TCFDREPORT2023
Task Force on Climate-related Financial Disclosures ReportInitiatives in Line with TCFD Recommendations
The Nippon Fine Chemical Group uses raw materials derived from fossils and fossil fuel as energy sources in themanufacture of many of our products. Based on our recognition that risks and opportunities due to climate change are
key management issues, in December 2021, we declared our support for the recommendations of the Task Force on
Climate-related Financial Disclosures (TCFD). We are using scenario analysis to assess the risks and opportunities ofthe impact of climate change on our business. Going forward, we will recognize the signiﬁcance of such impact,strengthen the resilience of our strategies by reﬂecting such impact in our management measures and strengthen
relationships of trust with our stakeholders.

Governance
We h a v e e s t a b l i s h e d a S u s t a i n a b i l i t y

Sustainability Organizations

Committee, chaired by our Representative
D i re c t o r, P re s i d e n t a n d c o m p o s e d o fmembers selected from each division.
The Sustainabilit y Commit tee identiﬁesrisks and opportunities based on scenario

Representative Director, President

analysis of climate-related issues, assesses

Management Meeting

their importance, formulates promotion
action plan, and manages the progress ofactivities.
The Sustainability Committee puts together
a promotion action plan once a year, which

Sustainability Committee(Membership: Sales, Purchasing, Production, Research,Administration Divisions and Committees of Group companies)

the Board of Directors approves following
deliberation by the Management Meeting.
The Sustainability Committee checks theApproves sustainability
promotion action plans
and supervises
promotional activities

Board of Directors

Sustainability Committee Secretariat
Administration Divisions

Sustainability Oﬃce

state of activities on a quarterly basis, inprinciple, and reports the results of such checks to the Management Meeting. The Board of Directors receives semiannual
reports and supervises promotional activities.
Details of external trends and information on climate change are shared with the Management Meeting and the Board ofDirectors through the Sustainability Committee obtained by endorsing the TCFD recommendations and joining the TCFD
Consortium.
To promote the reduction of greenhouse gas emissions, the Board of Directors approved and announced a 38% reduction
in carbon dioxide emissions by FY2030 compared to FY2013 levels. In addition, the state of achievement of materialities,including the reduction of carbon dioxide emissions, is reﬂected in performance-linked remuneration paid to directors andcorporate oﬃcers.

●Sustainability Committee Agenda for FY2022
Timing of Meeting
April2022

July

2022

August2022

September 2022
October

2022

Main Matters Discussed
Evaluation indicators for materialities, formulation of numerical materiality goals, and proposed TCFD disclosuresFormulation of a plan for achieving the numerical materiality goals and calculation of business impact
assessments related to TCFD
Details of TCFD business impact assessment estimates
Details of TCFDs business impact assessment estimates and proposed disclosures
Conﬁrmation of the progress of the plan to achieve numerical materiality goals and detailsof the TCFD business impact evaluation estimates and countermeasures, and indicators and targets

November 2022

TCFD business impact evaluation estimates and countermeasures, and indicators and targets

December 2022

TCFD disclosure draft

January2023

Conﬁrmation of the progress of the plan to achieve numerical materiality goals and proposed TCFD disclosures

February

2023

Committee's ﬁnal TCFD Group disclosure draft1

Risk Management
The Company-wide Risk Management System Committee, chaired by the Representative Director, President andcomposed of managers, is the highest decision-making body in our risk management system (RMS). The committee
discusses risk management policies, plans, implementation, RMS improvements, and other general RMS-related matters,and ﬁnal decisions on such mat ters are made by the chairman based on the outcome of such discussions. The
Company-wide RMS Committee identiﬁes critical risks using a risk map based on the impact on business activities andfrequency of occurrence evaluation axes. Risk management for sustainability-related matters is referred to theSustainability Committee, which identiﬁes materialities based on the degree of importance to stakeholders and thedegree of importance to our Group. The Sustainability Committee has identiﬁed climate-related risks as one of theenvironmental materialities, and identiﬁes and evaluates risks and opportunities based on the following evaluation axes todetermine the level of materiality. The Committee formulates measures and creates promotion action plans for items thatare assessed as having a signiﬁcant impact on risks and opportunities. The Committee also manages the progress of theformulated plans and activities and reports such progress to the Management Meeting. The Management Meeting
deliberates management plans and business strategies based on the state of current initiatives and other factors, andsuch plans and strategies are then approved by the Board of Directors.

