Information Disclosure Based on TCFD Recommendations

Morita Group has positioned initiatives on the problem of climate change as one of its materialities, and will promote information disclosure based on the Task Force on Climate-related Financial Disclosures (hereinafter referred to as "TCFD") recommendations.

Governance

Critical issues related to climate change are deliberated by the Sustainability Committee, which report and make recommendations to the Board of Directors. Additionally, the Sustainability Working Group, under the direction and supervision of the Sustainability Committee, identifies and assesses the potential risks and opportunities that climate change may pose to our business operations. It also makes revisions as necessary in response to changes in the external environment and business conditions.

Strategy

Morita Group identifies risks and opportunities that are considered to be of particular importance to the Group's core businesses, namely the Fire Fighting Vehicle Business and Fire Protection Equipment & Systems Business, based on the short-, medium-, and long-term impacts of climate change on the economy and society, as guided by the framework of the TCFD recommendations.
The financial impact of each of the identified risks and opportunities on the Group is analyzed divided into two scenarios: less than 2°C, in which climate change countermeasures and regulations are expected to strengthen, and 4°C, in which the severity of disasters is expected to worsen.
Additionally, for each risk and opportunity, we consider its financial impact and likelihood of occurrence, and evaluate the materiality of its business impact on our group.
To obtain the information necessary for consideration, we referenced reports such as IEA (International Energy Agency) WEO 2022 Net Zero by 2050 and IEA ETP2020.
Below is a summary of how we forecast the business environment and impacts on our business under each scenario.

Less than 2°C scenario

In this scenario, we forecast the following business environment where transition risks, such as carbon taxes, mainly arise from advancements in climate change-related regulations and efforts to mitigate rising temperatures and as society moves toward a low-carbon future.

【Overview】
Countries are proactively responding to climate change and policies such as CO₂ emissions regulations and introduction of carbon taxes are being progressed. Companies are likely to be forced to bear the costs of responding to such policies and price shifts from suppliers.

【Changes in business environment】
The shift to clean energy and technological innovations that lead to decarbonization will change customer attitudes and increase demand for products and services that can contribute to a low-carbon society. Emissions regulations and electrification will progress, particularly in vehicles.
With increasing demand for vehicles with a lower environmental impact, electrification is expected to also progress in the Group's core business, special-purpose vehicles, which includes fire trucks. In addition, regulations on fire extinguishing agents will increase and recycling will become more important.

4°C scenario

In this scenario, we forecast the following business environment where rising temperatures have not been mitigated due to a lack of decisive climate change action and the impact of physical risks, such as more severe natural disasters, including flooding and storm surges, will worsen.

【Overview】
Climate change regulations and policies are not being implemented decisively, and environmental regulations are not having significant impact on business. Meanwhile, rising temperatures are likely to lead to an increase in large-scale natural disasters, resulting in more extensive damage.

【Changes in business environment】
Natural disasters have the potential to disrupt supply chains and make it difficult to procure parts needed for production. In addition, direct risks to production sites located in areas vulnerable to sea level rise will increase.
On the other hand, the importance of disaster prevention will increase with the frequency of disasters, and opportunities to provide solutions for disaster prevention and recovery from disaster are expected to increase.

Risk management

Regarding risks related to climate change, the Sustainability Working Group, under the direction and supervision of the Sustainability Committee, uses scenario analysis to identify and evaluate risks that could impact our business operations.
The Sustainability Committee deliberates and discusses the degree of business impact and adaptation measures of risks identified as critical, and reports and makes recommendations to the Board of Directors.

Indicators and targets

To mitigate the risk of climate change and contribute to a decarbonized society, Morita Group has set GHG emissions as one of its indicators and is working on managing its emissions. Based on the results of GHG emissions calculations, we will actively work to reduce GHG emissions by utilizing renewable energy and increasing recycling rates.
The chart below shows a record of the Group's GHG emissions.