Initiatives toward Carbon Neutrality

The NGK Group considers our response to climate change to be one of our material issues. We will work towards carbon neutrality throughout our entire value chain, and aim for net zero CO₂ emissions in our business activities. In April 2021, we detailed our Carbon Neutrality Strategic Roadmap in our Environmental Vision which comprises four strategies. In line with this roadmap, we are moving forward with activities aimed at achieving our goal of net zero CO₂ emissions by 2050 at the latest.

CO₂ Emissions Reduction Promotion Framework

The NGK Group has been making steady progress toward achieving the CO₂ emissions reduction targets of our fifth 5-Year Environmental Action Plan following the NGK Group Environmental Vision, by creating and implementing annual plans.
From FY2021 through FY2023, NGK launched and implemented the Net Zero CO₂ Emissions Project as a cross-functional organization in an effort to develop a system dedicated to carbon neutrality. With the Senior Vice President responsible for manufacturing engineering departments at headquarters serving as the project leader, it has established working groups based on the four strategies for carbon neutrality whose goal is to implement initiatives on various themes, including improving energy conservation efforts, implementing international carbon pricing (ICP), developing fuel conversion technology, and installing photovoltaic power generation systems. Over the past three years, each working group has created a roadmap and established a system that can implement initiatives toward carbon neutrality. Therefore, starting from FY2024, we have dissolved the project structure and each working group is working independently. The NGK Group supports laws and regulations related to climate change and the reduction of energy consumption (in Japan, the Act on Promotion of Global Warming Countermeasures and the Act on the Rational Use of Energy, etc.), and appropriately responds with policies at our locations inside and outside of Japan.

Net Zero CO₂ Emissions Working Group Promotion Framework

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Targets and Achievements

In FY2023, as in FY2022, we made investments in environmental facilities through our energy conservation patrol and ICP, and also improved the operations of our clean rooms and production facilities. Plus, as part of our efforts to make energy use visible, we collected energy data on a monthly basis and shared it on our internal platform.
As a result, we were able to reduce our CO₂ emissions by 31,000 metric tons. Moreover, thanks to initiatives to install photovoltaic power generation systems photovoltaic power generation systems at facilities within the NGK Group, procure renewable energy, and switch to carbon neutral LNG*, we were able to meet our target with 560,000 metric tons of CO₂ emissions in FY2023.
In FY2024, we set our CO₂ emission target at 600,000 metric tons. In addition to the initiatives above, this fiscal year we will continue to promote energy-saving activities, and implement improvements through process improvements and waste heat utilization. However, in our environment business, we expect to see increased demand against a backdrop of recovering passenger car sales and tightening exhaust gas regulations. Therefore, we have set target values based on the possibility of increased emissions. In addition to promoting activities for achieving our targets, we will strengthen energy-saving activities and other efforts in order to limit the increase in actual emissions as much as possible this fiscal year.

Carbon neutral LNG is a type of LNG considered to have no CO₂ emissions because the emissions it releases are offset using CO₂ credits.

The figures in the graph include the effect attributable to carbon neutral LNG. Carbon neutral LNG is liquid natural gas that has been offset using CO₂ credits so that it is not considered to generate CO₂ emissions. However, we list it in a separate category since it is not currently eligible for credits under the Act on the Rational Use of Energy.

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Efforts to Achieve Carbon Neutrality within the NGK Group

To achieve the NGK Group Environmental Vision, we have formulated a Carbon Neutrality Strategic Roadmap, and are working to reach net zero CO₂ emissions for the entire Group by 2050.

Top-Down Enhancement of Energy Saving

Main Energy Conservation Activities Aimed at Reducing CO₂ Emissions

Enhancement of Framework for Promoting Energy-Saving and Energy Conservation Support

In FY2021, the NGK Group created a system for promoting energy conservation led by the general manager of the manufacturing division. Since then, we have set common energy-saving targets towards the goal of carbon neutrality. We are enhancing our management of planning and progress of reduction activities by collecting monthly energy data and making it visual through the establishment of an internal platform. This is proving to be useful for analysis. Meanwhile, we have created guidelines and a brochure of energy-saving best practices to support energy conservation by business divisions, and have distributed them to all locations inside and outside Japan (Japanese and English versions). In addition, the Engineering Department at our Head Office visits production sites inside and outside Japan to conduct energy conservation patrols and exchange opinions with on-site staff. This has eliminated energy leaks and waste in general equipment (compressors, boilers, air conditioners, etc.), improved the energy efficiency level of production equipment as a whole, and led to a significant reduction in energy costs.

