Disclosure Based on the TCFD Recommendations

We disclose material information about climate-related issues in compliance with recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).

Governance
Strategy
Risk Management
Metrics and Targets

Governance

The Group has established the Sustainability Committee chaired by President and Representative Director to tackle significant business challenges such as climate change, promoting management with a sustainability perspective to contribute to the realization of a sustainable society.

The committee analyzes scenarios based on the TCFD framework, discusses measures to address risks or opportunities identified, sets targets including greenhouse gas (GHG) emissions reduced, reviews our policies, and reassesses progress of the initiatives. Results of the discussions and reassessment are regularly reported to the Board of Directors by the committee through management meetings. The Board of Directors considers concrete measures to tackle climate change, strategies behind the measures and initiative policies on major issues before results of the deliberations are used to make decisions by operations managers in each department.

Sustainability Committee Structure

Strategy

The Group is providing foods stably and building and improving a sustainable supply chain to deliver safe and reliable food to customers as an integrated food company.

Climate change caused by global warming has a significant impact on the supply chain of the Group, whose businesses are based on food. In our steady and sustainable development, we consider reducing greenhouse gas emissions as one of the most important problems to control climate change. We conducted a scenario analysis to identify risks and opportunities arising from climate change.

Scenarios Used for the Analysis

To grasp impacts of climate change on our business environment as of 2030, we selected the 4℃ and 1.5℃ scenarios for the analysis, referring to an RCP scenario by the Intergovernmental Panel on Climate Change (IPCC) and scenarios by the International Energy Agency (IEA) to identify physical risks caused by climate change and transition risks resulting from the shift to a decarbonized society respectively (Table 1).

Table 1. Scenario Descriptions
	4℃ scenario	1.5℃ scenario
Summary	In this scenario, the global average temperature is supposed to rise by approximately 4℃ above pre-industrial levels (the late 19th century) in 2100 because of narrow-scope policies on climate change. Although we are affected by physical risks such as intensification of extreme weather, the impact of transition risks is small due to not tightened regulations related to climate change.	In this scenario, proactive decarbonization policies are supposed to limit a rise in the global average temperature to 1.5℃ above pre-industrial levels in 2100. Despite a relatively smaller impact of physical risks than the 4℃ scenario, we are affected by transition risks caused by policies and regulations related to climate change, such as a carbon tax.
Reference scenarios	Transition Risks: IEA Stated Policy Scenario (STEPS)	Transition Risks: IEA Net Zero Emissions by 2050 (NZE) and Sustainable Development Scenario (SDS)
Reference scenarios	Physical Risks: IPCC Representative Concentration Pathways (RCP) 8.5	Physical Risks: IPCC RCP 2.6

Scenario Analysis Results

4℃ Scenario

The 4℃ scenario predicts physical impacts resulting from climate change such as more extreme weather. The impacts on the Group include business suspension caused by disaster and poor growth of crops due to climate change. We are dispersing our manufacturing bases both domestically and internationally to avoid risks of procurement difficulties caused by the above factors.

1.5℃ Scenario

The 1.5℃ scenario predicts that we are affected by transition impacts arising from the decarbonization of society through such measures as a carbon tax and policies regarding renewable energy and energy saving. The risk to the Group represents increase in operation costs due to use of renewable energy and introduction of carbon pricing (a carbon tax and the emissions trading scheme). To address the challenge, we consider to install energy-saving equipment and solar panels. On the other hand, the opportunities include reduction in the purchase amount of electricity due to an early introduction of energy-saving or renewable energy installations and improvement of external reputation by proceeding with efforts for environment. We continue the introduction of eco-friendly equipment and the eco renewable energy business to contribute to a decarbonized society while considering to enrich the information disclosed such as a GHG emissions reduction target.

