Information Disclosure Based on the TCFD Recommendations

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. Based on the TCFD recommendations, we will proactively disclose information on risks and opportunities for our business brought about by climate change and promote initiatives to reduce such risks and maximize opportunities.

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. Specifically, the status of initiatives related to climate change is reported to the Board of Directors four times a year.

The main resolutions and cases regarding climate change reported at recent Board of Directors meetings are as follows:

• FY2021: Toshiba Group Sustainability Policy, which is a new policy on sustainability management that includes the company’s response to climate change, was resolved.
• FY2022: Toshiba Group’s carbon neutral promotion scheme and the setting of renewed SBT (Science Based Targets) as well as the setting of non-financial KPIs associated with Toshiba Group’s material issues, including response to climate change, were reported. 

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.

Toshiba Group has introduced evaluation of non-financial aspects to its executive compensation system. In the individual evaluation for performance-linked compensation of Toshiba Corporation’s Executive Officers and Corporate Officers as well as some senior directors at Group companies, special contributions for environmental management, including response to climate change, are taken into account. The evaluation items include the status of progress toward GHG reduction targets and initiatives for achieving carbon neutrality.

Using the same evaluation items as for officers, we also conduct environmental management evaluation of our key group companies. The results of environmental management evaluations are reflected in each company’s performance evaluation as well as each company’s employee bonuses.

• Toshiba Group Environmental Audits and Performance Evaluation System

• Environmental Management Structure
• Sustainability Management (Sustainability website)

Under Environmental Future Vision 2050, Toshiba Group is undertaking initiatives on climate change with the aim of achieving carbon neutrality throughout our entire value chain. In addition to reducing GHG emissions within the Group, measures are actively being implemented in each stage of the value chain, including increasing the creation of products and services that contribute to reducing GHG emissions in society and cooperating with suppliers to reduce upstream emissions.
Toshiba Group material issues also include "response to climate change" as a key item, and achieving carbon neutrality is an important policy shared by the entire Toshiba Group.

• Environmental Future Vision 2050
• Material Issues and KPIs (Sustainability website)

To realize highly resilient corporate management as society changes in various ways due to the impact of climate change, it is important to respond appropriately by grasping the risks and opportunities from climate change facing our company. Under the Sustainability Strategy Committee chaired by the President and CEO, Toshiba Group conducts scenario analysis for each business domain to grasp and consider countermeasures for climate change-related risks and opportunities.

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

● 1.5°C scenario:
For mainly transition risks and opportunities, we use the Net Zero Emissions by 2050 (NZE) scenario created by the International Energy Agency (IEA), assuming a world where the temperature increases by 1.5°C compared to the level before the industrial revolution. 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 described in the Fifth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC), assuming a world where the temperature increases by more than 4°C compared to the level before the industrial revolution. Although this scenario does not predict an impact due to regulations and technology as the 1.5°C scenario does, the impact of physical damage such as greater risk of natural disasters like typhoons and floods caused by unusual weather may increase.

● Scope:
To confirm the wider impact on all our main businesses, we expanded the targets of scenario analysis to the following seven business domains in FY2023. Since each domain has various 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
- Building Solutions Business
- Retail & Printing Solutions Business
- Electronic Devices & Storage Solutions Business
- Digital Solutions Business
- Other（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 the mid-term business plan, up to FY2030 as the mid-term in light of the setting periods of Toshiba Group’s management policy and our GHG emissions reduction targets (mid-term), and up to FY2050 as the long-term in light of Toshiba Group’s Environmental Future Vision 2050 and our GHG emissions reduction targets (long-term).

● 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 “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 high 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 are calculated for the amount of financial impact and countermeasure costs by setting parameters, and we will give priority to formulating countermeasures for such items.

The main results of the latest scenario analysis conducted in FY2023 are as follows.

• “Transition Risks" and "Opportunities" in common risks/opportunities are mainly identified assuming the 1.5°C scenario. “Physical Risks” are identified assuming the 4°C scenario.
• “Importance” of common risks/opportunities is based on the assessment of "impact" and "likelihood" as described in the "Analysis steps" above, and is determined comprehensively considering other factors such as the status of our response to the risks/opportunities.

• Toshiba Group’s Risks and Opportunities by Business(818KB)

For the details of the scenario analysis results for the Retail & Printing Solutions business, please refer to “Toshiba Tec Group Integrated Report 2023.”
Toshiba Tec Group Integrated Report 2023 (Toshiba Tec Corporation)(13.66MB)

As a result of the scenario analysis for each business assuming the 1.5°C 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, high efficiency LED lighting, elevators with high energy-saving performance, POS systems and multifunction peripherals (MFPs), power semiconductors, ICT solutions that contribute to reducing GHG emissions, and automotive batteries.

Some of the countermeasures for risks and opportunities that were identified and assessed in the above scenario analysis are incorporated into the mid-term business plan of each business domain, and measures are promoted. Risks and opportunities of high importance will continue to be reflected in mid-term business plans, and their progress will be managed regularly.
Toshiba Group’s management policy announced in June 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. To increase this policy’s effectiveness, we first launched a Toshiba Group company-wide project in FY2022 to formulate a GHG reduction roadmap that incorporates specific measures toward carbon neutrality at our own business and production sites, and then promote these activities. In addition, toward contributing to carbon neutrality of the entire society, we have established a structure to promote our business quickly and effectively by making a organizational change to strengthen our energy aggregation business in FY2022, and launching a Negative Emission Project Team in FY2023. Going forward, we will continue to link scenario analysis results to Toshiba Group’s business strategy and engage in resilient business management while appropriately responding to risks and opportunities.

• Our strategy
• Response to Climate Change in Business Activities
  
• Products and Services Associated with Power Supply
• Products and Services Associated with Power Consumption
• Contribution to GHG reduction through digital technology
• Adaptation Measures to Avoid the Effect of Climate Change
• Initiatives for Carbon Neutral (Toshiba Energy Systems & Solutions Corporation)

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 monthly as matters arise. We have added climate-related risks (policy and legal risks, technology risks, market risks, reputation risks, and physical risks) based on the TCFD recommendations to the business risk criteria and will work to strengthen the assessment processes concerning climate change going forward.

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.

• Structure of Risk Management and Compliance (Sustainability website)

Under 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.

Toshiba Group’s GHG reduction targets have been certified as net zero targets by the Science Based Targets initiative (SBTi).

As of FY2022, reduction is progressing smoothly in all of Scope 1, 2, and 3 toward achievement of the targets. We will continue to promote GHG reduction measures at each stage of the value chain.
In addition, for the results of Scope 1, 2, and Scope 3 Category 11 (Emissions caused by the use of sold products and services), we undergo a third-party verification to ensure data reliability.

• Environmental Future Vision 2050- Breakdown of Greenhouse Gas Reduction Target
• The Seventh Environmental Action Plan
• Toshiba’s Net Zero Targets Approved by SBTi
• Greenhouse Gas Emissions Across the Value Chain
• Third-party Verification