Evaluating Transition Plans in Japan’s High Emission Sectors 2025 Chemical Sector
Background and Objective
In 2023, KSI conducted a study to assess the extent to which Japanese high-emitting industries and the banking sector have advanced the formulation of transition plans and published a report “Evaluating Transition Plans in Japan’s High Emission Sectors”. The results showed that while disclosure of historical emission data is progressing, there are challenges in setting 1.5°C-aligned science-based targets, presenting corresponding emission pathways, establishing short-term implementation plans to achieve reduction targets, and defining Scope 3 reduction targets. In the coming years, attention will increasingly focus not only on revising targets to be more ambitious, but also on verifying implementation and actual achievement.
Building on these findings, this study, while following the perspective of the previous one which focused on providing an overview of corporate transition plans, gives greater emphasis on examining the implementation status of transition plans, actual emission reduction performance, and the consistency of business portfolio and capital allocation plans with the stated transition strategies. The study also compares Japanese companies with their international peers to identify current trends and challenges.
Coverage
Mitsubishi Chemical Group Corporation
Sumitomo Chemical Co., Ltd.
Mitsui Chemicals, Inc.
Asahi Kasei Corporation
Tosoh Corporation
(Reference overseas companies)
BASF SE (Germany)
Dow Inc. (United States)
LyondellBasell Industries N.V. (Netherlands)
- Key findings
-
Analysis
- ・Decarbonization context for the chemical sector
- ・Scope 1 and 2 reductions are on track toward 2030, but ambition unclear except for Sumitomo Chemical
- ・Scope 3 not covered by reduction targets at four of the five companies
- ・Biomass feedstock availability and production costs of biomass-based products
- ・Building a circular scheme for recycling used chemical products
- ・Three items expected to grow in importance for chemical-sector transition disclosures and stakeholder communication
Key Findings
Scope 1 & 2 Emission Reduction Target (Indicator 1.1.1)
All surveyed companies operate in-house thermal power plants that use fossil fuels, which are major sources of emissions.
All companies have set a 2050 carbon-neutral target for Scope 1 and 2, along with 2030 milestone targets.
Mitsubishi Chemical (domestic operations only) and Dow have established short-term targets through 2030.
Scope 3 Emission Reduction Target (Indicator 1.2)
Three of the five Japanese companies and all three overseas companies have Scope 3 exceeding 70% of total emissions.
Only Sumitomo Chemical among the Japanese firms, with a smaller Scope 3 share, has Scope 3 emission reduction target.
All three overseas companies have Scope 3 emission reduction targets.
Some companies also set targets for “avoided emissions” and for sales of “GHG reduction products”.
Level of Ambition of Emission Reduction Target (Indicator 1.3)
Only Sumitomo Chemical has SBT-validated emission reduction targets among the eight companies.
Business Portfolio Plan (Indicator 1.4)
Japanese companies are pursuing structural reforms in their underperforming petrochemical businesses while advancing greening.
Except for Mitsui Chemicals*, four companies plan to apply feedstock-switching technologies in priority businesses toward 2030–2035. *Mitsui Chemicals plans to spin off its Basic & Green Materials business in 2027.
Scope 1 and Scope 2 Absolute Emissions Reduction Performance (Indicator 3.1)
Domestic companies show an overall decline in Scope 1 and 2 emissions.
To meet its 2030 target, Tosoh will need to accelerate reductions.
Overseas companies are also showing a downward trend but LYB must reduce at a faster pace than before.
Scope 3 Absolute Emission Reduction Performance (Indicator 3.2)
Four of the five Japanese companies show declining emissions in major categories.
Among overseas companies, two of the three show an increasing trend.
Application of Internal Carbon Pricing (Indicator 3.3)
All five companies use internal carbon pricing, and four disclose the price, though details on its application are limited.
Linking Emission Reduction Targets to Executive Compensation (Indicator 3.4)
Four of the five Japanese companies and two of the three overseas companies tie executive compensation to the achievement of emissions reduction targets.
Implementation Plan and Progress (Indicator 2.1)
Fuel Switching：
Japanese companies are shifting from coal, oil, and coke to biofuels and LNG.
Overseas companies are adopting renewable-powered electric steam crackers and heat pumps.
Renewable procurement for purchased electricity remains limited among Japanese companies.
Feedstock switching：
Mitsui Chemicals leads domestic adoption of biomass-derived products.
In material recycling, each company is building waste-plastic collection schemes and commercializing recycled products.
