Endorsement of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD Recommendations)
(Climate-related disclosure based on TCFD Recommendations)

We hereby agree with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD Recommendations) and declare our intention to promote measures to address climate change issues.

We established the "Company-wide Environmental Management Policy in 2024" as follows, under which we are carrying out environmental initiatives.

Company-wide environmental management policy in 2024

We aim to realize a sustainable society by promoting environmentally friendly business activities and by preserving and protecting the environment.

We commit ourselves to environmental conservation.
We work to promote Carbon Neutrality.
We will continue and extend the work we do on recycling and saving resource.

The Japanese government declared its aim to achieve climate neutrality in 2020, thereby increasing the need for corporate management to shift to decarbonization. Meanwhile, due to the revisions to the Corporate Governance Code ^[1] in June 2021, the Tokyo Stock Exchange's Prime Market-listed companies are required to disclose information according to the TCFD Recommendations. Furthermore, they are called on to disclose information in accordance with the TCFD Recommendations in their security reports from the financial year ending in March 2023. Given the rising need to enact climate-related measures and the importance of disclosure, we are disclosing climate-related information according to the TCFD recommendations. We will also update our disclosures in accordance with the trends of standards such as IFRS S2 ^[2] and SSBJ ^[3].

Core Elements recommended for Disclosure in the TCFD Recommendations

Governance	The organization’s governance around climate-related risks and opportunities
Strategy	Impacts on the organization’s businesses, strategy, and financial planning
Risk Management	Status of identification, assessment, and management of climate-related risks
Metrics and Targets	The metrics and targets used to assess and manage relevant climate-related risks and opportunities

1.^A summary of the main principles of corporate governance (a system for companies to make transparent, fair, prompt, and purposeful decisions based on the perspectives of shareholders, customers, employees, local communities, and other stakeholders) as set forth by the Tokyo Stock Exchange.
2.^Climate-related disclosure standards issued by the International Sustainability Standards Board (ISSB) in a manner consistent with TCFD Recommendations for disclosure.
3.^Sustainability Standards Board of Japan. Responsible for coordinating with the development of international sustainability disclosure standards and developing domestic sustainability disclosure standards such as ISSB.

Governance

We have established a governance system for climate change^[5] in order to reflect the climate-related risks and opportunities ^[4] in our management strategy and business activities.

■The role of management in assessing and managing climate-related risks and opportunities

We define climate change as an important domain, and have established a Carbon Neutrality Promotion Committee to discuss climate change related issues, with the Managing Executive Officer as chairperson and the other Executive Officers as members. The Carbon Neutrality Promotion Committee (secretariat: the manager of the Environmental Business Department and the manager of the Construction & Production Business Planning Office) compiles and discusses reports on basic policies and important issues related to climate change from each division, and reports to the Executive Committee and to the President and Representative Director for further deliberations. The Committee also reports important issues to the Management Committee and Board of Directors for deliberations.

■Oversight by the Board of Directors on climate-related risks and opportunities

Important issues related to climate change are reported to the Board of Directors at least once per year after being passed by the President and Representative Director and the Management Committee. The Board of Directors makes and monitors important business decisions, including those on climate change.

Governance system for climate change

4.^Refers to transition risks and opportunities that arise as a result of transitioning to a low carbon economy when climate measures are carried out proactively, and physical risks and opportunities brought about by an increase in the frequency and severity of floods, severe storms, and other disasters when climate measures are inadequate. See Strategy for details.
5.^A management system for addressing climate change company-wide, and that positions climate change-related initiatives as important issues.

Strategy

While we are already taking action to address climate change under our Company-wide Environmental Management Policy in 2024, we are also working to identify risks and opportunities that may impact our business activities to prepare for situations that may occur in the future. Moving forward, we will assess the financial risks and opportunities presented by climate change scenarios that are expected in the future to be reflected in our company's management.

■Expected Scenarios

Climate change is a phenomenon that will unfold over the mid to long term. Therefore, we must envision multiple temperature rise scenarios, identify and evaluate the risks and opportunities, and take measures. This analysis used a scenario under which temperatures rise by 1.5°C by 2100 over temperatures at the start of the industrial revolution after the implementation of a variety of climate mitigation measures, and another scenario under which the current use of fossil fuels continues, and temperatures rise by 4°C. Each scenario was designed based on public documents released by the IPCC ^[6] and IEA ^[7].

