Environment

• Climate Change Initiatives
• Environmental Management
• Resource Circulation
• Biodiversity

Climate Change Initiatives

Basic approach

Aichi Steel emits CO₂ both directly and indirectly through the manufacturing processes of its various products, such as heating of steel materials, and melting of steel scrap, which is the raw material of its main product, specialty steel. For this reason, our response to climate change is a serious management issue from the perspectives of risks and opportunities. We are accelerating our efforts to decarbonize with the goal of achieving carbon neutrality as early as 2050. As a resource circulation-based company that uses steel scrap as a raw material in manufacturing, we will utilize our strengths, which have contributed to sustainable manufacturing through materials and parts, to help realize a decarbonized society. To this end, we will also continue to develop and provide products and services that contribute to reduced CO₂ emissions across the entire supply chain.

Endorsement of TCFD recommendations and information disclosure

In 2021, we declared our support for the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures.)We have been analyzing various scenarios based on the impacts, and associated risks and opportunities, that climate change may have on our business, and have considered how to reflect the results in management strategy to achieve sustainable growth. We detail our climate-related initiatives here in line with the framework (governance, strategy, risk management, and metrics and targets) recommended by the TCFD.
From FY2024, we established a Sustainability Promotion Department within the Corporate Planning Division to plan and drive company-wide responses to sustainability issues. The department is raising the level of various climate-related initiatives (expanding adoption of renewable energy, acquiring EPDs (Environmental Product Declarations), exploring steel production using non-fossil fuel certificates, utilizing hydrogen gas combustion etc.)

Governance

We have identified climate change as a priority issue (materiality) for management, and are setting KPIs and working to accomplish our targets. As the organization responsible for considering important business management-related matters, the Top Management Meeting and the Environmental Working Group discuss and consider response policies, business strategies, and the status of initiatives related to risks and opportunities that can severely impact business management, such as climate change. The Board of Directors performs its supervisory function by receiving subsequent reports and considering matters that are particularly important.

Risk management

We follow the process on the right to identify, evaluate, and supervise all risk management. We also discuss and report climate change-related risks in the Environmental Working Group and Top Management Meeting to clarify impacts and our responses.

Main agenda items in FY2024

Organization chart

Risk management process

Strategy

While referencing reports of the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), we developed two scenarios (1.5°C scenario and 4°C scenario) of what society would look like in 2030 assuming a global average temperature rise of 1.5°C and 4°C by the end of this century (compared to pre-industrial levels), and analyzed the risks and opportunities.

Analysis results by scenario

Main risks and opportunities, and response policies (excerpt)

[Definition of impact]

High: Risks/opportunities with the potential to impact revenue by billions of yen or more

Medium: Risks/opportunities with the potential to impact revenue by hundreds of millions of yen

• Based on current company assumptions. Subject to change in the future.

Indicators and targets

We are contributing to the realization of a decarbonized society, with the goal of reducing CO₂ emissions from our business operations by 50% by FY2030 compared to FY2013 levels, and achieving carbon neutrality by FY2050. As well as promoting technological development in production processes and implementing energy-saving activities with full employee participation, we are taking active steps to reduce CO₂ emissions, such as introducing more solar power generation and other non-fossil energy sources. In FY2024, we achieved steady results, with a 25.4% reduction compared with FY2013 on a non-consolidated basis and a 26.5% reduction on a consolidated basis.

Roadmap to carbon neutrality by 2050

We have formulated and are systematically implementing a roadmap for achieving our targets. We have also detailed plant-specific roadmaps, and we are systematically conducting activities focused on (1) deepening and pursuing energy savings, (2) utilizing renewable energy, and (3) developing and adopting decarbonization technologies. In FY2024, we drew up a roadmap for our group's eight domestic subsidiaries to reduce GHG emissions. Going forward, we will engage in GHG reduction activities in our group, both domestically and internationally.

