The Paris Agreement, which aims to keep the increase in global average temperature well below 2°C compared to pre-industrial levels and to strive to limit the increase to 1.5°C, entered the implementation phase in 2020. Expectations toward achieving this goal are growing not only for nations and governments, but also for companies, and it has become necessary for companies to act on climate change through their business activities.
The Toyota Tsusho Group has identified the effort to "Contribute to the transition to a decarbonized society by reducing CO2 emissions from automobiles and factories/plants through the use of clean energy and innovative technologies" as one of its key sustainability issues (Materiality) and has positioned its renewable energy strategy as one of the seven priority domains in its growth strategy.
Another essential climate change countermeasure is the shift to a circular economy. The Toyota Tsusho Group also recognizes the effort to "Contribute to the development of a recycling-based society by transforming waste into resources for manufacturing" as one of its key sustainability issues (Materiality). It also includes "Circular Economy" in its seven priority domains.
Our Environmental Policy states that we will "Contribute to the transition to a decarbonized society, reduce greenhouse gas emissions through our business activities and aim for carbon neutrality by reducing CO2 emissions from automobiles, factories, and plants through the use of clean energy and innovative technologies."
The Toyota Tsusho Group supports the Paris Agreement, and in July 2021, we formulated a group-wide target to reduce greenhouse gas emissions by 50% by 2030 compared to 2019 and to become carbon neutral by 2050 as a concrete policy toward contributing to the transition to a decarbonized society. For the mitigation of the impact of climate change as well as the minimization (adaptation) of ongoing and potential future damages, Toyota Tsusho is promoting carbon neutrality and a circular economy around the world through company-wide climate change countermeasures that incorporate various aspects and can only be implemented by Toyota Tsusho.
Our group has long been developing businesses that lead to the realization of carbon neutrality and the circular economy. We will continue to further expand businesses that contribute to the transition to a decarbonized society, such as the end-of-life vehicle (ELV) recycling business that we started in the 1970s and the renewable energy business that we have been focusing on since the 1980s.
The Toyota Tsusho Group’s strength is its ability to accelerate and promote businesses that contribute to the reduction of greenhouse gases (GHG) throughout the industrial life cycle on a company-wide level. All our employees will work together to contribute to the solution of these social issues by playing a leading role in realizing a carbon neutral and circular economy society.

Toyota Tsusho Group Carbon Neutrality Declaration

We identified climate change as one of the material issues that matter most to our business. The content of Materiality initiatives is verified by the Sustainability Management Committee (held annually),^*1 which is chaired by the president & CEO, and incorporated into our business strategies via the sales division CEOs who make up the committee. Since 2020, the committee has been tasked with setting key performance indicators (KPIs) for material issues, monitoring their progress, and reporting on the particulars of deliberations to the Board of Directors meeting. Members of the Board have a wealth of competence and experience concerning ESG issues, including climate change, and have put in place a system to ensure that appropriate oversight is carried out.

To address climate change, the Carbon Neutrality Promotion Meeting (held monthly),^*2 which is chaired by the president & CEO, discusses strategies for transitioning to a decarbonized society. The meeting also manages progress in reducing our greenhouse gas emissions. The Carbon Neutrality Promotion Department, which was established in April 2022, serves as the secretariat for the committee and is responsible for further accelerating our decarbonization efforts as a specialized organization.

The status of achievement of energy-saving targets, as well as responses to climate change-related revisions to laws and regulations and new requirements, are deliberated at our Safety and Environment Conference^*3 once in a year. Our progress is also confirmed at theconference. The representatives of the sales divisions and group companies who make up the members of the conference incorporate the details of these deliberations into our business activities.

We have introduced an internal carbon pricing system to promote greenhouse gas emissions reductions. Under this system, the progress of each sales division's efforts to reduce greenhouse gas emissions is reflected in the performance and compensation of the CEO who is responsible for that division.

*1

*2

*3

Reference Scenarios

We referred to the following scenarios from the International Energy Agency (IEA), Intergovernmental Panel on Climate Change (IPCC), and other sources to assess new business opportunities and business resilience and to analyze the impact on our business in the event of significant changes in our business environment as a result of climate change.

