Information Disclosure Based on TCFD Recommendations

first

In May 2023, the Tenma Group announced its endorsement of the TCFD (Task Force on Climate-related Financial Disclosures) recommendations, and based on the TCFD recommendations, established governance, strategy, risk management, and indicators. We are working to disclose information related to four items:The Tenma Group has set “mitigation and adaptation to climate change” as one of its materialities (important issues), and is striving to strengthen its response to climate change. To achieve both, we will strategically promote sustainability activities throughout the Group.

*TCFD (Task Force on Climate-related Financial Disclosures)
It was established by the Financial Stability Board (FSB) in 2015 at the request of the G20.Companies are encouraged to disclose information on "governance," "strategy," "risk management," and "metrics and targets" related to climate change-related risks and opportunities. (TCFD website:https://www.fsb-tcfd.org/

Governance

【Oversight system of the Board of Directors】

The Tenma Group recognizes that sustainability issues, including climate change, are important management issues, and in order to address these issues, we have established the Sustainability Promotion Office and the Sustainability Promotion Committee as an organization that reports directly to the President and Representative Director.

The Sustainability Promotion Office works with related departments to lead the calculation of greenhouse gas emissions and climate change scenario analysis. Formulation and progress management of action policies for identified and identified materiality, deliberations on matters related to information disclosure related to sustainability, reporting to the Board of Directors, and reporting to the Board of Directors on the activities and progress of this committee We have a system to reportIn addition, in order to discuss specific initiatives for materiality and promote sustainability activities, working groups are set up directly under the committee as necessary, and the entire group works together.

The Board of Directors receives reports and proposals from the Sustainability Promotion Committee as appropriate, discusses and makes resolutions, and oversees overall initiatives related to sustainability issues, including climate change.

Governance system chart for climate change
気候変動に係るガバナンス体制図

【Role of management】

The President and Representative Director serves as chairman of the Board of Directors, directs and supervises sustainable management, including formulating management plans and materiality, including responses to climate change, and has the authority to appoint the chairman of the Sustainability Promotion Committee. and has ultimate responsibility for climate-related issues.

strategy

Scenario analysis is conducted on climate-related risks and opportunities to assess the resilience of Tenma Group's business strategies.

【Scenario analysis process】

We use the following process to identify and assess climate-related risks and opportunities, and consider countermeasures.

Identification of risks and opportunities
Extract a wide range of climate-related risks and opportunities, and identify the most important risks and opportunities based on the magnitude of the business impact of the risks and opportunities.
Scenario creation
Obtain objective future information on parameters related to risk/opportunity items and create scenarios
Measuring financial impact
Measure the financial impact in fiscal 2030 of highly material risks and opportunities based on the scenarios created
Examination of countermeasures
Based on the measured financial impact, consider countermeasures aimed at reducing risks and seizing opportunities

[Scenario overview]

Based on reports based on scientific knowledge such as the IEA and international trends such as the Paris Agreement, we have selected a 1.5°C scenario for transitioning to a low-carbon society and a 4°C scenario for advancing global warming.

scenario Overview Main References Referenced
1.5 ℃
scenario

In order to achieve net zero greenhouse gas emissions by 2050, decarbonization policies such as carbon taxes, emissions trading, and plastic regulations will be strengthened.

Along with this, it is expected that there will be requests for efforts to reduce greenhouse gas emissions, a shift from virgin plastics to recycled and bioplastics, and an increase in demand for low-carbon products.

Since the temperature rise will be suppressed, it is assumed that the physical impact will not be large.

  • IEA (International Energy Agency) WEO NZE scenario
  • SDS scenario
  • IPCC (Intergovernmental Panel on Climate Change) RCP1.9
  • OECD (Organization for Economic Co-operation and Development) "Global Plastics Outlook POLICY SCENARIOS To 2060" etc.
4 ℃
scenario

Reliance on fossil fuels has fueled economic development, inadequate climate change policies, and slow progress in decarbonization technologies.

On the other hand, as the temperature rises, the need for air conditioning equipment and measures against heatstroke will increase, and it is expected that weather disasters such as floods will become more severe and physical damage will expand.

  • IEA WEO STEPS scenario
  • IEA "The Future of Cooling"
  • IPCC RCP8.5
  • WRI Aqueduct Floods
  • Ministry of Land, Infrastructure, Transport and Tourism hazard map, etc.

[Important risks/opportunities, financial impacts and countermeasures identified]

financial impact Small: Less than 1 million yen Medium: 1 million yen to less than 10 billion yen Large: 10 billion yen or more
Timeline Short term: 0 to less than 3 years Medium term: 3 to less than 10 years Long term: 10-30 years

