Disclosure in Line with TCFD Recommendations

Basic Approach to the TCFD Recommendations

October 1, 2024

Towards the realization of a carbon neutral society, in August 2021, the KOKUSAI ELECTRIC Group endorsed the TCFD (Task Force on Climate Related Financial Disclosures) recommendations, and in April 2023, set a goal of reducing CO2 emissions in line with current pledges under the Paris Agreement to limit global warming to 1.5˚C. 

We have reviewed the climate change related information disclosed in line with the TCFD recommendations in May 2023. The renewed information is disclosed in this report. 

Governance

The KOKUSAI ELECTRIC Group's activities to address climate change are deliberated and decided by the Sustainability Committee, which meets regularly, chaired by the President and CEO, and then reported to the Board of Directors. The Board provides supervision to the Sustainability Committee to ensure validity of the process. 

The risks and opportunities associated with climate change response are deliberated by the Sustainability Committee along with other environmental matters. So far, in addition to setting targets for CO₂ emission reduction and introduction of renewable energy, the Committee has also decided on participating in climate change-related initiatives including Semiconductor Climate Consortium and obtaining Science Based Targets Certification. 

Going forward, the Committee plans to deliberate on the introduction of an internal carbon pricing system, plans for achieving net zero emission, and also about linking board members' compensation with progress against climate change targets. 

Diagram of the governance system for climate change response (See Corporate Report for overall corporate governance) 

Diagram of the governance system for climate change response

Strategy

Risks and opportunities expected in the future due to climate change have been identified by analyzing the following scenarios according to the TCFD recommendations. 

Reference scenarios 

SSP1-1.9 and SSP5-8.5 of Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report; WEO2020 and NZE 2050 of International Energy Agency (IEA)

Temperature scenarios

1.5℃ scenario and 4℃ scenario

Scope of analysis

KOKUSAI ELECTRIC Group and its entire value chain including both upstream and downstream activities

Time axis

Short term: up to 2030  Medium term: up to 2040  Long term: up to 2050

Risk/opportunity 

Expected future environment and impact on Group business

1.5℃ scenario

  • We assumed that carbon tax will be introduced and that policies, laws, and regulations will be enhanced to address climate change.

  • Acute or chronic physical impact of climate change will affect some parts of our business activities but not so severely.

  • Assuming that semiconductor manufacturers will drive the reduction of carbon emissions from their manufacturing processes, there will be increased demand for energy-efficient manufacturing equipment, leading to expanded opportunities for business growth.

4℃ scenario 

  • We assumed that there will not be significant change from current policies, laws, and regulations to tackle climate change.

  • We also assumed that there will be acute and chronic physical impacts of climate change including intensifying abnormal weather events.

  • The need for labor saving solutions to cope with frequent infection outbreaks and other consequences of global warming will accelerate demand for automation, and thereby demand for semiconductor memory is projected to increase.

Process for Identifying Risks and Opportunities Arising from Climate Change

In preparing to respond to impacts of climate change, we analyzed two different climate change scenarios and identified climate-related risks and opportunities. From a total of 186 risk and opportunity items extracted by relevant departments, 10 items with a particularly significant impact have been identified based on assessment of degree of interdependence and severity of impact. 
The 10 items were assessed on a scale of small, medium, and large in terms of response measures and financial impact. 

Main Climate-related Risks and Response Measures

Profit/cost: ↑ (profit)　↓ (cost) 

Impact degree: ↑ (small)　↑↑ (medium)　↑↑↑ (large)

Scenario Risk/
opportunity 		Category Risk to
the Group 		Timing of
manifestation 		Value
chain in which risk manifests 		Impact on
the Group 		Degree
of
financial
impact 		Response
measures
1.5℃ Transition risks Laws and
regulations
(1)

Introduction
of carbon
tax

 Short to medium term Upstream
Direct operation		 Deterioration
of profit due to
carbon tax		 ↓↓

  • Promote introduction of renewable energy

  • Promote reduction of CO₂ emissions by introducing internal carbon pricing

  • Request
    supply chain
    members to
    replace
    the energy
    they use
    in
    manufacture
    and
    transport
    with
    renewables

(2)

Law amendment to place a cap on Scope 1, 2, and 3 emissions, and other tightening of regulations

 Medium term Direct operation Slow down of business activities due to limit on energy use ↓↓

  • Scope 1 and 2: Introduce renewable energy

  • Scope 3: Develop energy-efficient products

  • Increased cost for responding to tightening of regulations

Market
(3)

Price increase of materials and components

 Short to long term Direct operation Deterioration of profit due to increase of development and manufacturing costs ↓↓

  • Facilitate evaluation and certification for application of alternative materials

  • Expand application of alternative materials when developing new equipment

(4)

Increase of electricity and fuel prices

 Medium to long term Direct operation Deterioration of profit due to increase of development and manufacturing costs ↓↓

  • Update existing equipment to improve energy efficiency

  • Reduce equipment operating time by improving operational efficiency

Evaluation
(5)

Evaluation by customer

 Short to medium term Downstream Decline in evaluation by customers due to delay in response to environmental issues requested from the value chain ↓

  • Appeal the Group's environmental initiatives both internally and externally by actively participating in international consortiums

  • Invest resource in ESG management (environmental measures) and expand information disclosure to customers and stakeholders

(6)

Intensified
competition
in the
development
of low
carbon
products
and
energy-
efficient
equipment

 Short to medium term Direct operation
Downstream

  • Deterioration
    of profit
    due to
    cost
    increase
    caused by
    applying
    energy
    efficient
    technologies
    in products

  • Reduction
    in sales if
    environmental
    performance
    is lower than
    competitor
    products

↓↓↓

  • Develop energy efficient technologies by strengthening collaboration with business partners

  • Promote systems for environmental performance certification of own products

1.5℃ Physical risks Chronic
(7)

Increased energy consumption for air conditioning of offices and clean rooms due to increase in average temperature

 Medium to long term Direct operation Increase in power consumption leading to increased development and manufacturing costs and profit decrease ↓

  • Promote replacement to energy-efficient air conditioners

  • Increase purchase of renewable energy and installment of PV generation systems

4℃ Acute
(8)

Natural disasters such as floods, typhoons, massive snowfall, and landslides causing disruption of transportation and damage to offices

 Short to long term Any part of the value chain Operation of production sites may stop as a result of damage to buildings, affected employees, employees being unable to commute, and disruption of component supply caused by natural disasters ↓↓↓

  • Extract measures to ensure business continuity in case of abnormal weather events (decentralization of production sites, diversification of raw material suppliers, etc.)