Category	Scenario overview	Main reference scenarios
Below 1.5°C/2°C scenario	Under this scenario, policies and regulations are implemented to achieve a decarbonized society and the global temperature increase from the pre-industrial level remains below 1.5°C/2°C. Although the transition risk is higher than under the 4°C scenario, the physical risk is lower.	IEA Net Zero Emissions by 2050 Scenario (NZE) IEA Sustainable Development Scenario (SDS) IPCC RCP2.6
4°C scenario	Under this scenario, no new policies or regulations are introduced and greenhouse gas emissions continue to increase. The transition risk is lower than under the below 1.5°C/2°C scenario, but the physical risk is higher.	IEA Stated Policies Scenario (STEPS) IPCC RCP8.5

Selection of Subject Businesses

Among Toyota Tsusho’s businesses, those that are significantly affected by climate change (from perspectives A–D below) were selected as the subject businesses, and the analysis was conducted for the lithium business, molten aluminum supply business, renewable energy business, and automotive sales business. Going forward, we plan to expand the scope of subject businesses.

The scenarios and understanding of the business environment in this scenario analysis are based on major scenarios presented by international organizations and others and do not represent the medium- to long-term outlook.

Toyota Tsusho's production of lithium carbonate began in 2014 at Salar de Olaroz, Argentina, to supply raw materials used in automotive lithium-ion batteries (LiBs), which are essential for electrified vehicles. We constructed a lithium hydroxide manufacturing plant in Naraha-machi, Fukushima Prefecture, and production started in 2022.

Impact on Businesses in Each Scenario

Below 1.5°C/2°C scenario	In a comparison between the below 1.5°C/2°C scenario and the 4°C scenario, a larger increase in demand for electrified vehicles and storage batteries is expected in the below 1.5°C/2°C scenario, resulting in greater opportunities for this business overall.
4°C scenario	Regarding the risk of reduced lithium production efficiency at the lithium carbonate production site in Argentina due to changes in rainfall, any impact on lithium production is expected to be minor as the level of precipitation is expected to remain relatively constant, judging from the results for 2022 and the years leading up to it.

In both scenarios, demand for electrified vehicles and storage facilities that use lithium batteries is expected to increase.

We supply recycled aluminum to customers in molten form, which reduces CO₂ emissions, and the volume of recycled aluminum we supply is one of the highest in the world. Aluminum parts required for weight reduction will also be increasingly in demand as the popularization of electrified vehicles accelerates. In addition, demand for recycled aluminum is also expected to increase due to the recycling of aluminum scrap for environmental considerations.

Impact on Businesses in Each Scenario

Below 1.5°C/2°C scenario	In the below 1.5°C/2°C scenario, the share of gasoline vehicles in total sales volume is expected to decrease due to stricter fuel efficiency regulations and other factors. On the other hand, demand for weight reduction is expected to increase as the sales ratio of electrified vehicles grows, and demand for recycled materials is expected to increase globally, expanding opportunities for this business as a whole.
4°C scenario	In the 4°C scenario, it is assumed that fuel efficiency regulations will not be tightened as in the below 1.5°C/2°C scenario, and the impact on this business overall is expected to be limited.

We are expanding wind, solar, hydroelectric, geothermal, biomass, and other power generation businesses globally. As well, we are focusing on promoting development in Africa and emerging countries and the development of offshore wind power generation.

Impact on Businesses in Each Scenario

Below 1.5°C/2°C scenario	In the below 1.5°C/2°C scenario, although the discontinuation of feed-in tariffs as a result of the revision of renewable energy policies could have an impact, it is expected that worldwide development of policies and a significant increase in demand for renewable energy will lead to progress of related technological innovations and renewable energy becoming a core energy source. Accordingly, the opportunities for this business as a whole are expected to expand as development progresses in response to the demand for renewable energy.
4°C scenario	In the 4°C scenario, demand for renewable energy is expected to increase to a certain level, although not to the same degree as under the below 1.5°C/2°C scenario. While there is a possibility that the business could be affected by policy revisions, the impact on the business as a whole is limited.

