Thank you very much for taking your time out of your busy schedules to attend Panasonic Group's sustainability second briefing. Due to the need to limit the number of people in the real venue as a precautionary measure for COVID, this conference allows for online participation. With the tendency of the larger number of newly infected people, we ask that all attendees wear masks, including during the Q&A session, and we establish a clear board. We would like you to make sure that you wear masks all the time, during the time of the presentation, and also for the Q&A. About the schedule, as has been already notified, the first part of the seminar will consist of a presentation and Q&A session by our Group CEO, and the second part will be a panel discussion with invited guests. Without any further ado, we would like to start the first part.
The presentation materials will be projected on the remote screen. They are also available on our website. If you are participating online, we'd like you to have access to that material. The presentation will be given by Mr. Yuki Kusumi, Group CEO, Panasonic Holdings. Mr. Kusumi, the floor is yours.
Good afternoon, everyone. I'm Yuki Kusumi, CEO of the Panasonic Group. I would like to thank you all for gathering here at this venue despite your busy schedule. I also thank those of you participating online. This is the second briefing on Panasonic Group's sustainability following the first briefing held last January. I'd like to go over some details of Panasonic Green Impact Initiative's Tour 2050 to address global environmental issues as we have refined the FY2024 and FY2031 milestones in formulating the medium-term strategy of each operating company under the new organizational structure. The purpose of the Panasonic Group is to realize an ideal society with affluence both in matter and mind.
To achieve this, we aim to contribute to the sustainable happiness of each and every customer under the brand slogan of "Live your best." At the previous briefing, I said that our management is based on enhancing competitiveness based on our basic business philosophy as the basis of governance, which is to contribute to solving global environmental issues and well-being of our customers. That is ESG management itself. On the premise of each operating company fulfilling responsibility for solving global environmental issues, they are to contribute to the society and, in doing so, acquire competitiveness second to none and earn profits as compensation to ensure sustainable growth. Aiming for that, in the group's medium-to-long-term strategy, we have set cumulative operating cash flow as a key medium-term management metrics.
At the group strategy briefing in April, Panasonic Green Impact Initiatives were classified into three impacts, aiming for a reduction contribution impact of more than 300 million tons, which is 1% of the current total global emissions by 2050. The first is own impact to thoroughly reduce the total emissions of 110 million tons in the company's value chain by reducing energy and accelerating the introduction of renewables, and at the same time, by contributing combining it with the decarbonization effect of society. It aims to realize virtually zero CO2 emissions in health as a whole toward 2050. The second is contribution impact, which aims to contribute to reducing CO2 emissions in society in existing business areas such as accelerating electrification, including environmentally friendly vehicles, minimizing energy loss, and making full-scale use of hydrogen energy. The projected impact is 100 million tons.
Third, future impact featuring creation of new technologies and new businesses such as innovative device development and energy supply demand balance adjustment for the further practical application of clean energy. The expected impact is reducing 100 million tons on energy transformation of society. After formulating strategies for each business, the targets for fiscal years 2025 and 2030 to achieve the 2050 target have been clarified, and the feasibility of the roadmap for net zero and reduction contribution of the company has also improved. Today, I will explain the contents. First, I would like to go over the Green Impact Plan, which is a three-year environmental action plan up to fiscal year 2025, GIP 2024. This is a milestone to reach the target of 2050 set by Panasonic Green Impact.
First, it sets the target numerical value through concrete measures such as the company's CO2 emission reduction target by FY2025 and the amount of the emissions reduction contribution to society. Own impact aims to reduce CO2 emissions by 16.34 million tons in Scopes 1, 2, and 3 from the current level of 110 million tons. We will also increase the number of net zero factories that virtually emit no CO2 in the process of manufacturing from seven factories in FY2021 to 37 factories up to FY2025. In the area of contribution impacts, we will increase the amount of reduction contribution to society to 38.3 million tons. In addition to the three impact areas, we will also enhance initiatives in the area of circular economy. One is the rate of recycling of factory waste. There will be countries and regions that have yet to build methods for waste handling.
Through review of product design and rigorous sorting, we will aim at constant recycling rates of over 99% on a global scale. Regarding expanded use of recycled resin, we will more than double the volume to 90,000 tons in three years. We will also focus on creating circular economy-oriented business models. In fiscal 2021, we have such businesses, including the cellulose mixed resin business. By fiscal 2025, we plan to deploy over 13 circular economy businesses, including home appliances subscription business and sharing of motor-assisted bicycles. In other words, increase from 5 to over 13. By presenting and achieving these concrete medium-term goals up to FY2025, we aim to step by step get closer to the ideal state. This is a more refined illustration of milestones of Panasonic Green Impact.
The upper half represents CO2 emissions and their reductions in our own value chain, the so-called own impact. The lower half shows contribution to the emissions reduction in society. In other words, contribution impact and future impact. We will do our utmost to achieve the goal of GIP 2024. The target value beyond that for 2030 has also become clear in the process formulating the medium-to-long-term strategy under the new system. I would like to share some of the projected values. In FY2031, as we have already committed, we aim to achieve net zero in-house emissions. In addition, in scope 3, through rigorous pursuit of energy saving in the lifestyle business, we aim to expand own impact to 31.45 million tons.
In the area of contribution impact shown at the bottom, by enhancing the competitiveness of existing businesses centered on the fields of electrification, energy efficiency, and hydrogen, we project the amount of contribution to reduction to be 93 million tons in FY2031. Meanwhile, a unified method has yet to be established to calculate contribution volume. We may need to revisit the figures predicted for 10 years from now should a standardized calculation method show different results as indicated by the current method. By successfully attaining these figures, we will contribute to achieve the 2050 target as quickly as possible to contribute to carbon-zero society. From here, I will explain the specific initiatives in own impact and contribution impact. First, the own impact initiatives, focusing on the scopes one and two.
