Response to climate change

Disclosures based on the TCFD recommendations

Recent years are seeing increasingly serious impacts from climate change, including weather-related disasters. Under these circumstances, there are growing expectations for IT as a tool for overcoming serious global environmental crises. In this respect, we believe that the CTC Group has significant roles and responsibilities to fulfill. We have identified "Contribute to addressing climate change" as one of the items of materiality (material issues) that were renewed in April 2021. Moreover, in April 2022, we expressed support for the Task Force on Climate-related Financial Disclosures (TCFD). We will work to realize a decarbonized society with our technologies and skills and ensure appropriate disclosures in accordance with the TCFD recommendations, aiming to build a sustainable society rich in dreams.

Governance

To address climate change, we have created a structure for promoting sustainability, headed by the President & CEO. Important matters are discussed by the Sustainability Committee, which is chaired by a managing executive officer, before decisions are made by the Management Committee and approval is given by the Board of Directors. We have also established a structure under which activities related to climate change are reported regularly to the Management Committee and the Board of Directors and are supervised by them.

Major important matters

Matters related to climate change risks and opportunities, important guidelines and measures related to climate change, progress in medium- and long-term environmental targets including CO₂ reduction, and others

Role and frequency of each meeting body

Category	Roles	Frequency of meetings
Board of Directors	Supervising climate change countermeasures	About twice a year
President & CEO (Management Committee)	Determining important matters associated with climate change countermeasures	About twice a year
Sustainability Committee	Deliberating on important matters on climate change countermeasures	About twice a year

CTC Group's structure for promoting sustainability

We promote action against climate change under the following structure.

Strategies

Using scenarios^* disclosed by an international institution and other entities, we studied how climate change affects our businesses. We identified the direct impacts of climate change on our businesses, including our supply chain (domestic businesses), as well as changes in policy trends and other impacts on our business activities, income, and other aspects. We then analyzed the financial impacts of the identified opportunities and risks expected in 2030 and 2050, both qualitatively and quantitatively by using the 4℃ and 1.5℃ scenarios, and summarized our policies for countermeasures. An outline of the results is as follows.
We position climate change countermeasures as opportunities for medium- to long-term growth and we are proactively expanding the green transformation (GX) business toward a decarbonized society, as a means to address social issues and achieve sustainable growth.

*Reference: Intergovernmental Panel on Climate Change (IPCC) RCP8.5 / RCP2.6, International Energy Agency (IEA) STEPS/NZE2050

Opportunities related to climate change			Magnitude of impact^*2				Action policies
Category	Details	Length of time required before actualization^*1	4℃ scenario		1.5℃ scenario
Category	Details	Length of time required before actualization^*1	2030	2050	2030	2050
Products and services	Increase in demand reflecting the use of IT for efficient energy use and energy conservation Increase in demand for products and services that contribute to the development of renewable energy	Short term	Small	Small	Medium	Medium	Expanding businesses that help solve issues, including those related to efficient energy use and those related to energy conservation Expanding businesses that contribute to the development of renewable energy
Market	Market expansion driven by simulation technologies and services that contribute to the development of new technologies (related to low carbon, hydrogen, and others) Improving social trust with climate change countermeasures	Short term	Large	Large	Large	Large	R&D and expansion of technologies and services that support the use of new energy as a means of achieving decarbonization Expanding businesses which contribute to decarbonization and making information about them available

Climate change risks			Magnitude of impact^*2				Action policies
Category	Details	Length of time required before actualization^*1	4℃ scenario		1.5℃ scenario
Category	Details	Length of time required before actualization^*1	2030	2050	2030	2050
Policies and legal restrictions	Increase in costs for responding to the tightening of regulations related to CO₂ emissions and new political measures and regulations (including carbon tax and emissions trading scheme)	Medium term	Small	Small	Medium	Medium	Continuously reduce CO₂ emissions from our businesses by driving energy conservation further and introducing renewable energy
Reputation	Damage to social trust and decline in employee motivation resulting from delays in taking climate change countermeasures	Short term	Small	Small	Large	Large	Expanding businesses which contribute to decarbonization and making information about them available Joining in initiatives related to climate change
Physical	Negative impacts on business continuity of damage to facilities and supply chain disruption caused by weather disasters	Short term	Medium	Medium	Small	Medium	Continuing to take disaster prevention and mitigation measures related to our business continuity plan (BCP) Effective teleworking

