Polyplastics Group’s Initiatives to Prevent Climate
Change and Realize Carbon Neutrality

In FY2022, the Polyplastics Group identified risks and opportunities related to climate change and considered their impact and countermeasures.

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Scenario Analysis Assumptions

1. Scope of Scenario Analysis

Scenario analysis was conducted using the following process (see figure below):

POM, PBT, PPS, LCP, and COC businesses operated by Polyplastics
Scope: Consolidated companies

2. Scenario Assumptions
Based on information provided by the IPCC and IEA, etc., we considered risks andopportunities based on a 1.5ºC/2ºC global surface temperature rise scenario in
which decarbonization advances, and a 4ºC scenario in which decarbonization
does not progress.

1(1) evaluation of importance, (2) scenario definition, (3) business impact evaluation,and (4) planning countermeasures.

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Evaluation ofImportance• Sort climate change-related eventswith medium- to long-term impacts
into transition risks, transition
opportunities, or physical risks• Identify businesses that will growthrough decarbonization policies
as opportunities

PlanningCountermeasures

3. Timescale• Planning initiatives to reduce

Transition risks and opportunities and physical risks as of 2030 were considered.
°C
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SSP5-8.5

4

SSP3-7.0

3SSP2-4.5

2

SSP1-2.6
SSP1-1.9

10–1
1950

Scenario Analysis Process

2000

2015

2030

2050

Global surface temperature change(compared to 1850–1900) for each scenario
2100 Summary for Policy makers, P.22, IPCC AR62• 1.5ºC/2ºC scenario: IPCC’s SPP1-impact on business, newbusinesses (products andservices) that contribute tothe realization of adecarbonized society

2.6 and SSP1-1.9 scenarios• 4°C scenario: IPCC’S SSP5-8.5
and SSP3-7.0 scenarios

BusinessImpact Evaluation

4ºC Scenario

1.5/2ºC Scenario

Scenario
Definition• Task force teams that3

include marketing & sales,
production, supply chain,
and R&D personnel toidentify business impacts
through workshops

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1-3Scenario Overview (1.5ºC/2ºC)

Scenario Overview (4ºC)

Societal Changes

Societal Changes• In order to keep the average temperature increase to less than 2ºC by the end of• D ivision between regions that are quick to implement strong laws andthe century, strong legal and regulatory enforcement and technologicalregulations, especially in Europe, and regions that are slow to introduce strict

innovations will be promoted

regulations, especially in emerging nations whose focus is on economic growth• Environmental performance (low environmental impact) is as valuable tocustomers as quality, cost, and delivery (QCD), in line with their efforts to realize
decarbonization globally• In the chemical industry, corporations and businesses unable adapt toresults in slow progress in GHG reduction• L imited number of customers choosing to evaluate environmental performance(low environmental impact)• L ack of aggressive investment in the fossil fuel and chemical industries anddecarbonization will be eliminated and raw material procurement risks willconsolidation due to aging facilities will increase risk associated with raw

increase due to corporate consolidationmaterial and fuel procurement• Criticism from society for non-compliance with environmental policies becomessevere (conditions lead to customers stopping transactions)• Increased share of renewable energy sources will destabilize the power supply• C riticism from society for non-compliance with environmental policies becomessevere (conditions lead to customers stopping transactions)• Increased share of renewable energy will destabilize electricity supply insome regions

Technological Innovation

Technological Innovation• Technologies related to carbon capture and utilization (CCU) and resource• Increased energy prices encourage investment in energy-saving technology, andrecycling are actively developed and will be put into practical use by 2030

the availability of such technology will directly affect cost competitiveness• Investment in CO2-reduction technologies will increase, and whether or not
appropriate technology is acquired will directly affect cost competitivenessClimate Change

Climate Change• Increasing severity of disasters such as typhoons and floods• Increasing severity of disasters such as typhoons and floods• Increasingly extreme weather events such as heat waves• Increasingly extreme weather events such as heat waves

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2Polyplastics Group’s Initiatives to Prevent Climate Change

To continue as an excellent solution provider, Polyplastics has promised to proactively reduce its product carbon footprint (PCF) andaddress climate change risks (adapt to the 1.5ºC/2ºC scenario and achieve growth).

Basic Strategies
1 Reducing costs and CO2 emissions through proactive environmental investment
2 Introducing energy from low environmental impact sources
3 Reducing PCF by working with suppliers
4 Expanding recycled products and investing in recycling technology development
5 Securing stable supplies of low-CO2 raw materials
6 Stabilizing quality (uniformity and multi-origin), optimizing grade lineup, and evolving technical services
7 Actively participating in GX-ETS and other GHG reduction schemes and complying with laws and regulations
8 Proactively providing PCF and other environmental performance data to customers

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3Risk and Response (Transition Risks)

Transition Risks

Risks

Financial Impact(billion/year)
4ºC
Scenario

1.5ºC/2ºC
Scenario

Our Initiatives

Taxation on GHG Emissions

Impact of imposing a carbon tax on the 2030 businessas-usual emissions

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10.8

Cutting impact in half by promoting activities to achieve theDaicel Group’s GHG reduction target (50% total GHG emissions
reduction compared to FY2018)

Increased Raw Material
Prices• Carbon tax equivalent to the amount of CO2 containedin raw materials will be passed on to Polyplastics• Increased raw material prices due to high fossil
fuel prices• Increased working capital (increased interest burden)