●Assessment Axis for Climate-Related Risks and Opportunities
１2

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Identify risks and opportunities related to climate change that may aﬀect the Group with reference
to the TCFD Final Report
Evaluate identiﬁed risks and opportunities from the perspective of their impact on the Group's businessactivities, customers, suppliers, etc., and the likelihood of their occurrence
Evaluate the impact of each item from both a qualitative and a quantitative perspective using scenario
analysis to determine relative importance

Strategies
We have added ARBOS which is NFC Group company and in environmental hygiene product business, to the strategies forthe impact of climate change on our business. We set 2030 and 2050 as the time frame for considering, and haveanalyzed scenarios for risks and opportunities associated with the transition to a low-carbon economy and risks andopportunities associated with the physical impact of climate change in a 1.5°
C world in which climate change measures
have progressed and the Paris Agreement targets have been realized and in a 4°
C world in which no new climatechange measures are taken and greenhouse gases have increased. In assessing the impact on our business, we found that
under the 1.5°
C scenario, there will be a signiﬁcant impact on our business of policies and regulations relating to carbon
taxes and emission reductions and concerns about procurement of naturally derived raw materials, while there will also
be opportunities to expand the sale of materials for perovskite solar cells. Under the 4°
C scenario, we found that there
will be a signiﬁcant impact on our business of soaring crude oil prices and concerns over the procurement of
naturally-derived raw materials, while there will also be opportunities to expand the sale of materials for perovskite solar
cells as under the 1.5°
C scenario.
Nippon Fine Chemical alone has reduced Scope 2 by switching all purchased electricity to renewable energy since May
2022. In the future, we will promote Scope 2 reductions by expanding this switch to Group companies. We will also
implement fuel conversion from heavy oil to city gas for boilers, and continue to consider Scope 1 reductions byupgrading aging facilities to save energy and replacing company vehicles with EVs, etc.

●Main Scenarios Referenced1.5°
C Scenario
Transition-related Risks
and Opportunities

4°
C Scenario

International Energy Agency (IEA)

International Energy Agency (IEA)

IEA NZE2050

IEA STEPS*

Physical impact-related Risks

Intergovernmental Panel on Climate Change (IPCC) Intergovernmental Panel on Climate Change (IPCC)

and Opportunities

SSP1-1.9

SSP5-8.5*Substitute due to there being no 4°
C scenario

2Results of 1.5°
C and 4°
C Scenario Analysis (aﬀected items)
Risk/Opportunity Category

1.5°
C World

4°
C World

Carbon taxes will be introduced toachieve the 1.5°C target, carbon prices

Carbon tax
and carbon pricewill rise, emissions trading will become
more common, and production,

Policies/Regulationstransportation, and procurement costs

Eﬀorts related to carbon pricing will nothave progressed and remain largely
unchanged from the current situation.

will increase.

- Global regulations on palm plantation
development will be tightened, palm oil
supplies will be squeezed, and there

Carbon emission targets/policies in each country

will be pressure on supply and demand.
- The introduction of carbon taxes in the
EU will trigger a global trend of
imposing the same level of tax on virgin

Transition

plastics, including in Japan, which will

- Palm oil supplies from newly developing
countries will grow and supply anddemand is stable.
- The obligation to use recycled plastic
will not be introduced and use willremain largely unchanged from thecurrent situation.

lead to higher procurement costs.

