Responding to climate change (Disclosure based on TCFD recommendations) | Environment | Sustainability| Comprehensive valve Manufacturer KITZ Corporation

Governance

In its Long-term Management Vision, KITZ places sustainability management at the core of its management strategy.
We are advancing the “3ZERO(Triple Zero)” long-term environmental vision, aiming to achieve zero CO ₂, zero environmental impact, and zero risk.
The progress and results of the major items in the Mid-term Management Plan, the Long-term Environmental Vision, and the disclosed environmental goals are checked at the management meeting composed of executive officers to make decisions on the direction, issues to be solved, and particularly important measures.
In December 2021, the Group-wide Sustainability Promotion Committee was established following the resolution of the Board of Directors.
The committee is chaired by the Director, Managing Executive Officer and the General Manager of the Corporate Planning Division, and meets twice a year.

For more information about the Group-wide Sustainability Promotion Committee, please click here.

Structure to promote environmental,health and safety

The Group-wide Environmental, Health, and Safety Committee, chaired by the executive officers of KITZ and the presidents of Group companies, has been established to confirm the establishment of environmental, health, and safety measures and targets, performance evaluations, and the status of compliance with laws and regulations, and to discuss measures to resolve issues.
The director in charge of environmental, health, and safety reports to the Board of Directors on the status of implementation of the Long-Term Environmental Vision, progress management, and investment in environmental facilities.

Promotion System for Environment, Health and Safety

Strategy

Scenario analyses

The scenario analyses conducted this time assumed future temperatures of 1.5°C to 2°C and an increase of 4°C based on the scenarios presented in IPCC Sixth Assessment Report (AR6).

IPCC socio-economic scenarios (SSP) show how much temperature increase is suppressed by future socio-economic development. The world where the temperature is kept within 1.5°C to 2°C is defined as SSP1 and the world where the temperature rises by 4°C is defined as SSP3.

Generally, SSP1 has the greatest transition risk and SSP3 has the greatest physical risk. KITZ selected the tough scenarios with the highest risk for both transition risk and physical risk. Opportunities are critical in both scenarios. In KITZ, we selected SSP1 with more opportunities.

Scope, identification and definition of scenarios

Scenario Analysis Results-Transition Risk

Legend of financial impact:

Major: There is an impact on the business, and it is assumed that some response needs to be considered as soon as possible.
Medium: There is an impact on the business, and it is assumed that some kind of response needs to be considered.
Small: It is assumed to have a considerably lower impact, although it may have a business impact.

