TCFD｜Toyoda Gosei Co., Ltd.

TCFD

Information disclosure in line with TCFD proposals

Toyoda Gosei announced its support for the Task Force on Climate-Related Financial Disclosures (TCFD) in May 2019, and held up the materiality (important issue) of creating a decarbonized society by reducing CO₂ emissions as a measure to combat climate change.

Based on the thinking of the TCFD, a scenario analysis was used to identify risks and opportunities in our business activities and we implemented activities integrated into our management strategy. We will enhance these efforts in the future, including verification of the effects on finances.

Governance

The TG 2050 Environmental Challenge, our long-term environmental activities plan, was formulated by the Carbon Neutrality and Environmental Committee (formerly, Environmental Committee) and announced in February 2016. The Toyoda Gosei Group is reinforcing its activities to achieve a sustainable society.

The Carbon Neutrality and Environmental Committee meets twice a year, with the company president serving as the chairperson. The committee discusses risks and opportunities related to climate change, including effects on our suppliers, certifies our medium-and long-term goals, formulates scenarios to achieve those goals and reflects them in corporate strategy. The results are regularly reported to the Board of Directors and management meetings.

Strategy

Toyoda Gosei has been making efforts to reduce CO₂ based on its TG 2050 Environmental Challenge. Heeding the intensifying calls for action from society in recent years, higher targets were set that brought forward the timing for the achievement of zero CO₂ emissions from 2050 to 2030, and the introduction of 100% renewable energy by 2030.

To achieve this, we considered the “4℃ scenario^*1” and “1.5℃/2.0℃ scenario^*2” announced by the Intergovernmental Panel on Climate Change (IPCC) and identified the following climate-related risks (physical risks and transition risks) and opportunities for our business activities, for which we are taking action.

*1 4℃ scenario: The scenario in which the earth’s average temperature rises about 4℃ compared with pre-industrial revolution levels
*2 1.5℃/2.0℃ scenario: The scenario in which the rise in the earth’s average temperature at the end of the 21st century is kept to 1.5℃/2.0℃compared with pre-industrial revolution levels

■Physical Risks　Risks Related to Physical Influences, Such as Disasters Due to Climate Change

Matters that affect us		Risk	Impacts	Opportunity	Impacts	Response
Acute	Large-scale disasters from abnormal weather	Production difficulties due to river flooding, super typhoons, supply chain disruptions, water shortages, etc.	Large	Stronger resilience in business continuity planning (BCP) will help to ensure a robust production network and increase competitiveness	Medium	Strengthened BCP resilience systems and training Ensuring key infrastructure during emergencies Inspecting and upgrading land and buildings for durability and flood risks Development of materials and new products with superior durability, water resistance and heat resistance
Chronic	Rising temperatures Changing precipitation and weather patterns	Quality defects from insufficient product durability with warming temperatures	Medium	Increasing added value with enhanced product durability, and increasing revenue	Medium

■Transition Risks　Risks that Will Occur in the Transition to a Decarbonized Society

Matters that affect us		Risk	Impacts	Opportunity	Impacts	Response
Policy and regulations	Measures to promote electrification (Zero emission vehicle (ZEV),^3 fuel economy, gasoline vehicle regulations) Government carbon neutrality declaration (Carbon pricing (CP)^4 regulations, expansion of subsidies)	Declining sales of parts for gasoline vehicles with the accelerated development of BEVs	Large	Developing products for ZEVs (BEVs, FCEVs) and increasing sales	Large	Developing new products for BEVs, FCEVs Increasing sales to BEV advance market/OEMs High-durability, lighter weight, and decarbonization of plastics and rubber, by leveraging Toyoda Gosei’s knowledge of polymer materials Accelerating efforts based on the introduction of ICP Bringing carbon neutrality forward to 2030
		Decreasing cost competitiveness with the introduction of a carbon tax	Large	Ensuring competitiveness with expanded development of environmentally-friendly products and manufacturing methods using government support (subsidies, etc.)	Medium
			Large	Increasing sales of lighter weight products and parts for improved fuel efficiency (electricity consumption)	Medium
Markets	CASE, MaaS market expansion Market expansion of new fields with green technology	Declining sales of conventional products with changes in user values and how vehicles are used	Medium	Increasing sales of disinfection/antibacterial products with the spread of car shares	Medium	Development of disinfection/purification products using Toyoda Gosei’s deep ultraviolet LED technology Development and commercialization of GaN power devices Development of new products for autonomous driving Expansion of non-automotive businesses (healthcare, energy, etc.)
Markets		Declining sales due to boycotts of products with large environmental impacts	Medium	Expansion of businesses with the development of green technologies^*6	Large
Technology	Development and spread of energy production and conversion technology Progress and spread of renewable energy technology Spread of energy-saving technology	Increased production costs with adaptation to new energy resources	Medium	Energy savings in the manufacturing stage and rising profit from development of low-cost production	Large	Optimizing plant energy Saving energy with more efficient production processes utilizing IoT and digital technology Active introduction of renewable energy Promoting Car to Car recycling and decreased impacts over product lifecycles Expanding hydrogen tank business
Technology		Decreased competitiveness with late start in technical dissemination (sluggish CO₂ cuts, cost increases from decarbonization)	Medium	Rising profits with advances in developing environmentally-friendly products and setting up production processes	Medium
Reputation	Changes in customer evaluations Changes in reputation among investors	Decreased competitiveness from not being able to include environmental considerations (decarbonization, recycled materials, etc.) in ordering conditions	Medium	Improved competitiveness by developing green technologies^*6 that lead in the field of rubber and plastic automotive parts	Medium	Environmentally-friendly product development and commercialization (development of high-function materials, biomaterials, and recycled materials)

