Information Disclosure in Line with TCFD and TNFD Recommendations

We have expressed our support for the October 2022 recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)^*1 and engage in information disclosure based on these recommendations. Giving consideration to the CO₂ emission reduction levels discussed in the Paris Agreement, as one of our materiality targets, we are working to reduce greenhouse gas (GHG) emissions in FY2030 (Scope 1 and 2) to 23% of FY2020 levels. In addition to striving to conserve energy and electricity, we are aiming to reduce our GHG emissions and realize a decarbonized society by utilizing renewable energy and introducing decarbonization technologies at our production sites.

Regarding the Taskforce on Nature-related Financial Disclosures (TNFD)^*2, we adopted the Kunming-Montreal Global Biodiversity Framework in December 2022, and set specific goals, including our 2050 Vision of “a world living in harmony with nature” and our 2030 Mission to “halt and reverse biodiversity loss to put nature on a path to recovery.” The Japanese government also adopted the National Biodiversity Strategy 2023-2030 by Cabinet decision, which outlines the direction to be taken.

In July 2025, with a view to strengthening our commitment to biodiversity, Nippon Chemical Industrial endorsed the TNFD’s information disclosure recommendations and registered as a TNFD Adopter^*3. We intend to promote dialogue with our stakeholders while disclosing climate change-related and natural capital-related information in accordance with the TNFD Recommendations and Framework^*4. Taking into account the opinions of our stakeholders, we will continue to promote TNFD initiatives and proactively disclose information with the aim of realizing a sustainable society.

*1: A climate-related financial disclosure task force established by the Financial Stability Board at the request of the G20 to consider climate-related information disclosures and how financial institutions should respond.

*2: An international initiative that aims to establish a framework for companies and organizations to assess and disclose information on the impact of their economic activities on natural capital and biodiversity.

*3: Companies and organizations that have registered and declared their willingness to disclose information in accordance with the TNFD Recommendations on the TNFD website.

*4: The TNFD Framework requires companies to assess and disclose the risks and opportunities their business activities present in terms of their relationships (dependencies and impacts) concerning natural capital and biodiversity.

Governance

In order to build positive relationships with various stakeholders based on our corporate philosophy and become a company that is trusted and relied upon by others, we shifted our focus from CSR (Corporate Social Responsibility) activities to sustainability activities that contribute to all stakeholders by creating value through corporate activities, and established the Sustainability Promotion Committee in 2022 to promote activities that reflect a sense of urgency.

Chaired by the President, the Sustainability Promotion Committee deliberates on the basic policy on sustainability and other matters related to sustainability.

The Sustainability Committee was established under the direct control of the Sustainability Promotion Committee. The Committee promotes initiatives related to sustainability, including those that address climate change as well as biodiversity and other natural capitals, and the certification of environmental contribution products.

The Board of Directors receives reports and proposals concerning important matters deliberated on by the Sustainability Promotion Committee and also provides instruction and supervision concerning policies as well as action plans for addressing climate change and natural capital-related issues.

■ Governance Structure

Sustainability Promotion Committee

The Sustainability Promotion Committee, chaired by the President, deliberates on matters related to sustainability, including the Company’s Sustainability Policy, in light of domestic and international developments related to ESG and the SDGs, and regularly reports and makes recommendations to the Board of Directors. Four committees operate under the purview of the Sustainability Promotion Committee: the Sustainability Committee, Company-wide RC Committee, NBCP (Nippon Chemical Industrial Business Continuity Plan) Steering Committee, and Ethics Committee. The Sustainability Promotion Committee oversees and directs the activities of these four committees and works to reinforce and promote their management through regular meetings.

Sustainability Committee

The Sustainability Committee, under the supervision of the Managing Executive Officer, promotes the provision of value to all stakeholders and advances sustainability initiatives such as addressing climate change, biodiversity, and other natural capital issues.

Company-wide RC Committee

The Company-wide RC Committee, chaired by the President, promotes responsible care activities as they relate to the environment and safety, and works to maintain and improve levels of compliance with laws and regulations, environmental conservation, safety and disaster prevention, occupational health and safety, product safety, and logistics safety.

