NEC expressed its support for the Task Force on Climate-related Financial Disclosures (TCFD) and its recommendations in 2018 and provides disclosures on this page based on the TCFD framework.

Climate Change Countermeasure Implementation Framework

In the Environmental Management Implementation Framework, NEC engages in environmental management as well as climate change.

Within the framework described in Environmental Management Promotion Framework, we are also implementing climate change measures. The NEC Group’s environmental policies and goals regarding climate change are discussed and formulated by the Environmental Management Promotion Committee, which is made up of the managers in charge of the environment from each business unit. The Corporate Officer in charge of the Environment confirms the council’s proposals and reports them to the Business Strategy Committee, an organization that is further up the organizational hierarchy. Risks related to climate change are also shared at the Environmental Management Promotion Committee. The Corporate Officer in charge of the Environment confirms those risks that could have a significant impact on businesses and, as necessary, deliberates these risks at the Risk Control and Compliance Committee in accordance with the risk management process.

In particular, climate risks and opportunities that could significantly affect businesses are also reported to the Board of Directors, as necessary. Through deliberation, the Board of Directors gives instructions on relevant measures, thereby providing supervision that ensures that NEC advances appropriate climate change measures.

In addition, as part of our climate change measures, we are advancing groupwide measures to reduce our in-house CO₂ emissions by addressing specific aspects of the issue through special committees. By reporting and submitting proposals to the Environmental Management Promotion Committee, these special committees facilitate the groupwide pursuit of energy-saving initiatives. Decisions made at the Environmental Management Promotion Committee are reported and instructed at each business unit and plant committee, and are then communicated to and thoroughly implemented by all employees.

Participation in Initiatives Related to Climate Change

NEC is participating in environmental initiatives to build a sustainable business foundation for itself and promote the realization of a sustainable society through co-creation.

Involvement with Industry Associations

Environment-related Reports for Main Committees

Since climate change is an important materiality, committees attended by managers deliberate, supervise and report on initiatives and risks related to the environment, including climate change. In fiscal 2022, in addition to engaging in dialogue with stakeholders, NEC set up the Sustainability Advisory Committee to broaden discussions between management and outside experts.

Key Discussions, Audits, and Reports

Climate Change Countermeasure Policy

NEC has positioned Environmental Action with a Particular Focus on Climate Change (Decarbonization) as one of its priority management themes from an ESG perspective – materiality. As a result, NEC will not only make efforts to reduce the environmental impact of its products and services, but will also support customers and society in their decarbonization efforts by utilizing ICT. Based on this approach, NEC formulated the Course of Action for Climate Change Toward 2050, declaring its intent to reduce its CO₂ emissions to net zero as a long-term environmental goal. 
At present, we have moved up our carbon neutrality target to 2040 pursuant to signing The Climate Pledge, and are implementing initiatives after changing the language of our climate change guidelines to move up the year for achieving our carbon neutrality target to 2040.

Aiming for reductions to achieve zero CO₂ emissions from our supply chain by 2040, we obtained SBT Net-Zero certification in April 2024 and have intensified action. Given the global goal of achieving a low-carbon society,  we established the Carbon Neutral Business Promotion PMO and are implementing initiatives throughout the Group that involve reducing energy use in our ICT infrastructure, visualizing solutions for CO₂ emissions, resource aggregation businesses, and environmental consulting.

Contributions through Businesses

Contributing to Customers’Environmental Management Challenges

In the Environmental Strategy section, we outlined NEC’s approach and goals in addressing environmental management challenges, and we recognize that our customers face similar issues. NEC is still in the process of advancing its environmental management, and we believe customers are also at varying stages: Stage 1, where they are responding with minimal cost to meet customer demands and regulatory requirements; Stage 2, where they aim to reduce environmental impact and improve competitiveness while earning external recognition and enhancing corporate value amid rising carbon taxes and energy costs; and Stage 3, where environmental initiatives are integrated into their growth strategies, going beyond cost savings and value enhancement. NEC believes it can contribute in various ways tailored to each customer’s stage, drawing on its own experience.

In 2024, NEC introduced BluStellar, an end-to-end business model that creates value starting from customers’ management challenges. NEC applies the BluStellar values creation model in its environmental business as well. By leveraging technologies such as sensing, AI, and security, along with highly regarded external experts and knowledge, we visualize and analyze complex environmental issues to clarify the challenges that need to be addressed. Through the Client Zero approach, which treats NEC itself as the first client for value verification, and co-creation with clients, we clarify issues and effects, contributing to the establishment of industry standards.

Climate Change Mitigation (Decarbonization): Product-Level Environmental Information Management

Until now, CO₂ emissions have typically been visualized at the corporate level to comply with regulations. Going forward, visualizing CO₂ emissions at the product level will become essential to translate CO₂ reduction efforts into product competitiveness. As a result, environmental information management, including CO₂ emissions, will expand from organizational-level management for disclosure to product-level management that supports product competitiveness. In the previous fiscal year, NEC conducted a product-level CO₂ management trial at a Group factory as part of its Client Zero initiative. The trial helped identify challenges in operational processes and supplier collaboration that cannot be resolved by introducing management tools alone. NEC is now working on developing appropriate solutions.