	KITZ Climate-related risks	In KITZDetails of financial impact	In KITZDegree of financial impact	KITZ Response
Government Policy ・Laws and regulations	1. Government’s strengthening of carbon-related policies and regulations 2. Reinforcement of the duty to disclose GHG emissions associated with the revision of CG Code and the market-realignment (response to TCFD recommendations, etc.) 3. Recommendation of Voluntary Collection by Enforcement of the Law for Promotion of Recycling of Plastic Resources	1. Increase in operating costs (fuel costs) and raw material costs (plastics, etc.) due to higher fossil fuel prices 2. Increased costs associated with calculating GHG emissions, setting reduction targets, and disclosing information 3. Increase in costs such as the establishment of a voluntary recall system	1. Small: Even at present, the use of fossil fuels is small, and we plan to further reduce it in the future. 2. Small: We have already established the Sustainability Promotion Office to respond. 3. Small: We are already working to reduce the use of plastics, mainly at the Production Division.	1. Aim to achieve the targets of the long-term environmental vision. (Reduce CO₂ emissions by 90% or more by 2030, and achieve carbon neutral by 2050.) 2. Continue efforts for climate-related disclosure centered on the current Sustainability Promotion Office. 3. Aim to achieve the targets of the long-term environmental vision (zero environmental impact by 2050).
Technology	4. Cost of replacing and shifting to fluidic control technologies and materials that achieve low carbon 5. Decline in demand for valve products/services in petrochemical and other fossil-fuel-related fields 6. Advance implementation of decarbonization-related valve R&D, etc.	4. Invest in fluidic control technologies and materials development to reduce demand for existing products, lower sales, and lower carbon emissions 5. Decline in sales due to decreased demand for valve products/services in petrochemical and other fossil-fuel-related fields 6. Decarbonization-related valve Additional Investments for Technologies	4. Small: Fluid control technology and material development to realize low carbon are already at the center of the industry. 5. Small to medium: Demand may decline and sales may decline after 2030 6. Small: Already continuously engaged in R&D, etc.	4. Maintain and develop the current R&D system. 5. Support customers’ transition to decarbonization through fluid control technology and material development. 6. Continue and develop current R&D, etc.
Market	7. Demand for valve decreased due to a decline in valve customers in petrochemical and other fossil-fuel-related fields. 8. Fluctuations in raw material prices linked to fossil fuel prices 9. Fluctuations in the price of renewable energy-derived electricity	7. Decline in demand for valve products/services and sales in petrochemical and other fossil-fuel-related fields 8. Increase in production costs due to price fluctuations of raw materials 9. Increase in production costs due to fluctuations in electricity prices	7. Small to medium:Decline in demand for valve: products/services and sales in petrochemical and other fossil-fuel-related fields 8. Small: Increase in production costs due to price fluctuations of raw materials 9. Small: Increase in production costs due to fluctuations in electricity prices	7. Support customers’ transition to decarbonization through fluid control technology and material development. 8. Review raw material procurement systems in terms of climate risks. 9. Maintain and strengthen the system for procuring CO₂-free electricity.
Reputation	10. Fluctuations in the price of renewable energy-derived electricity	10. Decline in investor willingness to invest due to inadequate disclosure of financial information on climate-related risks	10. Small: Disclosure has already been made based on the long-term environmental vision.	10. Maintain present disclosure activities and establish a system to respond to new disclosure requirements such as ISSB.

Scenario Analysis Results-Physical Risk

	KITZ Climate-related risks	In KITZDetails of financial impact	In KITZDegree of financial impact	In KITZDegree of financial impact
Acute・ Chronic	Acute: Severe abnormal weather 1. Impact of increased natural disasters at major domestic and overseas bases – Casualties and safety impediments to employees and customers – Damage to buildings and facilities, flooding – Shutdown due to these damages 2. Stagnation of the supply chain due to an increase in weather disasters – Impact on production sites – Impact on suppliers (shutdown, inadequate supply, etc.) – Supply of products to customers (stagnation, etc.) Chronic: Increase in mean temperature, change in precipitation pattern 3. Increase in costs due to the operation of air conditioning and cooling equipment, etc. due to an increase in average temperature 4. Shortage of industrial water at manufacturing sites due to changes in precipitation patterns	1, 2. Increase in the additional cost of safety measures for employees and customers 1, 2, 3, 4. Safety measures at business sites and increase in the additional costs required for stable operations 1, 2, 3, 4. Increase in the price of various insurance premiums for the health effects of employees and damage to business sites 2. Increase in costs related to supply chain safety measures and stable operation, such as securing alternative suppliers and sales bases	1. Small to medium: – Health and safety measures have already been promoted, and it is necessary to continuously review them according to the situation. – It is necessary to assess the physical risks caused by climate change and prepare for the increase of the impact, referring to past examples. 2. Small to medium: – It is necessary to secure the means to prepare for the supply chain if it is affected, mainly by major production bases. 3, 4. Small: – Continuous review according to the future situation is necessary.	1, 2, 3, 4. – Renewal and regular review of BCP – Reinforcement work of buildings, etc. and securing of emergency power supply – Non-life insurance coverage 2. – Establishment of alternative distribution routes – To secure multiple, alternative suppliers, safe inventories of procured products, sales bases, etc. that are in line with the degree of risk – Arrangements for the contents of communication and procedures for dissemination

KITZ Climate-related risks

In KITZDetails of financial impact

In KITZDegree of financial impact

Acute・
Chronic

Acute: Severe abnormal weather

1. Impact of increased natural disasters at major domestic and overseas bases
- – Casualties and safety impediments to employees and customers
- – Damage to buildings and facilities, flooding
- – Shutdown due to these damages
2. Stagnation of the supply chain due to an increase in weather disasters
- – Impact on production sites
- – Impact on suppliers (shutdown, inadequate supply, etc.)
- – Supply of products to customers (stagnation, etc.)