Expected Scenarios	Worldview	Key Reference Materials
1.5°C Scenarios	A world in which each country carries out a variety of mitigation measures to achieve net zero CO₂ emissions by 2050	・IPCC^[6] SSP1-1.9 ・IEA^[7] Net Zero Emissions by 2050 Scenario（NZE）・IEA Announced Pledges Scenario（APS）
4°C Scenarios	A world where the current use of fossil fuels continues and no mitigation measures are taken	・IPCC SSP5-8.5 ・IEA Stated Policies Scenario（STEPS）

6.^Intergovernmental Panel on Climate Change. An intergovernmental organization established to provide a scientific basis for the climate change policies of the national governments of each country.
7.^International Energy Agency. An organization established for oil consuming countries to cooperate on energy security.

Summary of Key Reference Materials

IPCC SSP1-1.9
A scenario in which climate mitigation measures are adopted to keep the rise in temperature to 1.5°C or less under sustainable development, to achieve a net zero in CO₂ emissions by 2050
IPCC SSP5-8.5
A scenario in which no climate mitigation measures are adopted under fossil fuel-dependent development.
IEA Net Zero Emissions by 2050 Scenario（NZE）
A net-zero emissions scenario that meets the primary elements of the United Nations sustainable development targets on energy
IEA Announced Pledges Scenario（APS）
A scenario that assumes that the climate change commitments of each nation’s government are fulfilled completely and on time
IEA Stated Policies Scenario（STEPS）
An existing policy scenario that reflects current policies and assumes no additional policies are implemented

Projected temperature rises under each scenario

Prepared based on Summary of the IPCC Sixth Assessment Report - Combined Report, Ministry of the Environment, Government of Japan — Prepared based on "Summary of the IPCC Sixth Assessment Report - Combined Report," Ministry of the Environment, Government of Japan

Prepared based on World Energy Outlook 2023 IEA — Prepared based on "World Energy Outlook 2023" IEA

■Risks and Opportunities

Climate-related risks are generally categorized into transition risks that arise as a result of transitioning to a low carbon economy when climate measures are carried out proactively, and physical risks brought about by an increase in the frequency and severity of floods, severe storms, and other disasters when climate measures are inadequate. In addition to these two types of risks, we are also identifying, analyzing, and assessing opportunities caused by climate change, such as expanded demand or advancement of new business. With regard to the assessment of financial impacts, we have assessed the impact for FY2030 given that there is abundant accessible data, such as public future forecast models, and because it is easy to compare with internal business plans. “Time of Onset” refers to the timing at which the impact of risks and opportunities emerge, and we have defined and categorized these as short term: within 3 years; mid term: by 2030; and long term: by 2050. Based on our sales for the impact on sales and our ordinary income for the impact on costs, we have categorized financial impact as small: up to 2%; medium: 2% to 10%; and large: 10% or more.

Transition risks (that arise as a result of transitioning to a low carbon economy)

Category	Item	Description	Scenario	Time of onset	Financial impact	Measures
Policies and regulations	Carbon price	Raw materials costs will increase with the rise in the price of asphalt and the cost for production of the asphalt mixtures due to the mandated carbon levy on fossil fuel importers (to be introduced in 2028) and the introduction of carbon pricing.	1.5°C	Mid term	Medium	Reducing energy consumption by optimizing product manufacturing volume through demand management Reducing energy consumption through energy conservation in offices Reducing energy consumption through restructuring the supply chain Reducing fuel consumption through transition to electric vehicles Reducing energy purchase volume by promoting energy production such as solar power generation Improving energy efficiency during product manufacturing Expanding use of facilities and equipment that use less energy Reducing energy emissions intensity during construction through the use of alternative fuels and renewable energy Requesting to suppliers to shift to energy sources with low GHG emissions
	Carbon price	Taxes on CO₂ emissions from business activities will increase, causing business expenses to rise. ...1^*	1.5°C	Mid term	Large
	Compliance with GHG emission regulations	Adoption of renewable energy and new energy sources will be required to achieve carbon neutrality due to tighter emissions caps, causing a rise in manufacturing expenses. ...2^*	1.5°C	Mid term	Large
Technology	Spread of renewable energy and energy-saving technologies	Failure to proliferate renewable energy and energy conservation technologies in the supply chain will cause a decline in order opportunities due to lack of progress in emissions reduction. Business opportunities will decline due to delays in technological development and a shortage of engineers capable of low-carbon design and construction.	1.5°C	Mid term	Small	Requests to suppliers to shift to energy sources with low GHG emissions Purchasing raw materials with lower emissions intensity by restructuring of the supply chains Avoiding of lost opportunities through proactive investment in decarbonization technology Actively adopting energy-saving designs in buildings
Market	Energy demand trends	Material procurement costs will increase due to adoption of high priced new or alternative materials when asphalt becomes difficult to procure due to a decrease in domestic crude oil consumption.	1.5°C	Mid term	Small	Reducing raw material costs by quickly building relationships with companies that develop new and alternative materials Reducing raw material consumption by optimizing production processes
	Price fluctuation of important products and commodities	Material procurement costs will increase due to rising material prices caused by restrictions on raw material extraction. Procurement costs for cement, asphalt, and other primary materials will increase due to the impact of low carbonization.	1.5℃	Mid term	Small
	Price fluctuation of important products and commodities	Sales will decline due to failure to apply energy conservation to buildings.	1.5°C	Mid term	Medium
Reputation	-	A delay in responding to environmental issues will cause damage to corporate reputation, leading to a decrease in the number of employees and a decline in sales.	1.5°C	Mid term	Medium	Improving corporate reputation by promoting technological development in environment-related businesses Improving corporate reputation by proactive consignment of decarbonization-related construction from an early stage Improving corporate reputation through timely disclosure of information on climate change

