Information Disclosure of Integrated Environmental Management（TCFD/TNFD)

Information Disclosure of Integrated Environmental Management

CN｜Carbon Neutral  
CE｜Circular Economy  
NP｜Nature Positive

Traditional social and economic activities and lifestyles centered around mass production, mass consumption, and mass disposal have degraded rich ecosystems and resources, and have caused climate change. To address these issues, global efforts to reassess such practices are underway. These efforts focus on achieving carbon neutrality by reducing greenhouse gas emissions to mitigate climate change, establishing circular economy by minimizing resource extraction and sustainably use of limited resources, and realizing nature positive that conserves and restores sound ecosystems so that humans can coexist harmony with nature.
Against this backdrop, companies are required to disclose information about how their business activities impact and are affected by the natural environment. They are also expected to actively address environmental challenges through their business operations.
Under the Taisei Group Philosophy, “to create a vibrant environment for all members of society,” the Group recognizes the “realization of a sustainable and environmentally friendly society” to be one of its core priorities. We are advancing initiatives while focusing on the realization of “decarbonized society (carbon neutrality),” “recycling-oriented society (circular economy),” and “nature co-existing society (nature positivity).”
This section comprehensively discloses information on the Taisei Group's environmental management. In four pillars: governance, strategy, risk management, and indicators and targets.
In our decarbonization efforts, we refer to frameworks such as the TCFD Framework. In our initiatives toward a recycling-oriented society, we follow guidelines such as those from the Ministry of Economy, Trade and Industry and the Ministry of the Environment's “Guidance for Disclosure and Engagement for Promoting Sustainable Finance toward a Circular Economy.” In our nature co-existence initiatives, we align with frameworks such as the TNFD Framework.

Environmental Policy

In March 2023, the Taisei Group updated its Environmental Policy in response to changes in the business environment and societal demands regarding climate change and other environmental issues. Our policy focuses on realizing a sustainable, environmentally friendly society; achieving our group's long-term environmental goals; and contributing to a decarbonized, recycling-oriented, and nature co-existing society through our business activities.

Group's Long-Term Environmental Target:
TAISEI Green Target 2050
-Realization of a Sustainable and Environmentally Friendly Society-

The Taisei Group established a long-term environmental target (TAISEI Green Target 2050) to realize a “Sustainable and Environmentally Friendly Society” and we strive to achieve the three types of societies and to address the two individual issues.

Governance

Organization

The Sustainability Committee, a committee within the Board, and the Sustainability Promotion Committee, an advisory body to the Management Committee, have been established to deliberate subjects related to sustainability management, including environment-related ones. The Sustainability Committee discusses important policies and initiatives related to all aspects of ESG, while the Sustainability Promotion Committee deliberates basic policies and mid- to long-term goals concerning sustainability management.

To incorporate a variety of perspectives, the Sustainability Committee is consisted of five directors including the President (of which two are External Members of the Board). Matters are discussed within this committee, after which they are deliberated and resolved at the Board. Important issues related to the Taisei Group's environmental challenges are reviewed and decided upon by these committees before being finalized by the Board.

Decisions made by the Board are communicated to our various business units and group companies and then integrated into their management plans and business operations. These decisions are also implemented as specific actions at our construction sites, and we ask the our business partners to cooperate these efforts.

Organizational Chart of Climate-Related Governance

Executive Officer for Climate-Related Issues

To clarify responsibilities for advancing sustainability management, including addressing environmental issues, a Chief Sustainability Officer (CSuO) has been appointed. The CSuO is responsible for advancing sustainability management in business operations, including addressing sustainability-related issues as decided by the Board. Additionally, the CSuO serves concurrently as the Deputy Chairperson of the Sustainability Promotion Committee.

