JSR Group sees responding to the problem of climate change currently facing society as one of the most important issues for the company because of its large correlation to the Group’s businesses, and we are therefore actively working to reduce greenhouse gas (GHG) emissions both internally and externally.
JSR Group’s manufacturing sites and supply chain directly impact climate change in various ways. At the same time, JSR Group aims to become a solution provider using innovation as a driving force. Thus, we can help mitigate climate change indirectly through our products and services. We understand that our response to climate change must be mindful of both these facets.

It is in this context that JSR Group expressed its support for the TCFD^*1 Recommendations in October 2020. We believe that these recommendations will contribute to the development of a sustainable society that is transitioning to a decarbonized economy. As a chemical company that takes climate change seriously, we seek to more deeply understand the opportunities and risks that impact the Group’s business activities. We take action accordingly and strive to disclose our initiatives proactively and publicly. We will seek to achieve net-zero emissions by 2050 as JSR Group announced in 2021 and to reduce GHG emissions through our products.

*1 TCFD (Task Force on Climate-related Financial Disclosures): Founded by the Financial Stability Board in 2015. In June of 2017, the TCFD recommended that financial institutions, companies, governments, and the like disclose their climate change impacts in their financial reports. More than 4,500 organizations around the world have endorsed the recommendations (as of May 2023; from data published by the TCFD).

JSR utilizes a supervisory structure, overseen by the Board of Directors, to examine and carry out appropriate responses to issues that could potentially pose business risks or represent business opportunities. With the aim of strengthening supervision of risks and opportunities related to sustainability, including responses to climate change, the Board of Directors receives progress reports twice a year, examines them as identified themes, shares issues, and discusses and deliberates on future activities. In addition, the executive officer in charge of promoting sustainability (CSO) concurrently serves as a director. In this manner, we have established a system that enables the Board of Directors to thoroughly implement sustainability management.

In addition, JSR has established the Sustainability Promotion Committee, chaired by the CEO and President, as a cross-functional meeting body to advance the implementation of sustainability activities. Under the Sustainability Promotion Committee, we established the Sustainability Planning Committee, Environment, Safety and Quality Committee, the Risk Management Committee, and the Corporate Ethics Committee (each chairperson of which concurrently serves as a member of the Sustainability Promotion Committee), with the Sustainability Promotion Committee overseeing all of these committees.
In particular, with regard to climate change response, the Sustainability Planning Committee is responsible for setting the direction of sustainability-related strategies, the Environment, Safety and Quality Committee is responsible for approving the action plan of the entire organization and evaluating and verifying the results of activities, and the Risk Management Committee is responsible for implementing and improving response policies and response plans according to actual and potential crises. The Sustainability Promotion Committee supervises and guides the activities of these three committees and strives to strengthen and advance management through regular meetings held four times a year and extraordinary meetings. In principle, the Sustainability Promotion Committee reports its activities to the Board of Directors quarterly.

• Sustainability Promotion Committee

• Activity reports from each committee and results of ESG rating agency assessments (July)
• Progress of addressing materiality (October)
• JSR Group’s activities to advance sustainability management (February)

The yearly bonuses of the CEO and President are determined based on Group performance (90%) and a non-financial evaluation (10%). This means that bonuses are linked to progress on Group-wide sustainability management indicators such as reducing GHG emissions and promoting DE&I. The amount of remuneration based on non-financial evaluation is first discussed by the Remuneration Advisory Committee and then decided by the Board of Directors, who can set it to any amount from 0% to 200%.

The vision of JSR Group's Medium-Term Management Plan is to generate value for all stakeholders and to create a resilient organization that adapts to all environmental changes with the aim of achieving sustainable growth. The entire JSR Group is working on climate change as one of the themes to be addressed.

In formulating strategies, risk management, indicators, and targets related to climate change, JSR Group has been conducting scenario analysis in line with the TCFD recommendations since FY2019. In FY2022, we worked on designing calculation software for quantitative simulations. In FY2023, we will use this software to conduct simulations under conditions based on multiple scenarios and continue to conduct quantitative analysis.

On the other hand, we have incorporated internal carbon pricing (ICP) into the decision-making process for future investments. Specifically, the cost of investment assets is calculated based on ICP, future cash flows are calculated, and reflected in return on investment. Based on the characteristics of each investment, we then determine the appropriateness of the payback period.

For those social environments associated with JSR Group business, we assumed climate change impacts over the short term (five years), medium term (10 years), and long term (30 years).

* External information utilized includes IPCC_RCP1.9/2.6, RCP8.5, and IEA_B2DS.

A climate change impact-related scenario analysis for JSR business was performed based on the gravity of the climate-related risks.
JSR Group has set a target to achieve net-zero GHG emissions (Scope 1 & 2) by 2050 and, as an intermediate target, we have announced our commitment to reduce GHG emissions (Scope 1 & 2) by 30% by 2030 compared to 2020 levels. We will plan scenarios based on the assumption that we will make the necessary investments, and examine their financial impacts.

Digital Solutions Business, Life Sciences Business, and Plastics Business were chosen as JSR Group’s core business domains.

1. (1)Based on the socio-economic scenario assumptions, relevant business impact scenarios were formulated and the degree of business-specific impact determined.
2. (2)Based on the potential for, and impact on business (human loss, financial impact, etc.), of the above, particularly significant risks and opportunities were categorized while upholding examples of other companies to further define the direction of JSR Group’s response.

1. (1) Impact Scenarios and Degree of Business-Specific Impact

1. (2)Significant Risks and Opportunities and Direction of JSR Group’s Response
   For those classified as transition risks, items identified from the 1.5°C scenario will have a significant impact earlier than in the 4°C scenario. Conversely, items classified as physical risks identified from the 4°C scenario have a significant impact earlier than in the 1.5°C scenario. Therefore, we believe that the most sustainable and resilient response for JSR Group is to anticipate and respond to transition risks in the 1.5°C scenario and physical risks in the 4°C scenario as the scenarios that will have the greatest impact.

JSR Group's vision is to aim for sustainable growth, generate value for all stakeholders, and create a resilient organization that adapts to all environmental changes. Our strategy for responding to risks and opportunities based on scenario analysis is follows this vision.

JSR Group is preparing to address anticipated regulatory issues such as carbon pricing head-on, incorporating them into financial plans, while continuing efforts and investments to mitigate climate change, such as reducing GHG emissions at its own facilities. At the same time, we will not miss opportunities to expand our business in response to changes in the social environment, such as increased demand from new markets for sustainable products.

In order to remain sensitive to changes in society and perceive environmental issues as potential opportunities, we will need to create a resilient organization. The Five Foundations define a series of actions to advance the desirable shift to a lean organization and flexible thinking as required by the management policy in order to achieve sustainable growth. The Five Foundations, which are comprised of Sustainability, Innovative Culture, Digitalization, Globalization, and Operational Excellence, serve as important guidelines for solidifying our management foundation and enhancing corporate value. By taking on the challenges of responding to climate change-related risks and opportunities from an early stage, we will further increase resilience.

We will continue to conduct scenario analysis, identify potential countermeasures, and understand the financial impacts of risks and opportunities associated with climate change. The results of reviews will be regularly reported to the Board of Directors for deliberation and implementation of the PDCA cycle.