Climate Change Adaptation: NEC Digital Adaptation Finance

Climate change measures must address not only decarbonization but also adaptation areas such as disaster prevention and mitigation. One of the main issues in the adaptation domain is insufficient funding, caused by the regional and temporal unevenness of climate-related causes and damages. At  COP28 in 2023, NEC proposed “NEC Digital Adaptation Finance,” a framework that quantifies the effects of adaptation measures using digital technologies to encourage funding. NEC has since established the Japan Consortium for Adaptation Finance and is working with its members and global partners to develop various financial instruments. The adaptation finance initiative was also introduced at COP29 in 2024, where it received numerous inquiries from organizations around the world. NEC’s expertise in digital transformation (DX) for disaster prevention has enabled the Company to pioneer initiatives like this new business for many years.

Scenario Analysis

In order to build a sustainable management foundation for NEC and promote the realization of a sustainable society through co-creation, we analyze the risks and opportunities that affect the environment and are implementing measures to reduce risks and increase opportunities.

In fiscal year 2025, we utilized AI for the first time to reassess companywide and business-specific risks.

Risks and Opportunities Presented by Scenario Analysis

NEC's Vision for 2030/2050: Our Future Lifestyles and Local Governments

NEC believes that a company cannot continue to exist and grow without analyzing scenarios for climate change. Among recent global risks, climate change risks are numerous and could have an extremely large impact on not only corporate business activities and earnings but also our livelihoods. No matter what future is in store for us, based on multiple scenarios, NEC will examine steps that should be taken to realize a safe and secure society while surviving and growing itself. In 2019, we conducted a Companywide scenario analysis, and in two different scenarios, we analyzed potential changes in risks and opportunities for NEC.

We envisioned "climate change x government DX" (FY2023)

Since fiscal 2022, we have been conducting scenario analysis for each of our various business fields because the climate change risks and opportunities differ depending on the field. In fiscal 2023, in the domain of "digital government," we used the 1.5°C and 4°C scenarios to evaluate NEC's business opportunities in government digital transformation (DX) in Japan and the transition to a decarbonized society in 2030. Specifically, we drew up a picture of "climate change x government DX" in 2030, and considered the business concept proposal based on the company's risks and opportunities. Furthermore, we have enhanced our external hearings in order to reflect the voices of our stakeholders, .

Results of Scenario Analysis (2030): World Envisioned by NEC in 2030 and 2050
～climate change x government DX～

NEC created scenarios for 2030 and 2050 to envision the impact of climate change on the future of regions and local governments (core cities and small-scale cities). We evaluated four scenarios, with the 1.5℃ and 4℃ scenarios in the transition to a carbon-free society on the vertical axis, and the relationship of citizens with their governments and the state of government systems, separated by enforced actions and voluntary actions, on the horizontal axis. In each scenario, we used some items related to climate change and decarbonization, with assumptions for 2050 in the following scenarios.

Referenced Published Scenarios

Scenario：Our Future Lifestyles and Local Governments

Risks and Opportunities Based on Scenario Analysis

Identifying Climate Scenarios

NEC conducts scenario analyses to understand the impact of climate change on our businesses and evaluate the resilience of our strategies for climate-related risks and opportunities. Our analysis focuses on the 1.5°C scenario, which involves the transition to a low-carbon economy based on the Paris Agreement and the demands of stakeholders; and the 4°C scenario, in which implementation of climate change measures fall short of current expectations. The scenarios we referred to during scenario analyses are as follows:

Referenced Published Scenarios

Timeline

To address the Paris Agreement and stakeholder demands, we recognized the need to evaluate the long-term impacts of climate change and therefore conducted our analysis up to the year 2050. We also made 2030 an interim milestone to align with the SBT targets we set.

Analysis Steps

In fiscal year 2025, we utilized AI for the first time to reassess companywide and business-specific risks, through the following steps.

As a result of the steps above, we identified carbon pricing as a companywide risk, and the data center and telecom services businesses as business-specific risks.

Summary

In fiscal year 2025, NEC conducted a scenario analysis-based risk assessment across all its businesses. By applying AI for the first time and screening by the Environment Management Department, NEC identified companywide and business-specific climate-related risks that could reasonably be expected to impact the Company’s outlook. The Environment Management Department led the assessment, and confirmed that NEC could continue and grow its business under any scenario by taking appropriate measures. The climate change risk measures identified will be sequentially incorporated into the long-term strategies of each business unit.

At the same time, envisioning diverse future scenarios for customers from a climate change perspective is a necessary step to uncover NEC’s business opportunities, and analysis of such opportunities will be carried out in the coming years. 

NEC is targeting carbon neutrality by 2040. We have set targets for 2030 and fiscal year 2026, and are taking action.

