Climate-related Disclosures​ (TCFD Recommendations)

The global environment is the foundation of humanity, all living organisms and ecosystems that inhabit the planet, and corporate activities cannot continue without a healthy global environment.
The EBARA Group recognizes that climate change is a serious issue facing the world, and in 2019 signed the TCFD in support of the initiative. Through dialogue with our stakeholders, we will continue to improve our engagement with climate change and disclosure.​ As the IFRS® took over the monitoring of companies’ climate-related disclosures from the TCFD, we updated part of the information as of June 2024 based on IFRS® Sustainability Disclosure Standard S2 Climate-related Disclosures (hereinafter referred to as IFRS® S2).​

The Board of Directors recognizes that the important business challenge that the EBARA Group faces is the improvement of social and environmental values by practicing advanced sustainability management in light of ESG and sustainably contributing to solving the social challenges of the SDGs through our businesses and economic value by practicing ROIC-based management and portfolio management. The Board of Directors develops the basic management policy taking into consideration the long-term business environment so that the EBARA Group can sustainably generate capital for growth by practicing the above and then create greater value as it oversees continued implementation of the policy. We have specified and disclosed this approach in the Basic Policy on Corporate Governance and established the Sustainability Committee to make sure to implement this approach. The Board of Directors has included deliberations on matters related to sustainability that it should discuss, such as climate, nature, human rights, and human capital, on its annual agenda and secures time to discuss them from various angles on a regular basis. The Board of Directors has a system in which it holds discussion to specify how to execute the above and promote execution and gives feedback on the results to the Sustainability Committee. The Board of Directors has a system in which it holds discussion to specify how to execute the above and promote execution and gives feedback on the results to the Sustainability Committee. Additionally, as a mechanism to support the achievement of non-financial targets, the Company has adopted climate change as an evaluation item in ESG evaluation indices and has introduced a system to link it to executive compensation.

For more information on sustainability governance, please see here .

We have established the Sustainability Committee as an executive body to deliberate on the policy, strategy, goals and KPIs of activities that contribute to society, the environment and the sustainability of our group, and to confirm and review the results. The Sustainability Committee is chaired by the president and representative executive officer and has all the executive officers as its members and external sustainability experts as advisors. The course of action, strategies, risk management, and metrics/targets related to climate are discussed by the Sustainability Committee. All management personnel share the view that addressing climate change is an important management issue and one of the material issues in our group's long-term vision, E-Vision2030. The analysis of climate-related scenarios in each market that include the identification of risks and opportunities related to climate-related strategies is conducted under the responsibility of the presidents of the companies and the results are reflected in each company’s strategies. The results of our climate-related efforts are reflected in our executive officers' compensation.
We strive to incorporate advice from directors who sit on the Sustainability Committee into our activities.

We have established a Risk Management Panel (hereinafter referred to as "RMP") to oversee our group's risk management activities and to deliberate, provide guidance and support for improvements. The RMP is chaired by the President and Representative Executive Officer, and made up of all Executive Officers. Efforts to manage climate-related risks by the Risk Management Panel (RMP) Responses to acute physical risks such as meteorological disasters are discussed in the RMP.

When climate-related risks and opportunities relate to asset disposals, investments and loans, etc., they are submitted to the Management Meeting.
The Monitoring Meeting, which manages the progress of the management issue action plan toward achieving the medium-term management plan, monitors financial and non-financial issues, including climate change.
The Non-financial Management Issue Action Plan Monitoring Meeting is chaired by the Representative Executive Officer, President and CEO. Its meetings are held four times a year and the presidents of each company report the progress of the measures implemented to achieve the nonfinancial targets for the businesses of which they are in charge. The progress of the activities related to nonfinancial matters conducted in all the businesses is reported, and those activities are reviewed at the meetings of the Sustainability Committee held in March and September. The results of the Sustainability Committee's reports and reviews are reported to the Board of Directors.