NBCP (Nippon Chemical Industrial Business Continuity Plan) Steering Committee

The NBCP Steering Committee is chaired by the Executive Officer in charge of the Production Engineering Division and promotes continuous improvements to policies, plans, and drills as they relate to emerged and potential crises.

Ethics Committee

Chaired by the Executive Officer in charge of the Administration Division, the Ethics Committee endeavors to thoroughly disseminate the code of conduct to be observed by employees as they engage in their daily corporate activities and regularly checks the status of compliance in an effort to make continuous improvements.

Regarding nature-related stakeholder engagement, we are committed to respecting human rights throughout the supply chain and have expressed this commitment in our human rights and procurement policies.
In addition, our Code of Conduct with Respect to Biodiversity, created in December 2023, establishes the following four action guidelines used for planning and promoting biodiversity conservation activities.

Ascertain the impact of the Company’s business activities on biodiversity conservation throughout the entire value chain and continuously work on minimizing this impact.
Endeavor to raise awareness of biodiversity among all employees through Responsible Care activities.
Continue to engage in activities that contribute to society by helping biodiversity conservation in order to be highly valued by society and the residents of local communities.
Proactively disclose the above initiatives and deepen communications with stakeholders.

Risk Impacts and Management

We analyze the degree to which risks affect our business activities, taking into consideration the characteristics of our business and the environment in which we operate, in accordance with our Risk Management Regulations, and manage risks within the framework of the Sustainability Promotion Committee. Each division identifies all risks, including climate change-related and nature-related risks, and a committee comprised of managers from each division (the Division Manager Council) categorizes and lists these risks and evaluates them according to the level of frequency of occurrence, level of impact, and level of control. For each assessed risk, the Sustainability Promotion Committee discusses fundamental solutions in terms of such aspects as causes, prediction, training, and prevention of recurrence. Through this, the Company takes measures to prevent risks. Risks are assessed on an annual basis.

We have established a system and structure to identify risks; assess them based on factors such as their frequency of occurrence, impact, and level of control; and respond to those risks. Material risks are reviewed annually.

With regard to our dependence and impact on nature, we have identified survey areas by focusing on the objective and qualitative importance of direct operations and value chain upstream operations, and evaluated their risks. Based on our Sustainable Procurement Policy formulated in June 2024 (and revised in July 2025), we are working with suppliers to reduce environmental impact.

In addition, we introduced an internal carbon pricing (ICP) system in April 2024 to quantitatively assess climate change risks. In our capital investment plans for low-carbon and decarbonization facilities, we make use of ICP (3,000 yen/Mt-CO₂) to convert costs and use this as a metric for investment decisions.

Strategy 1: Climate Change

In recent times, large-scale wildfires and floods, attributed to climate change, have been occurring across the globe, and the impact of climate change on our society is becoming more serious by the year. The international community is accelerating efforts to build a decarbonized society, and companies are also being asked to provide meaningful support for these endeavors.

The Company also sees addressing climate change as an important challenge, and is committed to reducing the amount of greenhouse gas emissions it will generate in FY2030 by 23% compared to FY2020. We have also defined products that contribute to solving environmental issues and improving the environment throughout their life cycles as “environmental contribution products,” and have established a policy of actively offering these products to the market. Furthermore, we have set a KPI for the ratio of sales of environmental contribution products to total sales, and are engaging in Company-wide efforts in this area.

To promote understanding among stakeholders regarding our activities and enhance our corporate value, we will continue to disclose climate change-related information, such as progress reports on GHG emission reductions, the amount of waste generated and environmentally hazardous substances emitted, and the ratio of sales of environmental contribution products.

Scenario Analyses, Risks, and Opportunities

1.The 1.5°C scenario^*1

In this scenario, aggressive measures will be taken to combat climate change to keep the increase in temperatures in 2100 over temperatures at the time of the Industrial Revolution to around 1.5°C. In this scenario, climate change measures are strengthened and transition risks in terms of policy-driven regulations, markets, technology, and reputation are heightened.