To accelerate the plans formulated by each operating company to achieve net zero CO2 emissions, we will promote expertise and experience sharing among group companies. Given that the cost and amount of stable supply of renewable energy vary from country to country, nine model factories will be selected to drive initiative addressing regional features. Expertise and know-how accumulated there are to be deployed globally. At present, cost of renewables is lower overseas with larger and stable supply volume. Up to FY2025, as you can see, we will focus on deploying renewables overseas ahead of domestic sites. In Japan, which lags behind in the penetration of renewables, we will focus on eliminating waste at factories, revisiting processes, and deployment of energy-saving equipment to rigorously reduce the energy use. On top of that, we will deploy and procure renewables.
In addition to introducing solar panels, storage batteries, and fuel cells, we will expand the application of expertise gained at RE100 Solution in Kusatsu, Shiga Prefecture. Also, leveraging internal carbon pricing system, we will promote the introduction of renewables. At factories where solar panels cannot be installed due to land availability restrictions, we will utilize the off-site corporate PPA system to procure energy from outside. Through such measures, we will efficiently promote introduction and procurement of renewables on a group-wide basis. Through gradual implementation, these initiatives, automotive, industry, and energy management systems will accelerate the achievement of net zero factories in response to requests from B2B customers ahead of schedule. Knowledge gained will be shared throughout the group. I hereby reconfirm our commitment to achieving targets group-wide in fiscal year 2031 by selecting the most efficient introduction and procurement of renewables.
Next, I'd like to talk about the contribution impact dividing our effort in reducing emissions for the society into three broad categories. While decarbonization efforts to convert power supplies to renewable energy will continue to advance around the world, the CO2 emitted by products that burn fossil fuels remains an issue. Therefore, we will continue to promote the electrification of products that burn fossil fuels. In our electrification efforts, we will contribute through dissemination of green vehicles and replacement of gas appliances with electric ones. We will increase the amount of reduction contribution from 9.7 million tons in fiscal year 2021 to 70 million tons in fiscal year 2031. In order to minimize energy consumption, we will develop energy-efficient solutions and energy-saving products.
We will promote integrated control of indoor air quality and AC, lighting control, dissemination, and efficiency improvement of distributed power sources, thereby increasing reduction contribution in this area from 2.4 million tons to 17 million tons over 10 years. Furthermore, we will actively promote the use of hydrogen energy for the spread of zero-carbon energies through the dissemination of ENE-FARM and pure hydrogen fuel cell. We increased the contribution to 6 million tons by fiscal year 2031, a 30-fold increase over fiscal year 2021. Over the longer term, we will expand the value chain for the realization of a hydrogen-based society, such as through green hydrogen creation. In order to stop global warming as quickly as possible, we will promptly take every possible measure to make an even greater contribution.
Today, I'd like to explain our efforts in businesses that will make a significant contribution to reductions by fiscal year 2031 that will ultimately drive the growth in the group. First, let me explain our efforts in the automotive battery business in the area of electrification. The electrification of mobility is one of the most closely watched business opportunities for carbon neutrality. The market size of automotive batteries for green vehicles is expected to grow rapidly with a CAGR of 31% from fiscal year 2021 to fiscal year 2031. In this context, we will thoroughly strengthen performance and cost competitiveness, which are indispensable for the expanded use of green vehicles, and build strong relationships with customers who need the quality and performance advantages of our lithium-ion batteries. In terms of the performance, we will continue to lead the industry with high-capacity, high-reliability battery technology.
We will also work to reduce the carbon footprint of battery production, or CO2 emissions from resource extraction and raw material processing by half, to boost the environmental performance of EVs. We will also pursue cost reduction by innovating materials and manufacturing processes by setting targets for material cost, equipment cost, utilization rate, labor reduction, and other cost-defining factors. Finally, we will strengthen our supply capabilities by optimizing our supply chain, such as by multi-sourcing raw materials and increasing the local procurement rate. While refining such competitiveness, we aim to achieve 59 million tons of reduction contribution in fiscal year 2031, which is seven times that of fiscal year 2021. Next are efforts on hot water heat pump systems.
In Europe, where hot water heating is widely used, replacement of gas and oil boilers with hot water heat pump systems is rapidly progressing due to growing decarbonization awareness, large subsidies from green deal policies, and the situation in Ukraine. The market is expected to grow eightfold with CAGR of more than 20% over the next 10 years to fiscal year 2031. In order to promote local production for local consumption in this rapidly expanding European market, we will strengthen our production capacity at our plant in the Czech Republic starting in fiscal year 2024 to keep pace with the expansion of our market. Our unique technology to provide stable indoor heating even at low external temperature has been highly appreciated in the market. In cold regions, heating stoppage in winter can be fatal.
We have service personnel on the ground, especially in the northern part of Europe, to perform regular maintenance. Our products are IoT compatible, and we remotely monitor equipment for signs of abnormalities. We will expand our market share supported by our maintenance service business, in which service personnel immediately visit customers for repair. In addition, through collaboration with local manufacturers, we will develop integration with hot water ventilation system, energy management solution for homes, and our commercial air conditioning systems, promoting effective use of energy together with comfort and thus contribute to the shift away from fossil fuels. These efforts will contribute to a reduction of 11 million tons of CO2 emissions in fiscal year 2031. Next, from the field of energy efficiency, I will talk about integrated control of IAQ and AC devices.
Due to growing global demand for solutions to bacterial and viral concerns such as COVID, the air quality-related market is expected to grow at a CAGR of 7%, reaching JPY 7 trillion by fiscal year 2031. The need to maintain comfortable room temperature and achieve a clean indoor environment through regular ventilation and disinfection varies by region and is particularly apparent in Europe, China, North America, and Japan due to climate, housing conditions, and customer purchasing power. On the other hand, ventilation that brings in outside air leads to energy loss. Therefore, we have developed a solution to minimize energy loss by integrating a heat exchange ventilation unit that can switch air in and out, and air quality and air conditioning systems that can control sensible temperature taking into consideration the balance of temperature and humidity, as well as airflow.
