Climate Change Data

Environmental Metrics

ESG Focus Areas

• Global Warming
• Environmental Protection
• Energy Security
• Economic Efficiency
• Compliance
• Human Rights
• Labor Support
• Corporate Governance

Environmental Achievements

• Reduced atmospheric emissions of dichloromethane, trichloroethylene, and tetrachloroethylene by 93.1% from 1996 levels.
• Achieved zero landfill waste disposal at five works.
• Installed solar power systems with a total capacity of 480 kW.
• Reduced CO2 emissions by 149 tons through photovoltaic facilities.
• Contracted to purchase 1 MWh of wind-generated power annually for 15 years.

Social Achievements

• Established a system for rehiring employees after retirement age.
• Increased handicapped employment rate to 1.70%.
• Conducted plant tours for shareholders.
• Implemented various support activities for suppliers to raise awareness and knowledge levels.
• Provided training to instructors at private enterprises.

Governance Achievements

• Revamped corporate governance structure in June 2005, increasing the number of outside directors and reducing the number of directors.
• Established an Internal Audit Department and CSR Center to fortify internal monitoring and strengthen compliance promotion.
• Established an Order Compliance Committee.

Climate Goals & Targets

Environmental Challenges

• Alleged violations of the Antimonopoly Act in multiple business dealings.
• Increased CO2 emissions (14.4% above 1990 levels) due to increased production volumes and machinery installations.
• Information leaks due to computer viruses.
• Inadequate security measures in managing information released outside the company and managing outside personnel.

Mitigation Strategies

• Established an Internal Audit Department and CSR Center.
• Established an Order Compliance Committee.
• Implemented various measures to prevent violations of the Antimonopoly Act (e.g., drafting conduct standards for contacts with competitors, compliance check sheets, periodic personnel transfers).
• Redoubled commitment to achieve a 6% reduction in CO2 emissions by 2010.
• Strengthened system for managing energy usage during product transportation.
• Prepared a written guide on how to prevent leaks of confidential information and conducted a company-wide survey.
• Implemented measures to improve security (e.g., encoding external memory devices and emails, promoting exchanges of memoranda on information leakage prevention).

Supply Chain Management

Responsible Procurement

• Basic policy on procurement emphasizing fairness, openness, equity, justice, mutual trust, and compliance.
• Strict adherence to laws against unfair trade practices and delayed payments to subcontractors.
• Initiatives to raise awareness and knowledge levels among suppliers (e.g., letters, lectures).

Climate-Related Risks & Opportunities

Opportunities

• Development of CO2 recovery and fixation technologies
• Development of renewable energy technologies

Reporting Standards

Frameworks Used: GRI Guidelines (2002 edition), Japanese Ministry of the Environment’s Environmental Reporting Guidelines (2003 edition)

Certifications: ISO 14001

Sustainable Products & Innovation

• CO2 recovery systems
• Wind turbines
• Solar cells
• High-efficiency gas turbines
• Environmentally friendly air conditioners

Awards & Recognition

• 54th Electrical Machinery Industry Technology Award (Development Prize)
• 54th Electrical Machinery Industry Technology Award (Encouragement Prize)
• 43rd SHASE Award of Technology
• Kanto Region Invention Award
• Central Japan Invention Award
• Kinki Region Invention Award
• Kyushu Region Invention Award
• Technology Prize of The Japanese Society of Printing Science and Technology

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced organochlorides emissions by 91.9% from 1996 levels.
• Seven out of 15 works achieved zero emissions.
• Introduced 720 kW of solar power systems in 2007 (1090 kW cumulative).

Social Achievements

• Launched rehiring system for retired employees.
• Increased mid-career worker hiring by approximately 30% in 2007.
• Obtained the “Kurumin Mark” certification for child-rearing support.

Governance Achievements

• Established the CSR Committee chaired by the President.
• Established the Order Compliance Committee to prevent bid-rigging.
• Strengthened internal control systems with the establishment of the Group Management Department.

Climate Goals & Targets

Environmental Challenges

• Increased CO2 emissions due to increased production and new plants.
• Bid-rigging incidents.
• Maintaining manufacturing capabilities due to workforce reduction and aging equipment.

