Responding to Climate Change

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Sustainability
Environment
Responding to Climate Change

We recognize that responding to climate change issues is not only a risk which could jeopardize corporate sustainability, but also an important management issue that leads to an expansion of profit opportunities. In November 2022, we agreed with TCFD※1 and decided to disclose "Governance," "Strategy," "Risk Management," and "Indicators and Targets" based on a medium to long-term perspective towards 2030/2050, in line with the recommendations published by TCFD.

※１ TCFD refers to the Task Force on Climate-related Financial Disclosures, which was established by the Financial Stability Board (FSB) at the request of G20. TCFD recommends that companies disclose items related to climate change risks and opportunities.
TCFD Website：https://www.fsb-tcfd.org/

TCFD | TOYO Corporation

Governance

We have established the promotion of environmental conservation as one of our sustainability priorities, and our Sustainability Committee oversees initiatives related to climate change. Our Sustainability Committee is chaired by the President and CEO with an outside director (vice-chairperson) and managers of relevant divisions (committee members). The committee promotes our sustainability measures and monitors the progress of these measures to ensure continuous improvement.
The Executive Committee receives regular reports from the Sustainability Committee on the status of activities and plans, discusses and decides on important issues related to climate change, and monitors progress.
The Board of Directors receives regular reports on important issues determined by the Executive Committee and provides instructions and supervision.

Structure for Sustainability Promotion

Structure for Sustainability Promotion | TOYO Corporation

Strategy

After identifying our risks and opportunities for the impacts of climate change, we conducted our analyses on the possible impacts, reviewed our strategies in response to those scenarios, and verified our resilience.

The degree of financial impact on business is qualitatively assessed in three stages: large, medium, and small, as it is difficult to assess the business impact quantitatively at this point. While continuously analyzing scenarios to improve the accuracy of our financial impact analyses, we will strengthen our ability to respond to risks and opportunities associated with climate change and strive to raise the level of sustainability management.

Climate-related risks and opportunities, financial impact on our business

Classification		Term	Our main risks	Degree of impact	Major opportunities for us	Degree of impact
Transition	Policies and regulations	Medium	Increase in cost of products and services due to higher energy materials and freight costs after introduction of carbon tax	Medium	Growing demand for R&D to strengthen energy conservation and promote technological innovation throughout the supply chain	Small to medium
	Policies and regulations	Medium and long	Delay in product supply due to tightening of environmental regulations	Small		Small to medium
	Marketplace and technology trends	Short and medium	Decrease in demand for R&D for internal combustion engines due to the promotion of electrification	Medium	Growing demand for R&D related to the promotion of electrification	Large
		Short and medium	Decline in demand in the fossil fuel business due to changes in the energy mix	Small	Growing demand for the development of hydrogen-related and renewable energy markets	Medium to large
		Short and medium	Loss of business opportunities due to the inability to meet customer demands for climate change response	Small	Expanding demand for solutions that promote DX (Digital Transformation) that helps resolve climate change issues	Large
	Evaluation and reputation	Short and medium	Decline in corporate image due to insufficient efforts and information disclosure amid increasing environmental awareness among stakeholders	Medium	Improving corporate image by expanding environmentally conscious business and enhancing information disclosure	Medium
Physics	Chronic	Long	Damage to health and increase in electricity costs to cope with extremely hot weather due to an increase in the average temperature	Small	Expansion of the market for weather data collection and coutermeasures against flood and high waves Increase in demand for life science solutions	Small
	Acute	Long	Lower production due to supply chain damage and lower sales due to transportation delays	Medium to large
	Acute	Long	Increase in costs for the restoration of facilities due to natural disasters such as floods, and a decrease in sales due to a decline in business functions	Medium to large

Adopted scenario：

4 °C scenario：IPCC/RCP8.5、IEA
1.5/2°C scenario：IPCC/RCP2.6、IEA

Time frame definitions：
Short-term：less than 3 years、Medium-term：3 to 10 years、Long-term：10 to 30 years

Countermeasures for risks

Our main risks	Countermeasures
Increase in cost of products and services due to higher energy materials and transportation costs after the introduction of a carbon tax	Promotion of energy conservation through employee awareness-raising activities Expanding the use of environmentally-friendly vehicles and renewable energy Promoting suppliers, procurement methods, and transportation of environmentally-conscious products
Decrease in demand for R&D for internal combustion engines due to the promotion of electrification	Expanding solutions, in-house developed products and services that contribute to technological innovations in electrification
Decline in corporate image due to insufficient efforts and information disclosure amid increasing environmental awareness among stakeholders	Expanding solutions that contribute to resolving environmental issues, promoting environmental conservation, and strengthening information disclosure
Lower production due to supply chain damage and lower sales due to transportation delays Increase in costs for the restoration of facilities due to natural disasters such as floods, and a decrease in sales due to a decline in business functions	Building a flexible and stable supply system Identifying sites with high risk due to heavy rains, flooding, and storms using hazard maps, and strengthening disaster prevention measures to ensure the safety of employees and critical facilities

Risk Management

In order to respond to various changes in the external environment related to climate change, our Sustainability Committee quantitatively analyzes and evaluates the financial impact of risks and opportunities in three stages: large, medium, and small, and considers countermeasures. Risks and opportunities that have a large financial impact are reported to the Executive Committee and the Board of Directors, and appropriate measures are deliberated and decided from the perspective of company-wide risk management. In this way, we promote strategies to minimize risks and maximize opportunities. Going forward, we will continue to strengthen governance and risk management in climate change.

Indicators and Targets

We have set a target of reducing greenhouse gas emissions related to Scope 1 and 2 by 46% in fiscal 2030 compared to fiscal 2013. At the same time, we are aiming to achieve carbon neutral emissions by 2050 based on the “Green Growth Strategy Through Achieving Carbon Neutrality in 2050” formulated by the Japanese government.

Indicators and Targets | TOYO Corporation

Greenhouse Gas Emissions

For fiscal 2022 results, please refer to the Greenhouse Gas Emissions section of the environmental data.

Scope1 + 2 *Greenhouse-Gas Emissions Reduction Rate	Scope3 *Greenhouse-Gas Emissions Reduction Rate
FY 2030: 46% reduction compared to FY2013 FY 2050: Realization of carbon neutrality(virtually zero)	In order to set targets, we will work to refine our calculations in the future.

Notes
Scope 1： CO2 emissions from the use of fuels by the company itself
Scope 2： CO2 emissions from the use of electricity supplied by other companies
Scope 3： Indirect emissions other than Scope 1 and Scope 2 (emissions by other companies related to the company's activities)

Environmental
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Responding to Climate Change
Prevention of environmental pollution
Environmental Data
Businesses Contributing
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