Introduction

Natural Capital
Realize a sustainable society

Related materialities

Climate change ontribute to the reduction of the environmental impact of customers
Cand society through the use of the IDEC Group’s technologies andproducts.
Reduce CO2 emissions through the in-house use of renewable energy.

IDEC Report 2023

Examples of enhanced eco-friendly products

Easy

Rotate toassemble

Stack

Completed
φ22 Smart RFID Reader“KW2D series”

Surface mount terminal
block “BTBH-H series”

KW2D has a compact andsmart design ideal for factory
automation environments, andit can be mounted on φ22mm
panel cut-out. Data can berecorded as electronic data by
combining with a touch panel,
which contributes to saving
resources such as paperless.

Easily assemble the required
number of terminal blocks
without tools. No connecting
rod required, which achieved
the reduction of the numberof parts, and eco-friendly
product.

Resource-saving/ Space-saving /Reduce man-hours

Mainevaluation
pointsResource-saving/ Weight-saving /Reduce man-hours

Effects
Space-saving (totalheight of panel 9mm,
depth 48.5mm)

Data

We have established “The Procedure Manual for the Development of EcoFriendly Products” and are developing products with the aim of achieving
energy-saving, resource-saving and decarbonization from the design stage
onward. We are reducing the number of parts used, making products more
lightweight, phasing in the use of recycled plastics, and calculating a life
cycle assessment (LCA) and carbon footprint (CFP) for major products.
In addition, we score the degree of environmental consideration of new
products based on the IDEC’s own standards. New products that meetthe standards are certified as “enhanced eco-friendly products” and arestamped with the IDEC’s original eco-mark, compliant with ISO/JIS Q
14021 (Type II). The cumulative ratio of enhanced eco-friendly products
launched since FY2020 was 74.1% as of FY2023.
Moreover, as a framework of promoting investments in environmentallyconscious development, we introduced internal carbon pricing (ICP) in
FY2023. In the initial year and FY2024, the ICP was set at JPY 6,000
and 8,000, respectively, and the price will be reassessed each year.
To ensure that the ICP concept is thoroughly disseminated within thecompany, the Environmental Strategy Committee has selected modelcases and is calculating CO2 emissions reduction amount and studying
the impact on return on investment after applying ICP. As examples
of studying, we are conducting simulations on the introduction of newenergy-saving manufacturing equipment, investment in the developmentof eco-friendly products with a lower environmental impact than existingproducts, the installation of energy-saving air conditioning equipment,
and replacement of gasoline vehicles with electric ones.

 enewable energy utilization ratio 18%
RReduction of CO 2 emissions 24% (vs. FY2020)
Reduction of industrial wastes 24% (vs. FY2020)
Cumulative ratio of enhanced eco-friendly products tototal new products 60% or higher (vs. FY2020)

Governance

The IDEC Group has formulated its long-term vision for 2050 andinterim vision for 2030. As a global corporation, the Group aims toachieve sustainable growth while tackling societal challenges that
include measures to deal with global warming and climate change.
Actions to ensure sustainability, in particular initiatives forclimate change, are essential for companies from the standpointof both responding to increased social needs and preserving the
global environment. Moreover, in the effort to achieve sustainablegrowth, environmental strategies are an important part of theGroup’s business strategy, and therefore an environmental
response is viewed as a transition opportunity. We will implement
strategies for helping to achieve our Group’s main purpose of
ensuring safety, ANSHIN, and well-being for people aroundthe world, through the development of eco-friendly products,
environmental energy business, and other activities.
Specifically, “Promotion of initiatives to reduce environmental
impact” are included as one item in the basic strategy outlinedin the medium-term management plan. We have establishedsustainability KPIs and are pursuing an action plan that reflects
our transition opportunities toward the achievement of the goal.
Beginning with what can be achieved right now, we are
addressing to achieve carbon neutrality in order to realize ourvision for 2050.

Major sustainability KPIs (FY2025)

Foundation For Value
Creation

Development of eco-friendly products
and equipment investment

https://us.idec.com/idec-us/en/USD/
sustainability/environment

Business Strategy

The environmental management of the
IDEC GroupFor further information, please referto the “Environment” of the IDEC
sustainability website.