*The numbers in the regular pavement chart represent the "Current Initiatives" number.

Physical risks (brought about by increased frequency and severity of floods, storms, etc.)

Category	Item	Description	Scenario	Time of onset	Financial impact	Measures
Chronic risks	Average temperature increase	Decreased productivity due to increased health issues (such as heat stroke) or inability to work during extremely hot time periods among construction workers	4°C	Mid term	Medium	Ensuring productivity through thorough worker health management Improving productivity through improvement of the working environment using labor-saving technologies and ICT tools Securing of product quality by developing and adopting products and technologies that can handle temperature rises
		Increased labor costs due to a decline in available workers	4°C	Short term	Medium
		Difficult to secure product quality able to withstand severe climate conditions ...3^*	4°C	Mid term	Large
	Changes in precipitation and weather patterns	Increased costs required for technical development to handle climate change	4°C	Mid term	Small	Avoiding localized costs through early technology development Reducing development costs through reuse of existing technologies
Acute risks	Intensification of extreme weather	Increased costs due to loss of work time for temporary construction and sheeting/covering processes, or due to rain damage	4°C	Mid term	Medium	Avoiding additional costs through work plans that take into account damage and work loss from extreme weather Reducing damage from disasters by increasing the durability of phisical assets such as buildings Avoiding disaster damage risks through insurance enrollment and risk assessment Reducing costs during emergencies by strengthening coordination for the procurement supply chain
Acute risks	Intensification of extreme weather	Delays in recovery occur due to difficulty in procuring materials and equipment due to damage to the region, In addition to the personnel injuries and replacement costs incurred due to damage to the company's phisical assets such as buildings and properties.	4°C	Mid term	Small

*The numbers in the regular pavement chart represent the "Current Initiatives" number.

Opportunities

Category	Item	Description	Scenario	Time of onset	Financial impact	Measures
Resource efficiency	Optimization of production/logistics processes	Decreased expenses due to consolidation of operations thanks to progress in digital transformation (DX)/use of ICT for composite material manufacturing and delivery process, and the consolidation of manufacturing sites through technology development enabling long distance transport.	1.5°C 4℃	Mid term	Medium	Identification and consolidation of asphalt mixture plants that can be consolidated through analysis of orders and transportation conditions at each plant. Achievement of long distance transport through technological development.
Energy	Use of new technologies	Increased demand for high value-added surfacing due to large vehicle convoys, spread of self driving technology, and infrastructure enhancement (Wiress Power Transfer, Solar Pavement, etc.).	1.5°C	Mid term	Medium	Provision of stable supply of high value-added asphalt pavement early on through quick technological development. Expanded business opportunities due to quickly grasping demand for high value-added products.
Products/Services	Development, expansion of low carbon products/services	Decreased expenses due to expanding demand for Warm Mix Asphalt and Cold Mix Asphalt.	1.5°C	Mid term	Small	Expanded business opportunities through improvement of product/construction quality. Expanding business opportunities for renewable-energy related construction. Active promotion of preventive pavement maintenance at an early stage when damage is minor. New development and sales of high durability asphalt pavement and recycled products. Expanding business opportunities through pavement management proposals using pavement surface diagnostic technology.
		Expanded demand for renewable energy-related construction, such as solar power and offshore wind power.	1.5°C	Short term	Small
		Increased business opportunities due to shortening of the road repair cycle caused by increased load on asphalt surfaces under rising temperatures and the spread of EVs.	1.5°C 4℃	Mid term	Medium
	New product/service development through R&D and innovation	New business development due to advancement of recycling technology for asphalt and concrete waste.	1.5°C	Mid term	Small

■Current initiatives

Here we introduce the measures we are already implementing to address three particularly impactful issues from among the risks and opportunities identified.