Chemical recycling is moving from demonstration to commercialization.
Carbon recycling remains at the demonstration stage, but commercialization has begun in some cases.
Capital Allocation (Indicator 2.4)
All five Japanese companies disclose rough decarbonization investment amounts, although the time frame is unclear for three and one has no confirmed future plan.
None of the five disclose the share of decarbonization investments within total capital spending.
Among overseas firms, BASF discloses both its four-year investment plan and past investment figures.
Analysis
According to the International Energy Agency (IEA), the chemical sector is the largest energy consumer in the industrial sector and the third-largest emitter of greenhouse gases after steel and cement, because about half of its energy input is consumed as feedstock (*1). Petrochemicals are the second-largest industrial emitter after steel in Japan, accounting for 16% of energy-related CO₂ emissions (*2).
The chemical sector has a complex value chain, with plastics and other chemical products used as components and materials across manufacturing, construction, healthcare, and agriculture. Demand for primary chemicals, which serve as feedstocks for many chemical products, is expected to continue rising globally through 2050 (*3).
In recent years, the petrochemical industry has faced rising energy costs and global oversupply driven by China’s expansion, leading to lower operating rates at facilities in Europe and Japan. Large-scale restructuring is becoming unavoidable, and regulatory frameworks for decarbonization and the circular economy have also been introduced in succession.
Regarding plastics, the largest end use for primary chemicals, the EU revised the End-of-Life Vehicles (ELV) Directive in July 2023, and although parliamentary discussions are still ongoing, plans call for requiring up to 25% recycled content in automotive plastic parts in stages (*4). The Packaging and Packaging Waste Regulation, which restricts plastic use and sets minimum recycled-content requirements to ensure all packaging placed on the EU market is recyclable by 2030, entered into force in February 2025 and is expected to apply from August 2026 (*5).
Japan has likewise advanced policy reforms: the “Review of Systems toward a Growth-Oriented Resource Autonomy Strategy” was compiled in February 2025 (*6), and a bill to amend the “Act on the Promotion of Effective Utilization of Resources”, designating automotive, home appliance, and packaging plastic components as products required to use recycled plastics, was approved by the Cabinet (*7).
As such circular-economy measures are introduced, demand is expected to rise and the market for recycled materials to expand.
Key decarbonization efforts in the petrochemical business include fuel switching, the main source of Scope 1 and 2 emissions. In the production of basic chemicals, naphtha crackers, as well as downstream processes, require significant heat and energy. All five domestic companies surveyed operate in-house fossil-fuel-fired power generation and have begun shifting from fossil fuels to LNG and biomass.
Mitsubishi Chemical, Sumitomo Chemical, Mitsui Chemicals, and Asahi Kasei are progressing toward their 2030 Scope 1 and 2 targets, with Asahi Kasei already achieving its goal in FY2023. Tosoh must raise its reduction pace (see p.34), but a biomass-fired power plant scheduled to start up at the Nanyo Complex in April 2026 is expected to deliver significant emissions reductions.
As one indicator of ambition, we reviewed SBTi validation under indicator 1.3 to assess the ambition level of the 2030 targets (see p.16). Only Sumitomo Chemical is certified, leaving the others’ ambition uncertain. While this does not allow for a precise comparison, we compared the companies’ targets with the IEA NZE scenario, which forecasts an 18% reduction in global emissions from basic chemical production by 2030 versus 2022, regardless of output changes (*1). Using each company’s FY2022 Scope 1 and 2 emissions and their 2030 targets, the resulting reduction rates are as follows:
Sumitomo Chemical 27.5%
Tosoh 27.4%
Mitsubishi Chemical 17.8%
Mitsui Chemicals 16.7%
Asahi Kasei 1.9%
Sumitomo Chemical and Tosoh exceed the NZE’s forecast (18%), indicating relatively ambitious targets. Any update to Asahi Kasei’s already-met 2030 target will be monitored.
Scope 3 emissions (major categories accounting for over 80% of total Scope 3 emissions) fell by 14–20% over FY2021–FY2023 for four companies, except Mitsui Chemicals (see p.35). Meanwhile, only Sumitomo Chemical has set Scope 3 targets (Categories 1 and 3). Scope 3 levels differ across the five companies, as reflected in their share of total Scope 1–3 emissions, ranked as follows (FY2023 figures, Mitsui Chemicals: FY2022):
Asahi Kasei 79.0%
Mitsubishi Chemical 77.0%
Mitsui Chemicals 72.2%
Tosoh 42.8%
Sumitomo Chemicals 39.9%
SBTi requires Scope 3 targets when they exceed 40% of total emissions. Sector guidance for chemicals is still in draft form and calls for companies to set targets in key categories based on their business activities.
