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Response to TCFD

We believe that climate change is a factor affecting the planet, our activities, our customers and our supply chain.
We will promote climate change measures throughout the company and strive to enhance the quality and quantity of information disclosure based on the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures).

Governance

To manage risks related to the global environment, including climate change, SMK has established the Environmental Conservation Committee to oversee and strengthen environmental protection activities throughout the Group.
Environmental Management

The committee meets quarterly and reports to the CSR Committee, a subcommittee of the Board of Directors and the Executive Committee, which is chaired by the President and Representative Director. The Environmental Conservation Committee is chaired by the Vice President of the Environmental Division and consists of representatives from divisions, Works, and other related departments. The Environmental Conservation Committee manages greenhouse gas and waste emissions, and works to share and laterally spread information on energy conservation and waste reduction measures within the Group.

In 2021, the "Carbon Neutrality Task-Force" was established as a subordinate organization of the Environmental Protection Committee to strengthen cooperation on climate change measures within the Group, especially among Works and with the Group headquarters.

Strategy (Risks/Opportunities)

The Group's risks and opportunities related to climate change are described below.
For scenario analysis, we will confirm detailed information and make estimates based on it to enhance our analysis of risks and opportunities.

●Risks

<Transition risks>
- Investment burden of high-energy efficiency equipment and renewable energy
   power plants.
- Impact on production activities of energy shortages due to the sudden change
   in direction to stop the use of fossil fuels, and increased electricity costs.
- Greater obligation to reduce greenhouse gas emissions: Increased electricity
   costs due to use of renewable energy menus.
- Changes in market/customer behavior: Decline in revenue due to inability
   to keep up with changes in market/consumer preferences.
- Decrease in credit options and increased prices due to reduction of
   greenhouse gas emission quotas in line with carbon neutrality
   progression.

<Physical risks>
- Damage to production sites: Decrease in income due to reduced production
   capacity.
- Increased costs due to impact on employees (health, safety, etc.).

●Opportunities

<Resource Efficiency / Energy Sources / Resilience>
- Reduce greenhouse gas emissions and electricity costs and strengthen
   resilience by owning renewable energy power plants.
- Reduce greenhouse gas emissions through the use of highly energy-efficient
   equipment and promotion of energy-saving activities.

<Product and service/market>
- Increase revenues by developing and offering products for low-carbon society
   and markets. (Renewable energy, telework, EVs, bicycles, etc.)

Risk management

Risk management related to climate change is handled by the Environmental Conservation Committee, which is under the umbrella of the Board of Directors, the Executive Committee, and the CSR Committee.

●To address the aforementioned risks, the company has implemented
   the following measures

- Promote energy conservation activities (investment in high-efficiency
   equipment, operational improvement activities).
- Promote possession of renewable energy power plants.
- Promote the development and provision of products aimed at a low-carbon
   society (environmentally-friendly products).
- Decentralization and optimization of production sites.

●Environmentally-friendly products

In order to develop products for a low-carbon society, the Company has established its own standards for environmentally conscious design in accordance with the ministerial ordinances of the Ministry of Economy, Trade and Industry.
Specifically, they are largely divided into four categories.

1. Energy-saving and high-efficiency products with reduced power consumption
    and standby power, and improved durability performance.
2. Resource-saving products that are smaller, lighter, thinner, and have fewer
    components.
3. Environmentally friendly products that use recycled materials,
    easy to disassemble and repair, solderless, plating-free, etc.
4. Reduction of the load on the manufacturing process, including reduction of
    input materials and ease of reuse.

In addition, products used in energy management, renewable energy, energy-saving home appliances, and bicycles are also positioned as products that contribute to the environment, and we aim to contribute to these markets.

Targets and Indices

Each year, we set management indices (environmental indices) related to the environment in order to contribute to climate change countermeasures and business cycles.
The environmental indices are CO2 emissions and waste emissions, which are indicated in terms of total emissions and emissions per unit of production value, respectively. The results are published annually on our website.
Environmental Preservation

In the future, we will work to disclose the occupancy of sales of environmentally friendly products and calculate CO2 emissions in the supply chain.