(1) Reducing CO₂ emissions during asphalt mixture manufacturing (risk: taxes on CO₂ emissions from business activities will increase, causing business expenses to rise)

We have already shifted to CO₂ free electricity sources to reduce CO₂ emissions.
We are also proactively installing energy conserving facilities and equipment, with energy conserving high efficiency burners adopted at a total of 116 asphalt mixture manufacturing plants as of the end of FY2022.
Furthermore, we have introduced ECO-foamed Warm Mix Asphalt technology that lowers the temperature at which asphalt mixtures are produced by using mechanical foamed asphalt equipment, thereby reducing fossil fuel consumption during the production of those mixtures, which further reduces CO₂ emissions.

(2) Fuel transition (risk: adoption of renewable energy and new energy sources required to achieve carbon neutrality due to tighter emissions caps, causing a rise in manufacturing expenses.)

We are moving forward with a transition of fuel used at asphalt mixture plants from fuel oils to city gas, and some plants have already adopted carbon neutral city gas.

(3) Development of surfacing technology capable of withstanding extreme weather conditions (risk: Difficult to secure product quality able to withstand severe climate conditions)

In addition to the development of PERFECT COOL, a solar heat blocking pavement that reduces road surface temperature, and COOL POLYSEAL, a water retaining pavement, both technologies reduce CO₂ emissions by preventing surface deformation from rising temperatures and increasing pavement durability, we also have technologies that increase the durability of the paving itself, such as POLYSEAL LC, PET REPET PAVE, and HARDASCON.

Solar heat blocking pavement (PERFECT COOL)

Asphalt pavement reaches temperatures in excess of 60°C during the summer when hit by strong sunlight. PERFECT COOL is highly reflective against the infrared rays in sunlight, limiting the rise in road surface temperature, and increasing the durability of the pavement. This technology won the Global Road Achievement Award from the International Road Federation (IRF) in 2009 and the Best Innovation Award from the World Road Association (PIARC) in 2011.

パーフェクトクールコート模式図 — Schematic diagram of a PERFECT COOL COAT

サーモグラフによる路面温度比較 / パーフェクトクールコート施工例（車道高知県高知市） — Left: Thermograph showing road surface temperature comparison
Right: Example installation of a Perfect Cool coat (road: Kochi City, Kochi Prefecture)

High durability pavement (Hard AsCon)

Hard AsCon is a surfacing technology that adds epoxy resin to the asphalt mixture to increase the mixture’s durability. It achieves longer road lifespan in high temperature environments.

ハードアスコン舗装断面図 — Cross-section of Hard AsCon pavement

ハードアスコン施工例（工場・倉庫構内） — Hard AsCon installation example (inside factory/warehouse)

We are moving forward with the development of new technologies and construction methods in anticipation of harsher natural environments in the future.

Risk Management

We believe that climate-related risks have a major impact on management strategies and business activities, and we have integrated climate-related risks into the organization's overall risk management system.

■Process by which the organization identifies, assesses, and manages climate-related risks

The Carbon Neutrality Promotion Committee identifies climate-related risks in each business division, assesses their impact on business, and manages such risks.

■Integration of identification, assessment, and management processes into overall risk management

Particularly important risks are reported to the Board of Directors via the President and Representative Director and the Management Committee, and they are managed comprehensively along with other risks that can have a significant impact on this company’s business. The board discusses measures to avoid risks and to minimize the impact when they emerge, and makes decisions.

Metrics and Targets

We monitor and manage CO₂ emissions as an indicator and target for responding to climate-related risks and opportunities.

We are working to reduce emissions, with targets including a 42% reduction over 2020 levels by 2030 under Scope 1 and 2, and a 25% reduction over 2020 levels by 2030 under Scope 3.

CO2 emissions reduction plan — CO₂emissions reduction plan

We believe that we must tackle Scope 1 and 2 first because these represent our own CO₂ emissions, for which we have an important responsibility, and reduction measures can greatly contribute to reducing emissions. In order to achieve Scope 2 reductions, we are currently transitioning the power sources used in our offices to CO₂ free electricity in all of our offices for which transition is possible. We are also planning and implementing a transition from fuel oil to city gas as part of our activities to achieve Scope 1 reductions. We will continue to move forward with measures to reduce CO₂ emissions toward our 2030 target.

Fuel shift initiatives to achieve Scope 1 reductions

CO<sub>2</sub>排出量と削減実績・目標 — CO₂emissions and reduction results/targets

ESG

Endorsement of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD Recommendations) (Climate-related disclosure based on TCFD Recommendations)