Increase Efficiency of Manufacturing Processes

The NGK Group makes efforts to reduce environmental impacts resulting from production through the introduction of highly energy efficient equipment and the promotion of the recovery and use of exhaust heat and improved production efficiency. We are committed to creating even more advanced eco-processes, aimed at enhancing competitiveness. Kilns are necessary for the firing process which is integral to the production of ceramics. However, they consume a particularly large amount of energy, so we have long been focused on making them more efficient. As the graph shows, we have achieved a roughly 70% reduction per unit of CO₂ for continuous kilns over the past 30 years.

Comparison of CO₂ Emissions from Continuous Kilns by Year of Introduction

Energy Conservation of General Equipment and Buildings

The NGK Group has also been engaged in energy-saving activities for general equipment such as lighting, air conditioning, boilers, and compressors. We have been adopting highly efficient machinery and promoting improvements in operations by switching to LEDs for lighting; switching to inverters, optimizing output, and shading outdoor units for air conditioning; optimizing air volume for compressed air; etc. In this way, we have efficiently linked energy savings from general equipment to greater results through horizontal deployment of common know-how information from departments at our head office to each location.
We work to achieve significant energy savings when renovating or constructing buildings. We do this by actively incorporating highly efficient machinery and renewable energy, and implementing measures that take into account specific location details such as effectively utilizing low temperature waste heat from our nearby plants, and exploiting natural ventilation and natural lighting. Our new administrative/welfare wing in Mizuho, Nagoya (completed in October 2020) is a ZEB (zero energy building)-oriented office facility that incorporates these measures, and aims to reduce CO₂ emissions to less than half that of standard building energy consumption. This construction project has been lauded for its pioneering CO₂ reduction technology, and it was adopted as a Leading Sustainable Building Project (CO₂ Reduction) by Japan’s Ministry of Land, Infrastructure, Transport and Tourism. This allowed us to achieve ZEB readiness in FY2022. It has been lauded as a model for other companies, because it achieved ZEB-Ready status based on its utilization of unused low-temperature waste heat from our plant and its adjustment of air conditioning with consideration for the comfort of employees. And in FY2023, we won the Agency for Natural Resources and Energy Commissioner‘s Award (Business Category), Best Practice Category of the FY2023 Energy Conservation Grand Prize Award sponsored by The Energy Conservation Center, Japan (ECCJ). Due to changes to our business structure and the aging of buildings, we have many plans to construct new buildings and renovate existing ones. So, we will work to implement energy conservation, meet ZEB standards, and improve operations to more efficiently utilize energy as we have the opportunity.

Implementation of Internal Carbon Pricing

Internal carbon pricing (ICP) refers to the establishment and use of in-house carbon pricing for the purpose of promoting decarbonization-focused investment and policies.
Starting in FY2022, NGK has introduced an ICP to incentivize investment in high-efficiency equipment and facilities and renewable energy-related infrastructure that will realize the NGK Group Environmental Vision target of net zero CO₂ emissions by 2050. We are also evaluating the possibility of introducing equipment. In FY2023, since the International Energy Agency (IEA) revised the CO₂ price used to set the ICP, we revised our ICP to US$140/metric ton-CO₂ and applied this ICP to the return-on-investment calculation when installing waste heat utilization and photovoltaic power generation systems to reduce CO₂ emissions. Going forward, we will pay attention to societal trends and start to consider further application of internal carbon charges.

Promoting Technological Innovation

We can reduce our Scope 2 CO₂ emissions through efforts such as adopting renewable energy, but the production of ceramic products which is our forte requires a firing process. For this process we must utilize fuels such as natural gas. For this reason, we are developing technology to transition to fuels such as hydrogen or ammonia, which will make the fuel used in the firing process free of CO₂ emissions. In FY2022 we installed a mass production demonstration kiln with the goal of practical utilization of hydrogen burners in kilns. In FY2023, we verified the durability of the burner and heat distribution within the kiln for this mass production demonstration kiln.
In addition, as we prepare for the roll out of hydrogen and ammonia infrastructure, we are also demonstrating CCS (Carbon Capture and Storage) to collect the CO₂ emitted from our plant as exhaust gas. In the future, we plan to move on to demonstrating methanation, which uses captured CO₂ and hydrogen to synthesize methane, which is the primary component of natural gas.

