Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced CO2 emissions by 48,000 tons year-over-year
• Achieved 17% reduction in CO2 emissions per unit from logistics from fiscal 2006 to 2019
• Increased end-of-life car recycling rate to 99.8%
• AS Shot® received the Silver Prize at the 2020 Aichi Environmental Awards

Social Achievements

• Launched a Harassment Prevention Committee
• Established an Aichi Steel Compliance Hotline
• Proactively hired more female employees
• Developed working from home and career design training for female employees
• Implemented “Jikotei Kanketsu” training for team leaders
• Provided specialized technical training for all skilled workers in forging plants
• Recognized under the 2020 Health & Productivity Stock Selection Program by the Ministry of Economy, Trade and Industry (METI) and Tokyo Stock Exchange
• Recognized for the third consecutive year as a Health and Productivity Management Outstanding Organization

Governance Achievements

• Fully complied with the Corporate Governance Code
• Submitted a report regarding disclosure to the Tokyo Stock Exchange
• Established an internal risk management system
• Established a permanent Denshinkan Education Center to teach and pass on lessons learned from past accidents

Climate Goals & Targets

Environmental Challenges

• Global warming
• Biodiversity loss
• Changes in the global environment
• Changes in existing market environments
• Aging and diversity
• Safety and health
• Spread of new infectious diseases
• Dwindling workforce due to declining birthrates
• Impacts of pandemic on business (declining demand, inability to operate)
• Arrival of the smart society (CASE, IT/AI)
• Expansion of the EV market (reduction in use of specialty steels)
• Shrinking Japanese forged product market
• Declining demand for automobiles
• Declining production of forged products as more EVs enter the market
• Increasing local procurement practices overseas
• Labor shortages resulting from a dwindling workforce

Mitigation Strategies

• Development and adoption of technologies to reduce CO2 emissions
• Improvement of energy efficiencies and promotion of energy-saving activities
• Development of materials and products that can help with updating of social infrastructure
• Improved competitiveness of integrated forging with steel making processes
• Enhancement of diversity
• Development of work environments
• Health promotion activities
• Building of flexible production systems and promotion of diverse workstyles (remote working)
• Driving workstyle reform
• Development of materials and components for EVs and FCVs
• Expansion of business into new fields
• Improvement of productivity through adoption of IT technologies
• Implementing Genryou Management
• Consolidating equipment
• Improving specific consumption
• Managing personnel
• Consolidating furnace equipment
• Constructing a steel heat treatment furnace
• Consolidating and rationalizing various equipment
• Collaborating with development divisions and Kitaeru Company to develop and manufacture components for EVs
• Entered a business capital tie-up with Vardhman Special Steels Limited
• Providing technical support to Vardhman Special Steels Limited
• Introduced an in-house company system
• Splitting our Manufacturing and Future Planning Headquarters into a Research and Development Headquarters and a Manufacturing Innovation Headquarters
• Implementing initiatives to expand the market
• Working with customers to select and develop drivetrain components
• Launching Japan’s first electric furnace with an exhaust heat recovery system
• Eliminating by-product emissions
• Reducing energy consumption by leveraging the strengths of integrated forging and steel making process
• Improving the efficiency of material heating equipment
• Improving the combustion efficiency of heat treatment furnaces
• Developing components that enable to reduce heat treatment process
• Establishing forging processes that are highly energy efficient
• Creating more efficient operations through initiatives such as consolidating equipment and concentrating production
• Improving profits by reducing overtime expenses through workstyle reform and reducing other expenses through zero-based budgeting
• Enhancing inventory management
• Obtaining early financing
• Establishing flexible bank credit facilities

Supply Chain Management

Responsible Procurement

• Fair transactions with suppliers

Climate-Related Risks & Opportunities

Transition Risks

• Adoption of carbon pricing systems
• Response to society’s requests to reduce CO2 emissions

Opportunities

• Development of energy-efficient products
• Development of materials and components for EVs and FCVs

Reporting Standards

Frameworks Used: GRI Standards, ISO 26000 (Corporate Social Responsibility), International Integrated Reporting Framework

Certifications: ISO 14001

Sustainable Products & Innovation

• AS Shot®
• MAGFINE® Dy-free bonded magnets

Awards & Recognition

• Silver Prize at the 2020 Aichi Environmental Awards
• Japan Stainless Steel Association Prize
• Monodzukuri Nippon Conference Joint Chairman’s Award at Nikkan Kogyo Shimbun’s Cho Monodzukuri Grand Award for Parts
• Ministry of Economy, Trade and Industry’s Global Niche Top Companies Selection 100

