Climate Change

Surrounding Environment

We identified climate change as one of our materialities that matter most to our business.

The United Nations' Sustainable Development Goals (SDGs), which consist of 17 global goals, specify Goal 7 as "Affordable and Clean Energy" and Goal 13 as "Climate Action." Also, the Paris Agreement, which has been in the implementation stage since 2020, aims to keep the global average temperature rise below 2°C compared to before the Industrial Revolution and to make efforts to keep it down to 1.5°C.

To achieve these, there is an urgent need to develop and disseminate renewable energy alternatives to oil and coal, and mechanisms that enable efficient use of energy. Companies are also required to contribute to the creation of a sustainable society by grasping changes in environment (E) and society (S) and implementing appropriate governance (G).

Policy

The Toyota Tsusho Group has established as one of its Materialities: "Contribute to the transition to a carbon-free society by reducing CO2 emissions at automotive, manufacturing, and plant constration through the use of clean energy and innovative technologies."

To this end, we have positioned our renewable energy business as one of our four priority business domains.

We intend to engage in a variety of unique initiatives aimed both at combating climate change and at growing the company at the same time. These include our renewable energy business; the stable supply of lithium - which is a key material for next-generation eco-cars - and the rebuilding, reusing, and recycling (the so-called "3Rs") of batteries in the mobility field; and increased sales of products, such as bioplastics and recycled aluminum, that contribute to reductions in CO2 emissions in other fields.

Disclosure Based on TCFD Recommendations

The Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD) to examine how climate-related information should be disclosed, and how nancial institutions should respond. The TCFD published its nal report in June 2017. The nal report recommends that corporations and organizations disclose to stakeholders their climaterelated risks and opportunities in four areas: governance, strategy, risk management, and metrics and targets.

At Toyota Tsusho, we believe climate change to be a key management issue and, in May 2019, expressed our support for the TCFD. Based on TCFD recommendations, we intend to disclose more information related to the in uence that climate change has on our business activities.

1.Governance

We identified climate change as one of our materialities that matter most to our business. The actions for our Materialities are verified by the Sustainability Management Committee, which also meets regularly once a year, then reported to the Board of Directors as appropriate.That content is incorporated into our business strategies via the representatives of the sales division's CEO who make up the committee From 2020, the committee has also been tasked with setting KPIs and will review their progress.The Global Safety & Environmental Promotion Meeting is held regularly once a year, where the status of achievement of energy-saving targets, as well as climate change-related revisions to laws and regulations and responses to new requirements, are deliberated. Our PDCA improvement cycle is also checked at the meeting.The content of these deliberations is incorporated into our business activities via the representatives of the sales divisions and group company contacts who make up the meeting.Furthermore, we established the Task Force for Promoting Carbon Neutrality as a cross-company organization in April 2021, and are discussing strategies for the transition to a decarbonized society.This is where we also manage the GHG reduction progress of our Group.

Sustainability Management Committee Decisions on policies and important issues related to Materialities, including climate change
Chairperson Ichiro Kashitani (President & CEO)
Representative officers in charge Hiroshi Tominaga (Member of the Board, CSO)
Secretariat Sustainability Management Group, Corporate Planning Department
Global Safety & Environmental Promotion Meeting Progress in addressing climate change-related laws and regulations, etc.
Representative officers in charge Takahiro Kondo (Executive Vice President)
Secretariat Global Safety & Environmental Promotion Department
Task Force for Promoting Carbon Neutrality Decisions on strategies towards the achievement of carbon neutrality
Representative officers in charge Toshimitsu Imai (CDTO)
Secretariat Next Mobility Development Department

2.Strategy

At Toyota Tsusho, we seek to comprehensively analyze and understand short-, medium-, and long-term business opportunities and risks related to climate change. Going forward, we intend to implement our initiatives and disclose information based on TCFD recommendations. To this end, we are currently discussing the use of both scenario analysis and internal carbon pricing.

At Toyota Tsusho, we believe that the shift to a carbon neutral society represents a business opportunity. In particular, our renewable energy business and lithium business for eco-cars overlap with our priority areas of our Mid-term Business Plan. Also, the move from using virgin materials to using recycled materials - which is intended to improve carbon efficiency - is also an opportunity for our metal recycling business.