Value Creation Story

Regarding the relationship between the global environment and corporate
management, the IDEC Group recognizes that all humans desire to exist inharmony with the planet, and therefore the company’s basic environmental
policy is to act to preserve the environment as the most important issue for all
business activities, and to strive to achieve sustainable development.

Reduce the number ofparts (non-use of screws)/ Decrease the installedheight by 7mm compared toconventional products

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Replacement of plastic bags used in production processes withreusable plastic cases (Suzhou factory)

Biodiversity

Solar power generated (MWh)23,21524,211

19,092

8,239

2019

IDEC Report 2023

2020

2021

2022

2023

(FY)

The Suzhou factory (China) has addressed the initiative
to reduce the amount of non-reusable plastic bags by using
reusable soft trays and buckets instead of plastic bags. The
final goal is to use zero plastic bags, and to reduce 2.7 ton ofplastic bags annually. We plan to spread the similar initiative toother factories in Japan and overseas.
We are also reassessing our use of product packing
materials. In December 2021, we began using bubble wrap madeNatural CapitalData

14,565

The grease ozonizer which constantly
purifies grease traps

We consider biodiversity to be critical for our business continuity,and carry out diverse activities to protect biodiversity. In April
2023, the IDEC head office’s green space was selected as a
private business green space with excellent conservation andcreation activities under the Social and Environmental Green
Evaluation System Operation, Management and Active use
program (SEGES OMA) of the Organization forLandscape and Urban Green Infrastructure.
Through green space development centering
on native species, we provide a habitat for wild
birds, insects and so on, helping to preserveand improve biodiversity.
IDEC approved and signed the statement of
BUSINESS FOR NATURE at the 15th Conferenceof the Parties (COP15) for mandatory assessment
and disclosure of biodiversity framework.

Governance

The garbage disposer

The amount of solar power generation in the environmental
energy business (Japan)of film containing 25% or more biomass plastics at two sites
in Japan. Through this and other actions, we have addressedGroup-wide initiatives to reduce our environmental impact forrealizing a circular economy.
In the future, we plan to further activate our Global
Environmental Management System network and deploy eachenvironmental initiative throughout the entire IDEC Group.

Foundation For Value
Creation

IDEC SYSTEMS & CONTROLS CORPORATION, a groupcompany, is developing a renewable energy business thatprovides one-stop services from solar power plant construction
to follow-up from 2012.
There has been an increase in adoption of the selfconsumption solar power generation equipment utilizing theroofs of buildings such as factories, warehouses, stores, facilities
in recent years. It helps to reduce CO2 emissions through green
energy use. It also makes an invisible contribution to the safety
and ANSHIN of the local community by providing emergency
power to neighboring areas in the event of a disaster. We aim
to achieve a better society through promoting the business.

To achieve carbon neutrality, the IDEC Group has addressed
initiatives for circular economy to use limited resources effectively.
As a manufacturer, we pursue management practices thatemphasize reducing environmental impact and considering
environmental issues at all stages, from product design anddevelopment through manufacturing processes, logistics, andpacking materials.
One example is the movement toward paperless operations
to reduce paper consumption at workplaces by digitalization ofreferences and design drawings in quality-related departments.
Moreover, in February 2022 the head office cafeteria installed
a garbage disposer which decomposes garbage into water andcarbon dioxide, as well as a unit that separates and collects theoils, leftover food, and vegetable scraps in wastewater in orderto purify the grease traps constantly. By introducing them, it isexpected to reduce approximately 8 ton of garbage discharged
from the head office cafeteria each year to almost zero.

Business Strategy

Environmental energy businessRealizing a circular economy

Value Creation Story

By accelerating the introduction of our own solar power
generation facilities for our offices and factories both in Japanand overseas, we are reducing the environmental impact wecreate by replacing electricity with renewable energy.
IDEC (unconsolidated) operated one additional power
generation facility in FY2023, and is planning to operate three
new facilities in FY2024.
Among our Japanese group companies, power generation
facilities have been installed in the factory and head office of
IDEC FACTORY SOLUTIONS CORPORATION. Globally, solar
power generation facilities are also in operation at our US office
and factory and our UK factory.

