Combating Climate Change

The effects of climate change are becoming more serious every year and adverse impacts can be felt right across society, affecting everything from daily life to major economic activities. In order to mitigate such impacts, companies need to implement measures to combat climate change in cooperation with the national government and others. To meet this requirement, the Nabtesco Group is fostering greenhouse gas emissions reduction and energy conservation activities as countermeasures for climate change based on the Group’s management materiality. We have introduced various environment-related incentive systems. Moreover, we are utilizing an environmental information management tool to monitor the entire Group’s energy conservation activities and effectiveness in a quantitative manner for the steady reduction of greenhouse gas emissions.

In 2016, the Nabtesco Group set its previous long-term greenhouse gas emissions reduction target in line with the 2.0 degrees Celsius target of the Paris Agreement^*1, an international framework for dealing with climate change. In July 2021, the Nabtesco Group raised its long-term CO₂ emissions reduction targets in line with the 1.5 degrees Celsius scenario and made a declaration to be carbon-free by 2050. The Group aims to achieve virtually zero CO₂ emissions by 2050 under its new targets aligned with the 1.5 degrees Celsius scenario. These targets have been approved by the Science Based Targets^*2 (SBT) Initiative.

The Nabtesco Group supports the initiative implemented by CDP^*3 of the UK to reduce the impacts of climate change and greenhouse gas emissions and has been disclosing our climate change-related strategies and amount of GHG emissions to increase the transparency of our measures. Moreover, we expressed our support for the recommendations made to the Financial Stability Board (FSB)^*4 by the Task Force on Climate-related Financial Disclosures (TCFD)*5 and are taking relevant measures. In line with the progress of these measures, we will disclose more climate change-related information in accordance with the TCFD’s recommendations.

Nabtesco Corporation's Board of Directors determines and supervises our strategies, basic policies, and the execution of important operations by sharing information through reports on important issues. Regarding climate change, the director in charge of production innovation serves as supervisor and the director in charge of environmental security reports on the progress toward the CO₂ emission reduction goal and the status of major environmental facility investments.

Under the guidance and supervision by the Board of Directors, the President and CEO (hereinafter, "CEO") establishes Nabtesco Group's environmental philosophy, environmental action guidelines, and long-term goals. At the Board of Executive Officers (composed of the CEO and executive officers), the director in charge of environmental security reports the status of CO₂ emissions at internal companies and main group companies. If there is a gap between the current status and the goal, we identify the causes and take measures accordingly. If any item under discussion or report is deemed to affect our business, the CEO determines appropriate measures and reflects them in our business strategies.

As a promoting organization under the direct control of the CEO that is involved in Environment, Safety, and Health (ESH) management, Nabtesco has established the ESH Committee with jurisdiction over the entire Nabtesco Group. The CEO appoints the chairperson and members of the ESH Committee from our officers, including members of the Board of Directors. The chairperson of the ESH Committee collects important information on the environment, safety, and health, including climate change-related risks and opportunities, from our companies and group companies. The chairperson also visits each site to carry out ESH audits and company-wide energy conservation meetings, etc. The ESH Committee uses the results of this monitoring to evaluate importance and deliberate measures for any issues deemed to be important.

In order to identify and manage the possible impact of climate change on our business activities, we are analyzing the risks and opportunities across the entire supply chain, including our business partners and customers, using multiple scenarios developed by external parties about temperature rises, including the “below 2 degrees Celsius” scenario.
When the result of the audits by the ESH Committee shows that any issues (risks or opportunities) associated with climate change have an important effect on our business, they are reflected to our business strategies by the determination of the CEO.

The Nabtesco Group identifies “Countermeasures for climate change” as one of the management materiality issues which is the important challenges for the achievement of our long-term vision. The Management Materiality Committee collaborates with the ESH committee and other relevant committees to regularly evaluate these issues. Activities are discussed and determined by the Management Committee and reported to the Board of Directors.

In the future, the following risks are anticipated depending on requests from the market or customers: increase of carbon prices, increase of operating costs due to the purchase of electricity from renewable sources, increase of capital expenditures for the introduction of power generation equipment, etc. using renewable resources and the increase of R&D costs for energy-saving product development. There are also physical risks such as business interruption due to damaged infrastructure or unstable electric power supply caused by wind or water disaster.

On the other hand, the following opportunities are also expected: new business opportunities from the establishment of new laws and regulations (e.g. the energy-efficiency labeling system becoming obligatory) and the expansion of opportunities for the Maintenance, Repair, Overhaul (MRO) business, etc. due to a change in consumers' preferences for longer product lives to reduce CO₂ emissions as their awareness of climate change increases.