Specific initiatives

Utilization of renewable energy

The large amounts of electricity used in Aichi Steel's specialty steel manufacturing processes have made it essential to shift to electricity derived from renewable energy. Therefore, in addition to thorough efforts to conserve energy and improve efficiency, we are actively promoting adoption of such electricity. In June 2025, Higashiura Plant launched operation of solar power generation using on-site PPA, which is expected to reduce annual CO₂ emissions by more than 700 tons at our three plants (Higashiura, Seki, and Gifu). In July 2025, we began procuring renewable energy (approximately 100 million kwh/year) through off-site PPAs, which is expected to reduce approximately 43 thousand tons/year of CO₂. Our plan is to continue to expand stably procurable renewable energy sources from a long-term perspective.
In addition to electricity, we are considering the conversion of energy used at our plants, such as city gas, to hydrogen through our participation in the Hydrogen Utilization Study Group in Chubu. Initially, at Kariya Plant, we have carried out modification work on the steel material heat treatment furnace to enable hydrogen combustion, and have started verification trials of hydrogen combustion technology. With the goal of developing hydrogen-based steel heat treatment technology, we will continue to conduct verification for hydrogen utilization, including hydrogen combustion trials and knowledge collection. As a member of the Hydrogen Utilization Study Group in Chubu, we also aim to utilize the knowledge gained from these verifications to expand the use of hydrogen at other plants.

CO₂ emissions by scope

[Scope 1, 2]

Calculation method:

Calculated based on “Standard Calorific Values and Carbon Emission Factors for Energy Resources” (Agency for Natural Resources and Energy) under the Act on Promotion of Global Warming Countermeasures (MOE), and the annual emission factors of contracted electricity providers

[Scope 3] *Non-consolidated

• Figures in the above table are rounded to the nearest thousand tons, and 0 means less than 500 tons.

Emission intensity:

“Emission Intensity Database for Calculating Greenhouse Gas Emissions of Organizations Throughout the Supply Chain (Ver. 3.5))” (April 2025, MOE) and “LCI Database IDEA version 3.5”
(Advanced LCA Research Group, Research Institute of Science for Safety and Sustainability, National Institute of Advanced Industrial Science and Technology(AIST))

Collaboration with society

To help drive social change and achieve carbon neutrality by 2050, we are participating in various initiatives and obtaining relevant certifications. Through these activities, we seek to expand the use of products and services that contribute to decarbonization, and to maintain and strengthen competitiveness in the specialty steel industry in Japan.

Acquisition of SuMPO EPD label

Start of hydrogen combustion verification trials at Kariya Plant

In July 2024, we started hydrogen combustion technology verification trials at Kariya Plant as part of our efforts to carbon neutrality. In cooperation with Toho Gas Group and others, we modified our steel heat treatment furnace equipment that uses city gas to be compatible with hydrogen combustion. Our goal is to develop heat treatment technology using hydrogen, and we plan to use the knowledge gained for rollout to other plants.

Basic agreement on hydrogen utilization signed with the Central Japan Hydrogen and Ammonia Association

Participation in the Aichi Environmental Innovation Consortium

Environmental Management

Basic approach

To achieve the Vision 2030 management mission of contributing to society as the “most environmentally friendly steelmaker,” Aichi Steel formulated the Aichi 2025 Environmental Action Plan to chart a course of action through to 2025. It defines targets that should be accomplished by 2025, and we are currently working to achieve these targets, focusing on the three pillars: eco-energy, eco-production, and eco-management.

Promotion structure

Aichi Steel is working to implement environmental management through effective employment of the PDCA cycle mainly through the Environmental Working Group, which operates under the supervision of its Board of Directors with the president as chairperson. The Environmental Working Group is in charge of executing strategy, establishing targets, and checking progress in accordance with company policies and the Aichi Environmental Action Plan. Seven subcommittees have been established under the Environmental Working Group with clear areas of responsibility to promote efficient and targeted activities based on specialized perspectives. In addition, the Aichi Steel Group Environmental Committee was established to share information and successful case studies to promote Groupwide activities.

