Response to TCFD Recommendations

Response to TCFD Recommendations (Climate Change Initiatives)

Currently, damage from extreme weather events such as storms, floods, and droughts is increasing in many parts of the world. In addition, regulations and markets are likely to change significantly in order to transition to a decarbonized society in the future.Recognizing that the social and economic impacts of climate change are an important management issue that must be addressed in terms of sustainability, in June 2022 we announced our support for the TCFD (Task Force on Climate-related Financial Disclosures). In accordance with the TCFD recommendations, we will strive to proactively disclose information based on the disclosure framework of "Governance," "Strategy," "Risk Management," and "Metrics and Targets”. In addition, we will take concrete measures to address climate change and work on it.

1. Governance Structure - Sustainability Promotion Structure

We have established the Sustainability Committee as an advisory body to the Board of Directors in order to address environmental issues, including climate change, as one of the most important management issues and to promote it in an integrated manner with our management strategy. The Sustainability Committee, chaired by the President and Representative Director, confirms and deliberates on management issues related to sustainability, including environmental issues such as climate change.
In addition, risks and opportunities related to climate change are analyzed and countermeasure decisions are made by the Risk Management Committee. The Sustainability Committee and Risk Management Committee report their deliberations to the Board of Directors on a regular basis (once a year), and as necessary, on an ad hoc basis. The Board of Directors deliberates and decides on important matters regarding climate change-related risks and opportunities, directs actions to be taken, and supervises progress.

Committee Name Role Number of meetings
Board of Directors Deliberation, decision-making, and supervision of important matters related to climate change response 12 times/year
Sustainability Committee Review and deliberate on climate change response 2 times/year
Risk Management Committee Analyze climate change risks and opportunities and decide on responses 4 times/year

2. Strategy

We identify potential risks and opportunities associated with climate change throughout our supply chain and analyze and consider the impact on our business. The analysis is based on the 4℃ scenario and the below 1.5℃ scenario published by the IEA. We discuss the impact on the Company as of 2030 in each of these world views.

  • 4℃ Scenario
    A worldview in which the global average temperature rises an average of 4℃ by 2100 compared to the global average temperature around the time of the Industrial Revolution, and the severity of extreme weather events such as typhoons and heavy rainfall increases.
  • Less than 1.5℃ scenario
    A world in which temperature rise is controlled to 1.5℃ through carbon neutrality measures such as the introduction of a carbon tax, renewable energy policies, etc.

Analysis Results

We have identified possible risks and opportunities for each scenario. In the 4℃ scenario, the major risk is estimated to be an increase in response costs due to shutdown of operations and logistics functions as a result of more extreme weather events, such as an increase in typhoons and storm surges. On the other hand, under the 1.5℃ scenario, the introduction of a carbon tax and a sharp rise in the price of fossil fuel-derived electricity due to global decarbonization efforts are expected to pose a major risk of increased operating costs. In order to prepare for such an eventuality, we will quantitatively calculate the financial impact of possible items and consider specific countermeasures.
We have also identified many opportunities as well as risks. Increased demand for EV-related products in the wake of the development of a decarbonized society and the expansion of hydrogen-related business due to the spread of hydrogen technology are estimated to be major opportunities.

List of Risks and Opportunities Related to Climate Change

Evaluation Minor:Small financial impact Moderate :Medium financial impact Serious :Significant financial impact

Impacts of climate-related issues
(risks and opportunities)
Possible events Evaluation
4℃ Scenario Less than 1.5℃ scenario
Impacts of the transition to a decarbonized economy Risks Introduction of carbon tax and emissions trading ・Increase in business costs - Serious
Compliance with GHG emission regulations ・Increased costs for replacement of equipment and fixtures with high-efficiency machines - Serious
Plastics regulations ・Increased costs due to the establishment of a production system to comply with stricter de-plasticization regulations
・Changes in materials used in products will affect performance and costs
- Serious
Recycling regulations ・Decrease in sales of target products if businesses are required to pay recycling fees - Moderate
Renewable Energy Policy/Energy Saving Policy ・Increase in business costs due to higher renewable energy prices
・Increased costs due to upgrading company equipment to be energy-efficient
Minor Serious
Diffusion of renewable energy/energy saving technologies ・Decreased sales of pneumatic equipment due to preference for energy-efficient products - Moderate
Advancement of low-carbon technologies ・Decreased sales if the company is unable to respond to customers' rapid shift to electric equipment
・Increase in R&D costs to develop decarbonization technologies
Minor Serious
Changes in raw material costs ・Increase in procurement costs for iron, copper, lithium, aluminum, and resin due to the impact of a low-carbon society Minor Moderate
Opportunities Introduction of carbon tax and emissions trading ・Increase in sales of products that contribute to the environment such as CO₂ reduction Minor Serious
Compliance with GHG emission regulations ・Increase in sales of products with low CO₂ emissions in the manufacturing process Minor Serious
Plastics regulations ・Creation of new business opportunities by establishing technologies and promoting development of facilities for 3Rs, biomass packaging materials, paper blisters, and other plastic-free products Minor Moderate
Recycling regulations ・Expand business opportunities by developing recyclable products
・Create business opportunities by establishing a recycling mechanism for maintenance and resale.
・Creating a market for used (recycled) equipment will expand the equipment refurbishment business, increase demand for products with reduced environmental impact, and expand the service business.
・Increased sales due to preference for products that are easy to disassemble
- Serious
Renewable Energy Policy/Energy Saving Policy ・Increase in demand for services and business opportunities that lead to energy savings for customers, such as air leak diagnostics
・Increased new business opportunities in solar, hydro, and biomass power generation
Minor Serious
Diffusion of renewable energy/energy saving technologies ・Increased sales of equipment for solar cell manufacturing processes
・Increased sales of products with reduced environmental impact
・Increased sales of electric products
Minor Moderate
Advancement of low-carbon technologies ・Increase in sales of products for rechargeable battery manufacturing processes including Lithium-ion battery manufacturing machines due to the growing demand for hybrid and electric vehicles
・Increase in demand for hydrogen-related businesses due to the spread of FC (fuel cell) technology
・Expansion of business related to materials and processing for weight reduction and development of new suppliers
・Increase in demand for IoT-related equipment for production facilities in line with the progress of digital technology
・Expanding business opportunities to expand sales of electric equipment
・Increase in sales of equipment and solutions that enable condition monitoring, fault prediction, and remote control using communication and sensors in smart factories.
・Expand sales of semiconductor-related equipment due to the growing needs for semiconductors
Minor Serious
Physical impacts of climate change Risks Intensification of extreme weather events ・Shutdown of operations and logistics functions and increase in response costs
・Delayed delivery of procured materials and increased procurement (transportation) costs
・Damage to production sites and supply chains due to disasters and disruptions, resulting in production stoppages and impact on business continuity
・Increased BCP costs
Serious Minor
Rise in average temperature ・Increased energy costs due to increased air conditioning usage
・Decreased productivity due to heat stroke
Moderate Minor
Increase in infectious diseases ・Extreme impact on production sites and supply chains, resulting in shutdown of operations and logistics functions, and increased response costs
・Delayed delivery of procured materials and increased procurement (transportation) costs
・Performance affected by reduced productivity
Moderate Minor
Opportunities Intensification of extreme weather events ・Increased demand for factory automation equipment due to capital investment in relocation and reorganization of production bases, manufacturing that does not depend on human resources, and promotion of automation
・Expansion of maintenance business related to reconstruction from disasters
Serious Minor
Increase in infectious diseases ・Increase in sales of automated pharmaceutical packaging systems
・Expanded opportunities for adoption of unmanned, automation-oriented equipment, remote support, and IoT technology
Moderate Minor