1.5℃ scenario

Sort Climate change
driver
Assumption Impact on business
(potential financial impact)
Risk/Opportunity Timeline Finance
イ ン パ ク ト
counter-measure
policy·
Laws and regulations
Introduction of carbon tax/emissions trading system Creates a burden of carbon emissions Increase in procurement costs due to pass-on of carbon tax, etc. (Increase in procurement costs) risk medium to long L
  • Increase procurement of recycled/bioplastics
  • Research on the use of bioplastics
  • Reducing the use of raw materials derived from petrochemicals
  • Understanding the status of suppliers' decarbonization efforts and strengthening cooperation
Increase in logistics costs due to pass-on of carbon tax, etc. (Increase in logistics costs) risk medium to long
  • Logistics efficiency
  • Grasping the status of initiatives for decarbonization by logistics companies and strengthening cooperation
Scope 1,2 and 1,2 bear the burden of carbon emissions (increase in costs such as carbon taxes related to Scope XNUMX and XNUMX) risk medium to long L
  • Expansion of introduction of renewable energy power generation equipment
  • Expand introduction of high-efficiency/energy-saving equipment
  • Building a highly efficient production system
Scope 1,2 and 1,2 reduction will reduce future carbon emission burden (Cost reduction such as carbon tax related to Scope XNUMX and XNUMX) opportunity medium to long
Introduction of plastic regulations Burden of virgin plastic tax will be incurred The price of petrochemical-derived plastics, a major raw material, will rise (increase in procurement costs) risk medium to long L
  • Increase procurement of recycled/bioplastics
  • Research on the use of bioplastics
  • Reducing the use of raw materials derived from petrochemicals
  • Promoting the use of recycled/bioplastics in collaboration with suppliers
Development of low-carbon products enables the use of cheaper raw materials than petrochemical-derived plastics (reduction of procurement costs) opportunity medium to long L
Use rate of recycled plastics and bioplastics is set Necessity to use a certain percentage of recycled plastics and bioplastics (increase in procurement costs) risk medium to long L
Market material price increase Prices will rise as demand for recycled plastics and bioplastics increases due to the development of a low-carbon, recycling-oriented society. The price of recycled plastics and bioplastics, which are raw materials, will rise (increase in procurement costs) risk medium to long L
  • Reducing the amount of raw materials used by reducing weight
  • Development of high value-added products
Increasing customer awareness of low-carbon and recycling-oriented societies Customers demand the use of low-carbon energy and the achievement of carbon neutrality It will be necessary to introduce low-carbon energy and achieve carbon neutrality (increase in costs for measures aimed at carbon neutrality) risk medium to long
  • Expansion of introduction of renewable energy power generation equipment
  • Expand introduction of high-efficiency/energy-saving equipment
  • Building a highly efficient production system
  • Setting goals for carbon neutrality in 2050
Increasing customer preference for low-carbon products Loss of sales opportunities for products using petrochemical-derived plastics due to an increase in the number of customers who prefer low-carbon products (decrease in sales of petrochemical-derived plastic products) risk medium to long L
  • Development and sales of products using recycled/bioplastics
  • Research on the use of bioplastics
Sales opportunities for low-carbon products using recycled plastics and bioplastics will increase (increase in sales of low-carbon products) opportunity medium to long L
Growing demand for 3R initiatives for plastic products Costs related to the plastic circulation scheme will increase (increase in collection and recycling costs) risk medium to long L
  • Building a recycling chain
  • Expand sales of recycled products
Building a plastic recycling scheme will increase sales opportunities for recycled products (increase sales of recycled products). opportunity medium to long L
retail electricity
price increase
Retail electricity prices will rise as electric power companies shift to power generation based on low-carbon energy (renewable energy, CCS, etc.) The price of electricity purchased by suppliers rises (increase in procurement costs) risk medium to long L
  • Understanding the status of suppliers' decarbonization efforts and strengthening cooperation
Electricity bills purchased by our company rise (increase in electricity costs) risk medium to long
  • Expansion of introduction of renewable energy power generation equipment
  • Expand introduction of high-efficiency/energy-saving equipment
  • Building a highly efficient production system
Reduction in electricity bills through the introduction of renewable energy and energy-saving equipment (decrease in electricity costs) opportunity medium to long

