Addressing Climate Change

Reduction of CO₂ Emissions

CO₂ and fluorocarbons are the main causes of global warming. The reduction of these emissions is therefore a global issue. The Taisho Pharmaceutical Group is engaged in reducing the emission of CO₂ and fluorocarbons as a company with responsibility for dealing with climate change.

Objectives

Reduce the amount of CO₂ emissions (Scopes 1 & 2) by 25% by the fiscal year ending March 31, 2031 compared to CO₂ emissions in the fiscal year ended March 31, 2014*
Reduce the average amount of CO₂ emissions from offices in Saitama Prefecture from fiscal 2015 to fiscal 2019 by 13% compared with the baseline year

* Basis for setting target year: Target fiscal year prescribed in Japan’s Intended Nationally Determined Contribution (INDC) (July 2015)
Basis for setting target figures: “The Commitment to a Low Carbon Society” issued by The Federation of Pharmaceutical Manufacturers’ Associations of Japan

Total Emission Volume from Offices in Japan (Scopes 1 & 2)

In fiscal 2018, we undertook measures such as upgrading to equipment with higher energy efficiency focused on factories and research centers in Japan and reviewing the conditions for using air conditioning. CO₂ emissions increased by 4.4% compared with the baseline year, but decreased by 4.7% compared to the previous fiscal year. Because emission coefficients for electricity increased in fiscal 2018 compared with the baseline year, CO₂ emissions also increased. However, usage amounts for electricity and fuel are being reduced compared with the baseline year.

CO₂ Emissions (Scopes 1 & 2) and Basic Unit of CO₂

Fiscal year	2013 (baseline year)	2015	2016	2017	2018
Scope 1^{1, 2}(t-CO₂)	26,236	24,919	26,295	27,201	25,766
Scope 2^{1, 3}(t-CO₂)	30,028	35,248	36,149	34,402	32,956
Total (t-CO₂)	56,264	60,167	62,444	61,603	58,723
Amount of CO₂ emissions compared to fiscal 2013	—	106.90%	111.00%	109.50%	104.40%
Basic unit of CO‏2 emissions^*4 (t-CO₂/net sales (millions of yen))	0.190	0.207	0.223	0.220	0.225

*1. Gas used for calculation: Energy-derived CO₂
Coefficient used for calculation: As stipulated by the Act on Promotion of Global Warming Countermeasures
Scope of calculation: Offices in Japan (Taisho Pharmaceuticals Head Office, branches, distribution centers, factories and research centers)
*2. Direct greenhouse gas emissions produced by a company
*3. Indirect greenhouse gas emissions from consumption of purchased electricity, heat and steam
*4. CO₂ emissions (Output (Scope 1 + Scope 2) / Sales (consolidated))

Overseas Factory CO₂ Emissions (Scopes 1^1 & 2^{1, *2})

		2015	2016	2017	2018
PT. Taisho Pharmaceutical Indonesia Tbk	Scope 1	678	678	263	325
	Scope 2	1,880	1,813	1,798	2,020
	Total(t-CO₂)	2,558	2,491	2,061	2,345
Taisho Pharmaceutical (M) SDN. BHD.	Scope 1	0	0	0	0
	Scope 2	1,658	1,685	1,899	2,042
	Total(t-CO₂)	1,658	1,685	1,899	2,042
Taisho Co., Ltd. Shanghai	Scope 1	445	488	526	566
	Scope 2	507	508	521	581
	Total(t-CO₂)	952	997	1,047	1,148
Hoepharma Holdings Sdn. Bhd.	Scope 1	144	116	175	189
	Scope 2	364	340	395	393
	Total(t-CO₂)	508	456	570	582
Taisho Vietnam Co., Ltd.	Scope 1	10	20	14	13
	Scope 2	304	322	389	406
	Total(t-CO₂)	314	342	403	420
Compañía Internacional de Comercio, S.A.P.I. de C.V. (CICSA)	Scope 1	24	95	16	15
	Scope 2	560	536	537	481
	Total(t-CO₂)	584	632	552	496
Total	Scope 1	1,301	1,398	993	1,110
	Scope 2	5,272	5,206	5,537	5,923
	Total(t-CO₂)	6,574	6,603	6,530	7,033

*1. Gas used for calculation: Energy-derived CO₂
Coefficient used for calculation: Taken from “CO₂ emissions from fuel combustion 2018”
*2. Location-based method

