Achieving a Decarbonized Society

• Efforts to Achieve a Decarbonized Society
• Environmental Strategy for Achieving a Decarbonized Society
• Expanding the Decarbonization Business
• Decarbonization Business Case Examples
• CO₂ Emissions Reduction as Avoided Emissions
• Improving the Environmental Performance of Products and Services Through Eco-Design
• Reduction of Product and Service CO₂ Emissions During Use
• CO₂ Emission Reductions at Business Sites (Factories and Offices) and Hitachi Carbon Neutrality 2030
• The Hitachi Internal Carbon Pricing Framework
• Activities and Achievements at Business Sites (Factories and Offices)
• Introducing Renewable Energy
• Initiatives to Reduce CO₂ Emissions from Purchased Goods and Services
• Reducing Transportation Energy Consumption
• Hitachi Fleet Management Reduces CO₂ Emissions from Business Vehicles

Efforts to Achieve a Decarbonized Society

Approach & Policy

Materiality

Tackling climate change has become a global issue, and the roles required of governments and companies have changed dramatically. With our participation in the 28th Conference of the Parties (COP28) to the United Nations Framework Convention on Climate Change, Hitachi aims to become a Climate Change Innovator, tackling environmental issues from a global perspective while deepening cooperation with governments and stakeholders to accelerate the transition to a decarbonized society .
Hitachi, under its "GX for CORE", which is one of the two pillars of our green strategy, will accelerate measures to reduce its own CO₂ emissions to achieve carbon neutrality at business sites (factories and offices) by the fiscal 2030.
Additionally, as stated in our long-term environmental targets, Hitachi Environmental Innovation 2050, we are working towards achieving carbon neutrality across the entire value chain by fiscal 2050. Under GX for CORE, one of the two pillars of our green strategy, we are accelerating measures to reduce our own CO₂ emissions to achieve carbon neutrality by fiscal 2030 at our business sites (factories and offices). And under GX for GROWTH, we aim to contribute to realize a decarbonized society by collaborating with stakeholders through the growth of green businesses. For example, Hitachi Energy will invest approximately $6 billion (as of June 2024) between fiscal years 2024 and 2027 to enhance manufacturing capacity and strengthen research and development, helping to accelerate the clean energy transition. This will also help to reduce emissions during the use of our products and services, which account for the majority of CO₂ emissions in Hitachi's value chain. Hitachi will tackle environmental issues head-on by providing products and services with minimal environmental impact and by offering a wider range of solutions that reduce CO₂ emissions for customers and society.

Environmental Strategy for Achieving a Decarbonized Society

Strategy & Target

Expanding the Decarbonization Business

Approach & Policy

Activities

Hitachi provides value to customers and society, contributing to a decarbonized society through businesses that reduce CO₂ emissions and collaborative creation with customers. Hitachi operates three business sectors: Green Energy and Mobility, Digital Systems and Services, and Connective Industries. Among these sectors, we are growing the following businesses, which contribute to decarbonization.

• Businesses that help to accelerate the energy shift aimed at realizing decarbonization, and that provide safe, comfortable, and clean mobility (Green Energy and Mobility)
• Businesses that help to reduce CO₂ emissions by using cutting-edge digital technologies to improve the efficiency of systems that underpin society (Digital Systems and Services)
• Businesses that contribute to the decarbonization of industry and society by providing products and services that have a low environmental impact when used by customers (Connective Industries)

Examples of Decarbonization Business: A Hitachi Focus

*1HVDC: High Voltage Direct Current

Decarbonization Business Case Examples

Activities

Hitachi contributes to reducing customers' CO₂ emissions mainly in the following three areas.

(1) Transition to non-fossil energy

Contribute by providing key components for the introduction of non-fossil energy, including renewable energy.

High Voltage Direct Current (HVDC)

Hitachi Energy's High Voltage Direct Current (HVDC) efficiently transmits large amounts of energy over long distances from remote locations to demand areas, supporting output fluctuations and stabilizing interconnected AC systems. As a transmission technology, indispensable for the mass introduction of renewable energy, it is contributing to the transformation and flexibility of the energy system.

(2) Energy saving

Contributing by providing energy efficiency through high-efficiency products and optimization of control, such as high-efficiency industrial equipment, to achieve energy savings

Air compressor

Hitachi Industrial Equipment Systems' air compressors reduce CO₂ emissions by improving energy efficiency through enhanced performance of the compressor unit and increased efficiency of the motor. Hitachi contributes to decarbonization of the industrial sector through its energy-efficient equipment.

(3) Electrification

Contributing by electrifying products that utilize fossil energy, including industrial machinery.

Electrification systems for mining dump trucks

Hitachi Industrial Products provides electrification systems for mining dump trucks, where an engine drives a generator that produces electricity for driving and control, thereby improving the driving and control performance of the vehicles and helping to reduce CO₂ emissions.

