Pursue decarbonization in all corporate activities

• Challenges
• Our policy
• Responsible executive (as of April 2023)
• Action promotion system (as of April 2023)
• Grievance mechanism
• Main resources for promoting activities (2022)
• Responding to climate change risks and opportunities (TCFD)
• Reducing GHG emissions
• Reducing Greenhouse Gas Emissions
• Increasing use of clean energy

Challenges

• Responding to climate change risks and opportunities (TCFD)
• Reducing greenhouse gas emissions
• Increasing use of clean energy

Relevant stakeholders

• Direct: Local communities, the environment, customers
• Indirect: Shareholders and investors, creditors, NGOs, industry groups

Our policy

Climate change has begun to cause frequent extreme weather events and natural disasters in recent years, such as heavy rainfall and flooding. We acknowledge that it is increasing the risks faced by our Group, including impacts on the growth of trees providing the natural rubber used to make tires, impacts on plant operations, and disruptions in the supply chain.
We also recognize that our Group’s efforts to reduce CO₂ and other greenhouse gas (GHG) emissions within its business are essential in working toward achieving both the Paris Agreement goal of limiting average temperature increases to below 2°C, and carbon neutrality in Japan.
As the impact of climate change intensifies, increasing social demands are being made towards mobility. We see the mobility business as the heart of our Group, and recognize that responding to climate change is the most key issue decisive to our growth. Our responsibility to both current and future generations is to reduce our greenhouse gas (GHG) emissions to help achieve the long-term targets set by the Paris Agreement, as well as expand our use of clean energy, and we are aiming to be carbon neutral by 2050.
With all this in mind, the Group has declared our support for the TCFD recommendations, and will report information covering governance, strategy, risk management, and metrics and targets in accordance with the TCFD framework in order to activate stakeholder dialogue and promote climate change-related initiatives that help work toward a more sustainable world.
The Group supports laws and regulations (such as the Act on Promotion of Global Warming Countermeasures, and the Act on Rationalizing Energy Use) as well as policies related to climate change and reduced energy use, and is taking appropriate steps to comply with them at our sites both in Japan and overseas.

Responsible executive (as of April 2023)

Corporate Officer and Vice president of Quality Assurance, Environment & Safety Headquarters

Action promotion system (as of April 2023)

The Sustainability Committee is chaired by the President and meets quarterly to report on, deliberate and decide on measures and responses to climate change and other sustainability issues.
Under the jurisdiction of the Sustainability Committee, in July 2021 we established the Decarbonization Task Force, led by the officer in charge of Quality Assurance, Environment & Safety Headquarters, to discuss project plans, targets and KPIs for reducing CO₂ emissions in our corporate activities. The Sustainability Committee regularly checks and monitors the task force’s progress.
Climate change-related issues deliberated and decided upon by the Sustainability Committee are reported to the Executive Committee for further consideration, and reflected in the establishment and review of annual and medium-term business plans. These issues are also reported to the Board of Directors in a timely and appropriate manner.

Grievance mechanism

• Reporting hotline (whistle-blowing system): For executives, employees and suppliers
• Customer Relations Department: For customers (consumers) and local communities
• Online inquiry form: For customers (consumers), shareholders and investors, and NGOs

Main resources for promoting activities (2022)

Costs of climate change adaptation and mitigation in main business area: 4,637 million yen

Activities: Responding to climate change risks and opportunities (TCFD)

Strategy

We have performed a scenario analysis of the impact climate change could potentially have on Group corporate activities.
Below is an overview of this process.

1. Select scenarios to use and understand the outlook of each scenario
2. Investigate risks and opportunities in each scenario
3. Assess the significance of each risk and opportunity, and identify those of high significance

Highly significant risks and opportunities

Baseline scenario Short-term: around 2025, Medium-term: around 2030, Long-term: around 2050

Transition Scenario Short-term: around 2025, Medium-term: around 2030, Long-term: around 2050

Significant medium- and long-term risks: Financial impact and response measures

1. Impact of changes in weather patterns on natural rubber procurement (risk)

2. Impact of carbon pricing mechanism(risk)

Risk management

Identification and assessment of climate-related risks is carried out primarily by the Corporate Administration Division, which leads TCFD response, the Corporate Infrastructure Division’s ESG Promotion Department, which oversees the Sustainability Committee, and the Environment & Safety Division’s Environment & Health Department, which manages the Decarbonization Task Force. After assessment, they are deliberated by the Sustainability Committee to evaluate company-wide climate-related risks.
Through the Sustainability Committee’s Decarbonization Task Force, we closely monitor the regulatory requirements in each country—such as GHG emissions reduction targets (including renewable energy targets), vehicle fuel efficiency regulations, and bans on sales of new gasoline-powered vehicles—and encourage the relevant departments to address each risk and manage progress.

