Climate Change

Governance

Board of Directors supervisory structure for risks and opportunities related to climate change

“We respond to societal changes, strive for the stability and development of our corporate management and contribute to the communities in which we do business.” RYODEN has established this as a principle of its Management Philosophy.

Our vision for 2050 is “contributing to the achievement of a sustainable society through environment, security and safety,as a 100-year company.” To achieve this philosophy and vision, we have established the Sustainability Committee to manage sustainability issues, including climate change.

We are fully aware of the needs of our customers, which are under pressure to accelerate carbon neutrality initiatives, as well as our responsibility for our own greenhouse gas (GHG) emissions. We regard addressing climate change as an important managerial issue, and we will engage in management that emphasizes sustainability. The Sustainability Committee is chaired by the Director of Board, President & CEO, and composed of Executive Officers with titles. Important climate-related matters are discussed by the Sustainability Committee, and reported at least once per year, in principle, to the Board of Directors, for the consideration of sustainability issues.

Role of management in assessing and managing risks and opportunities related to climate change

At RYODEN, management is deeply involved in the effectiveness management of climate-related issues, to speedily address customer needs related to carbon neutrality. Specifically, the Director of Board, President & CEO, as the person responsible for climate-related issues, manages the progress of issues through the Sustainability Committee, instructing and supervising each division, executive office, and Group company as necessary.

We contribute to mitigating climate change not only by visualizing our GHG emissions and emissions reduction contributions and promoting initiatives at our offices in Japan and overseas through RYODEN’s unique Total Carbon Management (TCM) but also through the products and services we provide to customers. The Sustainability Committee deliberates on the state of progress of these initiatives, and reports to the Board of Directors.

The Board of Directors then indicates countermeasures. In this way, our supervisory structure increases the effectiveness of our response to climaterelated issues.

Strategies

Timeframes for climate change-related risks and opportunities (short-term, medium-term, and long-term)

For our customers in the electronics industry, carbon neutrality represents a pressing challenge. At the same time, we regard it as a favorable opportunity to provide products and services to address climate change, as we work towards becoming a “business creation company.” We are therefore monitoring trends in environmental regulation and market changes, considering their impact on our strategies and operations, strengthening our highly energy-saving product offerings in Cooling & Heating and Building Systems, and enhancing our offerings of systems to improve production efficiency in FA Systems.

In the medium term, we will accelerate our new product offerings to respond to decarbonization, contributing to technological development through dialogue with customers and suppliers engaged in initiatives to achieve decarbonization.

We will promote activities to address these climate change-related opportunities,and risks that represent opportunities, based on the following timeframes.

Short-term	We will respond swiftly to demand for products and services with better energy-saving performance, and work to address short-term changes in the business environment, including the mitigation of environmental impact due to business activities.
Medium-term	We will respond to climate change risks by strengthening our initiatives to achieve a decarbonized society, aiming to create products and services (solutions) with low environmental impact throughout the product life cycle.
Long-term	We aim to develop and expand products and services optimized for a decarbonized society—those with extremely low CO2 emissions and those designed for adaption to climate change—as a core business.

Short-term: 0–2 years; medium-term: 2–8 years; long-term: 8–28 years

Impact of climate-related risks and opportunities on the organization’s business, strategies, and financial targets

Our approach to serious risks

We have designated the implementation of structural reforms to strengthen profitability and the promotion of digital transformation as strategic themes under the ICHIGAN 2024 Medium-term Management Plan. We perceive “operating profit” as an especially important management target, and we aim to evolve into a company that contributes to achieving a sustainable society through profitable and sustainable growth.

Moreover, RYODEN’s businesses are established on business models deeply linked to “supply chains,” including aspects such as the procurement of products from suppliers and the onstruction of business networks. For these reasons, when assessing the serious financial and strategic impact of climate change risks, we consider not only the impact on RYODEN alone but, as a responsible member of global supply chains, the impact across the entire supply chain.

Definition of serious risks

Serious risks include potential pressure on RYODEN’s operating profit due to an increase in procurement costs and management costs arising in the event of a disruption to logistics at RYODEN or in its supply chains, or if procurable products or important materials or components become difficult to obtain, due to the rising physical risk of natural disasters or other issues caused by climate change. We regard the quantitative standard for defining serious financial impact as approximately 10% of RYODEN’s operating profit.

Risks

Transition risks		Countermeasures	Timeframe
Reputation	Decline in social reputation due to delays in the provision of products and services that will contribute to reducing carbon and decarbonization.	Collaborate with suppliers and partners to implement the technological development needed to transition to products and services capable of responding to reducing carbon and decarbonization.	Short-term
Regulation	Increase in management costs due to stricter greenhouse gas (GHG) emissions regulations. Decline in sales volumes due to the introduction of carbon taxes, with a particularly significant impact on semiconductor devices, which consume large amounts of energy during production.	Monitor regulatory trends through the Sustainability Committee, and respond promptly. Contribute to ameliorating the impact of regulations through cross-industry initiatives targeting suppliers, such as providing the introduction of highly-efficient cooling & heating and building systems and FA systems to boost production efficiency.	Medium-term
Technology	Loss of sales opportunities for low-carbon products and services due to delays in the development of advanced technologies to respond to the dramatic transition to a low-carbon society	Monitor trends in the level of technology deemed necessary for low-carbon society, through coordination between the Sustainability Committee and business divisions	Medium-term
Markets	Decline in sales volumes for products and services that are difficult to adapt to carbon reductions and decarbonization, due to changes in market needs	Collaborate with suppliers and partners to implement the technological development needed to transition to products and services capable of responding to reducing carbon and decarbonization	Long-term