In order to realize a clean and safe indoor environment, we will continue to refine our long-nurtured unique technologies in the area of disinfection, humidity control, and ventilation. Our unique active air purification technology, such as Nanoe X and Ziaino, suppress bacteria that are airborne or attached to surfaces in the room and purifies the entire indoor space, which is a unique strength of ours. To deliver this proposal to customers, you need not only the control technology for equipment integration, but also sales network and engineering capabilities. We will continue to accelerate our collaboration with our local partners to offer our customers the best possible solution. By thoroughly strengthening our competitiveness in these areas, we expect to contribute to the 4 million tons reduction in CO2 emissions in fiscal year 2031. Finally, in the area of hydrogen, I'd like to explain our approach to fuel cells.
Hydrogen has two important roles to play in the expansion of renewable energy for a decarbonized society and in the transition to a decentralized society for greater resilience. First, as global demand for electricity increases due to electrification, hydrogen can be used as a regulation power source to mitigate the risk of instability in the power infrastructure due to the unstable nature of solar, wind, and other natural energies. Secondly, it can act as an energy carrier that enables high-density long-term storage and transfer without attenuation. Therefore, there is a strong focus on hydrogen as one of the long-term scenarios for decarbonization. The global market for fuel cell systems, including pure hydrogen type, is expected to grow to JPY 900 million in 2030 and JPY 3.9 trillion in 2050, with a growing proportion of pure hydrogen fuel cells.
We were the first in the world to start field verification of RE100 at the H2 Kibo field, where hydrogen is utilized in a major way, and we have received many inquiries both from home and abroad, of which more than 10% are now being studied toward realization with our customers. The key to achieving competitiveness in this domain will be not only the evolution of equipment performance and innovation in manufacturing that will be achieved through field verification, but also the expansion of the network of consultation, engineering, and services. Together with our various partners, we are advancing the entire supply chain from creating, transporting, to using hydrogen. In this market as well, we will make investment decisions based on whether we are competitive enough over the long term to make a significant contribution compared to our competitors.
As of now, we expect to make 6 million tons of CO2 reduction contribution by fiscal year 2031. Today, I have described the progress of our efforts to achieve our long-term environmental vision, Panasonic Green Impact. However, Panasonic Green Impact is not simply our expression of determination to fulfill our duties and contribution. The word impact expresses our hope that our activities will connect with the thoughts of people around the world who deeply care about the global environment, have an impact on society, and reach out to our customers and other companies in the wider world. We are also committed to building a global consensus that will help us to gain social recognition of such impacts and support for our activities.
We will actively promote activities with the government, companies, and industry associations in order to achieve carbon neutrality as soon as possible and to realize society that coexists with the beautiful environment of the Earth. Following my presentation, we will have a panel discussion to deepen your understanding of the efforts required to realize a carbon-neutral society. We'd like you to listen to this panel discussion as well. Thank you very much for your attention.
Mr. Nguyen, thank you very much for your kind attention. We will now take questions. During this Q&A session, Mr. Kusumi is joined by Tatsuo Ogawa, the Group CTO. As has been announced already, we will take questions only from those of you in this hall. Your cooperation and understanding is appreciated.
We do have the members of the media and the institutional investors and securities analysts here, and we will be asking you to ask questions. Please wait until your name is called upon and wait for the microphone to be brought to you. You're kindly asked to state your name and affiliation. We ask you to ask questions only pertaining to this presentation, the sustainability. In the interest of time, please limit the number of your questions to two questions per person. Any questions, please raise your hand. Thank you. On the third row, we have a gentleman raising hand.
Thank you. Naganawa from Nikkei Newspaper. Thank you for your presentation. I have two questions. First, the operating companies under this new structure, I wonder if you have set targets per operating company.
Thank you. Naganawa-san, for your question.
Unfortunately, I do not have the data per company at hand, but in a nutshell, what I presented today is the sum, the total sum of the figures or the targets set for each company. Okay? What's your second question?
Yes, my second question. Earlier, you mentioned that you will be focusing and cooperating to the global consensus. What specifically do you plan to implement in terms of the global consensus? Mr. Kusumi.
Thank you. For example, the reduction contributions at IEC and others, standardization efforts are underway, but we have yet to see a true global consensus. METI, Sorted GX League, and other initiatives, and taking those into consideration, we would like to promote them to become the global consensus. I say that because the CO2 emissions in-house would not be sufficient.
Looking at what is happening globally, the global warming, and there are many things that are happening, and we need to stop that as quickly as possible, meaning that to stop that momentum rather than just focusing on reducing our own emissions, which would entail cost, the contribution to reductions in a nutshell is to contribute to others achieve the target and turn them into our business. It is not just Panasonic, but anyone who is successful in doing that can benefit from such businesses. Should these institutions become global, I think that will further promote the expansion of such efforts. I think it is important that we build a global consensus on reductions, not that we alone are going to work on that, but everyone is working towards that. I am sure at the panel discussion later, that will be brought up as well.
That is helpful.
Thank you.
Person in the first row.
Thank you. Watanabe from Kyodo News. In your material, on page two, I have a question. You talked about a future impact. Maybe it's too early to ask you, but could you tell us a bit about the new businesses? What kind of new businesses are you thinking of? Also, what kind of discussions are you having within the company?
Thank you for your question. I am pinning high hopes on such areas as, actually, this is in the stage of R&D, hydrogen creation. This is one thing that I'd like to see the growth. We want to be competitive here, and we want to have the commercialization here. Here, we have Ogawa, the CTO of the company. Ogawa might want to make some comments.
Thank you. I am responsible for technology. My name is Ogawa.
As was mentioned by Kusumi-san, the hydrogen creation is one thing that we'd like to focus on. Then the energy value chain in which the hydrogen is used. It is important to insert the renewables. This is the kind of power system that we have to consider. DARMS is the distributive management system. Again, we'd like to focus on DARMS as well.
About the retrofit?
Yes. On top of that, about the PV, we have the new, the flexible, and the power-tight, the PV, which can be painted, is something we'd like to focus on.
These links are in the stage of R&D at this moment. I'm sure some other companies are working on it as well. There has been a report that some of them are now closer to the commercialization.
