Disclosure based on recommendations from Task Force on
Climate-related Financial Disclosures (TCFD)
1. Response to TCFD Recommendations
In order to realize our management philosophy of "Continuing to support people and society
by pursuing the possibilities of materials," we consider climate change action to be one ofour most important management issues. As a part of this effort, we have formulated the"Daido Carbon Neutral Challenge" and are promoting initiatives aimed at reducing CO2emissions by 50% in FY2030 compared to FY 2013 and achieving carbon neutrality by 2050.
In November 2021, we expressed our support for the TCFD recommendations and further
strengthened our governance and clarified our strategy based on the TCFD recommendations.
We will work to further enhance information dissemination and disclosure by communicating
the risks and opportunities that climate change poses to our business in an easy-tounderstand manner.
※About the Task Force on Climate-related Financial Disclosures (TCFD)
The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial
Stability Board (FSB) at the request of the G20 and recommends that companies disclose thefinancial impacts of risks and opportunities posed by climate change on their operations and thespecific measures they have taken to address them.

2. Information disclosure in accordance with the TCFD Framework(1) Governance
In April this year, we reorganized the existing CSR Committee and established a new
Sustainability Committee as an organization to review and deliberate basic policies, importantmatters, risks, and opportunities related to climate change. The Sustainability Committee ischaired by the President and CEO and submits matters discussed and decided by theCommittee to the Board of Directors.
The Sustainability Promotion Section and the "CO2 Reduction Project," a company-wide
project, have been established to plan, deploy, and strengthen the promotion of CO2 emission
reductions throughout the company.
The agenda items deliberated and decided by the Board of Directors will be forwarded toeach business division and reflected in their respective business operations.

CRM: Corporate Risk Management(2) Strategy
A scenario analysis was conducted for the period 2030~2050 in order to understand therisks/opportunities and impacts of climate change on our company, and to examine theresilience of our mid- to long-term strategy and the need for further measures. The scenario
analysis referred to climate change scenarios (1.5°C scenario and 4°C scenario*) by theInternational Energy Agency (IEA) and the Intergovernmental Panel on Climate Change(IPCC). Risks and opportunities were extensively extracted, and risks and opportunities withhigh impact on our business were selected from the perspective of "those with a highlikelihood of occurring" and "those with a large impact when they do occur," andcountermeasures were considered. We will also continue to closely monitor risks andopportunities that were not included in the analysis this time.
After examining countermeasures for each risk and opportunity, we have concluded that we
can improve our corporate value by developing and expanding sales of high-functional
materials and innovative environmentally friendly engineering products based on the basic
strategies of our medium- to long-term management plan in response to the socialtransformation toward decarbonization. We evaluated our strategy as having resilience.
*1.5°C scenario: a scenario in which measures such as tighter regulations and market changes are taken
to minimize temperature rise
4°C scenario: a scenario in which temperature rise results in extreme weather events and other physicalimpacts

TCFD Scenario Analysis
Scenario

Factor

1.5℃Conversion toEV

ChangeDecreased
demand forinternal
combustion
engine parts

Impact on our company
Risk

Increased
Chance ●Demand will increase for thedemand for highfollowing materials
performance* e-Axle components, battery
materials for EVs
components, high-strength steel,magnetic materials, etc. used forcontrol system components, etc.
Strengtheningof various
environmental
regulations
including GHG
emission

Increase inelectricity costs
due to use ofrenewable energy
sources

Introduction of Increased
carbon pricing operating andprocurement
costs
Increased
demand forelectric furnacematerials

Increased
Increased scrap
demand for
procurement
scrap materials costs

Disseminationof new
environmental
and energyrelated
technologies

Increased
demand forinnovative ecofriendly
engineering

Our countermeasures●Demand for internal combustion□Achieve sustainable businessengine vehicles (ICE) is expected
growth by expanding sales in theto remain at the current level until
future growth markets of CASE
2030, but is estimated to decline(automotive), semiconductorsignificantly after 2030 due to therelated products, and green energy.
shift to EVs.
□Material development for eachproduct need
□Production capacity improvement
to meet increased demand□Launch and market entry of new
products and businesses for nextgeneration automobiles

Risk●Electricity costs will increase due □Cost improvements through energy
to the increased use of renewableconservation, improved productenergy sources.
yields, etc. to absorb increasedpower costs□In-house installation of renewableenergyRisk●Procurement and operating costs
for alloys and materials may
increase□Offset the cost burden by investingin CO2 reduction and converting allelectricity to renewable energy□Requesting suppliers to reduce CO2
emissions

Chance ●Demand for electric furnacematerials with relatively low CO2
emissions is expected to increase
in response to the growing
demand for decarbonization andthe increasing preference for low
emission products.

□Aggressive sales expansion of "lowCO2 emission special steel
products" manufactured from theadvanced innovation electric
furnace "STARQ" developed by ourcompany□Further differentiation by shifting to
renewable energy sources

Risk●Demand for high-grade scrap will
increase due to rising global
demand for electric furnacematerials.
●As a result, prices may soar or it
may become difficult to procure.