Mitigation Strategies

• Developed a new CO2 reduction plan.
• Established the Order Compliance Committee and Departmental Compliance Committees.
• Established the Production System Innovation Planning Department to improve manufacturing capabilities.

Supply Chain Management

Responsible Procurement

• Fair and equitable evaluation and selection of suppliers.
• Compliance with applicable laws and regulations.
• CSR considerations in supplier evaluation.

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products and renewable energy technologies.

Reporting Standards

Frameworks Used: GRI G2 and G3

Certifications: ISO 14001

Sustainable Products & Innovation

• High-efficiency turbines
• Amorphous solar cell modules
• Wind turbines
• Centrifugal chillers
• Newspaper offset press
• Dry cutting system
• Fruit-dry dry-cleaning machine

Environmental Metrics

ESG Focus Areas

• Energy & Environment
• Transportation
• Aerospace
• Human Rights
• Labor Practices
• Compliance
• Community Involvement

Environmental Achievements

• Reduced CO2 emissions by 9.8% compared to 1990 levels (at production sites).
• Achieved 95% by quantity and 97.2% by value green purchasing targets.
• Developed a 7MW offshore wind turbine generator.
• Won the ECCJ Chairman Prize for energy efficiency improvements.
• Received the 2012 Environmental Business Award for its CO2 Recovery Plant.

Social Achievements

• Launched the “Megumi no Mori” forest cultivation volunteer project.
• Donated storage refrigeration units to the Japan Fisheries Cooperative in Miyagi Prefecture.
• Participated in the UN Global Compact since 2004.
• Implemented safety improvement measures for PWR plants in Japan.
• Held the first overseas Business Partner Conferences in India and China.
• Opened the Safety Transmission Center at Nagasaki Shipyard & Machinery Works.
• Developed the first domestically produced 100% low floor LRV, Green Mover max.

Governance Achievements

• Established the CSR Committee and various other committees to improve CSR-oriented management.
• Implemented a risk management policy and organization.
• Established the Guidelines for the Prevention of Bribery Involving Foreign Civil Servants.
• Created Anti-Bribery Rules and Procedural Guidelines.
• Published the Basic Policy Concerning Conflict Minerals.

Climate Goals & Targets

Environmental Challenges

• Global procurement challenges, especially in emerging nations.
• Ensuring compliance with varying environmental standards across countries.
• Addressing public opinion surrounding nuclear power.
• Managing risks associated with global business expansion.
• Meeting growing global demands for power while reducing environmental impact.

Mitigation Strategies

• Expanded the Supply Chain CSR Promotion Guidelines to include overseas business partners.
• Implemented education and training for overseas offices and subsidiaries.
• Established a joint venture with Hitachi for thermal power generation systems.
• Developed the MEGANINJA container-type gas engine generator for distributed power generation.
• Improved nuclear power safety and developed advanced technologies.
• Established guidelines for the prevention of bribery.

Supply Chain Management

Supplier Audits: Evaluated 5 points (quality, cost, delivery, technology, and management) at around 2,300 major partners.

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines.
• Value Engineering (VE) proposals.

Climate-Related Risks & Opportunities

Opportunities

• Development of energy-efficient products and renewable energy technologies.

Reporting Standards

Frameworks Used: GRI G3.1, Japanese Ministry of the Environment Environmental Reporting Guidelines (2012 edition), ISO 26000

Certifications: ISO 14001, ISO 9001

Sustainable Products & Innovation

• High-efficiency generators
• CO2 recovery systems
• 7MW offshore wind turbine generator
• MEGANINJA container-type gas engine generator
• Air-cooled heat pump module chiller (Voxcel)

Awards & Recognition

• Numerous awards listed in the report (see Recognition from Society section).

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced CO2 emissions from using MHI’s products by about 30 million tons compared with fiscal 1990 levels.
• Greenhouse gas (CO2) emissions: 482 kilotons (FY2013)

Social Achievements

• Number of female managers increased.
• Social contribution expenses: ¥1.6 billion (FY2013)
• New Recruits and Post-Retirement Employees with Extended Employment Periods: 2,942 people (FY2013)

Governance Achievements

• Increased the ratio of outside directors.
• Introduced the Chief Officer System.
• Reduced the number of representative directors.

