Sustainability

Information Disclosure Based on TCFD Recommendations

In February 2020, the NGK Group announced our support for recommendations issued by the Task Force on Climate-Related Financial Disclosures (TCFD) created by the Financial Stability Board (FSB). Since then, we have evaluated how to apply the TCFD framework towards resolving issues facing our Group operations, such as the risks and opportunities posed by climate change, and towards necessary information disclosure.
Below, we disclose information related to scenario-specific analyses conducted based on the four themes outlined in the TCFD recommendations: governance, strategy, risk management, and metrics and targets.
We will continue to expand analysis work and enhance information disclosure as part of our commitment to communicating with our stakeholders. We will accurately identify climate change-related influences on Group operations and implement response measures to promote sustainable growth for our business.

Note: The Task Force on Climate-Related Financial Disclosures (TCFD) was established by the Financial Stability Board (FSB). Many Japanese companies chose the G20 Osaka Summit in June 2016 as an opportunity to express support for the task force (758 companies and organization as of (March 2022).

Governance

In April 2021, we announced the NGK Group Vision: Road to 2050. In this Group Vision, we position responding to ESG issues as a core management theme and outline the goal of being a company that contributes to carbon neutrality and the digital society using our ceramic technologies. Recognizing climate change response as one of the highest-priority issues to achieving sustainability for our planet, we drafted the NGK Group Environmental Vision as an extension of the NGK Group Vision. In this Environmental Vision, we outline achieving net zero CO₂ emissions for our business activities by 2050. Specific activities include setting management metrics and goals for each fiscal year of our 5-Year Environmental Action Plan. Our ESG Management Committee deliberates on these metrics and goals, and issues reports to our Board of Directors (at least once per year). We also have incentivized CO₂ emissions reduction by adding achievement benchmarks to the performance-linked bonus evaluation criteria for directors and executive officers.
We established a TCFD subcommittee within the ESG Management Committee. This subcommittee includes members from relevant divisions who gather to evaluate measures for information disclosure based on TCFD recommendations. The subcommittee's results are then deliberated by the ESG Management Committee before being reported to the Board of Directors. We also established an Environmental Action subcommittee within the ESG Management Committee. This subcommittee is focused on achieving carbon neutral business activities by no later than 2050, one of the goals outlined in our Action Plan. The subcommittee works towards this goal by promoting measures such as energy conservation and furnace fuel conversion.
The ESG Management Committee submits reports on its deliberations, including ESG issues such as our disclosure response for the CDP, to the Board of Directors (at least once per year).

NGK Group Vision

NGK Group Environmental Vision

Framework related to climate change response

Strategy

General Strategy

In April 2021, we announced the NGK Group Vision: Road to 2050, which outlines our vision through 2050. At the core of this Vision is how we define what we want to be: A company that contributes to carbon neutrality and the digital society using our ceramic technologies. We are shifting our business structure so that carbon neutral products and products related to the formation of a digital society comprise 80% of our sales.
Along with the NGK Group Vision, we also drafted the NGK Group Environmental Vision. In line with this Vision, we will develop and offer products and services that contribute to the realization of a carbon neutral society. At the same time, we will apply the policies of this Vision towards Group business activities to aim for net zero CO₂ emissions by 2050. As part of this initiative, we drafted our Fifth 5-Year Environmental Action Plan. This plan outlines targets for the environmental activities we will conduct between FY2021 and FY2025.

Climate Change Risks and Opportunities

We applied the risk and opportunity themes outlined in TCFD recommendations to analyze the risks, opportunities, and potential impact of climate change as it relates to NGK Group business.

Assumptions

(1) Timeframes

We set short-term, medium-term, and long-term timeframes.

Timeframe		Reason for setting
Short-term	FY2025	Final fiscal year of the Fifth 5-Year Environmental Action Plan
Medium-term	FY2030	Interim goal year of the NGK Group Environmental Vision
Long-term	FY2050	Goal year of the NGK Group Vision and the NGK Group Environmental Vision

(2) Scenarios

We set 1.5°C and 4°C scenarios.

