Skip to main content

Environmental

Climate-related Financial Information Disclosure (Based on TCFD Recommendations)

Endorsement of the TCFD Recommendations

Approach & Policy

In June 2018, Hitachi announced its endorsement of the recommendations by the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD). The following contains key climate-related financial information in line with the TCFD’s recommendations.
Hitachi’s TCFD disclosure has been rated highly for three consecutive years in the Excellent TCFD Disclosure, announced in March 2024, as selected by the Government Pension Investment Fund of Japan (GPIF) domestic equity investment management institutions. Hitachi received high ratings from eight institutions, the most of any selected company.

Governance

Structure

Hitachi sees climate change and other environmental issues as important management issues.
Important matters concerning the group’s sustainability strategy, including climate change measures, are discussed, and decided on by the Senior Executive Committee and are presented to the Board of Directors according to necessity. Hitachi reviewed long-term environmental targets, termed Hitachi Environmental Innovation 2050, which include reducing CO2 emissions. Our Board of Directors receives a report regarding these targets when formulated or revised. In addition, the Audit Committee of independent directors conducts an audit of sustainability-related operations once a year, and Hitachi executive officers report on climate-related issues to the committee during the audit.
As for TCFD initiatives we conduct outside the company, Hitachi has participated in the TCFD Study Group on Green Finance and Corporate Disclosures arranged by Japan’s Ministry of Economy, Trade and Industry (METI) since 2019. In addition, we have participated in the TCFD Consortium, which holds discussions on efforts to link effective corporate information disclosure and disclosed information with appropriate investment decisions by financial institutions and others. We participated in the consortium as a Steering Committee member and contributed to the formulation of TCFD Guidance 3.0, published in October 2022.

Strategy

Strategy & Target

In fiscal 2016, under our Environmental Vision and considering the Paris Agreement, the RCP2.6 Scenario*1, and RCP8.5 Scenario*2 of the Fifth Assessment Report of the IPCC, Hitachi created Hitachi Environmental Innovation 2050, a set of long-term environmental targets and a transition plan toward a decarbonized society. In this way, we intend to meet the contributions required of a global company toward the creation of a decarbonized society. Moreover, to help limit the global temperature rise to 1.5°C as recommended in the IPCC 1.5°C special report, in fiscal 2020, we revised our target to achieve carbon neutrality at Hitachi factories and offices by fiscal 2030. In fiscal 2021, we revised our target once more to achieve carbon neutrality in our value chain by fiscal 2050. This goal is in line with the SSP1-1.9 scenario*3 of the Sixth Assessment Report of the IPCC.
Hitachi is committed to contributing to the creation of a decarbonized society on a global scale by declaring and pursuing higher goals.

*1A Representative Concentration Pathway (RCP) scenario under which, at the end of the 21st century, the increase in global temperatures from preindustrial levels is kept below 2°C.

*2An RCP scenario that assumes that emissions will continue to rise resulting in an approximately 4°C rise in global temperatures compared to preindustrial levels.

*3SSP1-1.9 scenario: Presented in the Sixth Assessment Report of the IPCC. A scenario that limits the temperature increase to less than 1.5°C under sustainable development.

Identification and Assessment of Climate-related Risks and Opportunities

The Hitachi Group operates a broad array of businesses around the world with each business having its own set of risks and opportunities. We are responding to the impact of climate change by assessing climate-related risks and opportunities in accordance with TCFD classifications. We make sector-specific assessments of risks and opportunities for important business sectors that have a relatively high likelihood of being affected by climate change. Our assessments are also categorized according to time span, namely short-term, medium-term, and long-term as defined below.