Metrics and targets

Climate-related metrics

•  • GHG emissions (Scope 1,2,3)
  →View results from 2020-2022 here
•  • GHG emissions intensity
  →View results from 2020-2022 here
•  • Trial introduction of internal carbon pricing system
  Effectiveness of decarbonization-related investment/cost assessment being verified in FY2023 ahead of planned official introduction in FY2024

Climate-related targets

• • GHG emissions reduction targets

•  * Set by the Sustainability Committee in November 2021 and approved by the Executive Committee in December.
•  * Announced in February 15 in 2022.

Scope1 & 2	GHG emissions: Reduce CO₂ emissions by 46% by 2030 (vs. FY2019). Be carbon neutral by 2050
Scope3	GHG emissions intensity: Aim to help reduce CO₂ emissions per tire by 20% by 2030 (vs. FY2019)

•  * Scopes 1 and 2 GHG emissions target of a 25% reduction over FY2019 by 2025

Continuing to Align with TCFD

To continue incorporating the TCFD recommendations, in the future we will further refine our scenario analysis to gain a greater understanding of the quantitative impacts of risks and opportunities, and to investigate, devise and enact strategies in response.
We will also follow the TCFD recommendations when providing our stakeholders with timely disclosures.

Activities: Reducing GHG emissions

Reducing energy consumption

To help mitigate climate change, the Toyo Tire Group is striving to reduce energy consumption through effective usage of the energy required for corporate activities both in and outside the organization. We are also developing new products and technologies that contribute to climate change mitigation and adaptation.

Energy consumption

(thousand GJ)

	2020	2021	2022
Total energy consumption	6,777.4	6,992.9	7,370.8
By Region
Japan	3,594.3	3,842.6	4,199.7
US	1,704.2	1,753.3	1,825.9
Asia (excluding Japan)	1,478.9	1,397.0	1,345.2
Type of Source
Fuel consumption from non-renewable energy sources (gas, oil)	4,662.4	4,735.7	5,130.8
Consumption of purchased electricity	1,818.8	1,944.2	1923.5
Percentage of purchased electricity with a renewable energy certificate	15.7%	15.6%	5.94%
Consumption of purchased electricity from renewable sources, and consumption equivalent to procurement of non-fossil certificates	15.7%	15.6%	114.2
Fuel consumption from renewable energy sources (solar, waste tires)	0.44	0.80	0.73
Purchased steam	295.8	312.2	315.8

Boundary, period, and calculation method for environmental data
Energy consumption within the organization

Boundary	Japan: 13 sites Toyo Tire Corp. (Headquarters, Sendai Plant, Kuwana Plant, Hyogo Manufacturing Complex, Tire Technical Center, Automotive Parts Technical Center, Corporate Technology Center, Tire Proving Ground, Winter Tire Test Course), Fukushima Rubber Co., Ltd., Toyo Soflan Co., Ltd., Ayabe Toyo Rubber Co., Ltd., Orient Machinery Co., Ltd. Americas: 2 sites TOYO AUTOMOTIVE PARTS (USA), INC., TOYO TIRE NORTH AMERICA MANUFACTURING INC. Asia (excluding Japan): 5 sites TOYO AUTOMOTIVE PARTS (GUANGZHOU) CO., LTD., TOYO TIRE ZHANGJIAGANG CO., LTD., TOYO TIRE (ZHUCHENG) CO., LTD., TOYO TYRE MALAYSIA SDN BHD, TOYO RUBBER CHEMICAL PRODUCTS (THAILAND) LIMITED
Period	From January to December of that year
Calculation method	Calculated from actual fuel use values. Converted using the standard calorific value for fiscal 2013 (Agency for Natural Resources and Energy of Japan’s Ministry of Economy, Trade and Industry; last revised in 2020).