I think it is important to look more onto the enhancement of the production method and also the technology itself so that we are able to have a much better future impact. We are looking at this with this kind of view.
When you say future impact, you're talking about the contribution after the year 2030. That would be the contribution that you will be making. Could you tell us the page?
Yes, you have a point. This is not something we are able to do in the next three years, but we'd like to do that before the year 2030. The main contribution may be made after the year 2030. Having said that, we have to start working on the establishment of the new business. When we see some projection, we'd like to make sure that you will be notified.
Please pin high hopes on that. As can be seen in this session, we have a target for 2030. The future impact, the numbers are not incorporated in the numbers for 2030. We wish to do that, though.
Second question. This is also about the structure. For this kind of structures, you have to have a long-term view because it is impossible to have a short-term profit. In what way are you making the incentives? What are some of the structures with which you are able to support this kind of system? Are there any systems internally to drive the innovation? I talked about internal carbon pricing. This is for the introduction of the capital equipment. About the depreciation and also the other areas, we make sure that this will serve as incentive.
This is the kind of criteria with which this is assessed. This is not related to the actual profit derived from these initiatives. Thank you very much.
Okay. Next question would be from that gentleman on the third row from the front, wearing the black mask.
Thank you. Esawa from Citigroup Global Markets. I have two questions on batteries. First, 8 million-15.9 million tons would be a seven-fold increase in the reduction amount. Previously, you talked about up to FY2028 or so, the production capacity is to be increased by threefold or fourfold. This capacity increase, is there an alignment between the two? Is my first question. If that's the case, by FY2031, your battery production capacity would be how much? What will be the premise of calculating this reduction amount?
Currently, this is at Energy Company IR presentation.
It was mentioned during the ROJ, the capacity increase. There is an alignment there. At the current moment, is this really feasible or not? As was mentioned earlier in my presentation, it will be based on the agreements with our customers and also towards FY2031. What we do, would it be really competitive or not? Those will have to be clarified before making the investment decisions.
I see. Thank you. My next question, again on battery. Let's say there is agreement with your customer and your competitiveness of your products would be high. If you are successful in expanding as planned by FY2031, given the current situation, the production expansion for realizing the reduction emissions, I'm afraid it will entail lots of investments. I don't think you can finance that by yourself.
Maybe you will have to employ funds from outside since FY2031 is not too far away to realize that reduction targets. If you are going to expand using other capital, other funds as well, this reduction target, are you just looking at your own contribution, or are you considering the ratio of the total?
Thank you for that very detailed question. We can't really explain the details because we have yet to decide whether to employ funds from outside or not. How much expense will be needed? How much investment will be needed? As you said, Esawa-san, capital expenditure would be a large item to realize the expected capacity. How can you best do the investment? In other words, how can you minimize the investment?
That's another expertise because the investment will turn into depreciation, which would mean it will be part of the cost of production. That could be one of the major items in the investment decisions.
Thank you.
I hope that answers your question. Thank you.
Next question. Person in the second row. The second person from the left. Gentleman? Second row from the front.
Matsuki from Nikkei Kogyo Shimbun about reduction contribution. By fiscal year 2031, the 93 million tons. Could you tell us a bit about the calculation with which you are able to draw this number in order to enhance the convincing capability? How much is derived by the product and how many units you have to sell in order to drive that figure? Are you disclosing the calculation method? Would you like to answer? This is a very difficult issue, at least partially.
As in the case of Scope 3, the very detailed calculation of numbers are something that we have been working on at the ISC. The standardization effort is taking place, as was mentioned. We are now in the process of the measuring criteria. Please refer to phase 6 of the material presented by Kusumi-san. We have the 780 million and 6 million and others. They are based on our own calculation. In the case of vehicle sales, we have this amount of electricity used for how many years of usage. Based on this assumption, we look at the figures. We believe that the fair calculation is made internally in order to give you the figures. In our understanding, we have to say that this is not final.
This is not, we're not sure whether this will be put into the standard itself, but this is, again, based on the further discussion. Also, one more question from me. You see the calculation method is now being standardized. Now, at the TCFB or IFAS, these are the disclosure framework for the information. Rule-setting organizations such as IFAS and others, is it possible to incorporate this kind of reduction contribution? Are you thinking of addressing them? The first step would be the global consensus. When we are able to have the global consensus, we would love to talk to them to incorporate that into their standards. Does it answer your question? Thank you.
Next person. I see a hand in the fourth row, the extreme right.
Thank you for your presentation. Harada from Goldman Sachs Securities. I have two questions. First.
This relates to an earlier question. The green impact should take a look at the demand as well as the GHG emissions reduction, of course. At the same time, return on investment would be another very important element. As was the case with that battery investment question earlier, when you think of the group-wide investment, the green aspect and the profitability aspect of the group, how do you plan to strike a balance between the two for the investment decisions? You talked about the RE of 10%, but can you give us some of the criteria that you use? Thank you. The reduction contributions. Basically, when there is a demand in society towards that, we have to comply. As is the case with the electric vehicles. It's not just for Panasonic, but I think it will be a business opportunity for everyone. It's not a trade-off.
It's not a balance. If that's the demand of society, we should try to respond to that. Now, if our technology is inferior to our competitors, we will not be able to make a profit. We will not be able to increase our market share. We will not be able to make the sizable reduction contribution as we target now. It's not the balance. As we have been saying, honing the competitiveness is really important. We believe that that would be a very important element in this formula. Thank you. In terms of automotive battery, other companies are investment as well. The question is, what is the profitability for the industry overall? You said competitiveness is important. Given your competitiveness, maybe you can sell at a slightly higher price, and you think that you can enhance with better capability.
For batteries, in addition to the elements that you mentioned, whether we can successfully build the scheme is important. Some of the competitors have the support of the government, which is part of the price equation. Given that, we'll have to think of the competitiveness, including such factors. I see. My second question. In addition to automotive battery, what about the industrial battery, especially in Japan with renewable energies to be used as the adjustment element? I think it is going to become even more important. You have a very good track record, so I think it is natural to expect you to focus on the industrial battery as well. Any comment? Tadanobu-san from Energy should be a better person to take that question.