*1: The RCP2.6 scenario, with reference made to information provided by the Inter-Governmental Panel on Climate Change (IPCC) and International Energy Agency (IEA), the parameters for estimating the impact of climate change is used to set.

Transition risks and opportunities: Decarbonization scenario (1.5°C)

Transition risks and opportunities were studied based on a decarbonization scenario in which various regulations are introduced in connection with the transition to a low-carbon economy with an eye towards attaining the 1.5°C target.

In a decarbonization scenario (1.5°C), we can assume that prices will rise and expenses will increase as carbon taxes are introduced by governments intent on strengthening environmental regulations and demand for renewable energy rises, and that resource procurement costs will go up as global warming measures are taken on a global scale.

On the other hand, we believe that business opportunities will increase as research and development is spurred on by the rise in innovation for decarbonization in our growth areas of electronic ceramic materials and functional materials such as conductive adhesives for RFID tags, by the increase in demand for our environmental contribution products. In addition, the Company regards the reduction of CO₂ emissions generated by our production processes as an important issue and is working on reducing CO₂ emissions by leveraging renewable energy sources and adopting decarbonization technologies at our production sites.

As for procurement, we aim to continue to engage in stable procurement practices and reduce CO₂ emissions tied to raw materials by communicating with our suppliers.

The 4°C scenario^*2

In this scenario, aggressive measures will not be taken to combat climate change, the temperatures in 2100 will increase by around 4°C over temperatures at the time of the Industrial Revolution. This is a scenario in which physical risks will increase, such as in terms of more devastating natural disasters, rising sea levels, and more extreme weather events.

*2: The RCP8.5 scenario, with reference made to information provided by the Inter-Governmental Panel on Climate Change (IPCC) and International Energy Agency (IEA), the parameters for estimating the impact of climate change is used to set.

Physical risks and opportunities: Progressive warming scenario (4°C)

In terms of physical risks and opportunities, there is a major risk of a shutdown of business activities or disruption of supply chains as natural disasters occur due to extreme weather anomalies.

Natural disasters are difficult to forecast and if one were to occur, it is possible that we will sustain massive damage if, for example, our production sites are affected or there is a leak of chemical substances. In order to avoid a stoppage of operations due to a damaged facility or leak of chemical substances, we will need to make capital investments informed by disaster countermeasures, which we assume will lead to increased production costs. This trend will be amplified in the progressive warming scenario (4°C).

In order to deal with climate change risks and other aspects of major disasters, we have set up a specialized committee and formulated a BCP (Business Continuity Plan) system on a company-wide basis to minimize the impact on our business activities even in an emergency. We will continue to promote ongoing improvements to our BCP system.

■ Risks and Opportunities

The Company’s risks and opportunities under the 1.5°C and 4°C climate change scenarios are presented below.

(1)1.5°C climate change scenario

Items corresponding to opportunities	Changes in the wider world	Possible scenario	Risk	Opportunity	Timing of occurrence
Policies, laws, and regulations	Tightening of regulations governing GHG emissions and environmental considerations	Incurrence of costs to comply with regulations and costs to transition to decarbonization	△		Medium to long term
Markets and technologies	Introduction of carbon tax and emissions trading	Incurrence of costs to introduce a carbon tax and emissions trading	◎		Medium to long term
	Rapidly promoting the transition to a low-carbon/decarbonized world	Incurrence of costs to make capital investments and convert to renewable energy	△		Short to medium term
	Declarations of carbon neutrality made by industry associations and governments	Promoting CO₂ reductions through the use of renewable energy		○	Short to medium term
	Developing and promoting the spread of decarbonization-related products	Increase in demand for various environmental contribution products downstream and increase in demand for and revenue from products that we provide and that are used as materials for such products		◎	Medium to long term
	Soaring resource prices	Our competitiveness suffers from the rise of overseas companies operating in countries where production can be undertaken on a low-cost basis	△		Long term
	Soaring resource prices	Increase in the costs of procuring raw materials	○		Medium to long term