Climate Goals & Targets

Environmental Challenges

• Growing and diversifying compliance risks and business execution risks.
• Insufficient knowledge of new markets and new customers.
• Risks that grow due to the potential of a scheduled project to lengthen or expand in scope.

Mitigation Strategies

• Clarifying activity guidelines and entrenching rules that are consistent around the world.
• Setting up a standing organization to address business execution risks.
• Improving information-gathering capabilities, accumulating risk resolution know-how, and enhancing human resource development.
• Strengthening the financial base.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: International Integrated Reporting Council (IIRC) International Integrated Reporting Framework, Global Reporting Initiative Sustainability Reporting Guidelines (Fourth Edition, or G4), Ministry of the Environment of Japan Environmental Reporting Guidelines (2012 version)

Sustainable Products & Innovation

• High-efficiency large gas turbines
• J-Series gas turbines
• Integrated coal gasification combined cycle (IGCC) power generation technology
• Sayaendo LNG carrier
• Automobile turbochargers

Awards & Recognition

• Named one of the world’s 100 most innovative companies of 2013 by Thomson Reuters Corporation

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduced unit CO2 emissions by 15.8% compared to FY2014.
• Reduced unit water consumption by 15.0% compared to FY2014.
• Reduced unit waste generation by 15.9% compared to FY2014.
• Launched a high-efficiency condensing unit for freezing and refrigeration using the natural refrigerant CO2.

Social Achievements

• Increased number of female managers to 171 in FY2018.
• Opened two in-house nurseries for employees' children.
• Implemented various support systems for childcare and family care, resulting in 98% of employees returning to work after childcare leave and 98.8% remaining in work.

Governance Achievements

• Transitioned to a Company with an Audit and Supervisory Committee.
• Established the Nomination and Remuneration Meetings.
• Improved the objectivity and transparency of its processes, based on the revised Corporate Governance Code.

Climate Goals & Targets

Environmental Challenges

• Large-scale losses experienced in the past.
• Globalization of business activities increasing the scale of risks.
• Increasing complexity of technologies.
• Landfill disposal amounts increased due to sludge generated through maintenance at some sites.

Mitigation Strategies

• Created mechanisms to ensure effective execution of business risk management.
• Reinforced advanced, intelligent systems and process monitoring.
• Developed human resources in charge of business risk management and cultivated a culture of responding to risks.
• Conducting checks on water leakage and undergoing repairs in a timely manner as well as through water-reduction activities through improved work processes.

Supply Chain Management

Supplier Audits: 725 companies surveyed in FY2018

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines

Climate-Related Risks & Opportunities

Transition Risks

• Downward trend in the market for new coal-fired thermal power facilities.

Opportunities

• Global growth in demand for highly efficient power generation.
• Emissions regulations overseas.

Reporting Standards

Frameworks Used: IIRC International Integrated Reporting Framework, GRI Sustainability Reporting Standards, Ministry of the Environment of Japan Environmental Reporting Guidelines, Ministry of Economy, Trade and Industry of Japan’s Guidance for Integrated Corporate Disclosure

Certifications: ISO 14001

Third-party Assurance: Bureau Veritas Japan Co., Ltd.

UN Sustainable Development Goals

• Goal 4
• Goal 7
• Goal 11
• Goal 12
• Goal 13
• Goal 14
• Goal 15

The report details how various initiatives contribute to these goals through product development, community engagement, and environmental protection.

Sustainable Products & Innovation

• High-efficiency chiller/freezer unit free of CFC refrigerants
• World’s first large scrubber system for ships
• Energy-saving ship

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance
• Sustainable Development Goals (SDGs)

Environmental Achievements

• Reduced CO2 emissions by 10.4% compared to the previous year (non-consolidated basis).
• Successfully developed a burner that can use natural gas with a 30% hydrogen mixture, reducing CO2 emissions by approximately 10% compared to conventional natural gas-fired systems.
• Supplied the world’s largest CO2 capture plant to a coal-fired power plant in Texas.

Social Achievements

• Set a target in 2014 of expanding the ranks of women in management positions threefold by 2020.
• Implemented various systems to support work-life balance, including work-from-home programs and childcare support.
• Established frameworks for systematically developing and appointing women candidates for promotion to managerial positions.