But the basic strategy is, in terms of capacity, automotive battery technically would lead, and in terms of volume as well, automotive battery is the biggest element. In terms of procurement and supply chain, the expertise that we built would be leveraged in the industrial batteries as well. I see. That was very clear. Thank you.
Thank you. It is already close to the scheduled closing time for this part. We would like to take just one question from one individual. Anyone? The fourth row from the front, the second person from the left. Thank you very much for this opportunity. Hatanaka from Yomiuri Shimbun. Page five. In your material, page five, you talked about the CO2 zero factory. For each operating company, you talked about the achievement of the goals.
The industry and the energy and fast, and I'm sure there are different timings at which they achieve the goals. This is based on the location, maybe because of the location inside Japan and outside the country. Could you tell us a bit about the reason why the completion date is different? Thank you. For the manufacturing, some of them do not use too much energy. This is based on mainly the assembly. It's easier for in the case of fuel cells, in the case of PVs, and also fuel cells. We have many of them. In that situation, assembly is of the essence. However, on the other hand, for example, welding and also applying heat.
These factories in the area of energy and industry, maybe in the industry, some of them are only mainly on the assembly, but some of them are melting resins. In this situation, it's different. In the case of cells, maybe they could have the electrode, and then in some cases, sometimes they have to use the furnace to dry them. In this situation, energy consumption is large. The energy itself is now looked at. We have to focus on the reduction of the energy use in these factories. It is not that we introduce renewables. In that situation, renewables' cost would be much larger than we expected. It is important to start with low-hanging fruits. This way, sometimes renewables are much cheaper than other sources, especially outside of the country.
But still, generally speaking, especially in Japan, renewables are higher in terms of cost. In that situation, cost reduction should be the starting point. Only after that, we have the introduction of renewables. That is the reason why we have different completion times. Thank you. This is the only question that we were able to accept. It's already past the scheduled closing time. I see many hands. We are very sorry to close this session. With this, we'd like to conclude the question and answer session. With this ends the first part of this meeting of the Panasonic Sustainability Briefing 2. Thank you very much. Thank you. [Foreign language] We now like to start the panel discussion. We have four invited panelists: Professor Motohiro Ito, Professor Emeritus, University of Tokyo; Mr.
Shinichi Kihara, Deputy Director General for Environmental Affairs, the Ministry of Economy, Trade and Industry, Ms. Emi Onozuka, President and CEO, Eminent Group, and finally, Mr. Tatsuo Ogawa, Executive Officer and Group CTO, Panasonic Holdings Corporation. My name is Ito. I'll be serving as a moderator today. First of all, let me explain the purpose of this panel discussion. For the realization of carbon neutrality, we are now at the stage where society and companies are taking concrete actions. In this context, there is a need for a system in which corporate efforts to decarbonize are appropriately evaluated. The establishment, for example, of the system with which companies' contributions to decarbonization are properly evaluated will promote corporate endeavors. In the case of the companies evaluating their own contribution and also their supply chain's contribution, they have been a system.
As was mentioned by President Kusumi, the reduction contribution is something that would be made possible. If it is possible to visualize this, then society might change. With this as a starting point, we'd like to have a discussion here in the panel. First, we'd like you to introduce yourself. Also, at the same time, could you tell us a bit about how you look at carbon neutral efforts? Professor Ito, would you like to start? Thank you very much for your introduction. I'd like to start with the picture. There are three methods with which we are able to tackle global warming. One is the global approach, the engineering approach. This is something we have been working on. Each company and industry establishes its own goals to implement that. This is the socialistic or maybe planned economy kind of approaches.
The second is about the regulation by the government. This is, again, based on the intervention by the government. There is no need for explanation. These two are very important, but these two would not be able to solve all these problems associated with global warming. This is something everybody knows based on what we have experienced in the past. The third approach, which is very important, is the utilization of the market. You must be able to utilize the market to tackle global warming. There could be many different stages or maybe layers. The ultimate goal is to have carbon pricing. Maybe we could introduce carbon pricing so that it is possible to reduce carbon emission. Also, one more thing would be green finance. I'm sure we will be able to speak about this.
In what way are we able to use the capability of finance to reduce carbon emission? And also information disclosure. In what way are we able to establish governance role? The one thing that we are discussing is how to utilize the market. We are the economists, and we have to say that this is the typical case of the failure of the market. In order to reverse the situation, there is only one way, which is to utilize the market. This is the conclusion of the economist. One more thing that we have to consider is that this is not only for the Japanese companies, but also for the companies outside of the country. Many people are really passive. They are given the rules and also the practices. Against this backdrop, they try to do their best.
Engineering approach is that it's done based on that. In what way are we able to involve ourselves for the rule formation? In what way is it impactful for the activities, for the companies? It is not that they do what is needed, but also they create a value. As was mentioned today, they try to think about the ways in which they are able to have good business for the company. Rulemaking is a starting point, and this would become even more important for the company. That's all for me. Thank you very much. Kihara-san, would you like to follow on? Kihara from the Ministry of Energy. I'm very happy to be able to participate in this very important panel discussion. About the kind of things that we do, I'd like to speak about the policies of the national government.
Two years ago, carbon neutrality had been declared, and ever since, already two years have elapsed. The three policy packages have been released. One is for 2050. These are mainly for technological development, which is the green strategy. Also, for 2030, the Energy Basic Plan was established in order to streamline the energy mix. Green energy, the interim report of the green energy strategy, was issued in May. In what way are we able to achieve the goals in 2030 and 2050? How to is the key word for that in streamlining this. The very basis of the strategy is decarbonization and economic growth. We achieve both of them. It is not that one is sacrificed for the purpose of the other, for the sake of the other.
For that purpose, it is important to have the major shift of the economic system centering around renewables. Also, social systems and infrastructure should also be changed. These are the drastic changes we have to consider. There are five pillars of the policies. In the next 10 years, both private and public, we have to have JPY 15 billion worth of investment. In order to drive that, there are five policies. One is about the budget. For the budgetary treatment, we have JPY 20 trillion worth of investment. This is supported by the government budget. GX, the economic bond. That's not the formal name, but this is something we have to do. The second point is regulation and rules. We have the financial expenditures. Alongside with that, we have these regulations, rules. The third point is the financial package.
