Murata and the Environment

TCFD measures

Basic approach
Governance
Strategy
Risk management
Metrics and targets

Basic approach

Climate change is an imminent threat to the life of humanity and the health of the planet. It will also affect our business, our customers and our supply chain. The scientific assessment from the United Nations’ Intergovernmental Panel on Climate Change (IPCC) clearly shows that global warming is caused by human emissions of CO₂ and calls for urgent deep decarbonization.

We believe businesses have an important role in fighting climate change. We recognize that climate change presents both risks of increased cost and disruption for our business as well as new opportunities for Murata to create value while meeting the needs of society. The next decade presents immense opportunities to expand our business into new domains, while living out Murata’s mission of contributing to the advancement of society by creating innovative products and solutions.

Murata endorsed recommendations by the TCFD established by the FSB^*1. We will analyze risks and opportunities brought on by climate change and work to disclose information related to governance and strategies in accordance with the TCFD recommendations.
The followings outlined Murata’s efforts in the four thematic areas specified in the TCFD recommendations, namely, governance, strategy, risk management, and metrics and targets.

Link: Create a decarbonized society

	Murata Group's approach	Progress of fiscal 2024 initiatives
Governance	The Board of Directors has overall accountability for the management of all risks and opportunities including climate change, and supervises the Climate Change Committee and others upon receiving reports from them on measures and decisions The CSR Management Committee is chaired by the President and oversees the Climate Change Committee. The Climate Change Committee, chaired by the Executive Deputy President, reports on climate change countermeasures to the CSR Management Committee twice a year and promotes initiatives at the management level. Progress management of environment targets and review of decarbonization-related investment decisions Responsible department promotes company-wide climate change prevention measures based on the decisions made by the Climate Change Committee Introduction of a remuneration system with remuneration fluctuating based on the achievement level of social value targets, including climate change measures, for part of the officers' stock-based compensation (excluding Audit and Supervisory Committee Members, etc.)	The Climate Change Committee held four meetings (including special meetings) Subjects reviewed: CFP^*2 calculation with the aim to create further energy-saving measures and disclosure of such information to customers Introduction of on-site renewable energy to business sites and procurement of renewable energy from outside the premises Setting materiality goals for climate change measures in the next medium-term plan Brought forward the achievement of 100% renewable energy sourcing; set carbon neutrality goals encompassing Scope1,2, and 3 emissions
Strategy	Set “Create a decarbonized society” as one of the priority issues (materiality) Formulate Scope1,2 GHG^3 emission reduction target (1.5°C) and Scope3 GHG emission reduction target (WB 2°C) in conformity with the Paris Agreement (SBT^4-certified) Approaches for reducing Scope1 and 2 toward the attainment of medium- to long-term goals: Join RE100^*5 and formulate a long-term plan for introducing renewable energy for business use Reinforce active efforts for renewable energy and energy saving measures that utilize the sustainability investment promotion system (including the internal carbon pricing system)	Brought forward the achievement of 100% renewable energy sourcing; set carbon neutrality goals encompassing Scope1,2, and 3 emissions Implemented measures for achieving the medium-term targets established in Vision2030 Gave briefings and interviews targeting suppliers for the reduction of Scope3; rolled out modal shifts Signed a virtual PPA^*6 agreement with Mitsubishi Corporation and RENOVA, Inc. to procure environmental value with additionality, sourcing from their newly developed solar power plants; operation ongoing
Risk management	Incorporate risks deriving from climate change into the group-wide risk management items under the Risk Management Committee and identify and assess them as major risks for the group. Match with risks based on scenario analysis, and monitor efforts Extract all transition risks and physical risks that derive from climate change impact. Assess the impact level of each risk For the operation aspect, obtain ISO 14001 certification for offices and promote continuous improvements while assessing environmental risks	Implemented and disclosed risk/opportunity analysis according to transition and physical scenarios Applied the internal system “sustainability investment promotion system” as a measure for introducing carbon pricing in different countries Captured the global trends related to climate change and applied them to corporate efforts and countermeasures
Metrics and targets	Fiscal 2050 target GHG emissions (Scope1,2,3): Carbon neutral Fiscal 2040 target GHG emissions (Scope1,2): Carbon neutral Fiscal 2035 target Renewable energy sourcing: 100% Fiscal 2030 targets GHG emissions (Scope1,2): 873 kt-CO₂e (46% reduction vs FY2019) GHG emissions (Scope3): 3,246 kt-CO₂ (27.5% reduction vs FY2019) Renewable energy sourcing: 75%	Fiscal 2024 performance GHG emissions (Scope1,2): 1,044 kt-CO₂e (35% reduction vs FY2019) GHG emissions (Scope3): 3,395 kt-CO₂ (24% reduction vs FY2019) Renewable energy sourcing: 39.2%