Recent Major Environment-Related Discussions at the Board

• -2023 July:Progress reports on Medium-Term Business Plan（4QFY2022）and reports on the sustainability-related progress
•       August:Identification of “the risks that must be dealt with on a priority basis” on environmental due diligence
•       August:Publication of “Taisei Group Annual Report 2023”
•  December:Endorsement of TNFD recommendations（Registered as an Early Adopter）
• -2024 May:[TAISEI VISION 2030] Achievement Plan
  Information Disclosure of Integrated Environmental Management

Strategies

We recognize relating to decarbonized, recycling-oriented, and nature co-existing society risks and opportunities arise from two main categories. The first category is “transition” risks, which include regulatory tightening and market changes aimed at preventing issues such as rising temperatures, degradation of natural capital, and resource depletion. The second category is “physical” risks, which result from rising temperatures and the degradation of natural capital and resources, leading to acute and chronic extreme weather events and rising sea levels.
To develop a business strategy that can flexibly adapt to such environmental and societal changes, we have identified risks and opportunities in our vision toward 2030 and assessed their impacts on the Taisei Group's business. Based on this evaluation, we have formulated a strategic approach and integrated it into our management strategy.
In identifying risks and opportunities related to climate change, we referred to multiple climate change scenarios.

Scenario Analysis Results

Decarbonized Society

Climate change and the resulting natural disasters are becoming more frequent and severe, threatening the safety and security of our homes and lives. This shift has led to a major global movement towards decarbonization, stretching from the Kyoto Protocol to the Paris Agreement and significantly influencing policies worldwide, including Japan, and raising expectations for the roles that businesses will play.
The Taisei Group considers the impacts of climate change on its business to be a critical management issue. We endorsed the TCFD recommendations in July 2020 and have been disclosing information in line with these recommendations since May 2021.
If the transition to a decarbonized society is delayed and the impacts of climate change are not mitigated, our group faces risks such as decreased productivity and an insufficient workforce due to worsening working conditions caused by rising summer temperatures, increased labor costs, and higher prices for construction materials due to supply chain disruptions resulting from frequent severe natural disasters. Additionally, inadequate efforts by our group may lead to lower evaluations from stakeholders and reduced business opportunities.
Meanwhile, as society moves toward decarbonization, our group anticipates increased demand for ZEBs (zero-energy buildings) and construction involving renewable energy, as well as for strengthening facilities and infrastructure to adapt to climate change. Our ongoing development and implementation of low-carbon and decarbonized building materials, such as Zero Carbon Buildings (T-ZCBs^®) and environmentally friendly concrete (T-eConcrete^®), will help us to secure and enhance our competitive advantage.
We believe that transitioning to a decarbonized society presents opportunities for enhancing corporate value and improving evaluations from stakeholders.

• For details, please refer to Decarbonized Society.

Recycling-Oriented Society

Transitioning from a linear economy of mass production, consumption, and disposal to a circular economy that minimizes resource inputs and consumption while making efficient use of stock to create added value is a critical global issue. Companies are expected to adopt sustainable procurement practices across their supply chains, including conserving resources, using renewable materials, and addressing plastic pollution in the natural environment.
If the transition to a recycling-oriented society stalls, our group may face risks such as rising material costs due to resource shortages and increased waste disposal costs. Additionally, inadequate efforts by our group may lead to lower evaluations from stakeholders and reduced business opportunities.
Conversely, moving toward a recycling-oriented society opens up opportunities for our group as expanded use of recycled resources that contribute to the realization of a circular economy and increased contracts in environmental restoration projects (e.g., soil purification). Promoting development and implementation of resource-efficient designs, systems, products, and technologies that consider circular use in construction materials and resources, as we are now doing, strengthens our competitive edge.
We believe that transitioning to a recycling-oriented society presents opportunities for enhancing corporate value and improving evaluations from stakeholders.

• For details, please refer to Recycling-Oriented Society.