(2)4°C climate change scenario

Items corresponding to opportunities	Changes in the wider world	Possible scenario	Risk	Opportunity	Timing of occurrence
Reputation	Stricter evaluations of companies that have not yet decarbonized and that are emitting large volumes of CO₂	CO₂ reductions are sought across the entire value chain in downstream industries and demand fluctuates due to initiatives taken by us and our production lines	○	○	Medium to long term
Chronic	Changes in precipitation and weather patterns (increased rainfall and rising average temperatures)	Ensuring the safety of employees in the face of increased rainfall	△		Long term
Chronic		Risk of reduced sales and impairment losses affecting production facilities due to shutdowns or lower production	△		Long term
Acute	Intensification and increase in the number of extreme weather events (typhoons, wildfires, flooding, and severe storms)	Disruptions in the supply of raw materials due to natural disasters	○		Long term
		Risk of the leakage of chemical substances due to damage caused to production plants	○		Long term
		Incurrence of capital investment costs related to disaster countermeasures at key locations	○		Medium to long term

◎: Large impact ○: Somewhat large impact △: Negligible impact

*Large impact: Impact on business and finances is expected to be exceedingly large
*Somewhat large impact: Impact on business and finances is expected to be somewhat large
*Negligible impact: Impact on business and finances is expected to be negligible
*Short to medium term: Occurrence between now and 2030 is highly probable
*Medium to long term: Occurrence between 2030 and 2050 is highly probable
*Long term: Occurrence from 2050 onward is highly probable

Metrics and Targets 1: Climate Change

The Group’s greenhouse gas emissions in FY2020 totaled 63,356 tons: 29,117 tons for Scope 1 (direct emissions from business operations) and 34,239 tons for Scope 2 (indirect emissions from the consumption of electricity).

For this reason, upon taking into account CO₂ emission reduction levels required under the Paris Agreement and with a view to realizing a decarbonized society, the Company set a target for Scopes 1 and 2 emissions of a 23% reduction by FY2030 compared to the 63,356 tons of emissions recorded in FY2020.

We will aim to reduce greenhouse gas emissions and realize a decarbonized society by utilizing renewable energy and introducing decarbonization technologies at our production sites and striving to conserve energy and electricity.

GHG Emissions and Medium-term Reduction Targets

The Group’s CO₂ emissions are calculated in accordance with the GHG Protocol and are verified by a third-party organization to improve reliability and transparency.

■ GHG Emissions

■ Breakdown of Scope 3 by Category

Scope/Category		Category	FY2022 CO₂ emissions	FY2023 CO₂ emissions	FY2024 CO₂ emissions
Scope/Category		Category	(t-CO₂)	(t-CO₂)	(t-CO₂)
Scope 3		Total for all categories	212,874	190,722	217,211
Breakdown of Scope 3	Category 1	Purchased goods and services	163,369	145,798	179,636
	Category 2	Capital goods	13,185	8,260	8,630
	Category 3	Fuel- and energy-related activities * Not included in Scopes 1 and 2	10,986	9,367	6,981
	Category 4	Upstream transportation and distribution * Procurement logistics, horizontal logistics, and shipping logistics for which the company is the shipper	19,587	21,202	16,183
	Category 5	Waste generated in operations	600	816	703
	Category 6	Business travel	222	318	438
	Category 7	Employee commuting	588	676	550
	Category 8	Upstream leased assets	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 9	Downstream transportation and distribution * Shipping transportation (other companies are the transport shippers), storage in warehouses, and sales at retail stores	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 10	Processing of sold products	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 11	Use of sold products	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 12	End-of-life treatment of sold products	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 13	Downstream leased assets	4,338	4,286	4,091
	Category 14	Franchises	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation
	Category 15	Investments	Not applicable to calculation	Not applicable to calculation	Not applicable to calculation

No third-party guarantees have been received for emissions in FY2022.

Strategy 2: Natural Capital

LEAP Approach

We utilize the LEAP Approach developed by TNFD in our analysis for evaluation and management purposes related to natural capital. The LEAP approach consists of four processes: Locate (interface with nature), Evaluate (dependencies and impacts on nature), Assess (nature-related risks and opportunities), and Prepare (to respond to, and report on, material nature-related issues).

