Climate Change Data

Environmental Metrics

ESG Focus Areas

• Biodiversity
• Recycling

Environmental Achievements

• Issued 2019 CSR report highlighting biodiversity protection initiatives ('Kuccharo Natural Forest Daido' and community cooperation) and a recycling-oriented society approach (electric furnace contributing to iron resource recycling and STARQ® rotary electric furnace).

Climate Goals & Targets

Environmental Challenges

• Demand adjustment phase for automotive and industrial machine parts.
• Weakened scrap iron and nickel prices.
• Slowdown in automobile production in China impacting magnetic products.
• Demand adjustment in some overseas markets for metal powder products.
• Sagging automobile-related demand for die forgings.
• Slowdown in semiconductor-related equipment demand for open die forgings.

Mitigation Strategies

• Capital investments to reduce production bottlenecks, increase capacity, and improve process capabilities (continuous casting line streamlining, secondary processing capacity increase, electro-slag re-melting equipment upgrade, high-grade steel strip production capacity upgrade, new heat treatment furnaces, new production lines for high-performance powder products and soft magnetic powder products).
• Establishment of new facilities (Second Chita Factory, Nakatsugawa Research Institute, new stainless steel secondary processing factory in Thailand).

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Climate Change
• Waste Reduction
• Sustainable Resource Use
• Energy Efficiency
• Product Quality and Supply
• Workplace Safety
• Employee Health
• Community Relations
• Workforce Diversity
• Employee Development
• Corporate Governance

Environmental Achievements

• Reduced CO2 emissions by 12% compared to 2013.
• Increased coproduct recycling rate to 83.9%.
• Increased purchases of renewable energy-derived electric power.
• Developed DINCS® energy-saving combustion system, reducing CO2 emissions by 1000 t/year.
• Achieved a water circulation rate of 90% or greater at each plant.

Social Achievements

• Selected for inclusion in the 2021 Health & Productivity Stock.
• Recognized as a “White 500” enterprise in the 2021 Certified Health & Productivity Management Outstanding Organizations Recognition Program.
• Implemented various work-life balance initiatives, including flexible work arrangements and childcare/nursing care support.
• Increased ratio of women in next-generation managerial roles to 14%.
• Conducted safety education and hands-on training for 2091 participants.

Governance Achievements

• Established the Nominating and Remuneration Committee.
• Discontinued anti-takeover measures.
• Reduced cross-shareholdings.
• Enhanced disclosures about climate change risks and opportunities in line with TCFD recommendations.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to semiconductor shortages and COVID-19.
• Soaring prices of scrap iron and energy.
• Decreasing long-term demand for specialty steel for internal combustion engines.
• Intensifying competition from abroad.
• Need to achieve carbon neutrality by 2050.

Mitigation Strategies

• Raising base prices and implementing cost reductions.
• Re-enlarging capacity and improving production flexibility.
• Implementing measures to lower the break-even point (production consolidation, productivity improvement, yield ratio improvement).
• Promoting DX to reduce hours and workers and improve work productivity.
• Expanding sales of high-performance materials in East Asian markets.
• Developing and supplying products for growth sectors (CASE, semiconductors, green energy).
• Promoting the Daido Carbon Neutral Challenge.

Supply Chain Management

Responsible Procurement

• Modal shift to reduce CO2 emissions in transportation.

Climate-Related Risks & Opportunities

Transition Risks

• Changes to societal and industrial structures
• Changes in customer demand
• Regulations on greenhouse gas emissions

Opportunities

• Development of energy-efficient products
• Expansion of business in green energy sector

Reporting Standards

Frameworks Used: GRI Sustainability Reporting Standards, International Integrated Reporting Council (IIRC) Guidelines, Ministry of the Environment Environmental Reporting Guidelines 2018

Certifications: ISO 14001

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 9 (Industry, innovation and infrastructure)
• Goal 12 (Responsible consumption and production)
• Goal 13 (Climate action)

Daido Steel's initiatives contribute to these goals through energy efficiency improvements, development of sustainable products, waste reduction, and resource recycling.