Our group operates just one coal-related business - a coal-fired power plant in the Philippines. We are not engaged in any other coal-related businesses.

Risks and Opportunities

Risks include stricter regulations.

In the mobility field, the acceleration of electrification is also a risk. More specifically, there is a risk that distribution volumes will fall due to a decrease in the number of parts used, and there is a risk our existing assets will become obsolete due to changes in material composition. However, electrification will also give rise to new business opportunities. These include opportunities stemming from our Next Mobility Strategy, which is one of our priority areas, and opportunities based on new materials due to the need for weight reductions.

The shift to renewable energy also entails a risk that businesses based on fossil fuel resources will shrink. However, our expansion in onshore wind and solar power generation - which centers on Eurus Energy Holdings - is a major business opportunity. Various types of regulations such as fuel efficiency regulations, carbon taxes, and other national policies must also be counted as risks for our group. We will take steps such as promoting electrified vehicles while keeping abreast of the regulatory trends in each country.

Investment Strategy

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."

<Areas of Focus>
  • Renewable energy and energy management: Scale of investment 700 billion yen
  • Batteries: Scale of investment 400 billion yen
  • Hydrogen and alternative fuel: Scale of investment 200 billion yen
  • Resource circulation and the 3 Rs (rebuild, reuse, recycle): Scale of investment 200 billion yen
  • Economy Of Life (Fields relating to medicine, clothing, food and housing): Scale of investment 100 billion yen

3.Risk Management

Given the characteristics of our businesses, we ensure that we manage environmental risks - which include climate change - to a high standard. Business opportunities and risks related to climate change are deliberated by the Global Safety & Environmental Promotion Meeting and the Sustainability Management Committee, and their members and responsible departments incorporate the contents of these deliberations into our business strategies and activities.

Investments and Loans

At Toyota Tsusho, our officers participate in various meetings to see the impacts that our investment activities have on ESG: the CSO takes part in the Investment and Loan Committee; the assistant to the CSO in the Investment and Loan Meeting; and the CSO, the assistant to the CSO, and general manager of the Corporate Planning Department in the Investment Strategy Meeting. Among the evaluation items at the Investment and Loan Committee and the Investment and Loan Meeting, there exist environmental risks. Regardless of their sizes, we identify those risks that exceed certain condition thresholds set by either of the Investment and Loan Committee or the Investment and Loan Meeting. Should there be any concerns, we are required to address them and to report subsequent improvement measures.
At Toyota Tsusho, we have acquired ISO 14001, an international standard related to environmental management systems. The Head Office monitors the existing subsidiaries with manufacturing workplaces by carrying out internal environmental audits once every three years.
Going forward, we are considering using our six Materialities for evaluating projects in which we intend to newly invest or provide loans or increase our current investments. By comparing these projects against our climate change-related Materialities, we intend to evaluate the extent of both positive and negative influences.

4.Metrics and Targets

One of our Materialities is "Contribute to the transition to a carbon neutral society by reducing CO2 emissions from automotive, manufacturing,and energy plant construction through the use of clean energy and innovative technologies." We have set the following KPIs for this, and also use them as metrics and targets.

Greenhouse Gas Emissions Reduction Targets and Future Initiatives

Achieving carbon neutrality in the Toyota Tsusho Group's operations is as essential as contributing to carbon neutrality in society. Therefore, in July 2021 our group set a concrete policy toward contributing to the transition into a decarbonized society. We established a target of reducing greenhouse gas emissions generated through the business activities of Toyota Tsusho and its domestic and overseas consolidated subsidiaries (Scope 1*1 and Scope 2*2) to net-zero to achieve carbon neutrality by 2050. In addition, we also plan to reduce greenhouse gas emissions by 50% below 2019 levels by 2030.

The Toyota Tsusho Group aims to achieve these targets by promoting comprehensive energy conservation and renewable energy measures (installing LED lighting at business offices and plants, installing solar power facilities at company-owned buildings and structures), reducing CO2 emissions from production processes and logistics operations, reducing emissions through technological innovation, and utilizing J-Credits*3 derived from the use of renewable energy.

