Pursue decarbonization in all corporate activities

• Challenges
• Our policy
• Responsible executive (as of April 2024)
• Organizational responsibilities (as of April 2024)
• Grievance mechanism
• Main resources for promoting activities (2023)
• 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 2024)

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

Organizational responsibilities (as of April 2024)

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 (2023)

Costs of climate change adaptation and mitigation in main business area: 3,252 million yen

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
4. Calculate the financial impact of risks expected to have a large medium- to long-term impact and explore possible countermeasures

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

4. Calculate financial impact and explore countermeasures

We calculated the financial impact of any risks that are expected to have a significant impact over the medium to long term, and examined possible countermeasures.

1. Impact of changes in climate patterns on the procurement of natural rubber (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)
  →See the results from 2019-2023 here
•  • GHG emissions intensity
  →See the results from 2019-2023 here
•  • Introduction of an internal carbon pricing system
  Used to evaluate decarbonization-related projects and other investment initiatives. Following a trial operation in fiscal 2023, the system was officially launched in fiscal 2024 with a set carbon price* of 10,000 yen/ton.
  
  ^{*The appropriateness of the carbon price will be assessed each year and revised if necessary.}

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 GHG emission by 46% by 2030 compared to 2019 and aim to achieve carbon neutrality by 2050.
Scope3	GHG emission per unit: Aim to help reduce GHG emissions per tire in 2030 by 20% compared to 2019.

•  * One of our milestones is to aim to reduce Scope 1 & 2 GHG emissions by 25% by 2025 compared to fiscal 2019

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.

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.

See the results from 2019-2023 here

Energy consumption (during logistics)

See the results from 2019-2023 here

Energy intensity

See the results from 2019-2023 here

Examples of reducing energy consumption

We reduced CO₂ emissions from the Sendai Plant by 250 tons per year by enhancing the insulation of the plant’s vulcanizers and pipelines from July 2023.

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

See the results from 2019-2023 here

Reducing Greenhouse Gas Emissions

Reducing Greenhouse Gas Emissions

Greenhouse gas emissions are seen as a major cause of climate change so the Toyo Tire Group is working to reduce GHG emissions through its products and business activities inside and outside the organization.
The amount of energy consumed increases in line with increases in production volume. However, as a means of addressing Scope 1 and 2 emissions, we are seeking to reduce energy consumption by repairing process pipelines and introducing highly efficient equipment to improve energy efficiency, and also by encouraging automation and improving the usage of air-conditioning and lighting. In addition, we are switching to fuels that emit lower greenhouse gases. We are promoting the use of electric forklifts starting with our plants in Japan. We have purchased electricity derived from renewable sources at Japanese plants and promoted the electrification of 17 forklifts in fiscal 2023, which resulted in a reduction in CO₂ emissions of 421 tons. We will continue to promote electrification. Meanwhile, at the Kuwana Plant, we reduced CO₂ emissions by 364 tons by switching the boiler fuel from A-grade crude oil to natural gas.
The Toyo Tire Group aims to contribute to a 20% reduction in Scope 3 GHG emissions per tire by 2030 compared to 2019. A calculation of GHG emissions throughout the Group’s value chain based on the Japan Automobile Tyre Manufacturers Association’s (JATMA) Tyre LCCO₂ Calculation Guidelines Ver. 3.0.1 revealed that emissions from the Category 11 product use phase account for at least 80% of overall GHG emitted. According to the guidelines, fuel-efficient tires can reduce CO₂ emissions during use (during vehicle driving) by 95.4 kg CO₂e per tire for passenger car radial (PCR) and 879.0 kg CO₂e per tire for truck and bus radial (TBR) compared to standard tires. Our technical division is working to develop technologies to enhance fuel efficiency of tires by reducing their rolling resistance and weight. Over the medium to long term, the Group is planning to enlist the help of the Product Planning Division in upgrading fuel efficiency performance each time we change a tire model. As of 2023, emissions from PCR had been reduced by 1.5% compared to 2019, which is a reduction of 94.8 thousand tons-CO₂e.

GHG emissions

See the results from 2019-2023 here

GHG emissions intensity (t-CO₂/million yen)

See the results from 2019-2023 here

Increasing use of clean energy

From the second half of 2022, the Toyo Tire Group began switching electricity purchased primarily at production sites to power derived from renewable sources. By the end of 2023, 100% of the electricity purchased at the Sendai Plant, the Kuwana Plant and our tire plant in the United States had been converted to renewables, along with our administrative and technical bases in Japan. We will systematically promote efforts to achieve a global 90% renewable energy usage ratio by 2030. That ratio stood at 71.14% at the end of 2023. We are also actively introducing photovoltaic (PV) power generation systems for in-house use. The largest PV power generation system in Serbia (power generation capacity: 8.4 MW) was installed on the premises of our Serbia Factory, which launched operations in 2022. The system’s annual generation of 10.15 GWh of electricity is helping reduce CO₂ emission by 7,100 tons a year. In 2023, we installed a large-scale PV power generation system with a capacity of 14.0 MW on a factory building’s 96,000 square meter rooftop space in our tire plant in Malaysia. The system is expected to generate 19,000MWh and reduce CO₂ emissions by approximately 12,000 tons per year. Meanwhile in Japan, at the end of 2023, we introduced a solar power generation system at our Corporate Technology Center. The system generates approximately 419,000 kWh each year, which is more than any other system at any other base in Japan, and is equivalent to approximately 12% of the electricity used at the Center. The system is expected to reduce CO₂ emissions by approximately 128 tons per year.

SBTi^*1 initiatives

In May 2024, Toyo Tire Corporation submitted a letter of commitment to SBTi stating its intention to seek SBT certification. We have already set targets for reducing GHG emissions as the Toyo Tire Group and are currently working to achieve them. We will now strengthen our efforts across the entire supply chain by setting GHG reduction targets for the periods five to 10 years ahead, that comply with the levels required by the Paris Agreement^*2.

• *1 SBTi: The Science Based Targets Initiative is designed to achieve a goal of limiting any rise in average global temperatures to 1.5℃.
• *2 Paris Agreement: An international agreement formed at the Conference of the Parties to the United Nations Framework Convention on Climate Change held in Paris in 2015. The long-term goal of this agreement is to keep any rise in average global temperatures to well below 2℃ compared to pre-industrial levels, and strive to limit that increase to 1.5℃.