Disclosure in line with TCFD recommendations

Policy（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 2030.

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, chaired by the President and Chief Executive Officer, 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（1.2MB）

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 electronic units, anti-corrosive coatings, and overcoat materials for LCD color filters due to the increase in electronic components (passive components) and electronic units, as well as more and larger LCD panels. In addition, because LED lights are effective in reducing power consumption of EVs, demand for anti-fog 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-corrosive coatings for bolts used in wind power generation blades and solar panel mounting parts, as well as 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（836KB）

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

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

　Demand for refrigerating machine oil, a lubricant for refrigeration equipment, anti-corrosive coatings for fastening parts for external air conditioner units, and polybutene for air conditioner putty is expected to increase due to the increasing need for air conditioners and refrigerators accompanying rising temperatures around the world, including developing
countries. The base materials for refrigerating oils sold by NOF are for alternative CFC refrigerants and contribute 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（881B）

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.

Measures to meet greenhouse gas emission reduction targets
　NOF has set a mid-term target of reducing greenhouse gas emissions by 40% from the fiscal 2013 level by fiscal 2030, and a long-term target of becoming carbon neutral. The 2025 Mid-Term Management Plan period is positioned as a period for building up reduction measures to be implemented in the next Mid-Term Management Plan period, and we will promote reductions while controlling the increase in emissions associated with the expansion of production facilities.
　As a specific measure, in order to increase the use of renewable energy, we will promote the electrification of our facilities and reduce carbon emissions. Furthermore, we are reviewing our production processes and considering improvement measures to minimize environmental impact, such as reducing the amount of energy used, minimizing emissions, and utilizing renewable energy sources. We also plan to expand fuel conversion and the introduction of electricity certified to come from non-fossil fuel sources.
　During the 2025 Mid-Term Management Plan period, we are planning a 2.1 billion yen environmental investment. Furthermore, in order to accelerate the conversion to renewable energy and to a business model aimed toward decarbonization, we have set up an experimental internal carbon pricing initiative to consider the introduction of internal carbon pricing, which will be used as a reference for economic feasibility decisions.
　We will contribute to the mitigation of global warming by taking targeted actions to realize a sustainable future.

GHG reduction strategies, including for Scope 3
　Along with the establishment of CSR guidelines, NOF has declared our commitment to greenhouse gas reduction measures throughout our supply chain. We promote sustainable procurement activities by making a Declaration of Partnership Building with our suppliers. We also assess our Scope 3 greenhouse gas emissions and are working to address them.
　In addition, as a cleantech company, we also disclose our environment-related product line that contributes to climate change mitigation and adaptation. These products contribute to greenhouse gas reduction throughout the supply chain.
　Furthermore, we have announced our support for the TCFD recommendations, and are striving to reduce climate-related risks and create growth opportunities. As part of our JCIA-recommended Responsible Care activities, we actively participate in dialogue activities with suppliers and local communities.
　We are also working on decarbonization innovations for the supply chain. We are conducting research and development of biomass-derived raw materials and effective utilization of unused exhaust heat through industry-academia collaborative projects. This reduces Scope 3 greenhouse gas emissions and improves the sustainability of the entire supply chain.

Greenhouse gas emission

Status of Greenhouse Gas Reduction Efforts/Emissions

Greenhouse gas reduction policy
　The progression of global warming is arising from increased greenhouse gas emissions from the consumption of fossil fuels. The adverse effects of this climate change are posing major threats to our lives and ecosystems, including an increase in natural disasters such as heavy rains and floods, decreases in food and water resources, extreme heat, and outbreaks of infectious diseases.
　NOF is actively working to mitigate climate change and achieve a decarbonized society. We support the goals set by the Paris Agreement, which include keeping the global average temperature rise well below 2°C (the 2°C target) and striving to limit it to 1.5°C as much as possible. To that end, we are committed to reducing our greenhouse gas emissions and aim to achieve carbon neutrality by 2050. In addition, we have set a target of reducing GHG emissions by 40% or more from the fiscal 2013 level by fiscal 2030 (mid-term target for GHG emission reduction).
　We also began supporting the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) starting in 2022, and we disclose information transparently. From fiscal 2024, we will also participate in the GX League. We will not only focus on reducing our own greenhouse gas emissions, but also contribute to climate change mitigation by providing eco-friendly products and services. We are determined to take action and grow with society for a sustainable future.


Activities through industry associations
　NOF is a member of and supports the efforts of the Japan Soap and Detergent Association (JSDA) and the GX League, which is organized by the Ministry of Economy, Trade and Industry. We will proactively incorporate the policies and the latest developments toward solving climate change issues discussed by each organization, and apply them to our daily activities. In addition to addressing the goals of each organization, we are also working to ensure consistency in our policies and strategies at NOF. Furthermore, a NOF director serves as chair of the JSDA Environmental Committee, and promotes industry-wide climate change measures.

Energy consumption and CO2 emissions
　In fiscal 2023, energy consumption by the NOF Group decreased by 6.5% from the previous fiscal year, and by 4.5% on a non-consolidated basis. CO2 emissions associated with energy use decreased 4.1% from the previous year to 143 thousand tons for the NOF Group, and decreased 1.1% to 109 thousand tons for NOF on a non-consolidated basis. Energy intensity per product increased 0.9% from the previous year to 13.9 GJ/t for the NOF Group, and slightly increased 0.4% from the previous year to 14.6 GJ/t for NOF. Going forward, we will continue to steadily implement energy conservation measures, including conversion to high-efficiency equipment.

CO2 emissions other than from energy consumption
　At the Aichi Works, NOF manufactures products for specific purposes using perfluoro-carbon (PFC), which has a high global warming potential, as the diluent for organic peroxides.
　In fiscal 2023, PFC emissions decreased approximately 37% from fiscal 2022, due in part to the effects of facility improvements. Going forward, we will aim to reduce emissions through efforts such as maintaining steady operation of recovery equipment and further promoting the use of alternative diluents.

Energy-saving initiatives
　The crude oil equivalent of energy consumption by the NOF Group in fiscal 2023 was 75,061 kl, down 6.5% from fiscal 2022. The crude oil equivalent of energy consumption per sales was 0.34 kl/ million yen, down 8.4% from fiscal 2022. 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.

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.

Initiatives to reduce CO2 through the use of biomass fuels
　PT. NOF MAS CHEMICAL INDUSTRIES, which is located in Indonesia where palm oil is produced, is working to reduce CO2 emissions by utilizing palm kernel shells (PKS), a biomass fuel which is usually left as waste after oil extraction, as fuel for its boilers.

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 20.6%.
　CO2 emission per product by transportation was reduced from 100 in fiscal 2006 to 44.0 in fiscal 2023.

　CO2 emission per product by transportation＝Σ（CO2 emitted by each means of transport）／Net sales

• Disclosure in Line with TCFD Recommendations：FY2024（10.8MB）
• Disclosure in Line with TCFD Recommendations：FY2023（8.2MB）
• Disclosure in Line with TCFD Recommendations：FY2022（7.2MB）