Disclosure based on the TCFD recommendations

• ■1. Process for integration of the process for identifying, evaluating and managing climate-related risks into comprehensive risk management throughout the organization

  To manage risks on a Group-wide level, the ADEKA Group makes continued efforts with global risk management, crisis management, business continuity management, information security and a PDCA cycle based on the safety quartet (labor safety, environment safety, product quality safety and equipment safety), which is our unique concept. Meanwhile, identifying and evaluating ESG aspects involves the following system for CSR management.

• ■2. Process to identify and evaluate climate-related risks

  ●	The ADEKA Group has the CSR Promotion Subcommittee under the direct control of the CSR Committee. The Subcommittee identifies and evaluates important climate-related risks and opportunities that encompass the entire ADEKA Group in terms of, for example, the GHG Emissions and the impact on the company’s financial affairs.
  ●	Evaluating important risks and opportunities is decided after discussion at the CSR Committee and is reported to the Board of Directors.
  ●	In the ADEKA Group, climate change issues are regarded as important and are included in two of the CSR Priority Issues, “conserving the global environment” and “supplying eco-friendly products.”

• ■3. Process for managing climate-related risks
  

  

  ●	The ADEKA Group takes it for granted that climate change is included in the CSR Priority Issues. The CSR Promotion Subcommittee regularly discusses the progress of the Group’s efforts on climate change and reports it to the CSR Committee for deliberations and approval.
  ●	Items for evaluating the progress (1) KPIs defined in the CSR Priority Issues  i. “Conserving the global environment”: Amount of GHG emissions  ii. “Supply of eco-friendly products”: Sales of eco-friendly products (2) Progress of activities in terms of TCFD requirements

• TCFD recommends using multiple climate scenarios including those of under 2 degrees, to perform analysis in disclosing a strategy. We therefore set the beyond 1.5 degree / 2 degree scenario and the 4 degree scenario, which would entail the manifestation of impacts in terms of transitional aspects and physical aspects, respectively.

  We select businesses and identify risks and opportunities associated with climate change, giving consideration to the overall value chain from the procurement of raw materials to product demand on the basis of the following steps. In this way, we discuss the impact on our business and measures against it.
  
  

  

• The ADEKA Group determined that all its businesses were subject to scenario analysis. (Functional Chemicals, Food Products, Polymer Additives, IT Chemicals, Life Science)

  Based on “efforts for carbon neutrality” stated in the Mid-term Management Plan, we are performing scenario analyses for 2030 and 2050. The former is a mid-term milestone and defines a target for reducing GHG emissions whereas the latter is a long-term milestone characterized by the pursuit of carbon neutrality.

  More specifically, we refer to scenarios such as NZE (1.5 degree scenario) of the International Energy Agency (hereinafter “IEA”), SDS (beyond 2 degree scenario) and RCP8.5 (4 degree scenario) and RCP2.6 (beyond 2 degree scenario) of the Intergovernmental Panel on Climate Change (hereinafter “IPCC”).

• [ Target business ] All→ “All”, Polymer Additives→ “PAs”, Functional Chemicals→ “FCs”, IT Chemicals→ “ITCs”, Food Products→ “FPs”, Life Science→ “LS”

Degree of impact of risks and opportunities “Large”
┈ The scale of impact on profits is “2.0 billion yen or more”
Degree of impact of risks and opportunities “Middle”
┈ The scale of impact on profits is “no less than 0.5 billion yen and less than 2.0 billion yen”
Degree of impact of risks and opportunities “Small”
┈ The scale of the impact on profits is “less than 0.5 billion yen”

The following five product groups were seen as representing business opportunities for the ADEKA Group over the medium to long term from the perspective of responding to climate change. By working to achieve stronger growth in these fields, the ADEKA Group strives to simultaneously pursue social and economic value.

