Our corporate group identified climate change as one of the material issues that matter most to our business. The content of our Materiality initiatives is verified by a meeting of the Sustainability 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 experience and competence 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 (GHG) 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 annual Safety and Environment Conference^*3. Our progress is also confirmed at the conference. 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 reductions in GHG emissions. Under this system, the progress of each sales division’s efforts to reduce GHG emissions is reflected in the performance and compensation of the CEO 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

Selecting businesses with large climate change impacts (from perspectives A to D below) among all our group’s businesses, we performed scenario analyses with the lithium, resource recycling, renewable energy, automotive sales, and automotive parts logistics businesses. The molten aluminum business, selected until the fiscal year ended March 31, 2024, is included in the resource recycling business from the fiscal year ending March 31,2025 from the perspective of expanding the scope of GHG emissions and scenario analyses. For the same purpose, we added the automotive parts logistics business into the scope of scenario analysis.

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.

Our group has a long history of recycling. Since the 1970s, we have been promoting a circular economy as one of our businesses for roughly 50 years. Based on the recognition that all goods are resources, we recover, sort, and recycle them to promote resource recycling in support of manufacturing.

Impact on Businesses in Each Scenario

1.5°C scenario	Under the 1.5°C scenario, opportunities for the business as a whole are estimated to expand as the market expands due to an increased demand for recycled materials.
4°C scenario	Under the 4°C scenario, the market will not expand at the scale estimated to occur under the 1.5°C scenario. The impact on the business as a whole is thus estimated 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.

Our group operates affiliates and business frameworks around the world. Utilizing each site and logistic network, we have established a seamless, optimal parts logistics structure and a global-scale automotive parts supply chain.

From the fiscal year ending March 31, 2025, we newly started the analysis of the automotive parts logistics business to expand the scope of our GHG emissions and scenario analyses.

Impact on Businesses in Each Scenario

1.5°C scenario	Under the 1.5°C scenario, increases in the handling volume of parts and products, such as expensive batteries, are expected with changing automotive components as electrification progresses. Opportunities for this business are estimated to expand with the continuously increasing volume of automotive production worldwide.
4°C scenario	Under the 4°C scenario, it is projected that the progress of electrification would be slow compared to that under the 1.5°C scenario. The impact on the business as a whole would thus be limited, and opportunities for the business are estimated to be stable or expand with the continuously increasing volume of automotive production worldwide.

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.

Expertise in Scope 3 Emissions Reduction Actions and Avoided Emissions Businesses

The Toyota Tsusho Group vigorously engages in Scope 3 CO₂ emissions reduction throughout the entirety of its supply chains centering on the automotive field by utilizing the group’s long-reinforced strengths, such as resources recycling, efficient logistics and manufacturing, and low-carbon energy supply. The group is determined to continue to grow by further and broadly expanding this endeavor and contributing to emissions reduction by society at large.

1. *1Carbon dioxide capture, utilization, and storage: Technology to recover, store, and effectively utilize CO₂
2. *2The number of circles indicates the number of businesses related to the five working groups (WGs) and new Scope 3 emissions reduction and avoided emissions actions.
   The color of circles indicates the type of each business. The size of circles indicates the scale of each business.

Major Scope 3 Emissions Reduction Initiatives

Our corporate group reduces Scope 3 emissions using Toyota Tsusho’s distinctive initiatives, and we provide the approaches to such to our customers to contribute to society’s efforts to achieve avoided emissions and to create new business opportunities.

Toyota Tsusho’s Distinctive Initiatives

2023 Emissions and Reduction

Scope 3 Emissions

For 2023, our corporate group recorded approximately 124million t-CO₂ of Scope 3 emissions in total. Characteristics of emissions from our business activities are as follows.

• We handle low volumes of metal resources and fossil fuels,which are significant GHG emitters, and the number of our businesses that emit a large volume of CO₂, such as thermal power generation, is limited.^*4
• We have been engaging in a variety of initiatives centering on the automotive supply chain. Emissions classified as those arising from Purchased Goods and Services (Category 1) and Use o+C30f Sold Products (Category 11) account for the majority.

