Climate-Related InformationDisclosures Based on TCFD Recommendations

Expression of Support for the TCFD

The TODA KOGYO Group views climate change as a key management issue and we engage in measures to tackle global warming to create a sustainable economic society that enables future generations to live with peace of mind.
In July 2023, the Group declared its support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Governance

To promote and manage action on climate change Companywide, we have established the CSR and Environment Committee under the Risk Management Committee (Chairperson: President and CEO), and work through the committee to implement oversight and management of environmental matters for the Group in Japan.
The Board of Directors confirms the status of action on climate change through reports received from the Risk Management Committee, and makes decisions and supervises the development of the necessary systems and schemes. The general manager of the Corporate Planning Department serves as chairperson of the CSR and Environment Committee, whose members comprise managers and personnel from business sites across the Company.

Strategies

Mean global temperatures rising 4°C due to climate change would have a serious impact on society. In light of the Paris Agreement, which aims to limit the rise in global temperatures to less than 1.5°C, the Group has analyzed the risks and opportunities it faces under three scenarios of rising temperatures, the 1.5°C scenario, 2°C scenario and 4°C scenario.

1.5/2°C scenario

Under these scenarios, regulations and policies aimed at achieving carbon neutrality by 2050 are strengthened, around the world, action on climate change that exceeds the current status quo is implemented, and the rise in mean temperatures compared with pre-industrial levels is kept to within 1.5-2.0°C.

• Costs will be incurred to respond to regulations and policies, and transition risks such as rising prices of electricity from renewable energy will increase.
• Although the physical risks are also expected to increase, the impact will be minor compared with the 4°C scenario.
• Information sources: IEA1,WEO2 2022 NZE Scenario3 and IPCC4 RCP5 1.9, RCP 2.6, etc.

4°C scenario

Under this scenario, action on climate change beyond the current status quo is not taken, and mean temperatures rise by around 4°C compared with pre-industrial levels.

• Physical risks will increase, including greater damage due to increasingly severe abnormal weather events, and rising costs to deal with heat caused by higher air temperatures.
• Although transition risks are also expected to increase, their effects will be minor compared with the 1.5°C and 2°C scenarios.
• Information sources: IEA WEO2022 STEPS scenario6 and IPCC RCP 4.5, etc.

• IEA: International Energy Agency
• WEO: World Energy Outlook A report providing estimates on energy demand and technological development among other information
• NZE Scenario: A net-zero emissions scenario. A scenario in which developed nations achieve net-zero emissions by rapidly increasing clean energy policies and investments.
• IPCC: Intergovernmental Panel on Climate Change
• RCP: Representative Concentration Pathway. A representative pathway for radiative forcing
• STEPS Scenario: Existing government policy scenario. An energy system where only current policies are implemented and no new policies are introduced.

Major Risks

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Category	Type	Impact on our business activities	Time span	Evaluation	Measures
Transition risks(1.5℃/2℃)	Policies and legal restrictions	Higher tax burden due to carbon pricing (carbon tax, emissions trading, etc.)	Medium to long term	Medium	Reduction of Scope 1 and Scope 2 greenhouse gas emissions due to the promotion of energy saving and expanded use of renewable energies Use of internal carbon pricing in investment decisions
	Technology	Increased capital investment due to the switchover to low-carbonization equipment and low-carbon processes	Medium to long term	Medium	Reduced lifecycle costs due to product development with low-carbonization in mind Consideration of find particle synthesis technologies with high energy efficiency
	Market	Increased raw material and energy procurement costs	Medium to long term	Medium	Further loss reductions in manufacturing processes Appropriate reflection of increased procurement costs in sales prices
		Reduced demand for toner due to the restricted use of photocopiers and printers	Medium to long term	Medium	Increase in toner market share by responding to increasingly diverse customer needs and energy saving measures IDevelopment of applications for environmental materials utilizing functional pigment technologies
	Reputation	Loss of reputation among customers and investors in the case of insufficient efforts in response to climate change being recognized	Medium to long term	Medium	Promotion of greenhouse gas emission reductions Improved information disclosures
Physical risks (4°C)	Acute	Damage to buildings and equipment due to natural disasters	Medium to long term	Large	Improvements to BCP and implementation of drills Utilization of casualty insurance
		Reduced plant utilization rates due to supply chain disruptions	Medium to long term	Medium	BCP enhancements Development of multiple suppliers and transportation routes
	Chronic	Increased investments in coastal business site due to rising sea levels	Long-term	Large	Monitoring of information about rising sea levels

Key Opportunities

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Category	Type	mpact on our business activities	Time span	Evaluation	Measures
Opportunities	Products/Services	Higher demand for plastic magnets, barium titanate and components for contact-less power supplies due to the expansion of the EV market	Medium to long term	Large	Development of supply structures that meet market needs Expanded and enhanced R & D investments
		Increased demand for polyolefin heat insulating materials for agricultural use due to increased greenhouse cultivation* * For the purpose of protecting crops from natural disasters	Medium to long term	Medium
	Market	Increased demand for CO2 capture materials associated with expansion of the CCUS market	Medium to long term	Large	Development of business models utilizing open innovation Expanded and enhanced R & D investments Utilization of public support
		Increasing demand for the supply of hydrogen and carbon nanotubes through the direct methane reforming process	Medium to long term	Medium

Risk Management

The CSR and Environment Committee convenes monthly and implements its functions to oversee and manage environmental matters related to the Group in Japan, set annual targets for each business site, and manage progress through monthly activity reports from each business site. In addition, reports on climate change action are submitted to the Board of Directors twice a year through the Risk Management Committee.