We consider the impact of climate change on our business for each of our face-to-face markets through the following process. Climate-related strategies for our businesses in the building and industrial equipment market, oil and gas market, water infrastructure market, solid waste treatment market, and semiconductor manufacturing market are formulated under the responsibility of the company presidents and reflected in our medium-term management plans.
The following series of processes are carried out under the responsibility of each company president for each market. The analysis results and countermeasures from each company are compiled under the executive officer in charge of business strategy, reported to the Sustainability Committee, and the information is disclosed after confirmation by the Board of Directors.

We review our climate-related strategies at the same cycle as we formulate our medium-term management plans, and reflect them in the business strategies of each division company.
(Results of analysis conducted from the second half of 2021 to the end of March 2023)

We have assessed the climate-related risks and opportunities for our businesses in the building and industrial equipment market, oil and gas market, water infrastructure market, solid waste treatment market, and semiconductor manufacturing market as follows.

For the risk assessment, we extracted events that could occur in each facing market as subcategories within the medium categories of transition risks and physical risks shown in the "Risk Assessment" table below, and relatively assessed the financial impact of those events as "large," "medium," or "small." In the opportunity assessment, in addition to the subcategories extracted in the risk assessment, we also took into account the "Opportunity Aspects" in the table below to extract events that could occur in each face-to-face market, and relatively assessed the financial impact of those events as "large," "medium," or "small."

In line with the transition risks, physical risks, and opportunities outlined in the TCFD recommendations, we have identified climate-related risks and opportunities up to 2050 for each of our major face-to-face markets.
By referring to reliable documents such as SASB, IEA, and the Long-Term Vision for Responding to Climate Change in the Electrical and Electronics Industry, we have extracted risk items that could affect our business and comprehensively and qualitatively evaluated the importance of the risks and opportunities in terms of likelihood of occurrence, scale, and financial impact. The factors that may affect our business activities as climate change progresses are assessed as chronic physical risks by region. For example, we assessed water risks by using the AQUEDUCT assessment of overall risk as an index. We also conducted an assessment of our major business locations using AQUEDUCT, and as the assessment results were medium to small, we have determined that the importance of the chronic physical risk is low.
AQUEDUCT Please refer to the water risk website for the assessment.

We referred to objective scenarios such as the IEA* WEO** to compare the differences between the 1.5℃ scenario and the 4℃ scenario for the risks and opportunities identified in the importance assessment.
Based on the collected parameters and scenarios, how will the business environment change under the 4℃ scenario and the 1.5℃ scenario? How will we, our customers, policies/regulations, and suppliers change in a changing business environment? In addition, we created a scenario on the likelihood of new entrants and alternatives appearing. There will be no changes after the 2023 disclosure.
*IEA: International Energy Agency: International Energy Agency
**WEO: World Energy Outlook

Using the Group's financial and non-financial information, public information from the IEA and each country, and databases from international organizations, we estimated the financial impact of climate-related transition risks and physical risks for each of the Group's major face-to-face markets.

Based on the results of the financial impact assessment, we considered measures to address climate-related risks and opportunities up to 2050.

The figure shows the gap between the "course of events" and "after countermeasures" when climate-related risks and opportunities based on scenario analysis are taken into account, compared to the assumed operating profit for 2050 for each business (=100) that does not take into account climate-related opportunities and risks based on scenario analysis.
Course of events: Financial impact when considering the impact of climate-related risks and opportunities on current products, services, and production systems
After countermeasures: Financial impact when climate-related countermeasures are taken compared to course of events

In formulating our long-term vision, E-Vision 2030, we analyzed medium- to long-term changes in social conditions and market environments through scenario planning. We identified fluctuation risk as a long-term trend and volatility as a short-term risk, we further identified specific risks for each in-house company based on their operating markets. The identified opportunities and risks are managed under the corporate governance system.

