Climate and Nature-Related Disclosure (in Line with TCFD and TNFD Recommendations)
Tsurumi Manufacturing has been contributing to the global environment and society through water for a century. Both the environment and society, however, are now being threatened by climate change, which could also impact business activities that depend on them. Economic activities also rely on the benefits (ecological services) provided by natural capital such as the atmosphere, water, minerals, soil, plants, and animals, and conserving biodiversity is critical to continue enjoying these benefits.
We have therefore agreed to and endorsed the Task Force on Climate-related Financial Disclosures (TCFD), analyzing climate-related risks and opportunities and disclosing relevant information. The Taskforce on Nature-related Financial Disclosures (TNFD) provides a framework for disclosing information on nature-related risks. Accordingly, we conducted assessments in fiscal 2024 using the LEAP approach*1 to improve resilience.
*1: An integrated approach to scoping assessments and identifying and evaluating nature-related issues, consisting of four phases: Locate (interfacing with nature), Evaluate (dependencies and impacts on nature), Assess (critical nature-related risks and opportunities), and Prepare (response and reporting).
Governance
- Board of Directors
- The Board of Directors receives reports from management meetings and committees under its authority, makes decisions on critical sustainability issues related to climate change and nature, and reviews matters discussed and decided by the committees.
The President of Tsurumi Manufacturing, who also serves as the representative of the Board of Directors, is responsible for sustainability-related issues. - 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*2 to form a committee for each (at least once a year). The results of discussions and decisions regarding sustainability issues, such as those related to climate change and nature, are reported to the Board of Directors for review at least once a year.
- Risk Management Committee
- The Risk Management Committee was established to recognize potential risks, and to facilitate close cooperation and information sharing between the Board of Directors and relevant departments. 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.
- *2: Employees, etc., include regular employees, junior employees, non-regular employees, special assignment employees, contract employees, part-time employees, employees on temporary assignment, and dispatched employees.
Strategies
Climate-Related Matters
Our strategy studies involve identifying major risks and opportunities and conducting scenario analyses to develop measures that address them. Specifically, we reference the Sixth Assessment Report by the United Nations Intergovernmental Panel on Climate Change (IPCC) and the World Energy Outlook (WEO) by the International Energy Agency (IEA) to hypothesize two scenarios in which global temperatures rise by either 1.5°C or 4°C above pre-industrial levels. These studies are conducted annually, taking into account both external and internal changes in the environment and information. Results from studies conducted in fiscal 2024 are as follows.
IPCC: Intergovernmental Panel on Climate Change
IEA: International Energy Agency
Risks and Opportunities Identified
| Category | Risks | 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. |
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| Changes in the energy mix | ● | ● | • Drop in sales to conventional power generation markets • Increase in sales for renewable energy power generation |
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| 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 |
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| 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 |
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| Reputation | Perception of lack of efforts on global warming | ● | ● | • Loss of corporate reputation • Boost to corporate reputation through proactive efforts |
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| Perception of insufficient disclosure | ● | ● | • Drop in external ratings • Improved external ratings through appropriate information disclosure |
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| 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 |
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| 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 GHG emissions during use. |
| Providing carbon footprint data | We can cater to environmentally aware customers’ needs by calculating the GHG 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. |
GHG: Greenhouse Gas
Scenario-Based Evaluation and Countermeasures
Hypothetical Climate-Related 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 GHG 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 long-term management plans |
| Financial Impacts | |
|---|---|
| Definition | |
| Minor | An impact with little effect on our business activities |
| Moderate | An impact with an effect on only part of our business activities |
| Major | A negative impact that would interrupt or reduce business activities or a positive impact that would significantly boost sales |
Major Risks and Opportunities Identified via Scenario-Based Analysis,
and Countermeasures
| Risks ●: Risk ●: Opportunity |
Financial impacts |
Countermeasures | Time span |
|---|---|---|---|
| ●Introduction of carbon taxes ●Perception of lack of efforts on global warming ●Perception of insufficient disclosure |
Minor | Reducing GHG emissions (Scope 1 and 2) The 1.5°C scenario assumes the introduction of carbon taxes. As business growth leads to increased GHG emissions from manufacturing, these taxes could significantly affect corporate profits. Moreover, regardless of whether carbon taxes are introduced, failure to reduce GHG emissions may harm our reputation and result in profit losses. To address these risks, we announced the Green Plan 2030, which aims to reduce our GHG emissions from manufacturing by 50% by 2030 in comparison with fiscal 2014 levels. Specific measures include switching to LED lighting, installing solar power generation facilities, transitioning to electric or hybrid vehicles, and electrifying heating systems. We are committed to mitigating climate change by intensifying our emission reduction efforts and implementing other effective measures to minimize the risks inherent in our business activities. |
Short- to long-term |