Organization chart

Eco-energy

Approximately 90% of our CO₂ emissions come from electricity and city gas used to melt steel scrap and heat steel materials. Based on the roadmap formulated toward achieving carbon neutrality by 2050, we are promoting the reduction of energy consumption through efforts to deepen the energy-saving technologies that we have cultivated, the elimination of waste in our daily operations, and drastic improvements in manufacturing processes. In FY2024, we conducted 129 energy-saving activities.
Regarding the introduction of non-fossil energy, we have already introduced solar power generation through on-site PPAs at Seki Plant and Gifu Plant. In FY2025, we will install a new solar power generation facility at the Higashiura Plant, and systematically expand the introduction of non-fossil energy by also utilizing biomass power generation through offsite PPAs.

Breakdown of CO₂ emissions in FY2024
(Scope 1 + Scope 2 emissions from Aichi Steel on non-consolidated basis)

Resource Circulation

Eco-production

Aichi Steel is a resource circulation-based company that both recirculates steel resources and achieves economic value, by recycling steel scrap generated from the dismantling of automobiles and infrastructure into high-quality specialty steel products, automotive components, and other products. We aim to transition to a circular economy by further accelerating our efforts to reuse products and parts and recycle waste and raw materials while reducing resource input and consumption through the efficient use of resources and energy.

Efforts to increase by-product recycling rates

We have strengthened our recycling of by-products that were previously sent to landfills, maintaining a recycling rate in the upper 90% range. Slag generated in electric furnaces is primarily used as roadbed material for roads, while electric furnace dust is sent to recycling companies for processing to recover valuable metals. Additionally, waste brick used in steelmaking and refining is sorted and crushed, then reused as slag-forming material in electric furnaces. At present, we are focusing on developing technology to recycle slag-based by-products, which are difficult to process, as slag-forming material, with the aim of reducing the amount of landfill to 2,000 tons by 2030 and zero by 2050.

Trends in byproducts sent to landfill and byproduct recycling rate

Amount of industrial waste discharged from products using plastic

Initiatives for a circular economy

We are a member of Circular Core, an association for promoting the sound development of a circular economy, creating new value, and advancing sustainable manufacturing that is environmentally friendly, through collaboration across automotive materials, components, and the entire supply chain. The association actively conducts market research on the circular economy covering automotive materials, components, and the entire supply chain, researches, develops hypothesis and validates the latest technological trends and business practices, and engages in exchanges and cooperation with relevant domestic and international organizations.

Biodiversity

Eco-management

As a resource circulation-based company, we carry out manufacturing that achieves both the circulation of iron resources and economic value. In our business activities, we constantly benefit from the gifts of biodiversity, including natural resources and water. On the other hand, our CO₂ emissions and wastewater from melting scrap and heating steel materials impact biodiversity.
We are deeply aware of the importance of biodiversity, which is being continuously lost. Based on the following policies, we contribute to a sustainable society by conserving biodiversity and developing businesses that protect and utilize nature.

Aichi Steel Group's Biodiversity Policy

Biodiversity conservation initiatives

We endorse the Biodiversity Declaration and Action Guidelines of the Japan Business Federation (Keidanren) and are engaged in conservation activities. We also contribute to the revitalization of nature as a participant in the 30 by 30 Alliance, established by government agencies, companies, and NPOs.
Since FY2012, we have been promoting the Forest Habitat Creation for Beetles project in the Nakashinden Greenbelt adjacent to Chita Plant, maintaining an environment that attracts 50 indicator species. The site, which forms part of Chita Peninsular Greenbelt, a collaboration among 11 organizations including Aichi Steel and other companies, government agencies, students, experts, and NPOs, was certified in FY2023 by the Ministry of the Environment as a Nature Symbiosis Site.
In 2024, we planted 6,000 trees while zoning^*, and hosted a tree-planting ceremony attended by the Mayor of Tokai. In November, we were recognized as an Aichi Biodiversity Excellence Certified Company. Furthermore, we have been conducting forest cultivation activities in Nagano Prefecture since 2006, and in 2019, we signed a Forest Adoption Agreement with Otaki Village, the water source for our business operations. Employees and their families regularly engage in conservation activities, working together with the local community to nurture a richer forest.