  • Quickly develop business continuity plans and measures in case of a disaster (formulate action guidelines for floods and massive snowfall, formulate a procurement strategy to minimize procurement risks, etc.)

Main Climate-related Opportunities and Response Measures

Profit/cost: ↑ (profit)　↓ (cost) 

Impact degree: ↑ (small)　↑↑ (medium)　↑↑↑ (large)

Scenario Risk/
opportunity 		Category Opportunities
for
the Group 		Timing of
manifestation 		Value chain
in which
opportunity
manifests 		Impact on
the Group 		Degree
of
financial
impact 		Response
measures
1.5℃ Opportunities Market
(9)

More new players entering the sector of low carbon products and energy-efficient equipment development

 Medium to long term Upstream Improvement in the level of environmental technologies of business partners ↑

  • Incorporate new technologies by strengthening collaboration by forming alliances with newcomers or through M&A

Product/
service
(10)

Heightened
demand
from
customers
for low
carbon
performance
and
recycled
materials

 Short to long term Downstream Development
of products
leveraging
energy
efficient
technologies
will be
facilitated,
leading to
increase in
sales		 ↑↑↑

  • Promote research and development of environmentally friendly products with good energy efficiency performance and high use rate of recycled materials

  • Expand sales by developing high value-added products with superior energy efficiency compared to competitor products

4℃ Resilience
(11)

Heightened demand for labor saving and automation solutions due to increased floods, typhoons, massive snowfall, landslides, and infection outbreaks

 Short to long term Downstream Heightened demand from customers for semiconductor manufacturing equipment with high automation capability to respond to business continuity challenges ↑↑↑

  • Develop semiconductor manufacturing equipment with high automation capability so that customer processes can be operated by a small number of people even during disasters

Analysis of the Impact of Climate Change on Our Strategies

Main Climate-related Risks and Responses

In a decarbonized future society with enhanced climate control measures in place, it is expected that the prices of metal materials would rise due to the implementation of carbon tax and increased energy costs and that CO₂ emissions would be regulated by legislation. 
We will respond to these risks by accelerating the introduction of renewable energy, reviewing the ways we procure components and transport finished products, and continuously upgrading the energy efficiency of our products. 
We will contribute to solving environmental challenges and enhance corporate value through the creation of environmental value by participating in international environmental consortiums and strengthening efforts to tackle climate change through our products and business activities. 
In responding to physical risks associated with climate change, we will work to enhance business resilience by updating to energy efficient air conditioners, decentralizing production sites to cope with abnormal weather events and natural disasters, diversifying raw material procurement sources, and promoting the formulation of action guidelines in case of emergencies.  

Main Climate-related Opportunities and Responses

In a decarbonized future society with enhanced climate control measures in place, it is assumed that more new players will enter the sector of low carbon product and energy-efficient equipment development, increasing chances to strengthen collaboration through alliances and M&A. It is also expected that there will be increased demand from customers for low carbon products and recycled materials. To meet such needs, we will promote development and sales of environmentally friendly products with added environmental value.

Physical risks associated with climate change may include the need to move production sites due to rising sea levels and frequent infection outbreaks making it difficult to secure sufficient manpower across the entire manufacturing industry. These factors accelerating demand for labor saving solutions and automation, together with increased demand for AI in various fields including climate change prediction and monitoring of the natural environment, are projected to result in increased demand for semiconductor devices.

To meet these needs, we will strengthen our capacity to provide the market with semiconductor manufacturing equipment with high energy efficiency and automation capability. 

Risk Control

The KOKUSAI ELECTRIC Group has extracted and is considering responses to risk factors that will have significant impact on its business operations. 
Based on analysis and assessment of both urgent climate-related risks and potential risk factors that may manifest in the future, we have devised measures to mitigate such risks and incorporated them in our business plan. 
For those risks that have been identified as particularly important, relevant departments have set up a project team to ensure early response. 

Metrics and Targets

In addition to promoting energy saving and the introduction of renewable energy, the KOKUSAI ELECTRIC Group operates a system that certifies products that excel in reducing environmental impact as environmentally friendly products. We endeavor to achieve the following targets in order to contribute to the reduction of greenhouse gas (GHG) emissions in society.

We received SBTi certification*2 by the Science Based Targets initiative (SBTi)*1 in March 2024, confirming that our GHG emissions targets are based on scientific grounds. 

Metrics

Targets

①

Reduction of GHG emissions as a result of own energy use (Scopes 1 and 2) 

Target 50% reduction of GHG emissions by fiscal 2030 (compared with fiscal 2021)

②

Reduction of GHG emissions through products sold (Scope 3 Category 11) 

Target 52% reduction of GHG emissions per wafer by fiscal 2030 (compared with fiscal 2021)
*1

International initiative that supports companies to set science based targets for reduction of GHG emissions

*2

Five to ten year targets for GHG emission reduction set by companies in line with the level agreed in the Paris Agreement

GHG emission performance data is disclosed on our website.

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