Climate Change

Basic Concept

Since our Group is engaged in businesses that consume a large amount of energy during manufacturing, there is a risk that various regulations and systems (carbon pricing, etc.) associated with the Paris Agreement, etc. will lead to higher costs for energy and raw materials. We also believe that the occurrence of natural disasters due to extreme weather phenomena in recent years will lead to risks such as the instability of business continuity and supply. On the other hand, we also believe that the growing awareness of climate change among society and customers provides an opportunity for our low-carbon, resource-recycling steel products to gain a competitive advantage.

Environmental Vision 2030/2050 (Japan) / Medium-term Sustainability Plan

Response to TCFD Recommendations

In April 2022, the Yamato Kogyo group endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The TCFD was established by the Financial Stability Board (FSB), whose members include representatives of central banks and financial supervisors from 25 major countries and regions, and its recommendations for companies and organizations to disclose information on climate-related risks and opportunities. In Japan, the Ministry of Economy, Trade and Industry (METI) has published the “Guidance on Climate-related Financial Disclosures (TCFD Guidance)”, and companies have been accelerating their efforts to comply with the TCFD recommendations. In addition, the “Corporate Governance Code” revised by Japan Exchange in June 2021 also requires listed companies to disclose information based on the TCFD framework.
In light of the impact of climate change on our business, the Management Committee and Sustainability Committee of the Yamato Kogyo group have been considering climate change countermeasures in our domestic business since the FY2021. The following are the disclosures related to climate change based on the TCFD recommendations approved by the Board of Directors in April 2022.

Climate Change-related Governance Structure

Our group reports to the Board of Directors of Yamato Kogyo Co., Ltd. on a case-by-case basis on matters related to climate change issues discussed by the Sustainability Committee that meets regularly.^*1 When considering business plans and annual budgets, the Board of Directors makes decisions based on the impact of climate change on business management, including risks and opportunities. The Board of Directors also checks and supervises the targets and progress regarding climate change, which the Sustainability Committee has designated as materiarity of the Medium-term Sustainability Plan.
In the Medium-term Sustainability Plan (FY2026-FY2030), the Group has identified climate-related Materiality, including the “Promoting carbon neutrality initiatives”, “Further enhancing the environmental advantages of the electric furnace business”, “Contribution to the circular economy”.
To address these risks and opportunities, the Sustainability Committee deliberates on and monitors the progress of related initiatives, indicators, and targets. Through the Secretariat, the policies and measures determined by the Committee are disseminated across the Group via cross functional meetings and to relevant departments of each Group company.

*1 Normally held once or twice a year, twice in FY2025.

Climate Change-related Governance Structure

Risk Management Related to Climate Change

Our group classified climate-related risks in its operations into migration risks and physical risks following the TCFD recommendations, and further assessed the risks by examining their materiality in consideration of short, medium, and long-term time horizons and relevant laws and regulations. The risk assessment was determined after review and discussion at a Management Committee attended by directors and corporate auditors.

Climate Change Related Strategies

＜Assumptions for scenario analysis＞
In our scenario analysis, while taking into account the Paris Agreement’s goals and the IPCC Sixth Assessment Report, we examined two scenarios: a 2℃ scenario, which is a low-carbon transition scenario, and a 4℃ scenario, which projects higher warming outcomes and more significant physical impacts. In light of the Paris Agreement’s goal of “pursuing efforts to limit the increase in global average temperature to 1.5℃ above pre-industrial levels,” we will continue to study transition scenarios toward the 1.5℃ goals.

Global Average Surface Temperature Change (Relative to 1986-2005)

Source: IPCC Fifth Assessment Report

＜Scope of scenario analysis＞
The scenario analysis is based on the Japanese government’s greenhouse gas reduction targets (46% reduction by FY2030 and carbon neutrality by FY2050) and is conducted over a medium to long-term time horizon to 2050.