Soaring price ofraw materials

Industry/Market

Development of
new products andservices through R&D
and innovation

Oil prices will decline as a result of asigniﬁcant drop in demand due to
low-carbon technology innovation andpolicies to reduce CO2 emissions.

Globally, the amount of solar power
generation equipment introduced in
2030 is expected to be 4.3 times thecurrent level, which will increase thedemand for raw materials.

With no restrictions on fossil fuels, theglobal demand for energy is increasing.
The price of petroleum-derived raw
materials will rise in line with the rise in
the price of crude oil.

Globally, the amount of solar power
generation equipment introduced in 2030
is expected to be 3.1 times the current
level, which will increase the demand for
raw materials.

- More frequent and prolonged droughts
The quantity of wool grease produced
will decrease, making it diﬃcult toprocure, following the decrease in raw
wool production due to the reduced
demand for wool as a result of higher

Chronic

Physics

Increase in average

average temperatures.

associated with higher average temperatures
will suppress sheep numbers due to feed
shortages and higher feed prices. The numberof sheep will also decrease due to the fall inthe birth rate caused by the heat.
- The quantity of wool grease produced willdecrease, making it diﬃcult to procure,
following the decrease in raw wool production

temperature/changes

due to the reduced demand for wool.

in precipitation andtemperature patterns
There will be no change in the supply ofrapeseed oil due to higher averagetemperatures, and procurement costs
will remain virtually unchanged.

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There will be a decrease in rapeseed oil
production due to higher averagetemperatures and lower laborproductivity will result in a fall in supply
and higher procurement costs.

Addressing Climate Change Risks and Opportunities
Financial impactSmallRisks

Opportunities

PeriodLess than 100 million yen

Medium-term Until FY2030

Medium 100 million yen to less than 500 million yen
Long-term

500 million yen or moreLarge

Scenario

Risk/Opportunity

Carbon tax
and carbon priceTargetBusiness

F/E

1.5°
C
Scenario

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Develop
new products
and services throughR&D and innovation

Soaring price ofraw materials

F

Financial
impactImpact on Business

The introduction of carbon pricing, apolicy approach that puts a price on
carbon causing carbon emitters tochange their behavior, may increase
procurement and transportation costs
due to the increase in the price added
to carbon emissions by suppliers andtransporters, as well as the direct tax
burden.

Risks

Reduced demand for wool as a result of
rising average temperatures may make itdiﬃcult to procure naturally-derived raw
materials (wool grease) andprocurement costs may increase.

Risks

Already
implemented- Use a carbon neutral natural gas heatsource.
- Introduce heat source equipment that uses
energy that does not emit carbon dioxide.
- Introduce carbon dioxide capture andseparation technology.
- Improve product production processes anddevelop new products by introducing ﬂow
reactors and using enzymes.
- Reduce carbon dioxide emissions by
consolidating suppliers and sales destinations.
- Reduce carbon dioxide emissions byreplacing company vehicles with EVs, etc.

Longterm- Consider using biomass and algae-derived
oils and fats.
- Expand recycling of by-products of products.
- Reduce the amount of wool grease purchasedby reducing the quantity of products sold.

Longterm

Develop materials for perovskite solar
cells and expand sales.

Mediumterm- Consider substitution withnon-petroleum-derived raw materials.
- Consider using biomass and algae-derived
oils and fats.
- Promote the 3Rs for plastics, which are
made from petroleum-derived raw materials.

Longterm- Consider using biomass and algae-derived
oils and fats.
- Expand recycling of by-products of products.
- Reduce the amount of wool grease purchasedby reducing the quantity of products sold.

Longterm- Consider using biomass and algae-derived
oils and fats.
Medium - Multiple supply sources.

Longterm

Large

Large

FF

carbon neutrality goal

Nippon Fine Chemical alone switched allpurchased electricity to renewable energy
in 2022, and reduced CO2 emissions byswitching the energy source for its boilers
from heavy oil to city gas.

