Environment

Disclosure based on TCFD Recommendations

Governance
Strategies
Risk Management
Indicators and Goals

We recognize that climate change is one of the most important management issues facing the Group. We believe that our efforts to reduce our own greenhouse gas (GHG) emissions (Scopes 1 and 2) and to contribute to the decarbonization of the entire value chain, including our customers at the same time, will enhance the Group's corporate value. Based on this belief, we have identified "Contribution to a decarbonized, circular society by actively reducing environmental impact" as one of our Materiality issues. In September 2021, we announced our endorsement of the TCFD recommendations, and in addition to its existing efforts, we work to identify climate-related risks and opportunities and strengthen and expand information disclosure, including respective systems.

Governance

In October 2021, the Group established the Sustainability Committee, which is chaired by the Group CEO and includes executive directors and representative directors of the five core operating companies or persons in equivalent positions appointed by the President, for the purpose of strengthening the Group's sustainability promotion system. The Sustainability Committee, under the supervision of the Board of Directors, formulates sustainability-related policies and manages their implementation; identifies, analyzes, and evaluates risks and opportunities related to climate change; monitors the impact of climate change on the Group's business; and discusses countermeasures. For other initiatives and detailed discussions related to climate change and environment, the Environmental Subcommittee, a cross-group sub-organization of the Sustainability Committee, examines and manages the implementation of specific initiatives and management indicators. The director in charge reports on the progress and makes recommendations to the Sustainability Committee. Investments necessary to address climate change are discussed and approved individually by the Management Council, the Board of Directors, and other decision-making bodies in accordance with internal regulations.

Strategies

We have conducted a scenario analysis of the impact of climate change on our Group's business, using several climate scenarios (1.5C scenario and 4C scenario). Based on assumptions about the impact of climate change on the value chain, we identify risks and opportunities, analyze and evaluate them, and consider countermeasures, which will be reflected in our short-, medium-, and long-term business strategies to make the promotion of measures more effective.

Assumptions for Scenario Analysis

We have made the following assumptions for each scenario and analyzed the financial impact assumed as of 2030.

1.5℃ Scenario

Policies and regulations will be strengthened, and carbon taxes will be introduced to achieve carbon neutrality in 2050. In addition, consumers will demand more decarbonization from companies, and B-to-B firms will be under even greater pressure to respond to climate change, including reducing CO2 emissions.

4℃ Scenario

No carbon taxes will be introduced, and more emphasis will be placed on disaster prevention and BCP measures as natural disasters become more severe. Consumer behavior will not change significantly from the status quo, and corporate responses to climate change will remain at the current level.

*See IEA-NZE, IPCC-1.5, IPCC AR6 SSP1-1.9, IPCC AR6 SSP3-7.0/SSP5-8.5, etc.

Risks, Opportunities, and Financial Impact related to Climate

Based on the scenarios assumed, we examined the impact of climate change on the value chain for consumers, customers, our Group, and contractors who are suppliers to our Group individually. Then, we estimated the time when risks and opportunities emerge and their quantitative and qualitative impacts.

Countermeasures

In our quantitative calculations, carbon pricing (introduction of a carbon tax) under the 1.5C scenario has the greatest impact on our Group. In general, however, the financial impact of climate change on our Group is small, and we consider ourselves resilient to climate change. For countermeasures against the emerging impact of carbon pricing (introduction of the carbon tax), since measures to reduce emissions in cooperation with our customers and partners are effective, we will promote these measures in addition to our own measures. In addition to the quantitative analysis items, we will also update and monitor information on qualitative analysis items to verify their impact on our business.