Table 2. Scenario Analysis Results
Climate-related risks and opportunities				Expected events	Materiality assessment		Our approaches
Climate-related risks and opportunities				Expected events	4℃ Scenario	1.5℃ Scenario	Our approaches
Transition	Risks	Policies and regulations	Introduction of a carbon tax and emissions trading schemes	Our operating costs may increase due to the imposition of a carbon tax on GHG emissions generated by our business activities. Introducing or tightening emissions trading schemes will require expenses of complying with it and buying credits for unreduced emissions.	Small	Large	FactoryInstall solar panels in our plants FactoryDeploy a gas cogeneration system FactoryInstall garbage disposal units FactoryIntroduce boilers using chicken manure FactoryConvert to LED lighting FactorySwitch to steam boilers powered by gas FactoryUse freezers with natural refrigerant
			Restrictions on greenhouse gas emissions and the use of fossil fuels	Restriction of CO2 and fluorocarbon emissions will generate costs to change manufacturing processes and store equipment. Costs of replacing relevant machinery will arise due to restrictions of fossil fuels used in the manufacturing process.	Small	Medium
			Plastic regulations	The regulatory compliance will require costs of making plastic products such as packages and shopping bags thinner and switching them to biodegradable items. Actions to comply with regulations in the supply chain will increase unit prices of products and purchase costs.	Small	Medium	StoreDistribute reusable shopping bags FactoryReduce packaging materials by selling products with larger content volume
			Food recycling regulations	If the Food Recycling Act is tightened, our manufacturing processes and each store will bear the cost to comply with it.	Small	Small	DivisionDonate to a food bank FactoryUtilize food residue from our plants
			Policies on renewable energy and energy saving	Energy costs including electricity will rise if renewable energy prices are increased due to higher demand for the energy. Tightening energy-saving policies will increase costs to install efficient machines in manufacturing processes as well as energy-saving lighting and freezing showcases in stores.	Small	Large	StoreUse energy-saving refrigeration equipment FactoryInstall energy-saving conveyor belts FactoryApply a heat-insulating paint to plant roofs
		Technology	Advancement in low-carbon technology	The manufacturing process without low-carbon technologies may pose a reputational risk. Costs may be incurred to respond revised goals in the Energy Conservation Act due to improvements of low-carbon technology.	Small	Small
		Market	Fluctuations in raw material costs	Costs of raw materials procurement will be increased by laws and regulations and changes in the market arising from the transition to a decarbonized society.	Small	Medium	-
		Market	Shifts in customer preferences	If the demand for sustainable foods increases, stores not selling the foods will miss an opportunity to generate sales.	Small	Medium	DivisionDevelop sustainable foods StoreSell sustainable foods
	Opportunities	Policies and technology	Policies on renewable energy Spread of renewable energy technologies	Growing demand for renewable energy may have more opportunities to generate sales in the eco renewable energy business, which consists of solar and woody biomass power generation. With highly efficient renewable energy technologies widely used, we may improve profitability of the eco renewable energy business.	Small	Large	-
		Technology	Advancement in next-generation technology	Development of IoT systems may reduce our GHG emissions and streamline operations, leading to lower expenses and increased profitability.	Small	Medium	-
		Reputation	Reputation from customers and investors	Our proactive attempts to address environmental issues are expected to enhance our reputation from customers and investors and attract attention to our products and investment in us.	Small	Large	DivisionDisclose information based on the TCFD recommendations
Physical	Risks	Acute	Intensifying extreme weather	Our Business performance will be deteriorated by increasing severity of extreme weather events, such as typhoons and storm surges, which causes physical and human damage to each site and employees. A split in our supply chain disrupts a manufacturing process and product delivery to stores, reducing opportunities to generate sales.	Large	Large	FactoryDisperse our manufacturing locations FactoryRelocate domestic plants to inland areas in Japan
Physical	Risks	Chronic	Damage to crops from climate change	Changes in natural environment due to climate change may cause poor growth of crops, which generates further procurement costs.	Medium	Medium

Risk Management

We have established the business crisis management guidelines and the risk management guidelines for the entire Group. In accordance with these guidelines, information about potential risks in the Group's businesses is collected and organized in the managers meeting, and then the risks are evaluated based on factors such as the degree of impacts on our business. To avoid or treat more significant risks, the managers meeting considers the policy and detail measures before instructing each department of the Group. Risks related to climate change are managed through the process to control risks across the Group with the Sustainability Committee and the managers meeting working together.

In our integrated risk management process, including climate-related risk management, the Internal Auditors audit a status of risk management, evaluate its effectiveness, and as necessary, report them to the Board of Directors and the Audit and Supervisory Committee.

Metrics and Targets

The Group has calculated greenhouse gas emissions (Scope 1 and 2) to assess and manage climate-related risks.

To pass limited resources and the beautiful global environment to the next generation, we endeavor to lower impacts of our businesses on the environment by reducing waste and green gas emissions and using resources and energy more efficiently. The entire group is committed to addressing climate change and other environmental issues to achieve an environmentally friendly and sustainable society.

Sustainability
Initiatives

Environment

Social

Governance