Makita’s Sustainability Management

Environment

Strategy

Initiatives in Line with theTCFD Recommendations

1. Determining Risks and Opportunities
In identifying climate-related risks and opportunities that could affect our business, we have used climate change­scenarios from the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC), andother organizations to organize our views into (1) a 1.5°C to 2°C worldview in which decarbonization progresses and(2) a 3°C to 4°C worldview in which warming proceeds as it is now. The following is a summary of the results.

Global decarbonization

As the effects of climate change on society, such as• Tighter GHG emissions regulations, higher carbon prices

high winds and flooding, increase in frequency and1.5–2°C• Energy conservation and energy generation in buildings, expansion ofsolar panels, and widespread use of EV charging facilities

severity, the role of companies in achieving• Shift from fossil fuel to electric engines­decarbonization is becoming more important.
Accordingly, we view climate change issues as

Major drivers
affecting Makita’sbusinessa high-priority management challenge.
To this end, we are focusing on OPE that does not

Both scenarios• Expansion of building and construction market

emit exhaust gas during use and are actively working
to reduce GHG emissions by striving to reach theWorld continues on current pathgoal of virtually eliminating GHG emissions from our• Increasing frequency and severity of wind and flood disasters

3–4°C

operations by fiscal 2040 (FYE 2041).

• Increased preparedness and disaster awareness for wind and flood disasters• Decreased productivity of outdoor labor due to increased heat stress

Recognizing the importance of these efforts aswell as engaging in dialogue with our stakeholders

Based on these worldviews, we have identified our climate-related risks and opportunities and qualitatively assessed them.

regarding the impact of climate-related risks andopportunities on our business and other activities,

Risks

we endorsed the ­recommendations of the Task Forceon Climate-Related Financial Disclosures (TCFD)

Typein 2021.

Category
Large

Small

Risk
Increased operating costs based on own GHG emissions

Rising carbon price/energy conservation andPolicies and low-carbon regulations
regulations

Increased capital expenditures to enhance energy efficiency
Increased renewable energy procurement costs

Governance
Chaired by the President, the Sustainability Committee,
which promotes Company-wide efforts to address­sustainability issues through business activities, wasestablished in 2021.
The committee considers climate change to be one of
the most important sustainability issues, and deliberates
on policies, measures, and plans to reduce GHG emissions.
The Sustainability Committee reports and submits
proposals on important matters to the Board ofDirectors, which deliberates on these matters and makes
decisions in the course of monitoring and overseeing
the Company’s climate-related risks and opportunities.

Increased procurement costs of raw materials, energy, etc.

Board of Directors
Monitoring and supervision of climate-related risks
and opportunities

Submission of proposals
ReportTransition

TechnologyMonitoring
Supervision

Battery regulations

Increased battery procurement costs

Product technology
developmentcompetition

Increased development costs for technologies and products with­superior environmental performance (including portability and­operational efficiency)

Competition to develop
next-generation battery
technology

Increased development costs for next-generation batteries with­superior capacity, voltage, life, safety, etc.

Possibility

Short tomedium
term
Short term

Large

Medium tolong term

Short tomedium
term

Large

Increased procurement costs due to increased battery demand

Sustainability Committee

MarketIncreased procurement costs due to increased demand forChanges in market prices ­semiconductors

Committee Chair: President
Vice Chairs: General Manager of Quality Headquarters,
General Manager of Administration Headquarters
Committee members: Department heads of major divisions

Relevant
PeriodReputation

PhysicalAcute

Increased disclosure
requests
Increased frequency andseverity of wind andflood disasters

Short term
Large

Increased transportation costs due to decarbonizationof transportation

Short tomedium
term

Reputational damage due to inferiority of information disclosure­compared to other companies

Short term

MediumShort term

MediumPhysical damage to our offices and facilities
Losses due to business interruption
Losses due to supply chain disruptions

Note: Risk onset timing: Short-term: up to 3 years; Medium-term: over 3 years to 10 years; Long-term: over 10 years