The ability to accelerate and promote businesses that contribute to the reduction of greenhouse gas emissions throughout the entire industrial lifecycle is a strength of the Toyota Tsusho Group. All employees of our group will unite and work full force to contribute to the resolution of these social issues.

  1. *1Direct greenhouse gas emissions from Toyota Tsusho's use of fuel, etc. (coal, gas, etc.)
  2. *2Indirect greenhouse gas emissions from Toyota Tsusho's use of purchased electric power and heat
  3. *3In 2019, J-Credits derived from the use of renewable energy resulted in the certified reduction of 2,649 tons of greenhouse gas.

Cooperation with Industry Organizations

1. Japan Foreign Trade Council

The Japan Foreign Trade Council, Inc. (JFTC), of which we are a member, supports the initiatives of government and the Japan Business Federation (Keidanren) to build a low-carbon society, and we have participated in the Keidanren Voluntary Action Plan on the Environment (currently known as the Keidanren Commitment to a Low Carbon Society) since fiscal 1998. In accordance with the Shosha's Environmental Code of Conduct, established by the JFTC, we are taking action to create a low-carbon society, and are promoting energy-saving activities to achieve our target of reducing electric power consumption by 1% per year from the fiscal 2013 level (Keidanren Commitment to a Low Carbon Society). Toyota Tsusho declared its support for the TCFD recommendations in May 2019 and is now working in collaboration with other member companies regarding climate change related proposals and initiatives. As a company that has been appointed a vice chairman to the JFTC, Toyota Tsusho is involved in decision-making.

2. Hydrogen Council

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.

Toyota Tsusho Group CO2 Emissions Reduction

The Toyota Tsusho Group is reducing CO2 emissions by consolidating production facilities, reducing standby power consumption, and taking other measures.

We are taking various initiatives to reduce CO2 emissions at Group companies in Japan, primarily their manufacturing operations. These include reducing power consumption through the consolidation of manufacturing facilities (reduction of idle space), installation of skylights and LED lighting, and deployment of inverter controls, as well as the reduction of standby power consumption by turning off compressors when not in use.

At the Toyota Tsusho Nagoya Head Office, efforts were made to reduce power consumption from collective seating by the introduction of non-territorial office spaces and Big Ass fans. Also, at the Toyota branch, the ratio of renewable energy used for power was increased through solar power generation, storage batteries, and energy management systems (EMS).

Non-territorial work spaces in the Toyota Tsusho Nagoya Head Office
Non-territorial work spaces in the Toyota Tsusho Nagoya Head Office
Big Ass fan in the Toyota Tsusho Nagoya Head Office
Big Ass fan in the Toyota Tsusho Nagoya Head Office
Exterior view of the Toyota Tsusho Toyota Branch and power storage system
Exterior view of the Toyota Tsusho Toyota Branch and power storage system

Climate Change Adaptation

Toyota Tsusho supports the Energy Conservation Act and the Act of Japan's regulatory system relating to climate change, such as on Global Warming Countermersures.

Furthermore,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, and 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.

Case Study: Business Continued at an Alternate Site During Flooding in Thailand

Toyota Tsusho formulated BCPs that anticipate the inability to use key management resources as a result of physical risks of climate change and is taking various responsive measures.

In 2011, when the northern and central regions of Thailand experienced widespread flooding, damage occurred in Bangkok and seven industrial parks, and some 450 Japanese-affiliated companies were affected. Two years later, when massive flooding again occurred in October 2013, the Amata Nakhon Industrial Estate, one of Thailand's largest, was flooded and extensive damage again occurred. Despite this, TTK Asia Transport (Thailand) Co., Ltd., a Toyota Tsusho Group transportation company with a site in the industrial park, had a BCP in place, enabling it to relocate all personnel and trucks to an alternate site and maintain operations without interruption.

Strategy on Climate Change Risks and Opportunities(External Collaboration)

In the energy field, we use renewable energy and clean energy, as these are environmentally friendly energy sources.

While pursuing supply stabilization and cost reduction in the field of wind power generation - a strong field for the Toyota Tsusho Group - we will also endeavor to expand power source options such as to include geothermal power and hydraulic power, expand in regions such as Africa and the Middle East, and expand functions such as energy storage, energy transmission, and retailing, with the aim of further enhancing our renewable energy business.