We export passenger cars, commercial vehicles including trucks and buses, industrial vehicles, and spare parts produced by automobile and transport equipment manufacturing makers, primarily in the Toyota Group in Japan and overseas, to countries around the world. As well, we conduct business as sole import distributors and dealers through our global network that spans 150 countries around the world.

Impact on Businesses in Each Scenario

Below 1.5°C/2°C scenario	In the below 1.5°C/2°C scenario, the share of gasoline vehicles in total sales volume is expected to decrease due to stricter fuel efficiency regulations, though the share of electrified vehicles is expected to increase, expanding opportunities for this business as a whole.
4°C scenario	In the 4°C scenario, fuel efficiency regulations will not be tightened to the same degree as under the below 1.5°C/2°C scenario, and the impact on the sales ratio of gasoline and electrified vehicles will be small, so the impact on the overall business is expected to be limited.

In both scenarios, the total sales volume of new vehicles is expected to increase globally, especially in emerging countries, thus the risk to the overall business is expected to be minor.

We manage environmental risks and opportunities, including climate change, to a high standard. Businesses and risks/opportunities related to climate change are deliberated by the Carbon Neutrality Promotion Meeting, the Safety and Environment Conference, and the Sustainability Management Committee, and their members incorporate the details of these deliberations into our business strategies and activities. In particular, the Carbon Neutrality Promotion Meeting, chaired by the president & CEO, meets monthly to identify climate change risks and opportunities in light of the external environment and assess their impact on us, as well as to verify the progress of climate change-related businesses.

The Integrated Risk Management Committee defines the 10 most important risk items, including the environment, to focus on to review our global risk management status. The committee also manages climate change risk in the company-wide risk management process.

We have acquired certification under ISO 14001, an international standard related to environmental management systems, to monitor our risk management processes. Toyota Tsusho conducts internal environmental audits of domestic and overseas consolidated subsidiaries once every three years.

Toyota Tsusho has formulated the Carbon Neutrality Roadmap 2030, the growth strategy for the Toyota Tsusho Group toward 2030.

Our group is working to reduce greenhouse gas emissions in the supply chain with our distinctive initiatives. We work with customers and suppliers to reduce greenhouse gas emissions in the supply chain, which cannot be achieved independently.

In addition to manufacturing and logistics efficiency kaizen (continuous improvement) and the treatment and recycling of waste from ELVs and production processes, which have long been one of our strengths, in recent years we have focused on emissions reduction through our EV battery manufacturing business, lithium resource development, and parts and materials supply. Further, we aim to achieve carbon neutrality for Scope 3 by reducing the Scope 1 and Scope 2 emissions of our customers and suppliers through the supply of renewable energy and low-carbon energy.

We will update Scope 3 emissions on our website as soon as a third-party certification process is completed.

Our group focuses not only on reducing GHG emissions in its supply chains, but also on contributing to reductions of emissions in the world (avoided emissions).

We engage in a wide variety of initiatives, including by increase of renewable energy supply and replacement of the current products with bio-derived/recycled products.

An Example of Avoided Emissions Renewable energy power generation　2.69 million ton-CO2※

In the case of our group, which is involved in various parts of the supply chain and undertakes a variety of initiatives, the degree of involvement differs for each business, making it difficult to express the overall contribution using the same standard. The above is an example of the avoided emissions of the operational phase of a renewable energy power generation project, for which calculation methods are relatively standardized around the world.

※Calculation methods: Power Generation capacity (MW/year) x 24 hours x 365 days x facility utilization ratio x emission factor (tCO2/MWh) x our equity ratio

Toyota Tsusho endorses the Paris Agreement and fully supports laws, regulations, and policies that help mitigate climate change, such as the Act on Rationalizing Energy Use and the Act on Promotion of Global Warming Countermeasures. We submit an annual report to the government on energy consumption, progress toward energy conservation targets, and greenhouse gas emissions.
Under the business classification evaluation system in the Act on Rationalizing Energy Use, we received an "S class" rating which indicates that we are a business with excellent energy conservation. Through these efforts, we are playing a role in achieving the greenhouse gas reduction target.

Toyota Tsusho is formulating measures for adapting to climate change with the objectives of responding to the effects of climate change and preventing or mitigating damage. The risks of weather disasters from events such as torrential rain and extreme heat are rising. The entire Group is taking action with an awareness that the formulation, management, and operation of business continuity plans (BCPs) that anticipate these risks is crucial.