Going forward, Nabtesco Corporation will continue to strive to identify risks and opportunities associated with the environment and make efforts to take measures to address the risks and realize the opportunities, including the further promotion of energy conservation activities.

The Nabtesco Group has set medium-and long-term targets (SBT: Science Based Targets) for reducing CO₂ emissions, based on scientific evidence, in order to realize a carbon-free society. To achieve these targets, we have established measures to reduce CO₂ emissions through energy conservation, energy creation and renewable energy procurement in the short, medium and long terms, while formulating a plan to gradually reduce CO₂ emissions.

Under the Medium-Term Management Plan (2022-2024), we have allocated approximately ¥26 billion for environmental investments. Furthermore, under this plan, we are promoting energy conservation and creation through environmental facilities, aiming to achieve zero CO₂ emissions (carbon-free) by 2050.

Beyond reducing CO₂ emissions in our own operations, we have implemented various systems and initiatives throughout our value chain. Globally, we promote energy conservation activities and install highly efficient facilities at each production site. We also utilize the latest environmental technologies for constructing and renovating factory buildings. Furthermore, we engage in various energy-creating activities, including solar power generation, and procure renewable energy (through certificate purchases) to monitor progress.
Moreover, we have introduced a Certification System for Energy-Saving Products to encourage the development of decarbonization products and services. We also established an Energy Conservation Activity Award System to incentivize decarbonization efforts during production. Additionally, we support our suppliers in setting voluntary targets for reducing CO₂ emissions.

The ESH Committee collects important information related to risks and opportunities associated with climate change from the companies and group companies and evaluates whether or not they have a significant impact on our business activities and discusses measures for issues that are determined to be important. They evaluate and prioritize possible amount of financial impact and probability or feasibility. The ESH Committee draws up and discusses the measures to address highly probable risks on a preferential basis, regardless of their impact. In addition to climate change, the ESH Committee evaluates water resources and biodiversity conservation, waste, chemical substances, and employees' safety and health.

The Nabtesco Group's long-term CO₂ emissions reduction targets are to reduce the emissions of the entire Nabtesco Group by 63% as of FY2030 and by 100% as of FY2050 (base year: 2015, certified to SBT 1.5). The cumulative results through FY2023 show a 21% reduction, indicating a steady pace in line with achieving the target.

In addition, we are expanding activities from our company alone to our suppliers as well. Of the greenhouse gas emissions from the entire supply chain, the percentage of emissions from purchased goods and services (category 1 of Scope 3 emissions) is high, making it essential for our suppliers to take initiatives to reduce their greenhouse gas emissions. In response, we conduct a survey of our main suppliers (the top suppliers constituting 70% of annual purchases) to see if they have set voluntary targets to reduce their greenhouse gas emissions. As of FY2023, 77% of our main suppliers have set voluntary targets to reduce their greenhouse gas emissions and begun to take initiatives to achieve these targets. We will provide support so that all of our main suppliers set voluntary reduction targets by 2025.

Under the medium-term management plan for FY2022 to FY2024, we set the target of reducing our CO₂ emissions by 25% relative to the 2015 level, while making efforts to boost sales. In FY2023, we conducted energy conservation activities including those to increase the energy efficiency of air conditioning and lighting equipment and the updating of transformer equipment. As a result, CO₂ emissions from the Nabtesco Group came to 43,424 tons against the target of 44,445 tons, and we achieved a 21% emissions reduction relative to 2015. Going forward, we will continue to conduct such energy-saving efforts.

The Nabtesco Group has been fostering energy conservation activities to achieve the long-term reduction targets, including improving the efficiency of its production and air-conditioning equipment and utilizing energy monitoring systems. Although our production volume will further increase in line with our business growth, we make it a rule to make each of our new plants in Japan and overseas at least 40% more energy efficient compared to our existing plants. We will also apply the energy-saving technologies and know-how adopted for our new plants to our existing plants in and outside Japan, thereby reducing the CO₂ emissions of the Group as a whole.

The Nabtesco Group calculates greenhouse gas emissions from the entire supply chain with a view to identifying and effectively reducing the environmental impact of our business activities as a whole. The calculation results of the past five years are as shown below.

The breakdown of our Scope 3 CO₂ emissions is as shown below. Of our Scope 3 CO₂ emissions, “Purchased goods and services” (category 1) accounts for the largest percentage of 79.7%, followed by “Upstream transportation and distribution” (category 4) at 14.4%.

At the Nabtesco Group, we will continue to identify and reduce greenhouse gas emissions from our entire supply chain.

In order to ensure the reliability of the calculation results, we had them verified by a third party, LRQA Limited.

The Nabtesco Group strives to reduce its energy consumption. We are continuously working to conserve energy and replace existing equipment with energy-saving alternatives. We have also installed electricity meters in our energy-heavy production facilities to monitor excessive use of electricity and standby power, repair equipment, and improve operational methods.