• ■1. ADEKA Group Carbon Neutrality Roadmap (published on March 2, 2022)
  

  In March 2022, the ADEKA Group announced a roadmap for achieving carbon neutrality by 2050 based on two pillars, including:
  i. “2030: 46％ reduction in GHG emissions (Scopes 1 and 2)” and
  ii. Create technologies and products to contribute to GHG emissions reduction
  

  The reduction target applies to emissions from the ADEKA Group, namely Scopes 1 and 2. But we are also committed to creating products and technologies to help society achieve carbon neutrality with the aim of contributing to reductions in GHG emissions in the market and society.
  (At this point, we are examining in detail the amount of emissions throughout the supply chain, including Scope 3. We are focusing on efforts such as selecting categories to be covered by the calculation, conducting a detailed examination of the volume of emissions and drafting reduction policies. As soon as we are ready, we will begin efforts to reduce emissions encompassing Scope 3 and the entire supply chain.)
  

• ■2. “conserving the global environment,” a CSR Priority Issue
  
  
  
• ■3. Changes in GHG emissions (Scopes 1, 2 and 3) and GHG emission intensity
  

  The ADEKA Group discloses changes in its GHG emissions (Scopes 1, 2 and 3) and GHG emission intensity. To reduce emissions, we maintain a stable supply of products and proceed with improvements such as streamlining production. To check the progress, our plants undergo audits by the president and by the Environmental and Safety Division

• ■ADEKA Group Carbon Neutrality Roadmap
  
  
  

  *The ADEKA Group updated its GHG emissions figures in May 2023.

• ■4. Spurring the development and provision of eco-friendly products
  

  The ADEKA Group defines the KPI of “supplying eco-friendly products,” one of our CSR Priority Issues, for 2030 as tripling sales of eco-friendly products versus the FY2019 figure. This is also an indicator of the ADEKA Group’s pursuit of more business opportunities in relation to climate change.
  
  Eco-friendly products are products and technologies that are certified by our CSR Committee as contributing to society in any of three areas, including “action against climate change,” “reduction in environmental impact” and “efficient use of resources. (At present, they are divided into 14 product groups, with sales as of 2019 at approx. 31.3 billion yen)
  Moreover, the ADEKA Group has positioned “sales” as a Key Performance Indicator (KPI) for 2030 and has been monitoring the progress.
  Mid-term Management Plan: ADX2023 includes a key strategy titled “transforming the earnings structure,” which declares our determination to spur the development and provision of eco-friendly products and “simultaneously pursue social value and economic value.”
  Sales of eco-friendly products are expected to increase by a factor of 1.4 in the three-year period of ADX2023.

  • ≫ Click here for ADEKA eco-friendly products
  

• ■1. Establishment of a specialized organization, Carbon Neutral Strategy Department (April 1, 2022).
  

  The ADEKA Group established a specialized organization under the Corporate Planning & Strategy Division for flexibly advancing initiatives throughout the Group as ADEKA strives to realize carbon neutrality by 2050.
  It is now an indispensable demand of society to discuss strategies to achieve corporate growth, while contributing to the sustainable growth of society, through initiatives on climate change, decarbonization and carbon neutrality.
  The new department acts as the center in formulating carbon neutrality strategies and as the driving force behind group-wide activities.

  ■2. Establishment and implementation of “carbon neutrality promotion strategy”
  

  The ADEKA Group has established and has been implementing a “carbon neutrality promotion strategy” as a roadmap for achieving carbon neutrality by 2050 with an eye on value creation from a long-term perspective through the reduction of greenhouse gas.
  The Group has decided, through the establishment and operation of an internal working group that implements detailed studies and promotes the strategies, to introduce renewable energy (electricity for the head office, research and development laboratories, Osaka branch office, etc.; the said renewable energy was introduced during the fiscal year 2022) and started test trials of internal carbon pricing, among other initiatives.

  ■3. Improvement and continuance of the TCFD scenario analysis
  

  The Group will seek to incorporate the results of the recent analysis and evaluation into its business strategies and continue to refine the contents of the scenario analysis.
  
  Through a series of initiatives that contribute to the sustained enhancement of corporate value, the ADEKA Group will strive to periodically confirm and update the risks and opportunities identified in the climate change scenario analysis, in view of changes in the external environment and market situations. It will measure their impacts, specify and enhance indices and targets, and reflect them in its business strategies, etc. It will appropriately disclose such information and fulfill its accountability to stakeholders.