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

Alps Alpine identifies “climate change adaptation and mitigation” as a material issue. The Board of Directors deliberates and resolves important matters relating to basic policy and action on climate change issues. The President and CEO possesses ultimate responsibility and authority relating to sustainability issues, including action on climate change. A director nominated by the President and CEO is responsible for overseeing all sustainability measures as chairperson of the Sustainability Committee. In fiscal 2024, the Sustainability Committee was convened at the highest level of management, attended by executive officers. This ensured close coordination with the executive decision-making process, as well as between officers, enabling prompt, timely action on important matters. And in June 2024, an ESG evaluation indicator was added as an assessment factor for determining compensation in restricted stock units with the aim of promoting proactive leadership on sustainability-related issues by executive officers.
The Sustainability Committee not only keeps track of the progress of various measures but also deliberates important matters and determines companywide policy relating, for example, to climate change and resource circulation as required. Specifically, the committee made reducing emissions at the product design stage a priority strategy for reducing Scope 3 GHG emissions after discussing a finding that Alps Alpine’s primary suppliers account for around 60% of the company’s Scope 3 GHG emissions. Regarding climate-related opportunities, the committee discussed results of an EU taxonomy alignment assessment and decided that the sustainability promotion department and Engineering Headquarters would cooperate on advancing activity leading to creation of environmental value. As for the company’s earlier material issue “contribution to decarbonization,” which was based on the view that mitigation of climate change was the paramount challenge, this was revised to “climate change adaptation and mitigation” in the new materiality in recognition of the need for adaptation to climate change, having acknowledged a certain level of extreme weather events would occur due to climate change.
Environment-related measures and key performance indicators discussed by the Sustainability Committee are reported to the Board of Directors.

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)	Planning and implementation of measures addressing important sustainability issues, including climate change Provision of progress reports 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.

1) Scenario Analysis

Using information from the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA), we selected physical risk scenarios (RCP8.5, RCP2.6) and transition scenarios (STEPS, NZE), then analyzed outlooks under 4°C and 1.5°C scenarios. Given there is little difference in the temperature increase under 4°C and 1.5°C scenarios at the 2030 point, and due to the difficulty of predicting transition risks and opportunities from a business perspective at the 2050 point, we conducted the following combination of analyses.

	FY2030	FY2050
Transition risks	1.5°C or 2°C scenarios	-
Physical risks	-	4°C scenarios
Opportunities	1.5°C or 2°C scenarios	-

2) Results of Scenario Analysis

From the results of the scenario analysis, we recognized the importance of addressing the increasing severity of extreme weather events and associated effects under a 4°C scenario with not only measures at company locations worldwide but also risk countermeasures encompassing the entire supply chain. From the 1.5°C scenario, we reaffirmed the need to continue measures contributing to decarbonization to reduce the transition risk, as well as to actively respond to product, service, and market opportunities relating to climate adaptation.

3) 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	Details of Risks	Timeline^*1	Financial Impac^*2	Response Measures
Transition	Regulations	Carbon pricing mechanisms	CBAM^*3 was introduced in Europe in 2023 as a transitional phase. While currently limited to materials with high CO₂ emissions, inclusion of other parts and materials and broader adoption by countries are expected. The risks are a higher tax penalty if low-CO₂ materials are not used, and a higher cost ratio, affecting profits, if low-CO₂ materials are used.	Long term	Medium	Conduct hotspot analysis for each product group and reduce CO₂ emissions, starting with parts and materials with the largest impact.
	Changing demand	Changes in customer behavior	There is an increasing shift away from company-level GHG emissions surveys to product-level carbon footprint surveys. The risk is a higher calculation workload.	Medium term	Small	Strengthen frameworks to incorporate product carbon footprint calculation tasks as systematic company-wide activity.
	Changing demand	Changes in customer behavior	Moves to reduce CO₂ emissions in production are accelerating, especially in the automotive industry. The risk is losing competitiveness if there are delays in switching to or designing low-emissions materials.	Medium term	Medium	Conduct hotspot analysis for each product group and reduce CO₂ emissions, starting with parts and materials with the largest impact.
Physical	Acute	Increasing severity and frequency of cyclones, floods, and other extreme weather events	Recent extreme weather means all regions are at risk of being hit by a large hurricane. The risk associated with a large hurricane is flooding due to swollen waterways. The same risk applies to production plants of both Alps Alpine and its suppliers.	Medium term	Small	Create flood risk maps for Alps Alpine plants and plants of key suppliers.
Physical	Chronic	Higher average temperatures	Higher average temperatures will increase the number of days of extreme heat, especially in summer. The risks are lower productivity due to exhaustion and higher energy costs due to higher air conditioning usage.	Long term	Medium	Deploy efficient energy-saving initiatives to contain energy cost increases associated with higher energy consumption by air conditioning systems; and introduce an internal carbon pricing system to enable a portfolio-oriented renewable energy procurement strategy.

*1 Short term: within one year. Medium term: within three years. Long term: more than three years (currently up to 2030)
*2 High: Up to 10% of sales. Medium: Around 3% of sales. Low: From 0.5% of sales
*3 Carbon Border Adjustment Mechanism

Opportunities are identified in the areas of resource efficiency, energy sources, products and services, markets, and resilience.

Opportunity Type	Climate Change Impacts	Details of Opportunities	Timeline^*1	Financial Impact^*2
Products/Services	Development of new products or services through R&D and innovation	As extreme weather events caused by climate change occur more frequently, there is a shift toward climate-resilient economic activity. To be able to adapt to climate change, impacts and benefits need to be quantified. Alps Alpine possesses various sensor technologies and products for which we predict there are latent needs within a variety of markets.	Medium term	Medium
		Extreme weather caused by climate change creates major challenges in the form of water-related risks, such as the risk of disaster caused by river flooding and the expansion of water-stressed regions. Demand is expected to rise for Alps Alpine’s water-related products and technologies, such as leak sensors and water-level sensors.	Short term	Small
	Development and/or expansion of low emission goods and services	Business can increase through provision of products employing new decoration technologies (optical decoration) as an alternative to environmentally harmful plating and coating technologies.	Medium term	Small
Resource Efficiency	Use of more efficient production and distribution processes	Market introduction of logistics trackers to contribute to efficient distribution Contributing to IoT in factories by introducing analog meters to the market	Medium term	Small

*1 Short term: within one year. Medium term: within three years. Long term: more than three years (currently up to 2030)
*2 High: Up to 10% of sales. Medium: Around 3% of sales. Low: From 0.5% of sales

4) 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 change related 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

Alps Alpine aims to realize net-zero GHG emissions throughout the value chain by fiscal 2050. As a mid-term target to achieve by fiscal 2030, we will reduce GHG emissions (Scope 1 and 2) by 90% compared to fiscal 2021. This target was certified as a science-based target (SBT) in April 2024. Alps Alpine has also signed up to the RE100 initiative committed to sourcing 100% of electricity from renewable energy by fiscal 2030.
Alps Alpine will contribute to the reduction of GHG emissions through exhaustive energy conservation efforts and proactive use of renewable energy.

Target for FY2050: Net-zero greenhouse gas emissions across the entire value chain
Target for FY2030: Scope1, 2 : 90% reduction
(compared with FY2021)

Scope3 : 25% reduction
(compared with FY2021)

* Applies to Category 1 (purchased goods and services), Category 4 (upstream transportation and delivery), and Category 11 (use of products sold), which account for a large percentage of emissions.

RE100 :
Source 100% of electricity used from renewable energy