Action on Climate Change

Disclosure Based on TCFD Recommendations
Strategy
Governance
Risk Management
Indicators and Targets

Disclosure Based on TCFD Recommendations

In order to ensure we have a concrete understanding of the risks and opportunities that climate change will have on our business, we undertake scenario analysis.
In our scenario analysis, we assume two scenarios—a 1.5°C one and a 4°C one—set out below, identify the risks and opportunities that may impact our business by the year 2030, and assess the extent of this impact.

Strategy

In order to ensure we have a concrete understanding of the risks and opportunities that climate change will have on our business, we have undertaken scenario analysis. We assumed two scenarios: a 1.5°C scenario and a 4°C. Having identified the risks and opportunities that may impact our business by the year 2030 and assessed the extent of this impact, we then investigated measures to be taken.

We envisage that the main risks and opportunities for the Tsubakimoto Group in the 1.5°C scenario will come from changing customer needs as society as a whole transitions to decarbonization. We expect that there will be a reduction in demand for some Tsubakimoto products, such as those for internal combustion engines and fossil fuel-related products, while on the other hand, we also envisage that there will be factors that can be expected to have a positive effect on our business, such as transition-driven demand for EV-related products, renewable energy-related products, and logistics-related products. It is assumed that a carbon tax will be introduced (140 euros in 2030), in which case risk factors may include increased burden for energy purchasing (electricity, gasoline, etc.) and an increase in supply costs due to an increase in the cost of raw materials for the products we offer. We see the shift in customer needs as a business opportunity to increase the number of products we offer that support the transition to a decarbonized society. With regard to the introduction of a carbon tax, we are going to handle this through measures that include the use of renewable energy and the switching of company vehicles to EV.

For the 4°C scenario, we mainly assessed physical risks and identified the additional risk factors of impacts on our facilities, inventory, and other such assets as a result of increasingly strong typhoons, flooding caused by heavy rain, and other such weather events, impacts on supplies and sales due to factors such as the fragmenting of the supply chain, and decreased labor productivity due to a rise in average temperatures. We are going to cover the risks including the risk of damage from wind and rain through insurance or other such means. With regard to the impact on the supply chain, we will address this in cooperation with our business partners.

We believe that the resilience of the Group’s business against climate change risks is ensured under both scenarios. We will continue to address climate change through scenario analysis and refined evaluation of financial impact, and through the incorporation of actual risks, opportunities, and response measures in management plans.

Scenario analysis conditions and definitions

Scenario	Outlook	Reference scenario
1.5°C scenario	Strict policies are enacted toward the achievement of net-zero carbon emissions by 2025, a target which will achieve sustainability in society, and innovation in technology progresses. Temperature increase remains stable below 1.5°C at the end of the 21st century.	IPCC SSP1-1.9 IEA WEO2024 NZE scenario
4°C scenario	Currently enacted policies continue, and no additional measures are taken. Temperature increase exceeds 2°C at the end of the 21st century, and major impacts from climate change are felt.	IPCC SSP5-8.5 IEA WEO2024 STEP scenario

Impact
Large: Major impact on the Company Medium: Limited impact on the Company Small: Minimal impact on the Company

Impact Timing
Near term: Within 1-2 years Medium term: Within 5 years Long term: Within 20 years

Risks and opportunities identified through scenario analysis, and planned actions

