Response to Climate Change

Basic Stance / Risks and Opportunities Identification Based on Scenario Analysis

Basic Stance / Risks and Opportunities Identification Based on Scenario Analysis

Basic Stance

Recognizing that responding to climate change is one of the most important issues that must be addressed on a global scale, Idemitsu Group works to solve this issue through both "mitigation" and "adaptation" by making maximum use of our resources.
Assuming multiple scenarios of future possible business environments through scenario analysis, we identify risks and opportunities and reflect the results in its strategies and initiatives.

Scenario Analysis

With regard to risks and opportunities associated with climate change, we used scenario analysis to explore possible energy transition pathways, resulting from decarbonization, development of environmental technologies, and social change, and to examine their impacts on our company.
Scenario analysis identifies energy demand and the effects of climate change in the Asia-Pacific region and the management environment in 2050 is assumed. Four scenarios were prepared, including a scenario in which the increase in energy demand exceeds the trend toward low-carbon emissions due to the high growth of the Asian economy, and a scenario in which the targets of the Paris Agreement are achieved. (Figure below) We are examining specific priority topics with a strong awareness of the "Prism" scenario, in which the company is expected to take stronger environmental measures.

Figure
Risks and Opportunities

On the basis of scenario analysis, we examined the risks and opportunities we face. As for risks, we recognize a decline in demand for petroleum products due to the spread of electric vehicles (EVs) as well as changes in consumer awareness, and a decline in the reputation of the fossil fuel business. On the other hand, with an increasing demand for renewable energy and environmentally friendly products, we are aware of opportunities to contribute to the realization of a low-carbon society and to expand our businesses.
We aim to reform its business portfolio in order for the Group to become a group of resilient companies by responding to these risks and strengthening its business initiatives to capture opportunities. 

Classification Matters to be evaluated Response and initiatives
Transition risk Decline in demand for petroleum products due to the spread of EVs and changes in consumer awareness
  • Market monitoring and the establishment of optimal production, supply and sales systems
  • Departure from the business portfolio depending on fossil fuel
Decline in energy prices due to technological advances
  • Strengthening of the competitiveness of the entire supply chain
Possibility of divestment of the coal mining
  • Development of mixed burning technology with black pellets and biomass
Decline in the reputation of the oil and coal business
  • Strengthening of external engagement
Physical risk Suspension of equipment operation and damage to bases due to abnormal rainfall and others
  • Reinforcement of equipment maintenance and strengthening of the supply chain
Impact of sea-level rise on manufacturing and distribution bases
  • Measures such as reinforced seawall and relocation of control rooms
Opportunity Expanding demand for renewable energy
  • Development of renewable energy sources in Japan and overseas
Strengthening of IMO (International Maritime Organization) regulations
  • Efficiency improvement and reinforcement of refinery facilities
Increasing demand for environmentally friendly products with low environmental impact
  • R&D and overseas expansion of lubricants for electric vehicle units, advanced greases, and biological pesticides
Increasing demand for energy-saving materials
  • Development of applications for next generation materials and commercialization of all solid state lithium-ion battery materials
Development of distributed energy resource systems
  • Development of and entry into VPP(virtual power plant) control services
Development of the circular economy
  • Development of recycling technologies for waste plastics, solar panels, carbon, etc.
Advent of the MaaS (Mobility as a Service)society
  • Development leveraging the existing SS (service station) network and entry into ultra-compact EVs
Development of natural gas resources
  • Shifting focus from oil to gas
Risk Management

Climate-related risks are also identified and assessed by the Safety & Environmental Protection Headquarters. In addition, receiving advice from outside experts, the Safety & Security Advisory Committee conducts risk management from objective viewpoints. We are also developing a comprehensive risk management system that incorporates ESG elements into our internal control system.

出光興産, DFF Inc.