The use of renewable energy will be
encouraged and the demand for solar
power generation equipment willincrease.

F/E

Measure in line with FY2050

PeriodThe introduction of carbon pricing willencourage the use of renewable energy
Opportunities
and the demand for solar power
generation equipment will increase.
Large

Soaring crude oil prices following an
increase in demand for fossil energy
may increase the cost of procuringpetroleum-derived raw materials.

Measure in line with the FY2030 38%

reduction target for carbon dioxide emissions

Countermeasures

F4°C
Scenario

Increase in averagetemperature/changes
in precipitation andtemperature patterns

Until FY2050

Reason for Adoption

Opportunities
Large

Risks
Large

More frequent and prolonged droughts
associated with higher averagetemperatures will suppress sheep numbers
due to feed shortages and higher feed prices
and reduce birth rates due to the heat. Inaddition, reduced demand for wool may
make it diﬃcult to procure naturally-derived
raw materials (wool grease) andprocurement costs may increase.

Risks

There will be a decrease in rapeseed
oil production due to higher averagetemperatures and lower laborproductivity will result in a fall in supply
and higher procurement costs.

Risks

Large

F: Functional Products Business

E: Environmental Hygiene Products Business●Develop Materials for Perovskite Solar Cells
The ﬁlms for perovskite solar cells, which are expected to form the next generation of solar cells and which are
currently being developed, can be manufactured at low cost. They are expected to be used for multiple
applications due to being both light and very ﬂexible, and not requiring as much installation space as older types.
Nippon Fine Chemical is working on the development and practical use of Spiro-MeOTAD (SFA) and othermaterials used as novel organic hole transport materials that oﬀer high performance for perovskite solar cells, themost promising new renewable energy source.

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Indicators and Targets
The greenhouse gas emitted by the Nippon Fine Chemical Group is mostly energy-derived carbon dioxide. In October2021, the Japanese government published its Plan for Global Warming Countermeasures for Scope 1 and 2* whichcalls for a 46% reduction in Japan's overall GHG emissions by FY2030 compared to FY2013 levels. Within this overallgoal, the industrial sector s target is a 38% reduction in energy-derived carbon dioxide by FY2030, and so we areworking to reduce our carbon dioxide emissions by 38% in FY2030 compared to FY2013. Despite adding Groupcompany ARBOS (environmental hygiene products business) to our carbon dioxide emissions from FY2021, we havenot changed our carbon dioxide emissions reduction target for FY2030. Nippon Fine Chemical alone has reduced
Scope 2 by switching all purchased electricity to renewable energy since May 2022. In the future, we plan to conduct
Scope 3* calculations to reduce the amount of greenhouse gas emissions throughout our supply chain. We will also
work to achieve carbon neutralit y by 2050. In addition, the state of achievement of materialities, including thereduction of carbon dioxide emissions, is reﬂected in per formance - linked remuneration paid to directors andcorporate oﬃcers.

Changes in Carbon Dioxide Emissions

Unit: tons
25,000

Scope 1（Scope 2（
20,00015,000

5,374
5,071

Nippon Fine Chemical
Nippon Fine Chemical

109
5,337
5,570

5,616

6,049

5,890
5,402

5,866
335

10,0005,000

013,5142013

15,972

2014

ARBOS ）ARBOS ）

14,601

2015

11,641 12,558

2016

2017

13,766 14,104

2018

2019

431

164
329

12,505 13,351 11,998

2020

Japanese standards

2021

2022
FY

GHG protocol standards

Note: - Japanese standards: calculated based on Act on the Rational Use of Energy and Act on Promotion of
Global Warming Countermeasures- GHG emissions from FY2021 are calculated based on GHG protocol standards*Scope 1: Direct GHG emissions from an operator s own fuel combustion
Scope 2: Indirect GHG emissions from the use of electricity and heat supplied by other companies
Scope 3: indirect emissions not included in Scope 1 and Scope 2(emissions by other companies related to the company s activities)

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