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Climate Change

Our Approach

Toward the realization of carbon neutrality by 2050, NEC is expected to fulfill an increasingly large number of roles and responsibilities. In response, NEC has positioned climate change (decarbonization) as a core response to environmental issues and one of the Company's priority management themes from an ESG perspective—materiality. Based on the NEC Environmental Policy and the Course of Action for Climate Change Toward 2050, our climate change countermeasures are providing value both in terms of mitigation and adaptation. In 2021, NEC drafted NEC Environmental Targets 2030 and declared an objective to achieve net zero emissions of CO2 (Scope 1, Scope 2, and Scope 3) in its supply chain by 2050. In 2022, NEC formulated a climate transition plan and expanded its strategic activities through business and initiatives to reduce its environmental burden by setting more targets toward a decarbonized society.
In September 2022 NEC joined The Climate Pledge (TCP), an initiative that Amazon and Global Optimism launched jointly in 2019. In conjunction with this initiative, we pledged to move up our achievement of carbon neutrality to 2040. We will also contribute toward carbon neutrality for our customers and society as part of our business expansion efforts. We will do this through means including energy-saving ICT infrastructure, solutions that visualize CO2 emissions, resource aggregation businesses, and environmental consulting.

NEC also reports on its CO2 emission reduction activities based on Japan's Act on the Rational Use of Energy and Act on Promotion of Global Warming Countermeasures.

Disclosure in Line with the TCFD*

In 2018, NEC announced its endorsement of the TCFD. Pursuant with the TCFD's recommendations, we are disclosing climate-related risks and opportunities while projecting and managing their financial effect on our businesses going forward.

  • *
    Task Force on Climate-related Financial Disclosures
TCFD | TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES

Outline of Initiatives Based on TCFD Recommendations

Item Description Related pages
Governance
  • Report to the Board of Directors important issues related to the environment, including climate change
  • Based on environmental management rules, clarify roles, responsibilities, and authority of organizations related to promoting environmental management
Environment-oriented Management Implementation Framework
Reports and Deliberations by Main Committees
Strategy
  • Set key material issues for management of climate change
  • Examine countermeasures and identify risks and opportunities over the short, medium, and long term related to climate change, based on multiple scenarios
  • Mitigation (decarbonization) leads to business opportunities/Develop appropriate solutions and expand provision
  • Implement measures toward decarbonization, manage outcomes
Products and Services That Help to Mitigate Climate Change
Scenario Analysis
Risks and Opportunities Presented by Scenario Analysis
Introduction of internal carbon pricing
Risk management
  • Assess risks under Environment-oriented Management Implementation Framework and with the Risk Control & Compliance Committee
  • Advance activities to address potential and materialized risks, understand results and issues, and examine plans to reduce and prevent risks
Environment-oriented Management Implementation Framework
Environmental Risk Countermeasures
Risks and Opportunities Presented by Scenario Analysis
Risk Management
Compliance
Indicators and results 2040 targets
  • Net zero CO2 emissions
    (Scope 1, 2, and 3)
  • 100% renewable energy
2030 targets
  • Setting of SBT 1.5℃
    Scope 1 and 2: 55% reduction
    (compared with fiscal 2018); Scope 3
    (Categories 1, 3, and 11): 33% reduction
    (compared with fiscal 2018)
Climate Change
Greenhouse Gas Emissions
Policies and Targets for the Use of Renewable Energy
Progress toward SBT 1.5°C
Environmental Data

