EENVIRONMENTNVIRONMENT

Scenario Analysis
Selected Scenario

Contribution to
global environmental conservation

Hypothetical Scenario

SDGs and the Paris Agreement. Our Group supports the Japanese

important management mission for the Toho Titanium Group to

government's decision to lead the country toward decarbonization,

gain new profit opportunities. We will work to mitigate and adapt

and will comply with all laws and regulations related to climate

to climate change through our business, actively contribute tochange. We also recognize the importance of climate-related

decarbonization through technological innovation, and work

financial disclosures, support the TCFD, and disclose information inproactively in good collaboration with stakeholders to achieve bothline with the TCFD.

We selected the above scenario and assumed the following as our business environment.
· Each country's decarbonization policies continue to progress as they currently do, and the 1.5˚C target set out in the Paris Agreement will not be achieved.
· There is little incentive to actively invest in the development of decarbonization technologies, including switching the electricity consumed in our main titanium smelting business torenewable energy electricity, and adopting new smelting technologies that reduce electricity consumption.
· Regarding weather conditions such as storms, floods, and rise in temperature, we assume that the frequency/intensity will increase slightly from the current level, and consider the
impact on our main plants and production systems.

Identified Risks and Opportunities
Type

DriverOverview

Time horizon

Financial
ImpactUnder China's current energy consumption control policy
through decarbonization policies, it is highly possible thatthe country will end up with restrictions on power supply
to industries, and power supply to magnesium smelting
Introductionis also expected to be restricted, assuming that the
Approximatelyof renewable Short/medium/transition to renewable energy does not make significant
400 million yen/energy inlong term
progress. As a result, if magnesium production is delayed
year
China
in China (China accounts for approximately 80% of theworld's magnesium supply), there is a risk that the priceof magnesium we use in titanium smelting may rise andit may become difficult to procure it.

· Diversify magnesium procurement sources and adjust inventory to stabilize procurement.
We are considering reducing the amount of products imported from China.
· We will also respond to fluctuations in magnesium prices by shortening the contract
period and stipulating automatic cost adjustment items in the contract for titanium sales.

Physical risk
(acute)We expect the frequency and intensity of storms andflooding to increase in the areas where our plants arelocated. In particular, plants that are at high risk offlooding, due to nearby rivers overflowing, are likely tosuspend operations if occurrence of heavy rains increasein the future.
Frequency
Also, if the intensity of storms increases in the future, theof storms
scattering risk of roofs and walls of aging plant buildings
and floods
also increases.

Approximately
Short/medium/
100 million yen/long termday· For plants that are at risk of flooding due to nearby rivers overflowing, we have
implemented risk countermeasures to the point where the risk of plant shutdown isvirtually non-existent under the hazard conditions assumed by the city where the plant
is located (assuming rainfall once every 50 years). Going forward, we will continue toevaluate trends in changes in the frequency and intensity of abnormal weather eventsand consider whether additional measures are necessary.
· For plants with aging buildings and are in areas experiencing high levels of storm
intensity, we have formed a risk countermeasure working group and are proceedingwith storm countermeasure construction after conducting a risk level assessment.
Of the 19 countermeasures taken at the Chigasaki Plant, 13 are completed, 4 are in
progress, and 2 are planned. The Wakamatsu Plant is considering reinforcing the plantroof and installing a seawall at the central substation. Going forward, we will complete
construction according to this countermeasure plan. We will also consider the need for
additional measures by monitoring trends in typhoon and storm intensity across all sites.

Short/medium/Not remarkable
long term· In addition to activities that drive awareness of heatstroke via the Safety and Health
Department, we are also taking measures to counter the heat by installing air conditioning
equipment in departments where heatstrokes occurred.
· In workplaces where air conditioning measures is not expected to be very effective, suchas large work areas, risks are avoided through measures such as work time management.
· We will continue to monitor changes in heat conditions and the number of heatstroke
occurrences, and consider strengthening measures according to the situation.
· We will continue our effort to avoid a situation that would lead to a shutdown of operations
due to the reason multiple people at the same work place suffer from heatstroke at thesame time.

The amount of damage to our company due to thesuspension of plant operations will be significant, and wewill also incur costs for repairs to the plant building.

medium- to long-term improvements in the Group's corporate value
Physical risk
(chronic)

and sustainable development of society as a whole.
Through the reduction of GHG emissions across the wholevalue chain, we will also help achieve the goals set forth in the

As summer temperature and humidity rise and thenumber of extremely hot days is expected to increase, it
is possible that there will be an increase in the number ofcases of employees suffering from heat stroke while at
Number ofwork.
extremely
hot days

Information disclosure consistent with the four TCFD themes
GovernanceSelected Scenario

The ESG Promotion Subcommittee, which is made up of three(chaired by the President and Representative Director), which meetsworking groups of the ESG Promotion Committee, serves as thetwice a year, we discuss the status of activities from the Promotion

parent body responsible for formulating specific response plans andSubcommittee, as well as activity policies related to materiality,

targets for climate change issues and managing the progress ofimportant matters, plans for the next fiscal year, and other topics.

countermeasures, while also playing a liaison role with the business

These matters are then reported to the Executive Committee and thedivisions.

