Strategizing a low-carbon corporation: an interview with Kim Jong-yun

As the largest source of carbon emissions in many countries, the industrial sector’s commitment to sustainability plays a decisive role in shaping the national path toward net-zero. Behind such carbon reduction progress of leading businesses is the careful planning and arranging by the Corporate Planning Department. Kim Jong-yun at the chemicals and advanced materials business Toray's Corporate Planning Department spoke about the corporation's alignment and contribution to Korea's 2035 NDC goals.

Following the global trend emphasizing carbon neutrality and ESG, what vision does Toray pursue as a company?

Starting in 2018, we began activities based on an ESG vision. The Toray Group has now started operating under what we call the Toray Sustainability Vision. Its content involves achieving a balance between greenhouse gas emissions and absorption on a global scale, adding three additional goals.

What are the major projects Toray is pursuing to achieve its ESG goals?

At the Toray Group level, we are primarily advancing two major projects. One is the GI project, called Green Innovation, and the other is the LI project, called Life Innovation. For example, we assume scenarios where global temperatures rise by 0.5°C, 1°C, or 1.5°C. Under these scenarios, we explore what products the Toray Group can create and how we can contribute to society through innovation. These efforts are broadly divided into these two frameworks: Green Innovation and Life Innovation. Within these two projects, Toray is active across various fields it produces, such as carbon fiber, general fiber, and the medical field, organizing its activities under these two project categories.

How do Korea's environmental regulations (ESG, carbon neutrality policies, etc.) impact Toray's technology development or business strategy?

Regarding ESG, environmental regulations are intensifying in some areas, while in others, policy implementation is progressing more slowly. These trends shift annually. Broadly speaking, looking at the trends for 2020, 2025, and 2030. The 2025 phase is about building and refining these activities. Then, by 2030, most of these will become stronger, either through legislation as regulations or rules. Within this framework, Toray is also reflecting these trends and adapting to the times.

Looking ahead, by around 2030, we expect to transition into a phase where global legislation is more firmly established. Currently, activities are largely voluntary, but once legislation is in place, penalties like fines may be imposed. Alternatively, products might be barred from sale due to regulatory compliance issues. To prepare for this, we anticipate needing to obtain international certifications and deepen our technological capabilities to meet our customers' environmental regulations. To elaborate further within the ESG trend, there exists a Sustainability Reporting Directive.

This directive, known as the Corporate Sustainability Reporting Directive (CSRD), is currently being implemented at the European level. While it hasn't yet been fully legislated, individual European countries are gradually enacting their own legislation. Therefore, since these are regulations on how to create sustainability management reports, we are currently responding using what our company has developed internally, as they are not yet at the legislative stage. However, as we approach 2030, disclosure of financial indicators will become mandatory. We are preparing for this, anticipating that we will also reach a stage where disclosure of non-financial indicators, such as ESG activities, will be required.

Another trend is the Corporate Sustainability Due Diligence Directive (CSDDD). If Toray uses petrochemical raw materials to produce film, that film might be used by a company like Samsung Display to make a set product. Samsung Display then supplies that product to Samsung Electronics, which uses it to make TVs or monitors. Within this supply chain, due diligence is required. For instance, our customers undergo audits by their upstream suppliers. They assess how much carbon is used in production, and conversely, our customers also audit us. By 2030, even if it doesn't become legally mandated, an international standard will likely emerge. Companies will need to respond accordingly.

Finally, there is the Carbon Border Adjustment Mechanism (CBAM). Regulations for this mechanism will be established starting in 2026 for certain products like steel, aluminum, electricity, cement, and fertilizers. However, the polymer sector, which Toray's Advanced Materials operates in, is not yet covered by this mechanism. Preparations are underway based on the prediction that it will be included starting in 2028. In that case, we must measure how much carbon this product generates during production. The measurement standards can currently vary slightly between companies and countries. So, while we have a system now, it appears that by around 2030, standardization and regulation will likely deepen further.

So, broadly speaking, companies are aligning their strategic direction with the major trends of 2020, 2025, and 2030. Then, at a more granular level, they are establishing company policies based on the systems I mentioned earlier: CSRD, CSDDD, and CBAM.

Looking ahead, what kind of policy support would you most like to see to foster industrial development while also considering the environment?