Governance Achievements

• Fundamental reforms of its business structure and corporate governance between fiscal 2012 and fiscal 2017.
• Transitioned to a Company with an Audit and Supervisory Committee.
• Increased the ratio of outside directors to more than one-third.

Climate Goals & Targets

Environmental Challenges

• Global shift to low-carbon approaches leading to order cancellations for coal-fired power plant projects.
• Increasingly stringent environmental regulations.
• Cybersecurity threats.
• Climate change and its impact on business operations.

Mitigation Strategies

• Promoting MHI FUTURE STREAM initiative for constant innovation and continuous contribution.
• Expanding after-sales services for power systems.
• Implementing a cybersecurity program to minimize risks of cyberattacks.
• Developing innovative solutions to cope with and counter climate change, including hydrogen-powered gas turbines and CO2 capture technologies.

Supply Chain Management

Climate-Related Risks & Opportunities

Transition Risks

• Downward trend in the market for new coal-fired thermal power facilities.

Opportunities

• Growth in offshore wind turbine market.
• Expansion of AQCS adoption.
• Introduction of state-of-the-art technologies (IGCC, highly efficient USC, CCS/CCUS).

Reporting Standards

Frameworks Used: International Integrated Reporting Council (IIRC): International Integrated Reporting Framework, Global Reporting Initiative: Sustainability Reporting Standards, Ministry of Economy, Trade and Industry of Japan: The Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation, Ministry of the Environment of Japan: Environmental Reporting Guidelines (2018 version)

Sustainable Products & Innovation

• Hydrogen-powered gas turbines
• CO2 capture devices
• Offshore wind turbines
• Centrifugal chillers adapted for use with low-environmental-impact refrigerants

Environmental Metrics

ESG Focus Areas

• Climate Change
• Decarbonization
• Energy Issues
• AI/Digitalization
• Respect for Human Rights
• Diversity and Inclusion
• Corporate Governance
• Supply Chain Management
• Product Stewardship
• Occupational Health and Safety
• Community Involvement

Environmental Achievements

• Reduced unit CO2 emissions by 22.8% compared to FY2014 by 2019
• Reduced unit water consumption by 14.4% compared to FY2014 by 2019
• Reduced unit waste generation by 32.2% compared to FY2014 by 2019
• Installed PV systems at Thailand plant, reducing annual CO2 emissions by nearly 3,000 tons
• Developed VOC-free, solventless paints, significantly reducing VOC emissions in aircraft part manufacturing

Social Achievements

• Achieved target of tripling the number of female managers by 2020
• Received “Three Stars,” the highest “Eruboshi” rank, in all five evaluation categories for promoting women's participation
• Created new workplaces for differently abled people and conducted recruitment activities in collaboration with the Employment Support Center
• Implemented employee awareness survey to measure engagement of employees
• Introduced a groupwide job-posting system to enhance employee engagement

Governance Achievements

• Transitioned to a Company with an Audit and Supervisory Committee
• Established the Nomination and Remuneration Meetings
• Reduced the number of directors
• Obtained AA1000AS warranty from an independent third party for materiality disclosure
• Strengthened business risk management through improved systems and processes

Climate Goals & Targets

Environmental Challenges

• Large-scale losses experienced in the past
• Globalization of business activities increasing risk scale
• Expanding scale of individual projects and complex technologies increasing risks
• Balancing economic development with environmental impact reduction
• Addressing trade-off between smart technologies and increased energy consumption

Mitigation Strategies

• Creating mechanisms to ensure effective business risk management
• Reinforcing advanced, intelligent systems and process monitoring
• Developing environmentally friendly products and solutions
• Implementing a cybersecurity policy and strategy
• Conducting regular compliance training and establishing whistleblowing hotlines

Supply Chain Management

Supplier Audits: 2,790 companies surveyed, 2,009 assessed (8.4%) in last 3 years

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines (revised 2018)
• CSR training for 1,773 business partners (2019)

Climate-Related Risks & Opportunities

Transition Risks

• Downward trend in market for new coal-fired thermal power facilities

Opportunities

• Increased demand for highly efficient power generation
• Growth in offshore wind turbine market
• Demand for modernizing existing power plants to reduce emissions