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

FY20232 timesMay: NEC's Approach to Sustainability Promotion and Key Initiatives
February: Business Risks and Opportunities in the Natural Capital FieldFY20232 timesMay: NEC's Approach to Sustainability Promotion and Key Initiatives
February: Business Risks and Opportunities in the Natural Capital Field
Forum Fiscal year Frequency Key discussions, audits, and reports
Board of Directors FY2020 1 time May: Sustainability promotion policy
FY2021 4 times June: Report on sustainability promotion activities
December: Environmental perspectives in next mid-term management plan
February: Report on sustainability promotion activities
March: NEC Eco Action Plan 2025 (including investment and spending plans)
FY2022 4 times May: Report on sustainability promotion activities
December: Participation in BA1.5℃, report on ESG briefings
January: NEC's initiatives to become carbon neutrality
February: Environmental risks (part of Companywide risk countermeasure evaluations)
FY2023 4 times May: Activities for Carbon neutral
July: Issue of Sustainable linked bond
October: Climate Change Summit
February: NEC's environmental initiatives
~Strengthen carbon neutral measures in the future~
Dialogue between management and outside experts Dialogue with stakeholders FY2020 1 time Response to environmental issues centered on climate change
FY2021 1 time What initiatives should NEC take now to create environmentally beneficial businesses
Sustainability Advisory Committee FY2022 1 time Understanding global trends related to climate change and NEC's risks and opportunities
FY2023 2 times May: NEC's Approach to Sustainability Promotion and Key Initiatives
February: Business Risks and Opportunities in the Natural Capital Field

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

1.5℃ Scenario 4℃ Scenario
  • IPCC AR6 WGⅠ SSP1-1.9
  • IPCC 1.5℃ Special Report
  • IPCC AR5 RCP2.6
  • IEA World Energy Outlook 2021
    Net Zero Emissions by 2050
    Scenario (NZE)
  • National Institute for
    Environmental Studies, Japan,
    Version SSP SSP1: Sustainable,
    SSP5: Reliance on Fossil Fuels
  • IPCC AR6 WGⅠ SSP1-8.5
  • IPCC AR5 RCP8.5
  • IEA World Energy Outlook 2021
    Stated Policies Scenario (STEPS)
  • National Institute for
    Environmental Studies, Japan,
    Version SSP SSP3: Regional
    Divisions, SSP4: Disparities
Second scenario: 1.5℃ × Forced environmental supreme efficiency scenariozoomLarger view
Second scenario: 1.5℃ × Forced
environmental supreme efficiency scenario
First scenario: 1.5℃ × Spontaneous regional value diversification scenariozoomLarger view
First scenario: 1.5℃ × Spontaneous regional
value diversification scenario
Third scenario: 4℃ × Forced disaster response scramble scenariozoomLarger view
Third scenario: 4℃ × Forced disaster
response scramble scenario
Fourth scenario: 4℃ × Spontaneous wider adaptation gap scenariozoomLarger view
Fourth scenario: 4℃ × Spontaneous wider
adaptation gap scenario

Scenario:Our Future Lifestyles and Local Governments

  • *
    Vertical axis: Realization of 1.5°C carbon society (global temperature up 1.5°C in the year 2100) and 4°C failure (global temperature up 4°C in the year 2100)
    Horizontal axis: Forced and spontaneous aspects of relationships between residents and governments and state of government systems

Risks and Opportunities Based on Scenario Analysis

  Summary of 2030 scenarios Key themes Opportunities Risks 2030 NEC business examples
1.5℃
  • National and local policies and public concerns are focused on well-being and the environment.
  • Decarbonization policies are a top priority for national and local governments, and the transition to a decarbonized society is under way due to legislation introduced in the 2020s combined with the efforts of companies and local governments.
  • Areas at the forefront of decarbonization are introducing renewable energy and promoting energy management, with net zero CO2 emissions in the consumer goods sector.
  • The penetration rate of the My Number Card is 100%. The number of administrative services that provide incentives and subsidies using this card is increasing, encouraging citizens to change their behavior.
  • Renewable energy-based distributed power sources
  • Increasing use of electric vehicles
  • Incentives for environmental activities
  • Visualization of natural capital
  • Increased awareness of well-being
  • Disaster preparedness planning using digital twins
  • Post-disaster support using the My Number Card
  • Local governments outsource and privatize some operations
  • Increase in data centers using renewable energy
  • Healthcare business expands as health incentives become more significant
  • Systematization of frameworks for emissions calculation, carbon taxes, emissions trading and carbon footprint
  • Expanding markets for sensing, visualizing and quantifying ecosystems, environmental conservation, losses and damage
  • Increased use of image analysis technology in compact cities
  • Transformation of conventional business models due to the progress of government DX and the increased standardization and commonality of systems
  • Intensifying competition with competitors and new entrants
1.5°C and energy management:
Decarbonization support services for
local governments that visualize
resident initiatives and administrative
policy outcomes