Locate Phase: Locate Interface with Nature

Scope

The scope of the Locate phase covers direct operations and value chain upstream operations (raw materials and fuels). All four domestic production sites were selected as direct operations. For the value chain upstream operations, we selected eight companies: four companies that provide products on the High Impact Commodity List^*2 published by SBTs for Nature (SBTN)^*1 and are closely related to our business, and four suppliers of raw fuel for products that account for a high percentage of sales. The following tools were used to analyze the natural conditions in the vicinities of these operations and identify areas requiring attention.

*1: A framework that encourages companies and municipalities to set nature-related targets based on science.
*2: SBTN’s list of commodities (raw materials) that are considered to have a significant impact on nature.

Identification of Areas Requiring Attention

We utilized the analysis tools and databases recommended by SBTN to identify areas requiring attention. Areas requiring attention are identified where one or more of the following five criteria listed in the TNFD Recommendations apply.

Areas of importance for biodiversity (analysis tool: IBAT^*1)
Areas of high ecosystem integrity (analysis tool: GFW^*2)
Areas of rapid decline in ecosystem integrity (analysis tool: GFW)
Areas of high physical water risks (analysis tool: Aqueduct^*3)
Areas of importance for ecosystem service provision, including benefits to Indigenous peoples, local communities, and stakeholders (analysis tool: GFW)

*1:Integrated Biodiversity Assessment Tool
*2:Global Forest Watch (an online system for monitoring forests on a global scale using high-resolution satellite images)
*3:A data platform on water risk provided by WRI (World Resources Institute)

IBAT Analysis

We utilized four IBAT indicators (WDPA^*4, KBA^*5, IUCN^*6 Red List of Threatened Species STAR^*7, and IUCN management categories) to analyze the four domestic production sites and eight suppliers we surveyed in order to identify areas important for biodiversity.
The survey areas were set within a 50-kilometer radius of the production site (supply base) for WDPA, KBA, and IUCN Red List of Threatened Species STAR, and within a 0-kilometer radius for IUCN management categories.

*4: The World Database on Protected Areas
*5: Key Biodiversity Areas
*6: International Union for Conservation of Nature and Natural Resources
*7: Species Threat Abatement and Restoration

■ IBAT Data Map
　(STAR Threat Abatement 5 km resolution, East Asia region)

Results of Analysis Using IBAT (Direct Operations, Value Chain Upstream Operations)

The results of the analysis showed that the WDPA and KBA indicators applied to all four domestic production sites. In addition, the IUCN Red List applied to two sites to a medium degree, and IUCN management categories (IV to VI) applied to two sites.
As for suppliers, WDPA and KBA applied to five production sites (supply sites), IUCN Red List species counts applied to one site each to a high and medium degree, and IUCN management categories (IV to VI) to one site.

■ Summary of Analysis Utilizing IBAT

As of March 31, 2025

Production site name	Scope	World Database on Protected Areas				World Database of Key Biodiversity Areas	IUCN Red List of Threatened Species	IUCN management category
Production site name	Scope	National	World Heritage	Ramsar Convention wetlands	UNESCO MAB	KBA Important Bird and Biodiversity Area	Number of threatened species	IUCN IV~VI
Fukushima No. 1 Factory	50 km (1 km for IUCN)	Yes	No	No	No	Yes	Medium	Yes
Fukushima No. 2 Factory		Yes	No	No	No	Yes	Medium	Yes
Aichi Factory		Yes	No	Yes	No	Yes	Low	No
Tokuyama Factory		Yes	No	Yes	No	Yes	Low	No
8 Suppliers		5 sites	0 sites	0 sites	0 sites	5 sites	1 medium site 1 high site	1 sites

Yes: applicable; No: not applicable

Number of threatened species: rated low to high

Global Forest Watch (GFW) Analysis

To identify areas critical to ecosystem integrity and ecosystem service provision, we conducted an analysis using the following three tools from Global Forest Watch (GFW). The indicators used to identify each item (① through ③) were as follows.

