Disclosure in Accordance with the TNFD Recommendations

We aim to have all Kubota Group employees share in our corporate principles, which we refer to as the Kubota Global Identity, so as to contribute to society (stakeholders) by undertaking corporate activities through which every individual fulfills their role and responsibilities. We have established a Charter for Action and a Code of Conduct so that we can aim to achieve the continued mutual development of society. Agriculture is reliant on many different types of natural capital, including living resources and water resources. Cutting down forests to make way for more farming land leads to the reduction of habitats and ecosystems, and potentially affects crop yields. Moreover, water resources are indispensable to not only agriculture, but people’s livelihoods. Agriculture in which our tractors and other products are used is impacted by natural capital, however we believe our products can contribute to the conservation of natural capital, mainly by improving crop yields, which in turn limits the need for more farmland and deforestation. Accordingly, as demonstrated in our Code of Conduct, the Kubota Group is committed to helping solve various environmental issues, such as protecting biodiversity, suppressing deforestation, and efficiently using water resources by leveraging the products, technologies, and services we provide. We are also committed to carrying out business activities in a way that does not negatively affect the natural environment or wildlife habits around our production sites.

• Identifying and assessing risks and impacts in the overall value chain (direct operations and upstream/downstream processes)
• Setting management indicators and targets for identified risks and opportunities
• Grasping the progress of initiatives
• Evaluating initiatives and examining measures
• Identifying and managing serious risks

Our rice transplanters and combine harvesters are widely used in the production of specialty crops grown in particular regions and climatic conditions, unlike the usual crops of rice, large-scale grains, or soybeans. It is estimated that rice cultivation in Japan, China, and other parts of Asia account for more than 90% of global production. Specialty crops are widely grown in Asia, Europe, and the Americas. By the year 2050 the world’s population will be close to 10 billion, a large percentage of which will be in emerging countries. Accordingly, demand for food is expected to increase and the securing of crop yields will likely become a key challenge for society.
The use of agricultural water and suitable soil in particular is integral to rice cultivation, dry field farming, and fruit growing. Fertile soil has an impact on crop harvests, while the excessive use of pesticides can have a detrimental effect on soil ecosystems. Population growth and economic development are expected to drive increases in demand for water, so securing enough water for irrigation will be critical. Also, the relocation of suitable farming land owing to droughts, warmer temperatures, fluctuations in rainfall, and other weather events caused by climate change will lead to the clearing of new farming land. Forests absorb CO₂ and have a regulating effect on air temperature, but slash- and-burn cultivation and the clearing of forests to open up more farmland can encroach upon the habitats of plants and animals.

Torrential rainfall and other weather disasters seen around the world in recent years are expected to grow more frequent in the future. Extremely abnormal weather events not only have an impact on human society, but they also deprive living things of their habitat and significantly affect ecosystems. Some regions around the world currently face concerns of water scarcity due to climate change, excessive water use, or poor management of water resources. For example, even though Japan has built sophisticated water supply infrastructure and has well-developed water and sewerage networks in place, increased water consumption in urban areas means that securing enough water for irrigation has become a key challenge. In the rapidly developing regions of Asia too, population growth and urbanization, wastewater from industrialization and farming, and increases in household wastewater have led to concerns about water scarcity and deteriorating water quality, a situation that may place constraints on the availability of safe and usable water resources.
Also, the mining of rare metals and other mineral resources can negatively impact different aspects of natural capital, including soil contamination, water quality, and ecosystems. For instance, concerns have been raised about the use of phosphorus as an ingredient in fertilizer because mineral phosphate mining has the potential to degrade water quality and contaminate the soil. The impacts on natural capital therefore must be mitigated through the sustainable use of resources.

• Relationships with natural capital shared by both businesses

  The manufacturing of products is reliant on water because it is essential to cleaning processes, the cooling of equipment, and day-to-day use by employees. The Kubota Group has production sites in 15 countries. Water stress varies depending on the region and there exists the possibility that access to safe water needed for business activities and daily life could become difficult. This could potentially affect our business operations.

  In light of the above, our business activities are deeply intertwined with natural capital, so in order to expand our operations in the future, we believe we must take natural capital into consideration when adopting measures to fight climate change.