Reporting Standards

Frameworks Used: GRI, IIRC, UNGC, ISO 26000

Certifications: ISO 9001, ISO 14001, ISO 45001, EcoAction 21, K-EMS, ECO STAGE, Eruboshi, Kurumin

Third-party Assurance: Lloyd’s Register, Bureau Veritas

Sustainable Products & Innovation

• High-efficiency condensing unit for freezing and refrigeration using CO2 refrigerant
• Small- to medium-sized gas turbine for emerging markets

Awards & Recognition

• Plant of the Year 2017 (POWER Magazine)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Water Risk
• Biodiversity
• Waste/Pollution
• Human Rights
• Supply Chain Management
• Corporate Governance
• Diversity & Inclusion
• Employee Engagement
• Product Stewardship
• Customer Relationship Management
• Compliance
• Innovation

Environmental Achievements

• Reduced CO2 emissions per unit from offices and plants by 32.8% compared to FY2014 (as of FY2020)
• Reduced water usage per unit by 11.4% compared to FY2014 (as of FY2020)
• Reduced waste generation per unit by 12.3% compared to FY2014 (as of FY2020)
• Increased renewable energy share to 6.3% of total energy consumption in FY2020
• Issued first green bond in November 2020 for renewable/clean energy projects

Social Achievements

• Achieved target of tripling the number of female section managers and higher by 2020 compared to 2014 levels
• Received three-star “Eruboshi” certification in July 2020 for promoting women's participation in the workplace
• Implemented various support systems for childcare and family care, exceeding statutory minimums
• Introduced a groupwide job-posting system to enhance employee engagement

Governance Achievements

• Established Materiality Council and Sustainability Committee in October 2021 to strengthen sustainability management
• Maintained a Board of Directors with 50% outside directors, exceeding the one-third target
• Implemented robust compliance management system with biannual Compliance Committee meetings and whistleblowing hotlines

Climate Goals & Targets

Environmental Challenges

• Climate change impacts on business operations
• Water scarcity in some operating regions
• Maintaining and strengthening defense production and technological bases amid financial difficulties and rapid technological progress
• Ensuring compliance across a globally diverse workforce
• Maintaining high levels of employee engagement

Mitigation Strategies

• Established CO2 emission reduction targets and implemented energy-saving activities
• Conducted water-stress survey and developed action plan to reduce water consumption
• Developed various technologies to meet national security needs and pursued dual-use businesses
• Implemented robust compliance program including training, whistleblowing hotlines, and regional compliance officers
• Conducted employee awareness surveys and introduced pulse surveys to measure and improve employee engagement

Supply Chain Management

Supplier Audits: 1,886 companies surveyed by questionnaire in FY2020; 12 companies surveyed by ESG inspection in FY2020

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines (revised in December 2018)
• CSR education for business partners

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Natural disasters

Transition Risks

• Changes in emissions regulations
• Shifting market demand for fossil fuel-based products

Opportunities

• Growth in demand for renewable energy and energy efficiency technologies
• Development of hydrogen-powered gas turbines and CO2 capture technologies

Reporting Standards

Frameworks Used: GRI, IIRC, TCFD

Certifications: ISO 14001, ISO 45001

Third-party Assurance: Lloyd’s Register Quality Assurance Limited, Bureau Veritas Japan Co., Ltd.

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 13 (Climate action)
• Goal 8 (Decent work and economic growth)
• Goal 12 (Responsible consumption and production)
• Goal 17 (Partnerships for the goals)

Initiatives contribute to these goals through various environmental, social, and governance programs

Sustainable Products & Innovation

• Q-ton Circulation heat pump using low-GWP refrigerant
• Compact fuel gas supply module for LNG-fueled ships
• MSV2 series of heat pump chillers

Awards & Recognition

• Plant of the Year 2017 (POWER Magazine) for Petra Nova CO2 capture system

Environmental Metrics

ESG Focus Areas

• Climate Change
• Energy Transition
• Decarbonization
• Human Rights
• Diversity & Inclusion
• Corporate Governance
• Digitalization
• Safety & Security
• Supply Chain Sustainability

Environmental Achievements

• Targeting a 44% reduction (relative to FY2014) in total direct (Scope 1) and indirect (Scope 2) CO2 emissions by 2030.
• Developing hydrogen-fired gas turbines and ammonia-fired power generation technologies.
• Achieving the world’s largest-scale carbon capture system.
• Developing the world’s first hydrogen-based fine ore reduction (HYFOR) process for the steel industry.