Board of Directors, and opinions and suggestions are fed back to

The status of the working groups is shared at the ESG

the ESG Promotion Committee. This way the climate change issues

Promotion Subcommittee Meeting, which is held regularly every

are monitored from a secondary and company-wide perspective.

month. Furthermore, at the ESG Promotion Committee Meeting

System for addressing materiality including decarbonization (ESG promotion system)
Directions

Board of Directors

Identified Risks and Opportunities
Type

Transition risk We anticipate that demand for carbon(market)
free materials will increase from aircraft
manufacturers, plant manufacturers, and heatexchanger manufacturers, which are our major
customers. The current titanium smelting
method is a power-intensive manufacturing
Price ofmethod, so there is the potential issue of highcarbon-free
CO 2 emissions. If we do not reduce theseelectricity
emissions, we will not be able to meet customer
demands, and there is a possibility that our
products will be replaced with other materials
with lower emissions. Moreover, switching tocarbon-free electricity in order to avoid this will
result in higher costs.

Physical risk
(chronic)*Same as physical risk (chronic) in the table above

President and Representative Director

Opportunity(Products/
Services)

As efforts, such as decarbonization, arestrengthened toward building a sustainable
society, titanium, which is lightweight, has highstrength, and excellent durability, is a usefulmaterial that can contribute to this goal. Thus, by
establishing a new smelting technology that can
produce CO2-free titanium, we expect to create
opportunities for our titanium business.

ESG Promotion Subcommittee

Risk Management Committee
Business Execution Teams (various departments)

Opportunity(Products/
Services)

G
WorkingGroup

Strategy
The Group strives to understand the financial impact of climate change through scenario analysis. Based on the results of the scenario analysis,
we are formulating a concrete transition plan to achieve a low-carbon society, which will be reflected in the three-year medium-term corporate
management plan starting in FY2023.

33

DriverOverview

Management

ESG Promotion Committee

S
WorkingGroup

We selected the above scenario and assumed the following as our business environment.
· Decarbonization policies in each country will progress toward achieving the 1.5˚C target set forth in the Paris Agreement.
· There will be increasing pressure on the titanium smelting business, an electricity-intensive business, to switch to renewable energy.
· Development of a new smelting technology that can significantly reduce power consumption is required.
· Competition in technology development will intensify in the field of decarbonization technology, which we have determined as having a significant impact on our business.
As our technology develops in response to the acceleration of the shift to EV and the advent of a hydrogen society, new market expansion is expected.
· Regarding weather conditions such as storms, floods, and rise in temperature, we assume that the frequency/intensity will increase slightly from the current level, andconsider the impact on our main plants and production systems.

*Same as physical risk (acute) in the table above

Executive Committee

E
Working
Group

Hypothetical Scenario

IEA NZE 2050

Physical risk
(acute)ReportingI N T E G R AT E D R E P O R T 2 0 2 3Countermeasures

Transition risk
(market)To realize a decarbonized society
We recognize that climate change represents both risks and an

IEA STEPS
IPCC RCP4.5

Opportunity(Products/
Services)

The production and use of hydrogen is
expected to play a major role in building
a sustainable society centered on
decarbonization. In addition, our company's
business opportunities are expected to expandby developing titanium and titanium-containing
compounds essential as hydrogen-relatedmaterials.

Time horizon

Medium/long term

Financial
ImpactApproximately
600 million yen/
year

Countermeasures· We are progressing with the development and gradualcommercialization of a new titanium smelting methodthat significantly reduces power consumption and CO2
emissions to minimize the amount needed for switching tocarbon-free electricity.
· Compress
electricity cost increases through directpurchase of non-fossil fuel certificates· Continue
to proceed with energy conservation / waste
heat recovery and utilization measures, and use carbonfree energy other than electricity.
· In the future, we will also consider participatingin renewable energy power generation projects incollaboration with local communities and other companies.

· We will complete studies on resolving issues facing
industrialization by FY2024 based on the results obtainedso far regarding CO2-free titanium production technology.
·A company-wide steering organization will proceed withtechnology evaluation and investment decisions, with theaim of starting small-scale commercial production in 2025.
· Proceedwith gradual scale expansion while incorporating
improvements related to productivity and cost reduction.
· In conjunction with the application of other CO2 emission
reduction measures, the goal is to achieve substantial
carbon neutrality in FY2040.

