Participation in Third-party Initiatives

The IHI Group participates in climate change related initiatives. Participation in such initiatives is decided on by the Management Committee and the Board of Directors.

TCFD

The IHI Group became a signatory to the Task Force on Climate-related Financial Disclosures (TCFD) by resolution of the Board of Directors in May 2019. This framework plays a role as a tool to formulate strategies able to strengthen risk management and cultivate business opportunities.

GX League

In February 2022, the IHI Group endorsed the GX League Basic Concept announced by the Ministry of Economy, Trade and Industry, joining it in April 2023.
The GX League is a group of companies that are actively working on Green Transformation (GX), established as a forum for discussion on reforming socioeconomic systems and practices in their entirety for the creation of new markets, together with government, academics, and financial players who are also taking part in the GX challenge.

Relationships with Industry Associations

The IHI Group is a member of various industry associations relating to climate change. The Group has set itself targets that align with or surpass the goals set in climate change response measures formulated by government agencies and industry organizations, and is implementing activities aimed at carbon neutrality. In cases where it is deemed that there is a wide disparity between the strategy adopted by a given industry organization and the goals of the Paris Agreement, the Group will consider the best way to respond to this, which may include leaving the organization.

Activities with International Standardization Organizations

The IHI Group is involved in activities that relate to putting in place the international rules needed for solving global problems, and as part of these efforts, the Group is engaged in standardization activities with the International Organization for Standardization (ISO). With the aim of ensuring appropriate use of fuel ammonia for boilers used in electricity generation, the Group has participated, alongside other companies and the CFAA, in the joint development of a Technical Specification^* (ISO/TS 21343) which specifies implementation procedures and reporting processes for exhaust gas environmental performance evaluation testing; IHI served as the project leader with the cooperation of Professor Kobayashi of Tohoku University. This Technical Specification was formally issued on January 14, 2025.

Technical Specification (TS): A Technical Specification addresses work still under technical development, or where it is believed that there will be a future, but not immediate, possibility of agreement on an International Standard.

Responses to and Support for Public Regulations

The IHI Group supports laws, policies, regulations, and so on relating to climate change and responds to them appropriately at each domestic and overseas business site.
In particular, IHI is a specified business operator under the Act on Rationalization of Energy Use and Shift to Non-fossil Energy (the Energy Conservation Act), and as such, is obligated to make efforts to reduce energy consumption intensity by an average of 1% per year. In the IHI Group Environmental Action 2023 plan, which covers fiscal 2023 to fiscal 2025, the Group sets reduction targets in line with the Energy Conservation Act. By implementing energy-saving measures at each site, the entire Group is promoting the efficient use of energy.

Structures for Implementing Initiatives to Become Carbon Neutral

Within the IHI Group, the Environment Committee deliberates and decides on activity strategies, plans and targets relating to the response to climate change.
In fiscal 2021, the Group established the Carbon Neutral Task Force^* to promote measures aimed at realizing carbon neutrality throughout the value chain, with the Administration Division serving as its secretariat and with members from across the Group’s divisions. The Carbon Neutral Task Force’s activities are reported to and discussed by the Environment Committee, before being reported to the ESG Management Promotion Committee; feedback received from management is shared throughout the Group.
Of the matters discussed at these committees and meetings, those matters related to important management decisions, such as setting targets for carbon neutrality, are deliberated on by the Management Committee, which serves as the decision-making body for management execution, and are then submitted to the Board of Directors.

The Carbon Neutral Task Force’s members include representatives of the Administration Division, Finance & Accounting Division, Intelligent Information Management Division, Corporate Research & Development Division, Procurement Strategy Planning Division, and individual business areas.

System for Achieving Carbon Neutrality

IHI Carbon-Neutral 2050

The IHI Group is committed to achieving the Paris Agreement’s target of limiting the global average temperature increase to well below 2°C above pre-industrial levels, and striving to limit the temperature increase to 1.5°C above pre-industrial levels, by promoting “IHI Carbon-Neutral 2050.”
The Group aims to halve direct and indirect greenhouse gas emissions (Scope 1, 2) from its business activities compared to 2019 by fiscal 2030 and achieve effectively zero emissions by 2050. As short-term measures, the Group established the IHI Group Environment Action Plan 2023 (FY2023–FY2025) and set the target of reducing total Scope 1 and 2 emissions by 12,000 t-CO₂e through capital investment. The Group succeeded in reducing emissions by 9,000 t-CO₂e in fiscal 2024, with the goal of achieving a further reduction of 3,000 t-CO₂e by fiscal 2025. The Group has also set a target of reducing energy intensity (energy consumption per unit of sales) by 3% compared to fiscal 2022.
The Group also aims to achieve effectively zero greenhouse gas emissions released in upstream and downstream processes (Scope 3) by 2050. The Group formulated the Scope 3 Emissions Reduction Roadmap, will reduce emissions with a focus on category 11 (use of sold products) and category 1 (purchased products and services), which have particularly large emissions, to achieve carbon neutrality across Scopes 1, 2, and 3.
Possessing decarbonization technology, the IHI Group will take the lead in contributing toward the realization of a global carbon-neutral society through its efforts in achieving this goal.

