Disclosure based on TCFD Recommendations

Since FY2022.6, the TCFD Subcommittee, a subcommittee led by the Director in charge of sustainability has collected and analyzed necessary data concerning the impact of climate change-related risks and profit opportunities on the Company's business activities and earnings.

Based on the results and with the approval of the Board of Directors, the Sustainability Committee discloses the information in accordance with the framework of the Task Force on Climate-related Financial Disclosure (TCFD) recommendations.

【Governance】

We have established a Sustainability Committee chaired by the President to address our material issues, including climate change. It meets once a year to discuss environmental issues, including climate change, and reports its findings to the Board of Directors.

In order to ensure that the Sustainability Committee functions effectively for active discussions on environmental issues, an Environmental Subcommittee has been established to discuss specific activities to address environmental issues in accordance with the Committee's instructions. The contents of the subcommittee's discussions and the progress of initiatives are reported by the Director in charge of sustainability to the Board of Directors.

【Strategy】

As a company playing a role for benefits of healthcare in the pharmaceutical industry, we need to provide a stable supply of pharmaceutical products by addressing the risks related to climate change, such as supply chain disruptions.

The TCFD subcommittee identifies the risks and profit opportunities related to climate change under 1.5°C and 4°C scenarios, which reference the scenarios proposed by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). The identified issues are assessed and the results of the analysis are incorporated into our business strategies.

【Risk Management】

The Risk Management Committee recognizes the importance of the risks submitted by the group companies through the analysis of their possibility of occurrence and potential impact on the Group. Countermeasures for the high-priority risks are immediately considered.

Regarding environmental (climate change) risks, the Sustainability Committee identifies the risks, and the Risk Management Committee examines the risks with their significance and proposes countermeasures to the Board of Directors for approval. The progress of the countermeasures is monitored by the Sustainability Committee'.

Going forward, we will conduct not only qualitative analysis but also quantitative analysis of climate change-related risks and profit opportunities and enhance disclosure of climate change-related information.

【Metrics and Targets】

The Group calculated and disclosed Scope 1 and Scope 2 GHG emissions to set GHG emission reduction targets, including CO2 emissions. In FY2024.6 We plan to set reduction targets based on the calculated Scope 1 and Scope 2 GHG emissions, and also to calculate Scope 3 GHG emissions.

・Greenhouse Gas (GHG) = Seven types of greenhouse gases as defined in the Law Concerning the Promotion of the Measures to Cope with Global Warming, including carbon dioxide.

・Scope 1 = GHGs directly emitted by the business itself

・Scope 2 = GHGs emitted from the use of electricity, heat, and steam supplied by other parties.

・Scope 3 = GHGs emitted from sources other than Scope 1 and 2

【Risk】

Transition Risks	Policy	・Introduction of carbon pricing leading to increased costs through carbon taxes and emissions trading systems across our company and supply chain. ・Increased carbon reduction targets may necessitate the adoption of energy-efficient facilities and equipment, resulting in increased costs.
	Market	・Increased procurement costs due to suppliers addressing transition risks. ・Higher energy costs associated with increasing the proportion of renewable energy.
	Reputation	Potential stock price decline and customer attrition due to transition risk management and insufficient information disclosure.
Physical Risks	Acute	Worsening of Extreme Weather Events: ・Supply chain disruptions (raw material procurement and shipping logistics) leading to supply insecurity and increased procurement costs. ・Supply insecurity and cost increases due to disasters at own facilities, suppliers, OEMs, and logistics outsourcing locations. ・Decreased asset value in regions with a high risk of flooding. ・Increased manufacturing costs due to water supply restrictions resulting from droughts.
Physical Risks	Chronic	Rising Average Temperatures and Sea Level Rise: ・Increased manufacturing costs due to chronic water shortages and water supply restrictions. ・Increased procurement costs related to the physical risk mitigation efforts of suppliers, OEMs, and logistics outsourcing partners. ・Increased costs due to reduced labor productivity and increased health risks caused by heat stress. ・Increased energy costs due to temperature rise, including increased air conditioning operation. ・Reduced access to healthcare due to restrictions caused by the outbreak of infectious diseases. ・Reduced productivity of products derived from natural compounds.

【Opportunities】

Market	・Improved productivity and reduced energy costs through the streamlining of manufacturing and distribution processes. ・Expansion of our product offerings due to our contribution to customer supply chain emissions reduction initiatives. ・Increased demand for pharmaceuticals due to changes in disease and infection trends.
Reputation	Gaining trust from customers, attracting talent, and enhancing corporate value through proactive efforts to address climate change.

Sustainability

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