Response to the TCFD

We have supported the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). In addition, we are preparing for information disclosure with the disclosure framework (governance, strategy, risk management, indicators, and goals for climate-related risks and opportunities) recommended by TCFD.

TCFD

Governance

 We will set up a TCFD response project in order to support the Sustainability Promotion Committee. The project analyzes climate change response scenarios, risks, and opportunities, and then executes response measures. The results will be reported to the Sustainability Promotion Committee.
 Matters discussed by the committee will be reported to the Board of Directors for approval and instructions.
 The sustainability agenda reported to, approved by, or ordered by the Board of Directors will be communicated to relevant departments and group companies by the Sustainability Promotion Committee. Then, the departments and group companies will reflect the agenda in their management plans and operations. In addition, we will request that our suppliers cooperate with us, depending on the items included in the agenda.

Structure of Sustainability Promotion Committee

Structure of Sustainability Promotion Committee

Strategy

We have analyzed and assessed the impacts of climate change on our company by 2040, in line with the guidelines recommended by TCFD, utilizing a business environment scenario analysis method.

1)Overview of scenario analysis
Scope Companies subject to group consolidation
Planned period Present-2040 (For CO₂ reduction, 2050)
Scenarios 1. 1.5°C scenario
The global average temperature rise is kept below 1.5°C above pre-industrial levels

References:
IEA WEO2020 SDS scenario
SSP1-1.9,2.6, WG I report in the IPCC 6th Assessment Report
Other

2. 4°C scenario
The global average temperature rises about 4°C above pre-industrial levels

References:
IEA WEO2020 STEPS scenario
SSP2-4.5, SSP3-7.9, and SSP5-8.5, WG I report in the IPCC 6th Assessment Report
A-PLAT S8 Climate RCP8.5
Other

WEO: IEA's World Energy Outlook 2020
IPCC: Intergovernmental Panel on Climate Change
A-PLAT: Climate Change Adaptation Information Platform

2)Major risks and opportunities concerning climate change response

 To identify climate change risks and opportunities in a more specific manner, we have forecast changes in our business environments under the 1.5°C and 4°C scenarios and then identified possible risks and opportunities.
Of those, shown in the table below are the ones that can have major impacts on our management.

 Our scenario analysis indicated that some part of our operations can be affected by social and market changes associated with climate change, while there are also considerable business opportunities, such as expansion of renewable energy product markets.
 To achieve sustainable management and to grow, we need to act promptly, forecasting accurately how our business environments will change. We are currently studying possible measures.

Major risks Duration
Policies and
regulations
Strict greenhouse gas emission control regulations are introduced, requiring companies to invest in emission reduction and to improve their technologies. Short-to-long term
Market/customer changes Needs for engine products decrease due to the spread of EVs. Mid-to-long term
Product demand declines due to the spread of next-generation solar power generation panels. Long term
Changes in other
companies and industries
Competition intensifies due to eco-friendly transformation of production systems. Mid-to-long term
Procurement The demand-supply balance of raw materials (pitch coke) is disrupted and the prices soar. Short-to-long term
Carbon tax is introduced and the prices of green products soar. Short-to-long term
Manufacturing Catastrophic natural disasters occur more often, causing shutdowns and other events that can push up costs. Mid-to-long term
The costs of improving production processes for environmental protection increase. Mid-to-long term
Major opportunities Duration
Policies and regulations Demand for environmental products, such as renewable energies, increases. Mid-to-long term
Market/customer changes Demand for power semi-conductors and other graphite components increases due to a shift to EVs. Mid-to-long term
Demand for power supply and earthing brushes increases due to an increase in demand for wind power generation. Mid-to-long term
Along with reduction in CO₂ emissions, demand for graphite for nuclear power purposes increases. Mid-to-long term

Risk management

 Our group has the Risk & Compliance Committee (RC Committee) in place as the governing body for compliance with laws and regulations, our articles of incorporation, and corporate ethics, and to establish a risk management system. The committee discusses matters important in terms of risk and compliance, and then determines policies. Individual risks are controlled and addressed by responsible departments under the RC Committee's supervision.

 Climate risk items are managed by the Sustainability Promotion Committee and are assessed and reviewed by the RC Committee as part of company-wide risk management. The results are reported to the Board of Directors.

Metrics and targets

1)Metrics and targets for reducing greenhouse gas emissions

 Toyo Tanso is accelerating its programs for the reduction of greenhouse gas emissions, aiming to become carbon neutral by 2050.
 The greenhouse gas emissions in the past years in Scopes 1 and 2 were calculated in accordance with the GHG protocols. We are currently working to determine and disclose our greenhouse gas emissions in Scope 3. We are also working to set target levels so as to reduce greenhouse gas emissions.

Greenhouse gas emissions chart (Scope 1 + Scope 2: individual scope)

Greenhouse gas emissions chart (Scope 1 + Scope 2: individual scope)

Third party verification of greenhouse gas emissions.

We received third-party verification of greenhouse gas emissions covering the non-consolidated operations and activities of the company to further improve transparency in method of calculation and scope in data collection for key sustainability indicators.

Report on greenhouse gas emissions
[GHG emissions data]
period:1 January 2021 to 31 December 2021
[GHG emissions]
Scope 1 : 27,010 t-CO2e
Scope 2 : location-based 50,359 t-CO2e, market-based 62,099 t-CO2e

2)Metrics and targets necessary for risk and opportunity management

We will set metrics and targets for risk and business opportunity management after adopting response measures for each risk and opportunity.

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