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Climate-Related Information Disclosures Based on TCFD Recommendations

Climate-Related Information Disclosures 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 accordance with the framework recommended by the Task Force on Climate-related Financial Disclosures (TCFD), we disclose information on governance, strategy and risk management, and on our metrics and targets.

Governance

To promote and manage action on climate change companywide, we have established the CSR and Environment Committee under the Risk Management Committee (Chairperson: Representative Director, 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 Department 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.

Climate change management system

Strategies

It is anticipated that a 4 ℃ rise in global atmospheric temperature will cause irreversible and serious environmental destruction. In light of the Paris Agreement, which aims to limit the rise in global temperatures to less than 1.5 ℃, the Group has analyzed the risks and opportunities it faces under three scenarios of rising temperatures, the 1.5 ℃ scenario, 2 ℃ scenario and 4 ℃ scenario.

1.5℃/2℃ 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℃.

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℃ scenario.
Information sources: IEA*1, WEO*2 2022 NZE Scenario*3 and IPCC*4 RCP*5 1.9, RCP 2.6, etc.

4℃ scenario

Under this scenario, action on climate change beyond the current status quo is not taken, and mean temperatures rise by around 4℃ 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℃ and 2℃ scenarios.
Information sources: IEA WEO2022 STEPS scenario*6 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 business risks and opportunities (for the TODA Group)

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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 Scope1+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 fine 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
	Market	Reduced demand for toner due to the restricted use of copying machines and printers	Medium to long term	Medium	Increase in toner market share by responding to increasingly diverse customer needs and energy saving measures Development 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℃)	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
	Acute	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
Opportunities	Products and services	Higher demand for plastic magnets, barium titanate and parts for wireless 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
	Market	Increased demand for CO₂ solid sorbent 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
	Market	Increasing demand for the supply of hydrogen and carbon nanotubes through the direct methane reforming process	Medium to long term	Medium

The TODA Group has created a climate transition plan to achieve both the continuation of business and net zero GHG emissions in 2050. This climate transition plan applies to our operations in Japan. We are planning to expand its scope to the entire TODA Group. We will also manage and update it in consideration of the advancement of decarbonization technologies, increase of related infrastructure, tightening of environmental regulations and other factors.

An overview of the plan up to 2050 is as follows.

Roadmap of Scope1+2 greenhouse gas emissions (overview)

The Sixth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) says that it is necessary to reduce CO₂ by 65% by 2035 from the 2019 level for the purpose of controlling the temperature rise to below 1.5℃. In light of this remark, the TODA Group preferentially carry out measures with high feasibility and with high cost-effectiveness. We have made the reduction of energy consumption through business restructuring and energy-saving initiatives. We will gradually work to change the energy sources used for boilers.

Specific measures until 2035 are as follows.

Roadmap for Scope1+2 greenhouse gas emissions (details)

Initiatives and costs for GHG reduction until 2035 (in Japan)

Overview of investments and initiatives until 2035 (in Japan)

Investment plan	Business transformation Further business restructuring
	Scope 1: Initial investment of approx. 1.3 billion yen Energy-saving initiatives (reduction of heat loss) Change in manufacturing processes (improvement in energy efficiency) Transition LPG for boilers Transition LNG for boilers Switch to hydrogen for boilers (partly)
	Scope2: Initial investment of approx. 0.1 billion yen Energy conservation measures (high-efficiency lighting) Procurement of power from renewable sources of energy from multiple sources
Funding plan	Using not only funds on hand but also positive impact financing and other sustainable financing

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

With a view toward achieving net zero greenhouse gas (GHG) emissions in 2050, we have set challenging fiscal 2030 goals for Scope1+2 GHG emissions, Scope1+2 GHG emissions per unit of sales and the use rate of renewable energy. The scope of these goals is our operations in Japan. We are planning to expand their scope to the entire TODA Group.

1. Scope1+2 GHG emissions: 22,000 t-CO₂ or less (a 75% reduction from the fiscal 2013 level)
2. GHG emissions per unit of sales: 1.3 t-CO₂/million yen or less (a 70% reduction from the fiscal 2013 level)
3. Use rate of renewable energy: At least 17%

GHG emissions results in fiscal 2024 (in Japan)

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Indicators	Results	FY2030 targets
Scope1+2+3	157,973 t-CO₂	-
Scope1+2	32,470 t-CO₂	22,000 t-CO₂ or less
Scope1	21,535 t-CO₂	-
Scope2(market-based)	10,935 t-CO₂	-
Scope3	125,502 t-CO₂	-
Scope1+2 emissions per unit of sales	1.9 t-CO₂/million yen	1.3 t-CO₂/million yen or less
Use rate of renewable energy	29%	17% or more

Scope1+2 emissions (in Japan)

Scope1+2 emissions per unit of sales (in Japan)

Scope3 emissions in fiscal 2024 (in Japan)

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Category	Items	t-CO₂	Calculated sites	Method for obtaining emission factor	Remarks
1	Purchased products and services	96,009	TODA	IDEA Ver.2.3	Expenses subject to calculation were at least the top 90% of procurement amounts
1	Purchased products and services	96,009	TOKYO SHIKIZAI INDUSTRY	IDEA Ver.2.3
2	Capital goods	1,713	TODA	Ministry of the Environment Database of Emissions Unit Values	-
3	Upstream fuel procured	8,788	TODA	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values	-
3	Upstream fuel procured	8,788	TOKYO SHIKIZAI INDUSTRY		-
4	Transportation and distribution (Upstream)	4,833	TODA	Ministry of the Environment Database of Emissions Unit Values	At least the top 90% by procurement volume was subject to calculation
4	Transportation and distribution (Upstream)	4,833	TOKYO SHIKIZAI INDUSTRY
5	Waste generated by operations	264	TODA	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values	Only production sites were subject to calculation.
5	Waste generated by operations	264	TOKYO SHIKIZAI INDUSTRY		Only production sites were subject to calculation.
6	Business travel	231	TODA	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values	-
7	Employee commute	215	TODA	Ministry of the Environment Database of Emissions Unit Values	Estimated based on the city classification, the number of employees and the number of working days
			TOKYO SHIKIZAI INDUSTRY
			Toda Fine Tech
8	Leased assets (Upstream)	Not applicable	-	-	-
9	Transportation and distribution (Downstream)	1,299	TODA	Ministry of the Environment Database of Emissions Unit Values	Estimated based on the emissions from business partners with high transaction volumes
10	Processing of sold products	Not applicable	-	-	-
11	Use of sold products	Not applicable	-	-	-
12	End-of-life treatment of sold products	12,150	TODA	IDEA Ver.2.3 Ministry of the Environment Database of Emissions Unit Values	-
12	End-of-life treatment of sold products	12,150	TOKYO SHIKIZAI INDUSTRY		-
13	Leased assets (Downstream)	Not applicable	-	-	-
14	Franchises	Not applicable	-	-	-
15	Investment	Not applicable	-	-	-
-	Other (arbitrary)	Not applicable	-	-	-
Total		125,502	-	-	-