Sustainability

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Sustainability
Infromation Disclosure Based on TCFD Recommendations

Sustainability Sustainability

Sustainability

Infromation Disclosure Based on TCFD Recommendations

- Under the Group’s philosophy of contributing to society through the development of powder technology, we aim to address the issues around sustainability by accurately responding to the diverse needs and gaining the satisfaction of our customers through economical, superior technology. At the same time, our mission is to contribute to society, work to protect the natural environment through actions based on ethical guidelines, and strive to preserve the environment for future generations.

- Specifically, we are engaged in implementing a variety of sustainability measures both within and outside the Company, including:

Development, application, and sale of products that contribute to achieving the SDGs, including those that reduce greenhouse gas emissions and food waste and loss, and pharmaceuticals
Creation of products and services that contribute to a recycling-oriented economy and improved quality of life (QOL) by leveraging our proprietary powder technology
Offering raw material refinement and high-performance technologies to industries and sectors that are expanding in advance of carbon neutrality, including rechargeable batteries and motors
Introduction of an employee incentive plan (RS Trust) for all employees

- In particular, we believe that as we work toward carbon neutrality by 2050, the key will be for industries such as our Group that use steel to take action not only on their own, but across their entire supply chains. We acknowledge that continuing to steadily do what we can as a Group is essential to our survival and growth as a company. This goes as well for addressing climate change, where we will advance initiatives and the disclosure of information in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

1. Governance

The Group has now newly established the HOSOKAWA Sustainability Management Committee (meets quarterly or otherwise as needed; the “Committee”) to identify issues involving sustainability, engage in efforts to resolve those issues, and work to improve the level of governance. The Committee is chaired by the Executive Vice President and consists of the heads of each business and administrative division. It meets quarterly to discuss important matters related to the Company’s response to climate change. When necessary, it also submits reports to the Board of Directors to request that issues involving sustainability be considered when formulating management strategy, etc., and will receive directions and instructions from the Board.
The HOSOKAWA Sustainability Working Group (the “WG”) has also been established for the purpose of assisting in the operations of the Committee. This WG discusses and advances sustainability measures at the working level, including compiling proposals to be taken up by the Committee and making any necessary internal adjustments based on instructions from the Committee, submits reports to the Committee, and will receive instructions.
Establishment of targets and plans, selection of key priority issues, and progress with those plans are subject to verification as appropriate. Risks, opportunities, and their financial impact will be disclosed to stakeholders.
Organizational structure is as shown in the diagram below.

Organization of TCFD

2. Strategy

Scenario Analysis

The Group has conducted scenario analyses for the years 2030 and 2050, assuming the view that global temperatures in the year 2100 will rise 1.5°C, 2°C, and 4°C.
In the first year, scenario analyses were conducted limited to HOSOKAWA MICRON CORPORATION (domestic only), HOSOKAWA MICRON Cosmetics Corporation and HOSOKAWA Powders Corporation. Going forward, they will gradually be expanded to include overseas consolidated subsidiaries.
We are conducting these analyses, including assessments of criticality and financial impact, with reference to scenarios and other information disclosed by the government bodies and research institutions shown below:
IEA World Energy Outlook 2022 (2022), NZE2050/APS/STEPS
IPCC AR6, SSP1-1.9 (1.5°C scenario)/SSP1-2.6 (2°C scenario)/SSP5-8.5 (4°C scenario)

Risks and Opportunities

Below, we disclose nine areas of risk that are expected to have a particularly significant impact on the Group, and that are considered highly likely to actually occur.