Time Spans for Assessing Climate-related Risks and Opportunities

Time Spans for Assessing Climate-related Risks and Opportunities
Time Span Reason for Adoption
Short-term Over the next three years, from fiscal 2022 to 2024 Corresponds to the three-year management period covered by the Environmental Action Plan for 2024 established in line with the 2024 Mid-term Management Plan
Medium-term Through fiscal 2030 Time span of our fiscal 2030 long-term environmental targets
Long-term Up to fiscal 2050 Time span of our fiscal 2050 long-term environmental targets

Degrees of Impact

Degrees of Impact
Impact Definition
Major Has an impact sufficient to disrupt business or cause it to substantially decrease or increase
Medium Part of the business is impacted
Minor There is little impact

Responding to Climate Scenario Risks and Opportunities for Each Business

Hitachi operates a broad array of businesses with each business having its own set of risks and opportunities. We therefore selected businesses that have a relatively high likelihood of being affected by climate change and conducted scenario analyses. In selecting businesses, we considered the factors of high sales volume within Hitachi and the large amount of CO2 emissions from energy use when products and services are utilized. Until now, Hitachi’s businesses used fossil fuels as their main energy source, but those businesses have been deconsolidated.
As a result of our review, the Railway Systems, the Power Generation and Power Grids, the IT Systems, and the Industrial Equipment businesses were selected for analysis. For each of these businesses, we considered the business environment under the 1.5°C and 4°C scenarios and how we would respond.

  • 1.5°C scenario: As projected by the RCP2.6 scenario in the IPCC’s Fifth Assessment Report (when targets were formulated), the SSP1-1.9 scenario in the IPCC’s Sixth Assessment Report, the IEA 450 scenario (when targets were formulated), and the IEA Net Zero scenario, we are anticipating a world where stringent measures and regulations will be implemented to help realize a decarbonized society. Therefore, we investigated risks and opportunities on the premise of carbon neutrality by fiscal 2050.
  • 4°C scenario: Investigated the situation where global greenhouse gas emissions increase due to lack of regulation and frequent disasters caused by climate change, as shown by the RCP 8.5 scenario in the IPCC’s Fifth Assessment Report (when targets were formulated) and SSP 5-8.5 scenario in the IPCC’s Sixth Assessment Report.

Furthermore, we have summarized events that are expected to occur regardless of progress taken on the path to a decarbonized society as “Non-environmental market factors (neither the 1.5°C nor 4°C scenario).”
Our assessment of the major risks and opportunities for the selected businesses are outlined in the following table.

The Business Environment, Major Risks and Opportunities, and Strategies under the 1.5°C and 4°C Scenarios