Introduction

Expanded adoption of self-consumption
solar power generation46

Natural Capital
Introduction

Information disclosure based on the
TCFD recommendations
Governance

Strategy

scenario) and NZE (1.5°C scenario) as transition scenarios, and
IPCC Fifth Assessment Report’s RCP2.6 (2°C scenario) and
RCP8.5 (4°C scenario) as physical risk scenarios.
Based on the recognition of the world image in accordancewith each scenario, we have conducted analyses of IDEC Group’s
risks and opportunities.
Energy-related CO 2 emissions in each WEO scenario(2010 – 2050)

Business Strategy
Foundation For Value
Creation

Since the pandemic of COVID-19 in 2020, and especially in
2022, energy supply issues have risen caused by the worldwide
unstable status in Europe, etc. Not only the unstable frameworkof energy supply-demand has been visible, but the price increase
and inflation have proceeded due to the price escalation offuels. The amount of fossil fuel consumption including coaland oil has increased in EU, and the amount of CO2 emissions
has increased due to the economic recovery on a world scale,
which was reported in WEO 2022 that it would be difficult toaccomplish the target of reducing CO2 emissions defined at
the Paris Agreement.
Considering the above situations, we have selected two
transition risk scenarios and two physical risk scenarios,
respectively. One is a scenario to “hold the increase in the global
average temperature to well below 2°C above pre-industrial
levels and pursue efforts to limit the temperature increase to
1.5°C above pre-industrial levels” as a long-term target of theParis Agreement, and the other one is in accordance with thecurrent world status.
Specifically, we have selected WEO 2022’s STEPS (2.6°C

Value Creation Story

The Environmental Strategy Committee, which is a specialist
committee of the CSR Committee chaired by the CEO, plays a keyrole in the effort to disclose climate-related financial information.
The Environmental Strategy Committee meets monthly
under direction by the Senior Executive Officer in charge of
the Environment. For striving activities further shifted to theenvironmental management, the Committee was changed its
name from the Environment Management Committee to theEnvironmental Strategy Committee in December 2022 in order
to incorporate responses to the environment into business plan
strategically. Its activities include the audit of environmental items
for eco-friendly products, calculation of product carbon footprint,
encouragement of using internal carbon price, preparation fordisclosing climate change-related information based on the
TCFD recommendations, and planning and operation of theenvironmental events.
Decisions made by the Environmental Strategy Committee
are determined through the CSR Committee or by the direct
submission to the Top Management Meeting, where the policy
is decided, and then reported to the Board of Directors.

Selection on scenarios(Source: WEO 2022 issued by IEA)

Framework of the environmental governance
Environmental strategy

Top Management Meeting

CSR Committee
Chairperson: CEO

Top management of Global
Environmental Management System:
Senior Executive Officer in charge of theEnvironment
IDEC’s EMS Individual
departments and Group
companies in JapanIDEC FACTORY SOLUTIONSEMSE S G Sa Q

E: Environmental Strategy
Committee
Chairperson: Senior Executive
Officer in charge of the Environment

IDEC Report 2023

The Environmental Strategy Committee has picked up theassumed risks and opportunities of the IDEC Group by reference
to the risk and opportunity items of the CDP Climate Change
Questionnaires. Specifically, we have quantified potential
financial impact figure, magnitude of potential impact, likelihood,timeframe, and selected prioritized risk and opportunity items
in a quantitative manner.

Subsequently, we have assumed the external environmental
changes and the business impacts caused by them, considered
responses by the IDEC Group as environmental strategies, anddescribed them in the list and mapping of risks and opportunities.
The list and map for the top five items are shown on page 48.
For the detailed study results, see our sustainability website.

Data

Committees

Risks and opportunities

Governance

Board of Directors

Environmental Management
System (EMS)

Each overseas sites EMS

Link to IDEC website
Overseas sales companies
Responsible persons incharge of the environment

Click here for detailed risks list

Click here for detailed opportunities list

Click here for detailed mapping of risks and opportunities

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Risk management

Risks List

1

Increase in material costs

Short-termA espond to temporary sharp rise in material prices by deep mutual understanding withR
suppliers and customers continuously.
Reduce manufacturing costs in anticipation of material cost increases in the medium to longterm, and reduce costs through redesigned products in a planned manner.

2

Changing customers’
behavior

CPlace the environmental strategy as one of the focused item in the medium to long-term plan,and check progress as a sustainability KPI.
Increase the cumulative ratio of enhanced eco-friendly products for new products in themedium to long-term plans (sustainability KPI).
Promote to develop technology on a continuing basis relating to consideration andintroduction of eco-friendly packing materials and components.