Chronic: Increase in mean temperature, change in precipitation pattern

3. Increase in costs due to the operation of air conditioning and cooling equipment, etc. due to an increase in average temperature
4. Shortage of industrial water at manufacturing sites due to changes in precipitation patterns

1, 2.
Increase in the additional cost of safety measures for employees and customers
1, 2, 3, 4.
Safety measures at business sites and increase in the additional costs required for stable operations
1, 2, 3, 4.
Increase in the price of various insurance premiums for the health effects of employees and damage to business sites
2. Increase in costs related to supply chain safety measures and stable operation, such as securing alternative suppliers and sales bases

1. Small to medium:
- – Health and safety measures have already been promoted, and it is necessary to continuously review them according to the situation.
- – It is necessary to assess the physical risks caused by climate change and prepare for the increase of the impact, referring to past examples.
2. Small to medium:
- – It is necessary to secure the means to prepare for the supply chain if it is affected, mainly by major production bases.
3, 4. Small:
- – Continuous review according to the future situation is necessary.

1, 2, 3, 4.
- – Renewal and regular review of BCP
- – Reinforcement work of buildings, etc. and securing of emergency power supply
- – Non-life insurance coverage
2.
- – Establishment of alternative distribution routes
- – To secure multiple, alternative suppliers, safe inventories of procured products, sales bases, etc. that are in line with the degree of risk
- – Arrangements for the contents of communication and procedures for dissemination

Scenario Analysis Results-Opportunities

Legend of financial impact:

Major: Potential for new or further business development at an early stage or in concrete terms
Medium: New or potential for further business development
Small: It is assumed that there is a possibility of business development, but there is no significant impact.

	KITZ Climate-related opporunities	In KITZDetails of financial impact	In KITZMagnitude of opportunity	KITZ Response
Finished goods Service	7. Develop and deploy valve that can be used in supply chains such as hydrogen and NH3 8. Developing and Deploying valve Available for CCUS Processing 9. Develop and deploy automated valve for commercial and industrial facilities in IoT 10. Business development of valve Maintenance 11. Valve Business Development for LNG Plants 12. Develop and deploy energy-efficient fluid-control valve and filters 13. Development and deployment of energy-saving technologies in water treatment	7. Increase in revenues due to increased demand for valve when hydrogen and NH3 are widely used 8. Increase in revenue due to increased demand for valve when expanding the use of CCUS processing 9. Increase in revenues due to increased demand for automated valve that contribute to energy conservation 10. Expand businesses and increase revenues that contribute to reducing customers’ costs through valve and maintenance 11. Increase in businesses of LNG plants and possibilities for contributing to energy conservation and cost-cutting by customers 12. Increasing the potential of businesses that contribute to saving energy and cost-saving for customers through valve filters 13. Increase in the potential of businesses that contribute to saving energy and reducing costs for customers through energy-saving technologies in water treatment	7. Major: In the mid-to long-term, there are significant opportunities for Japanese, EU and Southeast Asian countries to move into hydrogen-and NH3 communities. 8. Small: From a medium-to long-term perspective, the use of CCUS processes is expected to expand, but the Japanese-led business is limited. 9. Medium to small: If we can develop an automated valve that can achieve energy savings through fluid-control technology and material-development, we have a chance. 10. Medium to small: There is a chance to extend service life and reduce cost and CO₂ by maintaining (to prevent energy loss by customers). 11. Major: If the market for LNG plants, a transitional energy, expands and cost-related issues are resolved, opportunities are great. 12,13. Medium to small: Opportunities exist for products that meet customers’ energy-saving needs.	7. From present activities, a system capable of responding to new demand such as hydrogen and NH3 in the medium and long term will be established. 8. Promote medium-to long-term development of CCUS supply chain by utilizing low-temperature, high-pressure valve technology. 9. Develop technologies to meet customers’ energy conservation needs. 10. Valve Quantify the benefits of cost-and CO₂-savings through longer life. 11. We will work on the assumption that LNG plants market-a transitional energy-will expand and cost-related issues will be resolved. 12. Participate in NEDO and other national projects and develop technologies that contribute to energy conservation by customers. 13. We are working to develop superior fluid-control and energy-saving techniques for KITZ in conjunction with membranes and valve for water-treatment and industrial machinery.

