E :Environment
Living in Harmony with Nature

Disclosure of information based on the recommendations of the Task Force on Nature-related Financial Disclosures (TNFD)

Addressing nature-related issues General Requirements Governance Strategy Risk and Impact Management Metrics and Targets Future challenges

Addressing nature-related issues

The Yokohama Rubber Group develops, manufactures, and sells tires and industrial rubber products utilizing natural capital such as natural rubber.
Amidst the worsening global environmental issues such as climate change and the degradation of natural capital, we recognize the impact of our business activities on the global environment, including greenhouse gas emissions, the use of natural capital, and land conversion, and are promoting sustainable business activities.
We are implementing various measures, including the development of tires capable of withstanding changing climate conditions such as high temperatures, heavy rain, and snow, and increasing the proportion of sustainable raw materials such as renewable and recycled materials.
We will analyze the risks and opportunities associated with climate change and natural capital issues surrounding our group and reflect them in our business strategy.
Furthermore, in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and the Task Force on Nature-related Financial Disclosures (TNFD), we will actively disclose information in a transparent manner to a wide range of stakeholders.

General Requirements

The TNFD recommendations require the application of six general requirements to the four pillars of “Governance,” “Strategy,” “Risk and impact management,” and “Measurement metrics and targets” in order to ensure consistency in disclosure information.
Our group has applied the general requirements as follows in its disclosures.

1. Application of materiality

In light of changes in the business environment and social issues surrounding our group, we have identified issues from the perspectives of external factors and internal factors (business activities), and evaluated the impact of our business on society and the environment, as well as the impact of social and environmental issues on our business, for each stakeholder.
We have analyzed these issues from the perspective of double materiality and have identified the following as material issues.
  • Provision of products and services that contribute to a sustainable society
  • Contribution to a decarbonized society and circular economy
  • Coexistence with nature
  • Coexistence with local communities
  • Development of human capital capabilities for sustainable corporate value enhancement
  • Establishment of a sustainable supply chain
  • Improvement of management resilience by strengthening corporate governance

2. Scope of disclosure

This disclosure analyzes and discloses the results of our corporate activities as well as the entire upstream and downstream global value chain.

3. Areas with nature-related issues

We identify areas where we conduct business activities and, to the extent possible, identify regions with nature-related issues by taking into account regional characteristics.

4. Integration of other sustainability-related disclosures

We analyze the correlation between nature-related issues and environmental issues such as climate change, resource recycling, and water risk, and disclose the results.
In the future, we will consider integrated disclosure while ensuring consistency with other disclosures.

5. Period under consideration

The period during which risks may arise is defined as the short term, from the present (base year: 2024) to three years (until 2027). The medium term is defined as up to 2030, and the long term is defined as thereafter (by 2050).

6. Indigenous peoples, local communities, and affected stakeholders engagement

Based on international norms and other relevant standards, our group has established the “Yokohama Rubber Group Human Rights Policy” and the “Procurement Policy for Sustainable Natural Rubber,” and based on these policies, we conduct human rights due diligence for people working on natural rubber farms.
In addition, we continuously engage dialogue with stakeholders who have significant impacts on nature-related risks and opportunities, including visits to natural rubber farms and hold discussions with local residents living near production sites.
  • Continual improvement
    As of the date of disclosure, we have assessed the impact of our business activities on nature and their dependence on nature in accordance with the LEAP approach. In addition, we analyzed the risks in the regions where we operate using tools such as Aqueduct, WWF Water Risk Filter, and WWF Biodiversity Risk Filter.
    Going forward, we will continue to engage with stakeholders to contribute securing a nature-positive world review our strategies, propose and implement initiatives, and report annually in our integrated report.

Governance

The TNFD recommendations on Governance require companies to explain the role of the board of directors in overseeing nature-related issues and the role of management in assessing and managing those issues.
Furthermore, as natural capital is closely linked to indigenous peoples and local communities, companies are required to demonstrate their human rights policies and engagement with these stakeholders.

