TOCALO : The environmental Reports 2023

TOCALO Co., Ltd. Sustainability Report 2023

Contents

Contents / Editorial Policy …………………………………………………………………………………………… 1

Message from the president ………………………………………………………………………………………… 3

Long-term vision and materiality …………………………………………………………………………………… 7

ESG data ……………………………………………………………………………………………………… 104

GRI Standards reference table ………………………………………………………………………………… 112

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TOCALO Co., Ltd. Sustainability Report 2023

Editorial Policy

TOCALO is a specialized manufacturer of surface treatments focused on thermal spraying. We believe that it is important for us to contribute to society by maximizing the benefts of the various functions of coatings, including saving resources, saving energy, and reducing environmental impact, as well as to progress toward achieving carbon neutrality, including reducing CO2 emissions. This report has been prepared to present up-to-date information (as of August 2022) in an easy-to-understand manner about TOCALO and its consolidated subsidiaries with a focus on the activities of the parent company for fscal 2021 (April 2021 to March 2022).

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Sustainability

Message from the president

We are using our unique expertise in manufacturing every way we can to help create a sustainable society.

ESG management that values manufacturing

I am Kazuya Kobayashi, and I am honored to introduce myself upon my appointment on June 23, 2023 as Representative Director, President and Executive Ofcer of TOCALO.

TOCALO is thoroughly engaged in applying ESG-focused management toward our vision of creating a "bright future for people and nature," and I intend to put all of my effort into continuing this drive because I believe ESG initiatives are extremely important.

In my career, I have served as the General Manager of two plants and the General Manager of the Production Headquarters, and I would like to use this experience to put particular focus on how we can use manufacturing to contribute to a sustainable society.

Manufacturing requires highly dedicated human resources. For our employees that are committed fully to their jobs at all of our worksites, I intend to invest fully to enhance production efciency and improve the work environment. Management and employees will share ideas so we can continue delivering consistent quality and better products to our clients.

I particularly want to emphasize the pride of being a craftsperson involved in manufacturing, and the expertise each employee has in the work they do. Rather than simply pursuing efciency by mechanically mass-producing products, we put care and effort into our work. Some defects can be prevented with just fve seconds of care. With just a little thought, we can deliver heartfelt products to our customers. I learned this from the generation before me, and I want to pass this down to the generation that follows me.

Kazuya Kobayashi

President and Representative Director

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Connecting individual employee growth to the Company's growth

I also want our employees to have clear goals for themselves and to know what they need to do so they can attain their goals. In addition, I would like them to think carefully about how pursuing their goals can contribute to the Company.

To develop that caliber of human resources, we will invest all that is necessary and aim to be a company that is richly diverse and respects each person's opinion. We will also allow fexible workstyles, such as remote work, and create a work structure that can accommodate individual workstyle proposals.

Through measures like these we are creating an environment that supports the career ambitions of all employees and that will lead to overall sustainable growth for TOCALO.

Low environmental impact manufacturing

We are also working to reduce the environmental impact of manufacturing operations. I have been promoting inter-plant initiatives since fscal 2021 when I was General Manager of the Production Headquarters. One initiative was to take successful energy-saving initiatives that were being implemented at individual plants and share that know-how with all of our plants. We will continue to incorporate best practices in this way to further reduce our overall environmental impact.

Electricity accounts for 95% of the energy that TOCALO consumes, so reducing our power consumption will be essential. Three of the major consumers of electricity are compressors, dust collectors, and cooling equipment. While maintaining our standard of quality, we are working to improve the efciency of our thermal spraying technology, which will save energy by shortening the time the equipment is in operation.

We have also set environmental performance targets, including cutting Scope 1 and 2 greenhouse gas emissions to 46% of the fscal 2013 level by fscal 2030 on a consolidated basis. By purchasing electricity derived from renewable energy sources, we reached the 46% reduction mark on a non-consolidated basis in fscal 2022. To reach our target, however, we have to do more than just purchasing power from renewable energy sources. We intend to pursue every avenue, including increasing our in- house power generation, to achieve our Group target.

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Joining with local industries for further growth in the future

Any industry can use our technology with any material. Renewable energy generation equipment and semiconductor manufacturing equipment are only the beginning. We are not restricting our focus to specifc industries, but are looking into a wide range of industries for applications for our surface modifcation technology.

At this moment, I am strongly interested in creating strong ties between our Company and local communities. We have manufacturing sites participating in industries all across Japan, and I would like each site to refect the characteristics of their region. By strengthening these connections, the growth of our business can revitalize a region and help ensure our business continuity.

We will achieve sustainable growth by valuing the interrelation of our employees, the environment, and local communities and by remembering that the small extra effort of dedicated craftsmanship may seem inefcient or unnecessary but is the heart of manufacturing.

Aiming to be a 100-year company and the perennial company of choice.

Hiroshi Goto

Director,

Managing Executive Ofcer; General Manager, Administrative Headquarters

I participate in management as General Manager of the Administrative Headquarters and as a Director. Our company has thrived for 72 years, but for us to reach 100 years, it is essential that we take a long- term view, at the core of which is our sustainability.

When we unveiled our medium-term management plan in November 2021, we also presented our long- term vision for a "bright future for people and nature." Now, in the plan's second year, looking back on the past, the top-down approach within the Company has been a success and is steadily producing results. However, I feel that we are still only halfway through the process in terms of every employee getting behind the plan and putting it into action. We are therefore putting together a new training program that we will implement throughout the Company to set in motion a bottom-up approach from employees.