Social Achievements

• Achieved target of tripling the number of women in management roles by 2020.
• Expanding programs that support work-life balance, including childcare leave and flexible work arrangements.
• Proactively expanding job opportunities for individuals with accessibility needs.
• Implementing Stop Work Authority (SWA) activities to prioritize workplace safety.

Governance Achievements

• Introduced Chief Officer System to enhance management oversight.
• Established Nomination and Remuneration Meeting (now an advisory body to the Board).
• Increased the number of outside directors to 50% of the Board.
• Implemented annual Board evaluations to ensure effectiveness.

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impacting production and service businesses.
• Intensification of competition in various business segments.
• Declining demand for fossil fuel-based power generation.
• Need to comply with increasingly stringent environmental regulations.
• Risks associated with mergers, acquisitions, and alliances.
• Supply chain disruptions and disasters.
• Product-related problems and intellectual property disputes.
• Cybersecurity threats.
• Legal and regulatory violations.

Mitigation Strategies

• Strengthening earnings power through cost reduction and portfolio optimization.
• Investing in growth areas and strengthening sales networks.
• Developing decarbonization technologies and solutions.
• Improving production efficiency and cost competitiveness.
• Implementing robust risk management processes.
• Maintaining adequate insurance coverage and disaster preparedness plans.
• Strengthening internal controls and compliance programs.
• Building a cybersecurity regime under the direct supervision of the CTO.
• Implementing cybersecurity controls and incident response measures.

Supply Chain Management

Responsible Procurement

• Socially responsible sourcing

Climate-Related Risks & Opportunities

Physical Risks

• Disasters

Transition Risks

• Declining demand for fossil fuel-based power generation
• Environmental regulatory tightening

Opportunities

• Energy Transition
• Hydrogen and CO2 solutions ecosystems

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (IIRC), Global Reporting Initiative (GRI) Standards, Task Force on Climate-Related Financial Disclosures (TCFD)

UN Sustainable Development Goals

• Goal 7: Affordable and clean energy
• Goal 13: Climate action

Initiatives related to energy transition, decarbonization, and renewable energy contribute to these goals.

Sustainable Products & Innovation

• Hydrogen-fired gas turbines
• Ammonia-fired power generation
• CO2 capture systems
• Next-generation light water reactors

Environmental Metrics

ESG Focus Areas

• Climate Change
• Water Risk
• Biodiversity
• Waste/Pollution
• Labor Practices
• Occupational Health and Safety
• Human Resources Development
• Talent Attraction and Retention
• Human Rights
• Corporate Philanthropy
• Corporate Governance
• Risk Management
• Compliance
• Product Stewardship
• Customer Relationship Management
• Innovation Management
• Supply Chain Management

Environmental Achievements

• Reduced CO2 emissions per unit from offices and plants by 42.1% in FY2021 relative to FY2014.
• Reduced water usage per unit in FY2021 by 23.2% relative to FY2014.
• Reduced waste generation per unit in FY2021 by 21.0% relative to FY2014.
• Installed PV systems at various business sites, reducing annual CO2 emissions.

Social Achievements

• Achieved a three-star rating in the “Eruboshi” certification for promoting women's participation in the workplace.
• Implemented various support systems for childcare and family care, exceeding statutory minimums.
• Introduced a job-posting system to facilitate internal job changes within the Group.

Governance Achievements

• Transitioned to a company with an Audit and Supervisory Committee in 2015.
• Established the Nomination and Remuneration Advisory Council in 2016.
• Maintained a Board of Directors with 50% outside directors in FY2021.

Climate Goals & Targets

Environmental Challenges

• Increased cost burden due to escalated carbon pricing.
• Shift to carbon-neutral manufacturing.
• Delays in establishing supply chains for hydrogen and ammonia.
• Rapid decline in demand for large-scale centralized power supplies.
• Commoditization of products due to electrification.
• Supply shortages of semiconductors and batteries.