Nature-related Governance Structure

We hold CSR Council meetings twice a year (in May and November) , chaired by the Chairman & CEO, Chairman of the Board to formulate and review sustainability issues that the Yokohama Rubber Group should address. Regarding issues related to climate change and natural capital, we have established an Environment Council (Chaired by: the Head of CSR Division) as a subordinate organization of the CSR Council to discuss and monitor strategies related to climate change and natural capital, including our carbon neutral strategy.
Furthermore, we have established four committees, two environmental task forces, two environmental councils as subordinate organizations of the Environment Council to conduct in-depth discussions on specific themes.
In addition, in case where important matters, early decision-making, reporting or deliberation are necessary, the matter is reported to and deliberated by the Management meeting Executive Committee, and depending on their importance, they are submitted to the Board of Directors for reporting and deliberation.
Regarding progress on sustainability issues, reports are submitted monthly to the Chairman & CEO, Chairman of the Board, President & COO, the Executive Officer in charge of CSR Division, and Member of the Audit & Supervisory Committee.
Additionally, at meetings where all group executives, including those overseas, gather to discuss business strategies (held twice a year in May and November), environmental issues such as carbon neutrality, circular economy, and nature positivity are discussed as ongoing themes.
The policies, strategies, and transition plans decided through these discussions are implemented through the Environment Council, where specific measures, target setting, and progress management are discussed and carried out.

Human Rights Policy and Human Rights Management Process

Based on the United Nations Guiding Principles on Business and Human Rights, the Yokohama Rubber Group established the “Yokohama Rubber Group Human Rights Policy” in April 2022.
We respect the human rights of all people involved in our business activities, prohibit discrimination, harassment, forced labor, and child labor, and respect the rights of workers. In addition, we respect the rights of local communities affected by our business activities, particularly the rights of indigenous peoples.
As a company trusted by society at large, we will implement human rights initiatives across the entire group to contribute to the realization of a sustainable society.
Specific initiatives include establishing and strengthening a human rights due diligence (HR DD) framework to ensure that the responsibility to respect human rights is fulfilled and that business operations are conducted appropriately, and conducting regular human rights due diligence.
Additionally, we have joined the “Japan Center for Engagement and Remedy on Business and Human Rights (JaCER)” and have established a system to receive complaints from all stakeholders of the Yokohama Rubber Group both domestically and internationally through the complaint reporting window of the same organization, and to respond appropriately.

Strategy

The “strategy” in the TNFD recommendations requires the assessment and explanation of identified material nature-related issues, measures to address nature-related risks, and disclosure of priority areas identified as a result of the assessment.

Nature related dependencies on and impacts

In our core businesses—the tire business, MB business (hose piping and industrial materials), and other businesses (golf equipment under the PRGR brand)—we have assessed nature-related dependencies on and impacts across the entire value chain, including raw material procurement and business processes, and identified sites where there is a possibility of natural characteristics, natural-related risks requiring attention, and natural-related issues based on the characteristics of the surrounding areas.
The target regions include Japan and other countries where our major production sites are located, such as China, India, Southeast Asia, the United States, and Europe.
The value chain for the tire business is as shown in the figure below.

Value chain for the tire business

To evaluate risks, we used the ENCORE natural risk assessment tool.
Furthermore, we evaluated the interface with nature using the WWF Biodiversity Filter and water risks using Aqueduct and the WWF Water Risk Filter.
As a result, we found that upstream in the value chain, there is a tendency for high dependence on and impact of land use and deforestation in natural rubber farms as well as land use and water use at own production sites.