4°C and disaster preparedness:
Pre-disaster (disaster self-sufficiency
simulation); during disaster
(uninterrupted telecommunication,
damage certification issuance
support); post-disaster: volunteer
support promotion system

Both scenarios and healthcare: Data
utilization system to improve local
branding based on healthcare for
4°C visitors and environmental value
4℃
  • Many regions of Japan are confronted with rapidly declining population and financial difficulties.
  • National and local governments struggle to provide infrastructure and services for all citizens.
  • Wide-area collaboration and public-private partnerships gain traction. Climate change mitigation is deprioritized due to limited administrative staff, funding and other resources.
  • Enhanced crisis management capabilities and continuity of administrative functions are required in anticipation of increasingly frequent, large-scale disasters, and adaptation initiatives are prioritized.
  • Growing community disparities, stratification and division are affecting all aspects of policy from economics and finance to welfare, education and urban planning, and are becoming social issues.
  • Disaster preparedness planning using digital twins
  • Post-disaster support using the My Number Card
  • Fossil fuel-based centralized energy systems
  • Rising prices for energy, food and other commodities
  • Cars are primarily for household use
  • Decrease in natural capital
  • Increased needs for disaster preparedness and mitigation, and for solutions during and after disasters
  • Creation of administrative solutions using personal and administrative data
  • Growing needs for agricultural products that are resilient to climate change
  • Increase in solutions for introducing renewable energy and promoting local energy production for local consumption
  • Entry into the personalized medicine and online medical care markets
  • Coordination of supply chain BCP among industries
  • Growing security business needs
  • Contracting markets and decrease in business opportunities due to fewer customers and system integration
  • Intensified deregulated competition
  • Resistance to the use of personal and biometric information

Risks and Opportunities for All of NEC

NEC identifies and classifies impacts arising from climate change as short-term, medium-term, and long-term risks and opportunities. Under the examination process, NEC evaluates the future impact of climate change based on scenarios after existing businesses are reorganized from a climate change perspective. At the same time, we confirm assets for addressing risks and taking advantage of opportunities. Major risks and opportunities are reflected in mid-term management plans.

Risks Description Risk Management and Countermeasures
Transition risk Risks from carbon pricing
  • Assuming all of NEC's Scope 1 and Scope 2 emissions (about 164,000 t -CO2) upon achievement of new targets in fiscal 2031 toward net zero CO2 emissions by 2040 ar e subject to carbon pricing (130 U.S. dollar/t-CO2), costs will increase by 2.8 billion yen (assuming 130 yen/1 U .S. dollar)
  • Assuming impact from higher costs in upstream and downstream supply chains
Increase use of renewable energy and achieve thorough gains in efficiency to achieve net zero CO2 emissions target by 2040 (ongoing efforts in supplier engagement and to improve energy saving performance of products)
Physical risk Possible disruption of supply chains due t o weather-related disasters (floods, landslides, water shortages, etc.), long-term outages of lifelines such as electricity, gas, and water Risk assessment of the entire supply chain, BCP measures (installing flood gates and moving power supply equipment) with provisions for weather-related disasters, such as river flooding, and strengthening of power generation in data centers
Opportunities Description Creation and expansion of opportunities
Value provided in transition risk
countermeasures (mitigation)
Development of low-emission transport infrastructure Logistics visualization and route optimization driven by AI and IoT; EV/PHV charging cloud
Support for expanding renewable energy use Virtual power plants, management of power supply and demand, commercialized resource aggregation (RA) for the supply and demand adjustment market, energy management systems (xEMS), provision of data center services that use renewable energy, etc.
Support for reducing energy use Process reforms using DX initiatives (work automation, smart factories, supply and demand optimization), products, and technologies that help data centers save energy (phase change cooling, new refrigerants, etc.)
Value provided in physical risk
countermeasures (adaptation)
Preparation for increase in weather-related disasters
  • Pre-disaster detection using AI, IoT, image analysis, flood simulation, evacuation support, etc.
  • Visualization of the amount of future CO2 reduction through disaster preparedness and mitigation, and consideration of mechanisms that promote investment in disaster preparedness and mitigation by transforming them into financial products.
Preparation for increase in forest fires Forest fire monitoring and quick response systems, disaster monitoring by satellite, etc.
Preparation for changes in areas suitable for agricultural production Simulations that forecast effects and changes in agriculture, agriculture-oriented ICT solutions, etc.
Preparation for the spread of infection Infectious disease countermeasure solutions, preparation of a logistics information management platform in the e vent of a global infectious disease, remote work, telemedicine support, education clouds, etc.