C onsider and adopt eco-friendly components, and promote to raise awareness of theCimportance of consideration for the environment in the whole processes of developing
new products.
Consider to develop technology with the awareness of reducing CO2 emissions in the overall
recycling and life cycle.
By collaborating with other companies in the long term, incorporate technologies that we do
not possess in a planned manner and integrate them with our core technologies.

B educe the impact of increased energy purchase price by introducing the self-consumptionRsolar power energy in a planner manner.
Reduce indirect costs by making efforts of saving energies and improving operation ratios atfactories.

MarketTransition risk

Technology 3Long-term

D

A: Increased direct costs B: Increased direct and indirect costs C: Reduced sales due to decreased demand for products and services
D: Reduced sales due to decreased production capacity

Likely nhance BCP measures to increase our company’s resilience.
EPrepare hazard maps of manufacturing sites and find potential risks.
Prepare a recovery plan for each site and procedure manuals for employees to ensurebusiness continuity in the event of a disaster.
Change manufacturing sites to be multi-skilled for flagship products.

High

Opportunities List
Item

Long-term

Responses by the IDEC GroupA

 xpand proposals relating to solar power generation business and fine bubble solutions forE
new markets.
Innovate our environmental business, using the response as an opportunity.
Develop products that use HMI and sensing technologies based on new needs, andpropose solutions to resolve issues.

Develop new products andservices through R&D andtechnology innovations

Long-term

B

3

Develop and/or enhance of
low-emission products andservices

Long-termB rovide low-emission products and services throughout the life cycle, based on the concept
Pof developing eco-friendly product we have currently addressed.

B reakaway from prolongation of our conventional technologies.
BEnhance software and systems-related technologies by promoting M&A and businesscollaborations, etc. as well as adoption and development of human resources.
Promote to incorporate new technologies to meet diverse needs through cooperation andcollaboration with other companies.
Foster a corporate culture of well-being.

4

5

Use new technologies

Participate in the renewableenergy program and adapt toenergy-saving measures

Long-termLong-termA eploy environment-related business such as solar power generation and fine bubble solutions.
DEnter into new markets using our new business as a door opener.
Provide products and services that meet new market needs.

3

2

1

5

5
3

Medium-high4MediumMedium-low
Likelihood

Between 1 billion yen and 10 billion yen

Potential financial
impact figure

Data

2

 ccelerate technology innovation of flagship products based on environmental aspects as well.
ADevelop new products to meet the demands for market well-being and promote proposals
for solutions.
A pplied research of easy recyclable materials to products.

4

Governance

Resource
efficiency

Diverse business activities

1

Potential
financial impact

Magnitude of impact

1

Timeframe

Foundation For Value
Creation

Climate change

Risks
Opportunities

Virtually certain

5

Mediumterm

Very likely

Chronic
risks

Tendency of carbon
pricing

Mapping of major climate-related risks and opportunities

Unlikely

4

Mediumterm

Very unlikely

Physical risk

Current
regulations

Technology delays tocompetitors(uncertain market signals)

The identified results of risks and opportunities related to climatechange, and risk items that have been assessed as important in
our mapping and were considered at the Environmental Strategy
Committee, are managed by referring to an integrated risk mapof the IDEC Group. They are also reflected in the environmentrelated risks and opportunities associated with the materiality.
The Environment Promotion Department describes
environmental risk management items on a risk management
table annually, specifies performance indicators, and reports
the progress of the achievement to the Risk Monitoring
Subcommittee.

