Panasonic’s push to decarbonize a big plant in China demonstrates the steep challenge for companies trying to reduce the greenhouse gases linked to climate change

By Phred Dvorak /WSJ

TOKYO
EnergiesNet.com )215 2022

Panasonic Corp. PCRFY 0.57% got its highest-emitting Chinese factory to “virtually net zero” carbon dioxide. It took six years, showing how difficult it can be for companies to reduce their environmental footprints to deal with climate change.

The Japanese electronics giant has pledged to eliminate or offset all of the greenhouse-gas emissions generated by its operations by 2030. But even tackling that one factory, which produces batteries in the city of Wuxi, near Shanghai, was tough, company officials say.

Panasonic incrementally trimmed its energy consumption through measures such as replacing workers with robots and fluorescent lights with LEDs. When that wasn’t enough, it bought carbon credits and renewable energy, finally letting it declare it had neutralized the plant’s emissions last year.

Large companies around the world are beginning to take similar steps to address their contributions to the greenhouse effect, as many make “net zero” emissions pledges to cut and counter their emissions, urged on by investors, corporate customers and consumers.

Panasonic, one of the biggest corporate carbon emitters in the world according to estimates by the company and outside experts, is just getting started. It has to repeat its Wuxi feat 37 times over to neutralize the roughly 2.2 million metric tons of greenhouse-gas emissions associated with the company’s operations.

And those emissions are just 2% of the 110 million metric tons Panasonic estimates it is responsible for, when its suppliers and the use of its products are included. While the company has a 2030 goal for emissions from its direct operations, it has given itself until 2050 to deal with its entire carbon footprint—an amount five times the size of Apple Inc.’s , and roughly equivalent to half of Spain’s annual emissions

For Panasonic—a 104-year-old manufacturing behemoth that has more than 10,000 suppliers and makes everything from refrigerators and TVs to fuses for surge protectors—just zeroing out emissions at factories by 2030 will be extremely hard, said Ryuji Shimono, a general manager in charge of external affairs at Panasonic’s environment division. But these days, he said, decarbonizing “is a matter of competitiveness.”

In 2017, the company was targeted by Climate Action 100+, a group of global investors that presses the world’s hundred-or-so largest emitters to reduce their carbon footprints. The California Public Employees’ Retirement System, which belongs to the group, reaches out twice a year to nudge the company on emissions-cutting and other green goals.

At least one European car maker has asked Panasonic to ensure the parts it supplies are carbon-free in the near future, and more corporate customers are likely to follow suit, said Mr. Shimono, who declined to name the car company in question. Apple, which lists Panasonic as a supplier, has said it would “achieve carbon neutrality” for its supply chain by 2030.

Other Apple suppliers—such as chip maker Taiwan Semiconductor Manufacturing Co. and assembler Hon Hai Precision Industry Co. , known as Foxconn—also have set their own goals to cut carbon emissions.

Panasonic turned its attention to the Wuxi factory in 2015, the year that the international Paris climate agreement set a target to keep rising global temperatures to less than 2 degrees Celsius from preindustrial levels, to avoid the worst impacts of climate change.

The plant makes lithium-ion and nickel-metal hydride batteries—the kind that power devices such as laptops, electric bikes and emergency lighting. It uses a lot of energy—mostly electricity, which it consumes in especially large quantities to charge and discharge the batteries during the testing process, and fossil fuel-generated steam, used for equipment such as dryers and dehumidifiers.

At the time, Panasonic calculated that electricity and steam was responsible for around 60,000 metric tons of carbon emissions a year—the highest amount among Panasonic’s 50-odd manufacturing sites in China and around a tenth of its total in the country.

Panasonic generally tries to reduce emissions by curbing the amount of energy it uses and by generating its own clean electricity. So the Wuxi factory started installing solar panels on the roofs of its buildings, eventually bringing in enough to cut its estimated emissions by around 1,250 metric tons.

Managers had to think hard to come up with new ways of trimming energy consumption, said Peng Li, the plant’s business planning director. They introduced a more energy-efficient way of running the factory’s dust collectors, air compressors and exhaust fans, resulting in a reduction of 660 metric tons of carbon dioxide a year.

The factory tackled its worker-heavy production lines, automating processes and switching to robots. The moves reduced the number of employees by 38%, the amount of energy consumed per battery by 11% and emissions by 2,710 metric tons. It replaced 13,725 fluorescent and other types of lamps with lower-wattage LEDs and traded energy-saving tips with a nearby factory of Japanese office-machine manufacturer Konica Minolta Inc.

Engineers consulted with one of the Wuxi factory’s equipment manufacturers, finding a way to collect and recycle some of the electricity produced when batteries discharge. Yet, after all that, the factory had only managed to trim around a quarter of its estimated emissions by 2020.

“In the beginning we tried all kinds of energy-saving measures,” Ms. Peng said. “But for a time we were quite troubled over how we were going to get to zero.”

In the end Panasonic, like other companies, turned to financial instruments that let it cancel out carbon emissions it was generating by buying units of clean energy or emissions reductions created elsewhere.

To handle the Wuxi factory’s electricity, which accounted for around 80% of the remaining 44,000 metric tons of carbon emissions, the company bought renewable energy certificates, each of which represented a megawatt-hour of power produced by a local wind, solar or other clean-energy project. That purchase let the Wuxi factory replace the equivalent amount of electricity from China’s grid, which tends to be heavily dependent on coal-fired power plants.

To counter the emissions from the production of its steam, the factory bought carbon credits issued by projects—such as planting trees or protecting forests—that reduce the amount of carbon dioxide in the atmosphere or prevent emissions from increasing.

For now, the factory’s managers say, the cost to buy carbon credits and renewable energy certificates in China is affordable: roughly $47,000 in 2021, or around half a percent of what the factory pays to power its equipment. That means Panasonic could reduce and offset Wuxi’s emissions without raising the price of the batteries it produces.

But the Wuxi factory’s managers worry the cost of such certificates will rise as more companies rush to go green.

“Everybody is going to be focusing on [these instruments], and the price will go up,” said Huang Hua, who heads the plant’s human resources and facility department. “We can’t just rely on them.”

Write to Phred Dvorak at phred.dvorak@wsj.com

wsj.com 12 02 2022