Risk and Opportunity Due to Climate Change

The IHI Group conducted simple scenario analyses of four business domains significantly impacted by climate change: the energy business, bridge and water gate business, vehicle turbocharger business, and the civil aero engine business.
The first step set ① a carbon-neutral world as the highest transition risk and ② a world greatly impacted by climate change as the highest physical risk in our own independent scenarios drafted with reference to external scenarios created by the International Energy Agency (IEA) and Intergovernmental Panel on Climate Change (IPCC).
The second step identified risks and opportunities for all four business domains. The third step assessed the impact each business has. The fourth and last step drafted countermeasures according to our findings.
Countermeasures set to address the two extreme worlds anticipated by these IHI scenarios enhance the resilience of IHI Group businesses against future risks.
The IHI Group can also reduce risks against the harshest world facing both these scenarios (① and ②) at the same time by integrating the countermeasures for each.
The IHI Group divides the risks and opportunities identified for each of the four business domains and the countermeasures into two categories: 1. risks, opportunities, and countermeasures specific to each business and 2. risks, opportunities, and countermeasures shared across all businesses.
In the future, the IHI Group will enhance its ability to leverage scenario analyses in business strategy through efforts, such as assessing the financial impact of climate change.
The IHI Group will proactively incorporate the concepts pursued by TCFD signatories in management policies and business strategies, contributing not only to the sustainable development of our Company, but society as a whole.

Scenario Analysis Process

External reference scenarios:

• A carbon-neutral world
  IEA 2DS (qualitative assessment based on the ETP2017 Global technology penetration in LDV stock by scenario, global electricity generation, etc.)
• A world greatly impacted by climate change
  RCP 8.5 (qualitative assessment based on the portions relating to wind and flood damage risk of IPCC AR5 WG2)

IHI Group Scenarios

1. High-transition risk scenario
   This scenario presents ① a carbon-neutral world where society at large shifts to mitigate climate change and stop all greenhouse gas emissions.
2. High-physical risk scenario
   This scenario ② presents a world greatly impacted by climate change that needs to adapt to the physical impact and directly confront drastic devastation by natural disasters.

Mitigating Climate Change (Initiatives to Become Carbon Neutral)

Reducing Scope 3 Emissions

The majority of the IHI Group’s Scope 3 emissions fell under category 11 (use of sold products) with coal-fired power plant boilers accounting for most of these emissions during fiscal 2023. However, new boiler construction will be completed by fiscal 2025, with emissions expected to decrease significantly from fiscal 2026 onwards. The Group also aims to significantly reduce emissions from other products included in category 11 by 2050 by converting to clean energy and improving energy consumption efficiency.
In order to achieve these goals, the IHI Group has devised a roadmap for reducing its Scope 3 emissions by 2050. In line with this roadmap, the Group will continue to reduce GHG emissions throughout the life cycle of our products from the material procurement, design, and manufacturing stages and use after customer purchase. Furthermore, the Group aims to reduce Scope 3 emissions by working to come up with carbon solutions to reduce its carbon footprint, such as building a fuel ammonia value chain and through carbon dioxide capture, utilization, and storage (CCUS).
Regarding civil aero engines, which serve as the IHI Group’s main product, the Group is working with business partners to make its entire supply chain, including material procurement, carbon neutral. Additionally, the Group is making efforts to improve conventional aero engine fuel efficiency and develop revolutionary aero engines with the goal of improving aircraft energy efficiency as a whole. Moreover, the Group will be focusing on developing and expanding the use of sustainable aviation fuel (SAF) production technology, aiming for carbon neutrality across its entire value chain.
In particular, the IHI Group has taken an interest in fuel ammonia. The Group plans to build a value chain by leveraging its strengths throughout each stage in the process, from fuel manufacturing, receiving, storage, and utilization. This will be beneficial toward expanding the use of fuel ammonia and contributing to reducing GHG emissions among society as a whole.

Scope 3 Emissions Results and Projections

Scope 3 Emissions Reduction Roadmap

“Climate Change” Targets and Results (IHI Group Environmental Action Plan 2023 [FY2023–2025])

(Scope: IHI and consolidated subsidiaries)

GHG Emissions (Scope 1 and 2) and Energy Consumption

(Scope: IHI and consolidated subsidiaries)

1. The total value for each item is rounded off and may not match the figures in the breakdown.
2. The denominator of the intensity is net sales revenue.