Business Strategy

Responses by the IDEC Group

Value Creation Story

Potential
financial impact

More likely than not

Timeframe

About as likely as not

ItemLong-term

Introduction

Risks and opportunities

Strategy

Between 100 million yen and 1 billion yen

Less than 100 million yen

A: Increased sales through entry into new and developing markets B: Increased sales as a result of increased demand for products and services

IDEC Report 2023

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Metrics and targets

CO 2 emissions

Return On Carbon (ROC)IDEC (consolidated)(million yen/1,000 t-CO 2)(Emission unit: t-CO2)
Scope 2

Scope 3
upstream

Scope 3downstream

FY20201,152

10,791--

FY2021

948

11,390--

FY2022897

12,146--FY2023781

10,371

213,925

870,694

1,261

742
394

Governance

Scope 1

328
2020

2021

2022

2023

(FY)

CO 2 emissions (Scope 1 & 2)
IDEC (consolidated)
11,943

12,338229

2021

13,043Emission intensity(kg-CO 2 /million yen)

11,152

Scope 1: Emission unit (t-CO 2)
Scope 2 Emission unit(t-CO 2)

184

133

2022

2023 (FY)

Data

205

2020

IDEC Report 2023

Foundation For Value
Creation

consumption solar power generation equipment and switch tocontracts for power with a lower emissions factor, the effect ofstarting introduction of CO2-free power to major domestic factories
including head office is expected, and we are working to achieve
the medium-term reduction target.
As for Scope 3, we began calculating both upstream(Categories 1-8) and downstream (Categories 9-15) emissions for
the IDEC Group (consolidated) in FY2023. Generally, Category 11,
use of sold products accounts for most of the Scope 3 emissions
amount. Therefore, we seek to reduce the in-use CO2 emissions
amount of products we offer to customers by the further promotionof developing eco-friendly products as a manufacturer.
As for upstream, category 1, purchased goods and services
accounts for the majority. Based on the CSR procurement
guidelines and the green procurement guidelines we provide to
our suppliers, we continue to request suppliers to improve their
responses to environment and reduce the CO2 emissions amount.
In the future, we plan to improve our supplier engagement with our
major customers by establishing more specific metrics.

Business Strategy

Our medium-term management plan sets the targets to reduce
Scope 1 and Scope 2 CO2 emissions by 24% by FY2025, and by
50% by 2031 (compared to the levels in FY2020). From FY2024,
we introduce the system that the progress level of achievement isreflected to executive compensation.
As for the CO2 emissions amount of FY2023, we have switched
to a power company with a lower emissions factor, and additional
self-consumption solar power generation equipment has started
operation, which resulted in the decrease of Scope 2 CO2 emissions
amount compared to that of FY2022. A factory operation increased
due to a strong increase in sales, which resulted in the increased
tendency of in-house CO2 emissions amount compared to that of
FY2020, but we could finally achieve the result of decreasing it slightly
compared to that of FY2021. Each factory is working to increase
the operation ratio, which resulted in the decreased intensity ofcarbon emissions steadily. Also, they have significantly increased
our Return On Carbon (ROC), an indicator of the extent to which
earnings have been efficiently achieved versus the amount of CO2
emissions reductions implemented.
In FY2024, in addition to the introduction of additional self-

Value Creation Story

The IDEC has considers environmental strategy to be an
important part of its business strategy and a transfer planreflects in the medium-term management plan. Specifically, we
have set metrics and targets for reducing the CO 2 emissions
amount to achieve a carbon neutrality, and we have establishedsustainability KPIs of the medium-term management plan
together with other environmental targets.
As measures for reducing in-house CO2 emissions amount,
we have introduced self-consumption solar power generations
in a planned manner, and we start to introduce CO2 -free power
partially in Japan since FY2024. We have also established the
CSR procurement guidelines and green procurement guidelines
to request our suppliers to reduce the environmental impact
every year.
As for businesses, we are working to develop ecofriendly products and to increase the degree of contributionof our business, such as the environmental energy business.
Therefore, we consider analysis of risks and opportunities
to be an important process for incorporating environmental
strategy into our business strategy. As shown in the list of major
opportunities, we study the future responses of our Group basedon elements that can serve as opportunities for our transition.
What we have considered are reflected in stages in medium tolong-term management plans and are incorporated into more
specific action plans. In addition, as those metrics, we start toconsider quantifying the degree of contribution of our businessfor environment-related business activities.
As for the development of eco-friendly products, one of thecore environment-related business activities, we are penetrating
the need for eco-friendly products and its importance to thebusiness contribution, as well as using transition opportunities
to create business opportunities to each department morethan ever.
Naturally, such activities relating to the transition plan will
be promoted as efforts whose environmental aspects are inharmony with realizing the main purpose of the IDEC Group,
to “achieve safety, ANSHIN, and well-being for people aroundthe world”.

Introduction

Transition plan

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