Avoided Emissions

Approach & Policy

Materiality

Hitachi calculates the contribution to decarbonization through collaborative creation with customers as avoided emissions. We convert the amount of the contribution to customer decarbonization via Hitachi products and services into CO₂ emissions. We expect an average 152.6 million metric tons of avoided emissions per year during the Mid-term Management Plan 2024, compared to our original target of approximately 100 million metric tons per year in fiscal 2024.
Hitachi calculates avoided emissions based on a comparison of customer CO₂ emissions from the use of Hitachi products and services during the fiscal year in question with emissions from Hitachi products and services during the base year. In principle, the base year for this calculation is fiscal 2013^*1.
The World Business Council for Sustainable Development issued guidance in March 2023 on avoided emissions, and in Japan, the GX League^*2 has been considering the use of avoided emissions in relation to disclosures and the assessment of climate-related opportunities. In addition, the IEC has been working on environmental standardization in regard to the amount of CO₂ reductions. A unified guide on specific calculation methods for products and services is under discussion, and Hitachi is participating in these discussions.

*1In accordance with the base year of Japan’s national CO₂ reduction target. For the consolidated energy-related company, we set fiscal 2020 as the base year based on the year the company joined the Hitachi Group.

*2A place where companies aiming to achieve sustainable growth with a view to becoming carbon neutral by 2050 and coming social changes collaborate with companies engaged in similar initiatives, as well as entities from across industry, government, and academia.

Calculating Avoided Emissions

Improving the Environmental Performance of Products and Services through Eco-Design

Activities

Materiality

For all products and services involving a design process, Hitachi promotes eco-designs by applying our Environmentally Conscious Design Assessments to steadily improve environmental performance throughout the group. This assessment identifies a total of 30 environmental impact categories that affect climate change, resource depletion, and ecosystem degradation at each stage of the life cycle of products and services. In this way, we assess the reduction of environmental impact from business activities across multiple perspectives.

Initiatives for Improving Environmental Performance of Products and Services

• Promoting environmentally conscious processes: In accordance with the IEC 62430^*1 criteria, promote environmentally conscious processes in designing and developing products and services, including by meeting environmental regulatory requirements and ascertaining the environment-related needs of our stakeholders within our existing management system.
• Implementing Life Cycle Assessments (LCAs): For our main, priority products, quantitatively evaluate their global environmental burden in such areas as the consumption of mineral resources, fossil fuels, and water resources, as well as their impact on climate change and air pollution, disclose the results to our stakeholders, and utilize them in improving the design of next-generation products.

*1IEC62430: The standard developed by the International Electrotechnical Commission (IEC) concerning environmentally conscious design for electrical and electronic products.

Approach to Transitioning to a Circular Economy/Innovation in Product Design

Reduction of Product and Service CO₂ Emissions During Use

Approach & Policy

Activities

CO₂ emissions related to the use of products and services account for the largest proportion of emissions in our value chain. To reduce these emissions, Hitachi sets reduction rate targets per unit based on fiscal 2010 levels for each product or service targeted. We use functional size^*1 as the denominator and CO₂ emissions as the numerator in our target equation.
In fiscal 2023, we achieved our target with a reduction rate of 24% against a target of 13%. The achievement of this target was driven by the introduction of new models of high energy-saving equipment used in industrial equipment and social infrastructure.
We added the emissions of a consolidated energy-related company to the calculation of Hitachi Group emissions, resulting in a significant increase in emissions throughout the value chain. This increase is due to higher emissions from the use of transformers and other key products provided by the company that are used widely in the global power infrastructure. Hitachi will continue to bring energy-efficient products to the market.

*1Function size: Major functions of products correlated with CO₂ emissions, such as their output and volume

CO₂ Emission Reductions at Business Sites (Factories and Offices) and Hitachi Carbon Neutrality 2030

Approach & Policy

Activities

Materiality

In working toward realizing a decarbonized society, Hitachi has set the goal of realizing carbon neutrality at all business sites (factories and offices) by fiscal 2030 as part of its long-term environmental targets.
To achieve our goals, we will promote initiatives by setting milestones of reducing CO₂ emissions by 50% compared to the base year of fiscal 2024, and 80% by fiscal 2027.
CO₂ emissions reduction measures at Hitachi include installing energy-saving and renewable energy equipment, and procurement of non-fossil power energy and utilization of energy attribute certificates^*1. Among these, installing energy-saving and renewable energy equipment is expected to incur initial investment costs. However, it will also lead to reduced risks associated with factors including future energy price hikes and help address carbon pricing. It also aligns with our Corporate Mission—“To contribute to society through the development of superior, original technology and products”—and for this reason as well, we are placing a priority focus on this approach.

*1Energy attribute certificate: Accredits the environmental value associated with electricity generation from renewable energy sources. Unlike the purchase of renewable electricity, acquisition of this environmental value, which is separate from the electricity itself, is regarded as equivalent to using energy sources that do not emit CO₂.

Major Initiatives for Reducing CO₂ Emissions at Business Sites (Factories and Offices)

Concrete efforts to achieve carbon neutrality at business sites, categorized by location type (factories, offices), can be outlined as shown below.

