Climate-Related Disclosure in Line with TCFD Recommendations

For a century, Tsurumi Manufacturing has been supporting the environment and society with water. Climate change, though, threatens both and has the potential to deeply impact our corporate activities. We have therefore announced our support for the recommendations of the Task Force on Climate-related Disclosures (TCFD) and become a signatory to these. As such, we work to advance our analysis of climate-related risks and opportunities and appropriate information disclosure.

Governance

Board of Directors
The Board of Directors, which is responsible for decisions related to climate issues, is chaired by Tsurumi Manufacturing’s President, who is the person ultimately responsible for such issues. The Board of Directors takes reports from the Management Meetings and committees that come under the umbrella of the Board of Directors, to review deliberations and decisions.
Sustainability Strategy Committee
The Sustainability Strategy Committee was established to deliberate and approve issues and measures connected to sustainability-related risks and opportunities. The Managing Director performs the role of chair and in response to different topics he or she invites executives, employees, and others to form a committee for each (at least once a year). The committee’s deliberations and decisions regarding GHG emissions or measures to mitigate or adapt to risks are periodically reported to the Board of Directors (at least once a year) and reviewed.
Risk Management Committee
The Risk Management Committee was established to consider the likelihood of dormant risks occurring, and to facilitate close cooperation between the Board of Directors and relevant departments to encourage information sharing. The Managing Director performs the role of chair and in response to different topics he or she invites executives, employees, and others to form a committee for each (at least once a year). The committee acts to evaluate risks, including of improper conduct, and its deliberations and decisions regarding risk countermeasures are periodically reported to the Board of Directors (at least once a year) and reviewed. Where necessary, the committee calls on financial auditors, legal advisors, or similar for advice and guidance.
Governance System for Climate-Related Matters

Strategies

Our strategy studies involved identifying major risks and opportunities and then carrying out analysis based on potential temperature rise scenarios. We referenced materials such as the Sixth Assessment Report by the United Nation’s Intergovernmental Panel on Climate Change (IPCC) and the World Energy Outlook report by the International Energy Agency (IEA) to hypothesize two potential scenarios for our company in which global temperatures rise either 1.5°C or 4°C above pre-industrial levels. This enabled us to investigate what the business environment might look like in 2030 and the measures we should take to adapt. We carry out these studies each year and our disclosures here are the result of these studies and take into account environmental and information changes.

Risks and Opportunities Identified

Category Risk Risk Opportunity Details
Transitional Policy/Regulations Carbon taxes   • Carbon taxes levied depending on amount of greenhouse gas (GHG) emissions
• Costs incurred to improve carbon footprints, etc.
Changes in the energy mix • Drop in sales to conventional power generation markets
• Increase in sales for renewable energy power generation
Technology Investments needed in low-carbon technologies • Difficulty in recovering investment if market trends vary from forecasts
• Increase in sales if successfully able to differentiate products from those of competitors
Market Increased material costs   • Rise in manufacturing costs as material prices soar due to increased demand
Changes in consumer behavior • Decrease in sales of conventional products due to increased environmental awareness
• Increase in sales to environmentally aware customers
Reputation Perception of lack of efforts on global warming • Loss of corporate reputation
• Boost to corporate reputation through proactive efforts
Perception of insufficient disclosure • Drop in external ratings
• Improved external ratings through appropriate information disclosure
Physical Chronic Rise in average temperatures • Drop in productivity due to worsening working conditions
• Costs incurred to improve working conditions
• Increased productivity by improving working conditions
Acute Increasing severity of abnormal weather • Halt to operations due to damage to company assets or supply chain interruptions
Main Opportunities
Increasing sales of energy-efficient products We can increase sales if we can cater to demand for products that help to reduce CO2 emissions during use.
Providing carbon footprint data We can cater to environmentally aware customers’ needs by calculating the CO2 footprint produced during manufacture.
Adapting to new power generation markets We can capture sales opportunities by pivoting to markets in geothermal power generation or new technologies.
Catering to increased flood defense needs We can increase sales by responding to demand for BCP countermeasures and more functional/updated wastewater equipment.
Constructing component production systems We can earn a strong reputation for reliability during uncertain circumstances by producing important components in-house.

Scenario-Based Evaluation and Countermeasures

Hypothetical Scenarios

1.5°C Rise Scenario (referencing the IPCC’s SSP1-1.9 and SSP1-2.6 scenarios and the IEA’s NZE scenario)

  • This imagines strict regulations being introduced and technical innovations made with the aim of achieving net-zero global CO2 emissions and so the main business impacts are the result of changes to markets and customers’ preferences as society transitions to a decarbonized world.

4°C Rise Scenario (referencing the IPCC’s SSP3-7.0 and SSP5-8.5 scenarios and the IEA’s STEPS scenario)

  • This imagines global efforts to tackle climate change being disparate and inconsistent, and regulations and technical innovations insufficient and so the main business impacts are the result of changes to society triggered by climate change in the form of rising temperatures and heavy rainfall.
Periods Used in Identifying and Evaluating Climate-Related Risks and Opportunities
Period Details
Short-term FY2024–2026 The activity period for our three-year medium-term management plan
Medium-term Until the end of FY2029 The final year of our long-term management plan and the end point for our current long-term environmental targets
Long-term FY2030 and beyond The period after our current management plans
Financial Impacts
Definition
Major A negative impact that would interrupt or reduce business activities or a positive impact that would significantly boost sales
Moderate An impact with an effect on only part of our business activities
Minor An impact with little effect on our business activities

Major Risks and Opportunities Identified via Scenario-Based Analysis, and Countermeasures