Scenarios	Summary	Main external scenarios used as reference
1.5°C Scenarios	Rapid changes in policy, regulatory systems, and markets to aim for carbon neutral by 2050 and limit the average global temperature increase to 1.5°C compared to pre-industrial revolution temperatures.	International Energy Association (IEA) Net Zero by 2050 scenario SSP1-2.6 scenario, etc.
4°C Scenarios	Lack of progress in government policy, regulatory systems, or social initiatives result in an average global temperature increase of 4°C compared to pre-industrial revolution temperatures. Massive impact from disasters and other events caused by climate change.	SSP5-8.5 scenario, etc.

(3) Important risks and opportunities

We conducted qualitative assessments while referencing the risk assessment criteria for all Group companies.

Furthermore, this analysis is a method of evaluating our responses to climate change-related risks and opportunities. This analysis may differ from the future vision we outline in the NGK Group Vision.

Particularly important risks and opportunities

These are tables expressing the risks in transitioning to a carbon neutral society under both 1.5°C and 4°C scenarios. They cover the risks and opportunities that could occur with respect to policy, laws and regulations, technology, markets, and reputation.

Particularly important risks and opportunities (PDF: 698 KB)

Subnano-ceramic membranes

Gallium Nitride (GaN) Wafer

DCB and AMB Substrates

Zinc Rechargeable Batteries

Risk Management

The NGK Group manages the day-to-day risks that impact our Group, including risks related to climate change, based on a related-position system and in accordance with our Basic Rules of Crisis Management. Furthermore, we work to avoid and prevent serious risks through the activities of the various committees established within the company. In cases of particularly serious risks, the Corporate Planning Office Executive Officer may decide to convene a response committee, which includes participation by the Company president, to address said risks.

Risk Management Framework

Risk Management Process

All risks with the potential to impact the operations or financial status of the NGK Group are organized and re-evaluated to identify serious risks. Those risks are deliberated by the ESG Management Committee before submitting a final report to the Board of Directors on Group risks requiring management.
For risks related to climate change, the TCFD subcommittee within the ESG Management Committee creates scenarios and conducts a scenario analysis to identify serious risks. Through this process, we extract risks and opportunities, and draft response strategies.
These results are deliberated by the ESG Management Committee and then a report is submitted to the Board of Directors.

Risk Identification Process

(as of March 2022)

Metrics and Targets

We drafted the Carbon Neutrality Strategic Roadmap to promote goal achievement that will enable us to realize the NGK Group Environmental Vision. We set milestone targets ahead of our 2050 goal of net zero CO₂ emissions for the entire Group. These milestone targets call for a 550,000 ton reduction in missions by 2025 (25% reduction compared to 2013 (reference year)) and a 370,000 ton reduction by 2030 (50% reduction compared to 2013).

This diagram explains the Carbon Neutrality Strategic Roadmap. We aim to achieve net zero CO2 emissions across the entire Group by 2050.

NGK Group Environmental Vision

We drafted our Fifth 5-Year Environmental Action Plan to help realize the NGK Group Environmental Vision. This plan outlines targets for the environmental activities we will conduct between FY2021 and FY2025.
The objective of this Plan is to make it easy to understand our progress towards net zero by 2050 and our 2030 milestone target of a 50% reduction compared to 2013. As part of our initiatives to expand our use of renewable energy, we set new targets for renewable energy utilization rates that we apply to electricity consumption for the entire Group. We also set targets to increase the number of products registered as carbon neutral-related products.

Fifth 5-Year Environmental Action Plan

CO₂ emissions Scope 1・2

CO₂ emissions Scope 3

The TCFD recommends disclosing the ratio of assets and businesses vulnerable to physical risks as a benchmark. In response, we assessed the depths of floods caused by river floods and storm surge at the NGK Group manufacturing sites around the world. Using simulations based on the Climate Score Global (CSG) model developed by Jupiter Intelligence in America, we conducted assessments, including for future climate, of manufacturing site locations at a resolution of 90m.
From these assessments, we learned that, in a 4°C scenario (SSP5-8.5), there are regions where the risk of water incursion from flooding or high tide with a likelihood of occurring once every 100 years will be higher in 2050 compared to 2020. The NGK Group is already implementing measures from the perspective of advancing our BCP and we will continue to evaluate and implement necessary measures.

(Disclosed in April 2022)