CO₂ FREE (Realization of a Carbon-neutral Society)

In October 2020, the Japanese government declared its target of achieving carbon neutrality by 2050, to this end raising its fiscal 2030 reduction target for CO₂ emissions from 26% to 46% (both compared with the fiscal 2013 level) in April 2021. This is but one example of decisions made by countries around the globe amid the accelerating trend toward across-the-board decarbonization and the realization of a low-carbon society. Toward achieving the CO₂-free target set out in the Kawasaki Global Environmental Vision 2050, the Kawasaki Group is not only actively engaged in realizing carbon neutrality at its plants (Scope 1 and 2) but also throughout its supply chain (Scope 3).

Efforts to Achieve Zero CO₂ Emissions—Carbon Neutrality Targets (Medium- to Long-term Targets)

Toward achieving the CO₂-free target set out in the Kawasaki Global Environmental Vision 2050, the following CO₂ emission reduction targets have been set for the years 2030 and 2040.

Corresponding companies: Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, Kawasaki Motors + Affiliated companies in Japan

Toward the Realization of Independent Carbon Neutrality by 2030 through Initiatives Focusing on Hydrogen Power Generation

To reduce Scope 1 and 2 CO₂ emissions, the Kawasaki Group will first create zero-emissions plants in Japan, which accounts for three-quarters of the Group’s total annual emissions of 400,000 tons, by combining power generation from waste, renewable energy, and other sources with a focus on in-house hydrogen-fueled power generation facilities, as described below. We will then expand implementation to overseas subsidiaries and promote the introduction of hydrogen energy to existing power generation facilities previously delivered to customers and other facilities. The natural gas-fired gas turbine facilities previously delivered by the company that are in operation as of 2023 have a total capacity of about 1,000 MW. If we make proposals for the introduction of hydrogen energy and are able to transition these facilities to mixed hydrogen or exclusive hydrogen firing, it will be possible to shift to hydrogen energy without making substantial changes to existing facilities. Hydrogen power generation is currently advancing from the verification stage to the commercial application stage, and one urban area that can serve as a model, we have already achieved supply of heat and electric power generated exclusively from hydrogen using gas turbines manufactured by Kawasaki Heavy Industries.

Zero-emissions plant refers to initiatives to achieve zero CO₂ emissions from plants by obtaining the electricity and thermal energy used at the plants from a combination of methods that do not emit any CO₂, such as hydrogen power generation, solar power generation, and waste power generation. The Kawasaki Group will reduce CO₂ emissions throughout the Group by converting its plants in Japan to zero-emissions plants by 2030.

Corresponding companies: Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, Kawasaki Motors

Leading Society by Advancing Toward Zero-Carbon Ready

Scope 3 Net Zero can only be achieved when all parties in the value chain including trading partners and clients become Zero-Carbon Ready. The Company will implement the maximum possible measures concerning Scope 3 to become Zero-Carbon Ready by 2040. Specifically, for category (i), we will slash CO₂ emissions by suppliers of materials and parts by 80% compared to fiscal 2021, and for category (xi), we will develop a lineup of CO₂-free standard solutions in all businesses. Moreover, we will reduce CO₂ emissions by more than the Company’s own Scope 3 emissions by working toward achieving a hydrogen-based society and engaging in the CCUS business, thereby contributing to the early achievement of carbon neutrality around the world.

^* Regarding Category (xi) in Scope 3, from fiscal 2022, the scope of calculation was expanded from a total of KHI, KRM, and KMC, to the Kawasaki Group.

Scope 3 Category (i) Procurement of materials and parts

It is anticipated that many industries and companies will tackle the reduction of CO₂ emissions through various measures, including the utilization of renewables and efficient energy use. The Company will deepen its partnerships, including sharing emissions data with business partners, offering support for CO₂ reductions and striving for early achievement of zero emissions. This will be achieved by means not limited to in-company utilization by the Group of solutions such as hydrogen power, hydrogen fuel, and other alternative fuels, as well as CCUS, but also by providing these solutions to business partners that supply materials and parts. As a first step, in fiscal 2023, we introduced tools for visualizing CO₂ emissions from procurement in some businesses and conducted briefings and study sessions on carbon neutrality for business partners. Furthermore, in April 2024, we held a briefing on carbon neutrality for our main business partners to provide an overview of the Kawasaki Group’s initiatives and guidelines toward the realization of a carbon-neutral society. Meanwhile, we are also promoting collaboration with our suppliers, such as making requests that they undertake initiatives to reduce their CO₂ emissions.

