Climate Change

Basic approach

The Glasgow Climate Pact was adopted at the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) in 2021, with the aim of addressing the global issue of climate change. The Pact incorporates a commitment to strive to keep the rise in average global temperatures within 1.5°C, which would have a less severe impact than the earlier target of 2°C, by utilizing the latest scientific know-how, and it thus set a de facto goal for the world to work toward. The Pact confirmed that the next 10 years will be vitally important for realizing this, and that it is important to reduce overall global greenhouse gas emissions by 45% by 2030 compared to 2010, and to cut emissions to net zero by 2050.

Toyobo group recognizes climate change as a very significant social issue that will have a critical impact on our business. We support the “Paris Agreement^*” and "Glasgow Climate Pact" and aim to achieve carbon neutrality by the fiscal year 2051, consistent with the global 1.5°C target.

We also believe that it is important to collaborate with our customers, business partners, industries, local communities, the national government, and society as a whole in order to resolve climate change issues. Our group engages in discussions and dialogue with various stakeholders and works collaboratively to realize the net zero emissions and the goals of the Paris Agreements.

In addition, in January 2020, we expressed our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and have been promoting initiatives and information disclosure in line with these recommendations.

• The Paris Agreement is a global framework adopted in COP21 in 2015 to reduce greenhouse gas emissions after 2020. For the first time in history, it is a fair agreement involving all countries and including the goal of keeping temperature rise below 2 degrees Celsius, and preferably 1.5 degrees Celsius.

• TCFD Index

Structure（Governance）

President & Representative Director, CEO & Co-COO has the highest responsibility for climate change-related issues. The Board of Directors receives regular reports on climate change policies and significant matters discussed by the Sustainability Committee and provides supervision and guidance. The Sustainability Committee, chaired by the President & Representative Director, CEO & Co-COO, handles company-wide issues and risks, including climate change issues.
In fiscal 2024, the Sustainability Committee met six times, and the results of the meetings were reported to the Board of Directors. As a result, the Board of Directors adopted the following resolutions to accelerate efforts to reduce greenhouse gas (GHG) emissions.

• Revised the committee structure under the Sustainability Committee, establishing a new “Climate Change and Biodiversity Committee”
• Officially joined the “GX League” established by the Ministry of Economy, Trade and Industry and approved and announced voluntary targets aimed at the voluntary emissions transaction scheme under GX League (GX-ETS)

In addition, we have commenced consideration of officer compensation (incentives) linked with the reduction status of GHG emissions to boost the effectiveness of those reduction efforts, with the aim of introducing such compensation starting in FY2026.

• Structure on corporate environmental issue

Risk Management

In fiscal 2022, our group established a Risk Management Committee, which conducts uniform group-wide management of risks including climate change issues. In addition to its overall administration of risk management activities (identification, analysis, assessment, and response), the committee formulates policy related to risk management for the whole group, builds and operates effective, sustainable organizations and systems by running the PDCA cycle, and works to strengthen the risk management system. As our point of departure for risk management activities, we identify serious company-wide risks requiring intensive attention from the results of evaluations in terms of the two axes of severity of impact^*1 and likelihood of occurrence^*2 based on each risk scenario. Toyobo group manages its important risks based on a companywide assessment of risks that include natural disasters such as flooding (floods, storm surges, etc.), which are increasing in severity due to climate change.

• 1 Scope of impact, duration of business operation stoppage, personal damage, reputation, and financials are evaluated on a three-point scale that includes “major damage equivalent,” “moderate damage equivalent,” and “minor damage equivalent.”
• 2 Evaluations use a three-point scale including “occurs frequently,” “occurs occasionally,” and “occurs infrequently.”

• Risk Management

Strategy for realizing a decarbonized society

Our group aims to achieve a “decarbonized society & circular economy” within the framework of the Sustainable Vision 2030. The total GHG emissions across our group's supply chain are approximately 6.33 million tonnes-CO₂, which can be categorized into two sources: “business activity areas (Scope 1 and 2)” and “the entire value chain (Scope 3).”

Proportion of Scope 1, 2, and 3

• Scope 1: Direct emissions from sources owned or controlled by the company
• Scope 2: Indirect emissions from the consumption of purchased electricity, heat, or steam
• Scope 3: Indirect emissions not included in Scope 1 and Scope 2. These are divided into 15 categories, including the emissions from activities related to purchased products and services such as manufacturing (Category-1) and from the use of products sold (Category 11).