| ●Investments needed in low-carbon technologies ●Increasing demand for energy-efficient products |
Major | Meeting diverse needs by expanding our product lineup Possible impacts of climate change on the pump market include a shift toward water-resistant products in fields where surface pumps are used, as well as increased demand for pumps equipped with high-performance motors. As product specifications that meet these needs vary by region, a broader product lineup is required to address the diverse requirements in each country. Since fiscal 2019, we have maintained a technical and business partnership with ZENIT, a company with a competitive edge in the industrial facility market. Through this partnership, we have complemented and strengthened our product lineup, promoted sales through both companies’ sales networks, and developed new products by integrating technological capabilities. In fiscal 2024, ZENIT became our consolidated subsidiary. Moving forward, we will further capitalize on sales and technical synergies to meet diverse needs in the market and drive sales growth. |
Short- to long-term |
| ●Changes in the energy mix ●Adapting to new power generation markets |
Moderate | Keeping track of trends and demand in the electricity market As progress in digital transformation (DX) and green transformation (GX) is expected to increase electricity demand, the electricity market must ensure a stable energy supply while promoting decarbonization, an effort that could lead to a variety of scenarios, such as those outlined in the Shared Socioeconomic Pathways (SSPs). Sales opportunities for our products are expected to increase, driven by short-, medium-, and long-term demand in conventional markets such as geothermal, biomass, and solar power. We will continue to serve these markets while allocating resources to address emerging markets and technology for zero-emission thermal power generation, where long-term demand is anticipated to grow. This approach aims to reduce risks throughout various foreseeable situations and promote new sales opportunities. |
Short- to long-term |
| ●Catering to increased flood defense needs | Moderate | Increasing demand driven by greater rainfall intensity Rainfall intensity in Japan is projected to increase by 10% by 2030, potentially boosting domestic sales of products that support adaptive measures, such as those related to business continuity planning (BCP). We will therefore offer our existing product lineup and provide knowledge-based solutions to secure projects, developing new products and enhancing our service and support systems to meet diverse needs. |
Short- to long-term |
| ●Changes in consumer behavior ●Providing carbon footprint data ●Sales opportunities for environmentally conscious customers |
Minor | A lineup of products that help reduce GHG emissions during use Expanding the lineup of products that help reduce GHG emissions during use helps attract environmentally conscious customers. For example, submersible automatic dewatering pumps, frequently used at construction sites, can be equipped with water level sensors to reduce idling, which in turn is expected to lower GHG emissions proportionate to the reduced idling time. Our non-clog smash pumps, used for sewage and wastewater treatment, feature high efficiency and excellent solid-passing capabilities, further contributing to the reduction of GHG emissions. We will utilize the strengths of these products to expand sales opportunities and calculate our carbon footprint to flexibly align with changing customer behavior. |
Short- to long-term |
| ●Increasing severity of abnormal weather ●Increased material costs ●Constructing component production systems |
Major | Enhancing supply chain resilience to mitigate procurement risks Utilizing flood and damage simulations based on hazard maps, we calculate the potential monetary value of damages in yen. Both the 1.5°C and 4°C scenarios predict a temperature rise of 1.5°C by 2030 and a doubling of current flood frequencies, leading to increased risks of supply chain disruptions. Since fiscal 2023, we have invested approximately 10 billion yen in the “Innovative Manufacturing (Kyoto) 2030” project to strengthen our production system by upgrading facilities, including those for motor manufacturing. Self-manufacturing of major parts and components reduces reliance on outsourcing and, consequently, minimizes procurement risks. Additionally, we have invested about 1 billion yen in Alloy Technology, one of our group companies, to establish an integrated production system incorporating processing facilities for high-precision stainless steel and high-chrome cast iron. We will continue to invest in the integration of these supply chains, thereby mitigating procurement risks and ensuring a stable product supply. |
Short- to medium-term |
| ●Rise in average temperatures | Moderate | Boosting productivity and improving workplace conditions Both the 1.5°C and 4°C scenarios predict deterioration in working conditions due to rising temperatures, posing threats to productivity and safety. The “Innovative Manufacturing (Kyoto) 2030” project, underway since fiscal 2023, involves integrating unmanned processing technology based on a flexible manufacturing system (FMS). This enhances the productivity of our existing production system and helps mitigate the impacts of rising temperatures on workplace conditions. Meanwhile, our casting business uses 3D sand casting technology to improve yield and produce sand molds that closely match design drawings, thereby reducing the number of post-processing steps. These efforts aim to increase overall productivity, create a stable production system, and improve workplace conditions. |
Short- to medium-term |
As part of our efforts to mitigate climate change, we have calculated Scope 1 and 2 emissions and identified major GHG emission sources. In addition, long-term environmental targets and specific reduction measures have been integrated into our environmental management system. On the sales front, climate change adaptation is projected to increase sales opportunities. While continuing to serve conventional markets, we will monitor growth and track trends in emerging markets to allocate resources appropriately. On the manufacturing front, ongoing investment plans are expected to improve productivity and reduce procurement risks. On the technical front, we already offer a lineup of products that help reduce GHG emissions and meet customer requirements. A closer look at these efforts suggests that we are highly resilient under both the 1.5°C and 4°C scenarios.
