Initiatives to Address Climate Change

Daido Carbon Neutral Challenge

Daido Carbon Neutral Challenge – Pursuing the Potential of Materials to Support Our Future –

In order to realize its management philosophy of “Pursuing the potential of materials to support our future,” the Daido Steel Group considers action on climate change to be one of its most important management issues. As a part of this effort, we have formulated the “Daido Carbon Neutral Challenge” and are promoting initiatives aimed at reducing CO2 emissions by 50% in FY2030 compared to FY2013 and achieving carbon neutrality by 2050.

Toward 2030 Reducing CO2 emissions by 50%, as compared with the 2013 level Toward 2050 Aim to achieve carbon neutrality in line with the development of decarbonization technologies and infrastructure

Three Policies

We will not only comply with the Act on Promotion of Global Warming Countermeasures and the Act on the Rational Use of Energy, but will also proactively engage in public policies related to climate change countermeasures and implement initiatives to reduce emissions.

The Carbon Neutral Action Plan formulated and published by the Japan Iron and Steel Federation (JISF) aligns with our company’s policies and goals, and we will continue to give it our support.

Three Policies for Achieving Carbon Neutrality

CO2 Emissions Results and Targets

[Daido Steel Group CO2 Emissions Reduction Targets]

Change in Scope 1 and Scope 2

Scope 3

We have conducted calculations for the possible Scope 3 categories 1, 2, 3, 4, 5, 6, 7, and 13 based on the "Basic Guidelines for Calculating Greenhouse Gas Emissions through Supply Chains."

In FY2023, overall CO2 emissions were confirmed to be 1,441 thousand tons, of which "Category 1: Purchased products and services" accounted for the largest percentage at 77%. In order to reduce CO2 emissions, we have introduced "Partners' Meetings" with our major suppliers in this fiscal year, during which we will engage in activities to calculate and reduce CO2 emissions from products for our company.

We will continue to work on product development and other activities to increase the ratio of products that can contribute to the reduction of CO2 emissions at our customers (e.g., high-performance materials used in EV vehicles and hydrogen-related products).

CO2 emissions by Scope 3 category

thousand t-CO2/year

Category FY2024  
1. Purchased products and services 1,043 Calculated by multiplying the purchase price and purchase weight of raw materials and materials by the CO2 emissions factor
2. Capital goods 73 Calculated by multiplying capital investments by CO2 emissions factor
3. Fuel and energy-related activities not included in Scope 1 or 2 179 Calculated by multiplying purchased electricity and fuel by CO2 emissions factor
4. Transportation and delivery (upstream) 51 Calculated by multiplying the amount of fuel used and the amount purchased under Category 1, as reported under the Act on Rationalizing Energy Use, by CO2 emissions factor
5. Waste generated in operations 15 Calculated by multiplying amount of waste for each type of by-product by the CO2 emissions factor
6. Business travel 3 Calculated by multiplying the money spent on each mode of transportation by the CO2 emissions factor
7. Employee commuting 3 Calculated by multiplying the money spent on each mode of transportation by the CO2 emissions factor
13. Leased assets (downstream) 0 Calculated by multiplying the leased surface area by the CO2 emissions factor
Total 1,368  
  • * Calculations are limited to categories applicable to Daido Steel on a non-consolidated basis
  • * Calculation method: IDEA LCI database Ver. 3.5 (April 15, 2025) used by IDEA Lab of AIST Research Institute of Science for Safety and Sustainability, and the emission factor database for corporate GHG emissions accounting over the supply chain (Ver. 3.5) used by the Ministry of the Environment.
  • * Fiscal 2024 emissions results (Scope 1, Scope 2, Scope 3) are subject to third-party verification.
  • * The total value represents the aggregate of all categories, including decimal places.

Additionally, the contribution to CO2 emissions reduction at customers for the Engineering Division's four major energy-saving products is calculated as 37,100 t/year (FY2024).