Business activity areas

Approximately 20% of our group's total GHG emissions come from business activities (Scope 1 and 2). These emissions are primarily from fuel combustion at our on-site power generation facilities located at three sites in Japan (Tsuruga Research and Production Center, Iwakuni Production Center, and Inuyama Plant). It is therefore a crucial GHG reduction measure for our group to transition to low-carbon and decarbonization of its on-site power generation facilities. In fiscal 2023, we formulated and announced the “Scope 1 and 2 Reduction Plan (Roadmap to Carbon Neutrality)” as part of our transition plan to carbon neutrality, and we are promoting various measures. For more details on other initiatives, please refer to “Initiatives related to our manufacturing business.”

GHG emission rate by site

Entire value chain

Approximately 80% of our group's total GHG emissions come from indirect emissions associated with business activities (Scope 3). Within Scope 3, “procurement of materials and raw materials (Category 1)” and “use of sold products (Category 11)” account for about 90% of these emissions. Accordingly, we are focusing on procuring low-carbon and decarbonized materials and raw materials, as well as improving the energy efficiency of sold products as key measures. For more details, please refer to “Initiatives related to the entire value chain.”

Indicators, Targets, and Results

Medium- to Long-Term Targets

With regard to Scope 1 and 2 greenhouse gas (GHG) emissions associated with our business activities, we have set ourselves the target of realizing net zero emissions by fiscal 2051. The midterm target for fiscal year 2030 is to reduce GHG emissions by more than 46% compared to fiscal year 2014.

To contribute toward realizing the decarbonized society, we are proceeding with efforts to reduce GHG emissions and energy use from the entire value chain deriving from activities that are related to our own business, while also working to expand the contribution that we make toward reducing GHG emissions through our products and services.

Short-Term Targets

As short-term targets, our group has set reduction rates for GHG emissions intensity relative to sales in Scope 1 and Scope 2. The targets are utilized as evaluation indicators in sustainable finance.

• Investor Relations > Stock and Bond Information > Sustainable Finance

Results of Scope 1 and 2

The actual results for Scope 1 and Scope 2 in fiscal year 2024 were 831 thousand tonnes of CO₂, representing a 31.6% reduction compared to fiscal year 2013. In October 2023, we renovated the private power plant at the Iwakuni site, significantly reducing Scope 1 emissions by switching from coal to LNG and other fuels.

• Calculation Scope: Total of Toyobo Co., Ltd. and Consolidated Subsidiaries

Results of Scope 3

The actual results for fiscal year 2024 showed a total of 5.499 million tons of CO₂ for Scope 3, representing an approximate 4% increase compared to the previous year. The main reason for the increase in Category 11 was the expansion of operations at lithium-ion battery separator factories in response to growing global demand for EVs.
This led to strong sales of VOC recovery equipment used in those factories, which in turn increased emissions during the use of this apparatus.

Emissions by Category for Scope 3

• ESG Performance Data（648KB）

Acquisition of SBT Certification

In December 2022, our group's GHG emissions reduction targets were recognized as science-based targets, or SBT^*, by the global initiative SBTi.

The targets approved by SBTi are as follows.

The target for Scope 1 and 2 corresponds to a reduction of GHG emissions by at least 46% by fiscal 2031 compared with fiscal 2014.

*

A target to reduce greenhouse gas emissions in line with what is considered to be a state-of-the-art climate-science requirement to meet the Paris Agreement targets

Independent Verification by third party

To increase reliability of our information, we have obtained independent verification from KPMG AZSA Sustainability Co., Ltd., that covers our Scope1,2, a portion of Scope3, and data on energy-consumption for fiscal 2023.
Scope of Assurance: Scope 1, 2, and Scope 3 (Categories 3 and 11), Energy Amount

• External Assurance

Initiatives related to our manufacturing business

Reduction of Scope 1 and 2 emissions

Formulating transition plan towards achieving a decarbonized society and economy

As a transition plan towards achieving a decarbonized society and economy, we have formulated a reduction plan for Scope 1 and Scope 2 (a roadmap to carbon neutrality). With business expansion expected to increase production activities by fiscal year 2031, it is anticipated that GHG emissions would also increase if no action is taken. To counter this, we will promote energy reduction (including energy conservation and improvement of production efficiency), fuel conversion (de-coal), and optimization of electricity use, including renewable energy, to curb energy consumption and reduce GHG emissions (Scope 1 and Scope 2). The contributions of major GHG reduction measures are as follows:

• An acronym for “Business as Usual,” indicating a case in which no particular GHG emission reduction measures are taken.

