TCFD-Based Information Disclosure | Sustainability

Response to TCFD Recommendations

In September 2020, Alps Alpine declared its support for the Task Force on Climate-related Financial Disclosures (TCFD). We will assess the risks and opportunities associated with climate change and reflect the findings in our business strategies with the intent of realizing sustainable growth and formulating an appropriate risk response.

Governance

The Board of Directors deliberates and resolves important matters, such as basic policies and measures to deal with climate change issues, by setting “realization of a decarbonized society” and “realization of a circular economy” as items of business materiality. The President and Representative Director has the highest responsibility and authority for sustainability issues, including climate change issues, and a director appointed by the President and Representative Director is responsible for overseeing all sustainability measures as the chair of the Sustainability Committee. From fiscal 2024, the committee structure will be changed to a structure with executive officers as constituent members to speed up decision-making, in conjunction with the executive remuneration system and through consultation with chief officers responsible for execution. Furthermore, five environment-related task forces have been established under the umbrella of the Sustainability Committee, which are responsible for formulating medium- to long-term environmental strategies and implementing measures in line with the Environmental Policy. The Sustainability Committee meets quarterly, and any matters requiring decision-making are brought to the Board of Directors. In fiscal 2023, the Board of Directors approved GHG emissions reduction targets for obtaining SBT certification and established a reduction promotion organization. In response to the trend toward mandatory product carbon footprint disclosure, including the EU Battery Regulation, the establishment of an organization for product carbon footprint calculation was approved. It was decided that these activities would be part of a task force.
The Sustainability Committee regularly evaluates the progress of each task force and other activities. Through this process, we are making steady progress toward achieving a sustainable society while minimizing the environmental impact of our business activities.

Governance Structure of the Company for Climate Change–Related Issues

Body	Roles	Meeting Frequency
Board of Directors (Chairperson: Hideo Izumi, Representative Director, President)	Sustainability policy decisions, including on climate change Determination of sustainability material issues, including climate change Oversight of climate change response	Reports four times a year Timely deliberation of Issues
Sustainability Committee (Chairperson: Satoshi Kodaira, Representative Director, Executive Vice President)	Progress management of sustainability issues, including climate change, and recommendations to the Board of Directors.	Held four times a year

Strategy

We have conducted a scenario analysis of climate change, and have identified risks and opportunities based on the results. This allows us to quantitatively assess the impact on our business based on internal criteria.

Scenario Analysis

Based on information from the IPCC and IEA, we identified risks and opportunities affecting our business activities in fiscal 2030 using 1.5°C and 4°C scenarios and evaluated their significance based on the magnitude of their business impact. Risks are assessed in terms of transition and physical risks, while opportunities are assessed in terms of products, resource efficiency, markets, and resilience.
The scenario analysis is broken down into these four steps.

Step 1 Assessment of Risk Materiality: We identified risks and opportunities affecting our business activities and rated their materiality based on the magnitude of their business impact.
Risks were evaluated in terms of transition risks (government policy and regulation, technologies, markets, and reputation) and physical risks (acute and chronic).
Opportunities were evolved based on the considerations of resource efficiency, energy sources, products and services, markets, and resilience.
Step 2 Selection of Scenarios: Analyses were conducted based on scenarios projecting average global warming of 1.5°C above pre-industrial levels as well as those projecting average global warming of 4°C.
The opportunities and risks were assessed using the following combinations of timings and scenarios due to the fact that differences in temperature in 2030 did not differ materially between the 1.5°C scenarios and the 4°C scenarios and the fact that it was difficult to project transfer risk and opportunities from a business perspec tive at 2050.

2030 2050

Transition risks 1.5°C or 2°C scenarios -

Physical risks - 4°C scenarios

Opportunities 1.5°C or 2°C scenarios -

Source: IPCC AR5 WGI SPM Figure SPM7(a)
Step 3 Assessment of Business Impacts: Assessments of the business impacts of the identified 13 items for transition risks, physical risks, and opportunities were performed based on internal and external information.
Specifically, business divisions verified the business impact and estimated the financial impact of the transition risk and opportunity items identified by the Sustainability Promotion Office.
Step 4: Identify potential responses: Action plans were formulated and enacted to address those risks and opportunities designated as having a potentially high financial impact.

	2030	2050
Transition risks	1.5°C or 2°C scenarios	-
Physical risks	-	4°C scenarios
Opportunities	1.5°C or 2°C scenarios	-

Results of Scenario Analysis

The results of the scenario analysis indicate that under the 1.5°C scenario, measures toward carbon neutrality in 2050 will be promoted in all countries, and regulations related to the circular economy will be strengthened. In the automotive industry, which has a particularly large impact on our business activities, demand for low-CO2 emitting products such as EVs and fuel cell vehicles (FCVs) is expected to increase, and the demand for reducing environmental impact will become even stronger. On the other hand, in the case of the 4°C scenario, we assume that the chronic rise in temperature will lead to more frequent and severe natural disasters worldwide, and that investments aimed at strengthening the infrastructure of our factories and moves to strengthen supply chains will accelerate regardless of industry.