Sustainable Products & Innovation

• Energy-saving electric furnace with a rotation drive (STARQ®)
• Energy-saving vacuum carburizing furnace (ModulTherm®)
• High-strength materials
• Non-tempered materials
• Soft magnetic materials
• High thermal conductivity metallic powders (cobalt-free) for 3D printers
• STARMESH®-ß1 sputtering target

Awards & Recognition

• 2021 Health & Productivity Stock
• 2021 Certified Health & Productivity Management Outstanding Organizations
• Eco Ship Mark Certification

Environmental Metrics

ESG Focus Areas

• Climate Change
• Human Capital Management
• Corporate Governance

Environmental Achievements

• Reduced CO2 emissions by 21% compared to FY2013 (CO2 emissions factor: -26%)
• 90% recycling rate for scrap products
• 80% recycling rate for by-products
• Recycling rate of over 90% for water

Social Achievements

• Established the Daido Steel Group Human Rights Policy
• Signed UNGC and joined GCNJ
• Increased female employee retention rate to 88.9%
• Launched the “Making a company that people look forward to working at every day” project

Governance Achievements

• Transitioned to a company with an Audit & Supervisory Committee
• Established Sustainability Committee
• Established ESG Management Department
• Introduced a stock-based remuneration scheme

Climate Goals & Targets

Environmental Challenges

• Rise in electricity costs caused by increased use of renewable energy
• Increase in operating and material procurement costs caused by the introduction of carbon pricing
• Suspension of operation at plants due to increases in natural disasters
• Reduced demand for internal combustion engine components caused by progressive shift to electric vehicles
• Loss of business opportunities due to inadequate response to laws and regulations and the demands of society
• Reduced employee motivation and productivity due to inadequate initiatives within the Company
• Accidents and fires during operation of major facilities
• Infectious disease leading to paralysis of business activities
• Failure to recruit and develop sufficient personnel due to the declining birthrate and aging of society
• Reduced employee motivation due to inadequate workplace environment and employment systems
• Negative impact of inadequate response to environmental and human rights issues by business partners
• Continued existence of company endangered by governance failures
• Trouble caused by inadequate response to risks
• Fines and administrative punishment caused by inadequate response to laws and regulations and the demands of society
• Diminished trust due to product liability damages and the occurrence of recall expenses
• Declines in share prices, hiring, and shares due to diminished trust

Mitigation Strategies

• Reduce CO2 emissions through the use of energy-saving measures, decarbonized electricity sources, and decarbonization technology
• Recycle scrap through use of electric arc furnaces
• Strengthen “3Rs” for by-products
• Conservation of water resources
• Supply of products to address mobility innovation
• Supply of products that contribute to clean energy business
• Strengthen global initiatives for respect for human rights
• Roll out key health and safety measures
• Promote better health among employees
• Recruit and develop diverse personnel
• Build a workplace environment that fosters sense of job satisfaction
• Enhance productivity by promoting work style reforms
• Strengthen cooperation with business partners through partnership system
• Reinforce structures such as Board of Directors, committees
• Promote various corporate governance initiatives
• Identifying risks and addressing key risks
• Promotion of thorough compliance
• Thorough quality management and quality improvements
• Enhance dialogue
• Promote disclosure of information

Supply Chain Management

Supplier Audits: 328 companies in FY2022

Responsible Procurement

• Daido Supplier Partnership system “DSP”

Climate-Related Risks & Opportunities

Physical Risks

• Increases in natural disasters

Transition Risks

• Rise in electricity costs
• Increase in operating and procurement costs
• Reduced demand for internal combustion engine components

Opportunities

• Rising demand for high-performance materials used in electric vehicles
• Rising demand for electric arc furnace materials
• Rising demand for innovative engineering to address environmental issues
• Rising demand for hydrogen-related technology and products

Reporting Standards

Frameworks Used: VRF “Sustainability Reporting Standards”, IFRS Foundation “International Integrated Reporting Framework”, Ministry of the Environment “Environmental Reporting Guidelines 2018”, Ministry of Economy, Trade and Industry “Guidance for Collaborative Value Creation”

Sustainable Products & Innovation

• CLEANSTAR®, STARQ®, DINCS®, ModulTherm, Premium STC® Furnace

Awards & Recognition

• Nissan Global Supplier Award—Innovation Award