RESPONDING TO CLIMATE CHANGE(DISCLOSURE IN LINE WITH THE TCFD RECOMMENDATIONS)

Supporting the Adoption and Implementation of the TCFD Recommendations

The Noritsu Koki Group believes responding to climate change should be one of its key corporate issues (materialities) and expressed its support for the TCFD (Task Force on Climate-related Financial Disclosures) recommendations in October, 2022. Guided by the recommendations, we, in the Group, will identify the potential business implications of climate-related risks and opportunities and reflect them in our business strategy. We continue to commit to information disclosure and ensuring the realisation of a sustainable society as well as the Group’s sustainable growth.

Governance

Role of the Board in Monitoring System

The Group’s Sustainability Promotion Committee, chaired by the Representative Director and CEO of Noritsu Koki, undertakes deliberations of important sustainability issues including climate change responses. They also provide reports and recommendations to the Board at least on a quarterly basis, thereby ensuring an appropriate monitoring system. The Board undertakes deliberations and makes decisions on reported important climate related risks and opportunities, as well as directing the responses and oversight of the progress.

Prior to the deliberations of the Sustainability Promotion Committee, important sustainability issues are first discussed in Sustainability Promotion Meetings, supported by the Company’s executive officer. In the meetings, they share performance results of climate change responses taken across the Group’s operations and track progress against the Group’s greenhouse gas (GHG) emissions reduction target.

Roles in Climate Change Responses

Roles	Committee Members
Board of Directors	・Discussing and making decisions on important climate-related risks and opportunities ・Providing direction and overseeing progress ・Overseeing the effectiveness of the Sustainability Promotion Committee’s risk management process and overall progress
Sustainability Promotion Committee	・Assessing and analysing climate-related risks and opportunities. Identifying important climate-related risks and opportunities. Developing policies and response measures to mitigate against these risks and exploit opportunities ・Reporting the above and presenting recommendations to the Board
Risk Management Committee	・Sharing information about these climate-related risks. Looking into the need for further actions as appropriate
Sustainability Promotion Meetings	・Discussing climate-related risks and opportunities ・Sharing performance results of climate change responses taken across the Group’s operations and tracking progress against the Group’s greenhouse gas (GHG) emissions reduction target

Risk Management

Risk Assessment, Identification and Management Process

The Sustainability Promotion Committee assesses, analyses and identifies climate-related risks and opportunities that may significantly impact on the Group and its business. The Committee develops policies and response measures to mitigate against these risks and exploit opportunities and presents reports and recommendations to the Board. The Board oversees the effectiveness of the risk management process and overall progress.

The Risk Management Committee manages overall risks across the entire Group. It shares information about the said risks with the Sustainability Promotion Committee and looks into the need for further actions as appropriate.

Strategy

Scenario Analyses

To strengthen the Group’s resilience, respond to risks and opportunities that may impact business and develop new strategies, we performed scenario analyses. We used the 1.5℃–2℃ scenario and the 4℃ scenario as presented by organizations such as the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA). In the scenario analyses we identified two types of risks: transition risks, which are related to tightening of policies and regulations with the transition to a decarbonized society, and physical risks, which are associated with the increasing severity of abnormal weather events and a rise in average temperatures. Based on quantitative analyses, we assessed the possible financial impact by 2030.

Noritsu Koki recognizes the potential for climate change issues to have a significant impact on the Group’s businesses, strategies and financial plans. We therefore regularly assess risks and opportunities and revise our strategies.

Our Responses to Climate-related Risks and Opportunities

Adopted Scenarios

1.5℃ scenario: IEA NZE (Net Zero Emissions by 2050)

2℃ scenario: IPCC Rcp2.6

4℃ scenario: IEA STEPS (Stated Policy Scenario)
IPCC SSP5-8.5

Metrics

Timeframe: Up to 2030

Financial impact: Small (less than ¥500 million) / Medium (from ¥500 million to less than ¥3 billion) / Large (¥3 billion or more)

Risks & Opportunities

Risk type			Scenario	Financial Impact	Group’s Response
TRANSITIONRISK	Policy and regulations	Risk	・Increase in costs related to GHG emissions in the Group’s manufacturing and business activities due to introduction of a carbon tax and emissions trading	Small	・Medium- to long-term reduction in GHG emissions (increase rate of renewable energy usage, introduce energy-saving equipment, implement energy-saving measures, streamline production process, promote technology innovation, etc.) ・Promotion of emissions reduction in cooperation with suppliers
		Risk	・Increase in electricity costs due to accelerated shift to renewable energy and resulting higher use of such energy	Small
		Risk	・Increase in investment costs resulting from requests to convert to highly energy efficient equipment driven by measures to promote energy saving	Small
	Technology	Risk	・Increase in transportation expenses as higher costs are passed through to prices with the progressive introduction of low-carbon technologies by logistics companies	Medium	・Promotion of modal shift, giving consideration to profitability
	Market	Risk	・Decline in business opportunities if environmental initiatives become necessary throughout the supply chain due to the promotion of ethical consumption, and if our efforts are seen as not proactive enough	Medium	・Supply of environmentally responsible products (reduction in resources used for products and packaging, shift to energy-saving products with longer lifespans, use of reusable and recyclable materials, creation of product recycling systems, etc.) ・Promotion of environmental initiatives in cooperation with suppliers
	Market	Opportunity	・Increase in business opportunities if environmental initiatives become necessary throughout the supply chain due to the promotion of ethical consumption, and if our efforts are seen as proactive	Medium
	Reputation	Opportunity	・Increase in stock price and decline in capital procurement costs as investor trust rises due to positive evaluation of our environmental consideration and BCP initiatives	Small	・Enhancement of climate change initiatives and disclosure, as well as dialogue
PHYSICALRISK	Acute	Risk	・Increase in costs incurred for responding to suspension of operations and logistics functions due to major impact on production sites and supply chains as increasingly severe abnormal weather causes an increase in flooding and storm surge damage at sites	Small	・Development of a business continuity plan (BCP) that includes the supply chain ・Diversify suppliers ・Relocation and decentralization of warehouses ・Stronger flood measures
PHYSICALRISK	Chronic	Risk	・Increase in refrigeration costs due to chronic temperature rise	Small	・Utilizing more energy-efficient air conditioning facilities

Note: For acute physical risks, we assessed domestic Group sites using hazard maps, flood control economic survey manuals and other tools. Under the 4℃ scenario, one site would be at risk for business suspension and asset losses due to disasters. Given the recurrence period, however, the annual impact is low. We have therefore classified the impact as “small.” Going forward, we will continue to evaluate the impact, including at contract manufacturer sites.

Metrics and Targets

To measure and manage the potential business impact of climate change, using Scope 1* and Scope 2* GHG emissions as our metrics, we have set a target of a 37% reduction by 2030 (compared with 2019). We are currently reviewing our targets to align them with the Science Based Targets initiative’s 1.5℃ scenario. In addition, in 2024 we will begin to calculate Scope 3* emissions and consider ways to reduce GHG emissions throughout our entire supply chain

Greenhouse gas (GHG) emissions

(Unit：t-CO2)

	Results					Targets
	FY2019	FY2020	FY2021	FY2022	FY2023	FY2030
Scope1・2	11,923	10,325	12,020	12,208	12,196	7,511

Note: Only energy-derived CO2 emissions are included in the calculation. Emissions for previous years have been revised due to a reevaluation of emissions coefficients and inclusion of gasoline usage in the calculation method. As emissions coefficients for overseas sites in 2023 have not been announced, 2022 emissions coefficients have been used.