Climate change information disclosure based on TCFD recommendations

Our group recognizes that responding to climate change is an important management issue that can have a significant impact on corporate activities, and in November 2020, we announced our support for the TCFD (Task Force on Climate-related Financial Disclosures). Furthermore, in March 2023, we announced our participation in Japan's JCI (Climate Change Initiative). Currently, based on the sustainability vision "ASV2050/2030," which is the core of the group's sustainability strategy, we are promoting activities to address climate change, including efforts to reduce CO ₂ emissions with the aim of achieving carbon neutrality in 2050.

• Governance
• Risk management
• strategy
• Metrics and goals

Governance

The Sustainability Committee, which oversees company-wide sustainability activities, including climate change, and promotes them across the organization, Board of Directors through President and Representative DirectorIt is under the supervision of. Important issues are discussed and resolved by the Group Management Committee, and the Board of Directorsand will be approved by the

President and Representative Director is the Group's Chief Officer for Addressing Climate Change Sustainability Committeeand is ultimately responsible for management decisions related to climate change, and at the same time, we have appointed a sustainability officer (Sustainability Committee Chairperson) as the executive officer responsible for activities.

The ESG Promotion Subcommittee, a subordinate organization of the Committee, is responsible for collecting information on climate change responses, identifying, analyzing, and evaluating risks and opportunities, formulating internal rules, and disclosing information. In order to enhance the effectiveness of these activities for management, the ESG Promotion Office was newly established in July 2023. In cooperation with the Sustainability Committee, management, Corporate Planning Division, Strengthen the incorporation of climate change responses into management plans in collaboration with the Finance & Accounting Department, and promote the realization of climate-related targets in various activities and budgeting in collaboration with the management departments of each business company. We will strengthen cooperation in the system.

Climate change response system (after July 2023)

Risk management

Risk/opportunity management process

Our group has built a company-wide risk management system centered on Risk Management Committee which is a subordinate organization of Sustainability Committee. Climate-related risks, like other corporate risks, are factors that affect a company's sustainable growth, and by taking appropriate strategic responses, it is possible to prevent risks from materializing and reduce the impact when they materialize. We recognize that this will not only lead to opportunities such as increased business profits and improved market evaluation. Climate-related risks/opportunities are managed by ESG Promotion Subcommittee in collaboration with Risk Management Committee, applying the same management process as for corporate risks in general.

ESG Promotion Subcommittee identifies and evaluates climate-related risks, makes proposals and reports to Group Management Committee and Board of Directors, and shares information and awareness within the Group through the annual Sustainability Meeting. Management and group companies incorporate countermeasures and action plans based on these risks/opportunities into medium-term management plans and business plans, and reflect them in specific measures.

Risk/opportunity identification/assessment process

ESG Promotion Subcommittee uses the risk/opportunity classifications defined by the TCFD recommendations (transition risks: policy and law, technology, market, reputation; physical risks: acute and chronic; opportunities: resource efficiency, energy sources, products and services, We comprehensively extracted risks/opportunities associated with climate change using a matrix of market/resilience) and our group's value chain processes (procurement, production, logistics, sales, development, management, use, and disposal). Furthermore, we confirmed the validity of these extracted results through a workshop (February 2022, 34 participants) for department managers from each group company. Afterwards, these approximately 300 extracted risks/opportunities were organized and aggregated into 41 items, and analyzed based on two axes of financial impact and probability of occurrence in accordance with two different climate change scenarios (1.5℃ and 4℃). We conducted an impact evaluation. In this way, we identified four risks and two opportunities that are considered important to our group based on the evaluation results.

Risk/opportunity items organized and aggregated in the risk/opportunity identification process (partial)

strategy

The Group recognizes that global climate change and the policies and measures taken by each country and local government can greatly influence the market environment, raw material procurement, and consumer preferences, and have a strong impact on business continuity and business results. doing. These risks/opportunities

Scenario analysis

The purpose of scenario analysis is to understand what risks/opportunities envisaged climate change will create, what impact it will have on our group, and to improve the resilience of our group's sustainable growth strategy in the envisaged future. The objective is to confirm this and consider the need for further measures. For the four risks and two opportunities that our group has identified, we have qualitatively shown the degree of financial impact and likelihood of materialization in three stages up to fiscal 2030, the period covered by the analysis.

The analysis included a 1.5°C scenario, which assumes a world in which various measures are taken to limit average temperature rise to 1.5°C compared to pre-industrial levels, and a 1.5°C scenario, which assumes a world in which a variety of measures are taken to limit the rise in average temperature to 1.5°C compared to pre-industrial levels, and a 1.5°C scenario, which assumes a world in which existing policies and systems remain in operation and the physical effects of climate change are reduced. We referred to the 4°C scenario, which assumes a world where the impact of risks increases.

Financial impact: 3 = Impact is several billion yen 2 = Impact is around 1 billion yen 1 = Impact is less than 1 billion yen
Probability of manifestation: 3 = Already manifested or will almost certainly develop in the future 2 = Relatively likely to occur 1 = Low possibility of manifestation
Period of increased impact: Short-term = around 1 year (period of annual plan) Medium-term = around 3 years (period of medium-term management plan) Long-term = around 10 years (mid-term target year of ASV2050/2030 = period until FY2030)
1.5℃ scenario: See IEA World Energy Outlook: Net Zero Emission by 2050 Scenario and IPCC: SSP1-1.9
4°C scenario: see IEA World Energy Outlook: Stated Policy Scenario and IPCC: SSP5-8.5
Scope of analysis: Existing businesses of the entire group and new businesses currently envisioned

定量分析

1. Impact of carbon tax
2. Amount of loss in the event of a flood in areas with high water risk
3. Reducing _CO2 emissions through the use of “environmental value” products that contribute to sustainability

Metrics and goals

1. _CO2 emissions

Since launching the "CO ₂ Reduction Project" in fiscal 2010, artience group has been working to reduce CO ₂ emissions at its domestic and overseas production sites. In the current medium-term management plan "SIC-II", we have declared "achieving carbon neutrality in 2050" and have set it as a central goal of ASV2050/2030.

ASV2030 aims to reduce domestic CO ₂ emissions by 35% compared to FY2020 to 50,000t-_CO2, and overseas emissions to 95,000t-_CO2, a 35% reduction compared to BAU in FY2030. In order to achieve these goals, we will take various measures in three areas: reducing energy consumption, reducing carbon emissions from energy, and reducing carbon emissions from electricity.

Main reduction measures and estimated reduction amount (domestic)

Direction and main examples of measures to reduce CO ₂ emissions

Direction of measures	Main measures
Reduce energy usage	・Energy saving (elimination of energy loss during the process) ・Production process reform from an energy-saving perspective
Low carbon energy	・Electrification of production equipment (reduction of direct emissions) ・Preparation and investigation for the use of LNG alternative fuel
Low-carbon electricity	・Introduction of low carbon electricity ・Introduction of renewable energy equipment

2. Sales ratio of products that contribute to sustainability

artience group has been working to improve the environmental friendliness of its products from an early stage, and has been releasing a variety of environmentally-friendly products since the 1990s. In recent years, product development has focused not only on such "environmental value," but also on aspects such as the comfort of people's lives, health and welfare, and safety and security. We are launching a diverse group of products that can contribute to improving possibilities (life value).

ASV2050/2030 adds the standard for "products with daily life value" to the conventional standards for environmentally-friendly products, and redefines them as "products that contribute to sustainability." By 2030, our group has set a goal of increasing the sales composition ratio of these sustainability-contributing products to 80% or more of the group's total sales, both domestically and overseas.