Amidst the increasing number of large-scale natural disasters caused by abnormal weather conditions around the world, the Kureha Group, which conducts business globally, views climate change as a material issue and aims to reduce environmental impact through the advancement of production technologies and achieve carbon neutrality by fiscal 2050. The Group supports international initiatives, starting with the Paris Agreement, as well as climate change-related regulations and various policies of the Japanese government. Furthermore, the Group regards efforts to adapt to changes in its business environment caused by climate change as opportunities for growth, and is reflecting this approach in its own policies and specific measures.
Since endorsing the Task Force on Climate-related Financial Disclosure (hereinafter, TCFD) recommendations in April 2022, we have been promoting information disclosure in line with the TCFD framework in order to strengthen the Group's engagement with shareholders, investors, and other stakeholders on climate change.

To ensure the implementation of sustainability initiatives such as responses to climate change, the Kureha Group has established a governance structure centered on the Sustainability Committee and the Sustainability Coordination Committee and has oversight by its Board of Directors. The roles of each of the committees are as follows.

The Board of Directors is responsible for making decisions on important sustainability matters for the Group. The Board of Directors determines material issues based on the recommendations of the Sustainability Committee. Furthermore, the Board of Directors formulates and agrees on mid- to long- term management plans that reflect the initiatives for the material issues and disseminates the plan to each department. At least once a year, the Board of Directors receives reports from the Sustainability Committee on activities related to material issues, including carbon neutral initiatives, and supervises them.

The Sustainability Committee principally meets twice a year as an advisory committee to the Board of Directors. The Committee monitors changes in the business environment surrounding the Group with regard to sustainability and makes recommendations to the Board of Directors about basic management policies and strategies related to sustainability, such as identifying material issues that require special focus for the Group's sustainable growth and enhancement of corporate value over the medium to long term. The Committee also monitors material issues through reports from the Sustainability Coordination Committee and other means.

The Sustainability Coordination Committee identifies risks and opportunities that affect the sustainability of the Group and society as "sustainability issues," and works together with stakeholders to minimize risks and maximize opportunities. The Committee formulates specific plans for resolving sustainability issues, including material issues, in collaboration with its six subcommittees (Responsible Care Subcommittee, Compliance Subcommittee, Information Security Subcommittee, Information Disclosure Subcommittee, Human Rights Subcommittee, and Risk Management Subcommittee) and the departments in charge of each issue, and manages the progress of these activities. These results are shared with the Sustainability Committee. One of the material issues, carbon neutral initiatives, is addressed by the Responsible Care Subcommittee, and the results are shared with the Sustainability Committee. The Sustainability Coordination Committee reports at least once a year to the Board of Directors on activities related to material issues such as climate change.

The Carbon Neutrality Project was established in October 2021 as a company-wide project under the direct control of the President, and is working to study new measures and develop technologies to achieve carbon neutrality by 2050.

The Group regards carbon neutral initiatives as material issues, and under the Kureha Group Mid- to Long-term Management Plan "Toward Creating a New Future," we are working to mitigate climate change both by reducing CO₂ emissions from the Group and through our products, aiming to achieve carbon neutrality by fiscal 2050.
To reduce the Group's CO₂ emissions, the Iwaki Factory will make use of CO₂-free fuel at its coal-fired power plant, conserve energy through production technology innovation, expand the use of CO₂-free electricity at each business site and Group company, and increase the efficiency of large-scale facilities and equipment when they are upgraded, in line with the Management Plan. In addition, to contribute to the reduction of CO₂ emissions through our products and technologies, we are improving the performance and developing technologies aimed at reducing the environmental impact of advanced materials such as polyvinylidene fluoride (PVDF) and polyphenylene sulfide (PPS), and conducting R&D aimed at bringing even more highly advanced materials to market.
Specifically, to increase our supply of PVDF for the lithium-ion battery binders of electric vehicles, which can reduce the amount of CO₂ more than gasoline-powered vehicles, we are boosting production of this material as part of our goal of doubling sales of our Advanced Materials segment, which produces PVDF, from about ¥83 billion in fiscal 2022 to ¥170 billion by fiscal 2030.

In our Mid- to Long-term Management Plan, we plan to invest a total of approximately ¥10 billion by fiscal 2030 in measures to reduce CO₂ emissions in production and waste reduction, etc. We will continue to make decisions on investments to reduce CO₂ emissions based on future risks and opportunities.

Furthermore, to build a technological foundation for helping the world become carbon neutral, the Group is developing technologies for reducing production costs, lowering environmental impacts, and improving the performance of PVDF, PPS, and other advanced materials for electric vehicles. It is also carrying out R&D with a view to entering the aerospace industry by supplying the market with performance- and cost-differentiated silicon carbide (SiC) fibers, which can replace metal components of aircraft as a means to reduce weight and improve fuel consumption. This technological development is moving ahead as part of R&D and new business investment totaling around ¥30 billion through 2030.

We took the following steps to conduct a scenario analysis of the impact of climate change on our Group. We examined the impact on our profit-and-loss projection and financial plan, and categorized risks, opportunities, and countermeasures into short, medium, and long term.