Mitigation Strategies

• Incorporating technologies like high-temperature heat pumps, hydrogen power generation equipment, and CCUS in manufacturing facilities.
• Accelerating the commercialization of hydrogen gas turbines.
• Applying CCUS to existing coal-fired power plants.
• Developing clean fuels such as ammonia/biomass-fired boilers.
• Supporting the restarting of nuclear power plants.
• Developing next-generation light water reactors.
• Proposing solutions that leverage collective knowledge.
• Accelerating the development of fuel-cell-powered forklifts and port logistics equipment.

Supply Chain Management

Supplier Audits: 38 onsite and 5 online audits (FY2021)

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines
• CSR questionnaires
• ESG inspections
• Conflict minerals policy

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters

Transition Risks

• Increased cost burden due to carbon pricing
• Shift to carbon-neutral manufacturing
• Delays in establishing supply chains for clean energy sources
• Rapid decline in demand for large-scale power supplies
• Commoditization of products due to electrification
• Supply shortages of components

Opportunities

• Leveraging strengths of emission reduction-supporting products and technologies
• Offering benefits of emission reduction technologies
• Commercialization of hydrogen gas turbines
• Development of next-generation reactors

Reporting Standards

Frameworks Used: GRI, TCFD, UNGC, ISO 26000

Certifications: ISO 14001, ISO 45001

Third-party Assurance: Bureau Veritas

UN Sustainable Development Goals

• Goal 7 (Affordable and Clean Energy)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 13 (Climate Action)
• Goal 8 (Decent Work and Economic Growth)
• Goal 17 (Partnerships for the Goals)

Various initiatives contribute to these goals as described throughout the report.

Sustainable Products & Innovation

• High-efficiency heat pump (Q-ton Circulation)
• CO2 capture technology
• Hydrogen gas turbines
• Next-generation light water reactors
• Fuel-cell-powered forklifts

Awards & Recognition

• Plant of the Year 2017 (POWER Magazine)
• METI Minister’s Award (2021)

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity, Equity, and Inclusion
• Corporate Governance
• Human Rights
• Supply Chain Management

Environmental Achievements

• Reduced CO2 emissions in 2021 by 42% (compared to 2014 levels).
• Forecasting a reduction in 2022 CO2 emissions of 47% (compared to 2014 levels).
• Successfully completed the world’s largest hydrogen mixed firing validation test with 20% hydrogen.
• Awarded Pre-FEED contract for carbon capture plant at a cement production facility in UK.
• Reduced CO2 emissions per unit from offices and plants by 9% in FY2023 relative to FY2014.
• Reduced water usage per unit in FY2023 by 7% relative to FY2014.
• Reduced waste generation per unit in FY2023 by 7% relative to FY2014.

Social Achievements

• Started development of educational materials (e-learning) on the topic of respecting human rights in MHI Group. About 75,000 employees world-wide took the course.
• The rate of lost-worktime injuries was less than the industry average.
• Implemented various employee support systems with consideration to childcare and caregiving.
• The 4th MHI Group Employee Survey was undertaken in March 2023.

Governance Achievements

• Maintained the percentage of independent outside directors at 50% (6/12).
• Engaged in initiatives to evaluate the effectiveness of the Board of Directors.
• There were no serious laws/regulation violations.
• Implemented compliance training for employees both within and outside Japan.
• Held an ESG briefing in March 2023.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to geopolitical risks and pandemics.
• Climate change related risks (physical and transition risks).
• Maintaining a safe and secure society.
• Achieving gender diversity and increasing the participation of females in management roles.
• Ensuring respect for human rights throughout the supply chain.

Mitigation Strategies

• Developed resilience indicators for products and services.
• Implemented various disaster impact assessments.
• Promoted the development and practical application of resilient designs and technologies.
• Strengthened cybersecurity measures.
• Implemented human rights due diligence initiatives.
• Introduced a range of measures to boost its competitiveness in the recruitment market and enhance employee engagement.
• Developed and strengthened systems to support work-life balance.
• Reinforcement of female employment (Our works tours, round-table discussions, and pamphlet creation for female science students).