Scope 3 Category (i) (CO₂ reductions scenarios)

Scope 3 Category (xi) Providing customer solutions

The Group will actively undertake three major initiatives. The first will be the provision of CO₂-free fuels and electrical power to society, with a focus on its hydrogen business. The second will be to make a selection of choices for electrification and CO₂-free fuels available to customers utilizing our various solutions including mobility and robots. The third will be promoting CO₂ capture as well as the effective use of CO₂ including the manufacture of synthetic fuels and chemical products to achieve a circular CO₂ society. With these three pillars, the Group will make choices available to our customers of products and services (excluding defense and related; emergency products business) that contribute to the achievement of carbon neutrality by 2040, and promote global reductions in CO₂.

* From fiscal 2021, the Group modified its calculation method to allow more accurate records of emissions levels for Scope3 category (xi). Previously, CO₂ emissions levels for products such as hydraulic machinery, manufactured as parts to be incorporated in finished products, were calculated by tallying the CO₂ emissions levels of the finished products such as construction machinery. However, from fiscal 2021, these calculations will also take into account the degree of contributions and weight ratios for final products.

In all businesses, we provide decarbonization solutions through a shift to hydrogen, electrification and green power grids, and CCUS/alternative fuels. We seek to carry out optimal decarbonization transitions in each business, provide CO₂-free solutions, and reduce CO₂ throughout society while expanding the scale of our business.

^* Following the Group Vision 2030・Business Report Meeting held on December 6, 2022, the net sales target was revised from 300 billion yen to 400 billion yen.

We will not simply store the CO₂ that we recover at KCC and DAC, but will also work toward achieving a circular CO₂ society by means such as the effective use of CO₂ including the manufacture of synthetic fuels and chemical products through synthesis with CO₂-free hydrogen.

Information Disclosure in Line with the TCFD Recommendations (Scenario Analysis)

Climate change-related information based on TCFD recommendations is reported in the Kawasaki Report. Please refer to the link below for the details on our report after fiscal 2023.

Environmental Management Activities Plan 2024 (Short-term Target and Plan)

Aiming to achieve its carbon neutrality target (medium- to long-term target), in the short-term, while the Company will step up efforts to introduce in-house hydrogen power generation by 2030 to achieve carbon neutrality at its plants (Scope 1 and 2), it will continue its ongoing efforts to scale the introduction of renewable energy and to save energy. Furthermore, the Company will accelerate these efforts with the introduction of internal carbon pricing. To achieve carbon neutrality in its supply chain (Scope 3), the Company aims to realize Zero-Carbon Ready by 2040 by advancing its provision of CO₂-free solutions to its business partners and customers. One aspect of Scope 3 reductions is the public disclosure of CO₂ emissions reduction contributions^* by products.

^* For information on emissions reduction contributions, refer to “Reducing CO₂ Emissions through Product-Based Contributions” below on this page.

Corresponding companies: Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, Kawasaki Motors

Utilizing Renewable Energy

The Kawasaki Group is advancing the use of renewable energy to reduce the CO₂ emissions from its plants. To this end, we are installing solar power generating systems at our plants. We have a total solar power generation capacity of 12,610 kW including Group companies. In fiscal 2023, these systems generated 13,632 MWh, of which 10,488 MWh was used in-house. Electric power used in-house is equivalent to 1.51% of the electricity consumed throughout the entire Group.

The Kawasaki Group’s Solar Power Generation Capacity

• *1 Power generation facility operated by Kawasaki Trading Co., Ltd.
• *2 FIT: Feed-in tariff; a program in which renewable energy is bought back at a fixed rate

Photovoltaic output (including power sold via FIT)

Systematic Investment in Energy-Saving Equipment

As a measure to promote energy-saving activities, in 2022, the Company introduced an initiative to set reference values for the CO₂ reduction efficiency of energy-saving investment projects as criteria for determining the investment in such projects and to increase the equipment budget allocation for projects in which the reduction efficiency meets the criteria. Through this initiative, the Company will continue to reduce its CO₂ emissions by advancing its investments in equipment with a focus on projects with a high CO₂ reduction efficiency. Such equipment investment projects include upgrading production equipment, switching air conditioning systems to those that run on electricity, and changing to LED lighting. In addition, in accordance with the Act on Rationalization of Energy Use and Shift to Non-fossil Energy, Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, and Kawasaki Motors aim to reduce unit energy consumption by an average of 1% per year.