Natural rubber value chain

In the natural rubber value chain, the process from our company to the natural rubber processing factory is relatively easy to trace.
However, tracing from the natural rubber processing factory to the upstream natural rubber farms is difficult.
The following three reasons are cited for this.
(1) Most natural rubber production comes from smallholder-farmers, estimated to number 6 million households worldwide.
(2) Natural rubber prices fluctuate on the international market, and dealers (intermediaries) who purchase raw rubber from natural rubber farmers decide where and when to sell based on the purchase price.
(3) There are cases where resale between dealers occurs multiple times, and transactions cross regional and national borders.
Natural rubber is primarily produced in regions centered around the equator, within approximately 15 degrees north and south latitude, with Southeast Asia accounting for approximately 80% of the world's natural rubber production. This region overlaps with biologically diverse tropical rainforests, and the expansion of natural rubber farms can sometimes impact the livelihoods of valuable species.
Additionally, compliance with the European Union's Deforestation Prevention Regulation (EUDR) has become an urgent priority. To address this, our group is working to enhance traceability through the use of traceability tools and by conducting on-site visits and interviews with natural rubber farmers.
Furthermore, in the downstream stages of the value chain (product use and disposal), we are promoting efforts across the group to prevent illegal tire dumping, collect and recycle used tires, and promote retreading※.
  • Retreading involves removing the worn tread rubber from tires that have been worn down from use, and bonding new rubber to restore them to like-new condition.
    Retreaded tires are said to reduce rubber usage by 68% compared to new tires and reduce CO₂ emissions during tire production by 60%. (Source: National Association of Retreaded Tires website https://www.retread.jp/)

Our evaluation methodology based on the LEAP approach

Heat map of analysis results using ENCORE
(Heat map of dependence)

(Heat map of impact)

The results of the analysis using ENCORE showed that there is a high risk of dependency in the procurement stage of raw materials derived from agricultural and forestry products, and that there are high risks throughout the entire business in terms of water use, land use, climate regulation, and pest control.
In terms of impacts, high risks were identified in the raw material procurement stage for agricultural and forestry products, including land use, water use, depletion of natural resources, and impacts on surrounding ecosystems. Additionally, high risks were confirmed for agricultural and forestry products, as well as for metals and mining.

Materiality analysis results for the tire business

We plotted the impact of our tire business activities on the natural environment on the horizontal axis and the degree of dependence on nature in our business activities on the vertical axis to illustrate the intensity of each industry in ENCORE.
As a result, agricultural and forestry products emerged as the issues that our group should prioritize.

Main operational factors related to the issues

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Water use In rubber manufacturing, the vulcanization process, which involves bonding rubber molecules with sulfur to impart the desired properties to the rubber, is indispensable.
This process requires the use of large amounts of steam (water vapor) to maintain high temperatures and pressures for a certain period of time, and water is also used for cooling.
Therefore, in areas with high water stress, we are implementing measures such as rainwater utilization and closed drainage systems (systems that reuse water without discharging it externally).
On the other hand, regarding water usage in the raw material procurement stage, it has been confirmed that natural rubber farms surveyed in Suratthani, Thailand, primarily use rainwater.
However, climate change has caused changes in precipitation patterns, resulting in poor growth of rubber trees (Hevea brasiliensis) in some areas due to drought, while prolonged harvest interruptions caused by rainfall are raising concerns about a decline in production.
Climate stabilization We manufacture and sell a wide range of rubber products, including tires, hoses, and conveyor belts, using natural resources. In particular, we recognize that reducing greenhouse gas (GHG) emissions into the atmosphere during the manufacturing process and use of our products not only contributes to the prevention of climate change, but also helps prevent changes in rainfall patterns and sea level rise, which is an important initiative for the continued operation of our business, especially in areas with high water risk.
Pest control In natural rubber production areas, there are concerns about a decline in production due to the spread of diseases such as leaf blight and white root disease in para rubber trees.
In natural rubber farms, the same clones (individuals with the same genetic composition) are often planted to increase productivity, and once a disease occurs, it has the potential to spread throughout the entire rubber farms.
Natural rubber cultivation supports the local economy, so the spread of disease could affect the local economy and undermine social stability.
Use of biological resources, depletion of natural resources, and impact on surrounding ecosystems We use natural rubber for approximately 20% of our purchased raw materials (subject to seasonal and product mix fluctuations). The primary production areas for natural rubber are generally limited to regions within 15 degrees north and south of the equator, which are part of tropical rainforest regions rich in biodiversity.
As a result, there are concerns about the degradation of biodiversity due to the expansion of rubber plantations.
On the other hand, natural rubber is a carbon-positive raw material (fixing carbon dioxide in the atmosphere as organic matter and reducing it) produced from the rubber tree, and as a major natural resource in these regions, it supports the economies of local communities and countries.
Starting in December 2025, the EUDR (EU Forest Deforestation Prevention Regulation) will require that products containing natural rubber produced and sold in Europe be proven to be free from deforestation.
Our group is also establishing the necessary systems to comply with these regulations.
Land use Heat map analysis of impacts showed that the company's operations and land use around the factory would have a significant impact on the surrounding ecosystem.
Specifically, changes to the factory site could reduce naturalness and disrupt continuity with the surrounding environment, potentially hindering the movement of organisms.

