Sustainability

The Group has identified and analyzed transition risks, physical risks, and business opportunities related to climate change using the 1.5°C scenario (partially 2°C scenario) and the 4°C scenario. The short-, medium-, and long-term climate-related risks and opportunities identified by the Group are as follows

• Scenario Worldview

  Target year	Scope of coverage	scenario	Assumed world view	Main Reference Scenarios
  2030年	Domestic Directly-managed Stores Business	1.5°C scenario (2°C scenario)	A scenario in which average temperatures are expected to increase by less than 1.5°C in 2100 compared to the Industrial Revolution. In order to realize a decarbonized society, stricter policies, laws, and regulations than those currently in place will be implemented.	IEA Net Zero Emissions by2050 ・IPCC RCP2.6
  		4°C scenario	This scenario assumes an average temperature increase of about 4 degrees Celsius above the level of the Industrial Revolution in 2100. Since there are no proactive policies or regulations to mitigate the climate change problem, and current policies continue, extreme weather events are likely to intensify.	IEA Stated Policies Scenario ・IPCC RCP8.5

• Risk (transition risk, physical risk)

  *Short-term (0-2 years), medium-term (3-5 years), and long-term (>5 years)

  Type of risk	category	risk item	Specific Impacts	Anticipated timing of occurrence	Anticipated Financial Impact
  Transition risk	Policy and Regulation	Introduction of carbon tax	・Increase in store operating costs ・Increase in capital expenditures to install energy-saving equipment ・Rise in raw material prices	long term	large (e.g. serving size)
  		Plastic Substitution	Increased costs associated with switching to non-plastic raw materials to comply with plastics regulations	Medium to long term	large (e.g. serving size)
  		Reduction of food waste loss	Increase in capital investment costs and other costs due to deeper efforts to reduce food waste loss	Medium to long term	small
  	Market & Reputation	energy prices	The cost of fuel for logistics facilities, stores, etc., including operating costs and fuel costs for deliveries, increased due to soaring fossil fuel prices. Soaring electricity prices have increased operating costs for logistics facilities and stores, as well as fuel costs for deliveries.	Medium to long term	large (e.g. serving size)
  		Changing tastes	∙ Increased demand for ethical consumption amidst growing public concern about climate change and the image of a lack of progress in decarbonization, resulting in lower sales	Medium to long term	small
  		Addressing Climate Change Issues	Delays in addressing climate change issues will make it more difficult to raise capital from investors and increase the cost of raising capital.	Short to long term	during (a certain time when one did or is doing something)
  physical risk	acute (e.g. illness)	Intensification of extreme weather	Increased disaster risk (e.g., damage to store facilities, suspension of operations, etc.) to offices and stores located in areas at high risk of flooding Decrease in frequency of store visits due to extreme weather conditions such as torrential rains, typhoons, and heat waves Cost increase due to review of logistics to secure logistics and products that can withstand torrential rains, typhoons, and other extreme weather events.	Short to long term	during (a certain time when one did or is doing something)
  			Extreme weather conditions may cause crop failures or quality deterioration, leading to higher raw material prices.	Short to long term	large (e.g. serving size)
  	chronic	Average temperature increase	-Impact on the storage environment of food products, resulting in shorter expiration dates, and the associated need for food disposal and review of serving methods, and the additional costs associated with this.	Medium to long term	large (e.g. serving size)
  			Increase in energy costs for cooling, refrigeration, etc. Decreased frequency of store visits due to higher average temperatures ∙ Suspension of operations due to combined outbreaks of epidemics and pandemics	Medium to long term	during (a certain time when one did or is doing something)
  		Changes in weather patterns	Raw material prices rose due to the impact on raw material production areas.	long term	large (e.g. serving size)
  			Outbreaks of pests make it difficult to stably procure raw materials, resulting in response costs Increased rainfall and strong winds cause distribution delays and accidents.	long term	during (a certain time when one did or is doing something)
  		sea level rise	The increased risk of flooding due to storm surges and tidal waves will require a re-evaluation of the location of the base in the medium to long term, resulting in relocation costs.	long term	during (a certain time when one did or is doing something)

• opportunity

  *Short-term (0-2 years), medium-term (3-5 years), and long-term (>5 years)

  Opportunity Type	category	opportunity item	Specifics	Anticipated timing of occurrence	Anticipated Financial Impact
  opportunity	Resource Efficiency/Energy	Reduction of food waste loss	Reduction of waste disposal costs through waste oil recycling and other waste reduction measures	medium-term	during (a certain time when one did or is doing something)
  		Average temperature increase	Increased temperatures in cold regions have made it possible to produce crops that could not be grown in the past, thus reducing costs.	long term	small
  		Promoting energy conservation	Reduction of electricity consumption costs through promotion of energy conservation	Short to long term	small
  		Improved logistics efficiency	Decrease in transportation costs by improving logistics efficiency	Medium to long term	small
  	Market & Reputation	Changing tastes	Improve sales through the development of environmentally friendly products and services. Increase sales by developing products and services that meet changing consumer preferences due to rising temperatures.	Short to long term	during (a certain time when one did or is doing something)
  		Addressing Climate Change Issues	Addressing climate change issues will increase investor recognition and improve capital raising capabilities.	Short to long term	small

THE GROUP USES THE BASIC UNIT OF CO₂ EMISSIONS (SCOPE 1 AND SCOPE 2) PER NET SALES OF THE GROUP'S DIRECTLY OPERATED STORES IN JAPAN AS AN INDICATOR RELATED TO CLIMATE CHANGE. WITH THE GOAL OF REDUCING CO₂ EMISSIONS PER UNIT OF SALES AT DIRECTLY OPERATED STORES IN JAPAN BY 1.0% EACH YEAR, EACH OF OUR STORES, FACTORIES, AND HEAD OFFICE IS PROMOTING EFFORTS TO REDUCE CO₂ EMISSIONS.