Product Name Contribution to CO2 emissions reduction (t/year)
Premium STC® 1,200
DINCS® (Highly-Efficient Combustion System) 3,500
ModulTherm® (Energy-Saving Vacuum Carburizing Furnace) 23,000
Sewage Sludge Carbonization Furnace 9,400

Third-party verification of CO2 emissions

GHG Emissions Verification Report

Information Disclosure Based on the Recommendations of the TCFD

In November 2021, we expressed our support for the TCFD recommendations and further strengthened our governance and clarified our strategy based on the TCFD recommendations. We will work to further enhance information dissemination and disclosure by communicating the risks and opportunities that climate change poses to our business in an easy-to-understand manner.

Governance

In April 2022, we reorganized the existing CSR Committee and established a new Sustainability Committee as an organization to review and deliberate basic policies, important matters, risks, and opportunities related to climate change. The Sustainability Committee is chaired by the President and CEO and submits matters discussed and decided by the Committee to the Board of Directors.

Additionally, as an organization addressing environmental and climate change risks, we established the ESG Management Department in January 2023 as the operational arm of the Sustainability Committee. Under this department, we renamed and established the former CO2 Reduction Project as the Global Environment Affair Section. This section is tasked with planning CO2 emissions reductions, rolling out initiatives company-wide, and strengthening their implementation.

Resolutions deliberated and passed by the Board of Directors are rolled out to individual business divisions, which reflect them in their business operations.

Strategy

In order to understand the risks and opportunities, and impacts of climate change on our company, and to examine the resilience of our medium- to long-term strategy and the need for further measures, we conducted a scenario analysis for the period 2030 - 2050. The scenario analysis referred to climate change scenarios (1.5℃ scenario and 4℃ scenario*) published by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). We conducted a thorough review of risks and opportunities, focusing on those with the highest potential impact on our business. These risks and opportunities were selected from the perspectives of “those with a high likelihood of occurring” and “those that will have a significant impact when they occur," and we subsequently considered measures to mitigate such risks and capitalize on opportunities. We will also continue to closely monitor risks and opportunities that were not included in the analysis this time.

After examining the measures to address each risk and opportunity, we have concluded that we can improve our corporate value by developing and expanding sales of high-performance materials and innovative environmentally-friendly engineering products based on the basic strategies of our medium- to long-term management plan in response to social transformation toward decarbonization. We thus concluded that our strategy has a sufficient level of resilience.

* 1.5℃ scenario: a scenario in which measures such as tighter regulations and market changes are taken to minimize temperature rise.
4℃ scenario: a scenario in which temperature rise results in extreme weather events and other physical impacts