Nature Co-Existing Society

Achieving nature positivity by protecting and leveraging natural capital and biodiversity, which are fundamental to our planet's sustainability and human security, is a major global priority. Companies are expected to contribute to achieving a nature positive society. The construction industry is closely linked to nature. Many construction materials, such as steel bars and frames, cement and concrete, sand, glass, and timber, rely heavily on natural resources. While construction activities adversely impact natural capital through land alteration and fragmentation, they also positively impact urban environments by creating nature. We joined the TNFD Forum in June 2022, endorsed the TNFD recommendations, and were listed as a TNFD Early Adopter in January 2024.
If the transition to a nature co-existing society stalls and the decline in natural capital continues, our group may face risks such as increased material costs due to resource shortages and higher costs due to increased environmental charges. Additionally, inadequate efforts by our group may lead to lower evaluations from stakeholders and reduced business opportunities.
On the other hand, transitioning to a nature co-existing society is expected to increase opportunities for our group to increase contracts related to conserving and creating rich natural environments as well as developing green infrastructure, all of which contribute to nature positivity. Our initiatives to develop and implement these technologies and services will help us to secure and enhance our competitive advantage.
We believe that transitioning to a nature co-existing society presents opportunities for enhancing corporate value and improving evaluations from stakeholders.

• For details, please refer to Nature Co-Existing Society.

Measures to address risks and opportunities

  : Decarbonized Society

     : Recycling Oriented Society

     : Nature Co-Existing Society

TSA (TAISEI Sustainable Action^®)
Environmental Impact Reduction Activities Involving All Group Employees

The Taisei Group is steadfastly committed to the TSA: TAISEI Sustainable Action^®. This is an eco-impact reduction endeavor, calling upon the collective participation of all Group members, to realize our environmental ambitions. These efforts include the creation of the TSA Action List, which compiles specific technologies and activities that are effective for reducing environmental burdens; the introduction of the TSA Points System for visualizing and quantitatively evaluating the effectiveness of these activities; the establishment of Priority Implementation Items, which all worksites are required to address; and the selection of worksites that are to undertake Policy Implementation Items, which involve advanced initiatives. These efforts aim to foster a shift in employee awareness and behavior, contributing to the reduction of Scope 1+2 emissions at our worksites. Moreover, to promote the broader adoption of TSA and facilitate the horizontal deployment of its specific activities, we distribute “TSA Newsletter” on a quarterly basis.
And we have established a commendation system for our efforts to achieve our environmental goals. We strive to raise employees' environmental awareness by informing them of cases that were highly rated in the commendation system as environmental impact reduction activities that can serve as models for other divisions in the company.

New Implementation Items

Development of the T-CARBON BIM Simulator BIM-Based CO₂Emissions Prediction System for New Buildings
Swift, accurate CO₂emissions calculation during the procurement and construction phases in the design stage

As we work towards achieving carbon neutrality by 2050, the construction and real estate sectors face the challenge of reducing embodied carbon^*1, which refers to the CO₂ emissions throughout a building's lifecycle, from material production to construction, use, and demolition. A critical aspect of this effort is understanding upfront carbon^*2, which refers to the CO₂ emissions during the procurement and manufacturing stages. To accurately estimate such emissions, we must calculate the CO₂ emissions per type of material used in a building according to the quantities of each such material. However, given the wide variety of materials used in a building, such calculations has been extremely time-consuming and labor-intensive, especially for large-scale projects, often requiring several months to see the result.
To address these challenges, we developed the T-CARBON BIM Simulator, a system that utilizes BIM data to effortlessly estimate upfront carbon during the design phase. By using this system to integrate detailed BIM data on the types and quantities of materials --including specifics such as the number of walls and doors --with our proprietary T-CARBON^® Navios^*3 system, we can significantly speed up and improve the precision of CO₂ emissions forecasts for building materials.

• *1Embodied carbon: The total amount of CO₂ emissions throughout a building's lifecycle, from the production of materials to construction, use (maintenance, repairs, etc.), and demolition.
• *2Upfront carbon: The CO₂ emissions that occur during the production, procurement, and manufacturing stages of construction materials used for constructing buildings.
• *3T-CARBON^® Navios: Our proprietary system designed to quickly and accurately measure the CO₂ emissions of each material during the procurement phase, which enables us to develop more effective strategies for reducing CO₂ emissions. Additionally, it can be used during the construction phase to plan for CO₂ emissions reductions during construction activities.