Nature-related risks and opportunities

In analyzing risks and opportunities, we referred to the TNFD guidance and set up four quadrant scenarios based on the two axes shown in the figure below: “alignment of market needs and regulatory tightening (transition risk)” and “deterioration of ecosystem services (physical risk).”
Based on the four quadrant scenarios, we examined the risks and impacts on our group's business and the measures to address them.

Risk and opportunity scenarios analysis

Major Risks and Opportunities Related to Nature

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TNFD Classification Business risks and opportunities for our organization Potential impact on an organization’s business Financial impact（qualitative） Time frame Future measures
Risks Transition risks Policies Introduction and enhancement of regulations Increase in procurement and development costs due to response to the enhancement of existing regulations and the introduction of new regulations related to deforestation, raw materials, and water Medium Short- to mid-term Measure 1
Measure 2
Markets Increase in raw materials prices Increase in costs for the procurement of natural rubber and other raw materials due to increase in costs for ecosystem preservation Large Short- to mid-term Measure 3
Change in consumer behavior Consumers’ decision to avoid purchasing our product due to insufficient efforts for ecosystem preservation Large Short- to mid-term Measure 4
Measure 5
Technologies Development and dissemination of technologies with low environmental impact Delay in the development of sustainable raw materials contributing to the reduction of environmental impacts, and increase in introduction costs Large Short- to mid-term Measure 3
Reputation Evaluation from consumers and society Defection of customers and degradation of corporate image due to insufficient efforts for ecosystem preservation Medium Mid- to long-term Measure 4
Measure 5
Evaluation from investors Decrease in ESG ratings and stock prices due to insufficient efforts for ecosystem preservation Medium Mid- to long-term Measure 4
Measure 5
Compensation liability Occurrence of compensation liability due to the development of laws and regulations, and legal precedents Increase in the number of lawsuits related to the violation of rights of indigenous people and local community Medium Short- to mid-term Measure 1
Measure 4
Response to lawsuits and administrative guidance by strengthening environmental regulations, etc. Medium Short- to mid-term Measure 4
Physical risks Acute Increase in natural disasters Production halt due to the occurrence of natural disasters associated with ecosystem degradation around production sites Medium Short- to mid-term Measure 4
Opportunities Resource efficiency Dissemination of efficiency solutions Cost reduction by the adoption of recycled raw materials and the improvement of resource efficiency Medium Mid- to long-term Measure 3
Markets Change in consumer behavior Response to increased demand for products giving consideration to the reduction of environmental impacts and ecosystem preservation Medium Mid- to long-term Measure 5
Measure 6
Products and services Expansion of businesses related to natural capital Development and sales of tires for agricultural and forestry machinery vehicles giving consideration to ecosystem preservation Medium Mid- to long-term Measure 6
Reputation Evaluation from consumers and society Improvement of customer evaluation and corporate image due to accelerated efforts toward nature positive Medium Mid- to long-term Measure 4
Measure 5
Evaluation from investors Improvement of ESG ratings and corporate value due to accelerated efforts toward nature positive Medium Mid- to long-term Measure 4
Measure 5