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Makita’s Sustainability Management

Environment

Theme 2 (Opportunities): Change in demand for power tools as the building and construction market expands

Opportunities
Category

Type

Large
Energysources

Productsand services
Transition

MarketPhysicalResilience

Small

Opportunity

Opportunities
under theTheme• Expansion in the global building and construction market is expected to increase demand for power tools.
• The demand for power tools is expected to increase as more energy-saving (i.e., renovation of existing buildings) and energy-­
creating (i.e., installation of photovoltaic panels) construction approaches are taken to further decarbonization, and as the­number of EV recharging facilities increases.

AnalysisAssumptions
Large• Increased demand for power tools is anticipated due to a growing volume of building and construction work globally• Baseline (as-is scenario) for power tools sales calculated based on statistics on the size of the building and construction market• The amount of energy-saving and energy-creating construction work in buildings and the installation of EV charging facilities topromote decarbonization is based on data from the building and construction industry and IEA scenario data (below 2°C scenario)

Analysis Results
Large• Sales of power tools are expected to grow under the as-is scenario, but are expected to expand significantly under the below
2°C scenario due to an increase in the amount of energy-saving and energy-creating construction work and installation of EV
charging facilities.
• Among them, cordless power tools with excellent work efficiency are expected to see increased use in the building and­construction market.

FutureOpportunity
Acquisition
Measures• Develop power tools based on market trends, in particular, proactively develop cordless power tools that contribute to reducing
environmental impact by improving work efficiency• Strengthen sales and service capabilities by expanding the sales and service network• Expand logistics functions and production capacity in anticipation of sales growth

Relevant Period Possibility

Increased carbon prices

Decrease operating costs by reducing GHG emissions tobecome carbon neutral

Short tomedium term

Product technology­development competition

Differentiation from competitors’ products through the­development of products with superior environmental­performance (including portability and work efficiency)

Short term

Competition to develop
next-generation battery
technology

Differentiation from competitors’ products through the­development of next-generation batteries with superior­performance

Medium tolong term

Energy conservation andlow-carbon regulations

Market expansion and product demand increase due to a shift
from engine-powered to cordless products

Changes in the building
and construction market

Increase in demand for products associated with ZEB*1/ZEH*2­conversion of buildings, installation of solar power generationequipment, and EV charging facilities, etc.

Increased disclosure
requests

Improve reputation through enhanced disclosure information

Rising temperatures,climate change, andextreme weather

Increase in demand for products in line with increase in DIY
demand due to longer time spent at home

Short tomedium term

Increased frequency andseverity of wind and flood
disasters

Expansion of the disaster readiness market, increase in productdemand, and contribution to recovery and reconstruction in
the affected areas

Short term

Rising temperatures

Increase in demand for products to improve working­conditions in hot environments

Short tomedium term

Large

Short term
MediumLarge

Theme 3 (Risks): Risks associated with lithium-ion batteries (procurement costs, rise of next-generation batteries withhigher performance)
Large
Risks under
the Theme• The growing demand for lithium-ion batteries (LiB) in the automotive and energy industries is expected to lead to fluctuations in
LiB procurement costs.
• The competitive environment is expected to change with the emergence of high-performance next-generation batteries.

AnalysisAssumptions• Baseline (as-is scenario) LiB unit price calculated with reference to the market forecast information on LiB unit prices• Based on historical data on LiB raw material costs (lithium, nickel, and cobalt), set raw material costs that will soar if demand for
LiB increases (below 2°C scenario)

Analysis Results• Under both the as-is scenario and the below 2°C scenario, LiB unit prices are expected to decline over the medium to long termagainst a backdrop of planned production increases by battery and materials manufacturers. If the supply-demand balance ofLiB raw materials is disrupted by greater than expected demand for EVs and storage batteries, etc., LiB unit prices may soar, but
the long-term impact is expected to be negligible.
• Although it is difficult to predict the market for next-generation batteries, we expect the competitive environment to changeover the medium to long term as next-generation batteries become more widespread and emerge in our product areas as aresult of the traction of the EV market.