4℃ scenario

Sort Climate change
driver
Assumption Impact on business
(potential financial impact)
Risk/Opportunity Timeline Finance
イ ン パ ク ト
counter-measure
physical
(acute)
Intensification of weather disasters (floods, heavy rains, typhoons, etc.) Weather disaster disrupts supply chain Delivery of materials and parts is delayed due to suppliers being affected by weather disasters (losses due to suspension of operations) risk short to long Small
  • Strengthening supply chain management
  • Purchasing from multiple companies and consideration of alternatives
Due to weather disasters, distribution networks are cut off and shipments are suspended (decrease in sales due to shipment suspension) risk short to long
  • Consider decentralization of production bases/external warehouses
  • Optimizing transportation distance
Our base is damaged by a weather disaster Damage to inventory assets and fixed assets due to damage from weather disasters (disaster loss of inventory assets and fixed assets) risk short to long L
  • Consider decentralization of production bases/external warehouses
  • Strengthen proactive response by continuously reviewing BCP
  • Consider purchasing non-life insurance
  • Assessment of weather disaster risk when establishing new production bases or relocating production bases
Suspension of operations due to damage from weather disasters (loss due to suspension of operations) risk short to long
Customers are affected by weather disasters Suspension of operations due to delay or suspension of delivery of our products due to weather disasters at our delivery destinations (losses due to suspension of operations) risk short to long
  • Development of a system that can respond to flexible production adjustments
  • Expansion of customer base
  • Strengthening cooperation with customers in preparation for emergencies
Importance of BCP increases due to intensification of weather disasters BCP measures need to be strengthened and reviewed (increase in BCP measures costs) risk short to long
  • Minimize damage by continuously reviewing BCP and strengthening proactive measures
physical
(chronic)
average temperature rise Increased need for air conditioning equipment to cope with rising temperatures Increase in investment in air-conditioning equipment and costs due to air-conditioning operation at our bases (increase in air-conditioning operation costs and capital investment costs) risk short to long
  • Improving building insulation performance
  • Reduction of power consumption by energy saving
  • Improvement of work environment through automation with robots, etc.
  • Improving work efficiency by promoting DX
Sales opportunities related to air conditioners will increase (Sales increase due to increased sales opportunities) opportunity medium to long
  • Development of a production/sales system that responds flexibly and quickly to demand trends
  • Consider expanding to areas with high growth rate of demand for air conditioners
Increased risk of heat stroke, etc. Increased costs for heat stroke measures in outdoor work (Increase in heat stroke measures costs) risk short to long Small
  • Improving the outdoor working environment
  • Promotion of measures against heatstroke such as hydration/salt replenishment
  • Improvement of work environment through automation with robots, etc.
Warmer temperatures will increase tropical infectious diseases Suspension of operations due to epidemic of infectious disease (loss due to suspension of operations) risk medium to long L
  • Minimize damage through continuous review of BCP
  • Promoting vaccination

[Results of scenario analysis]

As for the impact on business under the 1.5°C scenario, efforts aimed at achieving carbon neutrality will progress, and policies aimed at decarbonization such as carbon taxes, emissions trading, and plastic regulations will be strengthened. While operating costs such as electricity are expected to increase, sales opportunities for eco-friendly low-carbon products are expected to increase.

As for the impact on business in the 4°C scenario, we anticipate an increase in investment in air-conditioning equipment, etc. to cope with rising temperatures and costs related to heat stroke countermeasures.In addition, there are concerns that operations will be suspended due to damage to the Group's business sites and disruption of the supply chain due to intensifying weather disasters.

The results of the scenario analysis will be reflected in the Tenma Group's long-term vision and medium-term management plan, and by implementing countermeasures and monitoring progress, we will build resilient strategies.

Risk management

[Process to identify, assess and manage climate-related risks]

The Sustainability Promotion Office works with related departments to identify a wide range of climate-related risks and opportunities, identify and evaluate important risks and opportunities based on their impact on business, and formulate countermeasures. We are considering.

The results of scenario analysis and the progress of countermeasures for risks and opportunities are regularly reported to the Sustainability Promotion Committee and the Board of Directors.

[Integration status of climate-related risk management and company-wide risk management]

The Tenma Group will develop and operate a group-wide risk management system to ensure the completeness of risks, as well as identify important risks and implement risk mitigation measures to control risks for the entire group. For this purpose, we have established the Risk Management Committee, which is chaired by the Chief Risk Management Officer and whose secretariat is the Internal Control Office of the General Affairs Department.

Risks identified through scenario analysis are reported and made recommendations to the Risk Management Committee as necessary to integrate climate-related risks into company-wide risk management.

metrics and goals

[Indicators related to climate change risks and opportunities]

The Tenma Group has established Scope 1 and Scope 2 emissions as indicators to measure and manage climate-related risks and opportunities.We are also proceeding with calculations for Scope 3.

In order to achieve carbon neutrality in 2050, we are currently considering GHG emission reduction targets, and will disclose them once they are finalized.

[Results of Scope 1 and Scope 2 emissions]

Aggregation period: Non-consolidated from April to the following March, consolidated subsidiaries from January to December

(Linking)(t-CO2)

  2021 2022
Scope1 2,495.1 2,397.8
Scope2
(market standard)
97,335.1 99,180.2
Scope2
(location based)
97,425.4 100,280.0

(non-consolidated)(t-CO2)

  2021 2022
Scope1 1,031.1 909.2
Scope2
(market standard)
11,921.3 11,084.6
Scope2
(location based)
12,012.8 11,152.4

*Scope 1: direct greenhouse gas emissions
Scope2: Indirect greenhouse gas emissions

Status of efforts to reduce GHG emissions

In order to reduce GHG emissions, we are promoting measures such as electrifying injection molding machines, switching to LED lighting equipment, and updating air conditioning equipment at each production base. From May 2023, we will install solar panels on the roof of the new Shiga factory building under an on-site PPA (power purchase agreement) to expand the use of renewable energy. Zhongshan Co., Ltd. also installed solar power generation equipment in December 5 and is working to reduce GHG emissions.

To achieve carbon neutrality by 2050, in addition to the above measures, we will also consider improving energy efficiency by building a highly efficient production system.

Shiga factory photovoltaic power generation equipment
Shiga factory photovoltaic power generation equipment
Tenma Precision (Zhongshan) Co., Ltd. 
Solar power generation equipment
Tenma Precision Industry (Zhongshan) Co., Ltd. Solar power generation equipment