Type		Factors causing risk	Specific description	Financial impact in 2030
		Factors causing risk	Specific description	1.5℃ (2℃)	4℃
		Transition Risks	Policy and Legal	Increased pricing of GHG emissions	Increased taxes on fuels, including the introduction of a carbon tax, will increase manufacturing costs (raw material costs) and SG&A expenses, putting pressure on earnings	High	―
Strengthened energy conservation policies, low carbon/decarbonization measures, etc.	Increased capital investment and management costs due to own GHG emissions reporting obligations, GHG emissions reductions, presentations to customers, etc.			Low	―
	Environmental regulations limit business activities (opportunity loss) while also putting pressure on earnings			Low	Low
	Opportunity loss due to inability to procure from suppliers that cannot comply with regulations and go out of business as a result			Low	―
Markets	Changes in consumer behavior		Entry of businesses with alternative technologies triggers a shift in needs toward products (e.g., high energy efficiency) and services (reuse and maintenance) that contribute to low-carbon or decarbonization efforts; decline in competitiveness of Company’s existing high environmental impact products and delayed development response put pressure on earnings	Low	―
Reputation	Criticism of business sector Increased uncertainty among stakeholders		Loss of stakeholder support and decline in corporate value due to inadequate efforts to address energy conservation and low carbon/decarbonization policies and information disclosure	Medium	―
Physical Risks	Acute	Increased severity and frequency of extreme weather events, including typhoons and floods	More frequent and severe extreme weather events cause supply chain disruptions due to damage to facilities at Company’s own and partner factories, damage to suppliers and logistics warehouses, etc., resulting in longer delivery times and operational stoppages that cause opportunity losses and bad debt	Low	Low
	Chronic	Change in rainfall patterns Extreme fluctuations in weather patterns Rise in average temperatures Rise in sea levels	Rise in average temperatures puts pressure on earnings due to increased risk of heat stroke, declining operational efficiency and increased investment in air conditioning equipment, the occurrence of serious accidents, etc	Low	Low
	Chronic		Droughts and flooding associated with rising average temperatures and rising sea levels put pressure on earnings and cause opportunity losses due to difficulties in procuring raw materials and parts and soaring prices	High	High

Below, we disclose four areas of opportunity that are expected to have a particularly significant impact on the Group, and that are considered highly likely to actually occur.

Type		Factors resulting in opportunity	Specific description	Financial impact in 2030
		Factors resulting in opportunity	Specific description	1.5℃ (2℃)	4℃
		Opportunity	Resource efficiency	Use of more efficient modes of transportation Use of more efficient production and distribution processes	Reduced management and transport costs due to energy conservation and efficiency resulting from compatibility with energy conservation and low carbon/decarbonization regulations	Low	―
Products and services	Development and expansion of low carbon products and services Development of new products and services through R&D and innovation		Increased sales of products contributing to energy conservation and improved manufacturing efficiency (GEN4 RM, XO, PAS, PT-X, VBL-F and other dryers, crushers, and measuring instruments)	Low	―
Markets	Access to growth markets with shift to energy conservation and low carbon/decarbonization		Increased sales of Company’s powder-related equipment linked to increased demand for rechargeable batteries for EVs and food substitutes, etc.	Low	―
Reputation	Changes in stakeholder assessments		Contributing to low carbon/decarbonization through products, services, and Company’s business activities, and taking the industry lead in disclosing this information, will gain the support of stakeholders, enhance our value, and lead to increased business results	Medium	―

Response

With regards to our medium to long-term responses to the risks and opportunities identified herein, we will continue to implement and assess the effectiveness of these measures and improve the resilience of our business activities