Scope 1, 2 and 3 Emissions

Greenhouse Gas Emissions (Scope 1, 2 and 3) *Market-based data for Scope 2

Calculation Method

We determine greenhouse gas emissions for the NEC Group on a consolidated basis. Scope 2 market-based calculations are based on Japanese law, and location-based calculations are based on the country-specific emission factors in International Energy Agency (IEA) Emissions Factors 2024. Scope 3 calculations are based on the GHG Protocol Scope 3 Standard. Scope 1, 2, and 3 calculation results have all been verified by a third party

Progress towards Our SBT Net-Zero Goal

The NEC Group has the goal of achieving carbon neutrality by 2040, which has been certified as a Net-Zero goal by SBTi. To achieve this goal, we aim to reduce Scope 1, Scope 2 and Scope 3 emissions by more than 50% each by fiscal year 2031 compared to fiscal year 2021. To achieve our goals, for Scope 2 we are increasing the use of renewable energy that meets the RE100 standard. For Scope 3, we are engaging with our suppliers to reduce Category 1 emissions, which is the category with the highest emission volume.

Furthermore, in order to reduce Category 11 emissions, we are working to improve the energy efficiency of our products and proposing the use of green data centers that use 100% renewable energy to our customers.

However, Scope 3 emissions have increased as our business has expanded because the calculation of Scope 3 does not yet reflect the results of the above measures. To resolve this issue, we are currently reviewing our calculations to base them on primary data.

Assets and Business Activities Exposed to Physical Risks

NEC operates data centers in 11 locations throughout Japan, including Kobe and Kanagawa. Data centers provide cloud services and data warehousing services to government agencies and companies, and are important facilities that operate multiple information systems. The operational continuity of data centers is critical to providing uninterrupted services to customers. 

Meanwhile, in recent years, natural disasters have become more frequent in Japan. In 2019, a typhoon that brought record-breaking rainfall impacted a wide area of Japan. This rain caused major damage to lifelines, including power outages and broken water mains. River flooding caused widespread damage. Abnormal weather caused by climate change could increase the frequency of disasters, which could pose a risk to the continued operation of data centers. With this in mind, NEC builds data centers in areas that are less susceptible to flooding and tsunamis to prevent water damage to facilities. Our data centers are equipped with emergency power sources with enough fuel to operate generators for at least 72 hours. This would allow information systems to continue to operate even in the event of a power outage. We have concluded priority fuel supply contracts with fuel suppliers to ensure that we receive priority fuel supplies in the event of an emergency. 

In addition, to enable NEC to proactively respond to climate change in the future, we have decided to reevaluate the natural disaster resilience of all data centers and conduct annual load tests that involve start-up tests of emergency generators in simulation of actual power outages, and are taking action accordingly.

Performance of Data Centers in Japan and Goals for Fiscal 2026

Internal Carbon Pricing

With the aim of improving energy efficiency and promoting the introduction of low-carbon facilities and equipment, we have set internal carbon pricing. This pricing allows us to convert the CO₂ emission reductions that would result from a given capital investment into a monetary value, which we can then use as a reference when making investment decisions.

The aforementioned carbon pricing mechanism will drive our decarbonization activities going forward and reduce the risk associated with potential increases in carbon taxes and emissions trading in a decarbonized society of the future. NEC has set its internal carbon price at 3,000 yen/t-CO₂.

Reflecting Climate Change in Executive Compensation

In fiscal year 2023, NEC determined key performance indicators (KPIs) and sustainability performance targets (SPTs) that reflect NEC’s initiatives for “Environmental Action with a Particular Focus on Climate Change (Decarbonization),” and issued sustainability-linked bonds with maturities of five, seven, and ten years. Failure to achieve all SPTs will require NEC to purchase emission rights (CO₂ avoidance or reduction converted into credits or certificates) equivalent to 0.1% of the bond issuance amount prior to redemption, which will affect earnings. This will also significantly impact NEC’s reputation, and will directly affect the evaluation of corporate officers, including directors. The impact is less than 5%.

The CSCO is responsible for the entire supply chain. NEC has formulated climate change guidelines with a long-term perspective to 2040, determined medium-term goals to 2030, and integrated short-term and medium-term goals that are reviewed annually.

The CSCO is responsible for the NEC Group’s medium- to long-term goals, and is working on functional reforms to promote environmental management. Progress toward these goals factors into bonus assessment in the annual performance evaluation to reflect the significance of progress towards achieving the emission goals of the NEC Group. The impact is 10%.

Carbon Credits

At present, NEC is not using carbon credits to offset CO₂ emissions. With a view to achieving carbon neutrality by 2040, NEC plans to use carbon credits in the future to neutralize residual emissions, but has not yet considered specific details.

Energy Efficiency & Conservation Mutual Audit Program

In collaboration with our group companies, we conduct the ‘Energy Efficiency Mutual Audit Program’ twice yearly. This initiative involves mutual visits among our facilities to assess and evaluate energy usage and energy-saving measures. Within each facility‘s energy efficiency activities, we utilize a “mandatory energy-saving action checklist” (commonly established across the group) to regularly monitor implementation status. The audit process involves identifying key focus areas based on this checklist, followed by on-site inspections and stakeholder interviews. Through this program, we verify compliance with mandatory energy-saving measures while also providing specific feedbacks for potential improvements. These efforts contribute to improving overall energy performance and further drive energy conservation and cost-saving initiatives across the group.