Internal Carbon Pricing

To promote investment in carbon neutrality efforts such as the introduction of future hydrogen equipment and renewable energy and to change behavior within the Company, since fiscal 2022, the Company has introduced internal carbon pricing. Specifically, a carbon surcharge will be imposed in an amount calculated by multiplying the Scope 1 and 2 emissions of Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, and Kawasaki Motors in the previous fiscal year by a CO₂ unit price (2000 yen/t-CO₂). The aim is to make concentrated investments in carbon neutrality efforts based on the funds generated from surcharges of the internal carbon pricing program.

Corresponding companies: Kawasaki Heavy Industries, Kawasaki Railcar Manufacturing, Kawasaki Motors

Nearly 90% of CO₂ emitted during the life cycles of our products is released during the period of their use after they are sold. Therefore, the Company seeks to realize a carbon-neutral society by providing products that produce only low CO₂ emissions during their use. To reduce products’ post-sale CO₂ emissions, in addition to increasing product energy efficiency, we are advancing electrification and modal shifts when replacing existing products in our product lineup and expanding our lineup of products that utilize exhaust heat, waste, and renewable energy. Key products that help reduce CO₂ emissions are listed below. In fiscal 2017, we revised our rules for calculating CO₂ emissions reductions through product-based contributions in order to better quantify the contributions of such products to the mitigation of global warming. Calculations based on these rules showed that the CO₂ emissions reduction^* through products we sold in fiscal 2023 was about 16.30 million tons. Large contributions were made mainly by the M7A Series gas turbines for power generation, which boast excellent reliability, economy, and environmental friendliness and are certified under the Kawasaki Ecological Frontiers system, an internal certification program for environmentally conscious products, and the KC-MB-20, a controller for use in construction machinery to improve its fuel efficiency via the application of superior controlling technologies.

^* Reduction in CO₂ emissions compared to earlier products (refer to the calculation rules below.)

Key Products That Contribute to Reducing CO₂ Emissions During Use (by Segment)

• *1 CK Mill: Named after the companies that jointly developed it, Chichibu Cement Co., Ltd. (now Taiheiyo Cement Corporation) and Kawasaki.
• *2 Developed with a focus on three Es: energy saving, easy maintenance, and environmentally friendly.
• *3 Ship Operation and Performance analysis support system
• *4 Environmentally Friendly Advanced Commuter & Express train

• Products to be assessed: Kawasaki Ecological Frontiers system, products that use waste, waste heat, and renewable energy, as well as cogeneration systems and rolling stock pertaining to modal shifts, etc., were selected for assessment
• Period of assessment: Until fiscal 2016, we used a one-year period of assessment. However, in line with the revision of the calculation rules, since fiscal 2017, we have adopted a flow-based approach^* in which the period of assessment is the estimated useful life of products sold in the fiscal year, because the estimated useful lives of our products are long. This allows us to better calculate the difference in CO₂ emissions between our products and industry standard class products over the entire period of use.
• The calculation method expressed as a calculation formula is as follows: CO₂ emissions through product-based contributions = (annual CO₂ emissions from conventional products - annual CO₂ emissions from new products) x (assumed number of usage years)

^* Please refer to the "Guideline for Quantifying Greenhouse Gas Emission Reduction Contribution" (Ministry of Economy, Trade and Industry, March 2018)

In order to quantify the contributions of highly energy efficient products to the mitigation of global warming, products included in the calculation of CO₂ emissions reduction through product-based contributions include power generated through waste heat, waste, renewable energy, and so forth. As a result, some of the products included differ from those included in the calculation of Scope 3, category (xi), which covers only energy-derived CO₂ emissions. CO₂ emission reductions for the past five years are shown in the graph below. Particularly notable products that have had a large cumulative effect are shown below.

• Notes: 1. Kawasaki uses CO₂ emissions factors provided in the list of calculation methods and emissions factors published by Japan’s Ministry of the Environment.
• 2. The CO₂ emission reduction effect through product-based contributions achieved through the higher energy efficiency of products is based on a comparison using industry standard products.
• 3. The application of waste heat, waste, and renewable energy is counted toward the CO₂ emissions reduction effect through product-based contributions.

For details on the Kawasaki Ecological Frontiers certification system for environmentally conscious products, please refer to environmentally conscious products.

