Response to Climate Change

Basic Concept

The Tsubaki Group addresses a variety of issues through its Environmental Philosophy of contributing to the “development of a sustainable society” by generating environmental value and economic value through manufacturing.
In particular, the need to respond to climate change is an urgent social issue and, at the same time, it is positioned as the highest priority matter in the Tsubaki Group’s medium- and long-term management plans.
Climate change presents major physical risks that include rising temperatures and more intense natural disasters. From a business perspective, while the transition to decarbonization poses a risk that could have a significant impact on the Group’s business operations, business domains, and product concepts, we recognize that the implementation of appropriate countermeasures will provide opportunities to strengthen our corporate structure, improve competitiveness, and develop new markets and business opportunities.
In recognition of these circumstances, in March 2022, the Tsubaki Group announced its support of the Task Force on Climate-related Financial Disclosures (TCFD). Utilizing the information disclosure framework recommended by the TCFD, which includes the risks and opportunities posed by climate change, we will identify and evaluate our own risks and opportunities and reflect the relevant countermeasures in our business strategies. Moreover, we will proactively disclose all relevant information related to these initiatives.

TCFD

* TCFD (Task Force on Climate-related Financial Disclosures): A task force that was established by the Financial Stability Board (FSB) in response to a request made at the G20 Finance Ministers and Central Bank Governors Meeting.

Governance

The Tsubaki Group’s sustainability initiatives are formulated by the Sustainability Committee, chaired by the COO, according to the terms of our Basic Policy on Sustainability.
With regard to climate change and other environmental issues, the Sustainability Committee conducts risk assessments and assessments of importance of material issues with reference to information provided by the Environmental Committee and the Sustainability Promotion Managers Meeting, identifies important risks and opportunities for the Tsubaki Group, sets KPIs and targets, and comprehensively manages the progress of these initiatives. The Board of Directors receives regular reports from the Sustainability Committee on the status of initiatives and KPIs and the like. This system enables the Board of Directors to provide supervision.
Regarding specific initiatives, we have formulated an action plan in accordance with the Mid-term Management Plan for Carbon Neutrality and the CO2 Emissions Reduction Roadmap formulated by the Environmental Committee. Centered on the Environmental Committee, the entire Group implements the PDCA cycle with respect to all initiatives.

Climate Change-related Governance System

  Chairman Members
Sustainability Committee COO Executive officers in charge of business operations
Secretariat:
Executive officer in charge of sustainability
Executive officer in charge of human resources
Sustainability Promotion Managers Meeting Executive officer in charge of sustainability Managers of sustainability-related Departments
Secretariat: Sustainability Promotion Department
Environmental Committee Executive officer in charge of the environment General managers of Tsubakimoto Chain, Representative of domestic manufacturing company
Secretariat: Sustainability Promotion Department

Strategy (Scenario Analysis)

1. Implementation System and Scope of Scenario Analysis

Tsubakimoto Chain organized its current status and issues regarding TCFD-recommended disclosures and decided on specific disclosures through the following process.

Implementation System

Scope

Business Scope All business segments (Chain, Motion Control, Mobility, Materials Handling)
Regions Covered All global regions
Target Subsidiaries Consolidated subsidiaries

2. Assessments of Importance of Risks and Opportunities

Climate change risks and opportunities are classified as either transition risks or physical risks, and the importance of each is assessed according to the risks and opportunities that are actually anticipated from both the magnitude and duration of the impact.

3. Definition of Scenario Groups

We analyze the risks and opportunities of climate change assuming a society in 2030 based on two scenarios: one in which the temperature rise is limited to within 1.5°C through a transition to a decarbonized society; and a scenario in which the temperature rise reaches 4°C.

  4℃ 1.5℃
Assumed Scenario A world in which no measures are taken beyond the expected and the average temperature rises by more than 4°C within this century. Intensification of natural disasters will occur. Efforts to mitigate climate change will be implemented, and greenhouse gas emissions will be virtually zero by 2050.
Predicted Changes in the External Environment Progress was not achieved in the development of low-carbon technologies, the transition to renewable energy, or the adoption of zero-emission vehicles; natural disasters are more frequent and are becoming more intense.

* See figure below.

The frequency and scale of natural disasters are the same or slightly increased. The development of energy-saving technologies, the transition to renewable energy, and conversion to zero-emission automobiles are accelerated.

* See figure below.

Reference Scenarios IPCC/RCP8.5
Scenarios corresponding to the greatest greenhouse gas emissions in 2100
IPCC/SR1.5
The world depicted in the IPCC’s 1.5°C Special Report

When considering scenario analysis, we refer to the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC).

External Environment Change Forecast for Each Scenario

4. Business Impact Assessment

We are considering the impact that both of the above scenarios will have on financial indicators.
As shown in the figure, there are numerous transition risks and opportunities associated with climate change, and these are shown to have positive and negative impacts on both net sales and profit. The single most important issue for us could be considered to be how to minimize the risks and maximize the opportunities.
In the future, we believe it will be important to draw up scenarios for each business unit, and to analyze the impact on their respective performance statements (sales and operating income) and balance sheets (investment plans and ROE and the like).

“Transition” indicates transition risk; “Physical” represents physical risk.

5. Scenario Analysis Results

Responding to and Addressing Risks

Regarding the risks identified in the scenario analysis, the magnitude of the risks and countermeasures are summarized.

Responding to and Addressing Opportunities

Under our Long-term Vision 2030, we examine risks and opportunities in terms of three factors: improving the profitability of existing businesses, expanding our business through transformational growth, and new growth (new businesses), and considering countermeasures.

