets.

Four Belgian projects

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.

A service vessel in the North Sea at sunrise—construction goes on day and night.
A towering offshore substation

Participation in projects expanding in Europe: From Belgium to the UK and then to France

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.

  • Financial Close: Entering into a loan agreement for a project and meeting the lending requirements
The wind may agitate the sea, but it also makes turbine blades spin.

Potential in Asia

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.

A wind farm at sunset shows various expressions.

Establishment of the Fund to Expand the Renewable Energy Business

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.

DFF Inc.

Providing the global market with sustainable wood resources

Managing forests to contribute to carbon neutrality across the globe

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.

A port in New Zealand to export wood

Achieving sustainable forest management in New Zealand through forestation

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.

Wild horses inhabit the forest in New Zealand, which is managed in an eco-friendly manner

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.

The forest area owned in New Zealand's North Island has been expanded to about 50,000 hectares

Related Information

DFF Inc.

Renewable Energy Related Business

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
DFF Inc.

Green Building Initiatives and Issuance of Green Bonds

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.

<Eligibility Criteria>

  • Green Building
    下Any of the following items that have been or will be certified
    • B+ rank, A rank, or S rank in CASBEE certification
    • Three-star, four-star, or five-star DBJ Green Building certification
    • Three-star, four-star, or five-star BELS certification
    • Silver, Gold or Platinum in LEED certification
  • Renovation of existing building
    Renovation of the owned assets which meet the following;
    • To aim for improving environmental benefits such as reducing CO2 emission, energy consumption or water consumption (10% or more decrease in its volume)
    • To improve the certification level by one rank, acquisition or reacquisition of the certifications
  • Energy Saving Equipment
    • Costs related to renewal of air-conditioning equipment, conversion of lighting fixtures to LEDs, and introduction of power storage systems (expected energy savings of 10% compared with conventional systems)
  • Renewable Energy
    Acquisition or installation of renewable energy power generation facilities (installed on the premises or on the rooftop of the property)

Acquisition of major environment-related certifications at fund properties managed by Sumisho Realty Management Co., Ltd. (as of July 2023).

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 ☆☆☆☆☆
DFF Inc.

GX Concierge, Providing Side-by-Side Support for Decarbonized Management

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.

GX Management Cycle
DFF Inc.

ZEB Ready Certification for Hatchobori 1-chome Office Building Project (tentative title)

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.

DFF Inc.

Using GX Concierge to Visualize GHG Emissions from Logistics Facilities (SOSiLA )

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.

DFF Inc.

Issuing Green Bonds and Operating Eco-friendly Data Centers in the IT Business

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.

Bonds used to fund netXDC Chiba Center No. 3
DFF Inc.

Retrofitted EV Bus Business with Nishitetsu Group

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.

First retrofitted EV bus assembled in Japan (operating in Fukuoka City from June 2023)
DFF Inc.

Hakobune Established to Provide a Service Combining EVs with Energy Management

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.

DFF Inc.