Starting Development of a Japanese Construction Resource Circulation Data Platform
Partnership with Madaster, a Netherlands-based leader in the circular economy

In response to increasing procurement-related risks associated with resource depletion and the challenges of waste management, there is a growing need to promote efficient, circular use of resources across the entire lifecycle of products, production processes, and business operations. This involves fostering integration of arterial and venous activities^*1 between companies and industries as well as driving resource circulation throughout the lifecycle.
Construction projects use a diverse array of materials and equipment, such as structural components like steel, concrete, and wood as well as glass, gypsum board, components for HVAC systems and sanitary equipment, and more. Given the long lifecycles of buildings --from procurement and construction to operation, maintenance, and demolition --and the varying replacement timelines for different materials and equipment, from a circular economy perspective, it is crucial to develop a management system that integrates and oversees all such elements throughout a building's lifecycle.
To address this need, we have partnered with Madaster, a Dutch company renowned for its advanced resource circulation database that quantifies the environmental impacts of each material and piece of equipment. We are now working to create a Japanese version of the construction resource circulation data platform using Madaster's platform. This system that we are experimenting links CAD (BIM/CIM) data for construction projects, such as buildings and bridges, with material specification data in Excel, this enables us to quantify the circularity^*2 of each material and piece of equipment used throughout the entire lifecycle of a building, as well as the overall circularity of the building itself while calculating and visualizing the associated CO₂ emissions. By utilizing this platform, we can plan construction projects efficiently from the design stage, with a focus on high resource circularity and CO₂ emissions reduction throughout building lifecycles. Additionally, the platform can predict the extent to which materials can be recycled in the demolition stage, this potentially transforming buildings into material banks for construction^*3.

• *1Integration of arterial and venous activities: Collaboration between “arterial” companies that supply resources through manufacturing and distribution, and “venous” companies that collect, sort, and recycle waste after use or consumption. Such a system is crucial for promoting resource circulation across the entire lifecycle of products in a circular economy.
• *2Circularity: A unique metric developed by this platform, calculated based on the recycled material usage rate, the proportion of materials that can be recycled during demolition, and longevity indicators.
• *3Material banks for construction: The concept of viewing a building as a repository of resources, treating it as a “bank” of materials.

Developing a Nature Positive Evaluation Method
Quantitative assessment of the environmental impacts of construction projects

The construction industry inherently interfaces with and modifies natural environments. It relies on natural capital, such as construction materials, and impacts such natural capital negatively through land modification and other activities while positively contributing by preserving and creating natural environments. As part of our 2050 goals, in our efforts to realize a nature co-existing society, we aim to minimize the adverse impacts associated with construction activities and to maximize the positive impacts through nature co-existing projects, thereby achieving and deepening our nature positive approach.
We have embarked on developing the Nature Positive Evaluation Method to quantitatively assess positive and adverse impacts on natural environments. This evaluation method will consider natural capital --namely, resources generated by nature --and economic elements. We are collaborating with Professor Shunsuke Managi of Kyushu University, who has extensive research experience and expertise in natural capital evaluation. Our objective is to establish an empirically validated evaluation method specifically tailored to construction projects.

Features of the evaluation method

• 1.Quantitative assessment of construction projects' impacts on natural capital
• 2.Simplification of input items for broader application to various construction projects
• 3.Support for clients in disclosing information related to nature positivity

By leveraging this evaluation method, we aim to accurately understand and assess the impacts of construction projects on natural capital. This will drive our efforts toward achieving nature positive outcomes in the construction industry.

Application to the information disclosure based on the TNFD (Taskforce on Nature-related Financial Disclosures) Recommendations

Quantitatively assessing the impacts of construction projects on local environments using this evaluation method is expected to prove useful in identifying and evaluating priority locations* as required by the TNFD recommendations for information disclosure.