External Affairs Activities Concerning Climate Change

To contribute to realization of a society that limits the increase in the global average temperature to 1.5°C compared to pre-industrial times, the objective of the Paris Agreement, the Kawasaki Group is using its technological knowledge and expertise relating to decarbonization, actively participating in trade association activities, and contributing to the formulation of policy recommendations concerning climate change mitigation and adaptation. The directors in charge of the relevant departments ensure that trade association and public policy engagement is in line with the Group’s strategies concerning responses to climate change and report as necessary to the Board of Directors, the highest decision-making body responsible for deliberating on and finalizing fundamental sustainability policies and basic plans for the entire Group. In cases where we identify substantial misalignments between the activities of organizations of which the Group is a member and the objectives of the Paris Agreement, we engage in constructive dialogue with those organizations based on the Group’s climate change strategy and business activities, and if those misalignments cannot be eliminated after the passage of a certain period of time, we consider appropriate responses including withdrawal.

Hydrogen, a source of clean energy that does not emit any CO₂ during use, has become a focus of attention as one solution for achieving a carbon neutral society by 2050. In response, the Kawasaki Group has positioned the achievement of carbon neutrality centered on hydrogen electricity generation as one pillar of our climate change strategy and is now working to carry out that strategy in collaboration with policymakers and trade associations. Group Vision 2030, our management strategy, positions new business including the hydrogen business as our primary growth scenario and seeks to achieve the 1.5°C target in line with the Paris Agreement. The hydrogen business in particular is positioned at the center of the Company’s business growth and transition plan, and we are actively cooperating with policymakers, trade associations, and others to assess hydrogen GHG emissions and formulate international supply chain rules with the aim of achieving the objectives of Group Vision 2030 and carbon neutrality at an early stage.

Participation in the Development of the Methodology to Assess GHG Emissions of Hydrogen at IPHE

In order to promote low-carbon hydrogen utilization in society toward the realization of a carbon-neutral society, it is necessary to evaluate the hydrogen to show that it is low-carbon, and it is ideal that the evaluation criteria are standardized internationally. The methodology for determining greenhouse gas (GHG) emissions of hydrogen is discussed in IPHE (International Partnership for Hydrogen and Fuel Cells in the Economy), an international inter-governmental partnership whose objective is to facilitate and accelerate the transition to clean and efficient energy and mobility systems using fuel cells and hydrogen technologies. Our company has participated in this discussion as an expert supporting the Ministry of Economy, Trade and Industry, Japanese government, and has made a significant contribution, including providing technical advice, particularly about liquefied hydrogen supply chain.

Establishing International Rules Relating to Assessment of CO₂ Emissions in Hydrogen Supply Chains

The Kawasaki Group is using the technical knowledge and data concerning international liquefied hydrogen supply chains that it has accumulated as a top runner in an effort to establish international rules relating to methodology for calculating CO₂ emissions in collaboration with relevant organizations. Specifically, in May 2023, we announced a collaboration with DNV, an international third-party certification body, to establish methods of calculating CO₂ emissions during maritime transportation of liquefied hydrogen. Our ultimate objective is to have our efforts reflected in standardized international rules. We also participated in the formulation of the Technical Specification relating to a methodology for calculating CO₂ emissions in processes from hydrogen production to transport issued by the ISO in November 2023. In addition, Yoshinori Kanehana, the Company’s Chairman of the Board, served as co-chair of the Hydrogen Council from January 2022 to June 2024. The Hydrogen Council is an organization that promotes the roles that hydrogen can play in the global-scale transition to alternative fuels and currently has approximately 140 members from various industries around the world. We participate in discussions on methodologies for evaluating GHG emissions with council members.

HySTRA

As a member of HySTRA (CO₂-free Hydrogen Energy Supply-chain Technology Research Association), the Company participates in efforts to build a CO₂-free hydrogen supply chain consisting of hydrogen production, transport/storage, and utilization, and works to establish and verify the relevant technologies to be commercialized by around 2030. The Company's role at HySTRA is to engage in building liquefied hydrogen carriers and constructing liquefied hydrogen unloading equipment and bulk storage facilities by utilizing the cryogenic technologies it has developed such as for LNG carriers, LNG storage tanks, and liquefied hydrogen tanks for rocket fuel.

JH2A

The Company has participated in the Japan Hydrogen Association (JH2A), an organization that promotes global collaboration on the hydrogen field and the formation of hydrogen supply chains, as an executive board member since its foundation in December 2020. We support the purpose of the JH2A, which is to build a hydrogen society at an early stage through the realization of social implementation projects, and by working with other member companies and organizations, national and local governments, and academia, we are promoting the “global collaboration and cross-industry, open initiatives in the hydrogen field” supported by the JH2A, thereby contributing to the development of hydrogen supply chains and a hydrogen society.