We have also visualized our energy consumption by introducing a monitoring system, which permits us to monitor our energy consumption on a real-time basis.

The Nabtesco Group is promoting the use of renewable energy equipment at its facilities. Starting with installation at the Tarui Plant (Gifu Prefecture), we have been installing solar power generation facilities sequentially at our major manufacturing bases since then. In 2022 we also expanded the facilities of Nabtesco Power Control (Thailand) Co., Ltd. and Shanghai Nabtesco Hydraulic Co., Ltd. Then in 2023, we installed the same facilities at the Konan Plant and expanded them at the Kobe Plant and Shanghai Nabtesco Hydraulic Co., Ltd.

The Nabtesco Group will continue its proactive measures to promote the use of renewable energy in the future.

The Nabtesco Group has multiple internal commendation systems to foster energy conservation, creation and other activities and annually gives commendation under the systems.

The Nabtesco Group eventually contributes to reducing greenhouse gas emissions by increasing the efficiency and reducing the weight of its Condition Monitoring System with Fail-Safe (CMFS), aircraft equipment, railroad vehicle doors and compressors, automatic doors, precision reduction gears and hydraulic motors. We are also providing and expanding maintenance, repair and overhaul (MRO) services for our railroad equipment, commercial vehicle equipment, marine vessel equipment, aircraft equipment, automatic doors and packaging machines. Through MRO services we will build a system to foster product repair and overhauling and expand the recycling and reuse of our products as much as possible to reduce the generation of waste, while helping customers use our products more efficiently, prolong the product lives and reduce the use of resources and greenhouse gas emissions from the products.

Since FY2021 we have been selling the NATRUS+e automatic doors, which contribute to better indoor environments and barrier-free and energy conservation measures by reducing unnecessary opening/closing of the doors and the door opening time by reading the movements of people, thereby preventing wind from blowing into the inside and mitigating changes in indoor temperatures to improve the indoor environment while also saving energy. In 2023, we launched the NATRUS+e W, which expands the flow-line judgment area by approximately four times wider compared to the conventional product, improves air conditioning efficiency, and helps to reduce power consumption.

The products of the Nabtesco Group, which are used in a range of fields, have an impact on the environment throughout their life cycle. In order to make environment-friendly products, we carry out environmental assessments, as detailed below, at the design stage of new products.

In this environmental assessment, we include the evaluation of energy consumption at the product manufacturing and use stages with a view to reducing the environmental footprints of all our products. Also, we quantify their environmental impact for each of their life cycle stages to implement necessary environmental measures to reduce that impact. As part of this effort, we also disclose the results of the life cycle assessment (LCA*), as shown below.

Moreover, as a means to identify the sources of environmental impact existing in relation to our products and systems and the improvements that we can make to reduce the impact, we assess the environmental impact of the major products of Nabtesco (unconsolidated) on global warming (in terms of CO₂ emissions and the use of fossil fuels) at each of the stages from the procurement of materials through to the disposal and recycling of the products. As for raw materials wasted in our manufacturing process and hazardous substances contained in our products, the amount is very limited in both cases, and only a minimum amount of water is used at the procurement, manufacturing, transportation and use stages of our products. Moreover, concerning our products, emissions of air pollutants other than CO₂ are very small relative to CO₂ emissions and can therefore be excluded from the target of LCA. We therefore assess the life-cycle impact of our products targeting only CO₂ emissions (and the use of fossil fuels) and deem this as the “full LCA” of our products. The Nabtesco Group is thus developing products based on the criteria set in consideration of the environment impact of its products.

Taking these results into consideration, the products of the Nabtesco Group recognize the important orientation of our company toward environmentally friendly designs as follows.

The Precision Equipment and Power Control Companies focus on weight reduction and MRO in the design of their products because their products emit larger amounts of CO₂ in the raw materials phase. The Accessibility Innovation Company designs its products with a focus on saving energy during their opening and closing because its products emit larger amounts of CO₂ in the use phase.

The Nabtesco Group collects important information about the environment, safety, accident prevention, health, and others, including climate change-related risks and opportunities, assesses the materiality of related issues, and discusses measures to implement for those that are deemed to be important.

In FY2023, to diminish the risks of climate change, we implemented some measures, for example we replaced air conditioning facilities with the models that are expected to increase energy efficiency as the rising average temperature accelerates their use, and moved forward with measures to prevent the leakage of rainwater and drainage problems. The expenses for these activities were approximately 270 million yen.
Furthermore, in FY2023 we spent about 11.0 billion yen on R&D related to climate change measures, development of green products, and other initiatives.