① Identification of areas of high ecosystem integrity
　Global Biodiversity Intactness
② Identification of areas of rapid decline in ecosystem integrity
　Forest Landscape Integrity Index
③ Identification of areas of importance for ecosystem service provision, including benefits to Indigenous peoples, local communities, and stakeholders
　Indigenous and Community Lands

Results of Analysis Using GFW (Direct Operations, Value Chain Upstream Operations)

The results of the analysis showed that ① applied to one supplier, ② applied to the Fukushima No. 2 Factory and one supplier, and ③ did not apply to any operations.

■ Summary of Analysis Utilizing GFW

As of March 31, 2025

Production site name	Identification of areas of high ecosystem integrity	Identification of areas of rapid decline in ecosystem integrity	Identification of areas of importance for ecosystem service provision, including benefits to Indigenous peoples, local communities, and stakeholders
Fukushima No. 1 Factory	None applicable	None applicable	None applicable
Fukushima No. 2 Factory		Applicable
Aichi Factory		None applicable
Tokuyama Factory		None applicable
8 Suppliers	1 site applicable	1 site applicable	None applicable

Aqueduct Analysis

To identify areas of high water risk, we used the following three analysis tools from Aqueduct provided by the World Resources Institute (WRI). We conducted this analysis in accordance with our water risk baseline (3 = areas at or below medium-high, regarded as not applicable and 4 = areas at or above high, regarded as applicable).

① Water stress
② Riverine flood risk
③ Coastal flood risk

■ Aqueduct Analysis (Water Stress, 4 Production Sites in Japan)

Results of Analysis Using Aqueduct (Direct Operations, Value Chain Upstream Operations)

The results of the analysis showed that ① applied to two suppliers, ② applied to one supplier, and ③ did not apply to any operations.

■ Summary of Analysis Utilizing Aqueduct

As of March 31, 2025

Production site name	Identification of areas of high ecosystem integrity	Identification of areas of rapid decline in ecosystem integrity	Identification of areas of importance for ecosystem service provision, including benefits to Indigenous peoples, local communities, and stakeholders
Fukushima No. 1 Factory	None applicable	None applicable	None applicable
Fukushima No. 2 Factory
Aichi Factory
Tokuyama Factory
8 Suppliers	2 sites applicable	1 site applicable	None applicable

Identification of Priority Areas (Direct Operations, Value Chain Upstream Operations)

Based on the analysis obtained using the aforementioned analytical tools and databases, the following priority areas were identified.

■ Summary of Priority Areas

Production site name	Location	Identification of areas requiring attention
Production site name	Location	Areas of importance for biodiversity	Ecosystem integrity	Areas of high physical water risks	Provision of important ecosystem services
Fukushima No. 1 Factory	Koriyama City, Fukushima Prefecture	There are four production sites in Japan, and several IBAT indicators applied to all four. Accordingly, biodiversity is considered to be of high importance for these areas.	Not an area in which ecosystem integrity is high nor in which it is in rapid decline.	Not a high water risk area.	Not areas of importance for ecosystem service provision, including benefits to Indigenous peoples, local communities, and stakeholders
Fukushima No. 2 Factory	Tamura District, Fukushima Prefecture		Not an area in which ecosystem integrity is high but there is a possibility it is in rapid decline.
Aichi Factory	Chita District, Aichi Prefecture		Not an area in which ecosystem integrity is high nor in which it is in rapid decline.
Tokuyama Factory	Shunan City, Yamaguchi Prefecture		Not an area in which ecosystem integrity is high nor in which it is in rapid decline.
Suppliers (upstream)	8 sites (worldwide)	Multiple IBAT analysis indicators applied to five of the eight suppliers. Accordingly, biodiversity is considered to be of high importance for these areas.	Ecosystem integrity is relatively high in the area of one of the eight suppliers, and another is not an area in which ecosystem integrity is high but there is a possibility it is in rapid decline.	Water stress applies to two of the eight suppliers and riverine flood risk applies to one supplier.

Evaluate Phase: Identify and Evaluate Dependencies and Impacts on Nature

Identifying Dependencies and Impacts on Nature

To identify our nature-related dependencies and impacts, we conducted a survey using ENCORE^*1 and aggregated the individual results using a heat map.