*1
Financial Stability Board.
*2
CFP is an abbreviation of Carbon Footprint of Products. It calculates the amount of GHG emitted throughout the entire lifecycle.
*3
GHG: Greenhouse gas. Gases that contribute to the greenhouse effect.
*4
SBT (Science Based Targets): Science-based greenhouse gas emission reduction targets in accordance with the Paris Agreement.
*5
RE100: An international initiative administered through a partnership between the international NGO called “The Climate Group” and CDP in which globally influential companies aim for 100% renewable energy.
*6
PPA stands for Power Purchase Agreement.

Governance

Murata is strengthening its governance system for climate change measures. The Board has overall accountability for the management of all risks and opportunities, including climate change. Our President and an Executive Deputy President, who are Executive Directors of the Board, chair Murata’s CSR Management Committee and Climate Change Committee respectively and are ultimately accountable for the oversight of our climate change agenda.

The Climate Change Committee is responsible for governing Murata’s overall strategies in response to climate change and monitoring the delivery of climate-related objectives across the Murata group of businesses. The Climate Change Committee reports its activity track records to the CSR Management Committee, which is an upper-level organization, and the CSR Management Committee reports these results to the Board of Directors for discussion. The Board of Directors takes the risks and opportunities that occur due to climate change into consideration, and directs business plans and business strategies while considering related policies and current initiatives of Murata.
In addition, a Presidential award and Committee award system was established for initiatives to reduce GHG emissions at each office as part of our incentives. These awards are primarily given for cases selected according to economic efficiency, reasonableness, and other unique standards adopted by Murata based on GHG reduction through energy saving and renewable energy.

Chaired by the Executive Deputy President, the Climate Change Committee is composed of responsible people of Manufacturing Department, Research and Development Department, Environment Department, Sales Department, and other business units. Meetings are held two or more times per year to make decisions on matters for discussion proposed by the subcommittees. Meetings concerning specific themes are also held on an ad hoc basis as the themes occur. The Committee held discussions concerning Murata’s climate change strategy with the 3 subcommittees: Climate Initiatives/Scope3 Subcommittee, Renewable Energy Subcommittee, and Energy-saving Subcommittee. In fiscal 2024, the discussions covered CFP calculation with the aim to create energy-saving measures (and disclosure to customers), introduction of on-site renewable energy to business sites and procurement of renewable energy from outside the premises, setting materiality goals for climate change measures in the next medium-term plan, earlier achievement of 100% renewable energy sourcing, and setting carbon neutrality goals encompassing Scope1,2, and 3 emissions.

Major reports and resolutions made in fiscal 2024 by the Board of Directors regarding climate change measures include the following:

Progress of achievement of targets regarding the “reinforcement of climate change countermeasures” materiality up to fiscal 2024
Setting “Create a decarbonized society” as materiality from fiscal 2025 and setting the evaluation criteria and targets
Bringing forward the achievement of 100% renewable energy sourcing and approaches to carbon neutrality

Link: Murata’s Corporate Governance System

Subcommittees

■Climate Initiatives/Scope3 Subcommittee: Established in 2019 Led by the Environment Department manager, composed of senior managers of related departments. In addition to considering the viability of climate related strategies, shares successful cases of cross-departmental cooperations and initiatives. To further advance measures to reduce Scope3 emissions, the subcommittee was renamed to Climate Initiatives/Scope3 Subcommittee in fiscal 2025 and welcomed new members.
Fiscal 2024 results

Briefings targeting suppliers for the reduction of Scope3 emissions and sophistication of measures; modal shifts
Review of compliance with sustainability disclosure laws such as CSRD and SSBJ

■Renewable Energy Subcommittee: Established in 2021 Led by senior managers of the Battery Department, Business Development Department, Environment Department, etc. Since joining “RE100,” considers initiatives to promote the introduction of renewable energy across the company such as the maximum introduction of solar power generation where possible at domestic business sites and long-term procurement contracts of power based on renewable energy.
Fiscal 2024 results

Efforts along the roadmap to the achievement of 100% renewable energy sourcing
Studied procurement of renewable energy from outside the premises and made into actions

