Information Disclosure Based on TCFD Proposal

Policy and Basic Approach to Climate Change

Today, climate change is one of the most pressing issues facing society, as is evident in the rising level of acute risk we face in terms of typhoons and torrential rains, and the accompanying floods that have become increasingly frequent and severe in recent years, as well as chronic risk in the form of rising average temperatures. In the IWATSU Group, as part of our promotion of ESG management, we have identified three forms of key sustainability issues related to the environment – “promotion of procurement activities that take sustainability into consideration,” “provision of environmentally-friendly products and services,” and “reduction of the environmental impact of the activities of business sites” – and we have positioned measures to tackle climate change through our businesses as one of our most important issues.

The IWATSU Group will work to fulfill the mission set forth in our Basic Policy on Sustainability, to “support the growth and development of companies and the people working at companies through the provision of communication technology that connects people and things, and aim to achieve a sustainable society and enhance corporate value.” At the same time, we will also support the recommendations of the TCFD and disclose information in accordance with these recommendations, as we aim to achieve the international targets set forth in the Paris Agreement.

Governance

The IWATSU Group considers climate change and other problems related to the natural environment as important issues in our promotion of ESG management, and we identify risks and opportunities related to climate change, and determine countermeasures and initiatives, through deliberation by our ESG Committee, which is chaired by the President & Chief Executive Officer. The Board of Directors also receives reports concerning the details of the meetings of this committee, and makes decisions concerning risk and opportunities related to management, as well as our response to these risks and opportunities.

Strategy

Process for Identifying Risks and Opportunities

　The businesses of the IWATSU Group consist of three main businesses: “business communication systems,” “test and measurement equipment,” and “printing systems.” The climate change risks and opportunities that stakeholders are expected to face differ in each business, so we select and identify these risks and opportunities separately for each business.

　We established the following perspectives for analysis related to the financial impact in 2030 when selecting risks and opportunities for each business and type of stakeholder.

Business Risks and Opportunities Identified

　The IWATSU Group performs scenario analysis on trends in problems related to climate change, and in Table 1, we show the risks and opportunities from climate change for the Company, identified based on the results of the selection of risks and opportunities in each business. For transition risks, the main risks and opportunities are expected to be based on “stronger regulations related to GHG emissions,” “changes in energy supply and demand,” and “changes in demand for decarbonization products,” based on the fact that in each of our main businesses, large amounts of electric power are used in processes from the manufacture of components and materials by suppliers, etc., to the use of products by users. For physical risks, we considered the main risks and opportunities to be the impact of climate change-related disasters on our plants and business sites.

Table 1 Risks and Opportunities Identified in our Businesses, and Countermeasures

Expected Financial Impact from Climate Change Risks and Opportunities

　The IWATSU Group expects the financial impact of climate change risks and opportunities projected in each scenario to be as follows.

　Under the 4.0°C scenario, we particularly expect physical risk in relation to “acute risk: increasing severity of natural disasters,” whereas in the 1.5°C scenario, we particularly expect transition risk in relation to increases in development expenses to reduce product CO₂ emissions as a result of “policy and legal: stronger regulations related to GHG emissions,” as well as changes in profitability owing to taxation from carbon taxes and rapid increases in energy prices caused by “technology: changes in energy supply and demand.”

Risk Management

Assessment of Climate Change Risks and Opportunities

　The IWATSU Group has assessed transition risks and “chronic” and “acute” physical risks related to “policy and legal,” “technology,” “market,” and “assessment of stakeholders” concerning climate change identified in scenario analysis, from the two perspectives of “impact” and “probability,” as shown in Table 2.

Table 2 Assessment of Impact and Probability

　The IWATSU Group has selected material climate change risks and opportunities from among those we assessed, and determined countermeasures after assessing them from the perspectives of “feasibility” and “degree of effect,” and prioritizing realistic and effective initiatives (see Table 1).

Management of Climate Change Risks and Opportunities

　The IWATSU Group monitors the latest information related to climate change through our environmental management system, and the ESG Committee appropriately revises risks, opportunities, the level of impact, and other factors, taking into consideration changes in business activities.

Integration of Climate Change Risks and Opportunities in Company-wide Risk Management

　Within the IWATSU Group, the ESG Committee analyzes and assesses company-wide risks and opportunities related to climate change, and reports the results to the Board of Directors. Together with other risks, the Company implements countermeasures against climate change risks and opportunities that we have decided upon, with the aim of mitigating risks and capturing opportunities under the direction of senior management.

Indicators and Targets

Target: Promote initiatives to achieve carbon neutrality

　The IWATSU Group will observe an SBT for 1.5°C level (WB for 2.0°C for Scope 3 emissions), and our targets for reducing greenhouse gas (GHG) emissions by 2030 will be as follows.
・ 42% reduction in Scope 1 and 2 emissions compared with FY2020 (average reduction per year of 4.2%)
・ 25% reduction in Scope 3 emissions compared with FY2020 (average reduction per year of 2.5%)

Scope 1 and 2 emissions reduction target

• Efforts by electric power companies to reduce emissions are based on the reduction when the target electric power CO₂ emissions factor for 2030 of 0.37/kgCO₂ set forth by the Federation of Electric Power Companies of Japan is applied, resulting in a 24% reduction from the electric power CO₂ emissions factor in 2020.
• For the reduction from energy conservation, we used a forecast of 15% in Scope 1 and 2 emissions compared with current levels.
• The switch to renewable energy is based on the difference between the total “target reductions by 2030” and reductions from the above two methods.

Scope 3 emissions reduction target

Record of emissions in the supply chain (Scope 1, 2, and 3)

• Items marked with “–” are not included because they are not applicable.

Scope 1 and 2 emissions

Scope 3 emissions