Supply Chain Management

Supplier Audits: 2,111 companies surveyed by CSR questionnaire in FY2022; 563 companies in FY2023; 35 companies by onsite ESG inspection in FY2023

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines
• CSR questionnaire survey
• On-site surveys
• Human rights due diligence

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events

Transition Risks

• Regulatory changes
• Market shifts
• Increased cost of carbon emissions

Opportunities

• Increased demand for products and services that promote carbon neutrality
• Development of hydrogen gas turbines
• Expansion of CCUS business

Reporting Standards

Frameworks Used: GRI, TCFD, UNGC, AA1000AS

Certifications: ISO 14001, Eruboshi, Kurumin, Excellent Health and Productivity Management Corporation

Third-party Assurance: Third-party assurance provider is mentioned but not specified.

Sustainable Products & Innovation

• Hydrogen gas turbines
• CO2 capture technology
• Energy-efficient air-conditioning systems
• Battery-powered forklift trucks

Awards & Recognition

• Inclusion in the Asia Pacific Index of the Dow Jones Sustainability Index (DJSI) for six consecutive years
• Selection for all six of the GPIF’s ESG-related indices used for Japanese stocks

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity & Inclusion
• Governance
• Employee Engagement
• Supply Chain Sustainability

Environmental Achievements

• Reduced CO2 emissions (Scopes 1 and 2) by 45% compared to 2014 levels in 2022.
• Reduced CO2 emissions across the entire value chain (Scope 3 + CCUS contribution) by 10% compared to 2019 levels in 2022.
• Achieved the world's top market share in commercial flue gas CO2 capture plants on a capacity basis.
• Successfully completed the world’s largest hydrogen mixed firing validation test with 20% hydrogen.

Social Achievements

• Launched joint trial tests of automated picking in beverage warehouses.
• Delivered a freezer/refrigerated warehouse to Kyoto Enkangyo Oroshi Kyodo Kumiai, contributing significantly to shortening construction time, improving cooling efficiency and reducing power consumption.
• Implemented a CSR questionnaire for overseas partner companies and obtained their agreement to the MHI Group Supply Chain CSR Promotion Guidelines.
• Provided compliance training to approximately 80,000 people (FY2022).

Governance Achievements

• Maintained the percentage of independent outside directors at 50% (6/12).
• Annually assessed the effectiveness of the Board of Directors.
• Established a three-tier risk management structure.
• Implemented a cybersecurity program under the direct supervision of the CTO.

Climate Goals & Targets

Environmental Challenges

• Geopolitical risks (Russia's invasion of Ukraine, US-China conflict)
• Exchange rate fluctuations and rising raw material prices
• Intensification of labor shortages and hollowing out of the manufacturing sector in Japan
• Reduced demand for products due to growing environmental consciousness
• Intensified competition and sharp drop in demand for fossil fuel-derived electric power
• Difficulty complying with environmental regulatory tightening
• Supply chain disruptions
• Cybersecurity threats
• Legal/regulatory violations

Mitigation Strategies

• Information collection on global conditions and regulations
• Prioritization of new functions/solutions incorporating external expertise
• Product/service development in new domains and collaboration across existing businesses
• Adequate insurance coverage
• Disaster preparedness/response tools and business continuity plans
• Various regulations and operational risk management regime
• Cybersecurity controls, incident response measures, and training
• MHI Group Global Code of Conduct and internal compliance reporting program
• Regular Compliance Committee meetings and training

Supply Chain Management

Supplier Audits: 25 suppliers in Southeast Asia (FY2022)

Responsible Procurement

• MHI Group Supply Chain CSR Promotion Guidelines
• CSR questionnaire for overseas partner companies

Climate-Related Risks & Opportunities

Transition Risks

• Increased cost of carbon emissions due to regulations
• Decline in competitiveness of current CO2 capture technology
• Emergence of innovative alternative technologies

Opportunities

• Increased demand for products and services that promote carbon neutrality
• Development of legal/tax systems supporting decarbonization

Reporting Standards

Frameworks Used: International Integrated Reporting Framework, TCFD Recommendations, GRI Standards, UNGC, ISO 26000

Sustainable Products & Innovation

• Hydrogen gas turbines
• Ammonia-fired gas turbines
• CO2 capture systems
• Advanced light water reactors
• Battery-powered forklifts
• Eco-friendly port handling equipment

Awards & Recognition

• 2023 Outstanding Health and Productivity Management Corporation