Strategic pillar

We will develop businesses aimed at decarbonization based on the following three strategies for addressing climate change issues.
1. ①Contribute to climate-change mitigation through reduced CO₂ emissions and efficient resource and energy use
2. ②Contribute to climate-change mitigation by promoting the reduction of CO₂ emissions through our products.
3. ③Work with communities to mitigate climate change and contribute to the creation of a sustainable future

Specific strategy content

①Contribute to climate-change mitigation through reduced CO₂ emissions and efficient resource and energy use

・Promoting energy conservation at our plants through unit energy consumption management:Further promotion of normal energy conservation activities (e.g. switching to LED lights, setting air conditioners at appropriate levels, etc.), introduction of high-efficiency equipment and facilities, etc.
・Promotion of renewable energy use :Procuring CO₂-free electricity and installing photovoltaic power generation facilities
・Indirect reduction of CO₂ through reduction of environmental impact:Reduction of water consumption and landfill waste through unit requirement control

②Contribute to climate-change mitigation by promoting the reduction of CO₂ emissions through our products.

・Support for the construction of a hydrogen supply chain for decarbonization through the development of fluidic control technologies and materials:In all processes of hydrogen production, transport, storage, and utilization, use of KITZ’s fluidic control technology and material development will be utilized to enter the hydrogen market, where social packaging is advancing.
Concrete activities: development in the hydrogen station market by package units, entry into small-scale local production and local consumption type green hydrogen energy chain business, entry into large-scale liquefied hydrogen demonstration plant, and execution of research and development for entry into the hydrogen aircraft market.
・Assistance for “transition to decarbonization” in all sectors:Support the transition of suppliers to decarbonization and low-carbon business* by utilizing KITZ’s fluidic control technique and material-development.
Specific activities include promoting and supporting the use of alternative fuels such as hydrogen and ammonia by developing fluid-control technologies and materials, responding to increased demand for LNG plants, and reducing customers’ CO₂ emissions by reducing energy loss and extending the service life of valve through appropriate maintenance.
※”Lower carbon” was defined as promoting the use of “natural gas” important during the transition to decarbonation.
・Development of products and systems that contribute to decarbonization:Development and deployment of automated valve for building and industrial facilities by IoT, development and deployment of valve, filters, and systems with flow control functions leading to energy conservation by customers, and development of valve products and systems related to CCUS (LCO₂ carriers, etc.).

③Work with communities to mitigate climate change and contribute to the creation of a sustainable future

・Development of a Community-Level (Microscale) Hydrogen Utilization System and Implementation of Demonstration Tests

Risk and management

Risk assessment and management system for climate change

In order to continuously reduce climate-related risks, KITZ is responding in accordance with the basic concept of Group risk management. Furthermore, we will establish a framework for evaluating and managing climate change-related risks under the Group-wide Sustainability Promotion Committee.

Process of assessing and managing climate change risks

The Legal, Intellectual Property and Risk Management Division plays a central role in identifying important risks from among the assumed risks associated with various business activities, including those related to climate change, and assessing and managing risks using common progress management tools.

Indicators and Targets

①Contribute to climate-change mitigation through reduced CO₂ emissions and efficient resource and energy use
Reduce in-house CO₂ emissions by 90% or more from the 2013 level by 2030, and make it carbon neutral by 2050 (promote the long-term environmental vision “3ZERO (triple-zero)”).

②Contribute to climate-change mitigation by promoting the reduction of CO₂ emissions through our products.
③Work with communities to mitigate climate change and contribute to the creation of a sustainable future

※②, For item ③, we plan to set indicators and targets based on the status of our own initiatives in the future.
※For domestic and overseas Group companies, we plan to set indicators and targets based on the status of future initiatives.

Responding to climate change
(Disclosure based on TCFD recommendations)