*Priority Locations (as defined by the TNFD) Priority locations are locations that are: Material locations: Locations where an organization has identified material nature-related dependencies, impacts, risks and opportunities in its direct operations and upstream and downstream value chain(s); and / or Sensitive locations: Locations where the assets and/or activities in its direct operations -and, where possible upstream and downstream value chain(s) -interface with nature in: Areas important for biodiversity; and/or Areas of high ecosystem integrity; and/or Areas of rapid decline in ecosystem integrity; and/or Areas of high physical water risks; and/or Areas of importance for ecosystem service provision, including benefits to Indigenous Peoples, Local Communities and stakeholders. Source: Recommendations of the Task Force on Nature-related Financial Disclosures, September 2023

Environment-Related Research and Development Investment

Demand for ZEB buildings is expected to increase in preparation for the achievement of the Japanese government's target of "ensuring energy performance that meets the ZEB standard for newly constructed buildings in 2030". Moreover, demand for environmentally friendly concrete, wooden architecture and other low-carbon and decarbonized construction materials is also expected to increase.
As the market is expected to increase, TAISEI will proactively invest in research and development to secure a market ahead of competing general construction contractors and construction material manufacturers in terms of technology development.

Investment Execution Status and Plans

Medium-Term Business Plan (2021-2023)

In the previous Medium-Term Business Plan, we aimed to allocate 60 billion yen over three years to environmental-related investments. Of this, 42 billion yen was designated for the development of technologies that contribute to industries expected to grow through a positive cycle between the economy and the environment as well as for developing competitive technologies. We practically executed approximately 52 billion yen of investments during that period.

Medium-Term Business Plan (2024-2026)

In the current Medium-Term Business Plan, we have set a target of 75 billion yen for environmental-related investments over three years. Of this, 60 billion yen will be allocated to developing technologies that address social and environmental issues, and 15 billion yen to renewable energy respectively.

To fund these environmental-related investments, we are utilizing sustainability-linked loans and green bonds. Going forward, we also plan to employ financing aligned with our newly established sustainability finance framework.

Internal Carbon Pricing (ICP)

In 2021, TAISEI introduced the Internal Carbon Pricing system with the expectation of the following three effects.

Expected Effects

1. Visualize the results and effects of investment and measures that contribute to decarbonization, by converting CO₂ emission reductions into monetary values through the introduction of ICP.
2. By using the ICP system as an incentive for action that contributes to decarbonization and as a guide for investment decisions, capital investment and technology development that contribute to decarbonization and activities that reduce environmental burden will be promoted, and thus activities toward the achievement of carbon neutrality will be accelerated.
3. Recognize the potential impact of carbon pricing and prepare for the introduction of a carbon tax, etc.

ICP price

Based on the "Net Zero by 2050 (NZE)" of the International Energy Agency (IEA) etc. the ICP price is currently set at JPY 11,000 until 2026, and is to gradually increase until 2050.

Risk Management

Promotion System

Based on our Risk Management Policy and the basic regulations for risk management, TAISEI established an overall systematized risk management system under the supervision of the Board. We set up an appropriate management system that also addresses major ESG-related risks such as quality, compliance, information, safety and the environment.

Promotion of Group-wide risk management

Taisei has established a risk management system with the President as chief executive and the general manager of the Business Administration Div. as Chief Risk Management Officer (CRO), and works to ensure ongoing operation of the risk management system to appropriately determine and manage risks relating to business operations. Every year, based on the risks that materialized in that fiscal year, the risk management content for the following fiscal year is reviewed, and the plan-do-check-act (PDCA) cycle is operated and the effectiveness of the risk management organization is verified.

Company-Wide Risk Management System

Business Risks

Risks that may have a significant impact on company operations are reported to the Management Committee and the Board, and the response policy with respect to those risks is studied and determined in a comprehensive manner and reported in “Business Risks” in the Annual Securities Report. Concerning environmental management, we identified “Risks of Violating Environmental Laws and Regulations” and “Risks associated with Environmental Issues including climate change” as “Business Risks.”