3. Risk Management

Risk management structure

The Risk Management Committee has been established as an organization under the direct control of the Board of Directors, and reports the progress and results of its activities to the Board of Directors on a regular basis to promote risk management.

Risks and Opportunities identification process

With regard to various important issues for the Group, including CO₂ emission reductions, the Headquarters administration division, each business division, and Group companies identify risks and opportunities that may hinder the improvement of corporate value and the achievement of management targets.
Based on the extracted results, the Risk Management Committee, chaired by a director, identifies external factors (risks surrounding corporate management, risks related to random attacks, natural disasters and other contingent risks) and internal factors (risks related to management’s decision-making on business strategies and risks related to business execution). The risks and opportunities are then evaluated and identified based on the frequency of occurrence and the degree of impact when they occur. Countermeasures are considered for the identified risks and opportunities, and are reported to and shared with the Board of Directors.

In identifying risks and opportunities, we will focus on the material issues defined in the Materiality Matrix.
The Sustainability Committee confirms and reviews the progress of each materiality issue, and the Board of Directors deliberates on them.
By appropriately managing risks related to materiality, we are building, maintaining, and improving a company-wide risk management system.

4. Metrics and Targets

(1) Indicators

Currently, we use CO₂ emissions calculated under Scope 1 and 2 as indicators, but we are considering calculating them under Scope 3 in the future.

Index Unit FY2017 FY2018 FY2019 FY2020 FY2021
CO₂ emissions - Group Total t-CO2 39,345 39,421 36,614 36,805 38,753
  Japan *1 t-CO2 28,542 28,228 28,254 27,339 29,044
  Scope1 *3 t-CO2 4,550 4,507 4,301 4,441 4,407
Scope2 *3 t-CO2 24,354 23,130 24,946 23,183 25,230
Overseas *2 *4 t-CO2 10,803 11,193 8,360 9,465 9,709
Energy consumption - Group Total KL - - - - -
  Japan *1 KL 14,752 14,786 15,170 15,319 17,202
Overseas *2 KL - - - - -
Renewable energy consumption - Group Total 1000kwh - - 437 1,751 4,316
  Japan 1000kwh - 3 13 430 869
Overseas 1000kwh - - 424 1,321 3,447
  • *1 Excluding domestic group companies
  • *2 Total for overseas plants
  • *3 CO₂ emissions (Japan) and target of Scope differ, so totals do not match
  • *4 Used Japan emissions coefficient

(2) Targets and Initiatives

Medium- to Long-term targets (reducing CO₂ emissions)

To contribute to the realization of a decarbonized society, the CKD Group is working to reduce CO₂ emissions by setting medium- to Long-term reduction targets for CO₂ emissions by backcasting based on the target of virtually zero CO₂ emissions in 2050.

Fiscal 2030 Reduce CO2 emissions per unit of sales by 50%(compared to fiscal 2013)

Fiscal 2050 Achieve virtually zero CO2 emissions

We will promote the following initiatives as specific reduction measures:

  • Promote thorough improvements in energy conservation
  • Expand renewable energy (introduce solar power generation equipment, etc.)
  • Utilize renewable energy-derived electricity

Renewable energy initiatives

To achieve our CO₂ emission reduction targets, we have installed solar power generation systems at our plants in Japan and overseas. In addition, as a new initiative to reduce CO₂ emissions, we are using carbon offsets through the J-Credit system and "Green Power" derived from biomass power generation.

  • Introduction of Solar Power Generation at Plants in Japan and Overseas
  • Headquarters/
    Komaki Plant

  • Kasugai Plant

  • China Plant

  • Thailand Plant

  • Use of Green Power
  • Inuyama Plant