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.

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 uses the 4℃ scenario and the below 1.5℃ scenario (consistent with the goals of the Paris Agreement targets) 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 less than 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.
We have confirmed the degree of impact on our business due to the introduction of carbon tax, increase in electricity prices, and changes in metal prices using the NZE, SDS, and STEPS scenarios published by the IEA. In terms of physical risk, we have also confirmed the degree of impact on the project in the event of flooding or storm surge based on the RCP 8.5 and RCP 2.6 scenarios and the Flood Control and Economic Research Manual.
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

Our approach to climate change related risks and opportunities

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

Indicators	Unit	FY2022 Results
CO2 emissions (before offsetting) (* 1, 2, 3)	t-CO2	44,281
CO2 emissions (after offsetting) (* 4)	t-CO2	41,506
CO2 emissions (per unit sales) (* 5)	t-CO2/100 million yen	26.0
CO2 emissions reduction rate (per unit sales, compared to FY2013) (* 5)	%	36.7

• *1 CO₂ emissions are the sum of Scope 1 and 2.
• *2 Scope 1 is the sum of major emissions of the Company, domestic subsidiaries, and overseas subsidiaries (plants only), using emission factors published on the Ministry of the Environment's website.
• *3 Scope 2 is the sum of the main emissions of the Company, domestic subsidiaries, and overseas subsidiaries (factories only), using the basic emission factor published on the website of the Ministry of Land, Infrastructure, Transport and Tourism.
  The same emission factor as that of the head office is used for our sales offices and overseas subsidiaries (plants).
• *4 We offset CO₂ emissions through the J-Credit System and Green Power Certificates.
• *5 CO₂ emissions (after offsetting) are used in the calculation.

(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 CO2 emissions 50% reduction (total, compared to FY2022)

Fiscal 2030 CO2 emissions 50% reduction (per unit sales, compared to FY2013)

Fiscal 2050 Virtually zero emissions

• *Starting in FY2023, we have set an additional CO2emissions reduction target of 50% reduction in FY2030 (total amount, compared to FY2022).

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 hydropower.

• ●Introduction of Solar Power Generation at Plants in Japan and Overseas

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  Headquarters/
  Komaki Plant

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  Kasugai Plant

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  Touhoku Plant

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  Shikoku Plant

• 

  China Plant

• 

  Thailand Plant

• ●Use of Green Power

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• 

  Inuyama Plant