• ① Japan (domestic)
• ② Risks and opportunities associated with climate change that are likely to impact our business
• ③ Potential climate change impacts across the value chain as the scope of analysis

The analysis at this time is as follows.

Climate Change-related Scenario Analysis

*2 2℃ scenario: A scenario in which the necessary measures are taken to limit the temperature increase to 2℃ or lower compared to the time of the Industrial Revolution period.
*3 4℃ scenario: A scenario in which no special measures are taken against climate change and the average temperature increases about 4℃.

＜Opportunity initiatives＞

Expansion of competitive advantage – market expansion

In Japan, the movement toward achieving carbon neutrality by 2050 is accelerating, and we expect that our customers in the construction and transportation industries will increase their procurement of products that contribute to low carbon emissions. Against this backdrop, our group has been working to expand its market through industry-leading initiatives. For example, in the area of climate change, while electric furnace makers generally emit about a quarter of the GHG emissions per ton of blast furnace makers in their steel manufacturing processes, Yamato Steel has been introducing rationalization equipment, including the adoption of a state-of-the-art single-stage preheater (SSP) in FY2019 that achieves significant energy savings. This has enabled us to reduce GHG emissions per ton, giving us a competitive edge in the electric furnace industry. In addition, while the selection of companies that produce products with low environmental impact is expected to be selective, we have been the first in the domestic steel industry to obtain SuMPO EPD for our main products and to make our Climate Declaration publicly available. We will continue to address climate change and expand our market by capturing business opportunities through our competitive advantage.
See also below for our group’s competitive advantages and initiatives in climate change.

Realizing a Circular Economy with Steel

＜Risk initiatives＞

Efficient energy use

A large amount of electric power is indispensable for our group’s business. We recognize that future trends in energy policy and laws and regulations will have a significant impact on our operating costs if retail electricity prices increase. To date, our group has implemented a variety of initiatives for the efficient use of energy, ranging from the introduction of equipment to fuel conversion and the establishment of technologies. These efforts have produced results not only in terms of total GHG emissions but also in terms of GHG emission intensity per ton of crude steel produced. Against the backdrop of growing social demands for further decarbonization in the future, we believe that the following past, present, and future initiatives of our group will lead to risk reduction.

• ・Low NOx regenerative burner installed (since Mar 2001)
• ・Fuel conversion to LNG (since Jan 2006)
• ・Establishment of low-temperature operation technology for reheating furnaces (since 2013)
• ・Use of LEDs in plant facilities (since 2018)
• ・Introduction of single-stage preheater (SSP) (since Jan 2019)
• ・Establishment of dynamic control technology by introducing exhaust gas analyzers
• ・Use of renewable energy

As a result of these efforts, energy consumption in FY2025 was 0.093GL and energy intensity was 0.181 kL/t-crude steel production.

Energy Consumption and Intensity

Indicators and Targets

Based on scenario analysis, the Group has formulated an Environmental Vision for climate change-related matters, setting targets for its operations in Japan to reduce GHG emissions by 38% by 2025 and 46% by 2030 compared with fiscal 2013 levels. To achieve these targets, we have also established KPIs in the Medium-Term Sustainability Plan, and the Sustainability Committee monitors and reviews progress and reports it to the Board of Directors. In fiscal 2025, Scope 1 and 2 emissions totaled 157 thousand t-CO₂, representing a 41% reduction from fiscal 2013 levels. The Group therefore achieved its 2025 target. This also represents approximately 89% progress toward the 2030 target, and we continue our efforts to reduce emissions.

GHG Emissions, Reduction Achievements, and Targets

*1 Direct emissions from in-house fuel use and industrial processes
*2 Indirect emissions from the use of electricity and heat purchased by the company

(Note 1) Date cover domestic iron and steel products business. Because the electric furnace business is characterized by heavy use of electric power, it would be significantly impacted by any change in the generation mix of electric power companies.
(Note 2) Calculated base on METI, “Act on Rationalization of Energy Use and Shift to Non-fossil Energy” (the Energy Saving Law).