*1: ENCORE (Exploring Natural Capital Opportunities, Risks, and Exposure), a tool jointly developed by the Natural Capital Finance Alliance—a network of financial institutions–and the United Nations Environment Programme World Conservation Monitoring Centre (UNEP-WCMC). The tool provides a list of potential nature dependencies and impacts, flowcharts, and other information.

Evaluating Dependencies and Impacts on Nature

Based on the information (heat map) obtained using ENCORE, we evaluated our nature-related dependencies and impacts in our direct operations and value chain upstream operations (raw materials and fuels).

Regarding the degree of nature-related dependencies, all items were at or below medium for our direct operations and value chain upstream operations (raw materials), while “water purification” was high for value chain upstream operations (fuels).

Regarding the degree of nature-related impacts, “soil and water pollutants” and “disturbances (e.g., noise, light)” were particularly high for our direct operations and value chain upstream operations (raw materials). “Soil and water pollutants” and “disturbances (e.g., noise, light)” were particularly high and “non-GHG air pollutants” were high for our value chain upstream operations (fuel).

■ Dependencies Heatmap

■ Impact Heatmap

Assess Phase: Assess Nature-related Risks and Opportunities

In identifying risks and opportunities, we conducted an analysis of scenarios based on TNFD guidance. The analysis was divided into four scenarios based on the degree of market and non-market consistency (transition risk) and degradation of ecosystem services (physical risk).

Of the scenarios presented on the right, Scenario 2 was considered the most feasible. Based on this scenario plus the priority areas identified in the Locate phase and the nature-related dependencies and impacts identified and evaluated in the Evaluate phase, and also taking into consideration our definitions of the time horizons of risks and opportunities^*1, we identified the risks and opportunities related to natural capital that we believe are important to the Company. We also considered how to respond to the identified risks and opportunities, taking into account our business lines, geographic regions, and value chain.

*1: Defined as short-term (less than 3 years), medium-term (more than 3 years to 10 years ahead), and long-term (more than 10 years to 30 years ahead).

■ TNFD Scenario Analysis

■ Summary of Nature-related Risks and OpportunitiesSummary of Nature-related Risks and Opportunities

Risk/ Opportunity	Area	Important dependencies and impacts	Type of risk/opportunity		Timing of occurrence	Risk/Opportunity factors	Countermeasures
Risk	Upstream	Tighter nature-related regulations	Transition risk	Markets and technologies	Medium to long term	Increased procurement costs due to tighter environmental regulations in raw fuel producing regions.	Strengthen supplier engagement and devise measures with suppliers.
	Upstream	Water stress, flooding	Physical risk	Chronic	Medium to long term	Unstable supply due to water issues in raw material production regions.	Reduce procurement risk by diversifying procurement regions and suppliers.
	Direct operations	GHG emissions	Transition risk	Markets and technologies	Medium to long term	If the amount of CO₂ from production activities cannot be reduced, the costs associated with carbon taxes and emission credits will increase.	Reduce CO₂ emissions by improving productivity, utilizing renewable energy, and introducing decarbonization facilities.
		Solid waste generation and release	Transition risk	Reputation	Long term	Increasing calls from municipalities and citizens for solid waste reduction and circular economy promotion, increasing waste disposal costs.	Reduce solid waste by improving productivity, promoting recycling, etc.
		Water supply	Physical risk	Chronic	Medium to long term	Inability to secure the water needed for production restricts the manufacture of products.	Gain understanding of water consumption per unit of production. Promote efficient use of water and reduce water consumption. Secure stable water supply by maintaining water storage capacity and diversifying water sources.
		Flooding and storms	Physical risk	Acute	Medium to long term	Disaster countermeasure costs incurred at major production sites.	Prepare for disasters and routinely reinforce facilities and emergency materials. Standardize response procedures and provide education and training.
		Flooding and storms	Physical risk	Chronic	Long term	Flooding causes shutdowns or reduced production, resulting in lower sales and impairment losses on manufacturing facilities.	Prepare for disasters and routinely reinforce facilities.
		Water purification	Physical risk	Chronic	Long term	Deterioration in the quality of water used results in deterioration in product quality and incurs purifying costs.	Maintain water storage capacity and consult with government agencies.
Opportunity	Upstream	Carbon neutrality	Transition opportunity	Markets and technologies	Medium to long term	Meet environmental regulations through decarbonization at raw fuel suppliers.	Utilize renewable energy at suppliers’ manufacturing sites.
	Direct operations	Developing and promoting the spread of decarbonization-related products	Transition opportunity	Markets and technologies	Medium to long term	The expansion of the decarbonization market increases sales of our environmental contribution products and improves profitability.	Develop and promote sales of environmental contribution products, improve processes, and promote recycling.
	Direct operations	Carbon neutrality	Transition opportunity	Markets and technologies	Short to medium term	Our carbon neutrality efforts are appreciated by stakeholders and the value of the Company in the market rises.	Reduce CO₂ emissions associated with our products by utilizing renewable energy and improving processes.