Expanding Use of Renewable Energy

The NGK Group needs to expand the use of renewable energy to achieve the goal of net zero emissions in 2050 under the NGK Group Environmental Vision. With regards to electric power in particular, we are a member of RE100 (100% Renewable Electricity), and have promised that all of the electric power used in our business will come from renewable energy by 2040. In order to achieve this target, we are systematically promoting installation of photovoltaic power generation systems and procurement of renewable energy while being cognizant of the associated costs.
We have been installing photovoltaic power generation systems at production sites both inside and outside Japan since FY2021, including our NCDK Tajimi Plant and ACC (NGK CERAMICS SUZHOU CO., LTD.). In FY2023, we continued to install such systems at our Nagoya site and Ishikawa Plant in Japan, and our overseas production site ACP (NGK CERAMICS POLSKA).
Regarding environmental value acquisition through the purchase of electric power derived from renewable energy and Green Power Certificates, we have focused on procurement at our overseas production sites. And in FY2021, we reached the goal of procuring 100% of electricity from renewable energy sources at all manufacturing sites in Europe: ACP, ACE (NGK CERAMICS EUROPE) and NBF (NGK BERYLCO FRANCE). Specifically, fuel was procured from renewable energy sources at NGK BERYLCO FRANCE, which became the first manufacturing site within the NGK Group to use 100% renewable energy for both electricity and fuel. In North America, NGK-LOCKE has switched over to using 100% renewable energy for electricity as well.
Regarding fuel, NGK's Nagoya, Chita, and Komaki sites, as well as NGK CERAMIC DEVICE headquarters, use carbon neutral LNG credits to reduce their CO₂ emissions.
Efforts including the installation of photovoltaic power generation systems and procurement of renewable energy mentioned above led to a reduction of 210,000 metric tons of CO₂ emissions in FY2023. Going forward, we will continue to expand the installation of photovoltaic power generation systems and procurement of renewable energy at our sites. We will work to achieve a rate of 50% utilization of electric power from renewable energy by FY2025.

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Efforts to Achieve Carbon Neutrality throughout Our Entire Value Chain

In order to promote carbon neutrality, it is important to understand not only our own Scope 1 and Scope 2 CO₂ emissions, but the Scope 3 CO₂ emissions in our value chain, and to work with suppliers and customers to reduce them.

Scope 3 Initiatives

Scope 3 refers to indirect emissions of greenhouse gases throughout the entire value chain other than Scope 1 and Scope 2. In FY2022 the NGK Group began to monitor CO₂ emissions for the entire Group. The actual amount for FY2023 was 3.27 million metric tons. Category 1 of Scope 3 (purchased goods and services) accounted for the largest amount at 1.88 million metric tons, followed by Category 11 (use of sold products) at 1.02 million metric tons. So we believe it is important to prioritize reducing emissions in these categories. Going forward, we will work with our suppliers to reduce emissions in line with the emissions reduction targets set in the standards published by the SBTi. On the other hand, Scope 3 Category 4 (Upstream transportation and distribution) accounted for a relatively small percentage at 110,000 metric tons. NGK had already been complying with Japan's Act on the Rational Use of Energy and implementing reduction measures such as a modal shift and improving our loading ratio. The basic unit per transport volume has been improving over the past few years due to changes in our product makeup. In FY2023, it improved by 0.7% over the previous year. Hereafter, we will strive to reduce emissions throughout the entire NGK Group.

Changes in Transportation Volume and Basic Unit per Transport Volume

Calculating Carbon Footprint (CFP) in Life Cycle Assessment

Life cycle assessment (LCA) is a quantitative evaluation method for environmental impacts of products and services throughout their entire lifecycle (raw material extraction-raw material production-product manufacturing-distribution/consumption-disposal/recycling). To promote reductions throughout the whole value chain, the first step of initiatives should be to understand CO₂ emissions from the LCA of NGK’s own products, in addition to Scope 3 calculations relevant to the entire company. The NGK Group has set a target of calculating CFP through life cycle assessment of major products in the fifth 5-Year Environmental Action Plan. We began CFP calculations based on ISO 14040 in FY2021. We will identify processes with a lot of CO₂ emissions for our main products and new products, and work to reduce emissions. Hereafter, we aim to provide highly competitive products with a low carbon footprint by conducting life cycle assessment in the product planning and design stages.

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Participation in Initiatives Related to Carbon Neutrality and Certification by External Organizations

Task Force on Climate-Related Financial Disclosures (TCFD)

In February 2020, we announced our support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) established by the Financial Stability Board (FSB), and we began disclosing information based on the TCFD recommendation in April 2022.

Information Disclosure Based on TCFD Recommendations

SBTi (Science Based Targets initiative)

In April 2022, we submitted a commitment letter to the Science Based Targets initiative (SBTi), an accreditation body for Science Based Targets (SBT), and obtained certification for our short-term and net-zero targets in July 2024.

NGK Acquires Certification under the Science Based Targets initiative (SBTi) Net-Zero Standard

Membership in RE100

In October 2022, we joined the RE100 international initiative, which aims to replace 100% of the electricity used in business activities with renewable energy. We aim to get 50% of our electricity from renewable sources by 2025, and achieved the goal of 25% in 2023.

Winner of the Energy Conservation Grand Prize Award

In FY2023, our new administration/welfare wing in Mizuho, Nagoya won the Agency for Natural Resources and Energy Commissioner‘s Award (Business Category), Best Practice Category of the FY2023 Energy Conservation Grand Prize Award sponsored by The Energy Conservation Center, Japan (ECCJ).

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