We have transition finance. This would be the new way of driving the finance. We have the pump priming within Japan, and also that would be impacted. That would have an impact in the entire world. GX League. Starting this year, we have 430 companies participating, and about 40% of the CO2 emission is already covered. We have already started this. This is for the emission trading, and rulemaking should be the starting point. The companies are the driving force of establishing the rules and also global strategy. These are the five pillars that we have established. Starting this April, starting this summer, we will have the committee that will be established within the Prime Minister's office. Thank you very much. Onozuka-san, this is viewed as a deaness of the ESG. Thank you very much for the introduction.
My name is Onozuka, the deaness of ESG. Allow me to introduce myself. In the last 25 years, also I was in the financial sector, and most of them are dedicated to global stacks. In the second half of the year of that, I got into the ESG starting 2015 to 2016. I have been in the GPIF. GPIF decided to focus more on the ESG investment. That was the area in which I was able to support as the member of the asset manager. Also in recent years, I have been a member of the Sustainable Finance Committee of the FSA. We moved on to the sustainable finance, which is one step forward from the ESG itself. I have been quite active, especially starting in July. I have been independent, and I have been exerting my effort here.
The background of my work at this moment is, as was mentioned here, the kind of the change of the finance and change of the industry itself, or maybe the change of the future. There could be a change in many fields with the changes of the environment. As one company, as a member of one company, I am not sure what kind of things I was not sure whether I was able to make a necessary contribution from the previous company. That is the reason why I became independent. In this Panasonic briefing, I'd like to share with you some of the points. One thing here is about sustainable finance. The rulemaking has been mentioned several times already. Global interface would be very important in that. In Japan, in many cases, rules will come only afterwards.
The reasons of not being able to respond or comply is the mainstream. As has been mentioned already, the reduction contribution, if that could become part of IFRS or other standards, that will be very beneficial. I think it is important that Japan take initiative in that. Second point, sustainable finance. Conventionally, ESG investments pertained to the equity investors. They were the main players. In sustainable finance, the players will increase dramatically. There will be banks, not just the major banks, but the regional banks as well. From there, the public funds will be part of the picture. In the case of green bonds, securities firms would be helping the companies to issue such bonds. There will be further diversity in the players. To make sure that there is the proper understanding for the proper financing would be critical.
This would include social impact, which is the theme of this panel discussion. That needs to be measured from many axes, including the social axis. How do you capture that? I think will be a critical question. That's all. Thank you. From Panasonic, Mr. Ogawa. Thank you. First, I'd like to thank fellow panel members for agreeing to participate in this panel discussion. I certainly appreciate your professional input. As our CEO, Kusumi, said, Panasonic Green Impact PGI started, and some of the updates have been provided. What is our aspiration in the green impact? Let me give you the backdrop, including my personal aspirations. Until last fiscal year, Environment Vision 2050 was the formula to create more energy than the energy that we consume at factories and offices.
In order to translate into the specific actions, we have to use the energy that could be measured. We thought that that will be the fair approach. That was the starting point. Now, everything being converted to carbon is more mainstream now within this decarbonization effort. The 2050 target, the environment vision, the level that we were trying to achieve, we have to make sure that that target would not be lowered. At the same time, together with the people in society and customers and other stakeholders, translate into more specific plans. We had extensive discussion on that on this occasion of changing into the holdings company structure. Scope 1, 2, and 3 are 110 million tons. In addition to this own impact, we have to contribute to the societal reduction and also the future impact.
Three hundred million tons altogether, we know that that's a very ambitious target, but we felt that unless we try to achieve such tall orders, we may not be able to survive as a company. That's the basic thinking behind the green impact. Since the founding of the company, we have always sought to contribute to society, the company's sustainability and societal sustainability to be integrated, to be approached as one. That would be the major driver. That will be the major challenge that faces us. I see. Thank you. Let us get to the specifics. The carbon neutral initiatives by company, what we expect of that, and to assess the carbon neutral. What will be the metrics that could be used? We'd like to look at those two aspects. First, your expectations of the carbon neutral initiatives by company.
Onozuka-san, CEO, Kusumi-san, referred to fuel cell as well as hydrogen. What is the market view of these technologies? Thank you. I'm sure many of you in this room are well familiar with this theme. In terms of the view from the financial market overall towards 2050, hydrogen electric vehicles and power semiconductors, on those technology elements, Japanese companies are doing a pretty good job. The working group on decarbonization technology, there are many companies that are on the top 10 list, I understand. In terms of investment, there are JPY 3,900 trillion available for sustainable investment. We want to bring many of that into Japan. I think many investors are paying attention from that perspective. In fact, the companies that do have the decarbonization technology capability, their stock price fluctuation was quite different from others.
That is because many of the investors are aggressively investing, focusing on such new technologies. Obviously, in the financing world, more attention is being paid to these technologies. At the same time, there are challenges. These are new technologies, and therefore, full understanding, appreciation of these new technologies. The world of science, technology, and financing are still very much apart, I'm afraid. Personally, what I'm working on is to address such challenges. More recently, a foundation for creating a new initiative based on financing and technology and science was established so that people in different worlds can speak the common language and also develop the talented people who are well-versed with both worlds. I see. Thank you. Technology that can contribute to the emissions reduction is attracting a lot of attention from the market.
It is clear that the common language is being pursued. Kihara-san, GX League started in April. I have a feeling that this could lead to a common language. Could you elaborate on that? Yes. The private companies are now competing globally from the aspect of decarbonization as well. That's a new challenge, very difficult challenge. From the government viewpoint, we would like to support that as much as possible. GX League is currently in the preparatory phase. Companies that are picking up the challenge of decarbonization and to become a winner in the international competition. 440 companies are supporting, covering over 40%. That is similar to the ETS coverage in the EU. This involves many different communities, many initiatives. One is the emissions trading.