Risk Management

Here at Tsubakimoto, in order to evaluate the importance of CSR issues related to the environment, society, etc., in FY 2019 we conducted a risk and opportunity assessment for each material issue through discussions among ESG-related divisions regarding both the degree of importance to the company and the importance to multi-stakeholders (Fig. 1). In the early part of FY 2020, we established KPIs and goals for each of the material issues, and initiated activities intended to systematize our activities to date and work on management issues from medium- to long-term perspectives. In the second half of FY 2021, we improved our governance system by establishing the Sustainability Committee and reviewing the structure of each committee. Going forward, the Sustainability Committee will periodically verify and review the assessments of importance of material issues related to ESG-related issues. In addition, efforts to address each issue through the PDCA cycle are implemented within each committee organization.
In June of FY 2021, we established the Tsubaki Group Long-term Vision 2030 with FY 2030 as the target, which set out both the direction of our path forward and what we want to be. From the risks and opportunities that can be expected from the future social environment, we have clarified the CSV issues and CSR issues that Tsubaki should work on going forward, as well as the role we should play.
The Environmental Committee evaluates the importance and priority of environmental issues based on their degree of importance to stakeholders (vertical axis) and their degree of relevance and impact on our business (horizontal axis) (Fig. 2). The degree of importance to stakeholders is evaluated based on the magnitude of the negative side (risks to be reduced) and the positive side (opportunities to improve financial indicators). As a result of this decision, we revised our Basic Environmental Policy in March 2021. In response to climate change issues, we have committed to raising CO2 reduction targets in accordance with the guidelines of the Paris Agreement and implementing reduction initiatives. Going forward, the Environmental Committee will continue to verify the demands of stakeholders and the progress of the company’s initiatives and periodically evaluate the importance of environmental issues, including climate change. Important matters are submitted to the Sustainability Committee for consideration.
Through these processes, we aim to enhance our corporate value by engaging in a cycle of identification and evaluation of climate-related risks.

Assessment of Sustainability-related Priority Matters (Fig. 1)

Environment-related Priority Matters (Evaluation of Material Issues) (Fig. 2)

Indicators and Goals

We have adopted medium- and long-term targets related to climate change.
The CO2 emissions reduction targets for Scope 1 + 2 adopted in 2017 were revised in April 2020 and the numerical targets were raised. Other targets have been adopted as priority matters under Long-term Vision 2030 and Mid-term Management Plan 2025, which were formulated in FY 2021.

* Science Based Targets (SBT), an international initiative that serves as an indicator of greenhouse gas emission reduction targets adopted by companies
Companies that are members of the SBT initiative set greenhouse gas reduction targets for Scope 1, 2 + 3 to meet the certification criteria set by the SBT. They may be certified by the SBT once their criteria are recognized.

* Annual trends for the above quantitative targets are listed in the Performance Data section below.

Initiatives and Performance Data (FY 2020)

Activities Meant to Reduce Total CO2 Emissions

As climate change progresses, the Tsubaki Group is working to reduce its CO2 greenhouse gas emissions.
We have established “Targets for Reducing Total CO2 emissions” as our mid-and long-term environmental targets, and are promoting specific initiatives based on our voluntary environmental action program.
Much of the energy used in the Group’s manufacturing is concentrated in the production process. We are therefore improving energy efficiency by proactively installing energy-saving production equipment while promoting the application of insulating paint coating for major plants and the conversion from heavy oil in air-conditioning equipment to liquefied natural gas and other fuels that have lower CO2 emissions. Further, when building or renovating plants, we carry out a host of CO2 reduction measures, such as expanding our use of renewable energy by proactively installing solar power generation equipment and adopting LED lighting.

FY 2020 Results

In FY 2020, the total CO2 emissions of the Tsubaki Group were as follows.
In Japan, we developed our long-term plan to reduce CO2, the 2030 Roadmap for CO2 Reduction in accordance with the long-term environmental goals of our group companies. Consequently, we were able to achieve a reduction in CO2 emissions by 9.8% compared to the previous fiscal year.
In addition, we achieved 51% (CO2: 23.4% reduction) compared to the long-term target for FY 2030 (CO2: 46% reduction).
Overseas, we referred to the data from FY 2017 at 14 major manufacturing bases in North America, Europe, and Asia.

Total CO2 Emission Trend Scope 1
(CO2 Directly Emitted In-House, Such as from Fuel Consumption)

  • CO2 emissions by location (domestic)
    CO2 emissions by location (domestic)
  • CO2 emissions by location (global)
    CO2 emissions by location (global)

Total CO2 Emission Trend Scope 2
(CO2 Indirectly Emitted In-House, Such as from Use of Electricity)

  • CO2 emissions by location (domestic)
    CO2 emissions by location (domestic)
  • CO2 emissions by location (global)
    CO2 emissions by location (global)

Total CO2 Emission Trend Scopes 1 and 2

  • CO2 emissions by location (domestic)
    CO2 emissions by location (domestic)
  • CO2 emissions by location (global)
    CO2 emissions by location (global)

 CO2 emissions factors for domestic power use are the “alternative value” of the “emission coefficient by electric utility” published by the Ministry of the Environment.
CO2 emissions factors for overseas power use are the 2018 CO2 emissions factors given in the International Energy Agency (IEA) Emissions Factors (2020 edition).

Toward a Sustainable Society

The Tsubaki Group is engaged in the “art of moving” and aims to provide value that exceeds expectations
to become a company that continues to be needed by society.