Climate Change Initiatives and Information Disclosure
Based on the IFRS Sustainability Disclosure Standards

■TOC■（Click the following each content to jump.）

Basic Concept
Governance
Strategy
Risk Management
Metrics and Targets
Information Disclosure in the EU

Basic Concept

The IDEC Group has been conscious of eco-friendliness since its foundation in 1945 through it's “Save all” and “Pursuit of saving” by words. We have formulated “The IDEC Way” in 2019 and have since been maintained a management focus on environmental issues and reduction of environmental impact through the realization of safety, ANSHIN, and well-being. Responding to climate change is a major societal challenge globally.

We identify responding to climate change as one of our priority issues. Having set the Vision for 2030 in the Materiality, we are promoting various initiatives aimed at achieving a sustainable society.

The IDEC Group has disclosed climate-related information based on the TCFD (Task Force on Climate-related Financial Disclosures) since FY2022. This year, we disclose climate-related information based on the IFRS (International Financial Reporting Standards) S2 that succeeds the TCFD recommendations.

Governance

The Environmental Strategy Committee, a specialist committee of the Sustainability Committee chaired by the CEO, plays a key role in our efforts to disclose climate-related financial information.

The Environmental Strategy Committee is composed of employees from various departments and meets bimonthly under direction by the Senior Executive Officer in charge of the Environment. Decisions made by the Environmental Strategy Committee are discussed by the Sustainability Committee, reported to the Top Management Meeting for approval, then reported to the Board of Directors for final approval.

Progress on the goals set in the medium-term management plan started in 2022 are reviewed at bimonthly meetings, and response measures are discussed if things are not progressing as planned. In FY2024, we also introduced a Performance Share Unit (PSU) system, as a medium-term incentive, under which common shares equivalent to approximate 10% of compensation are allocated to directors and executive officers. Non-financial indicators used in the calculation of PSUs.

Framework of the environmental governance

Strategy

The IDEC Group regards environmental strategy as an integral part of its business strategy, and has incorporated eco-friendly products into its transition plan starting in FY2026 by introducing sales targets for eco-friendly products as KPIs. This will enable us to systematically improve the level of environmental contribution of our business activities.

We are also accelerating the development of our value chain with suppliers by setting supply chain engagement rate as a KPI and revising CSR procurement and green procurement guidelines. In addition, we are continuously engaged in various environmental initiatives, including reducing CO2 emissions to achieve carbon neutrality, reducing industrial waste, and increasing recycling rates. 　

These transition plan-related activities align with the IDEC Group's purpose of contributing to the realization of safety, ANSHIN, and well-being for people worldwide, as a harmonized approach to environmental considerations. In addition, ESG-related information, including disclosures based on the TCFD Recommendations, has been included in our Securities Report since of FY2024.

Climate resilience

The World Energy Outlook 2024 (WEO2024) report published by the International Energy Agency states that due to global geopolitical tensions and divisions, the world faces energy security risks, which pose major risks to concerted efforts to reduce emissions.

While geopolitical risks abound, the report explains that the fundamental balance of the market is loosening, setting the stage for fierce competition between different fuels and technologies. Momentum for clean energy remains strong and is expected to lead to a peak in demand for various fossil fuels by 2030.

Based on these conditions, the IDEC Group’s selection scenarios for FY2025 are the same as in FY2024, and the transition risk scenarios are the WEO2024 STEPS (2.6°C scenario) and NZE (1.5°C scenario). For our physical risk scenarios, we adopt RCP2.6 (2°C scenario) and RCP8.5 (4°C scenario) of the IPCC Fifth Assessment Report.

Energy-related CO2 emissions
(2010-2050)

Source：WEO2024 issued by IEA

Based on our selected scenarios, we held workshops at IDEC head office and GEMS Steering Committee members’ countries and regions in FY2025 to analyze risks and opportunities together with team members from various departments. In our workshops, we used the International Energy Agency's World Energy Outlook 2024 (WEO2024), IFRS S2 and industry-specific disclosure topics, CSRD/ESRS, and the Materiality Assessment Implementation Guidance (MAIG) as reference materials for risk and opportunity assessments.

Findings were categorized into transition and physical risks, time-related impacts, and potential financial impacts, and organized into our 1.5°C/2°C and 4°C scenarios.

Risk Management

For each of the climate-related risks and opportunities identified by the Environmental Strategy Committee, we considered the likelihood of occurrence, degree of impact, and amount of potential financial impact, and compiled them into a risk and opportunity map. The identified results and risk items that have been assessed as important in our mapping are managed by referring to an integrated risk map for the IDEC Group. They are also reflected in the risks and opportunities associated with natural capital, one of our materialities.

The Environment Promotion Department lists environmental risk management items on an annual risk management table, specifies performance indicators, and reports the state of achievement to the Risk Monitoring Subcommittee.

Strategy: Climate change risks and opportunities

Based on our scenarios and other findings from risk and opportunity workshops conducted in Japan and other countries participating in the Global Environmental Management System, we identified transitions and physical risks and opportunities reasonably expected to have an impact on IDEC Group's outlook.

Next, we calculated the probability of occurrence, degree of impact, and potential financial impact for each risk and opportunity item, and updated our climate-related risk and opportunity map. Details summarizing the potential financial impacts of risks and opportunities and measures to address them is scheduled to be disclosed later.

