Preventing global warming | Initiatives for Realization of a Carbon-Neutral Society

Achieve a sustainable society and carbon neutrality in 2050

Based on the Paris Agreement adopted at the COP 21 (21st Conference of the Parties to the United Nations Convention on Climate Change), we developed the greenhouse gas emission reduction target by 2030 based on scientific grounds that are consistent with the Paris Agreement and have been promoting the global reduction activities throughout the TOTO Group under the Shared Value Creation Strategy TOTO WILL2030 toward the realization of a sustainable society and carbon neutrality by 2050.As for the reduction of CO2 emissions from business sites (Scope 1 + Scope 2), we work to improve energy saving/renew large facilities. As for the reduction of emissions, we work to improve energy saving, renew large equipment, expand the introduction of renewable energy and for electricity to use, we aim to use 100% renewable energy.

In addition, customers use TOTO products in their daily lives for as long as 10 to 20 years, and more than 90% of the CO₂ is emitted during the product use phase when we look at the entire product lifecycle. As for the reduction of CO₂ emissions during the product use phase, we will further evolve our products' environmental performance and by globally commercializing our Sustainable Products, a bathroom and kitchen product group that is unique to TOTO, that balance cleanliness, comfort; wellness, and the environment, we will contribute to the realization of a rich and comfortable society that gives consideration to the global environment.

Agreement with the International Initiatives

We agree with the international initiatives toward the realization of a carbon-neutral and sustainable society.

In May 2019, we agreed with the recommendations of the Task Force on Climate-related Financial Disclosure (TCFD).

Based on the recommendations of TCFD, we have analyzed the opportunities and risks led by climate change in several different scenarios and disclosed information on our governance, strategy, risk management, targets and objectives.

In April 2021, we joined an international initiative RE100.

We aim to use 100% renewable energy for the electricity used in our business activities by 2040.

In June 2021, we acquired the certification of the SBT (Science Based Targets) Initiative "Level well below 2℃: (WB2℃)". 

In March 2024, we updated our greenhouse gas reduction goals for 2030 and acquired the certification of the ”1.5℃ level,'' which aims to keep the global average temperature rise to less than 1.5℃ compared with pre-industrial revolution levels.

Disclosure of Information Based on TCFD Recommendations

Regarding initiatives for achieving a sustainable society and carbon neutrality , the TOTO Group discloses information based on recommendations by the Task Force on Climate-related Financial Disclosures (TCFD).

Governance

We recognize that the impact of climate change is a serious business risk. The agenda for our sustainability activities, which includes efforts toward climate change, is deliberated and executed by the Sustainability Committee, which is chaired by the President and Representative Director and meets twice a year. In addition, these activities are supervised by the Board of Directors.

Strategy

We formulated WILL2030 with a focus on achieving a sustainable society and carbon neutrality by 2050. The aim is to create an enriched and comfortable future society that has no impact on the global environment and to achieve economic growth. We engage in sustainability management through our key material issues (materiality) of “Cleanliness and Comfort; Wellness,” “Environment,” and “Relationships.” Additionally, we have been expanding the popularization of our sustainable products—bathroom and kitchen plumbing products unique to TOTO—that balance cleanliness, comfort, wellness, and the environment.

Analysis of Business Risks and Opportunities Caused by Climate Change

We specify the long-term business risks and opportunities caused by climate change based on the classifications as defined by the TCFD (transition risks, physical risks, and opportunities) and carry out scenario analysis.

<Summary of Scenario Analysis>

Analysis referred to projections by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) and calculated the impact of business risks and opportunities. This was based on the scenarios* for global average temperature increases of less than 1.5°C or 4°C of preindustrial levels and makes assumptions about social conditions in 2030 with an eye on carbon neutrality in 2050. The results of this analysis confirmed that, under either scenario, there is a risk of increased costs and the impact of natural disasters but also an expected increase in opportunities through environmental products.

※ 4℃ scenario ： ［IEA WEO］STEPS ［IPCC AR5］ RCP8.5

　1.5℃ scenario： ［IEA WEO］ APS，SDS，NZE ［IPCC AR5］ RCP2.6

＜Assumptions about Social Conditions in 2030＞

　●Social conditions under the 1.5°C scenario

　　-Environmental policies and regulations are widely reinforced, resulting in steep rises in carbon prices 

        due to the introduction of carbon tax, which accelerates the introduction accelerated introduction of 

        renewable energy and expands the construction of environmentally friendly buildings, such as 

        zero-energy buildings.

　　-Scale and frequency of natural disasters remain largely unchanged as a result of controlling impact of

　　 temperature increases.

　●Social conditions under the 4°C scenario

　　-Environmental regulations to reduce greenhouse gases experience no significant reinforcement.

　　-Impacts from natural disasters increase and demand for water expands.

<Degree of Financial Impact and Response>

With 2050 carbon neutrality in mind, we analyzed the risks and opportunities that social conditions in 2030 present to TOTO and considered our medium- and long-term responses to these.