To strengthen the EBARA Group's risk management system, we are thoroughly implementing the Group Management Regulations, establishing a risk management system, and establishing a contact system in the event of an emergency. We regularly conduct risk assessments to respond to the changes in the situation of risks surrounding the Group. In this risk assessment, we first organize possible risk items and then analyze the likelihood of occurrence, the degree of impact, and the remaining risks after countermeasures have been implemented for our Group. We then reevaluate our risk response system through questionnaires and interviews with business and division managers, clarifying the responsible department and reflecting this in our operations. In addition, in the event of an emergency or high level of importance that requires a company-wide response, a task force will be set up, headed by the CEO, to enable the entire company to quickly report, communicate, and make decisions.

Integrating climate-related risks into overall risk management

The significant climate-related risks and opportunities identified for each face-to-face market are managed in the "Action Plan for Non-Financial Management Issues" and "Action Plan for Management Issues," which are action plans in the medium-term management plan. In E-Plan 2025, our three-year medium-term management plan starting in 2023, we manage climate-related risks and opportunities in the "Action Plan for Non-Financial Management Issues."
The "Action Plan for Non-Financial Management Issues" is an action plan primarily for managing social and environmental indicators (non-financial), while the "Action Plan for Management Issues" is an action plan primarily for managing economic indicators (financial). The President, Representative Officer, CEO/COO chairs the monitoring meetings and reviews reports received from the in-house company presidents. Furthermore, the Sustainability Committee checks the progress of the Group's overall indicators and targets related to E (environment), S (society), and G (governance), and determines the Group's sustainability management action policy.
The "Action Plan for Non-Financial Management Issues" includes climate-related indicators. During the period of E-Plan 2025, we will monitor the financial impact of climate-related risks and opportunities, such as contributing to CO2 emission reduction through the provision of energy efficient products and setting goals to develop new products that further contribute to decarbonization. The "Management Issue Action Plan" monitors the progress of financial indicators.

The social and environmental value aspects of our Group's business activities are defined as "non-financial." We define social and environmental value and indicators that will have an impact on our finances in the future as non-financial indicators, and CO2 emissions and contributions to reductions are non-financial indicators.
In our medium-term management plan E-Plan 2025, which runs from 2023 to the end of 2025, we have set non-financial indicators and targets and are monitoring the progress of social and environmental value creation. The Non-Financial Management Issues Action Plan for the period from 2023 to 2025 sets targets for each fiscal year until 2025 by backcasting from performance targets for 2030 and includes metrics and targets for climate-related risks and opportunities for each target market identified by climate-related scenario analysis. Climate-related metrics are included in the Non-Financial Management Issue Action Plan. In addition, we are aiming to commercialize new businesses such as hydrogen-related, land-based aquaculture systems, and cultured meat production systems in order to solve various social issues, including climate-related risks and opportunities.
As a climate-related indicator and goal, we have set a goal of reducing GHG emissions by the equivalent of 100 million tons of CO2 by 2030. Other outcome targets also relate to climate-related transition and physical risks. We are promoting measures to achieve our performance targets.

The activity policy for CN and the progress of activities were submitted to the Sustainability Committee held four times in 2023, and the setting of Scope 1 and 2 targets for each company, Scope 3 targets, SBT setting, and the introduction of ICP were submitted to the Sustainability Committee to deliberate the activity policy. The contents of the discussion were reported to the board of directors.

Materiality 1: Review of the definition and calculation logic of "Reduction of 100 million tons of CO2 emissions through delivered products" (as of June 2024)
This target was set as one of the achievement targets in the long-term vision E-Vision 2030 announced by our Group in 2020. At this point, we defined and monitored the amount of CO2 that our customers could reduce by using our Group's products as our Group's contribution to avoided emissions.
With the publication of the Guidance on Avoided Emissions by the WBCSD in March 2023 as guidance on avoided emissions, we decided to review our definition in line with the guidance.
We are currently considering setting our own targets for Scope 3, avoided emissions, by 2024.

Materiality: Materiality in our long-term vision, E-Vision 2030. We have set five materialities. There are three material issues that are directly related to climate-related risks and opportunities.
We have set indicators and performance targets up to 2030, including risks and opportunities identified through comprehensive risk assessment and climate-related scenario analysis.
*Updated information for 2024