(Reference) Total tire production volume (new rubber)(thousand tons)

	2020	2021	2022
Total tire production volume (new rubber)	212.3	245.7	247.8
By Region
Japan	108.8	127.7	128.8
US	62.2	71.9	73.4
Asia (excluding Japan)	41.4	46.0	45.0
Europe	0.0	0.0	0.6

Energy consumption (during logistics)

	2020	2021	2022
Energy consumption for raw material & product transportation in Japan (thousand GJ)	109.6	118.9	107.2

•  * Main efforts to reduce energy consumption: introduce containers and undertake modal shifts (train, and marine transport), and utilize consolidated shipments

Boundary, period, and calculation method for environmental data
Energy consumption outside of the organization (in logistics)

Boundary	Logistics in Japan (trucks, ship, rail)
Period	From April of that year to March of the next year
Calculation method	In accordance with the Shippers’ Energy Conservation Handbook (Third Edition) (Agency for Natural Resources and Energy of Japan’s Ministry of Economy; Trade and Industry, the Energy Conservation Center, Japan).

Energy intensity

	2020	2021	2022
Energy intensity within the organization (GJ/million yen)	19.7	17.8	14.8

• Note: Energy intensity is the total amount of energy used within the organization divided by total sales.

Boundary, period, and calculation method for environmental data
Energy intensity

Boundary	Energy intensity (calorific value/sales) is same as in “Energy consumption within the organization.”
Period	From January to December of that year
Calculation method	Calculated from actual fuel use values. Energy consumption conversion is the same as used in “Energy consumption within the organization.” Net sales are consolidated figures. Converted assuming calorific value 10,000,000 KJ is converted to 0.258 kl of crude oil (Article 4 of Enforcement Regulations for the Act on the Rational Use of Energy (Conversion Methods)).

Examples of reducing energy consumption

Boundary, period, and calculation method for environmental data
Examples of reducing energy consumption

Period	From January to December of that year
Calculation method	Calculated from actual fuel use values. Energy consumption conversion is the same as used in “Energy consumption within the organization.”

Using recovered waste steam as a heat source

In August 2022, we installed a steam ejector at the Sendai Plant that reuses the steam from our vulcanization process. It recovers waste steam that would normally be released into the atmosphere and blends it with new high-pressure steam to create medium-pressure steam. The plant can now reuse about 60% of recovered steam, making it possible to reduce the amount of natural gas used in steam boilers, which is expected to reduce CO₂ emissions from the plant by 550 tons annually.

Reducing the energy requirements of products (fuel-efficient tires)

	2020	2021	2022
Reducing the energy loss *Estimated values	253.7	338.1	368.0
Reference: Production ratio of Fuel Efficient Tires
PCR (passenger car radial tires)	19.5%	23.1%	27.8%
TBR (truck and bus radial tires)	22.4%	35.0%	17.6%

Boundary, period, and calculation method for environmental data
Reductions in energy requirements of products (fuel-efficient tires)

Period	From January to December of that year
Calculation method	In accordance with the Tyre LCCO₂ Calculation Guidelines Ver. 3.0.1 (Japan Automobile Tyre Manufacturers Association, Inc.). Calculated individually for light track middle size tires as “passenger car radial tires,” and light track large size tires as “truck and bus radial tires.”

Activities: Reducing Greenhouse Gas Emissions

Reducing Greenhouse Gas Emissions

GHG emissions are the main cause of climate change. The Toyo Tire Group is working to reduce emissions by using energy effectively throughout business activities both in and outside of the organization, and in our products.
While increasing production volume does increase energy consumption, we are working to limit this within Scopes 1 and 2 by repairing pipes and installing high-efficiency equipment in manufacturing processes to use energy more efficiently, reducing energy usage through automation and more efficient use of air conditioning and lighting, and switching to fuel sources with lower GHG emissions.
In 2023, we will introduce nitrogen vulcanization at subsidiaries in China, which is expected to reduce annual emissions by 1,809 tons, and are planning to reduce CO₂ emissions by four tons annually by installing inverters on vacuum pumps.
With regards to Scope 3, after calculating Group GHG emissions throughout the value chain based on the Tyre LCCO₂ Calculation Guidelines Ver. 3.0.1 published by the Japan Automobile Tyre Manufacturers Association, Inc., it was found that emissions generated at the product use stage account for over 80% of total GHG emissions. Our technology departments are leading research and development in cooperation with product planning departments on fuel-efficient tires and other advancements that will help reduce CO₂ emissions from vehicles. According to the guidelines, compared to general use tires, fuel-efficient tires reduce GHG emissions during tire use on the road by 95.4kg CO₂e per tire for PCR (passenger car radial tires) and by 879.0kg CO₂e per tire for TBR (truck and bus radial tires). The Group plans to increase the fuel efficiency of tires with each new model over the medium to long term. Meanwhile, at the transportation stage we are promoting a modal shift and direct delivery of tires in Japanese domestic line haul transport, and in 2022 reduced GHG emissions per unit weight of tire by 9% compared to 2019.

