Disclosure Based on the TCFD Recommendations

With the issue of climate change growing increasingly serious, the Financial Stability Board established the Task Force on Climate-related Financial Disclosures (TCFD), which in 2017 announced its recommendations. These recommendations encourage companies to disclose information related to climate change so that investors can appropriately assess climate-related risks and opportunities.

Recognizing the potential of climate change to present medium- to long-term risks and opportunities that affect its business domains, in July 2021 MITSUBISHI MOTORS expressed its support for the TCFD Recommendations. Accordingly, we are analyzing the impact of climate change on our businesses and finances (scenario analysis). We will reflect the results of scenario analysis in our management strategies to enhance the resilience of our strategies and improve information disclosure in accordance with the TCFD Recommendations.

We recognize “responding to climate change and energy issues” as an important management issue and have accordingly identified it as one of our materiality issues. The Board of Directors makes decisions on important matters related to environmental initiatives, including those related to climate change, and oversees their execution. The Board of Directors approved the “Environmental Vision 2050” and “Environmental Targets 2030,” which were revised in FY2022, and these measures were announced.

To address climate change and energy issues, we have established the Sustainability Committee, chaired by the executive officer, president & CEO, who also holds top responsibility for initiatives related to climate change. The committee evaluates climate-related risks and opportunities, discusses response measures, and reviews progress and achievements in line with the Environmental Targets 2030. We have established the Carbon Neutrality Council under the Sustainability Committee. This council is chaired by the Executive Officer, Executive Vice President and consists of executives responsible for management strategy, products, manufacturing, procurement and logistics. This organization formulates medium- to long-term policies and goals based on the assessment of climate-related risks and opportunities, considering specific response measures in each area. These policies, goals, and their progresses are reported by the respective heads of each area at the Sustainability Committee for review and deliberation. The organization generally meets three times per year, and particularly important matters are deliberated and decided by the Board of Directors.

MITSUBISHI MOTORS considers climate-related risks and opportunities to be an important perspective in the formulation of our business strategy. We are identifying and evaluating short-, medium-, and longterm risks and opportunities, as well as analyzing the impact on our business based on multiple climate scenarios. We are also considering countermeasures in response to these risks and opportunities. As particularly high-impact migration risks, we identified the “strengthening of regulations for fuel economy/CO₂ and zero-emission vehicles” and the “introduction and expansion of carbon pricing.” We identified “increasing frequency and intensity of meteorological disasters” as a physical risk. While these risks may affect our business in various ways, we recognize that responding appropriately to these risks will lead to greater sales of electrified vehicles and new business opportunities.

Identified climate-related risks and opportunities

With the vision of “creating a vibrant society by realizing the potential of mobility,” MITSUBISHI MOTORS aims to enhance our corporate value over the long term by providing products with value that is unique to MITSUBISHI MOTORS through contributions to carbon neutrality and other efforts. As society-wide efforts to achieve carbon neutrality accelerate, we recognize that climate-related matters may affect our business, strategies, and financial plans, so we periodically review our strategies and plans as appropriate based on climate change risks and opportunities.

Impact on strategies and plans

Based on climate scenarios and future information from organizations such as the International Energy Agency (IEA), the Intergovernmental Panel on Climate Change (IPCC), and the Network for Greening the Financial System (NGFS), MITSUBISHI MOTORS considered the “less than 2°C scenario^*3,” which assumes actions by society to avoid climate change as of 2030 and 2050. We also looked at a “growth scenario^*4,” which assumes national policies continue to grow more stringent. Under these scenarios, we examined the risks and opportunities, focusing on areas with significant impact on our business activities.

In FY2023, we conducted an analysis of not only the risks, but also the impact on our opportunities to expand our sales as a result of increased demand for electrified vehicles.
We have expanded the scope of analysis to include overseas suppliers, and country- and region-specific scenario analysis is underway. The results of analysis related to the impact on our business of the associated risks and opportunities are as described below.

Impact of Risks and Opportunities on MITSUBISHI MOTORS’ Business Activities

MITSUBISHI MOTORS will incorporate measures to address climate-related risks and opportunities into our Environmental Plan Package^*5 and business strategies, which set forth the direction and goals of our environmental initiatives. In this way, we are promoting initiatives to reduce future risks, ensure sustainable business growth and enhance our resilience as a company.

On the product front, we will take our own plug-in hybrid electric vehicles (PHEV) and commercial electric vehicles in the Kei-car segment as a starting point, and leveraging the Allian’s technologies. We will develop electrified vehicles^*6 and promote fuel-efficient internal combustion vehicles, proactively introducing electrified vehicles that optimally meet customers’ needs, taking into consideration the energy situation and infrastructure development status in each country and region. Working toward carbon neutrality is one of the key challenges stated in “Challenge 2025,” our mid-term business plan. We will develop electrified vehicles and step up our efforts in the Alliance as we work toward the second phase of our plan to reinforce electrified vehicles (FY2026–2028). By FY2028, we plan to introduce nine electrified vehicle models. To date, we have introduced three: the “ASX PHEV/HEV models,” the “COLT HEV model,” and the “XPANDER/XPANDER CROSS HEV model.”