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced total CO2 emissions by 76,000 tons year-over-year
• 13% reduction of emission volume per transportation unit from the 2006 level
• Completed electric furnace exhaust heat recovery system, reducing CO2 emissions by 4,200 tons per year
• Achieved 91% waste recycling rate

Social Achievements

• Received Excellence Award for supplier contributions to quality improvement (Electronic Components Plant)
• Received Special Contribution Award from Kubota Engine (Wuxi) Co., Ltd. (Shanghai Aichi Forging Co., Ltd.)
• Received Quality Excellence Award from Daihatsu Motor Co., Ltd. (Forging Plant)
• Developed AUS305-H2, a resource-saving, high-strength stainless steel
• Reached a cumulative shipped total of 5,000 tons of deformed bars

Governance Achievements

• Changed executive management structure to focus on roles instead of titles, simplifying the structure and accelerating decision-making
• Implemented a new Executive system
• Improved the effectiveness of the directors and strengthened governance

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic impacting sales volumes and increasing raw material prices
• Japanese government's Carbon Neutral by 2050 initiative increasing energy costs and development expenses
• Decline in the use of forged products due to the shift to BEVs
• Supply concerns and restructuring of forging companies

Mitigation Strategies

• Implemented Genryou Management (managing with limited order quantity) to maintain profitability even with small production volumes
• Established a Task Force for Promoting Carbon Neutrality to reduce CO2 emissions by 35% by 2030 and work toward carbon neutrality by 2050
• Developed innovative technologies for reducing CO2 emissions
• Implemented a global backup production plan to mitigate risks associated with the COVID-19 pandemic
• Developed new products for electric vehicles leveraging integrated forging with steel making processes

Supply Chain Management

Responsible Procurement

• Green Procurement Guidelines prioritizing purchases from suppliers engaged in efforts to reduce environmental burdens
• Report on Presence of Environmentally Hazardous Substances requested from suppliers

Climate-Related Risks & Opportunities

Transition Risks

• Japanese government's Carbon Neutral by 2050 initiative

Opportunities

• Development of energy-efficient products
• Development of eco-products for the automotive industry
• Use of solar power and other renewable energies
• Reusing CO2
• Using hydrogen and ammonia

Reporting Standards

Frameworks Used: GRI Standards, International Integrated Reporting Framework, ISO 26000

Certifications: ISO 14001

UN Sustainable Development Goals

• SDG 2: Zero Hunger
• SDG 7: Affordable and Clean Energy
• SDG 12: Responsible Consumption and Production

PDMA fertilizer enabling agriculture in poor soil; MAGFINE® Dy-free bonded magnets for electric water pumps; CO2 emission reductions through various initiatives

Sustainable Products & Innovation

• AUS305-H2 stainless steel
• MAGFINE® Dy-free bonded magnets
• PDMA fertilizer
• Electric Axle for BEVs

Awards & Recognition

• Excellence Award for supplier contributions to quality improvement
• Special Contribution Award from Kubota Engine (Wuxi) Co., Ltd.
• Quality Excellence Award from Daihatsu Motor Co., Ltd.
• Bronze Award at 25th International Stainless Steel Forum (ISSF)

Environmental Metrics

ESG Focus Areas

• Sustainable global society
• Creation of a prosperous society
• Addressing social issues (aging societies, food scarcity)

Environmental Achievements

• Not disclosed

Social Achievements

• Expanded sales of GMPS autonomous driving support systems through provision of solutions for streamlining logistics in plants
• Expanded market share with MAGFIT dental magnetic attachments through coverage by health insurance
• Expanded sales through market launch of new products able to support diverse dental techniques

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Increased cost burden due to increased costs of raw materials and energy
• Reduced sales in the magnets business

Mitigation Strategies

• Increased supply chain resilience and rebuilt business models to ensure stability of raw material supplies (rare earths)
• Expanded and started operating new production lines at the Gifu Plant
• Preparations to increase production capacity by 30% to capture further growth in the market for electrified vehicle components

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Next-generation PDMA fertilizer

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Climate Change
• Resource Recycling
• Procurement
• Technology Innovation
• Cybersecurity
• Quality and Production
• Safety and Health
• Diversity
• Coexistence with Community
• Human Rights
• Legal Compliance
• Workstyles and Human Resources Development

Environmental Achievements

• Achieved carbon neutrality at five of seven plants through renewable energy certificates and carbon-neutral city gas.
• Reduced logistics-related CO2 emissions by 31% year-on-year.
• Raised CO2 emission reduction target to 50% by 2030 (compared to 2013).