*3 Zero emission vehicles include BEVs and FCEVs that do not emit CO₂ or other gases when driven
*4 Carbon pricing is done with carbon taxes and emissions trading
*5 Net zero energy buildings are buildings that achieve zero annual primary energy balance with high-efficiency equipment and the introduction of renewable energy
*6 Green technology: Products that help to resolve or mitigate environmental problems (for example, products that contribute to lighter weight and decarbonization)

Risk management

At Toyoda Gosei, climate-related risks (physical risks & transition risks) are managed by the Carbon Neutrality and Environmental Committee, Internal Control Committee (formerly, Compliance and Risk Management Committee), and Management System (ISO 14001). In the risk management process, risks are identified and evaluated and then ranked according to their frequency and impact. After this, measures such as avoidance, mitigation, transference, or retention are determined, and progress is managed by the committees and others. Regular reports on major risks are made to the Board of Directors.

Indicators and targets

Toyoda Gosei has been working to reduce CO₂ based on the TG 2050 Environmental Challenge. With recent societal demands, the timing for achieving CO₂ emissions in the company’s own production activities (Scope 1, 2) has been brought forward to 2030 from the original 2050. The target year for adopting 100% renewable energy has also been revised upward to 2030. The development of environmentally-friendly production processes and equipment and other CO₂ reduction activities are being undertaken across the company. We also formulate an “Environmental Action Plan” every five years and undertake activities that incorporate them into our company targets each year.

■Toyoda Gosei’s Medium- and Long-Term Targets

Efforts	Target year	Target value
7th Environmental Action Plan	2025	25% reduction in Scope 1 + Scope 2^*7 CO₂ emissions, compared with FY2015 levels
2030 milestones (Targets 50&50)	2030	Achieving carbon neutrality with combination of renewable energy, etc. Renewable energy adoption rate 100% 27.5% reduction in Scope 3^*7 CO₂ emissions, compared with FY2019 levels
TG 2050 Environmental Challenge	2050	Carbon neutrality in Scope 1 + Scope 2 + Scope 3^*7 Contribution to an environmental society with product technology

*7 Scope 1: CO₂ emissions from use of fuel by business itself
Scope 2: CO₂ emissions from use of electricity, etc., provided by other companies
Scope 3: CO₂ emissions over the entire product lifecycle except for CO₂ emissions in the manufacturing stage

TCFD Index

Toyoda Gosei agrees with the proposals of the Financial Stability Board Task Force on Climate-related Financial Disclosure (TCFD), and refers to its disclosure recommendations when disclosing relevant information. The company’s website and annual report (Toyoda Gosei Report) present information that is aligned with these disclosure recommendations.

Governance	TCFD recommendations	Publication Location	Website
	Overseeing the Board of Directors meetings on climaterelated risks and opportunities	P70-77 Corporate Governance	https://www.toyoda-gosei.com/csr/governance/corporate/ https://www.toyoda-gosei.com/csr/environmental/report11/
	Role of management in evaluation and management of climate-related risks and opportunities

Strategies	TCFD recommendations	Publication Location	Website
	Short-, medium- and long-term climate-related risks and opportunities identified by the organization	P24-39 New Medium-Term Business Plan: The 2030 Business Plan P58 Risks and Opportunities Related to Resource Recycling P59 Risks and Opportunities Related to Biodiversity P54-59 Contributing to Environmental Preservation through All Our Business Activities	https://www.toyoda-gosei.com/csr/environmental/report1/ https://www.toyoda-gosei.com/csr/environmental/report3/ https://www.toyoda-gosei.com/csr/environmental/report4/ https://www.toyoda-gosei.com/csr/environmental/report11/
	The impact of climate-related risks and opportunities on the business, strategies and financial plans of the organization
	Resilience in business strategies, taking into account different climate-related scenarios including the 2°C or lower scenario

Risk management	TCFD recommendations	Publication Location	Website
	Processes for identifying and evaluating climate-related risks	P55 Environmental Organization	https://www.toyoda-gosei.com/csr/environmental/report1/
	Organizational processes for managing climate-related risks	P82-85 Risk Management	https://www.toyoda-gosei.com/csr/environmental/report11/ https://www.toyoda-gosei.com/csr/governance/risk_management/
	Integrate identification, evaluation and management of climate-related risks into our risk management throughout our organization	P82-85 Risk Management

Indexes and targets	TCFD recommendations	Publication Location	Website
	Disclose measurement standards used for evaluation of climate-related risks and opportunities according to our own strategies and risk management	P24-39 New Medium-Term Business Plan: The 2030 Business Plan P54 Medium-to Long-Term Scenarios for Achieving the TG2050 Environmental Challenge	https://www.toyoda-gosei.com/csr/environmental/report1/ https://www.toyoda-gosei.com/csr/environmental/report2/
	Disclose GHG emissions and related risks for Scopes 1, 2 and 3	P97 Non-Financial Highlights	https://www.toyoda-gosei.com/csr/environmental/report3/ https://www.toyoda-gosei.com/csr/environmental/report8/
	Targets used by the organization to manage climate-related risks and opportunities, and the performance of these	P20-21 Materiality (Key Issues) P54 Medium-to Long-Term Scenarios for Achieving the TG2050 Environmental Challenge P97 Non-Financial Highlights	https://www.toyoda-gosei.com/csr/environmental/report1/ https://www.toyoda-gosei.com/csr/environmental/report2/ https://www.toyoda-gosei.com/csr/think/materiality/ https://www.toyoda-gosei.com/csr/environmental/report8/