• Relationships Between Business Activities and Natural Capital

  
  

  Related business activity	Regions thought to have a strong connection to natural capital
  Food business field	Rice growing regions	Asia
  	Dry farming and fruit growing regions	Asia, Europe, Americas
  Water & environment business field	Water stress regions	Asia
  	Regions dependent on natural resources	Japan
  Production sites	Water stress regions	Asia, Europe, Americas

The Locate analysis confirmed the business fields in which our operations are deeply intertwined with natural capital. Using ENCORE, the analytical tool recommended by the TNFD, we grouped our business fields into upstream, midstream, and downstream processes and used a heatmap to show dependence and impacts on natural capital.

In our machinery business, we have learned that agricultural practices at our customer’s sites can affect land, water resources, and the quality of water and soil. At the same time, agriculture itself may rely on these resources. We have also found that agriculture, much like in the TCFD assessments, is heavily dependent on weather conditions. On the other hand, we expect construction machinery to be used in cities, so its impact on ecosystems is considered to be relatively low. Moreover, the analysis demonstrated that the atmosphere is impacted by GHG emissions generated during the use of agricultural and construction machinery.

In our water-related businesses, we have learned that our operations rely particularly on the effective use of water resources and water quality. Meanwhile, it is thought that the impact and dependency of our operations on natural capital is relatively low in the environmental business because it contributes to the effective use of resources, starting with the disposal of waste.

The analysis revealed that production activities carried out in both businesses have particular impacts and dependency on water resources. Water used in production processes that was treated prior to being discharged could potentially impact the natural environment and we recognize that our operations rely on the supply of water, which is indispensable to product manufacturing processes and day-to-day use by employees. Our business activities could also have an impact on the surrounding environment if an accident occurs at one of our production sites where a furnace is located. The analysis also indicated that GHG emissions and the generation of waste may impact the natural environment.

An analysis with the use of ENCORE revealed that our production activities are dependent on water resources. Also, in order to identify the risks related to the use of water resources at our production sites and to find effective responses to such water risks, the Kubota Group conducted surveys concerning water stress* for all of its production sites. The results of a survey on water stress level of a total of 67 sites in 17 countries using Aqueduct (water risk assessment tool developed by the World Resource Institute (WRI)) are as follows:

• Water stress refers to the state where the annual water availability per capita is less than 1,700 tons and people feel inconvenience in their daily life. Water stress in this survey is the water stress for each river basin, which is calculated based on the ratio of water intake to the amount of available water resources. (World Resources Institute (WRI))

1. *1.Totals shown may differ from the simple sum of values shown due to rounding.

The survey results showed that “High” or “High-Middle” levels of water stress applied to 25 production sites, located in the Chinese city of Suzhou, central Thailand, Saudi Arabia, India, Russia, Italy, and the United States, which account for approximately 17% of the Group’s total water withdrawal. In the next “Middle” level category were 16 production sites situated in Japan’s Kanto region and Aichi Prefecture, Indonesia, coastal regions of Thailand, the southeast United States and a number of locations in Europe, which together account for approximately 44% of total water withdrawal. Production sites in the “Middle-Low” and “Low” categories accounted for approximately 39% of total water withdrawal.

• The Indian state of Haryana, where Escorts Kubota Limited’s RED factory is located, has mandated the adoption of water-saving measures at factories. To reduce water use, the RED factory uses a carbon filter-based wastewater treatment system to filter domestic wastewater, which is then reused for non-potable applications, for watering green areas around the factory, and in civil engineering work. Also, wastewater discharged outside of the factory is only released after being purified at a sewage treatment plant (STP) in an effort to minimize the impact on the water environments of India, a country known to have many water-stressed regions.

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    Equipment that allows the reuse of wastewater

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    Sewage treatment plant (STP)

❷Assessing our resilience in addressing natural capital

The Kubota Group provides technologies that align with the sustainable food systems strategy of the Japanese government, including those that aim to lower GHG emissions, limit the excessive application of pesticides and fertilizer, and establish circular agricultural practices. We believe these technologies can not only boost crop yields, but also contribute to the protection of ecosystems. We also offer solutions that support efficient water management. Going forward, we will continue to analyze and take measures against relevant business risks and opportunities to ensure that our business activities are resilient enough to address issues related to natural capital.