The Business Environment, Major Risks and Opportunities, and Strategies under the 1.5°C and 4°C Scenarios
Target Businesses Railway Systems Power Generation and Power Grids IT Systems Industrial Equipment
The Business Environment, Major Risks, and Opportunities Under the 1.5°C Scenario Business environment Global demand will continue to grow for railway transport systems that emit relatively less CO2 per distance covered, with tighter CO2 emission regulations in each country and region. Business environment Global demand will continue to grow for electricity from non-fossil sources, such as renewable energy and nuclear power, with tighter CO2 emission regulations in each country and region. Power networks will increasingly accommodate renewable energy produced through distributed power generation. Business environment Demand for energy-saving, high-efficiency IT solutions will grow, with tighter CO2 emission regulations in each country and region. There will also be increased demand for data centers and data analysis systems to accommodate the expansion of data utilization businesses, including the use of generative AI, in addition to the expansion of financial-related businesses such as investments and loans for decarbonization businesses and green bond issues. Business environment Global demand for energy-saving industrial equipment will grow, with tighter CO2 emission regulations in each country and region.
Risks A decline in competitiveness in the railroad sector if there are delays in the development of innovative technologies of the type expected to contribute to the reduction of CO2 emissions. Specifically, delays in the development of new technologies such as dynamic headways (flexible operations based on passenger demand) and support for new mobility services (e.g., MaaS). Also, a decline in competitiveness due to delays in the timely marketing of effective and sustainable products that comply with increasingly
stringent laws and regulations for decarbonization.
Risks Unprecedented demand will not be fulfilled by production capacity of established suppliers which will lower the barriers to entry for emerging suppliers. CAPEX capacity extension investment might dilute the strategic focus to accelerate development of new technologies and/or business models to thrive in the period after the peak of the industry mega-cycle. Pressures to shorten new technology development cycles might lead to quality issues in the long term. A lack of international and regional cooperation to maintain a balance between supply and demand in the power grid for renewable energy generation having large output fluctuations could result in delays in renewable energy utilization. Risks Competitiveness will decline if there is a slowdown in technological and human resource development to provide energy-saving and highly efficient IT solutions and if decarbonized measures for energy-intensive data centers are delayed. Risks Competitiveness will decline if there are delays in the development of high-efficiency, low-loss products.
Opportunities A transition of most long-distance public transportation to the railway sector under the 1.5°C scenario, since rail is a mode of transportation that contributes to decarbonization with low CO2 emissions per unit of
transportation. Expanded business opportunities by
developing and delivering railroad cars that are more energy efficient than existing models, by converting to bi-mode railroad cars, and by increasing the efficiency of rail services with digital technology.
Opportunities Expanded business opportunities in conjunction with rising demand for renewable energy—the key to a decarbonized future—and with the development of grid solutions, digital service solutions, and energy platforms that can accommodate the diversification of energy suppliers.
Unprecedented level of investments will be deployed into offshore wind, solar, digital load management systems and high/ultra-voltage transmission.
Opportunities There will also be increased demand for environment-related financial services as investments and loans for decarbonization businesses and green bond issues. Demand will grow for energy saving and high-efficiency information systems that contribute to zero-emissions. Opportunities Utilization of IoT, digitalization, and connected systems to develop innovative products and solutions that contribute to CO2 emission reductions without relying on the energy-saving features of individual products.
The Business Environment, Major Risks, and Opportunities Under the 4°C Scenario Business environment Demand for electric-powered transport will gradually increase even without tighter energy regulations. Damage from typhoons, floods, and other natural disasters caused by climate change will rise sharply. Business environment The cost competitiveness of non-fossil energy will increase as fuel prices gradually increase due to increased fossil energy consumption, and demand for renewable energy and nuclear power will increase moderately. Natural disasters caused by climate change will rise sharply. Needs will increase for climate adaptation to protect electric energy systems from extreme weather events. Business environment Demand for new, high-efficiency technology will expand as multiplex IT systems in response to natural disaster BCPs will result in increased energy consumption. Demand will also grow for social and public systems to reduce damage from natural disasters. Business environment Typhoons, floods, and other natural disasters caused by climate change will rise sharply.
Risks The frequent occurrence of natural disasters will exacerbate damage to production facilities, worsen working environments, and disrupt supply chains, leading to delays in deliveries and the procurement of parts. Risks The frequent occurrence of natural disasters will increase damage to power generation and transmission/distribution facilities, hamper efforts to restore power transmission/distribution, and disrupt supply chains, leading to delays in deliveries and the procurement of parts. Increased delays in the development and provision of power generation, transmission, and distribution equipment, facilities, and services capable of withstanding frequent natural disasters. Risks Natural disasters will exacerbate damage to production facilities, worsen working environments, and disrupt supply chains, leading to delays in deliveries and the procurement of parts. Risks Natural disasters will exacerbate damage to production facilities, worsen working environments, and disrupt supply chains, leading to delays in deliveries and the procurement of parts.
Opportunities Transport systems more resilient to natural disasters can be developed. Competitiveness can be enhanced by providing added value in such forms as energy-saving railcars and adaptability to new technologies. Opportunities Energy demand will grow as warmer weather leads to increased use of air conditioning. Demand will increase for disaster-resilient power generation and transmission/distribution technologies. Increase the competitiveness of existing power transmission and
distribution systems by making these systems more resilient to extreme weather conditions.
Opportunities Demand will increase for social and public systems that help reduce damage from natural disasters and for IT systems required as part of BCP. Opportunities Efforts to accommodate IoT products will lead to higher demand for remote control and remote maintenance during natural disasters.
Non-environmental
Market Factors
(neither the 1.5°C
nor 4°C Scenario)
  • Economic growth will lead to urbanization and population growth around the world which will drive the railway business globally as an efficient form of public transport for large numbers of passengers regardless of climate conditions. The market size in Japan and Europe will remain flat, but the Asian market overall will see substantial growth.
  • Long-distance transport will decline going forward as the global pandemic restricts travel and encourages remote work. Although the decline in demand will not be as severe as that for air transport.
  • Competition will grow as major railway manufacturers in various countries will expand their businesses to meet global demand.
  • Economic growth, urbanization, and population growth will push up demand for energy, especially electricity, mainly in developing countries.
  • Political trends in each country and region related to climate change and energy issues, and changes in public awareness.
  • Energy supply and demand will diversify due to various factors, such as CO2 emissions, the environmental burden, economic performance, safety, and supply stability.
  • Digital technology will develop further to enhance the stability and efficiency of the power supply.
  • Further digitization globally will exponentially increase the volume of data circulated, accumulated, and analyzed. Experience with the global pandemic will prompt a shift to remote, noncontact, and online formats, both in daily living and work, and will boost demand for digital solutions that facilitate such a shift.
  • New services and businesses utilizing big data, IoT, AI, and other digital technology will expand. As a result, demand for data centers and energy consumption will increase.
  • Digitalization, infrastructure renewal, population decline, and worker shortages will expand the automation market in industrial countries.
  • As the global pandemic forces people to stay at or work from home, demand will grow for factory automation enabling a handful of workers to operate a factory.
  • The industrial market in emerging economies will grow due to a rise in production plants.
Response to Future Business Risks
(Business Opportunities)