*1Length of time required before actualization
Short term: Up to 5 years from now, Medium term: Within 6 to 10 years, Long term: 11 or more years later
*2Magnitude of impact | Small: less than 300 million yen, Medium: from 300 million to less than 2 billion yen, Large: 2 billion yen and more

Initiatives to address opportunities and risks

Examples of initiatives to address opportunities and risks are given below.

Initiatives to address opportunities related to climate change

Launch of total hydrogen infrastructure simulation service (press release from October 25, 2021)
We provide a simulation service related to the generation, transportation, storage and use of hydrogen to support the creation of a sustainable hydrogen society.
https://www.ctc-g.co.jp/company/release/20211025-01364.html
Using quantum computing to calculation optimization of wind turbine placement (press release from June 16, 2022)
We developed a unique calculation model that can recreate complex natural conditions in a pseudo state and performed demonstration testing using quantum computing to determine wind turbine place to maximize generating output from wind power.
https://www.ctc-g.co.jp/company/release/20220616-01445.html
Supporting Corporate Green Transformation (GX) (press release from August 31, 2022)
We have developed and systemized a menu of carbon-related services to help visualize and reduce corporate greenhouse gas emissions, support the introduction and utilization of renewable energy, build a relevant data utilization infrastructure and so on. Based on simulation technologies developed over many years, including wind and solar power generation output prediction, we help transform society and economies toward carbon neutrality through the provision of services to companies and groups.
https://www.ctc-g.co.jp/en/company/release/20220831-01488.html
Developing methanation simulation service aimed at carbon neutrality (press release from October 12, 2022)
We provide a material analysis simulation service that will lead to carbon neutrality and GX through materials informatics that increases efficiency of material development with the help of information technologies. This service consists of the simulation of methanation, which synthesizes methane (CH4), a main constituent of natural gas, from hydrogen (H2) and carbon dioxide (CO2), and consulting on the recycling of remnants of materials in the factory manufacturing process to reduce consumption of the materials and cut CO2 emissions.
https://www.ctc-g.co.jp/company/release/20221012-01482.html
Developing the ReRAS cloud-based infrastructure supporting generating capacity prediction and demand-supply management for renewable energy (press release from March 28, 2023)
We have developed ReRAS (Renewable Resource Aggregation System) to support generating capacity prediction and demand-supply management for renewable energy. The system has been adopted in demonstration testing for an aggregation business to make renewable energy a main power source^* that is underway on a joint basis with ITOCHU Corporation.
https://www.ctc-g.co.jp/company/release/20230328-01560.html

*Launching demonstration testing of an aggregation business to make renewable energy a main power source (press release from October 15, 2021)

Initiatives to address risks related to climate change

Support for the Task Force on Climate-related Financial Disclosures (TCFD) and information disclosures
Formulating the 2050 CTC Group Environmental Declaration (revisions of greenhouse gas reduction targets)
Submitting commitment letter to obtain Science Based Targets (SBT) certification
Continuing to take disaster prevention and mitigation measures related to our business continuity plan (BCP)
Mitigating risks through the continued utilization of telework

Risk management

We clarify, identify, and assess climate change risks (assess the level of their impacts by using various parameters based on multiple future forecast scenarios). We formulate measures for them under our sustainability promotion structure and in accordance with company-wide risk control methods and TCFD framework.
Further, the Board of Directors supervises this risk control together with other material company-wide risks.

Metrics and targets

Greenhouse gas emissions by volume are the indicator. Our targets are set out in the 2050 CTC Group Environmental Declaration formulated in November 2022. The details are shared below.

2050 CTC Group Environmental Declaration