Information Disclosure Based on the TCFD Recommendations

The impact of climate change is intensifying every year, society’s interest in this issue is on the rise, triggering demands that companies step up their actions. The Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board, published its final report in 2017 that urged companies to disclose information on their climate-related risks and opportunities. We have endorsed the TCFD recommendations and are a member of the TCFD Consortium, which aims to promote actions by organizations in Japan in support of the TCFD recommendations. We aim to proactively disclose information on climate change in the four areas (Governance, Strategy, Risk Management, and Metrics and Targets) specified by the TCFD.

We have a system in place that has the Board of Directors appropriately supervise our efforts to address climate change and other important sustainability-related issues. Important policies, strategies, and measures concerning sustainability are discussed at the Sustainability Strategy Committee meeting held twice a year before they are reported to the Board of Directors. Executives related to sustainability, presidents of key Group companies, and managers related to sustainability participate in the meetings of the Sustainability Strategy Committee chaired by the President and CEO. Of the items discussed at this meeting, the Executive in charge of Sustainability and the Executive in charge of Environment report on important issues related to management at the Board of Directors meetings to be reflected in the Group’s business strategy twice a year.

In FY2020, the Sustainability Strategy Committee reported on the progress of initiatives related to the Science Based Targets (SBT), TCFD, and the long-term vision entitled “Toshiba Group’s Environmental Future Vision 2050” to the Board of Directors. In FY2021, the Board of Directors resolved to adopt a new policy on sustainability management, which includes the company’s response to climate change, in the Toshiba Group Sustainability Policy.

More detailed measures and policies related to the environment are discussed at the meetings of the Corporate Environmental Management Committee set up under the Sustainability Strategy Committee. The Corporate Environmental Management Committee meeting, chaired by the Executive in charge of Environment, is held twice a year and is attended by environmental promotion managers of key Group companies and corporate staff division managers. What is discussed here is then spread within each Group company in the Environmental Management Committee of Group Companies meetings to be held at key Group companies.

• Environmental Management Structure
• Sustainability Management (Sustainability website)

Under the Sustainability Strategy Committee chaired by the President and CEO, we conduct scenario analysis for each business domain to grasp climate change-related risks and opportunities.

In scenario analysis, we set up the following two scenarios:

● 1.5°C and well-below 2°C scenario:
For mainly transition risks and opportunities, we use the B2DS, SDS, and NZE2050 scenarios created by the International Energy Agency (IEA), assuming a world where the temperature increases by 1.5°C and well-below 2°C. This scenario predicts increase in costs due to carbon tax, energy saving related regulations, the introduction of renewable energy, etc., as well as increase in business opportunities due to growing demand for energy technologies to realize decarbonization and energy-saving products and services.

● 4°C scenario:
For mainly physical risks and opportunities, we use the RCP 8.5 scenario by the Intergovernmental Panel on Climate Change (IPCC), assuming a world where the temperature increases by 4°C. Although this scenario does not predict a greater impact of regulations and technology than the 1.5°C and well-below 2°C scenario, the impact of physical damage such as greater risk of natural disasters like typhoons and flooding caused by unusual weather may increase.

● Scope:
Our scenario analysis is conducted in the following five business domains taking into consideration the scale of the business and the significance of the impact of climate change. Since each domain has a range of businesses and the content and degree of impact of risks and opportunities vary according to the business, we conduct a detailed analysis for each business division to identify risks and opportunities that are specific to each business. Not stopping at the initiatives of our own company, the analysis covers the entire value chain including the upstream (suppliers) and downstream (customers, users).

- Energy Systems & Solutions Business
- Infrastructure Systems & Solutions Business
- Electronic Devices & Storage Solutions Business
- Digital Solutions Business
- Battery Business

● Time frames :
Three time frames are set (short-, mid-, and long-terms). We assumed the present to 3 years as the short-term in light of the period of Toshiba Group’s Seventh Environmental Action Plan (final year: FY2023), 4 to 10 years as the mid-term in light of the setting periods of Toshiba Group’s management policy (FY2025 and FY2030), and 11 to 30 years as the long-term in light of Toshiba Group’s Environmental Future Vision 2050.