Scope 3 CO₂ Emissions

CO₂ in the value chain (Scope 3) and basic unit of CO₂ emissions

Category	CO₂ emissions (t-CO₂)		Method of calculation
Category	FY2017	FY2018	Method of calculation
Scope 1^*1	27,201	25,766	Global warming potential based on “Act on Promotion of Global Warming Countermeasures”
Scope 2^*2	34,402	32,956
Scope 3^{3, 4}
1. Purchased products & services	56,110	51,107	Calculated by aggregating each purchased raw material, then multiplying by the basic unit
2. Capital goods	13,745	14,883	Calculated by multiplying the amount of capital investment in the fiscal year by the basic unit
3. Fuel and energy-related activity not included in Scope 1 & 2	2,447	2,414	Calculated by multiplying the amount of used electricity/heat by the basic units for the amount of energy used
4. Transportation, delivery (upstream)	9,508	9,704	Calculated by multiplying the delivery volume from suppliers to factories, between factories, and from factories to shipping destinations by the basic unit
5. Waste from business activities including manufacturing	3,743	2,953	Calculated by categorizing the waste generated by factories and research centers by treatment, then multiplying the weight of treated waste by the basic unit
6. Business trips	754	703	Calculated by multiplying the expense amount supplied to use aircraft (domestic and overseas) by the basic unit
7. Employee commuting	2,157	2,065	Calculated by multiplying the expense amount supplied for commuting expenses for each mode of transportation by the basic unit
8. Leased assets (upstream)	Outside scope of calculation		—
9. Transportation, delivery (downstream)	Outside scope of calculation		—
10. Manufacturing of sold products	Outside scope of calculation		—
11. Usage of sold products	Outside scope of calculation		—
12. Waste of sold products	930	889	Calculated by multiplying the usage amount of each material at the time of application under the Containers and Packaging Recycling Act by the basic unit
13. Leased assets (downstream)	Outside scope of calculation		—
14. Franchises	Outside scope of calculation		—
15. Investments	Outside scope of calculation		—
Basic unit of CO₂ emissions (Scope 3)^*5 (t-CO₂/net sales (millions of yen))	0.319	0.324
Basic unit of CO₂ emissions (total)^*6 (t-CO₂/net sales (millions of yen))	0.539	0.548

*1. Direct greenhouse gas emissions produced by a company
*2. Indirect greenhouse gas emissions from consumption of purchased electricity, heat and steam
*3. Indirect greenhouse gas emissions not covered in Scopes 1 & 2
*4. Gas used for calculation: Energy-derived CO₂
Coefficient used for calculation: From the emission basic unit database (ver. 2.5) for organizations to use when calculating greenhouse effect gas emissions generated throughout their supply chains.
Scope of calculation: Offices in Japan (Taisho Pharmaceuticals Head Office, branches, logistics branches, factories and research centers)
*5. CO₂ emissions (Scope 3) / Sales (consolidated)
*6. CO₂emissions (Scope 1 + Scope 2 + Scope 3) / Sales (consolidated)

CO₂ Emission Volume Associated with Sales and Transport, etc.

Fiscal year	2014	2015	2016	2017	2018
Sales (t-CO₂)	4,014	3,923	4,827	6,211	5,768
Logistics (t-CO₂)	7,132	7,074	6,889	6,534	6,361

Regulation on Saitama Prefecture Global Warming Strategy Promotion Ordinance (Offices in Saitama Prefecture)

Approximately 80% of Taisho Pharmaceutical’s CO₂ emissions are produced within Saitama Prefecture, including the Omiya and Hanyu factories, along with the Research Center.

At offices in Saitama Prefecture, we are pursuing a reduction in the average amount of CO₂ emissions by 13% for the second plan period (fiscal 2015 to fiscal 2019) when compared to the baseline year (average from fiscal 2002 to fiscal 2004) with a system for planning global warming countermeasures in accordance with Regulation on Saitama Prefecture Global Warming Strategy Promotion Ordinance.

During fiscal 2018, efforts to improve energy efficiency at the Hanyu Factory resulted in a 14.2% reduction in CO₂ emissions, compared to the previous fiscal year. The average annual rate of reduction in the second planning period is 12.2%.

Trends in the Amount of CO₂ Emissions for the Second Plan Period for Global Warming Countermeasures

Fiscal year	Baseline year (2002–2004)	2015	2016	2017	2018
Emissions^*(t-CO₂)	48,275	42,149	43,265	42,691	41,444
Reduction rate (%)	—	12.7	10.4	11.6	14.21
Average reduction rate in the 2nd planning period (%)	—	12.2

* The calculation for CO₂ emissions uses emission coefficients presented in the Regulation on Saitama Prefecture Global Warming Strategy Promotion Ordinance

Participation in FPMAJ’s Low-Carbon Society Project

To contribute to a low-carbon society, Taisho Pharmaceutical is participating in the Low-Carbon Society Project led by the Federation of Pharmaceutical Manufacturers’ Associations of JAPAN (FPMAJ).