1. Create a list of risks and opportunities from climate change that could have a long-term impact on its advanced materials, specialty chemicals, specialty plastics, and construction businesses and environmental services, which comprise the majority of the Group's businesses, and related responses in line with business planning and the R&D Policy.
2. Set three scenarios—growth scenario (1.5℃), standard scenario (2℃), and stagnation scenario (4℃).
3. Score the importance of risks and opportunities for each scenario by dividing the period up to 2050 into short (0-3 years), medium (4-10 years), and long (11-30 years) term.
4. Estimate the impact of highly important risks and opportunities on profit-and-loss projection and financial planning
   The impact of a carbon tax was estimated by assuming that the Group's total emissions in the medium to long term will be approximately 430 thousand t-CO₂/year (Scope 1+2), the same level as in FY2021, and based on a carbon tax price for each production site equal to that used in the Net Zero Emissions scenario of the IEA World Energy Outlook 2021 (equivalent to the progress scenario, developed countries: approximately 18 thousand yen/t-CO₂).
5. Based on the estimated amount of impact, identify risks and opportunities of high importance and formulate countermeasures

We used the following tools: environmental impact assessments, climate change projections by the Intergovernmental Panel on Climate Change (IPCC), ISO 14001, desk research results, and analyses provided by consultants.

• Impact: large (2 billion yen or more)*
• Impact: medium (1 billion yen or more but less than 2 billion yen)*

The Kureha Group identifies risks that could have a material impact on the Group's management, and works to prevent such risks from materializing and to minimize their impact if they do materialize. And for this purpose, the Risk Management Subcommittee, a subcommittee of the Sustainability Coordination Committee, identifies risks that could have a material impact on the Group's management. Depending on the classification of the identified risks, each subcommittee and/or related department takes the lead in considering and implementing a response. The status of risk management is monitored and evaluated by the Risk Management Subcommittee, which reports to the Sustainability Coordination Committee and the Executive Committee, which in turn reports to the Board of Directors. The Group recognizes climate change as one of the major risks that could have a significant impact on the Group's management. The Responsible Care Subcommittee, a subcommittee of the Sustainability Coordination Committee, takes the lead in carbon neutral initiatives in cooperation with the Risk Management Subcommittee.

The Kureha Group aims to achieve carbon neutrality by fiscal 2050 and to reduce its environmental impact through the advancement of production technology, and has set an interim target of reducing energy-related CO₂ emissions by 30% or more from the fiscal 2013 level by fiscal 2030.

The Company calculates both the overall Group's direct greenhouse gas (GHG) emissions from use of fuel and energy, etc., (Scope 1) and its indirect greenhouse gas (GHG) emissions from the use of energy purchased from other companies, including electricity, heat, and steam, (Scope 2) and discloses these as indicators of progress toward its goals. As a chemical company, Kureha recognizes that it is also important to manage emissions throughout the supply chain (Scope 3), from raw material purchases to waste disposal, and has begun to calculate those.
In addition, we are developing environmentally friendly products and technologies to contribute to the reduction of global GHG emissions, including new grades of existing products.

At the Iwaki Factory, we are steadily implementing energy saving plans, such as systematically updating to energy-saving equipment. We are also implementing various activities to promote energy conservation, such as energy-saving patrols and internal energy audits. In logistics, too, Kureha Unyu, which is responsible for the transport of our products, and relevant internal departments are working together to systematically upgrade to energy-saving vehicles. Other sites, such as the head office, are also promoting their own energy-saving and conservation activities.

In line with Japan's policies promoting the spread of renewable energy, we have installed solar power generation equipment at the Iwaki Factory that generates approximately 300 MWh of energy for the region per year.
The Kureha Group has factories in the United States, China, Vietnam, and other countries. Each country's energy policies are different, but each of our production sites are actively promoting climate change mitigation measures, such as switching the electricity we use to renewable energy, according to the policies of each country. For example, China-based Kureha (Shanghai) Carbon Fiber Materials Co., Ltd. is proactively introducing solar power generation.

CFP is an indicator of CO₂ emissions throughout the product lifecycle, from the procurement of raw materials to production and use, and disposal. We have begun to calculate product CFPs for our main products.
In addition, because it is necessary to reduce CO₂ emissions throughout the supply chain in order to achieve carbon neutrality the company is promoting the exchange of CFP information with our suppliers.

Beginning in fiscal 2017, Kureha has been periodically conducting surveys of its suppliers to determine the extent they fulfill their corporate social responsibility. We also evaluate key suppliers by having them complete check sheets of required items, such as calculations of CO₂ emissions and voluntary reduction targets. If requirements are not met, we engage with the supplier(s) to implement improvements.

We are reducing CO₂ emissions by increasing the size of our fleet, shortening the total transport distance and promoting a modal shift to transport by rail and ship to achieve our target of an average annual improvement of 1% or more in energy consumption intensity*.

In compliance with legal restrictions on fluorocarbon emissions specified in Japan, Kureha upgrades or replaces obsolete equipment that uses fluorocarbons specified in the law, and works to reduce fluorocarbon leaks by strictly carrying out basic and periodic inspections of equipment to detect leaks as soon as possible.

In February 2021, the government of Fukushima Prefecture issued its "Fukushima Prefecture 2050 Carbon Neutral" declaration aimed at achieving a decarbonized society by 2050. With this action, the Fukushima Protocol, under which our Iwaki Factory has participated in advancing voluntary measures to combat global warming, has now become the Fukushima Zero Carbon Declaration. As our Group is also working to achieve carbon neutrality by fiscal 2050, the Iwaki Factory is in agreement with the aims of this declaration.