Metrics and Targets 2: Natural Capital

Prepare Phase: Prepare to Respond and Report

Based on the results of our analysis of the identified risks and opportunities, we further selected the indicators and targets related to natural capital that we considered most important in light of our medium- to long-term strategy. We have identified these issues as materialities and are addressing them with KPIs. We aim to achieve these KPIs while allocating internal resources as appropriate.

■ Indicators and Targets for Natural Capital

Item	Indicator	Target	FY2024 results
GHG emissions	Scope1, 2	Reduce GHG emissions in FY2030 by 23% compared to FY2020	18.8%
Ratio of environmental contribution product sales to net sales	Sales of environmental contribution products	Achieve a ratio of environmental contribution product sales to net sales ratio of at least 14% in FY2025.	11.3%

Going forward, we will disclose indicators with reference to the TNFD core global disclosure indicators and strive to reduce our environmental impact.

■ Core Global Disclosure Indicators for Dependencies and Impacts

Dependency/impact indicator		Scope	Unit	2022	2023
GHG emissions (Scope 1+2)		non-consolidated	t-CO₂e	60,319	50,545
Soil pollutants (PRTR substances)		non-consolidated	tons	0	0
Wastewater	thousand m³	non-consolidated	thousand m³	1,629	1,712
	COD	non-consolidated	tons	5.6	7.1
	Total phosphorus	non-consolidated	tons	3.4	3.2
	Total nitrogen	non-consolidated	tons	13.3	14.6
	PRTR substances	non-consolidated	tons	0.066	0.056
Waste	Total industrial waste discharged	non-consolidated	tons	9,056	11,732
	Total specially controlled industrial waste discharged	non-consolidated	tons	4,193	6,141
	Incineration	non-consolidated	tons	3,384	5,157
	Landfill disposal	non-consolidated	tons	757	1,719
	Other disposal methods	non-consolidated	tons	1,581	1,654
	Disposal method unknown	non-consolidated	tons	0	0
	Recycled amount	non-consolidated	tons	3,322	3,290
Air pollution	Volatile organic compounds (VOC) (VOC)	non-consolidated	tons	No data	No data
	NOx	non-consolidated	tons	10.8	11.5
	SOx	non-consolidated	tons	0.9	1.2
	Particulate matter	non-consolidated	tons	2.5	2.5
	PRTR substances	non-consolidated	tons	4.2	1.7
Compliance breaches		non-consolidated	Cases	0	0
Recycling of hazardous waste in manufacturing processes		non-consolidated	%	0.468%	0%
Recycling of used hazardous waste		non-consolidated	%	36.2%	27.8%

Going forward we will continue to proactively disclose information concerning climate change and natural capital with reference to the TNFD Framework. We will also seek to improve and promote sustainability activities through dialogue with our stakeholders to realize a sustainable society.

Specific Initiatives

Forest-Conservation Activities

Tokuyama Factory participate annually in the Machi-to-Mori-to-Mizu Exchange Conference (consisting of forest conservation activities), which has been held in the Shunan District since 1997. Through these activities, we learn about how forests facilitate watershed cultivation and help prevent global warming. We will continue to promote forest-conservation activities as a member of the local community and strive to maintain its ecosystem.