Information Disclosure Based on TCFD Recommendations/ Efforts to address climate change｜Environment｜Sustainability

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Information Disclosure Based on TCFD Recommendations/ Efforts to address climate change

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.

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

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.

Principal risks		Emergence timeframe	Degree of Financial Impact
Policies and regulations	Stringent greenhouse gas emission reduction standards will be put in place, necessitating investments and technological improvements in order to reduce emissions.	Short to long term	-
Changes in markets/ customers	Demand for engine-related products will shrink due to the electrification of automobiles	Medium and long term	Small
Changes in markets/ customers	Widening adoption of next-generation solar panels will cause demand for products to shrink.	Long term	Small
Changes in the industry, for example in other companies in the same industry	Competition with competitors will intensify due to a review of the production system in consideration of the changing environment of the industry.	Medium and long term	Medium
Procurement	Disruption in the balance between supply and demand for raw materials (coke and pitch) may cause prices to rise substantially.	Short to long term	Medium
Procurement	The prices of procured products that comply with the introduction of a carbon tax and other environmental requirements may rise substantially.	Short to long term	Small
Manufacturing	Costs may increase due to factors such as stoppages in facility operations due to intensifying natural disasters.	Medium and long term	Small
Manufacturing	The cost of manufacturing process improvements required in order to comply with environmental requirements will rise.	Medium and long term	Medium

Principal opportunities		Emergence timeframe	Degree of Financial Impact
Policies and regulations	Demand for environmentrelated products such as renewable energy may rise.	Medium and long term	-
Changes in markets/ customers	Demand for graphite parts and materials, for example products related to power semiconductors, will rise as a result of the electrification of automobiles.	Medium and long term	Large
	Demand for power supply and earthing brushes increases due to an increase in demand for wind power generation.	Medium and long term	Small
	Demand for graphite for use in nuclear power applications may rise as CO₂ emissions are reduced.	Medium and long term	Small

[Financial Impact] Small: Less than 1 billion yen ; Medium: More than 1 billion yen to less than 10 billion yen ; Large: More than 10 billion yen

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.

Risk Management

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 Scope1, Scope2 and Scope3 were calculated in accordance with the GHG protocols.

FY2030 Targets
Greenhouse gas emissions per unit of sales (Scope1, Scope2 ) 30% reduction compared to FY2019 (Non-consolidated)

Greenhouse gas emissions chart (Scope1 + Scope2 : Non-consolidated)

Third party verification of greenhouse gas emissions.

We received third-party verification of greenhouse gas emissions covering 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 2023 to 31 December 2023

[GHG emissions]

Scope1(Consolidated) ： 35,594 t-CO2e

Scope2(Consolidated) ： location-based 84,302 t-CO2e,
market-based 62,013 t-CO2e

Scope3(Non-consolidated)： 83,689 t-CO2e

Breakdown（t-CO2e）

Category1： 53,716
Category2: 8,007
Category3: 16,239
Category4: 4,119
Category5: 817
Category6: 138
Category7: 410
Category13: 152
Category15: 90

Independent Assurance Report
(Scope1,2)(Consolidated)

Independent Assurance Report
(Scope3)(Non-consolidated)

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.

Efforts to address climate change

We recognize that climate change is a serious issue that will affect society in the future.
All of our employees strive to raise awareness of environmental maintenance by working to improve the efficiency and reduce energy use in manufacturing processes to reduce greenhouse gas emissions such as CO₂.
In addition, based on the basic concept of ISO14001, an international standard for environmental management, we comply with various environmental laws and regulations in each country, and thoroughly engage in resource conservation activities and management of environmental pollutants by reducing industrial waste.

Efforts to reduce greenhouse gas emissions

As global efforts to address the problem of climate change are accelerating, Toyo Tanso will further reinforce and accelerate its programs for greenhouse gas emissions, aiming to become carbon neutral in 2050.
Regarding Scope 1, Scope 2 and Scope 3, we are now carrying out calculations that conform to GHG protocols.

Primary past efforts

1.Introduction of energy-saving equipment
2.Introduction of energy sources with low CO₂ emission coefficients
3.Changing to baking furnaces with low energy consumption rates
4.Optimizing furnace operating times
5.Optimizing furnace loading efficiency

Future plan

1.Changing to renewable energy
2.Increasing solar power generation
3.Introduction of energy-saving equipment
4.Introduction of electric vehicles
5.Reducing energy consumption in manufacturing

Assessment results of the climate change category in the CDP

: We have earned a "B" in the climate change category in the CDP 2023 rating.
CDP is a UK-based international environmental non-governmental organization (NGO) founded in 2000.
The organization compiles and analyzes environmental disclosures collected from companies and municipalities around the world and rates their efforts on an eight-point scale (A, A-, B, B-, C, C-, D, D-).
Our current evaluation, the "B" score, is considered management levels, shows that we has been recognized as a company that is showing some evidence of managing its environmental impact and undertaking actions.