■Energy-saving Subcommittee: Established in 2022 Led by the Environment Department as well as senior managers of each division and business sites. Murata believes continued energy saving is crucial to reduce GHG emissions, and the subcommittee promotes visualization of energy consumption and GHG emissions from product development to manufacturing as well as energy saving measures.
Fiscal 2024 results

Efforts to achieve higher CFP accuracy; organization of results of and issues in energy-saving diagnoses at offices
The Murata Group implemented 940 energy-saving measures (as cumulative total of offices, expecting an annual reduction of approximately 81 kt-CO₂e)

Strategy

Murata identifies climate change countermeasures as critical issues for a manufacturing company and sets “Create a decarbonized society” as one of the materiality issues in Vision2030 and the medium-term management plan. By capturing climate change in both aspects of opportunity and risk, Murata seeks to practice corporate social responsibility and establish further competitiveness.

Murata analyzed risks and opportunities in the two scenarios announced by IPCC^*1 and IEA^*2, namely “4°C or higher global average temperature increase” and “keeping the global average temperature increase to below 2°C (1.5°C or below in some parts), agreed upon in the Paris Agreement.” As a result, we revised the “Reinforcement of climate change countermeasures” goal that we had up to fiscal 2024 to “Create a decarbonized society” with the intention to contribute to in-house and global decarbonization. As specific initiatives, Murata will continuously promote product development with competitiveness in terms of smaller size, higher efficiency, and longer service life in order to respond to the demand for high-efficiency parts required for changes in society, such as increasing energy saving and renewable energy needs, the transition in automotive industry related to the shift to EVs, and further speed and capacity increase in information communications infrastructure. Murata also aims to contribute to a decarbonized society and explore new business opportunities by rolling out energy saving and renewable energy measures both internally and externally, combining the solar power generation system introduced at Murata sites and Murata products such as storage batteries and energy management systems.
In fiscal 2024, we revised the transition risk analysis for TCFD. The results of scenario analysis will be reflected in future management plan strategies to formulate concrete plans for action.

*1
Intergovernmental Panel on Climate Change (IPCC)
*2
International Energy Agency (IEA)

■Summary of analysis■

Transition opportunity/risk analysis
Item	Analysis conditions
Target	World in 2030 with a view to 2050
Adopted scenarios	4°C scenario: IPCC RCP 8.5, IEA/STEPS 1.5/2°C scenario: IPCC RCP 1.9 and 2.6, IEA/SDS (partly IEA/NZE)
Timing	Short-term: Within the next 3years, Medium-term: Within 3 to 5 years, Long-term: 5 to 10 years
Impact levels	Large: 20 billion+ JPY, Medium: 10 billion JPY to 19.9 billion JPY, Small: Below 10 billion JPY
Scenario analysis target	Current business

Critical transition risks and action policies
Climate change element		Item	Action policy	Impact level^*4
Transition risk	Increase in decarbonized product needs Short to medium-term^*3	Customer loss due to incapability to respond to decarbonization needs	Continuous product development with competitiveness in terms of smaller size, higher efficiency, and longer service life Reduction in CO₂emissions in collaborations with suppliers Active introduction of renewable energy for the promotion of decarbonization in the manufacturing process Disclosure of product CFP for customers with high interest in the environment	High
	Increase in environmental awareness Short to medium-term^*3	Deterioration of corporate value due to changes in investors' criteria	Continuous dialogues with investors Timely and appropriate disclosure of information through the TCFD framework or CDP Climate Change Committee monitors the progress of achievement of environment management targets	Low
	Stricter energy saving standards medium to long-term^*3	Increase in plant building and operating costs	Decrease in cost burden through active use of energy saving subsidies and preferential tax treatment Offsetting increased building costs by reducing running costs through energy saving Active adoption of low-environmental burden building materials for constructing plants	High
	Strained balance between mineral supply and demand medium to long-term^*3	Increase in material procurement costs due to the strained balance between the supply of and demand for rare metals, etc.	Efforts to reduce the amount of materials used, associated with downsizing of products Recycling process efforts and exploration of alternatives	Medium
	Introduction of carbon pricing medium to long-term^*3	Increase in fuel and power costs	Energy saving efforts at manufacturing sites Reduction in fossil fuel-derived power consumption due to active introduction of renewable energy New attempts at realizing alternative energy sources, such as using hydrogen Introduction of internal carbon pricing system in fiscal 2021 aimed at promoting investments in energy saving and renewable energy measures	Medium
	Instability in power supply due to active implementation of renewable energy medium to long-term^*3	Loss of business opportunities due to insufficient BCP response	Enrichment of BCP at individual manufacturing sites Ensuring a backup system at key manufacturing sites	Low