Note: Opportunity onset timing: Short-term: up to 3 years; Medium-term: over 3 years to 10 years; Long-term: over 10 years*1 Net Zero Energy Building   *2 Net Zero Energy House

2. Scenario Analysis and Setting Themes
We conducted scenario analyses on the following four themes that we rated as “highly important” and evaluatedtheir probable impact on our business, strategy, and finances through 2050, taking into account the effect on ourbusiness operations, relevance to our business strategy, and the level of interest of our stakeholders.
3. Results of Scenario Analyses
Theme 1 (Opportunities): Change in demand for cordless OPE due to decarbonization of OPE
Opportunities
under theTheme• In the OPE sector, emission regulations are being introduced and strengthened.
• Demand for cordless OPE is expected to grow as the shift from engine-powered to cordless OPE progresses against a backdropof further tightening regulations and changing consumer preferences towards decarbonization.

AnalysisAssumptions• Baseline (as-is scenario) for market expansion calculated based on market forecast information for the OPE sector• For the OPE sector, data for the below 2°C scenario is based on IEA scenario data* assuming a shift to EVs in the automobile sector

Theme 4 (Risks): Risk of increased operating costs due to higher carbon prices
Risks underthe Theme• Operating costs are expected to increase due to the introduction of carbon pricing such as carbon taxes and emissions trading
schemes as well as increases in carbon prices.

Analysis Results• The market for cordless OPE is expected to expand under the as-is scenario due to the expansion of the OPE market, but underthe below 2°C scenario, we expect the market to expand significantly due to the shift from engine-powered to cordless systems.
• We expect sales to grow at the same rate as the market growth, and, if our market share can be increased, we can expect furthersales growth.

AnalysisAssumptions• Establish long-term GHG emission reduction pathways based on GHG emission reduction plans toward carbon neutrality andIEA scenario data, etc.
• Establish costs for GHG emission reduction measures, etc.
• Estimate future carbon prices based on IEA scenario data and compare to the above measure costsFuture
OpportunityAcquisitionMeasures• Actively develop cordless OPE that can replace engine-powered OPE• Strengthen sales and service capabilities by expanding the sales and service network• Expand logistics and production capacity in anticipation of increased OPE sales and products handled

Analysis Results• The cost of actively reducing GHG emissions, including the use of renewable energy, will be less expensive than the carbon pricebased on GHG emissions if GHG emission reduction measures are not actively pursued.

* Reference: IEA’s “Global EV Outlook 2021.” It is assumed that the shift from engine-powered to rechargeable systems in the OPE sector will progress at a slower rate than theshift to EVs in the automobile sector.

41• Build long-term relationships with battery suppliers
Future Risk
Countermeasures • Pursue research and development for the launch of products using next-generation batteries

Makita Report 2023

• Procure renewable energy electricity, and introduce and expand solar power generation for own consumption
Future Risk
• Further improve energy efficiency of business activities
Countermeasures• Promote commercial-use EVs

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Environment

4. Future Policies and Initiatives
We have qualitatively and quantitatively assessed and understood the impact of climate change on our business
operations, strategy, and finances and have confirmed not only that our products are financially resilient to climatechange as they contribute to climate change mitigation and adaptation but that our business strategy is feasible
and sustainable.
Among our products, we believe that our cordless products, which feature safety, convenience, improved comfort,and zero emissions during use, will play a particularly important role in contributing to climate change mitigation andadaptation. In addition, although not included in the previous section (3. Results of scenario analyses), under the as-isscenario, in which wind and flood disasters are expected to become more frequent and severe, it is important toensure a prompt and stable supply of cordless products so that recovery and reconstruction efforts in the affectedareas are supported, and we will continue to build a system to achieve this. We will continue to contribute to society
and work to achieve sustainable growth by promoting initiatives to become “a Supplier of a Comprehensive Range ofCordless Products.”
5. Plans for the Transition to Decarbonization
In 2005, we were the first in the industry to market professional cordless power tools that use lithium-ion batteries,
and we have since been strategically transitioning from traditional products to cordless products. In addition, theCompany has set a goal of reducing GHG emissions from its operations to virtually zero by fiscal 2040 (FYE 2041), andis actively working toward this end.
We are aiming to ensure and improve the effectiveness of these mitigation measures. We will set relevant indicators and targets, and we will supervise our performance, progress and achievement under them in line with climatechange governance. In addition, the transition plan will be regularly reviewed and updated. We will also strategicallywork to capture and maximize opportunities for decarbonization in our transition plan.