We will implement the major initiatives described on Scope 3 Emissions Reduction Initiatives throughout the automotive supply chain to reduce Category 1 and Category 11 emissions, which are high

1. *4Planning to withdraw completely from coal- and heavy oil-fired power generation businesses after the fiscal year ending March 31, 2025, and from thermal power generation projects at an early phase

2023 Scope 3 Emissions by Category

Category	Emission (1,000 t-CO2)
1 Purchased goods and services	77,588
2 Capital goods	596
3 Fuel- and energy- related activities (not included in Scope 1 or Scope 2)	137
4 Upstream transportation and distribution	3,460
5 Waste generated in operations	19
6 Business travel	9
7 Employee commuting	29
8 Upstream leased assets	0
9 Downstream transportation and distribution	4,695
10 Processing of sold products	143
11 Use of sold products	34,245
12 End-of-life treatment of sold products	18
13 Downstream leased assets	23
14 Franchises	6
15 Investments	3,160
Total	124,128

Avoided Emissions

Our corporate group engages in diverse emissions reduction actions, recognizing Scope 3 emissions reduction and avoided emissions businesses as growth opportunities. To further accelerate our related initiatives, we have been disclosing avoided emissions by quantifying our emissions reduction actions.

We classify our diverse emissions reduction actions as either direct contribution_*5, which is made through products and services we manufacture and supply, or indirect contribution,_*5 which is made by our indirectly contributing to the reduction of emissions of other companies’ products.

Our avoided emissions for 2023 totaled approximately 8 million t-CO₂ from direct contribution and approximately 31million t-CO₂ from indirect contribution.

1. *5Direct contribution: Emissions avoided by our final products and services that have an emissions reduction effect or those avoided through our manufacturing processes(Others: Although we have yet to calculate the volume of avoided emissions, we are taking the lead in multiple initiatives that contribute to society’s GHG emissions reduction, such as nonferrous metal scrap recovery and processing and energy-efficient data center operation.)Indirect Contribution: Emissions avoided by our company’s conducting a part of the manufacturing processes of final products and services that have an emissions reduction effect or by our sales of final products and services that have an emissions reduction effect
2. *6Formulated while referring to “5.5 Avoided Emissions Accumulation Methods” of the Guideline for Avoided GHG Emissions Quantification of Japan’s Ministry of Economy, Trade and Industry (METI).
3. *7LCA: Life cycle assessment; a method to quantitatively assess the environmental burden of a product throughout its life cycle

Calculation method: We referred to guidelines published by METI, the Institute of Life Cycle Assessment, Japan, and the World Business Council for Sustainable Development (WBCSD), among others, in calculating avoided emissions. As there are no universal rules for calculating avoided emissions at present, we will appropriately review our calculation methods and information to disclose based on international discussions and trends in society.
(Emissions from existing products, services, and manufacturing processes – emissions from new products, services, and manufacturing processes) x volume of diffusion
Calculation example: Recycled aluminum
Avoided emissions are calculated based on the difference between emissions from the use of recycled aluminum and the use of virgin metal, both being supplied by our company.
Electric vehicles: (Internal combustion engine vehicle LCA emissions*8 – electrified vehicle LCA emissions*8) x number of electrified vehicles sold for which our company is involved in a part of their supply chain

1. *8Internal combustion engine vehicle and electrified vehicle LCA emissions were calculated while referring to the IEA’s Global EV Outlook 2024

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.

Starting in the fiscal year ending March 31, 2025, we have added a Carbon Neutrality Award to our Be the Right ONE Awards, which is a program that recognizes organizations and employees who significantly contribute to the company throughout the year. The Carbon Neutrality Award will recognize model initiatives for realizing carbon neutrality, and adding it will further promote carbon neutrality, as winning organizations and business entities are to serve as drivers of carbon neutrality initiatives by other organizations and business entities.

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.