   　　* Small: Less than ¥2 billion, Medium: Between ¥2 billion and ¥5 billion, Large: More than ¥5 billion

< Introduction of Internal Carbon Pricing　(ICP) >

Due to the introduction of internal carbon pricing (ICP), we are promoting capital investment that contributes to reducing CO2 emissions while analyzing the degree of financial impact brought about by climate change.

• Internal carbon price: ¥20,000/t-CO2 *

• Scope of system: Change in CO2 emissions and large-scale capital investment

• Adopted method: Cost conversion of change in CO2 emissions by applying ICP

 * Set based on future outlook by the IEA

Risk management

We are engaged in risk management and have formulated the TOTO Group Risk Management Policy. Under the supervision of the president, the Risk Management Committee assesses business-related risks, including climate change, that may have a significant impact on our business and society. The committee identifies and manages serious risks, reporting them to the Board of Directors.

   Furthermore, environment-related risks are managed at each business division and business site based on the environmental management system.

Principal Major Risks

Each major risk is mapped out on a matrix evaluating degree of impact and frequency of occurrence from the viewpoints of damage to the brand, impact on personnel and financial consequences along an assumption scenario,and monitored by the Risk Management Committee, and risk mitigation activities are promoted throughout the entire Group.

Introduction of the Social value, Environmental value index

TOTO, which engages in sustainability management, has set the percentage of sustainable products in the Shared Value Creation Strategy TOTO WILL 2030 as the Social value, Environmental value index for the Bonus Based on Multi-Year Performance since FY 2022. We decided to set the six items of the social and environmental values upheld in the WILL 2030 long-term goals as the sustainability index for the Bonus Based on Multi-Year Performance since FY 2023 to realize a rich and comfortable society in the futurewhile giving more consideration to the global environment.

Metrics and Targets

We formulated indicators and goals based on the SBT as milestones for 2050 with the aim of achieving a sustainable society and carbon neutrality by 2050.

＜2030 Targets＞

*The Company’s SBT targets cover products that directly consume energy.

Acquired certification for the 1.5°C level in the SBT in March 2024.

Status of Efforts toward Indicators and Goals

Under the Shared Value Creation Strategy TOTO WILL2030, we set a vision of achieving a sustainable society and carbon neutrality  by 2050.

  As a milestone for achieving this vision, we have set targets for 2030 and have acquired and are promoting SBTi certification and targets for reducing greenhouse gas emissions based on scientific grounds.

In Scope 1 emissions, sanitary ware manufacturing makes up a high percentage of fossil fuel-based CO2 emissions.Accordingly, we are promoting the reduction of emissions, such as by advancing large equipment renewal for efficient kilns at the same time as improving energy-saving capabilities.

  In reducing Scope 2 emissions, we aim to expand the introduction of electricity generated through renewable energy. Going forward, we will promote initiatives for achieving a carbon-neutral society in line with social trends toward the utilization of hydrogen and CO2.

 In Scope 3 emissions, we have been expanding the popularization of our sustainable products that balance cleanliness, comfort, wellness, and the environment and further advancing their environmental performance.

  At the same time, we believe that social trends related to housing and construction, such as expansion of renewable energy; decarbonization of water and sewerage and hot water supply energy; and energy saving, energy creation, and energy storage of buildings, are advancing and, in combination with TOTO initiatives, will lead to achieving carbon neutrality in 2050.

<Targets for and Progress in Reducing CO2 Emissions from Business Sites (Scope 1 and Scope 2)>

We established 2030 targets for reducing CO2 emissions from business sites and have acquired certification for SBTi certification.

In Scope 1, we have reduced CO2 emissions by approximately 25% in fiscal  2023 compared with fiscal 2021, the reference year for the SBT, by promoting energy-conserving, high-efficiency manufacturing at production bases around the world.

In Scope 2, the TOTO Group has introduced renewable energy in Japan and oversea in order to continue to reduce Scope 1 and Scope 2 CO2 emissions. The renewable energy ratio for electricity was 36.8% in fiscal 2023.

Regarding the expansion of electricity generated through renewable energy, we are a member of RE100 and are promoting the plan for achieving 100% by 2040. However, we are also considering the possibility of bringing forward these targets.

As a result of these activities, we emitted 254,000 tons of CO2 in fiscal 2023.

Accordingly, in terms of our target of reducing emissions by 47.5% in 2030 (compared with fiscal 2021) based on the SBTi, in fiscal 2023 we achieved an approximately 28% reduction compared with fiscal 2021.

Reduction in CO2 Emissions from Business Sites: Targets and Progress

<Targets for and Progress in Reducing CO2 Emitted When Product Is Used (Scope 3 Category 11)>

In fiscal 2023, we emitted 15,612,000 tons of CO2 during product usage (Scope 3 Category 11), reflecting expansion in the percentage of sustainable products, improvement of social infrastructure, and other measures.

For products that directly consume energy in Scope 3 Category 11 emissions, TOTO has received SBTi certification for its 2030 targets. In fiscal 2023, TOTO made progress toward its 2030 target of reducing these emissions by 25% compared with the fiscal 2021 level, reducing emissions by approximately 5% compared with fiscal 2021.

CO2 Emitted When Product Is Used: Targets and Progress

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