Major Scope 3 emission categories differ across companies, but Categories 1 (purchased goods and services) and 12 (end-of-life treatment of sold products) tend to be among the largest sources of emissions. Further reductions are expected through greater use of biomass feedstocks and expanded material and chemical recycling, while the following challenges remain.
Biomass-naphtha–based plastics and other derivatives, produced from biomass feedstocks such as plants and used cooking oil, are already being commercialized by Mitsui Chemicals ahead of peers, with other companies also planning to bring biomass-based products to market. Supply of biomass feedstocks remains limited, and biomass naphtha, produced by a small number of biorefineries and increasingly generated as a by-product of SAF and biodiesel, is widely said to trade at two to three times the price of petroleum naphtha, given that trading volumes remain limited while demand continues to rise. Securing feedstocks and addressing this price gap will likely require policy support such as carbon pricing.
As noted above, following Europe, Japan is also expected to apply regulations mandating the use of recycled materials, mainly for plastic products such as automobiles and packaging. To meet these requirements, establishing a scheme for collecting and sorting used products is essential, and companies are working with municipalities and cross-industry corporate partners on demonstration trials and social implementation programs.
Mitsubishi Chemical is demonstrating a circular system for plastic containers under a comprehensive six-party collaboration agreement, including Kashima City. Mitsui Chemicals and two other companies are pursuing horizontal recycling of post-printing waste films, aiming for social implementation within this fiscal year.
To improve recycling efficiency, increasing the use of monomaterials rather than composites is essential and must be considered from the product design stage.
Utilizing certification schemes for biomass and recycled products
As biomass-based products and those made through material or chemical recycling move toward commercialization, ensuring transparency in the share of biomass or recycled feedstock used, as well as in environmental and social management across the supply chain, is an increasingly important effort.
To support this trend, the five surveyed Japanese companies have obtained or plan to obtain ISCC PLUS certification for specific products or production sites to ensure traceability and sustainable supply-chain management, suggesting that third-party certification will only grow in importance.
In addition to ISCC PLUS, other international schemes such as REDcert and RSB Global Advanced Products are available. Domestic schemes include the Eco Mark criteria for “Plants for converting wastes, etc. into chemical feedstocks using chemical recycling processes and chemical products derived from such processes” and the Japan Chemical Industry Association’s recycled-content verification system.
These international schemes allow both segregation and mass balance approaches (*8), and set principles and criteria to ensure credibility and real environmental benefits.
Ensuring appropriate application of the mass balance method
The mass balance method is a mechanism that allocates environmental value to final products based on the input ratio of biomass or recycled feedstock and has been adopted by all surveyed companies. While expectations for chemical recycling as a decarbonization solution for the chemical sector are rising, concerns have been raised about greenwashing, because in many cases outputs derived from biomass or recycled feedstock are combusted as fuel rather than regenerated as basic chemicals (*9).
Given these concerns, momentum is building to revisit the mass balance approach in chemical recycling. The method has historically relied primarily on “free allocation,” which offers companies a high degree of flexibility by allowing environmental value to be assigned to any product, but approaches such as the “fuel-use exclusion method,” which removes credits for outputs ultimately burned as fuel, could be recommended going forward (*10).
All surveyed companies are piloting biomass products and chemical recycling technologies (pp. 24–27), but because this issue affects not only disclosures but also product portfolios and business planning, companies need to monitor policy developments closely.
Assessment and Disclosure of life-cycle CO2 emissions for new technologies and products
BASF commissioned a third-party, independent LCA of its chemical recycling projects, which found, for example, that pyrolyzing unsorted mixed plastics through chemical recycling yields about 50% lower CO₂ emissions than incineration. The company also publishes the assessment report and an external expert review (*11).
While new technologies such as biomass products and material and chemical recycling are promoted as “green chemicals,” assessing through LCA how much CO₂ reduction new technologies achieve compared with conventional ones, and which deliver greater reductions, is considered essential not only for accountability to stakeholders but also for making investment decisions on new technologies and products as part of a company’s carbon-neutral strategy (*12).
By conducting LCA across their product portfolios, chemical companies can provide emissions inventories to downstream customers, thereby improving the accuracy of CO₂ emissions data across the value chain.