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17.5

• Reducing impact by working with suppliers to reduce GHGemissions• Reducing working capital by improving inventory management

Carbon Border Adjustment
Mechanism (CBAM)

Goods produced in Asia are subject to a different
carbon tax when exported to Europe

1.5

0.5

Reducing impact through energy-saving and implementing theprocurement of low-CO2 materials

Environmental Compliance
Violations

Being excluded from new development projects as aresult of suspension of transactions with customers
due to non-compliance0.40.4Maintaining ISO 14001 certification and strengthening systems
related to environmental response

Simplification of Raw
Material Composition

Customers demand the simplification of raw material
formulations for easy recycling, increasing the difficultyof designing compounds for functionality——

Resolving risks by accelerating technology development and byapplying expertise in formulation design and technical servicesConsolidation of Raw
Material Suppliers

Difficulty in procuring raw materials due toconsolidation in the chemical industry, forcing a change
to alternative raw materials (impact not yet calculated)——

Reducing impact by promoting multiple purchases, simplifying
raw materials through formulation, and promoting uniform
quality through improved manufacturing technology

Increased Prices of Low-PCF
Raw Materials, Difficulty inProcurement

Due to competition for bio-materials, etc., price hikes
and procurement difficulties (securing physicalinventories) occur, raising concerns about cost increases
and supply responsibility

1.01.0Developing CCU methanol within the Daicel Group, having longterm procurement agreements on low-PCF raw materials

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3Risk and Response (Physical Risks)

Physical Risks

Risks

Financial Impact(billion/year)
4ºC
Scenario

1.5ºC/2ºC
Scenario

Our Initiatives

Operations decrease due topower instability

Operations decrease due to plants being unable toprocure the required power

0.50.5Developing a response plan to minimize the impact of reduced
operations at each plant in the event of a power outage

Flooding of plantsDamage to plants and facilities from flooding exceeding
previous assumptions——

Investigating flood risks and preventing damage by making thenecessary facility modifications and formulating a business
continuity plan for floods

Deterioration of work
environment due toclimate change

Slowdown of production and other activities due todeclining work conditions, including increased instancesof heat stroke, and the spread of infectious diseases——

Ensuring health and safety is essential to a company’ssustainability, and we will continue to improve the workplaceenvironment as we have in the past.

The following physical risks were also considered and discussed.
Although it could be assumed that natural disasters will not be drastically impactful in 2030, we will concretely implement
risk management efforts through thorough discussion with our partners, including suppliers and logistics companies.

• Suspended or reduced operations at suppliers’ and customers’ offices and plants due
to water shortages, floods, power outages, etc.
• Interruption or delay of logistics channels• Impact on operations of power outages and transportation stoppages• Product and raw material quality loss due to floods

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4Opportunities

Creating Business Growth

Opportunities

5Business expansion throughproducts for environmentalload reduction

Financial Impact(billion/year)

Our Initiatives

4ºC
1.5ºC/2ºC
Scenario Scenario

Incremental profit gain from converting
customers’ environmental needs into growth
opportunities in the engineering plastics business

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6Investment

7.5• Developing the recycling business (Re-compounding business)• Developing low-CO2 products (utilization of CCU technology,
development of bio-based raw material products)

Financial Impacts on Polyplastics’ Businesses (Summary)

As part of Polyplastics’ initiatives towards Carbon Neutrality , we will invest ¥34.0

Through Polyplastics’ efforts towards Carbon Neutrality, we will actively implementbillion by 2023.

activities to reduce risks of financial impact and aim to expand our business as agrowth driver.

• Conversion to high-efficiency production processes• Installation of energy-saving equipment• Installation of equipment for the commercialization of recycled products• Switching to green energy

4ºC scenario

 Increase of approximately ¥4.0 billion

1.5ºC/2ºC scenario
Increase of approximately¥10.5 billion

Risks
Reduction activities approx. ¥34 bn
vs.
Opportunities
approx. ¥7.5 bnapprox. -¥31 bn

Risks
Reduction activities approx. ¥11 bn
vs.
Opportunities
approx. ¥1.8 bn
approx. -¥9 bn

The Daicel Group will promote Groupwide efforts to stably procure low-CO2 raw
materials (monomers).

In addition, as part of its responsibility as a supplier, Polyplastics will work to reducethe carbon tax burden (including CBAM, recycling regulations, etc.) by providing
low-CO2 products.
4ºC scenario

approximately¥2.0 billion

1.5ºC/2ºC scenario

approximately¥12.0 billion
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7Management Indicators and Targets for 2030

Reduce PCF (cradle-to-gate basis) by 46% (compared to FY2013)
Reduce GHG emissions by 50% (compared to FY2018 Daicel Group levels)

KPIs

Increase the rate of circulated materials used to 25% (realize engineering plastics recycling,methanol CCU, biomonomer procurement)
Increasing sales of recycled products (grade using recycled materials) to 10%In November 2021, the Daicel Group endorsed the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. In line with the TCFD
recommendations, Polyplastics will proceed with governance, strategy, risk management, and the disclosure of indicators and targets related to climate change.
The Polyplastics Group, as part of the Daicel Group, is committed to governance and risk management in its climate change initiatives and will continue topursue activities to realize the strategy as well as indicators and targets.
Polyplastics Group is committed to addressing climate change in line with the Daicel Group’s TCFD policy.
Please see here for the Daicel Group’s TCFD initiatives

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