Disclosure in line with TCFD recommendations

Our fundamental view
　Climate change is an urgent issue shared by the entire world. It poses various threats, including an increase in abnormal weather conditions, adverse effects on ecosystems, and a decrease in water resources. The NOF Group has set the reduction of greenhouse gas emissions as one of the goals of its Responsible Care activities, and has been working on various energy-saving measures. In view of the 2050 Carbon Neutral Declaration announced by the government in October 2020 and its new targets to reduce greenhouse gas emissions announced in April 2021, the NOF Group has decided to set new targets to reduce greenhouse gas emissions. By recognizing the risks and opportunities posed by climate change and promoting countermeasures, the NOF Group will co-create new value with the power of chemistry toward the realization of a prosperous and sustainable society as stated in the NOF VISION 2025.

Support for the TCFD recommendations
　In April 2022, the NOF Group announced its support for the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD). Based on the TCFD recommendations, the Group will work to reduce climate-related risks and create opportunities for growth, as well as expand our information disclosure.

Governance

　The NOF Group identifies materiality (important issues) related to sustainability through discussions in the Strategic Meeting, which is composed of Directors concurrently serving as Operating Officers as well as Operating Officers with a title, and the Sustainability Committee, which is chaired by the President. The Board of Directors then approves the materiality. For each materiality issue, KPIs and target values are set and activities are promoted by the supervising organization or department in charge. The progress and results are reported to the Sustainability Committee. The Sustainability Committee reviews materiality with the participation of all directors, and examines key issue items, KPIs, target values, and response policies in order to continuously improve the level of activities.
　Response to climate change is identified as one of the materiality issues, and important matters including medium- and long-term targets are discussed at the Sustainability Committee. In regard to risks, the Risk Management Committee conducts a comprehensive assessment, and the Responsible Care Committee supervises monitoring and managing the progress of risk countermeasures and greenhouse gas emission reduction measures. Opportunities are discussed by the Executive Management Committee and the Priority Business Review Committee, and important matters are deliberated by the Executive Committee. A system has been put in place in which the results of these committees and meetings are reported to the Board of Directors at least twice a year for supervision.

Strategy

　The NOF Group analyzes the risks and opportunities posed by climate change based on the 1.5℃、2°C scenario and 4°C scenario. The key risks and opportunities are as follows.

• Major risks and opportunities（83KB）

Financial impacts (selected)
　Steam, electricity, and other forms of energy are consumed mainly in the manufacturing processes of the NOF Group. As transition risks brought about by climate change, the financial burden is expected to increase due to rising carbon tax costs and higher unit prices of renewable energy charges,* and the total impact is estimated to be around 3.3 billion yen. In addition, the NOF Group has established a business continuity plan for physical risks with the 4°C scenario assuming 7.7 billion yen in facilities damage in the event that a typhoon, which occurs once every 500 to several thousand years, breaks through embankments and floods our waterfront plants.
*Charges for promotion of renewable energy generation

Products that contribute to the reduction of greenhouse gases to mitigate the progression of climate change

【Electric vehicles】
　　Functional Materials、Metal Coatings
　　Market scale：Large

　Compared to gasoline-powered vehicles, EVs are expected to cause increased demand for additives for in-vehicle electronic components, lubricants for electric units, anti-corrosive coatings, and overcoat materials for LCD color filters due to the increase in electronic components (passive components), electric units, and screws to hold the components in place, as well as more and larger LCD panels. In addition, because LED lights are effective in reducing power consumption of EVs, demand for antifogging agents for LED headlamps is expected to increase. Furthermore, EVs will make vehicles quieter, which is expected to increase demand for resin additives, such as agents that prevent abnormal noises caused by resins rubbing against each other in interior parts.

【Wind power / Solar power】
　　Functional Materials、Metal Coatings
　　Market scale：Large

　Demand is expected to increase for anti-corrosion coatings for bolts used in wind turbine blades and biodegradable lubricant required for gear lubrication. Demand is also expected to increase for organic peroxides for cross-linked polyethylene, which is used as a coating material for ultra-high-voltage and high-voltage electric wires used to transmit electricity from wind and solar power generation sites.

【Meat alternatives】
　　Functional Foods
　　Market scale：Small

　Demand is expected to increase for meat alternative oils and fats that help improve the flavor and texture of plant-derived meat alternatives that reduce environmental impact.

【Resin window sashes】
　　Functional Materials
　　Market scale：Small

　Demand for organic peroxides is expected to increase with the spread of energy-efficient housing because vinyl chloride resin is used in resin window sashes with high thermal insulation properties.

• Mitigation: 1.5℃ and 2℃ scenario（196KB）

Products that contribute to adaptation by reducing the impact of
climate change.

【Air conditioners / Refrigerators】
　　Functional Materials
　　Market scale：Large

　Demand for base material for refrigerating oils, a lubricant for refrigeration equipment, and polybutene for air conditioner putty is expected to increase due to the global increasing need for air conditioners and refrigerators accompanying rising temperatures. The refrigerating machine oil sold by NOF is for alternative CFC refrigerants and contributes to climate change adaptation.