Risks Associated With Environmental Issues Including Climate Change

In the process of formulating the TAISEI VISION 2030 achievement plan and the Medium-Term Business Plan (2024-2026), we identified associated with environmental issues, including climate change, across various business divisions. We then analyzed the impacts of these risks on our business and considered appropriate countermeasures. These analyses and countermeasures were then reflected in our management strategy after obtaining the approval of the Board.
These risks are aligned with those identified and evaluated under our Environmental Management System (EMS), which is based on the ISO 14001.

Indicators and Targets

Decarbonized Society (the entire Group)

Taisei Group’s CO₂emissions

More than 90% of Taisei Group CO₂ emissions are Scope 3.
Within Scope 3, more than 90% of emissions are Category 1 and Category 11.

• Category 1CO₂ emitted during the manufacture of steel materials such as steel frames and steel reinforced bars, cement, and concrete
• Category 11CO₂ emissions expected to be emitted during the period of use of the building delivered in that year

［Target group companies］ Taisei Corporation, Taisei Rotech Corporation, Taisei-Yuraku Real Estate Co., Ltd., TAISEI U-LEC Co., LTD., SEIWA RENEWAL WORKS CO., LTD., TAISEI SETSUBI CO., LTD.,J-FAST Co., Ltd., TAISEI HOUSING CORPORATION

Recycling-Oriented Society (Taisei Corporation/non-consolidated)

(FY2023 results will be published at a later date.)

Nature Co-existing Society (Taisei Corporation/non-consolidated)

(FY2023 results will be published at a later date.)

TNFD core global disclosure metrics

The TNFD recommendations require companies to first identify their priority locations and then disclose metrics for those specific locations. We will proceed with identifying priority areas and consider the disclose of metrics required by TNFD. Environmental data including the following items is disclosed on our website.

• For details, please refer to Environmental Data.

Sustainability

• Top Commitment
• Sustainability Management
  • Sustainability Management
  • Message from CSuO
  • Sustainability of the Taisei Group
  • Creation of Value and Policies
    • Toward Value Creation and Sustainable Growth
  • Materiality
  • Participation in Initiatives
  • The seven core subjects of ISO 26000
• Environment(E)
  • Environment(E)
  • Information Disclosure of Integrated Environmental Management
  • Realization of a Sustainable and Environmentally Friendly Society
    • TAISEI Green Target 2050
    • Decarbonized Society
      • Avoided Emissions
    • Recycling-Oriented Society
    • Nature Co-Existing Society
    • Forest Resources / Forest Environment
    • Water Resources / Water Environment
    • Compliance with Environment-related Laws and Regulations
  • Environmental Due Diligence
  • Environmental Data
  • Independent Assurance
• Social(S)
  • Social(S)
  • Human Rights
    • Respect for Human Rights
    • Diversity, Equity, and Inclusion
    • Human Rights Due Diligence
  • Labor Practices
    • Realization of an Attractive Working Environment That Is Good to Work in
    • Human Resource Development
    • Health Management
    • Thorough Management of Occupational Health and Safety
    • Cultivation of Technical Staff and Securing of Human Resources
  • Consumer Issues
    • Ensuring Quality and Improving Technology
    • Technical Development for Realizing a Sustainable Society
  • Fair Operating Practices
    • Promotion of Supply Chain Management
  • Community Involvement and Development
    • Contribution to Local Communities
    • Social and Cultural Contribution Activities
• Governance(G)
  • Governance(G)
  • Corporate Governance
  • Risk Management
  • Fair Operating Practices
    • Thorough Compliance / Restructuring of the Group Governance System
    • Management of Information and Intellectual Property Rights
• External Evaluations/Sustainable Finance
  • External Evaluations/Sustainable Finance
  • External Evaluations
  • Sustainable Finance
    • Sustainable Finance Framework
    • Green Bonds
    • Sustainability Link Linked Loans, etc
• ESG Data and Comparisons
  • ESG Data and Comparisons
  • ESG Data
  • GRI Standards Comparison Chart
  • ISO26000 Comparison Table
  • Information Disclosure of Integrated Environmental Management
• Editorial Policy
• Library