Critical transition opportunities and action policies
Climate change element		Item	Action policy	Impact level^*4
Transition opportunity	Increase in decarbonized product needs Short to medium-term^*3	Increase in the demand for high added-value, low-power consumption devices	Provision of the latest electronic parts that contribute to the evolution of hardware Continuous product development with competitiveness in terms of smaller size, higher efficiency, and longer service life	High
		Expansion of business opportunities due to supporting energy saving and renewable energy needs	Contribution to a decarbonized society through battery and power supply business Promote stakeholders' understanding of the competitiveness of energy saving and renewable energy efforts of Murata's products through information disclosure based on TCFD and participation in environmental initiatives (RE100, SBT, CDP responses) Creation of new businesses related to energy saving and renewable energy Environmental monitoring using modules and sensors (in-house technologies)	Medium
	Progression of EV shift Short to medium-term^*3	Increase in the demand for electronic parts for automobiles (CASE) and automobile infrastructure	Acquisition of opportunities due to the expansion of the parts market associated with the shift to EVs Provision of new value including software solutions drawing on findings in the field of communications Exploration of business opportunities in the Out-Car area	High
	Progress in the social implementation of information infrastructure^5 Short to medium-term^3	Increase in the demand for electronic parts for high-speed, large-capacity communications and sensing society	Promotion of the development of products that can respond to the technical requirements for the upcoming 6G society Efforts for low power consumption and reduced loss Continuous development of sensing techniques and devices	High
	Energy saving and improved efficiency in business operations Short to medium-term^*3	Reduction in power costs through introducing renewable energy and storage battery facilities in plants and promoting energy saving	Promotion of energy saving efforts at manufacturing sites Reduction in costs to purchase non-fossil fuel-derived power by actively introducing renewable energy and storage batteries	Low

Physical risk analysis
Impact is analyzed with the support of Weathernews Inc.
Item	Analysis conditions
Target	World in 2050
Adopted scenarios	IPCC RCP 2.6, RCP4.5, RCP 8.5
Climate models/data sets	AQUEDUCT (flood/storm surge), d4pdf (strong wind), CMIP6^*6 (extreme heat)
Timing	Medium-term: 2030, Long-term: 2050
Analysis target	20 major manufacturing sites and offices primarily in Japan, China, and Southeast Asia (covering 80% based on the number of employees in the Group)
Specific risks	Among the 10 climate hazards (extreme typhoons and extreme heat, extreme drought and landslide, extreme rainfall flood and sea-level rise, extreme precipitation, storm surge, river flood or snowmelt), those that are estimated to affect Murata significantly were chosen (flood/storm surge, extreme heat, strong wind) for verification of financial impact on Murata’s business activities. We are planning to analyze the impact on the whole value chain, such as suppliers and product transportation while also improving on the accuracy of verification results.

Physical risks and action policy
Natural disaster		Mitigation measures	Impact level^4 ^7
Physical risks	Extreme heat	Energy saving: Initiatives to lower our demand for electricity, a major source of our CO₂ emissions Renewable energy: Efforts for introducing solar power generation and storage batteries and for procurement of renewable energy Link: Integrated renewable energy control solution efinnos Internal systems: An internal carbon pricing system was introduced in 2021 to align investment decision-making with Murata's commitment to CO₂ emissions reduction Targets: Joined RE100, committing to sourcing 75% renewable energy by 2030 and 100% by 2035. Established Scope 1, 2 and 3 reduction targets in conformance with SBT standards, and aims to achieve carbon neutrality by 2050.	Medium
	Flood / Storm surge		Low
	Strong wind		Low

*3
Short-term: Within the next 3 years, Medium-term: Within the next 3 to 5 years, Long-term: Within the next 5 to 10 years
*4
Impact levels: Large: 20 billion+ JPY, Medium: 10 billion to 19.9 billion JPY, Small: Below 10 billion JPY
*5
Elements that indirectly constitute opportunities
*6
Coupled Model Intercomparison Project (CMIP6) is a collaborative framework led by World Climate Research Program (WCRP) with the aim to foster climate model improvements and support national and international assessments of climate change impact.
*7
Annual impact considering recurrence interval

Value-at-Risk (VaR)

Reflects the estimated financial loss that can incur to the selected portfolio or asset in a year, with a certain probability, if all the estimated hazard events occur under the considered scenarios and period.
This analysis uses Murata’s proprietary information to calculate VaR based on the following two aspects:
Loss from damages to assets: assessed by referencing past events, type of asset, total value of assets, etc.
Loss from business interruption: assessed based on the number of days of business stoppage due to disaster

As a result of analysis based on Murata’s proprietary information, VaR is ten billion yen to several tens of billions of yen (around 10% of Murata’s current income in fiscal 2024). We are planning more in-depth analysis and its reflection into more specific business strategies.
Our Business Continuity Plan (BCP) aims to minimize the impact of hazards on our operations.