The Hitachi Internal Carbon Pricing Framework

Activities

To promote CO₂ reduction at its business sites (factories and offices), in fiscal 2019 Hitachi introduced the Hitachi Internal Carbon Pricing^*1 (HICP) framework. Referencing emissions trading and carbon taxes globally, we establish internal carbon prices, and convert into monetary value as the effect of CO₂ reductions due to investment in equipment that contributes to decarbonization. We add this price to the value of energy reduction effects, and use the result to evaluate the impact of our investment. By applying incentives like these, we aim to further expand our investment in equipment that contributes to decarbonization.
Increased burdens from carbon taxes and new emission regulations are anticipated in the future. Taking such risk factors into account from the stage of equipment investment considerations and placing a higher priority on investments that contribute to decarbonization will help minimize the impacts of future climate change risks and make our company more resilient. The introduction of the HICP framework is instrumental in this process.
Initially, we set the HICP rate at 5,000 yen/t-CO₂ in consideration of 2025 carbon taxes and carbon trading prices (ETS^*2). Subsequently, looking ahead to 2030, we increased the rate to 14,000 yen/t-CO₂ in August 2021 in consideration of anticipated carbon taxes and carbon trading prices. We will leverage this framework to provide early responses to future risks such as carbon taxes as well as to actively promote the installation of energy-saving and renewable energy equipment, our highest priority initiative aimed at achieving carbon neutrality.

*1Internal carbon pricing: An in-house tool for assessing in monetary terms the amount of carbon generated or reduced in order to voluntarily make investment decisions and conduct risk management.

*2ETS: Emission Trading Scheme

HICP Implementation Results

*1Excluding an energy-related company which became a consolidated subsidiary in fiscal 2020

Note :From August 2021, the set carbon price will be raised from ¥5,000/t-CO₂ to ¥14,000/t-CO₂.

Activities and Achievements at Business Sites (Factories and Offices)

Activities

The Hitachi Environmental Action Plan for 2024 states a target for the total CO₂ reduction rate at business sites (factories and offices).
In fiscal 2023, the actual reduction in total CO₂ emissions was 74%, surpassing the target of a 35% reduction (compared to the base year of fiscal 2010) by a significant margin. The significant improvement in fiscal 2023 results can be attributed to several factors. Firstly, auto parts-related companies that were previously included in Hitachi's consolidated subsidiaries until fiscal 2022 were no longer included, thus excluding their figures from the aggregate. Additionally, improvements in facility efficiency through the introduction and upgrading of high-efficiency equipment, as well as initiatives such as the installation of renewable energy systems and procurement of electricity from non-fossil energy sources, have contributed to this improvement.

Introducing Renewable Energy

Activities

To reduce CO₂ emissions, Hitachi installs renewable energy power generation equipment on our premises. We also procure electricity produced through new renewable energy equipment located off-premises. We are expanding the use of corporate PPA to accelerate the replacement of fossil fuel-derived electricity with electricity derived from renewable energy sources.
Renewable electricity used will be based on the standards set by the GHG Protocol.

Locations operating on non-fossil energy

Initiatives to Reduce CO₂ Emissions from Purchased Goods and Services

Activities

Hitachi is also working to reduce emissions from purchased goods and services (Scope 3, Category 1) in order to achieve carbon neutrality across the entire value chain by fiscal 2050. In fiscal 2023, we selected approximately 100 companies from procurement partners with the highest Scope 3 Category 1 emissions, and key procurement partners in Hitachi's business activities to engage in reduction activities. Hitachi has been working to understand the amount of CO₂ reductions upstream in Hitachi's value chain by obtaining reduction plans from relevant partners and analyzing the details of these plans.

Efforts Toward Carbon Neutrality in the Value Chain Upstream

Reducing Transportation Energy Consumption

Activities

In addition to reducing energy used at our business sites (factories and offices), Hitachi strives to reduce energy usage during transportation. Each business unit (BU) and Group company incorporates the rate of reduction in transportation energy use per unit in Japan, with voluntary targets established in other countries.
Our business sites pursue modal shifts to highly efficient transportation methods by improving truck loading ratios, taking other measures to reduce transportation energy consumption and switching to the use of eco-cars for in-house operations.

Hitachi Fleet Management Reduces CO₂ Emissions from Business Vehicles

Approach & Policy

Hitachi is preparing to electrify our fleet of commercial vehicles as part of efforts to achieve carbon neutrality by fiscal 2050. However, we must address a variety of issues that companies face when introducing electric vehicles, including the limited choice of electric vehicles and the lack of charging infrastructure.
To this end, we created our own fleet management plan to prepare for fleet electrification at each BU and Group company. Specifically, we intend to use BPO^*1 and AI drive recorders^*2 to visualize vehicle operating conditions, followed by an analysis of collected driving data and CO₂ emissions monitoring. We will use the results of this analysis and monitoring to reduce CO₂ emissions from existing vehicles and advance the gradual replacement of existing vehicles with electric vehicles to reduce CO₂ emissions from business-use vehicles.

*1BPO: Abbreviation of business process outsourcing. BPO outsources the entirety of a business process to a contractor specializing in said activity.

*2AI drive recorder: A service that uses AI to analyze recorded driving video and visualize signs of dangerous driving and driver tendencies.

Hitachi Fleet Management

Note :Hitachi normally refers to suppliers (including vendors or providers) as procurement partners who build business together on an equal footing.