NOT CURRENT YEAR
Showa Denko has a relatively large production of hazardous chemicals and data tells us that it is producing 13 problematic substances, including 2 persistent chemicals. The production of problematic chemicals is one reason for the poor score in the Product Portfolio category, but also the fact that there’s no available data for as much as 94 percent of the company’s production that takes place outside of the EU and US. This low transparency is a big issue for investors, as it makes it hard to do a proper evaluation of the risks connected to the product portfolio. On a positive note, there is no record of Showa Denko being involved in any major controversies, rendering the company all 6 points in the last category. These points really save the company from being among the very worst performers. In the remaining categories, Showa Denko’s performance is weak across the board.
Opportunities for improvement
- Showa Denko currently has 2 substances in its product portfolio belonging to the group of chemicals dubbed “forever chemicals”, due to their extreme persistence. For investors, these chemicals pose a nightmare when the persistence and level of exposure is revealed, as demonstrated by the companies involved in the PFAS disaster, suffering massive financial implications. Investors risk stranded assets, as the environmental and human health impacts of exposure to “forever chemicals” can’t be stopped or easily reversed. For this reason – not to mention for the sake of human health and the environment – we strongly recommend that Showa Denko prioritises phasing out persistent chemicals from its product portfolio.
- The company should also reduce its hazardous portfolio overall, which currently consists of 13 banned, severely restricted or SIN-listed substances. Quite many, considering we only have data for 6 percent of the company’s total production. Chemical pollution has a harmful impact on human health and the environment, and poses a growing threat. Two million people died due to exposure to hazardous chemicals in 2019, compared to 1.56 million in 2016, according to the World Health Organization (WHO). Hazardous chemicals are also key drivers of biodiversity loss, putting entire ecosystems in jeopardy. A good place to start the reduction would be the two PIC substances that Showa Denko still offers. PIC, short for Prior Informed Consent, is one of the key provisions of the Rotterdam Convention, allowing the export of – often domestically restricted – hazardous chemicals to poorer countries with weaker chemical legislation, as long as the receiving country signs a consent that it understands what it is accepting and has a plan for how to handle it.
- Showa Denko misses out on many points for a progressive chemical management. For example, the development and marketing of greener products is lacking. The company should dedicate time and effort to develop a circular strategy with clear KPIs and SMART targets, to be able to contribute to the circular economy with its own products and concepts.
Showa Denko produces/uses 13 highly hazardous substances – 13 SIN List chemicals, 2 PICs, and 3 HHPs – 6 of which are included on the EU’s REACH Candidate List. None of these highly hazardous substances are either banned or severely restricted, with set dates when production needs to cease (no Authorisation List substances, and no POPs). The company produces 2 persistent chemicals. Persistent chemicals are particularly problematic, since they do not break down, but instead accumulate in humans and the environment. Because of this, persistent chemicals should be of extra concern for investors; substances that are not considered a problem today could become huge liabilities in the future.
Please note that there is no available data for the 94 percent of the company’s production that takes place outside of the EU and US. Lower EU/US production means higher uncertainty with regard to the total production of hazardous chemicals, which will have a negative impact on the company’s score in this category.
Showa Denko has a method in place to screen and assess the sustainability of its products and includes the intrinsic hazards of ingredients in the screening process. It does not, however, exclude substances with toxic properties from its new products. Showa Denko does not actively market safer alternatives on its own website or on ChemSec Marketplace. The company has no true circular product, process or innovation. Showa Denko does not use biobased resources. Nor does it source and treat recycled materials in a sustainable way, which is one of the key elements of a circular economy. Showa Denko is not actively reducing the hazardous waste it generates.
The Japanese company does not produce only sustainable products. Nor does it have a phase-out strategy for hazardous substances that go beyond regulatory compliance. It does not share chemical safety information on its website, but is following a credible code of conduct standard. Showa Denko did not respond to ChemSec’s attempts to communicate around its ChemScore ranking. Nor does it share any information about what kind of chemicals it produces in regions with low regulatory demands for transparency (e.g. Asia). Showa Denko has no circular economy program in place, thus lacking objective and measurable circular economy targets.
Although Showa Denko and its subsidiaries have not been involved in many incidents over the past ten years, last year, fluorine contamination of the soil and groundwater at Showa Denko’s aluminium manufacturing facility in Kitakata was revealed. The fluorine levels well exceeded the new environmental criterion from the law revision of 2019 by up to 120 times more than regulated. The levels of cyanogen, arsenic and boron also exceeded the criteria in a few places within the facility.Download Controversies Showa Denko (PDF, 95 KB)