In our business activities, we will seek to minimize energy use and transition to renewable sources of energy to reduce CO₂ emissions.

Across the supply chain, we will collaborate with business partners, related companies and organizations, and governments and municipalities to reduce CO₂ emissions at the production stage (through raw materials and parts) and in logistics (including products). We will also promote renewable energy and charging infrastructure, utilize carbon-neutral fuel and promote V2X^*7.

We believe the spread of electrified vehicles represents a chance to do new business in the form of reuse of used batteries, energy management, and data business using vehicle driving and battery data, and in collaboration with our partners and municipalities we will grow a mobility business that contributes toward the realization of a carbon-neutral society, which represents a unique opportunity for us as an automotive maker, into a fourth pillar of revenue after vehicle sales, financing (leasing), and after sales^*8.

We have established a cross-functional team under the Sustainability Committee to conduct scenario analysis based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).
We have identified and assessed climate-related risks and opportunities that could affect our business, considering their potential occurrence and impact levels.
We have incorporated goals and action plans for addressing climate-related risks and opportunities that have a particularly significant impact, and are monitoring progress through the Sustainability Committee.

The climate-related risks, opportunities, and corresponding measures identified by the Sustainability Committee have been assigned to responsible executives at the executive officer level. We have set KPI and are implementing a PDCA cycle. Additionally, reports on critical risks and opportunities requiring prompt action are provided to the Board of Directors, which decides on appropriate responses.

In FY2018, we identified material issues that we should address, involving various problems related to fields of the environment, society, and governance. We have positioned “responding to climate change and energy issues” as one of the most critical material issues, and we are stepping up our efforts in this regard across the Group.

Risks affecting our business are managed throughout the Group and include risks related to the effects of climate change. In addition, the Internal Control Committee manages operational hazard risk, based on the annual “Companywide Risk Survey.”

Please see P105 for our Group’s risk management framework, including the Internal Control Committee.

MITSUBISHI MOTORS formulated the Environmental Plan Package in 2020. Through electrified vehicles and the increased use of renewable energy, we aim to become carbon neutral by 2050 and contribute to the realization of a society that is resilient to climate change. We also formulated the “Environmental Targets 2030,” which clarifies specific initiatives to be achieved by 2030 in accordance with this vision. As major indices to be monitored and evaluated under “Action to Climate Change,” we set a target for Scope 1 and 2^*9 in the category of “CO₂ emissions from our business activities.”
We also set a target of reducing emissions under Scope 3^*9, Category 11 (use of sold products), which accounts for around 70% of total emissions throughout our supply chain, as well as “reduction in CO₂ emissions from new vehicles” and “ratio of electrified vehicles sales.”

In an effort to reinforce sustainable management, aimed at ensuring the Group’s sustainable growth, in FY2022 we added ESG-related items to an index used to determine the medium- to long-term performance-linked compensation for executive officers.
In relation to the environment, we introduced “CO₂ emissions from business activities” as an indicator to measure progress in addressing the escalating climate.

To move forward on efforts to reduce CO₂ emissions, we will introduce internal carbon pricing (¥18,000 per ton of CO₂) for domestic sites from FY2024, taking into account IEA and other international carbon prices. We will use this as one of the factors for consideration when making decisions on capital investment.

MITSUBISHI MOTORS calculates CO₂ emissions based on a GHG protocol. The table below shows actual CO₂ emissions in Scope 1, 2, and 3 for the period from FY2019 to FY2023.

To ensure our information is reliable and transparent, we have obtained independent third-party certification for our Scope 1 and 2 emissions. Please see here for details.

We are promoting a host of measures based on the Environmental Plan Package, which we formulated in 2020. We are developing electrified vehicles and technologies to improve fuel efficiency, introducing energy-saving equipment in production processes and using renewable energy in factories, offices and dealerships.

The Environmental Plan Package comprises the Environmental Policy, which incorporates our medium- to long-term perspective, the Environmental Vision 2050, which sets out our vision for society to be achieved by 2050 and directions for our initiatives, and the Environmental Targets 2030, which clarifies specific initiatives to be achieved by FY2030 in accordance with this vision. We have positioned the actions for climate change, resource circulation and pollution prevention as three environmental issues that we will directly address and have set specific targets for these themes.

As we position “action to climate change” as a topmost priority, in September 2022 we stated our aim of achieving carbon neutrality throughout the supply chain by 2050, and we revised the Environmental Vision 2050 accordingly. In March 2023, we announced revised Environmental Targets 2030 to serve as a milestone along the path to achieving carbon neutrality by 2050.