Environment

• Environmental Management
• Resource Recycling
• Biodiversity
• Information disclosure based on TCFD recommendations
  —Toward carbon neutrality—

Environmental Management

To achieve the Vision 2030 management guideline of "Contribution to a sustainable global environment," Aichi Steel formulated the Aichi 2025 Environmental Action Plan to chart a course of action through to 2025. It defines targets that should be accomplish by 2025, and we are currently working to achieve these targets, focusing on the three pillars: eco-energy, eco-production, and eco-management.

Promotion structure

Aichi Steel is working to implement environmental management through effective employment of the PDCA cycle mainly through the Environmental Working Group, which operates under the supervision of its Board of Directors with the president as chairperson. The Environmental Working Group is in charge of executing strategy, establishing targets, and checking progress in accordance with company policies and the Aichi Environmental Action Plan. Seven subcommittees have been established under the Environmental Working Group with clear areas of responsibility to promote efficient and targeted activities based on specialized perspectives. In addition, the Aichi Steel Group Environmental Committee was established to share information and successful case studies to promote Groupwide activities.

Eco-energy

Approximately 90% of our CO₂ emissions come from electricity and city gas used to melt steel scrap and heat steel materials. Based on the roadmap formulated toward achieving carbon neutrality by 2050, we are promoting the reduction of energy consumption through efforts to deepen the energy-saving technologies that we have cultivated, the elimination of waste in our daily operations, and drastic improvements in manufacturing processes. In FY2023, we conducted 251 energy-saving activities. We have also actively engaged in energy-saving activities outside the manufacturing process, such as visualizing the power consumed on each office floor by use, and implementing an Office Energy-Saving Challenge Award System to recognize offices that have contributed to energy-saving activities.

Breakdown of CO₂ emissions in FY2023
(Scope 1 + Scope 2 emissions from Aichi Steel on non-consolidated basis)

Resource Recycling

Eco-production

Aichi Steel is a resource circulation company that both recirculates steel resources and achieves economic value, by recycling steel scrap generated from the dismantling of automobiles and infrastructure into high-quality specialty steel products, automotive components, and other products. We aim to transition to a circular economy by further accelerating our efforts to reuse products and parts and recycle waste and raw materials while reducing resource input and consumption through the efficient use of resources and energy.

Biodiversity

Eco-management

Based on the belief that symbiosis with local communities and nature is necessary for its sustainable growth, Aichi Steel is working on local environmental conservation activities in collaboration with related organizations.

Biodiversity conservation initiative

Aichi Steel has been working since fiscal 2012 to create an environment where 50 indicator species can flourish in the Nakashinden green space adjacent to the Chita Plant under the slogan of "creating a forest where beetles live. "The Nakashinden green space is part of the Chita Peninsula Green Belt, which is a collaboration of 11 organizations, including our company, government, students, experts, and NPOs, and has been certified as one of the first "Natural Symbiosis Sites^*" under the Ministry of the Environment’s certification system launched in FY2023.
Aichi Steel also uses Aichi water, which has its source in Otaki Village, Nagano Prefecture, for its operations. As part of our activities to protect this water source, we have been engaging in water source forest cultivation activities since 2006. In 2019, we concluded a "forest caretaker" agreement with Otaki Village. Approximately 28.4 hectares of forest has been designated as the "Forest of Aichi Steel Group," where our employees and their families regularly clear trees and prune branches. We are working with the village of Otaki and local residents to create a rich forest, and in FY2023 we planted 350 saplings.

• An area designated by the government as "an area where biodiversity is being conserved through private sector initiatives, etc." Part of Japan's 30 by 30 initiative based on the G7 2030 Nature Compact agreed to at the G7 Summit in June 2021.

Amount of industrial waste discharged from products using plastic

Information disclosure based on TCFD recommendations
—Toward carbon neutrality—

Basic approach

Aichi Steel emits CO₂ both directly and indirectly through the manufacturing processes of its various products, such as heating of steel materials, and melting of steel scrap, which is the raw material of its main product, specialty steel. For this reason, our response to climate change is a serious management issue from the perspectives of risks and opportunities. We are accelerating our efforts to decarbonize with the goal of achieving carbon neutrality as early as 2050.
As a resource circulation company that uses steel scrap as a raw material in manufacturing, we will utilize our strengths, which have contributed to sustainable manufacturing through materials and parts, to help realize a decarbonized society. To this end, we will also continue to develop and provide products and services that contribute to reduced CO₂ emissions across the entire supply chain.

Information disclosure and support of TCFD recommendations

In 2021, we declared our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). We have been analyzing various scenarios based on the impacts, and associated risks and opportunities, that climate change may have on our business, and have considered how to reflect the results in management strategy to achieve sustainable growth. We detail our climate-related initiatives here in line with the framework (governance, strategy, risk management, and metrics and targets) recommended by the TCFD.

Governance

We have identified climate change as a priority issue (materiality) for management, and are setting KPIs and working to accomplish our targets.
As the organization responsible for considering important business management-related matters, the Top Management Meeting discusses and considers response policies, business strategies, and the status of initiatives related to risks and opportunities that can severely impact business management, such as climate change. The Board of Directors performs its supervisory function by receiving subsequent reports and considering matters that are particularly important.
We have also established an Environmental Working Group to execute strategies, set targets, and manage progress related to climate change. It comprises seven subcommittees, each with clear areas of responsibility, to conduct efficient and targeted activities. In FY2024, we established a new Sustainability Promotion Dept. to plan and promote our companywide response to sustainability issues for further bolstering our efforts.