Customerdemand for
low carbon
products· Mid-term:Start of dissemination of new
smelting technology· Long-term:Applicable to approximately 40%
of titanium products, stabilizing theeffect of the demonstration

Nationalhydrogenrelated
measures· The WEBTi porous thin titanium sheet is expected to be
applied to parts of water electrolysis hydrogen generators,
which is expected to be put into practical use by around2030. In order to be able to respond to the rapidly
increasing number of inquiries on the WEBTi porous thin
· Long-term:Emergence of markets for porous
titanium sheet, we will establish an initial mass production
titanium, titanium foils, and FeTi
system in 2024.
hydrogen storage alloys as the· Centered around the departments in charge of technology
creation of a hydrogen energy based
billions of yen /development and new businesses, we will accurately
society gains momentum
annual revenue
grasp technological seeds and market needs and trends,· Long-term:Promote in-house hydrogen
increase (FY2030) and aim for timely development and stage deployment.
utilization using the above· In addition to technological improvements, a companytechnologies (ultra-fine nickel
wide steering organization will make investment decisions
powder production, WEBTi Ti
and technology evaluations in accordance with thepowder production, etc.)
progress of building a hydrogen energy based society, andaim to expand the scale.
· In FY2040, the above materials will become a large-scale
market with the full-scale operation of a hydrogen energy
based society.

As decarbonization policies progress, EV are
expected to account for more than 50% of
new car sales by 2030. There is a strong needfor reducing the weight of EV, and there is a
EV production
Medium/long term
need for lighter and thinner parts, so we expect volume
increase in our Catalysts Business sales by
providing high-performance catalysts that can
produce these resins.

I N T E G R AT E D R E P O R T 2 0 2 3Not determined· Development
of high-performance catalysts began
Approx.
in 2020, and we plan to continue to improve their¥1 billion/year
functionality.
increase in· In order to respond to increasing demand, we haverevenue (FY2030) worked to expand our production sites for high*Compared toperformance catalysts, and a new plant was completed
FY2021
in November 2022.

34

ENVIRONMENT

Contribution to global environmental conservation
TOPIC

Information disclosure consistent with the four TCFD themes
Risk Management

Initiatives to make fuel carbon-free

The Climate Change Risk Identification Process

How We Respond to Risks

The Risk Management Committee leads the identification of climatechange risks. The results of ESG Promotion Committee deliberations arereported to the Executive Committee for final approval of the company's
identified climate change risks. In assessing and determining the severityof climate change risk, we primarily consider the following factors:

Identified climate change risks are assessed in accordance with the Risk
Management Manual. They will be categorized by avoidance, mitigation,transfer, and retention, and measures will be considered for each. After
deliberation by the Risk Management Committee, response policies arereported to and approved by the Executive Committee through the ESG
Promotion Committee.

Method of Determining Level of Severity

Integration into Company-Wide Risk Management∙ Short-, medium-, and long-term time horizons∙ Transition
risks: Decarbonization trends, generation power mix, productdemand trends, existing and new regulatory requirements (carbon
pricing, plastics regulations, etc.)∙ Physicalrisks: Frequency of occurrence, loss of life, impact on external
parties, degree of loss
∙ Potential
for risks to materialize

The Risk Management Committee is chaired by the Toho Titanium
president, and consists of its executive officers, the presidents of affiliatedcompanies, and other members appointed by the President. Climatechange risk is also managed by the Risk Management Committee in thesame manner as other risks, based on the system set forth in the Risk
Management Manual.

■Carbon Neutral LNG Buyers AllianceToho Titanium joined 14 companies including Tokyo Gas Co., Ltd. inlaunching the Carbon Neutral LNG Buyers Alliance in March 2021. The
alliance brings together Tokyo Gas and other companies that purchasecarbon-neutral LNG (CNL) in an effort to realize a sustainable society,expand the use of CNL, and increase the value of its utilization.
CNL is liquefied natural gas (LNG) that is regarded as producing
no CO2 emissions on a net global basis when burned, because thegreenhouse gases produced in the process from the mining of CNL to its
combustion are offset with CO2 credits (carbon offsets). In the future, we
aim to make CNL widely known worldwide, improve its reputation among
investment institutions, and establish its position in various environmentrelated systems.

■Introduction of carbon offset LPG

CO2 absorbed byforest conservation,afforestation, etc.

CO2 emissions in
the LNG value chain

We are in the process of switching to carbon offset LPG at sites that use
LPG in the manufacturing processes. Carbon offset LPG uses carbon
credits to offset the greenhouse gas emissions that occur when it isburned. We started implementing it at one location in Japan in October
2022.