It's not the trading itself that is the purpose, but it is to enhance the transparency of the initiatives in different companies to market. The demonstration test will start for carbon trading, emissions trading. Companies are making investments toward 2030. They're disclosing their achievements. The credits would be prepared if they cannot achieve it alone. Through this, the capital, labor, consumption from many different aspects, the GX companies are to be assessed and evaluated. That's the framework that we are trying to establish. The companies that are participating, I hope, will be invested in and attract more information attraction. Another is the rulemaking, which is another subject. Japanese companies are working on the reduction of emissions.
In order for them to be duly evaluated, it is important maybe we could accept the criteria for the standard from Europe, but also at the same time, it is important to make a proposal from Japan. In many fields, many of the private companies are creating de facto standards, and then the standard is made based on that. This is what is taking place in ISO. In the DXV, we go beyond the kind of discussions at the advisory committee of the government, but rather the leaders of the businesses would make a discussion, have the active discussions so that the proposals of the standard will be made. This is the first year. There was a template for that, and they are now starting discussions on several points. Here, many of the companies are interested in the emission reduction, emission contribution.
We are taking up this. Europe is considered to be the superpower in this field, but we have the capability of the value creation. It is possible to make a contribution for the rulemaking. With support of all of you, we would become the leader in the entire world. That's what we are aiming for in the GXV. The technology is now changing the world. Here, it is important to have participation from the Japanese industry. Rulemaking based on the initiatives of the industry is very important. Itosan, Professor Ito, about the solution of the global warming and also the growth of the company. In what way are they intertwined with each other? There are several issues that we have to point out about the global warming issue. This is a very difficult issue that we have to tackle with.
Without innovation, it is impossible to reach the final conclusion. We could have the utilization; we could work on the things that we have. It is like wringing the dry towel. It is important to have the creation of innovation. One more thing that would be something that we have to be happy about in the last 10 years or so, especially in the United States, the economists are now thinking about saying that the creative destruction is important, especially in the green and clean fields. In what way are we able to come up with the creative destruction? This is dependent on the efforts by the industry. We talked about the rulemaking and finance. Coming back to the discussion today, this is not only for Panasonic, but also for other companies as well.
Many of them are aware of this, but the companies would have to deal with the global warming. There are two key words. One is responsibility, and the second is the contribution. The responsibility is something that is to reduce the CO2 that is emitted from their own activities. In the case of contribution, when coming up with a new business and also new services, when they are proposing the new ones, they are able to make a contribution for the reduction in the society. However, while it is important to fulfill their responsibility, the business opportunities are very much limited. In that respect, the creative destruction and also the countermeasures for the climate change, in what way are they able to expand the scope for the contribution? One single company would not be able to do that.
The finance itself and the society itself should be involved to do that. The expansion of the scope of the market should be accompanying this move. Based on that, I'd like to expect for the companies to do what they can do. Fulfilling responsibility should be the starting point. In order to do this, the technology is important. Ogawa-san, would you tell us a bit about it? Panasonic might be able to make a contribution. You are doing R&D activities. In what way are you planning to make a contribution? In the first part, we partially touched upon this, especially about the reduction contribution. There are several impactful areas. For example, the storage battery is quite an impactful area. Also, one more thing, the Blue Yonder solution, which has joined us.
With this, we are able to raise the efficiency level of the supply chain itself for the decarbonization and energy conservation. It is possible to utilize your technologies. Also in the Scope 3 area that we have, the air conditioning and also the ventilation, it is important to have the integration of the indoor air quality and also AC. This way, we are able to reduce the energy consumption. We think we are able to make a huge contribution here. On top of that, we have to drive innovation in clean hydrogen. In what way are we able to create clean energy, clean hydrogen? Also we talked about Philborsguide, the E3. This is a new area for the energy conservation and also energy management such as DERMS.
If we are able to combine all these, then alongside with the reduction of the emission, we are able to make a contribution in the future. Again, we are able to maximize the level of the reduction contribution. We accept that. Also, at the same time, we make sure that we have full commitment for the R&D. Yes, we have a high expectation here. Now, starting from here, I'd like to move on to the second point. The keyword had been used about the assessment of, or maybe the scales with which we are able to assess the reduction contribution. Professor Ito, would you like to make a comment? This is a new concept, which is the size of the reduction contribution. Can we say that this is something that would show the effort by the company?
It's as if I am doing the lecture at the university. When it comes to the market mechanism, we have to have indicators and also indices to drive that. We use the term measuring or metering. About 40 years ago, I was toward the very end of the socialist Soviet Union. I visited the country, and I was surprised. I looked at the heating, and they were utilizing the seams, but they did not have any meters. They turn on the power, and then they do not know when it consumes the available gas. When it is done, it stops. We have meters. These meters or the instrumentation is important for the market mechanism. With the effort by the companies, it is important to have highly efficient meters.
It is not that you buy meters from outside, but rather you create your own meters yourself. Panasonic could do something, but it is not that Panasonic could do something and then do something, and also other people would have to introduce that. Innovation is not about something that would pop up in the minds of the very clever people, but rather innovation is about something that is created after five years or six years of effort by very dedicated people. The goals are important, and the directions are important. Dynamic operation is the key for that purpose. I think it is important to share the same concept in the manufacturing industries and manufacturing businesses. The importance of the meters are mentioned. Onozuka-san, you talked about something; you talked about the common language.
In the area of ESG, the reduction contribution could serve as the scale with which we are able to measure. What do you think about it? In the field of finance, we tend to look at things in a monetary figure. We talked about, we have been talking about the criteria for the reduction. In order to deal with the climate change, I think, as was mentioned, hedge funds were the driving force. They are looking at the technologies, and if they are convinced, there could be the move of the capital. I have two things in mind. The reduction contribution might be the criteria with which we are able to see the strength of the technology. We are using this as a scale. Globally, it might be possible to be utilized globally, but the consensus is needed.