To give one example, consider the CBAM policy. To calculate how much carbon emissions are generated during the production of a given product, you need a database (DB) that can provide the data for this calculation. We need a database for the carbon emissions of these raw materials. Since these raw materials are extremely diverse and numerous, calculating how much of each is used per unit of finished product could be done simply with an Excel spreadsheet. However, because there are so many products, a program system is necessary. If a company only had one to ten products, manual calculations might be manageable despite the complexity. However, companies often have several thousand products.

Smaller companies might struggle due to limited improvement capabilities rather than infrastructure, but for mid-sized companies and larger, the sheer volume of products makes calculations impractical. The same applies to databases.

There are various databases: Korean ones, Japanese ones, European ones. Even within Europe, each country has its own database, so the figures can differ depending on which database is used. Therefore, standardization is essential. Even if standardized, international certification is required to reflect the product's carbon footprint. This would enable reporting under the Carbon Border Adjustment Mechanism, showing how much carbon our company's products emit.

For instance, establishing a Korean standard would eliminate this concern for each company. If a unified Korean policy is established, we can calculate a product's carbon footprint based on that policy. For instance, creating a Korean standard for calculating carbon footprints and systematizing it so it applies well from SMEs to large corporations would inevitably reduce losses. National losses would decrease, losses within companies would decrease, and that effort could be made within Korea. The Korean government would also need to engage in mutual discussions to have the Korean system recognized in Europe or the US. system to Europe or the US, requesting recognition of our national system.

We use the Korean system, so it shouldn't require companies in each country to expend additional effort to gain recognition. From this perspective, standardization for calculating carbon footprints under the carbon border adjustment mechanism requires policy expression.

It seems there's a strong emphasis on standardization and systematization when it comes to carbon neutrality. So, regarding the recent news about Korea raising its 2035 NDC, what changes do you think this might bring to Toray's carbon fiber business or other operations?

From a national perspective, the NDC represents a commitment to reduce carbon emissions. This involves both the country's overall carbon emissions and the specific carbon emissions attributable to the industrial sector. The newly announced targets are described as being more ambitious. However, from the perspective of the industrial sector, manufacturing companies like ours, these targets are not excessively high and are achievable. But this doesn't mean no effort is required.

As a company grows and develops, it inevitably expands production lines, diversifies products, and increases output to meet customer demand. This naturally leads to higher carbon emissions. The Korean government has set a target to reduce these emissions by a certain percentage compared to 2018 levels. So, looking at the absolute volume, it's a structure where emissions can't just keep increasing indefinitely. To meet this target, we need to reduce emissions. That's why it requires effort. 

For example, since we have a production sector, if it's carbon fiber, when expanding the carbon fiber line, we could just continue with the existing methods as before. But now, measures to prevent carbon emissions must be implemented. Therefore, even when expanding production lines, plans are needed to ensure the expanded capacity does not exceed current carbon emissions. Furthermore, for existing lines, continuous efforts to reduce energy costs through conservation or improvement initiatives are essential. These ongoing efforts are necessary within the business sector.

What role do you see Toray playing in helping Korea achieve its enhanced 2035 NDC?

In Korea's case, there is a plan to reduce carbon emissions compared to 2018 levels. To achieve this reduction, each industrial sector, meaning each company, has been assigned a percentage target to meet. Based on that percentage, quotas have been allocated to each company. Therefore, a system is in operation to ensure companies do not exceed their allocated energy quotas. Achieving the goals of this system will naturally contribute to the nation's NDC being met. That's how it should be viewed.

Another important point to add is that, beyond reducing emissions when production increases, recycling is also a crucial aspect. Since our company manufactures textile fibers for clothing, we are actively pursuing recycling in the textile sector. For example, even within a single garment, numerous types of polymers are used. We are working to ensure all of these can be recycled. If you look closely in stores, you might see labels indicating recycled materials are used, and you'll see more of these recently. These will continue to increase, but there are many challenges to overcome.

Someone must collect these garments, then separate them for recyclability. Processes are needed to chemically or mechanically recycle the separated materials. Once recycled raw materials are produced, another process is required to transform them back into fabric. It's not a simple process, but we see recycling as a viable method for carbon reduction. Therefore, we anticipate recycled products will increase. Next, technological development must occur to enable the increase in recycled products. That's how we see it.