Regarding CO₂ emissions, Teijin is implementing initiatives based on its roadmap to achieve net zero emissions by 2050, including shifting to renewable energy sources for electricity and clean energy for heat sources. The shift to renewable energy is progressing smoothly in Europe and is ahead of schedule in China. In addition, projects to fully phase out coal have finished in Thailand, and are likely to be completed in Japan by the end of FY2025, with the full benefits of these projects set to manifest from FY2026.

After identifying businesses and industries that have the potential to be significantly impacted by climate change, the Teijin Group has been conducting an analysis of the level of this impact based on the 1.5℃ scenario and the 4℃ scenario^*, referencing World Energy Outlook (WEO), published by the International Energy Agency (IEA). In either scenario, differences in industry trends will have a minor impact on demand, or the positives and negatives will cancel each other out. Nonetheless, we will monitor industry trends and consider the appropriate time to make investments and allocate resources.

1. *1.5℃ scenario: IEA NZE 2050 scenario, 4℃ scenario: IPCC RCP8.5

In FY2020, the Teijin Group established and introduced an internal carbon pricing (ICP) system targeting capital expenditure plans throughout the Group that can lead to an increase or decrease in CO₂ emissions. In FY2021, we began applying this ICP system to our capital expenditures. In April 2023, we revised the ICP system, making changes to such aspects as set pricing and scope of application, taking into account such factors as the raising of our target for Groupwide CO₂ emissions reductions and the recent changes in the external environment. With regard to ICP, we raised this price from €50/t-CO₂ to €100/t-CO₂ to better reflect the increased risks of carbon taxes being introduced and rising tax rates as well as higher emissions trading prices in various countries, especially in Europe. We have expanded the application of our pricing system for in-house CO₂ emissions to include investments such as M&A, as well as decisions related to reducing emissions that do not necessarily involve capital expenditure, such as switching to renewable energy. In addition, with regard to indirect emissions from partners in our upstream value chain (Scope 3 Category 1), the revised ICP will be applied to capital expenditure for switching to recycled or biomass-derived raw materials purchased from other companies, thereby encouraging the reduction of CO₂ emissions throughout the supply chain.

• *A system that creates economic incentives to reduce CO₂ emissions by establishing internal carbon prices to quantify CO₂ emissions as costs, thereby promoting internal efforts to respond to climate change.

In October 2022, the Teijin Group made the decision to convert the in-house fossil fuel-based power generation facilities currently in use at the North Plant of Matsuyama Factory to a cogeneration system^* running on city gas. With regard to the Group's specific targets for net zero emissions by FY2030, allowing for future business growth, this target requires us to reduce CO₂ emissions by roughly 600,000 tons compared with FY2018 levels. The introduction of this gas cogeneration system in the North Plant of Matsuyama Factory is expected to achieve a reduction of 200,000 tons a year, or around 30% of this reduction. The total investment is expected to be over ¥10 billion, including the replacement of existing aging power receiving and distribution equipment, and the generating capacity of the new power plant is expected to be approximately 30,000 kW.

• *Cogeneration systems supply both electricity and heat on-site, and their high energy efficiency results in significant reductions in CO₂ emissions.

• Total Risk Management

We aim to reduce CO₂ emissions throughout the entire supply chain by using our long-cultivated technologies for reducing weight and increasing efficiency. By the early stage of FY2030, we aim to make the amount of our avoided emissions larger than the total CO₂ emissions^*2. We have also been making efforts toward establishing a life cycle assessment (LCA) evaluation system, which visualizes the environmental burden of a product across its entire life cycle. Through these efforts, we aim to reduce CO₂ emissions throughout the entire supply chain. In FY2023, we established the LCA Promotion Expert Meeting under which we are proceeding with Groupwide LCA initiatives.

• *1Calculated as the amount of avoided CO₂ emissions that the Company's products have contributed to in the supply chain downstream.
• *2Total CO₂ emissions are calculated for Scope 1, Scope 2, and Category 1 (Purchased goods and services), Category 2 (Capital goods), Category 3 (Fuel- and energy-related activities not included in Scope 1 and Scope 2), Category 4 (Upstream transportation and distribution), Category 5 (Waste generated in operations), Category 6 (Business travel), and Category 7 (Employee commuting) in Scope 3.