Main agenda items in FY2024

Risk management

We follow the process below to identify, evaluate, and supervise all risks. We also discuss and report climate change-related risks in the Environmental Working Group and Top Management Meeting to clarify impacts and our responses.

Strategy

While referencing reports of the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), we developed two scenarios (1.5°C scenario and 4°C scenario) of what society would look like in 2030 assuming a global average temperature rise of 1.5°C and 4°C by the end of this century (compared to pre-industrial levels), and analyzed the risks and opportunities.

Analysis results by scenario

Main risks and opportunities, and response policies (excerpt)

Indicators and targets

We are contributing to the realization of a decarbonized society by targeting a 50% reduction in CO₂ emissions from our business operations in FY2030, compared to the FY 2013 level. As well as promoting technological development in production processes and implementing energy-saving activities with full employee participation, we are taking active steps to reduce CO₂ emissions, such as introducing more solar power generation and other non-fossil energy sources. In FY2023, we achieved steady results, with 20.5% less emissions than in FY2013.

Roadmap to carbon neutrality by 2050

Aichi Steel has formulated and is systematically implementing a roadmap for achieving its targets. We have also detailed plant-specific roadmaps, and we are systematically conducting activities focused on (1) deepening and pursuing energy savings, (2) utilizing renewable energy, and (3) developing and adopting decarbonization technologies.

Specific initiatives

Utilization of renewable energy

The large amounts of electricity used in Aichi Steel's specialty steel manufacturing processes have made it essential for the company to shift to electricity derived from renewable energy. Therefore, in addition to thorough efforts to conserve energy and improve efficiency, we are actively promoting adoption of such electricity. In fiscal 2022, five of our seven plants (Seki Plant, Gifu Plant, Higashiura Plant, Electronic Components Plant, and Kariya Plant) effectively achieved carbon neutrality through the purchase of FIT non-fossil certificates with tracking^*1 and adoption of carbon neutral city gas^*2. In FY2023, two of these plants (Seki and Gifu) began solar power generation using on-site PPAs, reducing their annual CO₂ emissions by more than 700 tons, and in FY2025 we are planning to commence solar power generation at one further plant (Higashiura).
In addition to electric power, we are contributing to the creation of a decarbonized society by exploring the use of various renewable energy sources, including studying the conversion from city gas and other energy sources used at our plants to hydrogen through participation in the Chubu Area Hydrogen Utilization Council. In FY2024, we also commenced demonstration tests for hydrogen gas combustion in a heat treatment furnace for steel materials at the Kariya Plant. We are continuing to conduct demonstrations toward the utilization and applications of hydrogen gas, including verifications for hydrogen gas combustion, and the collection of know-how, with the goal of developing heat treatment technologies for steel materials utilizing hydrogen gas. We also aim to leverage the know-how gained from these tests to expand the utilization and applications of hydrogen gas at other plants.

• Certificates of the environmentally friendly value of electricity generated by non-fossil power sources (power sources that generate electricity without using fossil fuels such as coal and oil), which are subject to the FIT program established to promote the spread of renewable energy
• City gas produced using carbon neutral LNG, in which CO₂ generated in the processes from mining to the combustion of natural gas is offset by CO₂ credits (carbon offsetting)

Collaboration with society

We participate in the GX League^*1, established in FY2023 at the initiative of the Ministry of Economy, Trade and Industry as a space for industry, government, and academia to work together toward achieving carbon neutrality and social change by 2050. A decarbonized society requires the widespread use of environmentally friendly green commercial products, which in turn requires a social system that recognizes the environmental value of products. We participated in an initiative to develop such rules, called the working group for considering adding value to green products^*2. In December 2023, the working group formulated and published its Proposal for Value-Adding to Green Products. We additionally participate in the Environmentally Conscious Electric Furnace Steel Materials Working Group  of the Non-Integrated Steel Producers’ Association, which was founded in March 2024, and are undertaking initiatives to formulate guidelines for electric furnace steel materials  that apply non-fossil values.
Through these activities, we seek to expand the use of products and services that contribute to decarbonization, and to maintain and strengthen competitiveness in the specialty steel industry in Japan.

• Established by the Ministry of Economy, Trade and Industry in March 2022 as a forum for a group of companies actively engaged in GX (Green Transformation) to discuss the transformation of the entire economic and social system and to put into practice new market creation.
• One of the proposal-based working groups formed by companies that have expressed their support for the GX League. It is working to formulate recommendations about common rules for value creation in green products and low-carbon products.

CO₂ emissions by scope

CO₂ emissions by scope

• Figures in the above table are rounded off to the nearest 1,000 tons, with 0 representing less than 500 tons
• Previous years' figures retroactively adjusted following a review of data collection targets, coefficients, etc.

<Scope of calculations>

Scope 1 & 2: Energy sources of Aichi Steel alone; Scope 3: Applicable category for Aichi Steel alone

<Scope 1 & 2 calculation method>

Calculated based on the "Act on Promotion of Global Warming Countermeasures" (Ministry of the Environment), "Table of Standard Calorific Values of Energy Resources and Carbon Emission Coefficients" (Agency for Natural Resources and Energy), and the emission coefficient of the contracted electric power company for the respective year

<Scope 3 emission intensity>

"Emission Intensity Database for Calculating Greenhouse Gas Emissions and Other Emissions of an Organization through its Supply Chain (Ver 3.4)" (Ministry of the Environment, March 2024) and "LCI Database IDEA Version 2.3" (Advanced LCA Research Group at the Research Institute of Science for Safety and Sustainability of the National Institute of Advanced Industrial Science and Technology, and Sustainable Management Promotion Organization)