ESG Consulting Approach: Steps to Achieve Decarbonization

Introduction of Internal Carbon Pricing

With the aim of improving energy efficiency and promoting the introduction of low-carbon facilities and equipment, we have set an internal carbon price. This price 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.

Furthermore, 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 carbon-free society of the future.

Helping with Mitigation

Our ICT solutions reduce the overall CO2 emissions of customers by enabling their operations to become paperless and by improving the efficiency of work, the movement of people, and the movement and storage of goods. As customers and society move forward with measures to lower CO2 emissions, the opportunities for NEC's ICT solutions to make a contribution will increase.

Helping with Mitigation

Helping Companies Achieve Net Zero through the Resource Aggregation Business
With the aim of achieving carbon neutrality, efforts to make renewable energy humanity's mainstay source of electricity are proceeding on a global scale. In Japan, with the increased introduction of solar power and wind power, which have large fluctuations in power output, maintaining a balance between demand and supply in power grids is becoming more challenging. To address this problem, in April 2021 a reserve capacity market was established, which facilitates reserve capacity trading and thereby helps maintain a balance between supply and demand through absorption and augmentation in response to fluctuations in the supply of power from renewable energy. In the past, reserve capacity was supplied by aging thermal power plants with low operating rates. Since the opening of the market, however, storage batteries, private power generators, and other distributed power sources that can respond to fluctuations with a high degree of flexibility have also been able to supply their reserve capacity. As the reserve capacity supplied by distributed power sources can replace the reserve capacity supplied by aging thermal power plants, distributed power sources will play a major role in establishing renewable energy as society's mainstay power source.
By using new energy management technology that enables the integration and remote control of such distributed power sources as the power generation facilities and storage batteries of companies, NEC realizes virtual power plants that are an aggregation of all distributed power sources and function just as if they were actual power plants. In this way, we are helping to stabilize the power grid and make renewable energy the mainstay power source. Since 2019, NEC has been offering the NEC Energy Resource Aggregation Cloud Service, which is enabled by NEC's IoT technology. This service uses ICT to forecast demand and control and optimize multiple energy facilities, such as solar power generation installations, storage batteries, and electric vehicles (EVs). By remotely controlling consumers' storage batteries and energy management systems in light of the supply–demand balance and using demand response*2 to curb demand, the service helps stabilize the power grid. As these types of control also eliminate the unevenness and waste in solar power generation, they pave the way to zero emissions for individual companies. With its sights set on decarbonizing society as a whole, NEC will use the aforementioned technologies to become a resource aggregator that controls distributed power sources within the Group and at customers' sites and participates in the power trading market.

  • *2
    Curbing consumers' use of power by changing power consumption patterns through the pricing of power or the payment of incentives when the market experiences price hikes or when grid reliability is low
Our Aggregation Service

Helping with Adaptation

The social infrastructure business, on which NEC is focusing its efforts, an help society adapt to the range of impacts stemming from climate change, including disasters, water shortages, food shortages, and health hazards.

Under maintenance.

Greenhouse Gas Emissions: Targets and Results

Emissions in fiscal 2023 were as follows. All figures have been certified by third parties.

Item Target Results
Scope1,2 21.0% reduction (compared with fiscal 2018) 45.1% reduction(compared with fiscal 2018)
Scope 3 11.1% reduction(compared with fiscal 2018)
Greenhouse Gas Emissions: Results(Scope1,2,3)

Coverage: NEC Group

Breakdown of Scope 1, 2, and 3 Greenhouse Gas Emissions
Breakdown of Scope 1, 2, and 3 Greenhouse Gas Emissions