Risks		Financial Impact (1.5℃/4℃）	Time of emergence	Countermeasures
Policies & Regulations	Taxes and other regulations on CO2 emission reductions Increased cost burden due to the introduction / enforcement of carbon pricing ・Fuel and electricity use at transportation and distribution facilities (including contractors)	Small - Medium / -	Medium term	・Improved efficiency of transportation ・Conversion of vehicles to ZEV (long-term) ・Promotion of energy-saving equipment and measures ・Promotion of operations that reduce power use ・Acceleration of introduction of renewable energy ・Selection of partner companies
	Refrigerant regulation Increase in capital investment amount due to stricter regulations on alternative CFCs and other refrigerants ・Refrigeration equipment support for logistics facilities	Small / Small	Medium term
	Other Regulations Increased cost burden due to the introduction / enforcement of energy conservation regulations ・Regulations related to vehicles, such as the introduction of EVs and the ban on the sale of gasoline-powered vehicles ・Energy conservation standards for building such as insulation ・Regulations on renewable energy procurement / introduction ratio targets	- / -	Long term
Market & Reputation	Energy transition by transportation subcontractors Increase in transportation consignment costs due to progress in the shift to low-carbon and decarbonized fuels ・Introduction of low environmental impact fuels such as SAF (sustainable aviation fuel)	Small / Small	Short to medium term

Risks & Opportunities		Financial Impact (1.5℃/4℃）	Time of emergence	Countermeasures
Market & Reputation	Customer Trends (Conditions) Expansion of environmentally conscious response ・Contracts and orders are contingent on the identification and reduction of CO2 emissions.	Large / Small	Short term	Development and promotion of logistics solution services originating from social issues, such as SustainaLink, while grasping the needs of existing and potential customers related to climate change
Market & Reputation	Customer Trends (Products) Changes in characteristics of products handled by our customers ・Changes in production volume and location, component composition ・Emergence of new sustainable commercial products	Large / Large	Medium to long term

Physical Risks		Financial Impact (1.5℃/4℃）	Time of emergence	Countermeasures
Acute	More severe storm and flood damage (direct impact) Damage to assets owned and increase in insurance premiums and repair costs caused by more frequent and larger catastrophic disasters	Small / Small	Medium term	・Incorporate climate change impacts, such as more severe storm and flood damage, into risk management items ・Ongoing implementation of BCP and BCM measures ・Realization of a safe working environment
Acute	Reputation (indirect impact) Loss of trust due to inadequate understanding of the impact of storm and flood damage and insufficient BCP response	Small / Large	Short to medium term
Chronic	Sea level rise Damage to assets owned and increase in insurance premium and repair costs caused by more frequent floods	Small / Small	Long term
Chronic	Rise in temperature Increased risk of heat stroke ・Increased health hazards for employees ・Decreased available working hours Increased air conditioning costs due to higher average temperatures	Small / Small	Medium term

Legend

Large / Medium / Small: Quantitative and qualitative evaluations based on the results of financial impact estimates

・「 - 」: Potential risk, but not highly likely to emerge in 2030 based on current information
・Short term: 3-5 years
・Medium term: approx. 10 years (2030)
・Long term: more than 30 years (after 2050)

Risk Management

We stipulate the recognition and management of risks in the Group's business activities in the Risk Management Regulations, develop a system for each type of risk, and implement risk management. With regard to risks and opportunities related to climate change, the Sustainability Committee takes the lead in identifying, analyzing, and evaluating risks and opportunities, sharing information within the Group, instructing relevant departments to take action, and reporting to the Board of Directors, with the aim of addressing and minimizing the risks. KPI management and data analysis are conducted by the Environmental Subcommittee, a cross-group sub-organization of the Sustainability Committee.

Indicators and Goals

In order to realize our Materiality: Contribution to a decarbonized, circular society by actively reducing environmental impact, the Group has established environmental KPIs, including climate change, and manages their progress. With regard to greenhouse gas (GHG) emissions, we aim to reduce CO2 emissions generated from our Group's business activities (Scopes 1 and 2).

Scope	Time	Goal
Scope1+2※	FY2031	50% reduction (compared to FY2014)
Scope1+2※	FY2051	Net zero
Scope3	-	We work to reduce CO2 emissions throughout our own and our customers' supply chains. ※Reduction of CO2 emissions in customers' supply chains through the Group's supply chain sustainability support service SustainaLink contributes to the reduction of our Scope 3 emissions at the same time. We will also promote efforts to realize a decarbonized society through our own services.

※Scope of coverage: Holding company and core operating companies

Please refer to the following link (ESG data) for emissions data over time and other environment-related KPIs.