• The process of determining optimal plant placement

Disclosures based on the TNFD (Taskforce on Nature-related Financial Disclosures)

Based on the LEAP approach disclosure method recommended by the Taskforce on Nature-related Financial Disclosures (TNFD), we identified natural capital that the Group's direct operations across all sites depend on and impact and assessed risks and opportunities.

1. Governance

(1) Sustainability promotion structure

Our sustainability strategies, which include natural capital such as climate change and resource circulation, are promoted primarily by the Environmental Working Group chaired by the president. Progress is managed based on reports from subcommittees, and the details of proposals are reported to the Board of Directors via the Top Management Meeting, which deliberates on and supervises key matters.

Promotion structure

(2) Human rights policies regarding stakeholders and engagement activities

The Group prioritizes cooperation with stakeholders and local communities through measures that address natural capital. The Group formulated the Aichi Steel Group Human Rights Policy based on the United Nations Guiding Principles on Business and Human Rights (UNGP) and engages with suppliers based on the Supplier Sustainability Guidelines. We continuously seek opinions from local residents through means such as roundtable discussions, plant tours, and inquiry desks.

See the following link for our Human Rights Policy.

2. Strategy

(1) Understanding dependency and impact items and their assessments

To discover natural capital contact points in the Group’s business activities, we identified dependencies and impacts on nature in our direct operations and confirmed their extent. We employed the ENCORE analytical tool^*1 to identify dependencies and impacts on natural capital for each business activity category and assessed them.

• ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure) is an analytical tool for assessing dependencies and impact on natural capital for individual business activity categories at business sites.

Dependency and impact assessment results

(2) Identification of risks and opportunities

Based on the results of assessment of material dependencies and impacts on natural capital performed using ENCORE, we identified the risks and opportunities arising from those dependencies and impacts.

List of risks and opportunities

(3) Priority locations

There are two categories of priority locations: sensitive locations,^*2 that is, areas considered to be important from the perspective of biodiversity, ecosystems, and water risk; and material locations where dependencies, impacts, risks, and opportunities relating to nature that are material to the organization are present. Following assessment, nine sites were designated as priority locations for the Group.
Among these, taking into account activity levels and past performance, we are focusing on the Aichi Steel Chita District, and for the remaining eight sites, we will continue monitoring and conduct reassessment and take appropriate action as necessary.

Results of priority location identification

• Assessments were performed using the following analytical tools based on siting information for business sites.
  Materiality within biodiversity: Assessment of proximity to protected areas and similar sites using the Integrated Biodiversity Assessment Tool (IBAT)
  Adequacy of ecosystems: Assessment of regions with rich ecosystems using the Global Biodiversity Model (GLOBIO)
  Physical water risks: Assessment of risks including water stress and flooding using the Aqueduct assessment tool and hazard maps

3. Risk and impact management

In accordance with the Crisis Management Rules, the Group has developed risk management systems, preventive measures, and emergency responses. The Chief Risk Officer (CRO) oversees risk management, and each department and Group company identifies and reports on risks. Major risks are evaluated based on the scope of impact and other factors, response measures and management indices are set by the Top Management Meeting, they are reflected in management plans, and monitoring and implementation of countermeasures are continuously performed. The Board of Directors conduct supervision by considering plans and checking execution status.

Risk management process

4. Metrics and targets

The metrics are the global and sector-specific core metrics recommended by the TNFD, and the metric data that can be disclosed at this time are as set forth below. Regarding targets, we will take action with a focus on the Aichi Steel Chita District and work to reduce impacts on nature.

Metrics

• Areas of water stress risks: AFT, SAFC, AFI, AMT, AME

Targets