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 against climate related risks and opportunities that may impact on business and looking into a new strategy, we performed scenario analyses. We used the “below 2℃ scenario (partly below 1.5℃)” and the “4℃ scenario”, published by institutions such as The Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA). With the quantitative analyses, we assessed the possible financial impact by 2030.

In the below 2℃ scenario, it is assumed that intensified policies and regulations targeting the transition to a zero carbon society could increase and generate response costs (transition risks).

In the 4℃ scenario, it is assumed that the effects of climate change such as increased severity and frequency of extreme weather events or a rise of average temperatures could increase and generate response costs (physical risks).

Our Responses to Climate-related Risks and Opportunities

Adopted Scenarios

Below 2℃ scenario: IPCC Rcp2.6, IEA SDS (partly IEA NZE)

4℃ scenario: IPCC Rcp8.5, IEA STEPS

Metrics

Timescale: Short Term (by 2023) / Medium Term (by 2025) / Long Term (2025 onwards)

Financial Impact: Small (less than 500 million yen) / Medium (from 500 million yen to less than 2,000 million yen) / Large (2,000 million yen or more)

Transition Risks and Opportunities
(the below 2℃ scenario)

Categories			Timescale	Risks ・ Opportunities	Scenarios	Financial Impact	Responses
TRANSITIONRISKS	Policy and Legal	Pricing of carbon (carbon tax, emissions trading)	Medium to Long Term	Risk	・Increased costs due to introduced carbon tax and emissions trading	Small	・Setting out a target of greenhouse gas emissions reduction, development of an emissions reduction programme ・Selection of a building with electricity from renewable energy sources ・Swich to more energy-efficient facilities
		Renewable energy policies	Medium to Long Term	Risk	・Increased electricity costs resulting from accelerated shift to renewable energy and thereby higher share of renewables in electricity	Small	・Reduced electricity usage in the manufacturing process resulting from simplifying product designs ・Promotion of thorough efforts in energy saving activities
		Recycling regulations	Medium to Long Term	Opportunity	・Increased sales opportunities due to the development of products made from recycled material	Medium	・Development of new products made from recycled material
	Market and Reputation	Changing customer behaviour and shifts in consumer preferences	Medium to Long Term	Risk	・Reduced sales opportunities resulting from the perception of inadequate efforts for the environment	Medium	・Extensive climate change responses, satisfactory climate change disclosures and dialogue ・Encouraging suppliers to consider the environment ・Expanded sales destinations of components for electric cars and bicycles ・Promotion of new environmentally-friendly product innovation, development of a medium-to-long term plan (e.g., resource- saving products and packaging, energy- saving products, use of recycled material) ・Implementation of product recycling programmes
	Market and Reputation		Short to Long Term	Opportunity	・Increased demand for components due to increased users of electric cars and bicycles ・Increased value of products and sales opportunities resulting from developing environmentally- friendly products	Medium

Physical Risks and Opportunities
(the 4℃ scenario)

Categories			Timescale	Risks ・ Opportunities	Scenarios	Financial Impact	Responses
PHYSICALRISKS	Acute	Increased severity and frequency of extreme weather events (such as typhoons, heavy rainfall, landslides and storm surge）	Short to Long Term	Risk	・Failure in operations and distribution and increased operating and capital costs, resulting from serious damage to the manufacturing hub and supply chain caused by natural disasters (e.g., typhoons, floods)	Large	・Development of the Business Continuity Plan (BCP) including supply chain ・Decentralisation of suppliers ・Stronger flood measures
	Chronic	Rising mean temperatures and changes in precipitation patterns	Short to Long Term	Risk	・Decreased demand for outdoor products and services due to reduced consumers’ outdoor opportunities resulting from temperature rise and more rainy days ・Increased cooling cost during summer and loss of labour productivity due to temperature rise	Small	・Monitoring climate change and consumer trends and utilising such data in production planning and product development ・Use of more energy efficient air conditioning facilities ・Temperature control of air conditioning suited to climate change ・Development of more durable, water-resistant and heat-resistant products
	Chronic		Short to Long Term	Opportunity	・Increased demand for indoor and virtual products and services resulting from limited outdoor activities due to temperature rise and more rainy days ・Increased additional value and sales opportunities brought by improved product durability	Small

Metrics and Targets

To measure and manage the potential business impacts that climate change brings, using Scope 1* and Scope 2* greenhouse gas (GHG) emissions as our metrics, we have set a target of 37% reduction by FY 2030 (compared to FY 2019).

In addition, we are currently calculating Scope3* greenhouse gas (GHG) emissions and will work on the reduction 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

* Emissions from previous years have been revised due to a review of emission factors and adding use of gasoline into calculation
* 2022 emission factors are used for oversea sites as 2023 emission factors are not yet published

Scope1 :

Direct emissions from the company’s factories, offices, vehicles, etc.

Scope2 :

Indirect energy-derived emissions from electric power and other energy consumed by the company

Scope3 :

Indirect emissions other than Scope1 and Scope2 (Emissions by others related to the company’s activities)