Information disclosure based on TCFD recommendations
—Toward carbon neutrality—

Aichi Steel’s approach to climate change

The Aichi Steel Group regards climate change as a serious management issue that could impact efforts to achieve sustainable growth.
As a resource-recycling company that uses steel scrap as a raw material in manufacturing, Aichi Steel has expanded the potential of manufacturing through materials and parts.
Going forward, by utilizing strengths nurtured in manufacturing and to help realize a low-carbon society, we will continue to develop and provide products and services that contribute to reduced CO₂ emissions across the entire supply chain.
This special feature will explain the status of initiatives that we are implementing in line with the framework of the Task Force on Climate-related Financial Disclosures (TCFD) that we declared our support for in 2021.
We will continue to work to expand information disclosure and contribute to the realization of a sustainable society through our business activities.

CO₂ emission reduction target^*1

We have established the targets of reducing CO₂ emissions from Aichi Steel business activities by 50% by 2030 (compared to fiscal 2013), and working toward achieving carbon neutrality by 2050. We are now working toward achieving those targets, and bringing them forward.

• Scope 1 and 2 emissions from Aichi Steel alone

Roadmap to carbon neutrality by 2050

To achieve carbon neutrality in our business activities, we are conducting activities focused on (1) deepening and pursuing energy savings, (2) utilizing renewable energy, and (3) developing and adopting decarbonization technologies. To deepen and pursue energy savings, we are working to further streamline and rationalize our production processes so that we can reduce CO₂ emissions by 50% by 2050 compared to fiscal 2013 (approximately 1% each year). As for the remaining 65%, in addition to utilizing renewable energies (renewable energy electricity and offset systems, etc.), we aim to achieve carbon neutrality by adopting in-house solar power generation, converting energy usage to hydrogen and ammonia, and adopting new decarbonization technologies such as technologies that facilitate use of exhaust heat.

Governance

As the organization responsible for considering important business-related matters, the Top Management Meeting discusses and considers response policies, status of initiatives, and business strategies 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.
The Environmental Working Group executes strategies, sets targets, and manages progress related to climate change, and reports on its work to the Board of Directors. Six subcommittees^*2 have also been established, with clear areas of responsibility, to conduct efficient and targeted activities.

• Refer to Environmental management Promotion system
• Environmental Management System

Risk management

We follow the process below to identify, evaluate, and supervise all risks, including climate change.

Strategies

While referencing the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC), and other bodies, 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). We then analyzed the risks and opportunities of each.

1. 1.5°C scenario
   While risks include expansion of CASE applications in the automotive industry where our major customers are, and demands for decarbonization in the steel industry, we are confident that proactively addressing climate change will lead to the creation of new business opportunities.
2. 4°C scenario
   We reconfirmed the potential for natural disaster risks, which are increasing on a yearly basis, to impact our company and the rest of the supply chain. We will continue efforts to adapt to natural disasters, revise our business continuity plan (BCP), strengthen the supply chain by enhancing information gathering, and improve communication.

Vision of society

Important risks and opportunities, and response policies

• Global Magnetic Positioning System, an autonomous driving support system, developed by Aichi Steel, that employs vehicle body sensor modules to detect the magnetic force of magnetic markers that have been laid in the road to measure vehicle position with a high degree of accuracy
• Life Cycle Assessment, a method for quantitative evaluation of the environmental impact through all processes of products and services, from collection of the raw materials to product usage, and disposal
• Carbon-free electricity through the purchase of non-fossil certificates traded on the non-fossil value trading market of Japan Electric Power Exchange (JEPX)
• Adopting carbon neutral city gas, provided by Toho Gas Co., Ltd., produced using carbon-offset LNG that offsets CO₂ emitted throughout the process from natural gas extraction to combustion by reducing and absorbing the CO₂ through forest conservation and other projects

Indicators and targets: CO₂ emissions in the supply chain

The following table details Scope 1 and 2 CO₂ emissions arising from use of energy in Aichi Steel business activities, and Scope 3 CO₂ emissions in the supply chain as calculated using methods such as the Green Value Chain Platform from the Ministry of the Environment.

Figures in the above table are rounded to the nearest thousand tons, with "0" representing "less than 500 tons."
<Scope of calculations> Scope1 and 2: Aichi Steel alone / Scope 3: Aichi Steel alone in relevant categories
<Scope 1 and 2 Calculation method> Calculations are based on the Act on Promotion of Global Warming Countermeasures, Act on Rationalizing Energy Use, and Standard Calorific Value and Carbon Emission Factors by Energy Source (Agency for Natural Resources and Energy), and emissions coefficients from contracted power companies for each fiscal year
<Scope 3 Emissions Intensity> According to the "Database on Emissions Unit Values for Accounting of Greenhouse Gas Emissions, etc., by Organizations Throughout the Supply Chain" (Ver. 3.2, March 2022) from the Ministry of the Environment; and the "IDEA LCI Database" (Ver. 2.3) created by the Advanced LCA Research Group at the Research Institute of Science for Safety and Sustainability of the National Institute of Advanced Industrial Science and Technology (AIST), and Sustainable Management Promotion Organization (SuMPO)

Specific initiatives

Deepening and pursuing energy savings

Approximately 90 percent of all emissions at Aichi Steel come from the use of electricity and city gas in our manufacturing processes. In addition to further efforts to save energy on top of our steady progress made so far, we are working to develop new technologies based on our accumulated technologies and know-how, such as our first adoption of an electric furnace exhaust heat recovery system in Japan in 2020, and improve energy efficiency through digital transformation technologies, such as use of IoT and AI. During fiscal 2021, we reduced CO₂ emissions by 18,000 tons through energy saving activities such as improved combustion efficiency using oxygen-enriched burners.

Utilizing renewable energy

We use large amounts of electricity in electric furnaces when producing steel, so we are actively adopting measures like electricity derived from renewable energy. Five of our seven domestic plants achieved carbon neutrality in 2022 (Seki, Gifu, Higashiura, Electronic Components, and Kariya). Going forward, we will work to further expand our use of renewable energy.

Supply chain

To realize a low-carbon society, we need efforts from the entire value chain, not just from Aichi Steel. We are working to promote an understanding among members of the Suppliers Convention, which is an association of our major suppliers, of the importance of the entire supply chain working together, and to call for cooperation and collaboration on future initiatives.

Awareness within the company

To achieve our goal of carbon neutrality by 2050, it is important that every employee becomes more aware of climate change and other social issues, and works together. This is also why we are actively working to raise awareness, including the creation, and distribution to all employees, of the Carbon Neutrality Handbook, which is a collection of everything from basic information about carbon neutrality to the latest case studies.