Categories of opportunities & risks		Scenario	Issue	Specific impact on the Group	Impact	Impact Timing	Measures
Transition Risks	Policy/legislation	1.5°C	Introduction of carbon tax	Increase in heating and lighting expenses at offices and fuel costs for sales vehicles due to the introduction of a carbon tax	Small	Near- to medium term	Specific energy-saving measures (e.g. use of LED for office lighting, upgrading of devices to energy-saving devices) Procurement of electricity from renewable energy Switching of sales vehicles to HEV/BEV Reduced CO2 emissions through introduction of GreenEX (JR Tokai)
			Strengthening of obligation to report emissions	Increase in compliance costs, such as third-party certification costs for GHG emissions	Small	Near- to medium term	Introduction of a GHG calculation system for third-party certification Exploration into collaboration with suppliers in the supply chain toward a reduction in Scope 3 emissions
			Recycling regulations	Stricter plastic and other regulations increase the use of alternative materials for nonwoven fabrics and other such products, leading to higher production costs Rising costs related to the disposal of industrial waste, such as equipment removed and packaging materials required during installation work	Large	Medium-term	Exploration of raw materials for low-cost alternative non-woven fabrics Ongoing gathering of information concerning policy, regulations, and other such matters Identification of types of industrial waste Proposals to customers regarding recycling (removal facilities, etc.)
	Technology		Advancement of next-generation technologies	Missed sales opportunities caused by delays in the development of new products that contribute to decarbonization Loss of sales opportunities caused by the disappearance of needs for existing products	Small	Near- to medium term	Proactive offering of products that contribute to decarbonization of society Active rethinking of product portfolio Exploration, knowledge acquisition, and enhanced collaboration with manufacturers regarding new technologies that contribute to decarbonization Selection of products based on emission reduction volume and LCCO2
	Markets		Rising costs of raw materials	Increase in costs due to a shift to renewable raw materials	Large	Medium-term	Initiatives to fully minimize the impact of soaring costs of raw materials through engagement with suppliers Understanding regarding cost passing among client companies through engagement
	Reputation		Change in reputation among customers and investors	Loss of sales opportunities due to decarbonization efforts being rated as insufficient Insufficient initiatives and lack of disclosure result in decreased trust from stakeholders and lower external ratings	-	Medium-term	Proactive information disclosure of climate change-related actions Proactive information disclosure through external initiatives such as CDP and EcoVadis Formulation of a new medium-term management policy that sees the transition to a decarbonized society as a business opportunity
Physical Risks	Acute	4°C	Extreme weather (intensification of natural disasters)	Sales decline due to supply chain disruptions, stalled sales activities, and factory shutdowns or production cutbacks at customer sites caused by large-scale natural disasters	Small	Medium- to long-term	Engagement with suppliers concerning BCP Diversification of product procurement channels where possible Diversification of customer portfolio
	Acute		Extreme weather (intensification of natural disasters)	Inventory and other owned assets damaged by floods or other such disasters	Medium	Medium- to long-term	Regular evaluation of risks to bases Enhancement of disaster response (flood damage), etc., at bases Rethinking of scope of insurance coverage (some inventory assets are only covered for fire, and losses from water damage are not covered)
	Chronic		Rise in average temperature	Deterioration in worker efficiency due to deterioration of the working environment caused by rising temperatures	Medium	Medium- to long-term	Prevention of productivity loss through meticulous action in response to changes in the working environment Implementation of health management Supplementation through DX
Opportunities	Resource efficiency	1.5°C/ 4°C	Streamlining of logistics/production	Reduced energy usage through inventory base reorganization and logistics streamlining	Small	Medium-term	Review of inventory bases, streamlining of logistics
	Energy sources		Energy saving/decarbonization	Reduced energy costs through switching sales vehicles to EV or other eco-friendly cars	Small	Near- to medium term	Better fuel efficiency through promotion of eco-driving Upgrading of company vehicles to HEV, BEV Exploration into introduction of charging facilities (at Mikawa Anjo and Shikoku sales offices)
	Products and services		Development and growth of low-carbon emission products due to factors including changes in consumer and customer preferences	Expansion of components and equipment related to renewable energy, electric mobility, and hydrogen energy Expansion of logistics, railway infrastructure, food (agribusiness), and agriculture-related businesses Expansion of recycling and other environmental businesses	Large	Near- to medium term	Enhancement of GX-related business, its incorporation into medium-term management plan Discovery of low carbon emission products for import (Medium- to long-term) Exploration of collaborative robot and other products capable of increasing productivity under rising temperatures
	Markets		Change in customer and investor behavior	Decarbonization initiatives received well by customers, leading to increased sales opportunities Better assessment from investors and diversified procurement opportunities through decarbonization initiatives and proactive approach in the environment business	-	Medium-term	Proactive information disclosure of climate change-related actions Proactive information disclosure through external initiatives such as CDP and EcoVadis Formulation of a new medium-term management policy that sees the transition to a decarbonized society as a business opportunity