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Measure 1 Ensuring traceability
To prevent deforestation and environmental degradation, and to respect indigenous peoples and local communities, we identify the exact origin of our raw materials.
Measure 2 Proper management of water resources
Reduction of water intake, reduction of wastewater discharge, and management of water quality standards through closed-loop water use (introduction of closed-loop systems for recycling) in water-risk areas
Measure 3 Contributing to a circular economy
Minimizing the use of raw materials, exploring and adopting renewable raw materials (such as rice husk silica and other biomass-derived raw materials) and recycled raw materials, and increasing their usage ratio.
Measure 4 Strengthening biodiversity conservation activities
Contributing to nature positivity through collaboration with experts and strengthening biodiversity activities based on biodiversity guidelines and scientific evidence.
Measure 5 Strengthening stakeholder engagement
Expanding disclosure of information on natural capital on websites, etc., building trust through dialogue and collaboration with stakeholders, and ensuring the effectiveness of initiatives.
Measure 6 Production and sales of environmentally friendly products
Realization of green procurement and sustainability procurement. Provision of tires for electric vehicles and energy-efficient products. Contributing to reducing environmental impact throughout the value chain.

Natural risks and opportunities in natural rubber plantations

We identified changes in the availability of ecosystem services and other changes in organizations, society, and nature due to the impact of impact drivers and external factors that are expected to alter the natural environment in natural rubber plantations.

Risk and Impact Management

Under the Environment Council, committees such as the Nature Positive Promotion Committee, as well as various subcommittees and meetings, identify and assess risks and impacts related to natural capital, and implement measures to mitigate them.
Important risks and impacts identified by committees, task forces, and councils are deliberated and decided upon by the Environment Council.
In addition, with regard to physical risks such as natural disasters, we are promoting risk reduction through disaster prevention and BCP initiatives at the Central Disaster Prevention Council.
In the event of serious and urgent matters, the Risk Management Committee (chaired by the executive officer in charge of risk management), which was established to strengthen our defense against various risks surrounding the Company, deliberates and evaluates the appropriate response.
The activities of the Risk Management Committee are reported regularly to the Board of Directors.

Metrics and Targets

To address nature-related dependencies, impacts, risks, and opportunities identified through risk and opportunity assessments, we have established indicators and targets related to natural capital and are monitoring the progress of group-wide activities toward achieving nature positivity.
Going forward, we will consider developing transition plans to minimize risks and impacts related to natural capital and maximize opportunities based on monitoring results.
Additionally, for specific initiatives related to sustainable natural rubber procurement in the priority regions identified in this analysis, please refer to the “Additionally, for specific initiatives related to sustainable natural rubber procurement in the priority regions identified in this analysis, please refer to the “Sustainable Natural Rubber Procurement Initiatives” page.

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Metrics (KPIs) Results Targets
FY2022 FY2023 FY2024
Total number of trees planted/seedlings supplied through YOKOHAMA Forever Forest Programs 1,200,000 1,240,000 1,399,664 FY2030: Total number of trees planted and saplings provided of 1.5 million
Number of business sites certified as Nationally Certified Sustainably Managed Natural Site by the Ministry of the Environment ― 1 1 FY2026: 5 sites in total
Number of major environmental incidents (air, water, or soil) 0 0 0 Continuation of zero incidents
Number of surveys of natural rubber farms (cumulative) 437 667 861 FY2030: total of 1,200 cases
Number of seminars for natural rubber farmers (single year) 3 2 2 At least twice a year
Number of human rights DDs conducted in the supply chain (single year) ― ― 1 At least once a year

Future challenges

Yokohama Rubber Group will assess nature-related dependencies, impacts, risks, and opportunities across the entire value chain and promote measures to address them.
Based on the 2050 targets set out in the Kunming-Montreal Global Biodiversity Framework and the Yokohama Rubber Group Biodiversity Guidelines, we will consider expanding the LEAP approach, developing strategies, and expanding disclosure indicators for materiality related to “Living in Harmony with Nature.”