Social Achievements

• Launched Nice Family System supporting childcare and nursing care.
• Introduced Nice Senior System allowing employees to work beyond retirement age.
• Implemented measures to enable employees with disabilities to play active roles.
• Increased number of male employees taking childcare leave.

Governance Achievements

• Implemented all principles of the Corporate Governance Code (revised June 2021).
• Established Of/f_icer Remuneration and Nomination Committee.
• Obtained an “A” rating from Japan Credit Rating Agency, Ltd.

Climate Goals & Targets

Environmental Challenges

• Increased and persistently high costs of steel scrap and energy.
• Dramatic short-term /f_luctuations in demand due to supply chain disruptions in the automotive industry.
• Shift to electri/f_ication in the automotive industry.
• Reduced usage of specialty steel per automobile.
• Unstable global economic trends.

Mitigation Strategies

• Implementing Genryou Management (managing with limited order quantities).
• Lowering break-even points in Hagane and Kitaeru Companies.
• Adopting digital technology to reduce production lead times.
• Shifting cost increases to sales prices with shortest lag.
• Expanding sales of strategic products like steel materials and parts for electrified vehicles.
• Expanding steel scrap storage capacity.
• Building /f_lexibility into raw material receiving structures.
• Developing minimum-cost operating structures.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Green Procurement Guidelines

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters

Transition Risks

• Increased demand for decarbonization
• Reduced demand for specialty steel due to electrification
• Increased costs of raw materials and energy

Opportunities

• Demand for electric furnace steel
• Demand for materials and products for electrified vehicles

Reporting Standards

Frameworks Used: GRI Standards, International Integrated Reporting Framework, ISO 26000

Certifications: IATF 16949, ABINC certification

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Global Magnetic Positioning System (GMPS)
• PDMA biodegradable iron fertilizer
• Small-section continuous casting technologies

Awards & Recognition

• Special Award under the Excellent Green Logistics Commendation Program
• 3rd ABINC Award Special Prize

Environmental Metrics

ESG Focus Areas

• Corporate Governance
• Sustainability
• Decarbonization
• Human Capital
• Intellectual Capital
• Energy and Environment

Governance Achievements

• Implemented all principles of the Corporate Governance Code (revised June 2021)
• Established Officer Remuneration and Nomination Committee (June 2018)
• Appointed outside directors (June 2015)
• Revised director remuneration system (June 2020)
• Improved the function and quality of the Board of Directors by ensuring at least one-third of directors are independent outside directors.
• Regularly evaluates the effectiveness of the Board of Directors.

Climate Goals & Targets

Environmental Challenges

• Structural reform of earnings for core businesses
• Expansion of high-performance products in growth markets
• Appropriate communication of information to shareholders and investors
• Increasing the number of Aichi Steel fans through branding strategy

Mitigation Strategies

• Implementing structural reform of earnings for core businesses of steel materials and forged products
• Expanding high-performance products such as stainless steel and electronic components in growth markets
• Carefully explaining current situation and management strategies, engaging in constructive dialogue, and expanding understanding of the industry and Aichi Steel
• Increasing the number of Aichi Steel fans through a range of activities, including branding strategy and measures to improve brand recognition

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Climate Change
• Resource Circulation
• Biodiversity
• Diversity and Inclusion
• Human Resource Development
• Human Rights
• Quality and Production
• Safety and Health
• Corporate Governance

Environmental Achievements

• Reduced CO2 emissions by 20.5% compared to FY2013.
• Achieved a 98.6% byproduct recycling rate.
• Reduced by-products sent to landfill to 2,400 tons.

Social Achievements

• Launched Quality Step-Up Plan Activity to improve workplace culture and prevent recurrence of quality issues.
• Increased the percentage of male employees taking childcare leave to 69.7%.
• Established a “Nice Senior System” for senior employees to continue working.
• Received recognition as a Certified Health & Productivity Management Outstanding Organization for the seventh consecutive year.

Governance Achievements

• Established the Risk Management Headquarters to strengthen compliance.
• Established the Director Remuneration and Personnel Planning Committee to ensure objectivity and transparency in remuneration decisions.
• Implemented all principles of the Corporate Governance Code (revised June 2021).

Climate Goals & Targets

Environmental Challenges

• Out-of-tolerance steel length problem.
• Stagnant automobile production due to supply chain disruptions.
• Soaring electricity prices and other energy costs.
• Decreasing domestic demand for specialty steel due to automobile electrification.
• Tougher market competition due to increased imports of stainless steel materials.
• Rising procurement costs due to flow of stainless steel scrap overseas.
• Drop in number of forged products installed due to shift to electric vehicles.
• Shrinking domestic market and intensifying competitive environment for forged products.
• Growing geopolitical risks.
• Changes in short-term automobile production fluctuations and a sliding gap in selling prices caused by changes in raw material costs.