□Curbing price hikes and securing
necessary scrap volumes by
expanding scrap recycle schemes incooperation with customers andestablishing technologies thatenable the use of low-grade scrap

Chance ●Demand for our environmental□Aggressive sales expansion ofengineering services will increase
Daido brand energy-saving
as more investments contribute toproductsenergy efficiency for※STARQ, DINCS, Modul-Therm,decarbonization.
Premium-STC, etc.
□Promote development ofengineering products (hydrogencombustion industrial furnaces,etc.) that meet user needs

Increased
Chance ●The demand for high-performance □Material development for eachdemand formaterials such as steel for
product needhydrogen-relatedhydrogen embrittlement resistance □New user and market development
technologies andwill increase with the development
productsof a hydrogen society.
*High functional materials used inhydrogen stations, fuel cellvehicles, hydrogen internal
combustion engines, etc.
4℃

Weather-related Risk of shutdown
disasters
due to damage toIntensification suppliers or our(Acute)production sites

Risk●The risk of our operations being□Promote BCP measures such as risk
shut down increases if ourmanagement in cooperation withsuppliers or major plants are hit by suppliers and appropriate inventory
natural disasters.
□Major plants continue to takemeasures against flooding

(3) Risk Management
Through the Sustainability Committee, we will analyze climate-related risks, formulate andpromote countermeasures, and manage progress.
The Sustainability Committee will report its analysis and discussion to the Board of Directors
for company-wide integrated risk management.
In this disclosure, a working group on climate-related risks was established to conduct
scenario analysis. In light of our business strategy, we will prioritize climate-related risks
based on the likelihood of occurrence and impact of risks and opportunities, and focus on
high-impact matters for countermeasures. In the future, the TCFD-WG will be establishedwithin the Sustainability Promotion section, which operates the Sustainability Committee, tocontinuously check and review these issues.
Board of directors

Supervision

Sustainability Committee (meets at least 4 times a year)
Chairman: President & CEO
Vice-Chairman: Executive Vice President
Committee members: Directors, Managing Executive Officers, etc.
Role: To deliberate on the company's role as a responsible member of society and its corporate activities,
including its response to climate change. The committee oversees the sustainability-related matters ofeach committee and reports to the Board of Directors on their questions.

Sustainability Promotion Sect.
TCFD-WGCO2 reduction committee (2 times a year)
Chairman: Officer in charge of TechnicalPlanning Department
Members: General Manager of the General
Affairs Dept., Plant managers, etc.
Role: Progress management of CO2 emission
reduction related activities

Environment Committee (2 times a year)
Chairman: Officer in chargeof the Environment Department
Members: General Manager of technicalplanning dept., Plant managers, etc.
Role: Progress management of environment
related activities

CO2 Reduction Project

Environment Department

Daido Group CO2 reduction
Promotion Liaison committee

Daido Group Environment
Liaison Committee

Business units, Production Engineering departments, Plants and Group companies

(4) Metrics and Targets
Daido Steel has set reduction targets using total greenhouse gas (CO2) emissions as anindicator in order to assess and manage the impact of climate-related issues on management.
Daido Steel launched a CO2 reduction project in November 2020 and announced the Daido
Carbon Neutral Challenge in April 2021. We are promoting activities to reduce CO2 emissions,aiming to reduce CO2 emissions by 50% in 2030 compared to fiscal 2013 and to achievecarbon neutrality in 2050.

Daido Carbon Neutral Challenge～Pursuing the potential of materials to support our future～

Target for 2030

Cutting CO2 emissions by 50%(as compared with the 2013 level)
Target for 2050

Aiming to achieve Carbon Neutrality(in line with the development of decarbonization technologies and infrastructure)※CO2 emissions are SCOPE 1 + SCOPE 2 (energy-derived) for Daido Steel alone.
Actual CO2 emissions (2013 and 2021) were calculated using the electric power CO2 emission coefficientof the contracted power company for each year.

The policy for reduction efforts is as follows.
Three policies for carbon neutrality(A) Thorough energy saving efforts made by taking full advantage of existing technologies(B) Use of renewable power source(C) Introduction of decarbonization technology

■Scope 3 Disclosure
We have conducted calculations for the possible scope 3 categories 1, 2, 3, 4, 5, 6, 7, and13 based on the "Basic Guidelines for Calculating Greenhouse Gas Emissions through Supply
Chains’.
In FY2020, overall CO2 emissions were confirmed to be 1,103 thousand tons, of which"Category 1: Purchased products and services" accounted for the largest percentage at 73%.
In order to reduce CO2 emissions, we have introduced "Partners' Meetings" with our major
suppliers this fiscal year, during which we will engage in activities to calculate and reduce CO2emissions from products for our company.
We will continue to work on product development and other activities to increase the ratio ofproducts that can contribute to the reduction of CO2 emissions at our customers (e.g., highperformance materials used in EV vehicles and hydrogen-related products).
In addition, the amount of contribution to CO2 emission reduction by our customers from thethree main energy-saving products in the engineering division is calculated to be 30,900
tons/year (in FY2020).
Product name

CO2 reduction contribution t/year

STARQ

Energy-saving electric furnace with swiveling furnace body

8,000

ModulTherm

Energy-saving vacuum carburizing furnaces

21,000

DINCS

Highly efficient energy-saving combustion components

1,900

Scope 3 CO2 emissions by category
Category

1,000 tons-CO2/year
FY2019FY20201,055810

2. Capital goods

8050

3. Fuel & Energy related activities (Excluding Scope1,2)

194168

4. Transportation & Distribution (Upstream activities)

5749

5. Waste from operations

2017

6. Business travel31

7. Employee commute

33

13. Lease assets (Downstream activities)

55

1,417

1,103

1. Purchased Goods & ServiceTotal※Scope of calculation: Calculated for Daido Steel on a stand-alone basis for the relevant category only
※Calculation method: Using the Ministry of the Environment's Green Value Chain Platform (database Ver. 3.1)