Trends in total CO₂ emissions and avoided CO₂ emissions

In FY2023, our avoided emissions increased 5% compared with the previous fiscal year, to 3.33 million t-CO₂, due to such factors as the increase in sales of carbon fibers.

Through the early phase-out of all coal-fired power generation and the gradual transition to renewable energy sources for our electricity, we are working to decouple our business growth from GHG emissions.

1. *1Includes CO₂, methane, and N₂O
2. *2CO₂ emissions are calculated with the GHG Protocol as reference. The amount of CO₂ emissions equivalent to the amount of energy sold to other companies has not been deducted from this data. With regard to coefficients for fuel, we use emissions coefficients based on the Law Concerning the Promotion of the Measures to Cope with Global Warming. As for emissions coefficients for electricity, we use adjusted emissions coefficients of individual electric power companies for power purchased in Japan. For power purchased overseas, we use power company-specific coefficients, in principle. However, in cases where the power company-specific coefficient is unknown, we apply the latest available IEA country-specific emissions coefficient.

Trends in Group CO₂ Emissions

In FY2023, Group CO₂ emissions decreased 4% compared with the previous fiscal year, to 1.27 million t-CO₂ (Scope 1: 0.67 million t-CO₂, Scope 2: 0.60 million t-CO₂), owing to the introduction of renewable energy at overseas bases, among other efforts. This result represented an 14% decrease in emissions compared with FY2018.

We have set a KPI pertaining to two-thirds of our total supply chain CO₂ emissions and are working to reduce these emissions across the entire supply chain.

• *Covers Scope 3 emissions in Category 1 (Purchased goods and services) except emissions from products purchased in the Fibers & Products Converting Business for the purpose of sale. Category 1 emissions are calculated by multiplying the purchased weight or purchased value of purchased goods and services by the emissions intensity in units of weight or value. Emissions intensity data for monetary units is from Emissions Unit Values for Accounting of Greenhouse Gas Emissions, etc., by Organizations Throughout the Supply Chain (Ver. 3.4) (March 2024) (Emissions Unit Values Database V. 3.4), published by the Ministry of the Environment. Emissions intensity data for weight units is based on the intensity data of the Ecoinvent Database (operated by Ecoinvent Association) or the LCA for Experts (GaBi) Database (operated by Sphera).

Supply Chain CO₂ Emissions

In FY2023, emissions increased due to an increase in the items subject to calculation. This result represented a 2% decrease in emissions compared with FY2018, to 2.84 million t-CO₂.

In FY2023, CO₂ emissions associated with the logistics domain amounted to 5.89 thousand t-CO₂, which is an increase of 0.14 thousand t-CO₂ from the previous fiscal year. In FY2023, although there was a recover in demand for aircraft and automobile applications, the overall volume of freight transportation decreased 5.9 thousand t-km compared with FY2022, due in part to the slowdown in the Chinese economy. CO₂ emissions in logistics were up year on year as due to decreased transport efficiency caused by concerns over delays in marine transport, despite our ongoing measures to reduce the environmental burden of logistics that we implemented in FY2023, to the greatest extent possible, including improving the truck loading rate and promoting a modal shift (utilizing Japan Railway transportation and shipping). Following these reduced efficiency, in the entire Group's logistics, CO₂ emissions per unit of transportation increased 0.16 compared with the previous fiscal year. The standard basic unit per 1,000 t-km (t-CO₂/1,000 t-km) was 1.21 (against 1 in FY2011). In FY2024, in addition to shortening drayage distance by changing the point of discharge and to promoting container round use, we will continue efforts to lower emissions per unit by increasing vehicle size (expanding bulk transportation), improving the truck loading rate, and promoting a modal shift.

• *The scopes for calculating CO₂ emitted by logistics for each fiscal year are as follows.
  FY2011: Teijin Limited (excluding the aramid fiber business), Teijin Film Solutions Ltd., and the former Teijin Fiber Co., Ltd.'s apparel business that was consolidated with Teijin Frontier Co., Ltd.
  FY2020: Teijin Limited, Teijin Frontier Co., Ltd., Teijin Pharma Limited, and Teijin Cordley Limited (*)Teijin Film Solutions Ltd. and Teijin Engineering Ltd. are not included.
  Since FY2021: Teijin Limited, Teijin Frontier Co., Ltd., Teijin Pharma Limited, and Teijin Cordley Limited (*)Teijin Engineering Ltd. is not included.