Descriptions of risk items
①Increase in raw material costs
②Growing environmental awareness among customers and investors
③Delay in relative to competitors in the transition of existing and new products to low-emission/low-carbon technologies
④Tendency of carbon pricing
⑤Natural disasters (heavy rain, hail, snow/ice, cyclones, hurricanes, typhoons, floods, inundation, earthquakes) and temperature rise

Descriptions of opportunity items
①Demand for low-emission products and a diverse variety of new products and services through R&D and technological innovation
②Shift to alternative materials / diversification / new technologies
③Transition to distributed energy generation and the creation of new markets

The world images assumed in each scenario are summarized as below.

Category

Number

Item

Potential financial impact

Responses

Transition

risk

・Transfer costs in response to price increases by continuously mutual understanding with suppliers and customers.
・Reduce manufacturing costs in anticipation of medium to long- term increases in the cost of raw materials and reduce costs through planned product redesign and introduction of alternative parts and materials.

・Position environmental strategy as one of the priority items in the medium- to long-term plan, set materiality KPIs relating to the　environment, such as increasing the cumulative ratio of enhanced eco-friendly products among new products, and check progress.
・Promote to develop technology on a continuing basis relating to consideration and introduction of eco-friendly packing materials　and components.
・Engage in regular dialogues with investors and disclose appropriate information through IFRS and CDP, etc.

Delay relative to competitors in the transition of existing and new products to low-emission/low-carbon technologies

・Systematically incorporate technologies that we do not have and integrate them with our core technologies through long-term collaboration with other companies.
・Obtain and respond to regulatory information appropriately
・Expand operating temperature products with a range of temperatures that can be used in warm and cold regions.

Current

regulations

・Reduce the impact of rising energy purchase prices through the planned introduction of self-consuming renewable energy.
・Plan and implement planned upgrades to energy-saving equipment.
・Reduce indirect costs through efforts to save energy and improve the operating rate of factories.
・Drive decarbonization activities through the introduction of ICP.

Physical

Risk

Urgent/
chronic

・Enhance BCP measures to enforce the company’s resilience.
・Assess and review supply chain risks.
・Prepare hazard maps of manufacturing sites and find potential risks.
・Formulate recovery plans for each site and develop manuals for employee work procedures.
・Change manufacturing sites to be multi-skilled for flagship products.
・Ensure that employees affected by disasters are fully aware of how to confirm their safety as soon as possible.

Category

Number

Item

Potential financial impact

Responses

Resource
efficiency

・Accelerate technology innovation of flagship products based on environmental aspects as well.
・Applied research of easy recyclable materials for products.
・Develop products based on the assumption of recycling.
・Make unconstrained efforts to reduce packaging wastes.
・Expand environment-related services business.
・Secure a first-hand advantage by accelerating investment in development.
・Provide low-emission products and services throughout the life cycle, based on the concept of developing eco-friendly product we have currently addressed.

・Breakaway from prolongation of our conventional technologies.
・Enhance software and systems-related technologies by promoting M&A and business collaborations, etc. as well as adoption and development of human resources.
・Promote the incorporation of new technologies to respond to diverse needs through partnerships and collaborations with other companies.
・Foster a corporate culture of well-being.
・Develop products utilizing HMI and sensing technologies and propose solutions through systematization and packaging.
・Develop new products to meet the demands for market well-being and promote proposals for solutions.
・Promote safety, ANSHIN, and well-being to the world.
・Enhance lineup of environmental tolerance products.

Products
and
services

・Innovate our environmental business, using the response as an opportunity.
・Enter into new markets using our new business as a door opener.
・Develop products utilizing HMI and sensing technology, enhance product lineup, and propose problem-solving solutions based on the needs of new markets.
・Adapt IDEC products to the power specific specifications r by new energy sources.

Metrics and Targets

To reduce CO2 emissions, in our medium-term plan we have set the targets of reducing Scope 1 and Scope 2 CO2 emissions by 35% by FY2028 and 50% by FY2031 (both compared to FY2020). The internal carbon price (ICP) introduced in FY2023 has been set at 14,000 yen/t for FY2026. While the impact of ICP on environmental investment decision-making is not yet sufficient, the Environmental Strategy Committee is working to raise awareness within the Group by introducing model cases of ICP utilization on the intranet.

With the Performance Share Units (PSUs) introduced into the executive compensation system in FY2024, approximately 10% of compensation may be allocated to directors and executive officers in the form of common stock, with non-financial indicators being used in the calculation of PSUs. Our return on carbon (ROC) profit ratio, which indicates how much CO2 was reduced and how efficiently profits were earned, has continued to decline in line with the decrease in operating profit.

In terms of CO2 emissions for FY2025, total Scope 1 and Scope 2 emissions decreased in comparison with FY2024. We have been successful in continuously reducing emissions since FY2023.

While we do not plan to add solar power generation equipment in FY2026, the on-site power generation equipment introduced at Tatsuno Distribution Center in FY2025 is now in operation, and will contribute to reducing CO2 emissions in FY2026. In addition, we expect to see CO2 reduction benefits from switching to electricity with lower emission factors and achieving improved operating rates at each factory.

With regard to Scope 3 emissions, we will continue to implement eco-friendly considerations—such as energy-saving design—in our product development processes to reduce emissions.

Information disclosure in the EU (APEM, France)

APEM—which operates mainly in EMEA as the IDEC Group—has established a team to work on the requirements of the Corporate Sustainability Reporting Directive (CSRD) and is preparing for the disclosure in 2026. APEM has responded to EcoVadis, which the IDEC Group has addressed since FY2023, as a non-consolidated Group company in Europe, and is taking various measures to establish double materiality that will be required in the future.