Assessment of Risks and Opportunities

The results of the Group’s assessment of risks and opportunities in climate change are as follows.
Risks were evaluated in terms of transition risks (government policy and regulation, technologies, markets, and reputation) and physical risks (acute and chronic).

Category		Climate Change Impacts	Timeline^*	Financial Impact	Details of Risks	Response Measures
Transition	Regulations	Carbon pricing mechanisms	Medium term	Medium	Increase in energy procurement costs reflecting the introduction of carbon taxes Increase in costs associated with measures to reduce GHG emissions and purchases of emission credits due to introduction of emissions trading scheme	Accelerate GHG emissions reductions under a Scope 1 & 2 Reduction Task Force.
Physical	Acute	Rising severity and frequency of cyclones, floods, and other abnormal weather events	Medium term	Small	Decrease in sales as a result of discontinued operations at one of our plants Increase in costs due to continuation and recommencement of production Increase in costs for flood countermeasures at three overseas bases deemed to be at high risk of flooding	Reinforcement of business continuity plans through means such as production relocations and purchasing from multiple suppliers based on natural disaster risks threatening production Bases
Physical	Acute		Medium term	Small	Decrease in sales due to discontinued supplies of raw materials and components stemming from supply chain disruption; increase in costs for procuring alternative items Decrease in sales as a result of reduced production or discontinuation of operation at customer plants; increase in costs due to abnormal processing costs following production adjustments
Physical	Chronic	Higher average temperatures	Long term	Medium	Increased operating costs, such as air-conditioning in offices and plants due to rising average temperatures Increase in unit price of electricity due to increased demand for renewable energy	Set the target as 2% annual reduction of evergy use in order to absorb the estimated increase of electricity usage

* Short term: within one year. Medium term: within three years. Long term: more than three years (currently up to 2030)

Expansion of EV market leads to expansion of business for current sensors

Opportunity Type	Climate Change Impacts	Timeline^*	Financial Impact	Details of Opportunities
Products/Services	Development of new products or services through R&D and innovation	Medium term	Small	Expansion of EV market leads to expansion of business for current sensors
		Medium term	Medium	Expansion of EV sound products (pedestrian warning sound systems, engine sound generators, road noise cancellation) business due to EV market expansion
	Development and/or expansion of low emission goods and services	Medium term	Small	Business expansion through the provision of products using new decorative technologies (e.g., optical decoration) that replace plating and painting, which have a high environmental impact
Resource Efficiency	Use of more efficient production and distribution processes	Medium term	Small	Market introduction of logistics trackers to contribute to efficient distribution Contributing to IoT in factories by introducing analog meters to the market
Resource Efficiency	Use of more efficient modes of transport	Medium term	Medium	Reduction of CO2 emissions from transportation by producing at a plant near the final sales location

* Short term: within one year. Medium term: within three years. Long term: more than three years (currently up to 2030)

Risk Management

It is important that in order to achieve sustainable corporate growth and increase corporate value, the impact of various risk items surrounding our business be assessed. Measures should then be formulated and responded to over the medium to long term. We have prepared a risk map to prepare for risks and have identified climate changerelated risks as material management risks. Specifically, once a year, the Sustainability Promotion Office conducts a risk survey, and the identified risks are evaluated and managed by the Sustainability Committee. Risks with significant financial impact are reported to and discussed by the Board of Directors. Our domestic and overseas offices have obtained ISO 14001 certification and are continuously working to reduce their environmental impact based on environmental assessments.

Indicators and Targets

We aim to achieve virtually zero GHG emissions throughout our value chain by fiscal 2050. We have obtained SBT certification for our GHG emissions reduction targets (Scope 1, 2, 3) for fiscal 2030. We have also joined RE100 to declare our commitment to achieving a 100% renewable energy adoption rate in fiscal 2030.

Target for Fiscal 2050: Zero GHG emissions throughout the value chain
Target for Fiscal 2030: Scope 1 & 2 Reduction Target:
Reduce GHG emissions by 90% (base year: fiscal 2021)

Scope 3 Reduction Target:
For various purchased goods and services, upstream transportation and delivery,
and the use of products sold, reduce GHG emissions by 25% (base year: fiscal 2021)

Commitment to the RE100:
Percentage of renewable energy used: 100%