Roadmap for Carbon Neutrality

Energy reduction and conservation

TOYOBO CO., LTD. has set a shared goal of improving energy-efficiency^* by 1.0% or more annually. In fiscal 2024, we achieved this target through various energy-saving efforts. Specifically, we improved the power generation efficiency of our in-house power generation facilities, added waste heat recovery systems to production lines, and introduced energy-saving equipment. The three sites with particularly high GHG emissions (Tsuruga, Iwakuni, and Inuyama) have set even higher targets than the shared goal and are actively working to reduce their energy use.

In addition, we hold monthly meetings of the Energy Use Efficiency Committee, which consists of members from our main business sites and plants. The committee monitors the energy conservation activities of each site and shares know-how on energy conservation. Each committee member also conducts simple audits ("energy-saving patrols") at each factory site as appropriate to maintain and improve the level of activity.

• Energy consumption per sales and production volume in accordance with Japan's act on rationalizing energy use

Fuel conversion (away from coal)

We are also implementing a transition toward low-carbon energy use, by switching to fuels with lower carbon contents for our in-house electricity generating equipment and installing additional gas co-generation system^*1 equipment.

Fiscal 2024 achievements
Iwakuni Production Center: Renewed the in-house thermal power generation plant, converting the fuel from coal to liquefied natural gas and RPF^*2.
Inuyama Plant: Installed an additional gas cogeneration system to improve energy efficiency of the entire plant.

We are carrying out GHG reduction measures including fuel conversion at other business sites as well.

Future investments in power and utility facilities, including in-house power generation and renewable energy, will be carried out using the Internal Carbon Pricing (ICP) system, in line with the "Roadmap to Carbon Neutrality."

• 1: Gas co-generation systems are systems that use natural gas to generate electricity, with the waste heat being harnessed to produce steam and hot water that are used in manufacturing processes, for supplying hot water, for air conditioning, etc.
• 2: An acronym for “Refuse-derived Paper & Plastics Densified Fuel,” solid fuel made mainly from used paper and waste plastic

Introduction of renewable energy

We are proceeding with the installation of photovoltaic power generation at each of our business sites, making use of roof spaces and unused land.

Initiatives related to the entire value chain

Reduction of Scope 3 emissions

Our group aims to reduce Scope 3 emissions, focusing particularly on reducing emissions in Category 1^*1 (approximately 30% of the total) and Category 11^*2 (approximately 50% of the total), which have the largest emissions.

Initiatives for Category 11

The majority (over 90%) of Category 11 emissions are due to the VOC recovery apparatus^*3 sold by our group, which generates GHG emissions from the utilities such as steam, electricity, cooling water, etc. required for its operation. Recently, the adoption of our VOC recovery apparatus in the manufacturing process of separators for EV lithium batteries has been expanding, and the sales volume of this apparatus is also increasing, leading to a rising trend in Category 11 emissions.

On the other hand, we are promoting the introduction of new technologies and energy-saving technologies into this apparatus, aiming to reduce GHG emissions by curbing and reusing utility consumption and improving energy efficiency.

Our group's VOC recovery apparatus contributes to reducing environmental impact, including GHG emissions, by efficiently removing volatile organic compounds (VOCs) generated at our customers' factories related to EVs, semiconductors, pharmaceuticals, printing, and others. The apparatus enables the recovery and reuse of organic solvents. For more details, please refer to the Eco-Conscious Products page.

Scope 3 Breakdown

• 1: Emissions from activities (such as manufacturing) relating to purchased goods and services
• 2: Emissions from use of sold products
• 3: apparatus that removes VOC, Volatile Organic Compounds, by an adsorptive method, an absorptive method, or a chilling method, and recovers VOC as a liquid organic solvent. CO₂ emission from VOC decomposition is zero. Moreover, the recovered organic solvent can be reused. VOC is a generic term for volatile organic compounds such as toluene, ethyl acetate, and dichloromethane. It causes atmospheric pollution / air pollution and is responsible for asthmatic and other health-related problems.

• Eco-Conscious Products

Energy-saving initiatives in logistics

Our annual goal is a 0.5% year-on-year reduction in CO₂ emissions per unit of transportation in relation to logistics.

In the Logistics Department, we launched the Green Logistics Promotion Project in 2006, and as well as working to improve quality and cost rationality, we are also continuously working on environmental conservation such as energy saving, resource saving, and prevention of global warming. Up until now, we have implemented a variety of measures in order to reduce the environmental impact of logistics. These measures include shortening transportation distances by using the nearest port to our production sites, and using efficient stacking and bulk transport of cargo in order to reduce the number of vehicles used. We are also actively promoting the usage of ship and rail transportation which have lower specific energy consumption than truck transportation, together with lower CO₂ emissions.
We have been introducing a logistics system since 2019. Based on dispatch simulations, we worked to further improve loading efficiency by optimizing the allocation of vehicles.