Meanwhile, in the automobile-related field the popularization of next-generation vehicles such as HVs and EVs has led to rapid increases in demand for the lithium used in batteries for environmentally friendly cars. Lithium is a type of rare metal, and Japan relies on imports for 100% of its lithium materials. In order to develop new supply sources to support the proliferation of next-generation electrified vehicles, Toyota Tsusho conducted lithium reserves surveys, focused on Salar de Olaroz salt lake in northwestern Argentina, and after acquiring a 25% stake in a salt lake development project in 2012, commenced lithium carbonate production in December 2014. Toyota Tsusho will continue to contribute to the stable supply of the lithium batteries that will support the next-generation environment and the transition to a carbon-free society.

<External Collaboration>

In addition, Toyota Tsusho participates in various programs as a member of EPOC, an environmental partnership group formed by industry, government, and academia in the Chubu region. EPOC promotes the expansion of environmental behavior to society and the development of a culture for such behavior, dissemination of information on environmental behavior, and international exchange activities.

Through EPOC, we disseminate information on environmental responses from the Chubu region and seek to create a safe and comfortable circular society while establishing a world-class environmentally-advanced region.

Advocacy of COOL CHOICE

Toyota Tsusho supports the "COOL CHOICE" initiative, which encourages "smart choices" that contribute to global warming countermeasures such as switching to energy-saving and carbon-free products and reviewing lifestyles. We also adopted the new "Be Yourself," work attire guidelines, which allow all Toyota Tsusho employees to make their own decisions about what to wear at work and are compatible with the year-round Cool Biz/Warm Biz campaign.

CDP

CDP

Toyota Tsusho has been participating in CDP since the fiscal year ended March 31, 2017. CDP is an international NPO that was established in London in 2000. CDP calls on participating companies to disclose strategies on climate change and specific figures on the amounts of greenhouse gases emitted. As a representative of institutional investors with a total operational amount exceeding U.S.$100 trillion, CDP sends questionnaires to companies, analyzes and evaluates their responses, and discloses scores. Scores are ranked according to eight levels: A, A-, B, B-, C, C-, D, and D-.

CDP Evaluation Results for CDP2021

  • Climate change: A-
  • Water security: A-
  • Forests (Palm oil): B
  • Forests (Timber): A-
  • Forests (Soy): B

ISO 50001

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.