Response to business risks under 1.5°C or 4°C scenarios

  • Continue to strengthen the railway business as global demand for railways will increase under either scenario.
  • Specifically, develop and market more energy-saving railcars and battery powered railcars for non-electrified sections. Strengthen railway services through digital utilization such as dynamic headway (flexible operations in response to passenger demand) and new mobility services like MaaS.
  • Increase competitiveness by strengthening sustainable activities while adhering to international standards, etc.
  • Given the increasing frequency of natural disasters, take risk aversion into account when deciding the location and equipment layout of a new plant. Keep an eye on the supply chain in strengthening our ability to respond to business disruption risks in accordance with our BCPs. Evaluate and analyze organizational structures and physical locations and reflect the results of this work in response measures.

Response to business risks under 1.5°C or 4°C scenarios

  • Continue to enhance the response to relevant markets in view of expected higher demand for non-fossil energy under either scenario.
  • Production capacity expansion investments
  • Strengthen the provision of grid solutions, digital service solutions, and energy platforms that can accommodate the increased use of renewable energy and diversification of energy supply and demand management.
  • Given the increasing frequency of natural disasters, develop technologies for disaster-resilient renewable energy systems and disruption-resistant power transmission/distribution systems. Take risk aversion into account when deciding the location and equipment layout of a new production plant. Keep an eye on the supply chain in strengthening our ability to respond to business disruption risks in accordance with our BCPs.

Response to business risks under 1.5°C or 4°C scenarios

  • Continue to develop innovative digital technologies, nurture necessary human capital, and enhance digital service solutions that generate new value in view of the expected growth in demand for digital services and the subsequent market expansion under either scenario.
  • Specifically, enhance competitiveness by providing energy-saving and high efficiency IT solutions that contribute to the following: zero-emissions; environment-related financial services for decarbonization businesses; social and public systems to prevent natural disasters, reduce damage, and enhance resilience; and IT systems for BCPs.
  • Given the increasing frequency of natural disasters, strengthen our ability to respond to business disruption risks in accordance with our BCPs.
  • Ensure competitiveness by actively decarbonizing data centers.