Risks Financial
impacts
Countermeasures Time span
Introduction of carbon taxes Minor Under the 1.5℃ scenario, there is the possibility that carbon taxes will be charged. As business growth results in greater GHG emissions from manufacturing, the introduction of carbon taxes will significantly affect profits. With our long-term environmental target, Green Plan 2030, we aim to reduce GHG emissions from manufacturing by 50% by 2030. Specific measures to reduce our GHG emissions include introducing solar power generation facilities, promoting the use of renewable energy, and switching to electric or hybrid vehicles. Through these, we plan to help to fight climate change and simultaneously limit any cost rises associated with the introduction of carbon taxes. Short- to long-term
Plant shutdowns and supply chain disruptions caused by flood damage, etc. Medium Using a simulation for the hypothetical maximum amount of flooding and flood damage based on hazard maps, we calculate the yen value of the damage that might be caused. Under both the 1.5℃ and 4℃ scenarios, global temperatures are predicted to have risen by 1.5℃ over pre-industrial levels by the fiscal year 2030 and that the frequency of flooding is likely to be twice what it is now. We predict that the likelihood of damage to our sites, though, is eclipsed by the risk of supply chain disruptions. Therefore, alongside BCP efforts at our sites such as enhancing the resilience of our equipment or making components that can be used in multiple products, we will prepare for potential supply chain disruption risks by bringing the manufacture of major components in-house so as to strengthen our component supply systems. Short- to medium-term

By investigating the risks that were identified, we discovered no risks where it would be especially challenging to adapt our business to climate change. With regard to carbon taxes, we are looking at our Scope 1 and Scope 2 emissions, and identifying key sources of GHG emissions. Currently, we are promoting initiatives in a highly effective environment by adopting long-term environmental targets and the GHG reduction measures to achieve those into our ISO 14001 activities. In response to the risk of supply chain disruptions, we are investing in setting up logistics bases and bringing the manufacture of major production components in-house, and this will help to lower such risks.

Opportunities Financial
impacts
Countermeasures Time span
Increased sales opportunities brought about by more intense rainfall Moderate Rainfall intensity in Japan is expected to increase 10% by 2030, so any products that can contribute to BCP measures or similar in the country are likely to see improved sales. As well as continuing activities to capture orders by proposing solutions that leverage our existing product lineup and the extensive expertise we have built up so far, we will further enhance our product development and service and support systems to meet customers’ diversifying needs. In overseas markets where economic growth is predicted, too, we will work to understand the impact of climate change and market trends with the aim of growing sales. Short- to long-term
Increased sales opportunities associated with changes to the energy mix Minor In the electricity field, it is predicted that we will become less reliant on power generation from fossil fuels as we work towards net zero. As such, demand is expected to increase for vacuum pumps for geothermal and biomass power generation, and for submersible pumps used in rainwater reservoirs connected to solar power generation. Forecasts also suggest demand for new technologies such as CCU and CCUS will grow, and so we will focus on related markets. Short- to medium-term

We believe that demand will grow among both public and private organizations within Japan for water pumps used in BCP countermeasures. In the power generation field, it is probable that demand for CCU, CCUS, and other new technology products will rise. In this way, we can see that the growth in flood damage risks from climate change and the development of CO2 reduction technologies toward carbon neutrality will increase demand for our products as measures to mitigate or adapt to climate change, and this presents a major business opportunity. We will pay close attention to these trends and look to maximize these opportunities.

As a result of analysis into risks and opportunities, we were able to determine that we possess a sufficiently high level of resilience in the event of either the 1.5℃ or 4℃ scenario coming about.

Risk Management

At Tsurumi Manufacturing, the sustainability-related departments work to identify climate-related risks and use scenario-based analysis to evaluate these, a process they repeat each year. The risks and opportunities they designate, and the evaluations, are discussed afresh by the Sustainability Strategy Committee, before being reported to the Board of Directors. In a similar manner, the Risk Management Committee reports to the Board of Directors about the business risks it has evaluated.
The Board of Directors, taking into consideration reports from the committees, deliberates and determines corporate strategy and matters such as the company’s medium-term management plan. It also considers our sustainability-related initiatives to adequately monitor how management resources are allocated and how strategies are implemented.

Indicators and Targets

The climate-related indicators we have chosen to evaluate our performance are reductions (in percentage terms) to the amount and intensity of the GHGs we emit.
We have published our targets in our Green Plan 2030, and are working in various ways in our corporate activities to reduce GHG emissions. Our efforts include coordinating specific activities into our ISO 14001 environmental activities, and systematically implementing reduction measures.

Green Plan 2030

  • 1.Reduce the amount of greenhouse gases emitted from our activities to 50% of the level in FY2014 by 2030.
  • 2.Reduce the intensity of greenhouse gases emitted from our supply chain activities to 30% of the level in FY2014 by 2030.

FY2023 Results

Greenhouse gases from our activities (Scopes 1 & 2):
2,638 t-CO2 e (a 24.2% reduction from FY2014 levels)

Main GHG reduction initiatives

  • Reducing gasoline consumption by switching to electric or hybrid vehicles
  • Reducing kerosene consumption by updating air-conditioning equipment at Yonago Plant
  • Producing energy by introducing solar power generation equipment at Chubu Branch Office
  • Using renewable energy at our Osaka Headquarters, Tokyo Head Office, Tohoku Branch Office, Shikoku Branch Office, Kita-Kanto Branch Office, and Takasaki Sales Office

CDP score (climate change): B-

CDP is an international organization that rates strategies to deal with climate change, which it does by analyzing the information companies disclose and giving them one of eight ratings from A to D-. Our score of B- is set as a “management level” and shows that we are aware of our environmental risks and their potential impacts, and that we are acting accordingly.