Example of calculation of financial impact

Scenario	Assumptions	Financial impact
1.5°C scenario	Carbon pricing in 2030: 140 USD/tCO2 (Source: “World Energy Outlook 2024” by IEA)	Cost of approximately 15 million yen
4°C scenario	Labor productivity decline due to heat stress in 2030: 1.8% (Source: “Climate Impact Explorer” by Climate Analytics)	Increase in personnel expenses of approximately 100 million yen

Organizational strategy resilience taking into account different climate-related scenarios that include scenarios of 2°C or lower

With the aforementioned actions, we believe that the resilience of the Group’s business against climate change risks is ensured under both the 1.5°C and 4°C scenarios. We will continue to address climate change through scenario analysis and refined evaluation of financial impact, and through the incorporation of actual risks, opportunities, and response measures in management plans.

Transition Plan/Roadmap/Action Plan for Decarbonization

Current

2050

Target	50% reduction in GHG emissions by 2030	Carbon neutrality by 2050
GHG emission reduction	Initiatives in offices Specific energy-saving measures (use of LED for office lighting, upgrading of devices to energy-saving devices) Introduction of electricity from renewable energy
	Initiatives through company vehicles Better fuel efficiency through promotion of eco-driving Upgrade of company vehicles to HEV and BEV, exploration of introduction of charging facilities (at Mikawa Anjo and Shikoku sales offices) Use of HEV/BEV for company vehicles (and rental cars)
		Initiatives in the supply chain Reduced CO2 emissions through introduction of GreenEX (JR Tokai) Exploration into collaboration with suppliers in the supply chain toward a reduction in Scope 3 emissions [Medium- to long-term] Review of inventory bases, streamlining of logistics and use of green logistics Initiatives to minimize the impact of carbon pricing through enhanced engagement with suppliers and customers
Effective use of resources	Initiatives toward a circular economy Ongoing gathering of information concerning policy, regulations, and other such matters Identification of types of industrial waste, and initiatives toward reduction Proposals to customers regarding recycling (removal facilities, etc.) Exploration of raw materials for low-cost alternative non-woven fabrics
Business transition	Initiatives toward sustainability and decarbonized products Proactive offering of products that contribute to decarbonization of society, enhancement of sales structure Active rethinking of product portfolio Incorporation into medium-term management plan	Enhancement of GX-related business (allocation of capital and human resources) Exploration, knowledge acquisition, and enhanced collaboration with manufacturers regarding new technologies that contribute to decarbonization Selection of products based on emission reduction volume and LCCO2 Discovery of low carbon emission products for import (Medium- to long-term) Exploration of collaborative robot and other products capable of increasing productivity under rising temperatures
Market appraisal	Disclosure of sustainability information Proactive information disclosure of climate change-related actions Proactive information disclosure through external initiatives such as CDP and EcoVadis Formulation of a new medium-term management policy that sees the transition to a decarbonized society as a business opportunity Introduction of a GHG calculation system for third-party certification
Adapting to climate change	Continuous risk assessment Regular evaluation of risks to bases, enhancement of disaster response (flood damage), review of scope of insurance coverage	Engagement with suppliers concerning BCP, procurement channel diversification Diversification of customer portfolio
Adapting to climate change	Creation of a comfortable working environment Continuous implementation of health management Prevention of productivity loss through meticulous action in response to changes in the working environment	Better production efficiency through DX Offsetting cost increases caused by declining labor productivity through a shift to high-added value products (and services)

Governance

Sustainability issues, including climate change, are discussed by the Sustainability Promotion Committee, and important matters are escalated to the Board of Directors after first being examined by the Board of Corporate Management. Risks and opportunities related to climate change are identified, analyzed, and assessed on the basis of scenario analysis.
(See sustainability governance)