Roadmap toward Carbon Neutrality

Yamato Kogyo Group Greenhouse Gas (GHG) Emissions

Scope 1&2: GHG Emissions (FY2025)

(Unit: Thousand t-CO₂e)

	Scope1	Scope2	Scope1+2
Steel business (Japan)	89.22	114.23	203.45
Trackwork system business	0.04	1.83	1.87
Other	0.80	0.35	1.15
Total domestic sites	90.07	116.41	206.47
Steel business (Thailand)	124.63	198.27	322.90
Steel business (Indonesia)	44.84	126.82	171.67
Total	259.54	441.50	701.04

• The data covers the Company (Yamato Kogyo) and its six domestic and overseas consolodated subsidiaries (Yamato Steel, Yamato Trackwork System, Yamato Shoji, Matsubara Techno, Siam Yamato Steel, and Garuda Yamato Steel). The aggregation period follows the accounting period of each company.
• The Company and its domestic consolidated subsidiaries use the emission factors specified by the Act on Promotion of Global Warming Countermeasures, and calculate it by the Act on Rationalizing Energy Use.
• Siam Yamato Steel (SYS), a consolidated subsidiary in Thailand, calculates the emission factors and calculation method provided by TGO (Thailand Greenhouse Gas Management Organization).
• Garuda Yamato Steel (GYS), a consolidated subsidiary in Indonesia, calculates greenhouse gas emissions based on the GHG Protocol using emission factors from the IPCC 2006 Guidelines and other relevant sources.
• Since the Company has been using CO₂-free electricity derived from renewable energy sources since October 2021, it is excluded from the calculation of Scope 2 emissions.
• SYS has higher emissions than domestic steel operations due to higher production volumes and larger emission factors.

Scope 3: GHG Emissions by Category(FY2025)

(Unit: Thousand t-CO₂e)

Category		Emissions
		Yamato Steel	SYS
1	Purchased goods and services	131.92	42.94
2	Capital goods	17.78	-
3	Fuel-and energy-related activities not included in Scope1 or Scope2	29.21	56.29
4	Upstream transportation and distribution	14.85	12.95
5	Waste generated in operations	0.40	0.75
6	Business travel	0.05	0.04
7	Employee commuting	0.19	0.16
9	Downstream transportation and distribution	-	3.75
12	End-of-life treatment of sold products	0.71	-
Total		195.11	116.87

• The calculation covers the domestic bases (Head Office and Factory, Tokyo Branch, and Osaka Branch) of Yamato Steel and SYS.
• The period of the calculation follows the accounting period.
• The calculation method is based on the Ministry of the Environment’s “Basic Guidelines for Calculating Greenhouse Gas Emissions through Supply Chains (ver. 2.7)” and “Emission Unit Database for Calculating Greenhouse Gas Emissions and Other Emissions of Organizations through Supply Chains (ver. 3.5)”, and the Institute of Advanced Industrial Science and Technology’s “LCA Database IDEA ver. 2.3 (for calculating supply chain greenhouse gas emissions).”

Obtaining Third-Party Verification

For the purposes of accurately calculating emissions of the entire supply chain, quantitatively understanding the environmental impact and disclosing highly reliable and transparent data to stakeholders, Yamato Steel and SYS underwent verification of its Scope 1,2 and 3 emissions and obtained a third-party verification report.

Yamato Steel Greenhouse Gas Emissions Verification Report（PDF:1,907KB）

Obtaining Certification from the Global Steel Climate Council (GSCC)

The Company became the first Japanese steel manufacturer to obtain GSCC certification. The Company’s target for reducing the GHG emissions intensity of its steel products has been recognized as a science-based target aligned with the 1.5°C goal of the Paris Agreement.

GSCC Certification（PDF:328KB）

Use of Clean Energy Sources

Trends in Power Generation Capacity