Metrics and Targets

In June 2019, the Group formulated the TODA KOGYO Group Environmental Vision 2033, setting 2033 as the target achievement year to coincide with the Company's 100th anniversary. Under the vision we have declared specific numerical targets to be pursued as part of action on climate change.

GHG emissions for 2022 in Japan were 41,067t-CO₂ for Scope 1 + Scope 2 (a 54% reduction compared with FY2013 levels), achieving our goals at a faster pace than planned. In addition, starting in FY2022 we have also been calculating Scope 3 emissions, producing a result of 147,260 t-CO₂.
To achieve carbon neutrality by 2050 (achieve net zero GHG emissions overall), we have revised the target Scope 1 + Scope 2 emissions, GHG emissions based on net sales and renewable energy utilization laid out in Environmental Vision 2033, and set aggressive targets to be met by FY2030.

GHG emissions

t-CO₂

GHG emissions	FY2022[t-CO2]
Scope1＋2(In Japan)	41,067(54% reduction compared with FY2013 levels)
Scope3(In Japan)	147,260

FY2030 Targets

• 1. Scope 1 + Scope 2 GHG emissions Reduction to 22,000 t-CO₂(75% reduction compared with FY2013 levels)
• 2. GHG emissions based on net sales Down 70%(compared with 2013 levels)
• 3. Use of renewable energy At least 17%

GHG emissions(Scope 1 + Scope 2, in Japan)

GHG emissions based on net sales(Scope 1 + Scope 2, in Japan)

GHG emissions (Scope 3, in Japan, FY2022)

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Category	Items	t-CO2	Calculated sites	Method for obtaining emission factor	Remarks
1	Purchased products and services	104,939	TODA KOGYO	IDEA Ver.2.3	Expenses subject to calculation where at least the top 90% of procurement amounts
			Tokyo Shikizai Industry
2	Capital goods	2,214	TODA KOGYO	Ministry of the Environment Database of Emissions Unit Values Version 3.3	-
3	Upstream fuel procured	12,614	TODA KOGYO	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values Version 3.3	-
			Tokyo Shikizai Industry
4	Transportation and distribution(Upstream)	7,227	TODA KOGYO	Ministry of the Environment Database of Emissions Unit Values Version 3.3	At least the top 90% by procurement volume was subject to calculation.
			Onoda Plant
			Otake Plant
			Okayama Plant
			Tokyo Shikizai Industry
5	Waste generated by operations	380	Onoda Plant	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values Version 3.3	Only production sites were subject to calculation. (Hiroshima Head Office and Tokyo Office were excluded)
			Otake Plant
			Okayama Plant
			Tokyo Shikizai Industry
6	Business travel	148	TODA KOGYO	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values Version 3.3	-
7	Employee commute	321	TODA KOGYO	IDEA Ver.2.3	-
			Tokyo Shikizai Industry
			Toda Fine Tech
8	Leased assets (upstream)	Not applicable	-	-	-
9	Transportation and distribution(Downstream)	2,231	Onoda Plant	Ministry of the Environment Database of Emissions Unit Values Version 3.3	Expanded estimate based on emissions of business partners with a high volume of transactions
			Otake Plant
			Okayama Plant
10	Processing of sold products	Not applicable	-	-	-
11	Use of sold products	Not applicable	-	-	-
12	End-of-life treatment of sold products	17,185	TODA KOGYO	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values Version 3.3	-
			Tokyo Shikizai Industry
13	Leased assets (downstream)	Not applicable	-	-	-
14	Franchises	Not applicable	-	-	-
15	Investment	Not applicable	-	-	-
-	Other (arbitrary)	Not applicable	-	-	-
Total		147,260	-	-	-

Note: IDEA is a database that is able to quantify environmentally hazardous substances from all products and services in Japan including agricultural, forestry, marine and industrial products.

To meet our goals, From April 1, 2023 we switched the electric power used at our production sites in Japan (Otake Plant, Onoda Plant and Okayama Plant) entirely to CO₂-free electric power from solar power generation. In addition, we will introduce solar power generation (solar car ports) for internal consumption making use of parking facilities, and plan to use the electricity obtained for R & D activities.

Going forward, we will steadily implement the measures to combat global warning described above continuing to evaluate the risks and opportunities posed by climate change based on the scenario analyses recommended by the TCFD, while phasing in improvements to information disclosures.