By 2030, Toyota Tsusho will invest 1.6 trillion yen scale for the achievement of decarbonized society. Toyota Tsusho identified five priority areas that promote the circular economy in each stage of the industrial lifecycle; "energy creation," "energy collection and coordination," "manufacture of goods," "transport of goods," "use of goods," "waste processing," and "reuse and recycling."

Japan Foreign Trade Council (JFTC) supports the Paris Agreement and endorses the efforts of the government and Keidanren to establish a decarbonized society (Plan for Global Warming Countermeasures and Keidanren Carbon Neutrality Action Plan), and it is promoting these efforts in cooperation with other industries and organizations. JFTC has also formulated its own "Voluntary Action Plan on the Environment" and is working on this as an issue for the trading industry toward building a decarbonized society.
We regard the consideration and implementation of climate change mitigation and adaptation measures to be key issues and actively strive to create new businesses and solutions. In support of the primary objective of JFTC, we are participating as one of the vice chairman companies of the council. In the fiscal year 2023, as the chair of the Global Environment Committee, one of the various committees of the JFTC, we are playing a central role in the "Voluntary Action Plan on the Environment." By doing so, we are contributing to activities aimed at achieving the Paris Agreement's long-term goal of carbon neutrality by the year 2050.
As an example, the Act on Rationalizing Energy Use requires specified consignor companies to cooperate with transportation companies to promote energy conservation under the specified consignor system. However, the current Act makes it difficult to achieve the required indicators and targets and slows down the progress of energy conservation. The JFTC raised this issue at a meeting to exchange opinions between member companies subject to the specified consignor system and government authorities (the Ministry of Economy, Trade and Industry (METI) and the Agency for Natural Resources and Energy (ANRE)). This led to our participation as an observer in the METI/ANRE Working Group on Classification Standards for Consignors through the JFTC.
Furthermore, since 2021, at the same working group's industry interviews on "Consignor Energy Conservation Issues and Directions for Consideration," the manager and those in charge of our Global Safety & Environmental Promotion Department have participated as observers through the JTFC and raised the issues mentioned above. We are also continuing our efforts and proposals to create an environment that facilitates the promotion of energy conservation activities with transporters in the revision of the Act on Rationalizing Energy Use.

JFTC has set a target of reducing electricity consumption intensity (electricity consumption per floor space in the entire company) by 15.7% in 2030 compared to the fiscal year 2013. This is based on the effort target required by the Act on Rationalizing Energy Use (to reduce electricity consumption by an average of 1% or more per year over the medium to long term) and is set on the premise of a 1% reduction per year as the maximum target that can be achieved through continued efforts.
As a member of JFTC and chairman of its Global Environment Committee, we are also playing a part in this activity, promoting energy-saving activities and implementing initiatives to develop a decarbonized society.

The Battery Association for Supply Chain (BASC) was established in April 2021 to contribute to the global battery industry by developing the battery supply chain in a sustainable manner toward the realization of a decarbonized society.

Toyota Tsusho, Toyotsu Lithium, Toyota Tsusho Materials, and Toyotsu TEC are members of this association. Our Executive Officer Katayama (COO, Metals Division) serves as the vice president of the association, and Toyota Tsusho represents the association as one of the 10 managing companies in its policy advocacy efforts.

Since hydrogen does not emit CO₂ when used, can be produced using biomass or renewable energy, and can be stored, we recognize that it is a strong option toward the achievement of a low-carbon society. Since 2017, we have been a Supporting Member of the Hydrogen Council, a global initiative of leading companies in the energy and transport equipment industries with a united and long-term vision for hydrogen as a contributor to the energy transition. By becoming a member of this global council that has many companies that are trying to use hydrogen for decarbonization as members, we can exchange information and opinions widely with other companies that have the big target of decarbonization. Additionally, by collecting information related to hydrogen from around the world, it is our goal to promote our hydrogen business and contribute to the achievement of a hydrogen society.