Response to business risks under 1.5°C or 4°C scenarios

  • Under either scenario, continue developing energy-saving, high-efficiency products that use IoT technology. Focus particularly on connected products with communication features. Miniaturized, high-efficiency, low-loss products can also help reduce CO2 emissions.
  • Given the increasing frequency of natural disasters, take risk aversion into account when deciding the location and equipment layout of a new plant. Keep an eye on the supply chain in strengthening our ability to respond to business disruption risks in accordance with our BCPs.
Financial Information
(Sales Volume
of each Target
Sector)
Partial impact on the revenue of the Railway Systems Business, which accounted for approximately 8.8% of Hitachi’s revenue at 856.1 billion yen in fiscal 2023 Partial impact on the revenue of the Energy Sector, which accounted for approximately 22.2% of Hitachi’s revenue at 2,159.7 billion yen in fiscal 2023 Partial impact on the revenue of the Digital Systems & Services Segment, which accounted for approximately 26.7% of Hitachi’s revenue at 2,598.6 billion yen in fiscal 2023 Partial impact on the revenue of the Industrial Products Business, which accounted for approximately 5.0% of Hitachi’s revenue at 487.2 billion yen in fiscal 2023

Note:The above scenario analyses are not future projections but attempts to examine our resilience to climate change. How the future unfolds may be quite different from any of these scenarios.

Climate-related Risks (Hitachi Group)

Based on a business-by-business review, Hitachi did not find any significant climate change-related risks that were difficult to respond to risks that present difficulties in response.
When considering whether existing businesses will be viable when a decarbonized society is realized, many businesses that use electricity as their energy must be able to adapt to a decarbonized society by replacing the electricity they use with electricity derived from non-fossil energy sources. On the other hand, businesses that currently use fossil fuels will need to adapt to a decarbonized society by adopting new technologies such as hydrogen and biomass, as well as various measures to offset CO2 emissions. Since many of Hitachi’s businesses use electricity, it is clear that there is little significant risk arising from the unavailability of fossil fuels.
The following is a summary of Hitachi’s overall risks under the 1.5°C scenario and the 4°C scenario. Given Hitachi’s business format, we have determined that these risks related to climate change can be addressed.

(1) Risks related to the Transition to a Decarbonized Economy (Applying mostly to the 1.5°C Scenario)

(1) Risks related to the Transition to a Decarbonized Economy (Applying mostly to the 1.5°C Scenario)
Category Major Risks Time Span Impact Main Initiatives
Policy and Legal Increased business costs from the introduction of carbon taxes, fuel/energy consumption taxes, emissions trading systems, and other measures Short to long term Medium
  • Promote activities aimed at achieving carbon neutrality.
  • Avoid increases in business costs by further enhancing production and transport efficiency and promoting the use of non-fossil fuel-based energy. Promote energy-saving equipment by introducing Hitachi Internal Carbon Pricing (HICP).
  • Shift from fossil fuel-using to non-fossil fuel-using businesses.
  • Promote investments that contribute to decarbonization. For example, Hitachi Energy plans to invest approximately $6 billion (as of June 2024) from FY2024 to FY2027.
Technology Loss of sales opportunities due to delays in technology development for products and services for a decarbonized society Short to long term Medium
  • Contribute to reducing CO2 emissions by developing and marketing innovative products and services that lead to the achievement of long-term environmental targets and expanding the decarbonization business.
  • Promote the development of energy-saving and low-carbon products by implementing Environmentally Conscious Design Assessments when designing products and services.
Market and Reputation Impact on sales due to changes in market values or assessment of our approach to climate issues Medium to long term Minor
  • Established goals for carbon neutrality in the Hitachi Environmental Innovation 2050 long-term environmental targets to promote decarbonization efforts
  • Disclosing information on climate change initiatives and progress by publishing sustainability reports, posting sustainability information on websites, and participating in events such as COP

(2) Risks related to the Physical Impacts of Climate Change (4°C Scenario)