Net zero emissions

Indicators and Targets
Our Group is committed to reducing GHG emissions by achieving zero-CO2 emissions from manufacturing processes, conservation and effective use ofenergy, and moving to carbon-free sources for the energy we use. We have set targets of a 25% reduction by FY2025 and a 40% reduction by FY2030 (bothcompared to FY2018), with a final goal of reaching net zero by FY2050.

Roadmap to Achieving Carbon Neutrality by 2050
* FY2018 CO2emissions as 100

Achieving zero CO2emissions arisingfrom manufacturing
processes

2018

2025

2030

2040

2050

100

Toho Titanium CO2 emissions (FY2018)
260,000 t-CO2

Our Group responds to the emerging demands of our customers

of a sustainable society. The introduction of pilot equipment forand promotes the development of new processes and new products

WEBTi, a new material that will contribute to building a hydrogenthat contribute to reducing global environmental impact (p.25). We

energy based society, is progressing as planned, and sample work

are also keenly aware of how we can help achieve the SDGs throughis currently underway with the goal of full-scale commercialization

the raw materials we use, our manufacturing processes, and our

within FY2025.

product applications, thereby contributing to the development

75

Sustainable resource utilization

New titanium smelting technologies (from 2025)
58

Energy-saving
and efficientuse of energy

Providing Products Beneficial to the Environment and Safety

Effective Use of Water Resources

Extensive recovery and utilization of waste heat (from 2021)

Our Group is working to improve operations and promote water
Purchase of green power sources (from 2021)

Greening ofenergysources in use

Participation in renewable energy production and associated businesses (from 2030)

2
GHG Emissions*CO2 emissions from carbon
neutral city gas and carbon offset
LPG are considered zero.
*W ith regards to Scope 2 (samescore for FY2021 and FY2022(182)), in FY2022, sponge
production increased by 15%
compared to FY2021, andelectricity consumption increased.
However, we were able to reduce
CO2 emissions by expanding theswitch to CO2-free electricity.

Scope 1

30

33

34

29

32
26

20

200

191
153

150

182

182

FY2018FY2019FY2020

FY2021

FY2022

Disposal and Public Cleansing Act.
FY2018FY2019FY2020

FY2021

FY2022Adoption of CO2-free electricity

Compensation Rules for Directors and Management

From FY2021, we have introduced CO2-free electricity to the Chigasaki
Plant part of the Wakamatsu Plant, and the Hitachi Plant. In FY2022, we
increased the amount of CO2-free electricity introduced at the Chigasaki
Plant. Moving forward, we will continue to introduce CO2-free electricity
to other processes to reduce CO2 emissions.

The Company's compensation system for Directors and management
consists of fixed and performance-linked remuneration. In the future, wewill consider reflecting the achievement of climate change-related goals in
our compensation structure.

35

I N T E G R AT E D R E P O R T 2 0 2 3

While controlling amounts of waste generated at each business site as much as possible,
waste disposal is the only option left, we do so properly and in compliance with the Waste

50
0Reusable waste plastic
collection container

we are also enhancing our sorting of waste to render it valuable and recyclable. When

100

10
0

Promotion of Waste Reduction and Reuse(thousands of tons)
250
224

water intake. In addition to meeting the permit standards for water
regulations, we have confirmed that there are no business sites

Scope 2(thousands of tons)
40level survey results *1 in the "Aqueduct Water Risk Atlas *2".
*1 https://www.toho-titanium.co.jp/csr/data/*2 A tool published by the World Resources Institute (WRI) for measuring water
risks in various regions around the world.

quality and quantity in each region and complying with laws and0experiencing water stress as of FY2022 based on the water stressrecycling, as well as identify regions with high water risks and reduce

Investigating Where to Dispose of Sludge
Generated at the Wakamatsu Plant
With regards to the sludge generated from the
Wakamatsu Plant that is disposed of in landfills,
we will continue to consider switching disposal
contractors so that we can recycle waste,
and plan to develop measures to reduce thechlorine concentration in the sludge.

Promotion of Waste Plastic Reuse
Continuing from the previous fiscal year, weare promoting initiatives to recycling waste
by changing the outsourcing company for
waste treatment and adopting a recycling
process. This fiscal year, we are increasing
the number of departments within the
Chigasaki Plant that recycle waste plastic
and carrying out activities that contribute toenvironmental conservation.

I N T E G R AT E D R E P O R T 2 0 2 3

Breakdown of Industrial Waste (FY2022)
Adding Recyclable Value
12%
Landfill
Disposal*
34%

Recycling54%*32% of the 34%
landfill disposal ratio iseffectively utilized for thedevelopment of offshore
landfill sites.

36