Item		Specific description
1	Promote GHG emissions reductions in business activities	Improve efficiency of own operations and product deliveries	Optimize design (quantity of materials used, reduction in processing times) Develop sales activities and service offerings utilizing the web Promote automated capture (GEN4) of factory default data (initial values) Review product delivery and packaging methods (mixed loading, review of packaging materials, etc.) Improve efficiency in delivery operations (use of DX)
		Reduce energy usage	Shift to energy-saving, more efficient equipment Upgrade to energy-saving devices (more energy-efficient air conditioning, shift to LED lighting, shift to HEVs for company-owned vehicles, etc.)
		Shift to business activities that promote these measures	Formulate business plans (investments, etc.) based on trends in regulatory systems involving carbon pricing Create and implement a road map for reducing GHG emissions
2	Build a more resilient supply chain	Develop educational activities, including explaining our policies to partners (in procurement, manufacturing, construction, logistics, etc.) Encourage shift to in-house manufacturing
3	Expand products and services based on corporate philosophy of contributing to society through the development of powder technology	Expand energy-saving products	Develop highly energy-efficient, energy-saving products and technologies based on the collective technological strengths of Group companies, and develop and expand systems that contribute to greater energy savings and efficiency
3		Expand products and services that contribute to improvements in customer energy savings	Support for early development of optimized operations (energy-saving operations) via GEN4 Realization of failure prediction technology and early provision and expansion of services Develop designs and components with low maintenance costs
4	Explore new market needs associated with shift to low carbon/decarbonization	Address new market needs, including ethical consumption, etc. Strengthen human resource development to acquire technical capabilities compatible with market needs
5	Engage in proactive information disclosure and develop new sustainability initiatives	Strengthen communication with stakeholders through proactive information disclosure	Strengthen offering of information on energy-saving products and products and services to support improved energy savings Introduce Company low carbon/decarbonization activities
5		Develop new sustainability initiatives	Partnerships with companies that have decarbonization technology and expertise Initiatives in areas outside of products and services (environmental preservation)
6	Enhance resilience	Advance Company BCM*	Enhance BCM^* levels
6	Enhance resilience	Ensure employee safety and health	Create employee health friendly workplace environments (facilities/IT investments, etc.)

*BCM : Business Continuity Management

3. Risk Management

The Committee is primarily responsible for formulating policies and measures to avoid, mitigate, and control the identified climate change-related risks, and to formulate policies and responses for quickly initiating work on opportunities. Quarterly, and otherwise as needed, the Committee submits reports to the Board of Directors and will receive directions and instructions from the Board.
Climate change-related risks are regularly subjecting to and managing via the process shown below.

Regarding Group risks in general, the Business Division is responsible for reporting from a Company-wide perspective at meetings of the General Management Meeting held monthly on issues involving management and sales, as well as various issues including the status of overseas operations. Based on these reports, information is collected on various risks the Group may face going forward, and efforts are made to build a risk management system that can review and implement effective countermeasures while allowing for dynamic, optimal responses according to the degree of impact those risks have on management. This also applies to important risks related to climate change, which are reported to the General Management Meeting quarterly or otherwise as needed, in an effort to coordinate risks across the Company as a whole.

4. Indicators and Targets

Since the fiscal year ended September 2022, the Group has been engaged in efforts to understand CO₂ emissions from its own business activities (“Scope 1, 2”) and from within its supply chain (“Scope 3”).

In addition, using fiscal 2022 Scope 1, 2 levels as reference values, the Group has established Group Scope 1, 2 reduction targets* aimed at reducing CO₂ emissions.

　　　2050 Target: Scope 1, 2 Effectively zero
　　　2030 Target: Scope 1, 2 Reduce 24%^*(compared to fiscal 2022)　

* Applies to HOSOKAWA MICRON CORPORATION (domestic only),
HOSOKAWA MICRON Cosmetics Corporation and
HOSOKAWA Powders Corporation.

In fiscal 2022, Scope 1, 2 amounted to 2,259t; Scope 3 totaled 2,974,664t (metric tons).

We will contribute to reductions in Scope 3 as well, through energy-saving products and by expanding products and services that contribute to customer energy-saving improvements.

Values calculated based on the "Basic Guidelines for Calculating Greenhouse Gas Emissions Through the Supply Chain", issued by the Ministry of the Environment and the Ministry of Economy, Trade and Industry.
For the first year (fiscal 2022), calculations limited to HOSOKAWA MICRON CORPORATION (domestic only), HOSOKAWA MICRON Cosmetics Corporation and HOSOKAWA Powders Corporation.