In order to create a basic model for the achievement of a hydrogen society, we are currently building a usage model, from hydrogen production and supply through to the introduction of FC (fuel cell) mobility, in areas such as ports, public transportation and logistics. We are also supporting external FC sales and the development of FC-equipped equipment manufacturers. With continuously changing market trends and tightening regulations, we make proposals at the annual priority activity plan formulation meeting for items that the Hydrogen Council should work on to ensure the expansion of hydrogen utilization and the achievement of a hydrogen society in each country, including areas where we can contribute. These items include the creation of incentives and mechanisms that will motivate users to use hydrogen and FCs and the creation of an international unified standard for hydrogen, such as GHG calculation methods.

In Japan, the public and private sectors have long collaborated on research, development, and demonstration experiments related to hydrogen, but the infrastructure for social implementation is not yet sufficient, and the supply cost is high compared to existing fuels, so the market is still immature.

The Japan Hydrogen Association aims to establish a hydrogen society at an early stage by overlooking the entire supply chain and realizing social implementation projects as a cross-industry and open organization.

We have been a member of the association since its establishment in December 2020 and are actively collaborating in the commercialization/regulation working group to create demand for hydrogen and advocate for the easing of regulations and other policy proposals. At the seminar for the association's members in November 2022, we gave a presentation on initiatives for hydrogen energy in Japan and abroad. Through the association, we are contributing to promotional activities to increase the social acceptance of hydrogen and striving toward the realization of a carbon-neutral society.

As a cooperating party, we have joined the "Liaison Council for Collection of Waste Cooking Oil and Utilization of Biofuel for Domestic Vessels" launched by Japan Federation of Coastal Shipping Associations, Japan Passengerboat Association, UCO Japan and Japan Railway Construction, Transport and Technology Agency (JRTT) for the purpose of "promoting carbon neutrality in the domestic maritime sector by promoting the collection of waste cooking oil and expanding the use of biofuels."

In the government’s Plan for Global Warming Countermeasures, revised in October 2021, the reduction target was revised to reduce CO2 emissions for domestic shipping by 17% in the fiscal year 2030 compared to the fiscal year 2013. As a result, the possibility of biofuel utilization as one of the energy-saving and CO2 reduction efforts in existing vessels is gaining interest, although currently most of the waste cooking oil from domestic vessels is being disposed.

Together with the Maritime Bureau of the Ministry of Land, Infrastructure, Transport and Tourism, which is participating as an observer, and Daiseki Eco. Solution Co., Ltd., which is participating as a collaborator, we will conduct a survey of the actual conditions of domestic vessels through this liaison council and promote efforts such as the formulation of guidelines for operators for the collection of waste cooking oil.

On July 1, 2022, Toyota Tsusho established the "Carbon Accounting Adviser Institute," which aims to promote the correct approach to climate change financial information with four companies: Wastebox, Inc., Chubu Electric Power Miraiz Co., Inc., Nippon Life Insurance Company, and Aioi Nissay Dowa Insurance Co., Ltd. of the MS&AD Insurance Group. We have dispatched one director to this institute.

The Carbon Accounting Adviser Institute has established a new "Carbon Accounting Advisor Qualification System" as a private qualification, focusing on the method of measurement, which is not currently standardized, and with the aim of becoming a standard for measurement metrics. This "Carbon Accounting Advisor Qualification Tier 3" is recognized as "Decarbonization Advisor Basic" under the Ministry of the Environment's certification program.

Promoting the Carbon Accounting Advisor Qualification System will help companies address climate change, and through our activities in this association, we will contribute to the realization of carbon neutrality not only for Toyota Tsusho but also for society as a whole.

CDP (Climate Change)
As indicated above, we received an "A" evaluation for climate change as a result of the responses to the CDP questionnaire conducted in 2023.

Toyota Tsusho acquired ISO 50001:2018 (energy management systems) certification in 2020. The scope of the certification covers business sites in Japan (18 sites in 11 prefectures) subject to notification requirements as specified businesses under the Enegy Conservation Act as well as employee benefit facilities. We created energy management standards for each site and periodically confirm their implementation status by conducting energy-saving audits to encourage energy-saving measures.

Third-party certification has been obtained from LRQA Group Limited for a portion of the performance data above.