As a result of these efforts, we were able to reduce CO₂ emissions per unit of transportation by approximately 0.4% in fiscal 2024 compared to the previous year.

Strengthening climate change measures

Structure to achieve carbon neutrality

Starting from fiscal 2024, we have established a new "Climate Change and Biodiversity Committee." Recognizing that "responding to climate change" and "conserving biodiversity" are among the most critical business issues, we will promote activities to minimize our group's risks and seize business growth opportunities through the business operations of the Toyobo Group and its supply chain.

Additionally, we will promote companywide climate change responses with a view to internationally applicable sustainability standards.

Achievements of the Climate Change and Biodiversity Committee

• Implementation of GHG reduction measures in line with the Carbon Neutral Roadmap
• Obtaining third-party assurance for GHG emissions
• Participation in and goal setting for the emissions trading system (GX-ETS) in Japan

Introduction of internal carbon pricing system

In April 2022, we introduced an "Internal Carbon Pricing System," setting an internal carbon price to guide investment decisions. To achieve our group's "Roadmap to Carbon Neutrality" in line with the Paris Agreement and Japan's NDC, we use this system as one of the criteria for investment decisions. This promotes investments that contribute to GHG emissions reductions, including investment in low-carbon and decarbonization apparatus and development facilities.

Outline of Toyobo's ICP system

Development of technologies that contribute to the realization of a decarbonized society

Collaboration with Stakeholders

Toyobo group believes that it is important to collaborate with our customers, business partners, industries, local communities, the national government, and society as a whole in order to resolve climate change issues. Our group engages in discussions and dialogue with various stakeholders and works collaboratively to realize the net zero emissions and the goals of the Paris Agreements.

In addition, our group supports the climate change initiatives of industry associations and actively participates in their activities. In cases where there is a conflict or inconsistency between our group's policies and those of the industry associations we will take appropriate action to resolve these discrepancies.

Communication and Collaboration with business partners

Our group has established the "CSR Procurement Guidelines," which incorporate the TOYOBO Group Fundamental Policy on the Global Environment. We request our business partners to cooperate in efforts to support the development of a sustainable society throughout the entire supply chain. The "CSR Procurement Guidelines" ask our business partners to continue and strengthen their environmental activities, including initiatives to address climate change issues.

• To strive to reduce greenhouse gas (CO₂ and other gases) emissions, and mitigate climate change
• To strive for effective use of resources and energy savings such as improving the efficiency of water and energy use

Since fiscal 2024, we have been distributing a video of the Toyobo Group CSR Procurement Briefing to approximately 500 major business partners worldwide as part of their training. In the briefing, we explained the Toyobo group's sustainability initiatives (such as carbon neutrality, respect for human rights, CSR procurement policies, and environmental policies) and requested compliance with the "Toyobo Group CSR Procurement Guidelines." We also expressed our desire to collaborate with our business partners to contribute to the development of a sustainable society throughout the entire supply chain. Based on the guidelines, our group's procurement department conducts a "CSR Procurement Survey" for business partners to monitor and evaluate their efforts to reduce GHG emissions and other risk factors. If the survey finds issues with business partners, we ask them to make improvements. Please see the following sections for the latest survey results and corrective actions.

• Supply Chain Management > CSR procurement survey
• CSR Procurement Guidelines

Involvement in organizations dedicated specifically to climate-related issues

GX League

Our group participates in the "GX (Green Transformation) League," led by the Japanese government (Ministry of Economy, Trade and Industry). By engaging in activities such as voluntary emissions trading (GX-ETS), rule making for market creation, and the generation of business opportunities, we are accelerating our efforts towards achieving carbon neutrality. We aim to drive economic growth and transform social structures by collaborating with participating companies, government agencies, universities, financial institutions, and other stakeholders.

Green x Digital Consortium

We participate in the "Green x Digital Consortium", which aims to create a new society and market using digital technology to achieve carbon neutrality in society as a whole.

Keidanren Carbon Neutrality Action Plan

As a member of the Japan Chemical Industry Association (JCIA), our group participates in the "Carbon Neutrality Action Plan" of the Japan Business Federation (Keidanren). Through the initiative, we confirm the Japanese government's climate change policy and reflect it in our group-wide policy. We are working with the association on a variety of engagement activities related to climate change measures, including the submission of comments on government policies, and are working to realize a decarbonized society.

Keidanren “Challenge Zero” initiative

In support of the “Challenge Zero" managed by the Japan Business Federation (Keidanren) in cooperation with the Japanese government, we have announced specific initiatives for challenge innovation to create a decarbonized society.