Nature-related Disclosures (Response to TNFD)

Yokogawa with Biodiversity

The Kunming-Montreal Global Biodiversity Framework adopted in 2022 aims to conserve at least 30% of the land and sea by 2030. It recommends that companies disclose their impact on biodiversity as part of efforts to promote the preservation, recovery, and sustainable use of terrestrial ecosystems and achieve the sustainable management of forests. Companies are also required to consider impacts on biodiversity.
In its environmental policy, Yokogawa pledges its commitment to biodiversity issues. We have engaged in conservation activities for local biodiversity as part of our corporate citizenshipactivities together with local governments, local NPOs, and others. We also promote activities to assess impacts on biodiversity and to conserve it throughout the value chain. We ask our suppliers to promote biodiversity-friendly initiatives. In the GS2028 medium-term business plan, perceiving trends in biodiversity as a business opportunity, we will contribute to biodiversity through our businesses by accelerating spreading renewable energy, water environment business, etc.
Yokogawa has registered as a TNFD Adopter^*1 in October 2024, declaring the commitment to disclosures aligned with the TNFD^*2 framework.

*1 TNFD Adopter: An organization or company that has declared its intention to disclose information aligned with the TNFD recommendations by fiscal year 2025.
*2 TNFD (Taskforce on Nature-related Financial Disclosures): An international initiative that provides a framework for companies to appropriately assess and disclose nature-related risks and opportunities associated with their business activities, including those related to natural capital and biodiversity.

Governance　＜Governance regarding nature-related risks and opportunities＞

The Role of the Board of Directors

The Board of Directors recognizes biodiversity as an issue to be addressed. It formulates basic policies regarding the improvement of the system for managing risks and opportunities, monitors and supervises the effective operation of the system and appropriate response to sustainability issues.

The Role of Management and Execution

Executive officers take into account the impact of issues including biodiversity in terms of both risks and opportunities when formulating business strategies and plans. They work to achieve sustainability targets, including targets related to biodiversity.
The Sustainability Committee, which serves as an advisory body to the President & CEO, Representative Executive Officer, holds discussions specifically on sustainability. The Sustainability committee has conducted materiality analysis covering various issues related to biodiversity.

Strategy　＜Impact of nature-related risks and opportunities on businesses, strategy, and financial planning＞

Initiatives for Conserving Biodiversity

Yokogawa promotes biodiversity conservation activities in accordance with the Group environmental policy, which identifies commitments to addressing biodiversity-related challenges and advancing conservation efforts. Recognizing biodiversity as a foundation for sustainable society, Yokogawa engages with our stakeholders, including customers, employees, suppliers, partners, and local residents near our business sites, to promote biodiversity initiatives across the entire value chain By minimizing the negative impacts of business activities and enhancing the contributions through responsible operations, Yokogawa strives to contribute to creating a better environment in local communities.

Biodiversity Action Policies

• Contributing to Biodiversity Through our Businesses
  We contribute to biodiversity by solving our customers’ issues through the provision of products, solutions, and services utilizing Yokogawa’s cutting-edge technologies.
• Cooperation with the Local Community to Enhance Local Value
  We take action in cooperation with government agencies and NPOs to acknowledge and enhance local value.
• Providing Employees with Educational Opportunities and Raising Awareness
  We raise awareness of biodiversity among employees by offering them relevant seminars and events.
• Considering Biodiversity Conservation within Business Sites
  Through initiatives such as on-site green area managements, Yokogawa ensures that the business sites are conducted with due regard for surrounding ecosystems.

The Relationship Between Our Business Activities and Biodiversity

1. Impact of Yokogawa’s Business Activities on Biodiversity
   Yokogawa has identified key environmental risks across the value chain, including land alteration from raw material extraction, GHG emissions and air pollution during product use, and land and water pollution from waste disposal. We recognize the operational activities, such as emissions, wastewater discharge, waste generation, and land development, may also affect biodiversity in surrounding areas. Yokogawa is working to mitigate these risks through responsible environmental practices.
2. LEAP Approach^*3 Analysis on Yokogawa’s Operations
   Yokogawa assesses connections between business activities and biodiversity throughout the value chain. In fiscal year 2023, we analyzed dependencies and impacts of, and risks and opportunities arising from Yokogawa’s operations, in line with the LEAP approach of TNFD.

*3　LEAP is a comprehensive method recommended by the TNFD for identifying, evaluating, and managing dependence, impact, risks, and opportunities relating to a business’s natural capital. It consists of four phases of Locate, Evaluate, Assess and Prepare, and supports disclosure in line with the TNFD’s disclosure recommendations.

Locate: locate contact points with nature
To locate nature-related risks arising from Yokogawa’s operations, we utilized ENCORE^*4. We found out the risk of causing soil and water contamination due to our dependence on underground and surface water in the manufacturing business of electronic equipment (which falls under Electronic Equipment & Instruments of ENCORE). In the next step, we identified offices and production sites that are located in the areas carrying water-related risks, utilizing Aqueduct^*5.

*4 ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure): a tool to visualize how economies depend on and may affect nature, and how environmental changes bring business risks
*5 Aqueduct: a tool to assess water risks by region of the world, in terms of the risks of physical aspects (quantity and quality), regulations, and reputation

Evaluate: evaluate dependencies and impacts
We have evaluated water-related risks to our locations carrying such risks, which were identified in the Locate step. Based on evaluation results, we have also evaluated the magnitude of the risks, using Yokogawa’ s environmental performance data.

Assess: assess risks and opportunities
Yokogawa has set targets of water withdrawal amount, and enhanced monitoring of water withdrawals and measures for the efficient usage of water resources. Yokogawa is working to reduce the amount of water withdrawal by improving our production processes and introducing water-saving systems to our factories and offices. Thus, we have judged biodiversity-related risks small.

Prepare: response and disclosure
We have evaluated our dependencies and impacts on nature, and assessed the impacts of Yokogawa’s operations on biodiversity as relevantly low. However, Yokogawa depends on nature in various aspects, and biodiversity directly or indirectly affects our businesses. For this reason, we recognize biodiversity as an important issue for us. Hereafter, we will assess impacts of the entire value chain on biodiversity and consider actions to risks.

Risk and Impact Management　＜Methods for the identification, assessment and management of nature-related risks＞

We recognize biodiversity affects Yokogawa’s business both directly and indirectly. It is included in the scope of group-wide risk management. Each organizational unit of the Group identifies risks and assesses the magnitude and feasibility of them, and formulates and implements countermeasures and targets. The Risk Management Committee regularly monitors significant risks. In addition, Yokogawa analyzes materiality, in line with the frameworks of the “Corporate Sustainability Reporting Directive (CSRD).” We have recognized that Yokogawa’s business is associated with items, such as climate change, land alteration, usage of fresh and sea water, and atmospheric, soil and water pollution in a disclosure requirement ESRS E4 “biodiversity and ecosystems - direct impact drivers of biodiversity loss” set forth in the “European Sustainability Reporting Standards (ESRS),” in the aspects of risk and opportunity.

Metrics and Targets　＜Metrics and targets for assessing and managing nature-related risks and opportunities＞

Metrics for initiatives to contribute to biodiversity