【Diagnostic pharmaceuticals / Pharmaceutical
　 raw materials】
　　Life Science 、Functional Materials
　　Market scale：Large

　Due to climate change, there are concerns about the spread of tropical infectious diseases and other diseases and disorders. Therefore, demand for pharmaceutical raw materials is expected to increase due to the rise in disinfectants and additives for diagnostic pharmaceuticals to combat infectious diseases as well as the number of pharmaceutical products against diseases
and disorders.

【Environmental information / Disaster prevention
　 and mitigation products】
　　Explosives & Propulsion
　　Market scale：Small

　As climate change progresses, the need to survey the entire world, including seawater temperatures, may increase, and the amount of marine instruments, rocket launches, etc., for research may increase. In addition, there may be increased applications for temperature indicator materials (labels, stickers, etc.) for temperature control that change color when a specific temperature is reached. Furthermore, with the increased risk of storm surges and other such conditions, there may be an increase in embankment construction using industrial explosives involving procurement of rocks and soil from mountainous areas.

• Adaptation（195KB）

Risk management

　Within the NOF Group, the Risk Management Committee comprehensively identifies various management risks surrounding its business, and conducts company-wide risk assessment on the level of impact and potential for occurrence of each risk item in order to identify risks that need to be addressed as a priority. In disclosing information based on TCFD recommendations, a working group consisting of members selected from the Risk Management Committee and the Responsible Care Committee plays the central role in identifying the risks that climate change will affect among the various management risks surrounding our business, and conducts risk assessments to determine the degree to which the impact will change in the future. The analysis results are reported to the Sustainability Committee, and important decisions are made related to climate change risk countermeasures.

Metrics and targets

Roadmap toward reducing greenhouse gas emissions
　The NOF Group has created a roadmap toward reducing greenhouse gas emissions and is working to mitigate climate change in its business activities. Considering the possibility of an increase in emissions due to business expansion, the Group will aim for carbon neutrality in 2050 by introducing renewable energy as the new Phase 2 and starting to consider new processes and technologies as Phase 3, while also reducing the financial burden associated with transition risks.

Greenhouse gas emissions
　In view of the 2050 Carbon Neutral Declaration announced by the government in October 2020 and its new targets to reduce greenhouse gas emissions announced in April 2021, the NOF Group set a new target of reducing CO2 emissions by 40% by fiscal 2030 compared to fiscal 2013. The Group had already reduced CO2 emissions by about 20% (compared to fiscal 2013) in fiscal 2022, and is aiming to reduce greenhouse gas emissions and achieve carbon neutrality by 2050.

Status of initiatives to reduce greenhouse gas emissions

Energy consumption and CO2 emissions
　Energy consumption for fiscal 2022 decreased 7.8% from the previous fiscal year for the NOF Group, and decreased 7.0% from the previous fiscal year for NOF. The total volume of energy-derived CO2 emissions decreased 13.5% from the previous fiscal year to 149,000 tons for the NOF Group, and decreased 15.9% from the previous fiscal year to 111,000 tons for NOF. Energy intensity per product increased 2.0% from the previous fiscal year to 13.8 GJ/t for the NOF Group, and increased 4.6% from the previous fiscal year to 14.5 GJ/t for NOF. NOF will continue to implement energy-saving measures to produce even greater results.

CO2 emissions other than from energy consumption
　At the Aichi Works, NOF manufactures products for specific purposes using perfluorocarbon (PFC), which has a high global warming coefficient, as the diluent for organic peroxides.
　Efforts have been made to reduce PFC emissions by improving the manufacturing equipment on numerous occasions. As a result, PFC emissions have been reduced substantially compared with those in fiscal 1995 (the reference fiscal year for PFCs).
　In fiscal 2022, emissions increased by 144% compared to fiscal 2021. However, we will continue our efforts to reduce emissions through stable operation of recovery equipment and promoting the use of an alternative diluent.

Energy-saving initiatives
　The crude oil equivalent of energy consumption by the NOF Group in fiscal 2022 was 80,226 kl, down 8.0% from fiscal 2021. The crude oil equivalent of energy consumption per sales was 0.37 kl/ million yen, down 18.5% from fiscal 2021. We have been working on energy-saving activities such as process improvement and steam usage reduction through replacement of steam traps. In addition, we assess that the growth in net sales has had an impact on the improvement of crude oil equivalent of energy consumption per sales.

CO2 emission per product by transportation
　Starting the operation of an integrated delivery system in fiscal 2006, NOF has since been endeavoring for more efficient transportation. Additionally, NOF has also engaged in modal shifting* and joint delivery.
　With regard to modal shifting, as a result of the shift from trucking to rail transportation, the percentage of rail or marine transport in the total volume of our product transport had been around 18%.
　CO2 emission per product by transportation was reduced from 100 in fiscal 2006 to 54.6 in fiscal 2021.

Renewable energy measures (Domestic)
　As for the NOF Group’s initiatives in the area of renewable energy, solar power generation facilities were installed in the Kawasaki Works in 2018 and NiGK Corporation in November 2020 to use renewable energy to provide part of the electricity used in production activities in an effort to realize a low carbon society.
　In fiscal 2022, the Kawasaki Works generated 15 MWh/year and NiGK CORPORATION generated 19 MWh/year.

• Disclosure in Line with TCFD Recommendations（818MB）