Link: Business Continuity Plan

Risk management

The CSR Management Committee regularly evaluates the materiality of a wide range of social, environmental, and economic issues through a structured process. In the most recent materiality assessment, climate change was recognized as a critical risk and endorsed by the Board of Directors as a materiality for “Create a decarbonized society,” identifying management oversight and actions for this materiality as an important management issue.
Link: Identifying material issues

On a strategic level, the Climate Change Committee provides oversight on Murata’s climate change agenda, including the continuous monitoring of evolving climate-related risks.
To evaluate the potential risks and opportunities posed by future climate change and the resilience of our business strategy, we have been continuously conducting in-depth analyses of physical scenarios and transition scenarios since fiscal 2021. Other efforts include a full-scale introduction of the sustainability investment promotion system in fiscal 2022, and decarbonization initiatives with the perspective of unprecedented discontinuous challenges, including the adoption of the internal carbon pricing system. Aiming to refine and reduce Scope3 initiatives, we have continuously given briefings for decarbonization targeting more than 250 companies in Japan and interviews with suppliers. As a result, we were able to increase the primary data percentage of Category 1 CO₂ emissions up to 16.7%.

On the operational level, ISO 14001 is enforced in our production facilities to drive continuous improvement while assessing environmental and climate change risks. Since 2018, Murata has also been capturing the latest information on global climate change in a timely manner through its regular membership with Japan Climate Leaders' Partnership (JCLP) and has applied it to corporate efforts and actions.

Risks arising from climate change are incorporated into company-wide enterprise risk register under the supervision of the Risk Management Committee. For example, guidelines for responding to severe weather conditions are provided in our Business Continuity Plan (BCP) to minimize business disruption.
Link: Reinforcing risk management

Our participation in industry associations, such as JCLP and JEITA, and global alliances, such as RE100, can help us gather insights into emerging risks and opportunities related to climate change.
For the participation in an industry association or the review thereof, in line with its commitment to the Paris Agreement, Murata periodically checks for any significant discrepancies or deviations from the missions of the industry association in light of conformity with Murata’s aims and business activities. Withdrawal will be considered if conformity with their mission became difficult.

Metrics and targets

In order to contribute to global initiatives to limit the average temperature increase to 1.5°C, Murata acquired SBT certification.
Specifically, we have set Scope1,2 and Scope3 GHG emissions targets according to the 1.5°C scenario and WB 2°C scenario, respectively.
As a member of RE100, we have also committed to achieving 75% renewable energy by 2030 and 100% by 2035.
(Refer to ESG data collection for a breakdown of CO₂ emissions by scope/category.)
In the Medium-term Direction 2024, we set up strategic investments of 230 billion JPY over three years from 2022 to 2024 as capital allocation. We budgeted for environmental investments, which covers long-term climate change measures, and are steadily investing toward attaining the goals. Through active efforts for energy saving and renewable energy, we were able to achieve our fiscal 2024 medium-term goals. We will continue to implement measures in line with the Medium-term Direction starting fiscal 2025, under which we have designated a strategic investment of 220 billion yen.
Link: Medium-term Direction 2027

Murata Group’s environment targets (Create a decarbonized society)
Our Vision for 2030
To realize a sustainable global environment through co-creation with stakeholders and to spread it to our own business and to society.
Medium- to long-term goals
FY2027 targets	GHG emissions (Scope1,2): 976 kt-CO₂e (39% reduction vs FY2019) GHG emissions (Scope3): Data refinement Renewable energy sourcing: 55%
FY2030 targets	GHG emissions (Scope1,2): 873 kt-CO₂e (46% reduction vs FY2019) GHG emissions (Scope3): 3,246 kt-CO₂ (27.5% reduction vs FY2019) Renewable energy sourcing: 75%
FY2035 target	Renewable energy sourcing: 100%
FY2040 target	GHG emissions (Scope1,2): Carbon neutral
FY2050 target	GHG emissions (Scope1,2,3): Carbon neutral

Graph of Total GHG emissions — Trend of total GHG emissions and renewable energy sourcing rate, and medium- to long-term targets