Third-party Verification of Data

GHG Emissions (Scope 3)

The IHI Group calculated its Scope 3 emissions based on the GHG Protocol and the Ministry of the Environment Guideline^*. Within Scope 3, emissions from category 11 (use of sold products) were the highest, followed by category 1 (purchased products and services).

A basic guideline for calculating GHG emissions for organizations across the supply chain.

(Unit: t-CO₂e)

1. The calculation method through fiscal 2023 is based on weight, distance, and energy for each means of transportation. In addition, the scope of calculation through fiscal 2023 is IHI Corporation.
2. Many products are excluded because they are rarely transported after delivery and installation and as a result, emissions are minimal.
3. In many instances, finished products are delivered, and even if there are parts, the emissions from assembly and so on are minimal, and as a result, they are excluded.
4. For calculation method for civil aero engines, please refer to the reference material below.
5. Many products are made of metal and are recyclable, thus the final disposal volumes are minimal and the amount of waste is small, and have been excluded as a result.
6. The IHI Group is does not use a franchise format, making it ineligible.
7. In Ministry of the Environment materials (frequently asked questions and answers on supply chain emissions calculations), category 15 applies to private financial institutions, and accordingly, is excluded.

Third-party Verification of Data

Reference: Scope 3 Category 11 Calculation Method for Civil Aero Engines

Scope 3 category 11 includes greenhouse gas (GHG) emissions from the use of goods and services sold by the reporting company.
Commercial aircraft are required to achieve net-zero GHG emissions by 2050 in accordance with an international agreement specified by the International Civil Aviation Organization (ICAO). The IHI Group recognizes the importance of the calculation and evaluation of GHG emissions during use of its engines to achieve carbon neutrality in the civil aero engine business, which is positioned as one of our growth businesses.
The calculation formula for the IHI Group civil aero engine Scope 3 category 11 is shown as follows. The Group calculates the value based on the amount of GHG emissions generated during the use of its aero engines sold in the relevant fiscal year, taking account of the ratio of engine to aircraft weight, and the ratio of participation in engine development programs.

①GHG emissions during the total lifetime of the sold aero engines in the relevant fiscal year

The Group calculates GHG emissions during the total lifetime of the sold engine in the relevant fiscal year by multiplying amount of fuel consumption during the use of engines sold (number of engines sold × total lifetime of the sold engine × annual fuel consumption per engine) by emission factor (CO₂ emissions per unit of fuel consumption).
The emission factor is based on the values defined by the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) established by ICAO. It also takes into account potential changes through the future implementation of sustainable aviation fuel (SAF).

②Ratio of engine to aircraft weight

Since the engine is a part of the aircraft, it is necessary to multiply (engine weight / aircraft weight) in accordance with the Technical Guidance for Calculating Scope 3 Emissions, the international standard GHG protocol for calculating and reporting GHG emissions.
Engine and aircraft weight are dry weight based on data provided by the European Union Aviation Safety Agency (EASA).

③Ratio of participation in engine development programs

Civil aero engines are usually developed jointly by several companies. Companies participating in engine development programs share development costs and management risks. They bear business costs and receive profits depending on the ratio of participation under individual contracts. Considering it appropriate to allocate GHG emissions during the use of engines according to the ratio of the participation in engine development programs, the Group multiplies the relevant participation ratio.

The calculation of Scope 3 category 11 for civil aero engines does not include engine maintenance and the manufacture of spare parts.

Mitigating Climate Change (Initiatives to Become Carbon Neutral)

The IHI Group aims to make its complete value chain carbon-neutral by 2050. We are striving to reduce direct and indirect (Scope 1 and 2) GHG emissions from our business activities as well as Scope 3 emissions from the upstream and downstream processes in our value chain.

Initiatives to Become Carbon Neutral

• Reduction of CO₂ Emissions During Procurement and Production

  The IHI Group is working to reduce CO₂ emissions in procurement and production activities to achieve carbon neutrality throughout the value chain.

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• Using Ammonia as Fuel

  The IHI Group is working on the development of power generation technologies using ammonia as fuel and the construction of a value chain that envisions a society where ammonia utilization is expanded.

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• Lighten Products, Electrify, and Convert Fuel for Air Transport Systems

  In air transport systems, the IHI Group is developing and implementing various technologies such as electrification to achieve carbon neutrality.

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• Using Recycled Carbon as an Energy Source

  To prevent an increase in atmospheric CO₂, the IHI Group is conducting research on the technological development and social implementation of the separation, recovery, and effective utilization of emitted CO₂.

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Efforts Toward Disaster Prevention and Reduction

• Adapting to Climate Change

  Through the development of resilient infrastructure and the utilization of water management systems that make use of weather forecasting, the IHI Group aims to achieve a safe and secure living environment.

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