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We have identifed fve items as issues of materiality that are essential to address in order to fulfll our long-term vision. Among the fve, the most critical materiality is "Advanced coating and latent market development." Our business model is not to mass-producetop-selling products, but to make products to order. We must continue to develop new coating technologies and cultivate new markets for society to keep needing our company, and for us to survive.

In recent years, we have been actively investing capital, supported by our strong sales for semiconductor manufacturing equipment, and we expect these conditions to continue for several more years. However, our ability to continue to grow our business when these favorable conditions come to an end will depend on our ability to develop advanced coatings and cultivate latent markets. We must devote all of our efforts to developing coatings that fully meet society's needs and expanding their applications worldwide.

We have also stepped up how we use our business activities to contribute to addressing environmental issues. We are seeing steady results from the KPIs we set for the value of orders in the environmental and energy felds. While working to reduce the environmental impact of our manufacturing activities, we will also continue to develop coatings that improve the environmental performance of various industries.

Another key materiality is cultivating and activating diverse human resources. We established the Diversity Promotion Committee in July 2020 and the Diversity Promotion Division in February 2022, and I feel that the Company's systems and mechanisms for strengthening the diversity of human resources have been put into place in the past two years. I also feel that the understanding that a wide variety of human resources, including the active participation of women, is necessary for the Company's long-term growth is steadily taking root in the Company.

Beginning in fscal 2022, we launched a "global experience" program to develop human resources who will be the core of our worldwide business expansion and an internal "DX human resources recruitment" program in which we are selecting and training individuals in data and digital technologies that will lead to future innovation. We will continue to advance programs toward new directions and growth as we cultivate the human resources we will need for the Company's future.

In April 2023, I began visiting all of our factories and talking to employees to get a direct "feel" for how our sustainability strategies and measures are permeating our activities and what our employees think about them. In talking with younger employees, they reminded me of an eye-opening fact that, to them, the year 2051, when we will become a 100-year company, is not a point in the distant future, it's a point along the path to their future.

I will do my utmost to fulfll my responsibility to deliver to the next generation a TOCALO that will continue to be the "company of choice" by society in our 100th year and beyond for the next 30 and 50 years.

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Sustainability

Long-term vision and materiality

Long-term vision and mission

We are pursuing solutions for social issues and improving our corporate value as a group in line with our Vision

(Goal for 2030) and Mission.

Vision (Goal for 2030)

Contributing to a bright future for people and nature

Mission

Enhance corporate value through continuous growth focused on ESG

Provide high quality and high value-added products (coatings) to customers

Be always trusted by customers, shareholders, business partners, and local residents

Contribute to environmentally friendly technologies

Be a company that all employees and their families are proud of, and create a safe working environment where employees enjoy working

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Materiality and KPI

We have identifed specifc issues (materiality) to focus on to fulfll our Vision (Goal for 2030) and Mission.

We identifed the points of materiality by frst reviewing international standards, such as the GRI Standards, and then selecting possible candidate issues while considering megatrends, social issues, and the requirements and expectations of stakeholders.

We then considered them in relation to the strategies of the medium-term management plan and selected the issues that were in accord with the medium- and long-term direction of our business. The Board of Directors approved the following fve items as issues of materiality.

Furthermore, we have set key performance indicators (KPIs) to manage our materiality.

Materiality	Main initiatives	Related information

Invest with a focus on developing advanced coatings

	Develop high-performance coatings for
	the foundational elements of people's
	lives (such as digitalization,
	infrastructure, medical care, agriculture)
	Develop coatings that help proliferate and	Solutions
	improve the efciency of renewable
	Surface modifcation
	energy power generation (such as wind
	technology′s ability to
1. Advanced coating	power, hydropower, geothermal power,
protect the future global
and latent market	storage batteries)
environment
development	Develop coatings that help customers
Quality management and
	reduce greenhouse gas emissions (by
	customer satisfaction​
	supporting non-fossil fuels, recycling
	equipment)

Offer optimal solutions to customers

Grow from a supplier to a partner

Set up projects in priority areas

Foster experts in problem-solving

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Materiality	Main initiatives	Related information
	Advance decarbonization (carbon
	neutrality)
	Investigate thermal spraying methods
	that do not use fossil fuel	Environmental
	Reduce power consumption by improving
	management
	processing methods
	Material balance
	Use renewable energy
2. Environmental	Targets and results
impact reduction		Climate change measures​
measures	Measures to reduce waste and protect the
	environment	Waste​	reduction and
		environmental
	Reduce, recycle, and properly dispose of	conservation​
	waste

Understand and improve water and air pollution conditions

Reduce the use of harmful substances

Improve manufacturing process sophistication and efciency

Promote automation and IoT

Begin practical application of new coating formation technology

3. Manufacturing	Create smart on-site construction	Quality management and
sophistication and		customer satisfaction​
quality improvement	Reinforce the quality control system

Establish and promote product performance assurance

Implement quality controls systems (such as ISO)

Construct a Product Qualifcation Plan

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Materiality	Main initiatives	Related information

Form a medium- and long-term human resource development plan

Develop human resources and technical training

	Methodically develop global human	Human resource
	resources
4.Cultivate and activate	development
diverse human		Occupational safety and
resources	Create a comfortable work environment	health
	Fully engage in safety frst	Diversity

Promote diversity (value the talents of women, persons with disabilities, mid- career employment)

Promote workstyle reform

Lay the management foundation for a long- surviving company

	Act in accordance with corporate ethics
5. Thorough	(social mores, ethics and morals, the
environment, local community	Compliance
compliance (acting in
contribution)	Corporate governance
accordance with
Actively promote ESG initiatives
corporate ethics)

Promote engagement with domestic and foreign investors

Fully comply with the Corporate

Governance Code

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