Response to the TCFD

Based on its Corporate Philosophy of “Promote corporate activities that help protect the global environment”, the Toyota Boshoku group makes collective efforts to contribute to preserving the global environment in order to realize a sustainable society.
We formulated the 2050 Environmental Vision in 2016 and identified our Materiality (important issue to be resolved through our business operations) of “Together with our business partners, we will realize MONOZUKURI innovations that minimize environmental stress” in 2020 in order to promote environmental initiatives.
In April 2020, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). By extensively analyzing the impact of climate change on our business and the risks and opportunities that result from it based on scenarios, we will confirm the direction of our company’s initiatives and reflect them in our future management strategy.

Governance
Strategy
Risk Management
Metrics and Targets

Governance

Decision-making at the Board of Directors, and business execution at the Corporate Strategy Meeting, Corporate Planning Meeting, Corporate Management Meeting, etc.
Based on decisions made by the Board of Directors and instructions given by the Corporate Strategy Meeting, Corporate Planning Meeting, Corporate Management Meeting, etc., the Carbon Neutral Environmental Promotion Meeting and the Environmental Committee in each region examine and implement practical environmental measures.
Materiality is formulated as the approach we adopt to identifying and resolving issues including climate change, and this is finalized by the Board of Directors.
The Toyota Boshoku group checks KPIs every month based on the 2050 Environmental Vision and the 2025 Environmental Action Plan, implements target management and monitoring for each milestone at the Carbon Neutral Environmental Promotion Meeting, and reports and discusses the content thereof at meetings of the Board of Directors.
Climate-related opportunities are reviewed by the Carbon Neutral Environmental Promotion Meeting, after which the Corporate Planning Meeting determines the response policy (decides on investment in opportunities).
The Risk Management Promotion Meeting, CSV Promotion Meeting, and Corporate Management Meeting confirm the status, and the details of this are reported and discussed at meetings of the Board of Directors to review the Company’s goals and strategies.
In terms of the identification, assessment and management of the Toyota Boshoku group’s climate-related risks (typhoons, floods, etc.), ultimately reports are made to and approvals are given by the Risk Management Promotion Meeting, which in turn reports the details to the Board of Directors.

Strategy

Scenario Analysis on Climate-related Risks and Opportunities

(1) Scenario Analysis Results

We have identified short-term, medium-term, and long-term risks and opportunities based on the 1.5 to 2°C scenario*1 developed by the International Energy Agency (IEA), in which the impact of transition risks surfaces, and the 4°C scenario*2 developed by the Intergovernmental Panel on Climate Change (IPCC), in which the impact of physical risks surfaces. The table below lists the risks and opportunities that are assessed as particularly high.

1.5°C scenario: NZE (IEA World Energy Outlook 2021); 2°C scenario: SDS (IEA World Energy Outlook 2021)
4°C scenario: RCP 8.5 (IPCC 5th Assessment Report)

	Causes	Risks / Opportunities	Assessment	Actions
Transition risks and opportunities (1.5 to 2°C)	Enhancement of climate change policies, including carbon pricing	Increase in procurement costs by introducing carbon prices, etc.	Risk	Survey of suppliers (CO₂ emissions, efforts to reduce CO₂ emissions, etc.) Promotion of activities for setting CO₂ emission reduction targets Support for suppliers (Sharing of energy saving cases, joint development of new materials and new methods, joint purchase of renewable energy, etc.)
		Increase in operating costs due to the direct impact of the introduction of carbon prices or its indirect impact on energy prices	Risk	Introduction of highly efficient equipment to promote further energy saving and promotion of the development of new methods Promotion of the introduction of renewable energy Optimization of logistics (Reduction of CO₂ emissions associated with transportation through the promotion of local production for local consumption)
		Increase in cost due to investment in energy saving and renewable energy for decarbonization	Risk	Optimization of investment by introducing ICP (Internal Carbon Pricing)
	Enhancement of efforts to promote vehicle electrification	Expansion of business in new fields through collaboration between Toyota group companies	Opportunity	Expansion of new business domains and diversification of provided value
	Enhancement of efforts to promote vehicle electrification	Increase in demand for electrified products	Opportunity	Further planning and development of electrified products
	Change in evaluation by customers and the consumer value standard (raised environmental awareness, etc.)	Decrease in sales due to lower demand for products with insufficent low-carbon technology	Risk	Planning and development of products to further reduce carbon emissions Planning and development of plant-derived products and lightweight products Improvement of recyclability and promotion of simple disassembly design
		Increase in sales by developing low-carbon products Expansion of demand for plant-derived products and lightweight products Enhancement of competitiveness by developing technology to improve recyclability	Opportunity
Physical risks and opportunities (4°C)	Worsening of extreme weather, including heavy rain and subsequent flooding	Decrease in sales due to the impact of supply chain disruption on production	Risk	Risk management using a system to manage the range of supplier impact Selection of logistics routes that minimize the impact of disaster
Physical risks and opportunities (4°C)		Decrease in sales due to factory shutdown	Risk	Enhancement of the BCP system (Creation of manuals and establishment of an information collection/sharing system)

(2)Priority Action

Challenge to Carbon Neutrality through a Circular Economy for Product Materials

The Toyota Boshoku group promotes the reduction of CO₂ emissions in the product life cycle. In addition to reducing the weight of products, using plant-derived materials (biomass), and developing technologies for electrified products, we will improve the recyclability of products. We will also work to reduce CO₂ emissions from the materials used in our products toward carbon neutrality.

(1) Measures to reduce CO₂ emissions from product materials

Measures to reduce CO2 emissions from product materials

(2) Initiatives for a circular economy

Challenge to carbon neutrality by 2050 by recycling product materials and using biomass

Reusing products as raw materials to produce new products
Chemically decomposing and reusing the raw materials of products
A renewable resource of biological origin

(3) Through Scenario Analysis

We have recognized the magnitude of risks and opportunities that climate change poses to our business and have confirmed that our initiatives have led to risk reduction and opportunity expansion.
The results of scenario analysis will be used as a reference when we promote the initiatives in the 2025 Mid-Term Business Plan and consider the 2030 Mid-Term Business Plan and will be reflected in our management strategy.
Based on the results of scenario analysis, we will continue to strengthen our response to risks and opportunities and work on further information disclosure.

Risk Management

Identification and assessment of climate-related risks is determined by the Carbon Neutral Environmental Promotion Meeting, and approved and implemented by the Risk Management Promotion Meeting.
In addition, climate-related opportunities are reviewed by the Carbon Neutral Environmental Promotion Meeting, after which the Corporate Planning Meeting determines the response policy (decides on investment in opportunities).
A risk management promotion system is constructed, an inventory of significant risks is made.

Metrics and Targets

Medium- and long-term targets

2050 Environmental Vision
Challenge of achieving zero CO₂ emissions in the Toyota Boshoku group
Challenge of achieving zero CO₂ emissions in the product life cycle
2030 target
50% reduction in CO₂ emissions versus FY2014
2025 Environmental Action Plan
25% reduction in CO₂ emissions versus FY2014

Monitoring metrics

Scope 1, Scope 2 CO₂ emissions and energy usage (Toyota Boshoku group)
Scope 3 CO₂ emissions (Toyota Boshoku)

FY2021 results (thousand t-CO₂)