Mitigation Strategies

• Launched Quality Step-Up Plan Activity.
• Implemented aggressive profit improvement activities in procurement, manufacturing, and sales.
• Strengthened earnings base by promoting structural reforms.
• Expanding operations in India.
• Increasing sales of high value-added products.
• Developing small-section continuous casting technology.
• Developing high-mix low-volume production line for forged products.
• Expanding business in India and ASEAN markets.
• Strengthening manufacturing capabilities, improving labor productivity and quality.
• Developing new customers in the parts sector.
• Developing new technologies and businesses.

Supply Chain Management

Supplier Audits: Self-evaluation surveys for about 100 primary suppliers.

Responsible Procurement

• Green Procurement Guidelines
• Declaration of Partnership Building
• Supplier Sustainability Guidelines

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events and natural disasters
• Reduced crop yields

Transition Risks

• Increased demand for decarbonization
• Adoption of carbon pricing
• Decreased demand for specialty steel and parts due to increased electrification
• Increased operating costs associated with use of fossil fuels
• Increased operating costs due to rising renewable energy prices
• Supply shortages, reduced quality, and increased costs associated with increased demand for steel scrap
• Instability of procurement of rare metals and rare earths
• Damage to own facilities, and operation stoppages due to supply chain disruptions

Opportunities

• Increased demand for electric furnace steel
• Expansion of the autonomous driving market
• Development of energy-efficient production technologies and introduction of high-efficiency equipment
• Introduce and expand renewable energy with on-site power generation

Reporting Standards

Frameworks Used: GRI Standards, International Integrated Reporting Framework, ISO 26000

Certifications: IATF 16949

Third-party Assurance: SGS Japan Inc.

Sustainable Products & Innovation

• Green steel materials
• PDMA iron fertilizer
• Global Magnetic Positioning System (GMPS)
• High strength gear steel for electric vehicles
• Lead frames for power cards

Awards & Recognition

• Three awards from the Minister of Education, Culture, Sports, Science and Technology for QC circle activities.

Environmental Metrics

ESG Focus Areas

• Eco-energy
• Eco-production
• Eco-management
• Carbon Neutrality
• Resource Circulation
• Biodiversity Conservation

Environmental Achievements

• Reduced CO2 emissions from 795,000 t-CO2 in FY2013 to 617,000 t-CO2 in FY2022.
• Reduced waste sent to landfill from 76,000 tons in FY2013 to 2,400 tons in FY2022.
• Achieved virtual conversion of power used at four plants to renewable energy through FIT non-fossil certificates in FY2021.
• Installed solar power generation facilities at two plants, operational in FY2023.
• Introduced gas burners capable of using hydrogen and city gas, anticipating future hydrogen utilization.
• Reduced heat loss in steel heating furnaces by more than half through low-emissivity coating.
• Recycled raw material rate of 73.8%
• Byproduct recycling rate of 99.0%

Social Achievements

• Engaged in local environmental conservation activities, including water source forest cultivation and collaboration with the Chita Peninsula Ecosystem Network Council.
• Created a green space (Nakashinden) promoting biodiversity, achieving ABINC certification in 2019 and receiving the 3rd ABINC Award Special Prize in 2023.
• Concluded a “foster parent of forest” agreement with Otaki Village in 2019 for water source forest cultivation.

Governance Achievements

• Established an Environmental Working Group under the Board of Directors to oversee environmental management.
• Implemented a PDCA cycle for environmental management.
• Established six subcommittees under the Environmental Working Group with clear areas of responsibility.

Climate Goals & Targets

Environmental Challenges

• Approximately 90% of CO2 emissions come from electricity and city gas use in steel production.
• Dependence on natural resources (electricity, fuel, water) for manufacturing processes.

Mitigation Strategies

• Promoting energy-saving technologies, waste elimination, and manufacturing process improvements.
• Exploring future decarbonization technologies such as hydrogen and CCUS.
• Expanding the introduction of solar power generation and adoption of clean energy.
• Pursuing resource circulation through 4R activities (Reduce, Reuse, Recycle, Renewable).
• Working towards 100% recycling of battery electric vehicles (BEVs) and fuel cell electric vehicles (FCEVs).

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Development of energy-efficient products and technologies

Reporting Standards

Frameworks Used: Null

Certifications: ABINC certification (2019)

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• 3rd ABINC Award Special Prize (2023)