Physical risks		Countermeasures	Timeframe
Slowdown in production and sales activity and decline in sales due to damage to supply chains (manufacturing plants, warehouses, etc.) resulting from natural disasters.		Build systems to facilitate the detection of indications of natural disasters and take emergency response	Medium-term

Opportunities

Opportunities	Effect on business and strategies	Timeframe
Expansion in demand for air-conditioning equipment due to high temperatures in summer and extremely low temperatures in winter	Increase in sales opportunities for various airconditioning equipment in Cooling & Heating and Building Systems, and the achievement of CO2 emission curbs through the provision of products to enhance energy-saving performance	Short-term
Rising need to curb CO2 emissions from production processes	Business expansion and sales growth for FA systems, which contributes to improvements in production efficiency and energy efficiency	Medium-term
Expanding need to achieve stable agricultural production	Business expansion and sales growth through the stable production and sale of high-value-added, safe vegetables from RYODEN’s energy-saving next-generation plant factories	Short-term

Risk management

Climate-related risks are considered by the Sustainability Committee and other risks associated with business management are considered by the Risk Management Supervisory Committee. The results of this consideration are reported to the Executive Committee and the Board of Directors, and monitored by the Board of Directors. Working groups subsidiary to the Sustainability Committee are responsible for the specific management of identified serious risks and identified climate-related risks, instructing and supervising each business division, executive office, and Group company. The Sustainability Committee instructs and supervises each working group. The status of execution is reported by the Chairperson to the Executive Committee and the Board of Directors. These processes are monitored and supervised by the Board of Directors. Each year, measures to address identified serious risks and opportunities are formulated or reviewed and approved, and their progress is checked.

Targets used to manage climate-related risks and opportunities, and results against these targets

Greenhouse gas (GHG) emissions targets

We recognize responding to climate change as a crucial challenge for society, and we have established a target of reducing GHG emissions from all our internal business activities by 100% of FYE2022 levels by FYE2031.

Reason for setting this target	A 100% reduction in Scope 1 and 2 emissions will be possible by achieving the target of “zero greenhouse gas emissions associated with electricity usage by 2030,” established under the RYODEN Group’s Environmental Vision, and the 100% adoption of non-fossil fuel vehicles, including electric vehicles (EV) and fuel cell vehicles (FCV), as company cars. This target will enable us to achieve the SBT standards and government targets.
Scope	RYODEN (non-consolidated) + consolidated companies in Japan (excluding BlockFARM) [Scope 1 and 2]

Reason for setting this target

A 100% reduction in Scope 1 and 2 emissions will be possible by achieving the target of “zero greenhouse gas emissions associated with electricity usage by 2030,” established under the RYODEN Group’s Environmental Vision, and the 100% adoption of non-fossil fuel vehicles, including electric vehicles (EV) and fuel cell vehicles (FCV), as company cars. This target will enable us to achieve the SBT standards and government targets.

Scope

RYODEN (non-consolidated) + consolidated companies in Japan (excluding BlockFARM) [Scope 1 and 2]

Setting a target for electric power sourced from renewable energy
We will use non-fossil fuel energy certificates with tracking from the RYODEN-operated Kurihara Photovoltaic Power Plant (Kurihara City, Miyagi Prefecture) to reduce GHG emissions from the electric power we use in business activities to zero by FYE2031, and contribute to achieving a decarbonized society.
Other climate-related targets
Reduce GHG emissions to zero by 2030, through the 100% adoption of non-fossil fuel vehicles, including electric vehicles (EV) and fuel cell vehicles (FCV).
Initiatives to reduce emissions
In FYE2019, we introduced Total Carbon Management (TCM), which aims to outweigh the GHG emissions from electricity and fuel consumption in our business activities by contributing to reducing GHG emissions through the use of products we sell. We have continued this initiative since. In FYE2022, GHG emissions from our business activities amounted to 1,054 t-CO2, compared to a reduction of 8,286 t-CO2 in GHG emissions due to the use of products we sold. Our contribution to the reduction of GHG emissions far outweighed the GHG emissions from our business activities.
Promoting initiatives to reduce emissions
The success of the Total Carbon Management (TCM), a significant initiative aimed at reducing GHG emissions, depends largely on our activities to expand sales of products that contribute to reducing GHG emissions when they are used. In recognition of this fact, we have introduced an awards program where prizes are presented to employees and sections that demonstrate outstanding results significantly surpassing the targets for our GHG emissions reduction initiatives.

Products and services that can contribute to reducing emissions

FA systems	These systems contribute to improving customers’ production efficiency and energy efficiency, thus helping to curb GHG emissions.
Cooling & heating systems	Through total solutions, including a wide range of equipment, air conditioning, and cleanrooms for a range of sites such as offices, production sites and logistics processes, these systems achieve more efficient energy usage through better energy-saving performance, thus helping to curb GHG emissions.
Energy-saving, next-generation plant factories	Through the parallel establishment of facilities such as a proprietary-developed heat convection environment control system and mega solar power equipment for totally captive use, plant factories using artificial light contribute to achieving a decarbonized society as energy-saving, next-generation plant factories, capable of the stable production of agricultural products safe from the effects of abnormal weather due to climate change.

Thoughts on Climate change

Response to the TCFD recommendations