Overview of the Transition Plan to Achieve the 1.5°C Target

Climate Change
Mitigation

Reducing GHG
Emissions• Achieve virtually zero GHG emissions (Scope 1 and 2) by fiscal 2040 (FYE 2041)• Medium-term target: 50% reduction from fiscal 2020 (FYE 2021) levels by fiscal 2030 (FYE 2031)

Elimination of EnginePowered Equipment• Increase the OPE electrification ratio (fiscal 2022 (FYE 2023) result: 91.9%)

Indicators and Targets
Targets related to GHG emissions
The Makita Group has set goals to reduce GHG emissions from its own business activities (Scope 1 and 2) to virtuallyzero by fiscal 2040 (FYE 2041) and from its entire supply chain (Scope 3) to virtually zero by fiscal 2050 (FYE 2051).
The ­mid-term target for Scope 1 and 2 is to halve the fiscal 2020 (FYE 2021) level by fiscal 2030 (FYE 2031).
Targets and results related to GHG emissions (t-CO₂)
Fiscal 2020(FYE 2021) Results

Fiscal 2030
(FYE 2031) Targets

Fiscal 2040
(FYE 2041) Targets

Scope 1, 2

89,673

44,836

Virtually zero

Scope 3

6,006,569——

Fiscal 2050
(FYE 2051) Targets

Virtually zeroNote: Please see page 36 for GHG emissions in fiscal 2022 (FYE 2023).

To achieve the above goals, we will steadily implement initiatives to reduce GHG emissions through the use of­renewable energy and other means.
Indicators for the electrification of OPE
As described in the scenario analysis for “Theme 1 (Opportunities): Change in demand for cordless OPE due to­decarbonization of OPE,” the transition from engine-powered to cordless OPE is progressing in line with progress
toward a decarbonized society. We have set the electrification (elimination of engine-powered equipment) ratio as
an indicator and are striving to increase this ratio. In addition, Makita has discontinued production of all
engine-powered products, ­including OPE.
Indicators and results related to the electrification ratio* of OPE
Fiscal 2019
(FYE 2020) Results
86.1%

Fiscal 2020
(FYE 2021) Results
88.5%

Fiscal 2021
(FYE 2022) Results
90.9%

Fiscal 2022
(FYE 2023) Results
91.9%* Based on sales volume, including both AC products with power cords and cordless products

Capture and Maximize Opportunities

Strategic implementation of the following measures based on the results of scenario analyses• Active development of cordless products (including cordless power tools and OPE)
• Expansion of sales and service network• Expansion of logistics functions and production capacity in anticipation of sales growth

We will continue to promote the proactive development of cordless OPE that can replace engine-powered OPE inorder to contribute to solving environmental problems, particularly climate change issues.

Risk Management
We hold annual Disclosure Committee meetings to identify and scrutinize risks in our business activities as well as toevaluate and manage risks related to climate change. The details of climate change risks and opportunities areassessed and managed under the Sustainability Committee.
Recognizing that climate change is one of the most important external environmental risks we face, the Board ofDirectors discusses the impact of climate change on management and determines management strategies and­measures that will contribute to decarbonization.
We will further strengthen our climate change response by solidifying our systems and operations for managing
these climate-related risks.

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