● Analysis steps:
We conduct scenario analysis in line with the steps, “Risk importance assessment,” “Definition of scenario groups,” “Business impact assessment,” and “Definition of countermeasures” based on the TCFD recommendations.
In the most recent scenario analysis, we used a common format in the business domains listed in the above scope. First, each business division identifies transition and physical risks and opportunities that climate change would pose to their respective business in line with the two scenarios, “1.5°C and well-below 2°C” and “4°C,” based on the risk and opportunity categories presented in the TCFD recommendations, in light of the relevant business circumstances. Then, each business division assesses the importance of each risk and opportunity in accordance with the company-wide assessment standards. We set (1) three levels of impact (assessed by impact on sales or expense amounts) and (2) three levels of likelihood (assessed by probability and frequency) as the assessment standards. By multiplying the two assessment results, we categorize the final importance into one of three levels: low, medium, and high. Note that in this report we have mainly disclosed risks and opportunities with medium and higher importance based on the assessment results.
In addition, these analysis results were reviewed by related corporate staff divisions (Strategic Planning Division, IR Division, Sustainability Division, Environment Division) to reflect the viewpoint of each area of expertise. Moreover, of the risks and opportunities that have been identified and assessed, those with particularly high importance or those that are unique to each business will be calculated for the amount of financial impact by setting parameters, and we will give priority to formulating countermeasures for such items.

The main results of the latest scenario analysis conducted in 2022 are as follows.

• Opportunities are listed under “Risks and Opportunities by Business.”

• Toshiba Group’s Risks and Opportunities by Business(267KB)

As a result of the scenario analysis for each business assuming the 1.5°C and well-below 2°C scenario and the 4°C scenario, we identified different risk factors depending on the characteristics of each business. For example, technology and market risks of renewable energy-related products in the Energy Systems & Solutions business, policy and legal risks concerning GHG emissions in manufacturing processes in the Electronic Devices & Storage Solutions business, and risks related to human resources in the Digital Solutions business. As for opportunities, we also identified various business opportunities for each business, including renewable energy-related technologies, railway systems, disaster management solutions, power semiconductors, ICT solutions that contribute to reducing GHG, and automotive batteries.

The countermeasures for risks and opportunities that were identified and assessed in the above scenario analysis will be incorporated into part of a future mid-term business plan of each business domain, and its progress will be regularly managed.
Toshiba Group’s new management policy announced in FY2022 declares that we regard the social trend toward carbon neutrality as an opportunity and will contribute to achieving carbon neutrality by building infrastructure that everyone can enjoy and a connected data society in our business activities. In addition, as stated in Toshiba Group’s material issues as well as long-term vision Environmental Future Vision 2050, we uphold response to climate change as a priority item and aim to achieve carbon neutrality throughout Toshiba Group’s entire value chain by FY2050. Going forward, we will continue to reflect scenario analysis results in Toshiba Group’s business strategy and engage in sustainable business management while appropriately responding to risks and opportunities of climate change.

• Material issues and KPIs (KPIs) (Sustainability website)
• Environmental Future Vision 2050
• Response to Climate Change in Business Activities
• Products and Services Associated with Power Supply
• Products and Services Associated with Power Consumption
• Adaptation Measures to Avoid the Effect of Climate Change

Toshiba Group’s risk management concerning climate change is incorporated into the company-wide risk management process. For business risks that have significant impact on management including climate-related risks, we clarify management decision criteria, permissible risk limits, and corporate policy on business withdrawal in making management decisions to achieve Toshiba Group’s sustainable growth and increase corporate value. In addition, for each risk case, the Business Risk Review Committee conducts risk assessment, identifies the maximum risk, and establishes items for monitoring.

Matters of particular importance are discussed at the Management Meeting. The Business Risk Review Committee meeting is held several times annually as matters arise. Since FY2022, we have added climate-related risks (policy and legal risks, technology risks, market risks, reputation risks, physical risks) based on the TCFD recommendations to the business risk criteria and will work to strengthen the assessment processes concerning climate change.

With regard to risk management specialized for climate change, we identify risks and assess their importance as part of the scenario analysis for the main business domains, which are conducted under the Sustainability Strategy Committee, and share the results with the Committee. For the risks identified and assessed here, the executive in charge of sustainability and the executive in charge of environment bring them up to the Board of Directors meetings to be reflected in the Group’s management strategy.

• Risk Management and Compliance (Sustainability website)

Under the Environmental Future Vision 2050, we aim to achieve carbon neutrality throughout Toshiba Group’s entire value chain by FY2050. As a milestone, we aim to reduce GHG emissions by 70% by FY2030 compared to the FY2019 level.
We set out the following breakdown of GHG reduction target for FY2030 and are promoting related initiatives.

• Environmental Future Vision 2050
• The Seventh Environmental Action Plan