This is not something in which Japan is the only player. Again, in the case of the finance, it does not respect any border. It is important to convince the investors outside of the country. The awareness raising among the investors is important. This kind of kickoff event is very meaningful in that it can convince people outside of Japan as well. Also, evaluation of the technology would be the evaluation of the company, but there is an additional layer. Here, the ESG should be promoted in various aspects. We have been doing this, but many people say that the G is something we have to reinforce in Japan. The discipline and the investment and how to measure the result of the investment and also stakeholder value and also the shareholder value and the balance between the two.
These are the kind of messages that we want to expect from the non-financial companies. About the reduction contribution, are we able to utilize this in the policy? Could you tell us a bit about how the policies will be able to promote that? Yes. The discussion on the reduction contribution is important. Risks and opportunities need to be looked at. The assessments of the companies in terms of global warming, conventionally, the emissions amount have been used to measure the risk. Initiatives to disclose such information is well-refined. On the other hand, when it comes to developing new technologies to replace the existing technologies that could contribute to the reductions, there are companies that do have such expertise, technology, and services, and then there are investors looking for opportunities.
In terms of opportunities assessments, we have yet to see a complete exhaustive discussion having taken place yet. For example, in the case of Panasonic, reduce the CO2 emissions. Let's say that you have successfully developed a system that could have that effect. The more use of that technology will contribute to society, but Panasonic's activity will go up, and therefore the emissions will go up, unfortunately. The opportunities, that contribution aspect needs to be well assessed, and that's the framework that we need to calculate the reductions. For example, the patents number being disclosed. Those initiatives have taken place. When it comes to the assessment of the opportunities in relation to the risks, they have yet to be established. The way to disclose the relevant information varies from entity to entity.
We have yet to see the metrics that function well, especially here in Japan when it comes to contributions to reductions, what the Japanese companies are doing, or in fact, the source of strength. Building the system for that would be important. I think that Japan as a country takes initiative in building that system. By doing so, I think that money will start to circulate. That GX League that I mentioned earlier, as we develop the rules, we are trying to build such a system as well. For the metrics for measurement, have the financial people be part of that effort so that the system would appear appealing to the investors, the financial market.
Another important aspect is to have such information being shared to the rest of the world, to publicize and announce all the efforts that are being made in Japan, which I'm afraid Japanese companies are not very good at. The government will try to support that as well. Thank you. Yes, the international rulemaking to be promoted under the initiative of Japan, I think, would be a welcome event. Ogawasan, the international standardization of the metrics, I think, would be good news for Panasonic as well. How do you intend to participate in those efforts? Thank you. We're not advocating this for the sake of our efforts being appreciated. No, that is not the intent. We have been involved in the development of technologies, and that needs to be fairly assessed by society and by the market.
We wanted that to be established going beyond the differences in industries. ECTC 111 Working 17 is promoting discussion on this. Life cycle assessment approach or compared to the current model or the older generation, focus on the delta. These are the different approaches that are currently being discussed to see what will be the best way to assess the fair value. As Kiarasan said, by having good measurement, the opportunities for the companies engaged in good activities would be appreciated. Green bonds and carbon credit and eventually non-financial ESG assessment, I think, could ensue. We need to have a global system with that kind of functionality so that the companies engaged in decent activities would be decently appreciated. We would like to be part of the efforts to vitalize that. We are actively participating in the GX League preparation efforts.
We have the carbon emissions reduction contribution as part of ESG. We are hoping that there will be many companies that would have the similar aspiration to participate. In Japan, the high school baseball tournament, summer tournament, will start shortly at Koshien Stadium. I understand that with the use of the LED lighting system by Panasonic, the energy efficiency has improved dramatically by 60%. Because of that, Panasonic's activity increased and therefore more emissions. I think you are talking about the evaluation that would fairly assess your contribution. Right. We are asking for the fair assessment so that the system would be sustainable, would contribute to sustainable efforts being made. Thank you very much. I am afraid time flies, but I wonder if each of you have some final comments that you would like to make.
Starting from you, Professor Ito, I think I have said everything I wanted to say, so I just want to share my observation. In October of 2020, then Prime Minister declared carbon neutrality, carbon zero, and it's been less than two years since. Many things changed over time, and I think there has been major progress, especially on the topics that we discussed today. We have to make sure that we take advantage of such momentum to move society forward, and I look forward to the efforts being made by Panasonic as well. Thank you. Kihara-san. As I said earlier, in terms of transmitting information on a global scale to publicize what Japan is doing, I think there are many overseas counterparts that are working on similar efforts. I hope we can contribute help to match and align such parties.
Onozuka-san, sustainable finance is finally here, I think. I say so because ESG is the system to assess the efforts made by individual companies, whereas when it comes to the sustainable financing, it pertains to what kind of future the community wants, not the individual companies. What Panasonic is doing, the Japanese industry is based on manufacturing. We need to revitalize the Japanese industry so that we can look forward to a more rosy and more productive society. I think what Panasonic is doing can contribute to that. Those of us in the financing industry, we need to think of how best to be able to contribute to the flow of money and flow of the people to move things forward. Thank you. Thank you. Ogawa-san. Thank you. I think I've said what I wanted to say already, but Panasonic Green Impact, PGI.
This will be a group-wide effort. As was mentioned today, we need the support of the government and the academia and the financing industry, and in addition, our customers and the companies in different industries. That green impact, not Panasonic Green Impact, but general green impacts would be jointly promoted. Thank you. Thank you very much. Listening to the discussion, I was again reminded that in order to reduce the carbon emissions as a society overall, the initiatives, efforts by companies, private industry is critical. As a consumer, we need to choose the products and services with the right aspiration. For that, we need a framework that will let us get closer to and be aware of such products. We need metrics for that. We need framework for that. That is my observation as a consumer.
By changing the industrial structure, companies that try to coexist with the environment would be appreciated, will be chosen by the consumers, and make profit and grow. Having that system established would be important. Standardization and the metrics that will fairly assess the reductions contribution need to be built for that purpose. I'd like to extend my sincere appreciation to all the panelists. With this, we'd like to close this panel discussion. Thank you so very much.