GHG emissions

(thousand t-CO₂e)

	2020	2021	2022
Total direct (Scope 1) GHG emissions	263.9*	268.2*	265.3*
By Region
Japan	180.7	190.4	191.1
US	51.8	51.0	50.1
Asia (excluding Japan)	31.3	26.8	24.1

	2020	2021	2022
Total indirect (scope 2) GHG emissions	271.6*	284.4*	253.6*
By Region
Japan	57.1	65.0	50.7
US	86.8	94.2	85.1
Asia (excluding Japan)	127.7	125.2	117.8

	2020	2021	2022
Total other indirect (scope 3) GHG emissions	12,059.8	12,932.2	13,019.8

• * Third-party verified data

Note: GHG used for calculation is CO₂.

Boundary, period, and calculation method for environmental data
GHG emissions

Boundary	Scopes 1 and 2: Same as “Energy consumption within the organization” Scope 3: Tire production sites Japan: 6 sites Toyo Tire Corp. (Headquarters, Sendai Plant, Kuwana Plant, Tire Technical Center, Corporate Technology Center), Fukushima Rubber Co., Ltd. Americas: 1 site TOYO TIRE NORTH AMERICA MANUFACTURING INC. Asia (excluding Japan): 3 sites TOYO TIRE ZHANGJIAGANG CO., LTD., TOYO TIRE (ZHUCHENG) CO., LTD., TOYO TYRE MALAYSIA SDN BHD
Period	From January to December of that year
Calculation method	In accordance with the following laws and standards: The Act on the Rational Use of Energy, Japan’s Ministry of the Environment, Law Concerning the Promotion of the Measures to Cope with Global Warming, Superseded by Revision of the Act on Promotion of Global Warming Countermeasures (2005 Amendment), Greenhouse Gas (GHG) Protocol (WBCSD, WRI), Tyre LCCO₂ Calculation Guidelines Ver. 3.0.1 (Japan Automobile Tyre Manufacturers Association, Inc.) * Scope 2 adopts location criteria.

	2020	2021	2022
GHG emissions intensity (t-CO₂/million yen)	1.56	1.40	1.04

• Note: Emissions intensity is total volume from Scopes 1 & 2 divided by total sales.

Boundary, period, and calculation method for environmental data
Reduction in GHG emissions due to direct impact of efforts in fiscal 2022

Boundary	Same as “Energy consumption within the organization.”
Period	From January to December of that year
Calculation method	Calculated based on actual reductions compared to projected amount used for each type of fuel.

Activities: Increasing use of clean energy

The Toyo Tire Group is pressing ahead with its efforts to convert electricity used at production bases to that from renewable energy sources. In the second half of 2022, we converted 100% of the electricity purchased at our Sendai Plant to that from renewables. By the end of 2023, we plan to convert 100% of the electricity purchased at the Kuwana Plant and our tire plant in the United States to renewable electricity. Going forward, we will successively expand our use of electricity from renewable sources at other production sites around the world, and then at administration and technology sites, aiming to use over 50% renewable energy globally in 2023 and over 90% by 2030.
We are also installing solar power systems for our own energy use. In 2022, our Serbia Factory opened up one of the largest solar power generation systems in the country (with a capacity of 8.4MW), which will generate 10.15GWh annually to contribute to a 7,100 tons reduction in CO₂ emissions.
In the future, we will investigate installing solar power systems for our own energy use at other sites in Japan and around the world to help reduce CO₂ emissions.