TCFD Scenario Analysis
Scenario Factor Change Impact on our company Our measures
1.5℃ Progressive shift to EVs Reduced demand for engine/exhaust system parts due to progressive shift to EVs RiskMedium
  • We expect internal combustion engine vehicle (ICE)-related demand to decline slightly until 2030, but from 2030 onward we assume a significant decline as a result of the progressive shift to EVs
  • Expand sales in future growth markets such as CASE (automotive), semiconductor-related products and clean energy to achieve sustainable business growth
Increased demand for high- performance materials caused by the progressive shift to EVs OpportunityHigh
  • With the progressive shift to electric vehicles, demand for high-performance materials is expected to exceed the decline in demand for ICEs by 2030.
    * High-strength steel and magnetic materials used in e-Axle components, battery materials, control system parts, etc.
  • Develop materials tailored to different product needs
  • Increase production capacity in response to rising demand
  • Launch and market entry of new products and businesses for next-generation automobiles, including rare-earth-free magnets
Strengthening of various regulations, including those governing greenhouse gas emissions Increase in electricity costs due to use of renewable energy RiskLow
  • Electricity costs to rise as a result of increases in the ratio of renewable energy used.
  • Absorb increases in electricity costs by saving energy and improving product yields.
  • Introduction of recyclable energy to be used in the head office and factories and local offices
Introduction of carbon pricing Increase in operating costs RiskLow
  • Potential increase in operating costs due to the introduction of carbon pricing (carbon tax/emissions trading).
  • Invest in reducing CO2 emissions and move completely to renewable energy for all electric power needs to avoid cost burden.
Rising demand for electric arc furnace materials OpportunityMedium
  • Due to intensifying demands for decarbonization and a strengthening trend toward low-emission products, we expect rising demand for electric arc furnace materials due to their relatively low CO2 emissions.
  • Actively expand sales of low-CO2 emissions specialty steel manufactured in our innovative STARQ® electric arc furnace with rotating drives.
  • Move forward with the shift to renewable energy to promote further differentiation.
  • Incorporate customer needs through accurate CFP presentation.
Rising demand for scrap raw materials increase in scrap procurement costs Rising demand for scrap raw materials increase in scrap procurement costs RiskMedium
  • Rising demand globally for electric arc furnace materials, and rising demand for high-grade scrap.
  • Could be affected by soaring prices and difficulties in procurement as a result.
  • Expand scrap recovery programs in cooperation with customers, and establish technologies to enable the use of low-grade scrap in order to control soaring prices and secure necessary scrap volumes.
Diffusion of technology to address issues related to the environment and new energy Rising demand for innovative engineering to address environmental issues OpportunityHigh
  • As investments aimed at improving energy efficiency increase in preparation for decarbonization, demand for our environmental engineering will rise.
  • Actively expand sales of Daido brand energy-saving products.
    *STARQ®, DINCS®, ModulTherm®, Premium STC® Furnace, etc.
  • Promote the development of engineering products (hydrogen-fueled industrial furnaces, etc.) that match customer needs.
Rising demand for hydrogen-related technology and products OpportunityMedium
  • Rising demand for high-performance materials, such as hydrogen embrittlement resistance steel, as a result of shift toward hydrogen society.
    *High-performance materials used in hydrogen stations, fuel cell vehicles, hydrogen internal combustion engines, and other applications
  • Develop materials tailored to different product needs
  • Acquire new customers and open up new markets.
4℃ Increasingly intense (acute) climactic damage Risk of operations being suspended due to natural disasters on business partners and production sites RiskMedium
  • Increasing risk of business partners and main plants being struck by natural disasters, leading to suspension of operations.
  • Promote BCP measures such as risk management in cooperation with business partners and ensuring an appropriate level of inventory.
  • Continue to implement flood countermeasures for main plants.

The degree of impact for high, medium, and low is evaluated based on our current assumptions and anticipations.
We believe that this will change depending on the situation, and we will continue to review our evaluation.

  • High: It is anticipated that there will be a major impact on finances and business.
  • Medium: It is anticipated that there will be some impact on finances and business.
  • Low: It is anticipated that there will be a minor impact on finances and business.

Risk Management

As a process for managing climate-related risks, climate-related risks are analyzed, measures to address them are drafted and promoted, and progress is managed through the Sustainability Committee.

Details of matters analyzed and considered by the Sustainability Committee reported to the Board of Directors, and management of risks is integrated across the Company as a whole.

We conducted scenario analyses on climate-related risks, centered on the ESG Management Department. After taking into account Daido Steel’s business strategy, considering the likelihood of each risk and opportunity occurring and their impact in the event that they do occur, and prioritizing climate-related risks, we will focus on measures to address those with the highest impact. The ESG Management Department, which operates the Sustainability Committee, will continue to identify and evaluate risks and opportunities in the future.

Indicators and targets

In order to assess and manage the impact of climate-related problems on management, Daido Steel has set reduction targets using total emissions of greenhouse gases (CO2) as indicator.

The Daido Carbon Neutral Challenge was announced in April 2021. The Company established a reduction goal of reducing 2030 CO2 emissions by 50% over those of fiscal 2013, and of achieving carbon neutrality in 2050.

Furthermore, when formulating the 2026 Medium-Term Management Plan, we expanded the scope to include the Daido Steel Group, including domestic and overseas affiliates. The entire group is working together to promote activities to reduce CO2 emissions.

Daido Carbon Neutral Challenge