Performance Data

  • Greenhouse Gas Emissions (Scope 1 and Scope 2, Domestic)
  • Greenhouse Gas Emissions (Scope 1 and Scope 2, Overseas)
  • Breakdown of Greenhouse Gas Emissions (Scope 1)
  • Greenhouse Gas Emissions (Scope 3)
  • Internal Carbon Price
Greenhouse Gas Emissions(Scope 1 and Scope 2, Domestic)
Greenhouse Gas Emissions(Scope 1 and Scope 2, Domestic)
Tabulation scope: Toyota Tsusho Corporation (head offices, branches, sales offices, field offices) and domestic consolidated subsidiaries
CO2 emission factors from electricity: Basic emission factors in "Emission Factors by Electric Utility Operator" published by Ministry of the Environment and Ministry of Economy, Trade and Industry (published January 2021)
CO2 emission factors from non-electricity sources: "Greenhouse Gas Emissions Accounting and Reporting Manual" Ver.4.7 published by Ministry of the Environment and Ministry of Economy, Trade and Industry
Greenhouse Gas Emissions(Scope 1 and Scope 2, Overseas)
Greenhouse Gas Emissions(Scope 1 and Scope 2, Overseas)
Tabulation scope: Overseas consolidated subsidiaries
Conversion coefficient: (Electricity) IEA Emission factors 2018(Non-electricity sources) IPCC 2006 Guidelines for National Greenhouse Gas Inventories
Breakdown of Greenhouse Gas Emissions(Scope 1)
Unit ton-CO2
FY
2018
FY
2019
FY
2020
CO2 406,403 421,341 399,786
CH4/N2O/HFCs/PFCs/SF6/NF3 Others 0 0 0
Total 406,403 421,341 399,786
Tabulation scope: Toyota Tsusho Corporation (head offices, branches, sales offices, field offices) and domestic consolidated subsidiaries,overseas consolidated subsidiaries Applies to emissions exceeding 3,000 t-CO2e per year based on the greenhouse gas emissions accounting, reporting and publication system. 6.5 gases are not subject to third-party assurance.
Greenhouse Gas Emissions (Scope 3)
Unit ton-CO2
2018年 2019年 2020年
Category 2 (Capital goods) 135,441 126,565 117,711
Category 3 (Fuel- and energy-related activities not included in scope 1) 11,454 14,399 17,505
Category 4 (Upstream transportation and distribution) 21,699 21,127 17,167
Category 5 (Waste generated in operations) 3,372 3,109 4,395
Category 6 (Business travel) 1,377 1,589 1,727
Category 7 (Employee commuting) 3,304 3,755 4,218
Category 8 (Leased assets) 0 0 0
Category 14 (Franchises) 0 0 0
Total 176,647 170,544 162,723
Tabulation scope: Toyota Tsusho Corporation (head offices, branches, sales offices, field offices) and domestic consolidated subsidiaries
* Category4-Toyota Tsusho Corporation and Toyota Steel Center Co., Ltd. Conversion coefficient:
Calculation standards: Based on "Emissions Per Unit of Activity for Calculating Greenhouse Gas Emissions, etc. of Organizations Throughout the Supply Chain (Ver.3.1)",calculated using the factors in "Database of Emissions Per Unit of Activity for Calculating Greenhouse Gas Emissions, etc. of Organizations Throughout the Supply Chain (Ver.3.1)"(hereinafter the "DB")
Category 2 : Calculated by multiplying the amount of tangible fixed assets acquired on a consolidated basis in the reporting year by[Emissions intensity per capital goods prices]
Category 3 : Calculated by multiplying the fuel, electricity and heat consumption in the reporting year by [Emissions intensity per unit of electricity and heat consumption and emissions intensity during fuel procurement] in the DB Fuel is calculated by reference to the factors in IDEA v2.3 included as a reference in the DB
Category 4 : Aggregation of items related to domestic transportation in shipping of Toyota Tsusho Corporation and Toyota Steel Center respectively,based on the Ministry of the Environment and Ministry of Economy, Trade and Industry "Greenhouse Gas Accounting and Reporting Manual" However, calculated by calendar year (not fiscal year) period
Category 5 : Calculated by multiplying the [Intensity by waste type and methods of processing] in the DB classified by business-related general waste and industrial waste by type and processing method(valuable materials are excluded from the calculation)
Category 6 : Calculated by multiplying [Emissions intensity per employee] in the DB by the number of employees at each business site
Category 7 : Calculated by multiplying [Emissions intensity per number of employees by city classification by type of work and number of working days] in the DB by the number of employees at each business site
Category 8 : There are no CO2 emissions from use of leased equipment as they are reported in Scope 1 & Scope 2
Category 14 : There are no CO2 emissions as there are no matters falling under Franchises Business

Internal Carbon Price

J-Credit purchase costs were recognized and introduced as carbon pricing, and J-Credit purchase costs from January to March 2020 (approximately 5.5 million yen) were allocated to each seat in the company as carbon pricing (110 yen/seat-month).

  • *The company uses J-Credits for electric power generated from renewable energy, and since January 2019, 19 offices in 11 prefectures in Japan have been CO2 free from electric power use, essentially achieving 100% renewable energy use.

(J-Credit is a government certification program that provides credits for amounts of reduction and absorption of CO2 and other greenhouse gasses through the use of renewable energy and other means.)

FY2020
Internal carbon price Approx. ¥5.5 million

In order to accomplish the GHG emission reduction target announced in July 2021, we introduced a new "Internal Carbon Pricing System." It is a system in which in the event the volume of GHG emitted in business activities of the sales divisions exceeds the emission as of 2019, a carbon cost is deducted from our profits, and in the event of reduction thereof, the carbon credit will be added to profits. Through the introduction of this system, we will further promote our internal actions to address climate change.

Third Party Certification

Third-party certification has been obtained from Lloyd's Register Quality Assurance (LRQA) for a portion of the performance data above.