Nature-Related Matters
Fiscal 2024 assessments were conducted for domestic sectors directly operated by our group companies and for regions where our group companies’ plants are located. For the former, ENCORE*3 was used to identify the dependencies and impacts of applicable industries on nature, of which a heat map was created. For the latter, the Aqueduct Water Risk Atlas*4 was used to assess the significance of water-related risks. Results indicate that Shanghai is the only location where a plant is situated in a region with a water stress level of ‘medium or greater.’
The heat map of potential impacts suggests the possibility of noise and oil seepage. While compliance with relevant laws and regulations is a prerequisite, potential risks are identified and monitored through daily operations, including regular inspections and routine business activities.
Regarding water-related risks, the Shanghai plant has been identified as a high-risk location, requiring BCP measures as in the past. However, the potential impacts are currently considered minor, as the plant does not use water in its manufacturing processes.
- *3: A tool to help users assess their dependencies and impacts on nature
- *4: A mapping tool provided by the World Resources Institute (WRI) to help users
assess and visualize water-related risks worldwide.
Identification results regarding dependencies and impacts of the operations concerned (heat map)
| Operations | Dependencies | Impacts | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Air purification |
Flood mitigation |
Rainfall pattern adjustment |
Severe storm mitigation |
Water flow control |
Water purification |
Fresh water supply |
Soil and land conservation |
Noise, light pollution |
Non-GHG air pollution |
GHG emissions |
Water and soil pollution |
Water use |
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| Pump manufacturing | |||||||||||||
| Motor manufacturing | |||||||||||||
| Casting | |||||||||||||
Risk Management
The department responsible for sustainability identifies sustainability-related risks, including those associated with climate change and nature. Climate change-related risks are assessed through scenario analysis, and this identification and assessment process is conducted annually.
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.
Nature-related indicators and targets will be established, with key indicators identified based on analysis results. Trends in GHG emissions, as well as performance and volumes of water intake and discharge relative to targets, are presented in the ESG data sheet on our website.
ESG data sheet (Japanese Website)
- 1.Reduce the amount of greenhouse gases emitted from our activities to 50% of the level in FY2014 by FY2030.
- 2.Reduce the intensity of greenhouse gases emitted from our supply chain activities by 30% of the level in FY2014 by FY2030.
| GHG emission reduction activities and assessment by external parties | ||
|---|---|---|
| FY2022 | FY2023 | FY2024 |
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- *5: Calculated based on the expected GHG emission reductions per vehicle and the number of vehicles replaced.
- *6: Amount of GHG emissions avoided due to reduced heating oil consumption in fiscal 2023 (compared to fiscal 2022 levels), allocated in proportion to the number of instruments introduced in the year concerned.
- *7: The balance between the actual amount and the amount calculated using the emission coefficient (for reporting in fiscal 2023) for the contracted electricity before switching to renewable energy.
- *8: Business locations that used renewable energy in or before fiscal 2022 include the Osaka Headquarters, the Tohoku Branch Office, and the Kita-Kanto Branch Office.
- *9: Calculated using the actual amount of electricity generated and consumed in fiscal 2024 and the emission coefficient of contracted electricity (for reporting in fiscal 2025).
- *10: Calculated using the estimated amount of electricity to be generated and the emission coefficient of contracted electricity (for reporting in fiscal 2025).