(2) Risks related to the Physical Impacts of Climate Change (4°C Scenario)
Category Major Risks Time Span Impact Main Initiatives
Acute and Chronic Physical Risks Climate-related risks to business continuity including increased severity of typhoons, floods, and droughts (acute risks), as well as rising sea levels and chronic heat waves (chronic risks) Short to long term Medium
  • Considering the possibility of flood damage when deciding on the location or equipment layout of a new plant
  • Compiled the Water Risk Guidelines for identifying water risks and countermeasures, and complying with them at major manufacturing sites around the world.
Addressing Risks Related to Water and Biodiversity

Climate-related Opportunities (Hitachi Group)

To achieve the CO2 reduction targets set forth in our long-term environmental targets and 2024 Mid-term Management Plan, it is important not only to decarbonize our business sites (factories and offices), but also to reduce CO2 emissions from the use of products and services sold, which account for a large portion of emissions in our value chain. Developing and providing products and services that emit zero or very little CO2 during their use will not only satisfy customer needs, but also help meet society’s demands for reduced emissions. This represents a business opportunity for us in the short, medium, and long terms, and constitutes a major pillar of the Social Innovation Business that we are promoting as a management strategy.

Category Major Opportunities Impact Main Initiatives
Services and Markets for Products Increased corporate value and revenue from
expanded sales of products and services with innovative technology that can contribute to the mitigation and adaptation of climate change
Major
  • Expand business areas that contribute to decarbonization.
  • In the energy field, promote power generation using non-fossil fuel energy and the installation of power grids that support it.
  • In fields such as mobility and connective industries, promote the reduction of CO2 emissions during product use through energy conservation with greater utilization of digital technology (Green by Digital) and develop products that offer world-class efficiency.
  • Promote decarbonized solutions and services through collaborative initiatives with customers.
Resilience Provision of solutions to address climate-related natural disasters Medium
  • Providing flood simulators and evacuation/emergency operation support systems
  • Providing disaster prevention solutions such as high-performance firefighting command systems

The results of these studies indicate that Hitachi has not uncovered any significant or difficult-to-address climate change-related risks at this stage. We believe we can view our contributions to climate change action as business opportunities. Hitachi believes that we have high resilience in the transition to a decarbonized society in the medium to long term, as we closely monitor market trends and develop business flexibly and strategically under both the 1.5°C and 4°C scenarios.

Risk Management

Structure

Hitachi identifies, evaluates, and manages climate change-related risks by business unit and group company to determine environmental impacts and other factors. The results are tabulated by the Sustainability Promotion Division of Hitachi, Ltd., and those risks and opportunities perceived as being particularly important for the group as a whole are deliberated and decided by the Senior Executive Committee and, if necessary, by the Board of Directors as well.

Metrics and Targets

Strategy & Target

Hitachi defines medium- to long-term metrics and targets in the Hitachi Environmental Innovation 2050 long-term environmental targets. We also establish and manage short-term metrics and targets in detail every three years through the Environmental Action Plan.
Metrics for climate change mitigation and adaptation use total CO2 emissions and the reduction rate in CO2 emissions per unit. Total CO2 emissions from the use of sold products in Scope 3 in Category 11, which account for most of our emissions given the nature of Hitachi’s business, fluctuate greatly due to changes in sales volumes and our business portfolio. This has the disadvantage of making it difficult to see the results of energy saving and efficiency improvements. Therefore, we have established CO2 emissions per unit as a metric for providing customers and society with products and services that offer equivalent value while emitting less CO2. We also set and manage a metric for avoided emissions that contribute to the realization of a decarbonized society as a whole.
We continue to reduce CO2 emissions generated at our own business sites (factories and offices) by utilizing the Hitachi Internal Carbon Pricing (HICP) system, which provides incentives for capital investments that contribute to CO2 reductions. The carbon price for HICP is set at 14,000 yen per ton-CO2.
In addition, in April 2021, Hitachi, Ltd. introduced evaluations that take environmental value into account in the executive compensation system with a view to accelerating the creation of environmental value toward achieving long-term environmental targets.