Risk Management

In the Group, Sustainability Promotion Execution Teams take the lead in identifying and assessing sustainability-related risks and analyzing opportunities. Among sustainability-related risks and opportunities, the risks and opportunities related to climate change are identified, analyzed, and assessed on the basis of scenario analysis. Important risks and opportunities that have been identified and assessed are reported by the Sustainability Promotion Committee to the Board of Directors and the Board of Corporate Management as required, ensuring information on risks and opportunities is shared. At the same time, appropriate measures against risks are considered, and opportunities are incorporated, as necessary, into management strategies and issues to be addressed. Specifically, among sustainability-related risks, the risks related to management strategy and business operations are deliberated on by the Board of Corporate Management and the Board of Directors as necessary. Cooperation with the Risk Management Committee will be requested as and when required, all the while efforts are made to avoid the materialization of such risk events and consideration is given to measures to be taken if they do materialize. The Sustainability Promotion Committee also takes the lead with regard to opportunities and supports the initiatives of each business division. Regarding opportunities related to climate change, we are working to expand sales opportunities by developing new products, such as those related to decarbonization, that meet customer needs.

Indicators and Targets

The Group uses its GHG emissions (Scope 1 and Scope 2 emissions at all domestic bases of the Group) as metrics for assessing risks and opportunities related to climate change. The trend of the Group’s GHG emissions is as follows, and while fiscal 2024 saw the achievement of a 25.8% reduction compared to fiscal 2013, emissions have been in an upward trend since fiscal 2023 due to an increase in activities at each base. We aim to reduce the Group’s GHG emissions by 50% from the fiscal 2013 level by fiscal 2030 and to achieve carbon neutrality by 2050 through various decarbonization initiatives such as the use of renewable energy.
Since fiscal 2023, we have calculated and monitored emissions in our supply chain (Scope 3) in addition to our own emissions (Scope 1 and Scope 2). While it was regrettable that emissions rose in fiscal 2024 due to factors that include the completion of large-scale facility construction and equipment installation work, we will continue to improve the accuracy of Scope 3 calculations and consider Scope 3 reduction targets.

(GHG emissions: Scopes 1 and 2 reduction targets and actual results)

	Emissions (t-CO2)			Reduction rate (%)
		Scope 1 (Note 1)	Scope 2 (Note 2)	Reduction rate (%)
Fiscal 2013 (actual)	1,293	710	583	-
Fiscal 2021 (actual)	968	513	456	25.1
Fiscal 2022 (actual)	928	533	395	28.2
Fiscal 2023 (actual)	939	537	402	26.9
Fiscal 2024 (actual)	960	562	398	25.8

Scope 1 is defined as the direct emissions of greenhouse gases emitted by the Group itself. Therefore, it is calculated from the fuel consumption (gasoline, diesel oil, heavy oil, city gas, LPG) at all domestic bases of the Group.

Scope 2 is defined as the indirect emissions associated with the use of electricity, heat, and steam supplied by other companies. Therefore, it is calculated from the electricity consumption at all domestic bases of the Group.

(GHG emissions: Scope 3 actual results)

	Category	Emissions (t-CO2)
	Category	Fiscal 2023	Fiscal 2024
Scope 3 (Note 3)	1. Purchased goods & services	531,315	570,580
	2. Capital goods	1,953	2,070
	3. Fuel- and energy-related activities (not included in Scope 1 or Scope 2)	200	204
	4. Upstream transportation & distribution	637	873
	5. Waste generated in operations	265	305
	6. Business travel	1,811	1,603
	7. Employee commuting	251	276
	11. Use of sold products	217,220	294,244
	Total	753,651	870,155

Scope 3 is defined as emissions from other companies in the supply chain other than Scope 1 and Scope 2. Therefore, the emissions from other companies resulting from the activities of the Group (including overseas) are calculated by category.

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