Promotion of Environmentally Friendly Offices

Objectives: Taisho Pharmaceutical will work on improving the energy consumption rate^*1, and will continue to receive “A-class or higher”^*2 in evaluation system by class under the Energy Conservation Law

*1. Energy consumption rate
Factories, research centers: Energy consumption (kL) / Number of production lots (hundred million) {or production (hundred million yen)} x Floor area (m²)
Sales and back offices: Energy consumption (kL) / Floor area (m²)
*2. In order to continue to receive “A-class or higher,”
the following conditions have to be avoided:
· Energy consumption rate of 100% or more for two consecutive years
· Average consumption rate is 105% or more for five consecutive years

Taisho Pharmaceutical will continue to work on eliminating CO₂ emissions in the medium and long terms, and also on improving the energy consumption rate, for the purpose of using limited energy.

In fiscal 2018, we established units to measure the energy consumption rate at each workplace for production divisions, and undertook mechanisms to measure energy efficiency at each workplace every month. With this initiative, we were able to improve our awareness of wasted energy and implement countermeasures. As a result, we improved the energy consumption rate throughout the entire Company by 1.4% year on year, and we were able to maintain a Class A ranking in the evaluation system under the Energy Conservation Law, which is a Company goal.

Change of Energy Consumption Amount (Calorific Value) and Energy Consumption Rate

Fiscal year	2014	2015	2016	2017	2018
Energy consumption (heating value MJ)	1,062	1,060	1,091	1,074	1,044
Energy consumption rate compared to the previous fiscal year (%)	99.9	100.3	96.5	106.5	98.6
Average consumption rate for 5 fiscal years (%)	100.5

Measures to Save Energy and Reduce CO₂ Emissions in Fiscal 2018

	Measures
Taisho Pharmaceutical Company	1) Upgraded to higher-efficiency equipment
	2) Applied LED lighting and turned certain lights off
	3) Conducted Cool-Biz Campaign
	4) Participated in Lights-Down Campaign
Production and Logistic Headquarters	5) Reviewed manufacturing equipment and air conditioning
	6) Upgraded to higher-efficiency equipment
	7) Improved activities to combat energy loss (air leak, heaters)

Promotion of Environmentally Friendly Logistics Operations

Objectives: Reduce average annual energy consumption associated with transport by 1% or more by the fiscal year ending March 31, 2019

The annual amount Taisho Pharmaceuticals transports as a cargo owner is 30 million ton-km or more, so we fall under the category “Specified Shippers” in the Energy Conservation Law. We are undertaking activities that include promoting a modal shift (changing transportation methods to reduce environmental load), reducing transportation frequency, and improving fuel efficiency to reduce energy consumption during transportation.

The energy consumption rate in fiscal 2018 increased by 1.3% compared with the previous year, and decreased by 0.3% on average over the five-year period. In line with the decrease in shipments in fiscal 2018, the Company’s use of large-scale freight trucks also decreased, and the proportion of shipments transported by railroad declined due to the effects of the torrential downpours in western Japan in July 2018. On the other hand, we are steadily promoting a modal shift by increasing the amount we transport by ship by 8.0% year on year.

Energy Consumption Rate and Specific Energy Consumption Associated with Transport

Fiscal year	2014	2015	2016	2017	2018
Energy consumption (converted to crude oil) (kL)	2,702	2,690	2,626	2,494	2,413
Transportation amount (10,000 ton-km)	8,104	8,000	7,934	7,507	7,169
Energy consumption rate^*	0.333	0.336	0.331	0.332	0.337
Average consumption rate for 5 fiscal years (%)	100.3

* Energy consumption rate: Energy consumption (kL) / Amount transported (10,000 ton-km)

Control of Fluorocarbon Emissions

Objectives

Comply with the act (simple inspections, periodic inspections, report on calculated leaks),
provide education to fluorocarbon managers Companywide and reduce leaks

To ensure compliance with the Act on Rational Use and Proper Management of Fluorocarbons, we have established a Groupwide system for managing devices using fluorocarbons, etc. and have selected a general manager and assigned responsible managers and management representatives at respective offices to form a system that allows systemized management.

Amount of Fluorocarbons Leaked

Fiscal year	2016	2017	2018
No. of incidents	18	17	9
Amount of fluorocarbons leaked (t-CO₂e)	807	474	63

Addressing Climate Change

Reduction of CO2 Emissions