◆ Climate change initiatives and TCFD recommendations
Climate change is one of the most important social issues faced by global society.
Based on the Paris Agreement, Denyo has set its environmental target of reducing (Scope 1 and 2) CO2 emissions per unitof sales by 40% or more compared to the level in fiscal 2010 by fiscal 2030. To achieve this target, we will push forward withthe development and manufacturing of excellent products while deeply considering the global environment. We will also
disclose information in accordance with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations
to ensure good communications with our shareholders, investors and other stakeholders.
◆ Governance
The Denyo Group has established the Sustainability Promotion Committee chaired by our president to identify andappropriately manage material issues related to sustainability. The Sustainability Promotion Committee identifies materialrisks and opportunities related to sustainability, including climate change, formulates measures related to them, and move
forward with and supports initiatives related to key issues. The committee also monitors progress and cooperates closely withrelated departments. The results of these measures are reported to the Board of Directors twice a year. Important mattersrelated to climate change initiatives are determined by the president with the appropriate guidance and supervision of theBoard of Directors.
■ Internal structure and roles◆ Strategy
We have conducted scenario analyses of Denyo Co., Ltd., whose net sales are more than 60% of consolidated net sales, toidentify the risks, opportunities and financial impact of climate change in its business. Based on the results of the analyses,
we discuss measures to increase the resilience of our business activities. As a result of the scenario analyses, we identified thepossibility that the increase of costs reflecting the tightening of regulations with the goal of the decarbonization of society
will impact our business results in the scenarios announced by the Intergovernmental Panel on Climate Change (IPCC) andthe International Energy Agency (IEA) in which the temperature rise is kept below 2.0 (1.5) °C compared to the pre-industrial
level (with transition risks being the majority of risks). (E.g.: Increase in manufacturing costs when developed countries whichhave made carbon net zero declarations institute carbon taxes, which is assumed based on the IEA scenario)In the scenario in
which climate change is not controlled fully and the temperature rises by 4 °C from the pre-industrial level (with physicalrisks being the majority of risks), we identified the possibility that our business results will be affected by damage to factories,
the shutdown of factories, and supply chain disruptions caused by serious disasters resulting from abnormal weather.
■ Risk assessment based on business impact and our initiatives
Risk itemRisks related to thetransition to a
decarbonized economy

Risk assessment
4℃
２℃（1.5℃)

Our initiatives

Costs resulting from introduction ofcarbon taxes and emissions trading

SmallLarge●Controlling greenhouse gas emissions and energy consumption- Reducing the energy consumed by production equipment- Reducing energy consumed by utilities equipment- Power-saving activities in offices, etc.
- Replacing commercial vehicles with hybrid vehicles, etc.

Costs generated due to thefluctuation of the price of electricity

SmallLarge● Using clean energy by installing solar power generation systems,etc.

Impact on demand for engine-driven
generators

MediumLarge

Raw material costs

Small

MediumChanges in reputation withstakeholders

Small

Large

Flooding damage

Large

Medium

Small

Small

Small

Small

Risks related to thephysical impact of climate Storm surge damagechangeLoss from suspension of operations
due to disaster●Development and expansion of sales of environmentally friendly
products(with lower emissions and fuel costs)●Differentiating ourselves by developing decarbonized/low-carbon
products
Development of fuel-cell portable generators, fuel cell power
supply vehicles, hydrogen co-firing generators, and similar
products●Proactively disclosing information about environmental initiatives
in line with environmental reports and the TCFD
recommendations●Thorough business continuity measures- Employee safety- Measures for information infrastructure (mission-critical businesssystems)- Measures for utilities, and others●Developing business continuity products (such as emergencygenerators) and increasing the capacity to produce theseproducts

Based on the results of the scenario analyses, we engage in initiatives with the goal of increasing the resilience of ourbusiness activities. We strive to improve energy efficiency and reduce energy consumption to reduce the GHG emissions fromour business activities. In addition, we have strengthened product development and initiatives to increase production capacity
based on our understanding that the growing demand for environmentally friendly products and products featuring
decarbonization/low-carbon technologies based on next-generation energy such as hydrogen and the increasing demand forbusiness continuity measures are important opportunities. We have developed an environmentally friendly engine welding
machine with an automatic idle stop feature. We are also developing technology for fuel-cell portable generators and fuel cell
power supply vehicles, which are decarbonized/low-carbon products selected in 2019 by the Ministry of the Environment for
their Low Carbon Technology Research, Development and Demonstration Program. Through these and other initiatives, weare striving to create innovative products for the future. We are also responding to the demand for measures to ensure business
continuity. We are planning the construction of a new factory for Nishihatsu Co., Ltd., our subsidiary manufacturing
emergency generators for use in disasters. The goal is to increase our capacity for producing emergency in-house power
generators and other equipment.
◆ Risk management
While the environment surrounding corporations is growing more complicated and increasingly uncertain, we believe thatthe appropriate handling of risks which have the potential to greatly impact corporate activities is essential for theimplementation of management strategies and measures to achieve the purposes of business.
At the Denyo Group, we position risk management as an important initiative for the improvement of our corporate value

and take measures accordingly, guided by our Risk Management Committee. Regarding climate-change-related risks, theSustainability Promotion Committee shares information about identified risks with the Risk Management Committee. Risks
faced by the company as a whole are assessed and prioritized based on frequency of occurrence and financial impact. We
have also established a structure under which the risks that are deemed important are monitored regularly to ensure that therisks faced by the company as a whole are managed appropriately. Further, the content of the committee's deliberations arereported to the Board of Directors, and the president ensures that action policies and countermeasures are reflected inmanagement strategies and medium-term management plans.
■ Risk management structure and roles◆ Metrics and targets
We have set the target of reducing Denyo Co., Ltd.'s Scope 1 and 2 CO2 emissions per unit of sales at least 40% from thelevel in fiscal 2010 by fiscal 2030. In fiscal 2010, emissions were 4,869 t-CO2 and emissions per unit of sales were 20.02 tCO2/100 million yen. In fiscal 2021, emissions were 5,112 t-CO2 and emissions per unit of sales were 13.38 t-CO2/100 million
yen.

■ CO2 emissions from the entire supply chain (Scopes 1, 2, and 3)
Following Ministry of the Environment guidelines, we calculate CO2 emissions from Denyo Co., Ltd.'s entire supply
chain.

Scope/カテゴリ

CO2排出量[t-CO2]

割合[%]

Scope1

Direct emissions from our fuelconsumption

3,137.0

0.2%

Scope2

Indirect emissions from our power
consumption

1,975.0

0.1%

Scope3Emissions from the supply chain
Total of the following categories 1 to15

1,597,578.5

99.7%

1,602,690.5

100.0%

159,538.2

10.0%

988.8

0.1%

Total of Scopes 1, 2, and 3
Category 1 Purchased products and services
Category 2 Capital goods
Category 3

Fuel and energy-related activities that
do not fall under Scopes 1 and 2

1,062.7

0.1%

Category 4

Transportation and distribution(upstream)

7,169.8

0.4%

Category 5 Waste generated by operations

199.9

0.0%

Category 6 Business travel

131.9

0.0%

1,026.7

0.1%

Category 7 Employee commute
Category 8 Leased assets (upstream)
Category 9

Transportation and distribution(downstream)

Category 10 Fabrication of sold products
Category 11 Use of sold products

Not applicable－

Not applicable－

Not applicable－

1,426,420.0

89.3%

Category 12 End-of-life treatment of sold products

991.90.1%

Category 13 Leased assets (downstream)

48.5

0.0%

Category 14 Franchises

Not applicable－

Category 15 Investment

Not applicable－