Expressing Our Support for TCFD

HitoMile Group considers climate change to be one of material sustainability issues. It supports the recommendations of the Financial Stability Board’s Task Force on Climate-related Financial Disclosures (TCFD) and it is committed to enhancing its disclosure of information in line with the recommendations.

• 1.Governance
• 2.Strategy
• 3.Risk management
• 4.Indicators and targets

1.Governance

As a group whose core business is retail and logistics, we view the risks posed by climate change as a material issue that could impact business continuity, and have put the following systems in place.

The HitoMile Group Sustainability Committee, which makes decisions on sustainability-related policies and strategies, is chaired by the President and CEO of the HitoMile Group, and composed of directors and executive officers from each Group company. It meets on a quarterly basis.

Specific initiatives to address climate change are implemented by the Environment Sub-Committee (which falls under the umbrella of the Sustainability Committee), in collaboration with the main departments of each business, and progress is managed by the Committee's secretariat. In addition to this, after the discussion of material issues by the Sustainability Committee, progress is monitored through reports to the Board of Directors.

2.Strategy

i. Identification of risks and opportunities

Regarding climate change risks, there are two possible types of risk: risks related to the transition to a decarbonized economy, such as the regulation of GHG emissions, and risks related to adapting to the physical changes caused by climate change, such as more severe weather disasters. These risks may affect the Kakuyasu Group's performance and financial position. The Group has qualitatively assessed the timing of the manifestation of these risks and opportunities, as well as their financial impact based on a simple scenario analysis.

■ Key climate change risks and opportunities

ii. Setting of scenario analysis themes and climate change scenarios

Regarding the identified and organized climate-related risks and opportunities, the Group conducted a scenario analysis regarding the themes that are deemed to be particularly likely to manifest.

In this analysis, the Group used two scenarios, including the STEPS 1.5 °C scenario outlined in the internationally recognized World Energy Outlook (WEO) by the International Energy Agency (IEA), but some parameters are supplemented based on scenarios provided by the Network of Central Banks and Supervisors for Greening the Financial System (NGFS).

■ Scenario analysis themes and scope

■ Scenario setting

ⅲ. Results of scenario analysis

This theme was rated medium in terms of its impact on profits in the qualitative evaluation, but it has a particularly high likelihood of manifestation in consideration of global decarbonization efforts, including the expected introduction of carbon pricing in Japan, and a certain financial burden is expected to be incurred regarding the GHG emissions due to corporate activities.

The Group sells alcoholic beverages and other products in Japan and emits GHGs due to its use of electricity, gasoline, diesel, etc. in its activities such as delivery to restaurants, home delivery to general households and retail sales. Assuming the events of multiple global warming scenarios, the Group has considered its business activities in each scenario and also future low-carbon scenarios, so that the Group is able to have a more detailed understanding of the financial impact of global warming on its business.

In addition, by analyzing the energy use (GHG emission sources) that is required in its business activities and the fluctuation of energy prices, it is believed that an analysis closer to the actual state of its business activities can be performed.

■ Precondition

• To predict the impact of carbon pricing on future operating costs, the Group analyzed the financial impact of the carbon pricing to be imposed on the Group's Scope 1 and Scope 2 emissions and the financial impact of the fluctuation of energy prices in terms of the difference between the impact in the future and at the time of evaluation (2022).

(Financial burdens (costs) are indicated as positive, while reductions of burdens are indicated as negative.)

• The volume of the Group's activities in 2030 and 2050 have been forecast, considering factors that influence social and economic trends, such as future projections for related industries and demographics. In the medium to long term, the Group expects net sales in its business to increase and a corresponding increase in our energy consumption.

Based on the above, in the decarbonization scenario, the Group estimates energy consumption in both cases where the Group does not implement energy-saving activities and where it does implement energy-saving activities.

■ Analysis results: Future financial impact of the introduction of carbon pricing and fluctuations in energy prices

• Given that the impact (cost) of the fluctuation of carbon and energy prices is expected to be around several hundred million yen, the Group believes that their impact on the Group's finances will be limited. Based on the assumptions made in this analysis, it is believed that the Group is resilient to the risks analyzed.
• In a decarbonization scenario, energy-saving activities can be expected to not only reduce the financial burden, but will also have the potential to reduce energy consumption itself, as well as reduce the burden of carbon pricing associated with the reduction of GHG emissions.

The Group is promoting energy-saving initiatives, such as the replacement of low-energy-efficient air conditioning and refrigeration equipment and the switch to LED lighting. As a decarbonization effort, the Group is also actively promoting the introduction of electric light delivery vehicles and the switch from conventional electricity to renewable energy.

The Group will continue to consider investments for replacing facilities and equipment and contribute to the realization of carbon neutrality by 2050 and the realization of a decarbonized society through various other initiatives.

• In the IEA scenarios referenced here, the prices of fossil fuels such as crude oil are expected to fall significantly in the future following the sharp rise of their prices in the base year. Therefore, the financial impact will be small (or even positive) in some cases. The results of the analysis are based on the most recent data currently available, and if forecasts differ, results may vary accordingly.

The Group will continue to enhance its disclosure of information regarding significant risks and opportunities closely related to its business by conducting detailed scenario analyses as necessary and considering response strategies.

3.Risk management

The Hito Mile Group identifies and assesses climate-related risks and opportunities that have financial impacts, based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations.

The HitoMile Group Sustainability Committee's secretariat identifies risks and opportunities for the whole Group and reports them to the Committee. After we analyze the financial impact of identified risks and opportunities, the Environment Sub-Committee takes the lead in considering response measures, which are then reported to the Committee and implemented in coordination with the departments in charge of each business. The Committee's secretariat shares information on high-impact risks with the Group's Risk Management Committee, which oversees their management.

4.Indicators and targets

The delivery of alcoholic and non-alcoholic beverages and other products to customers accounts for more than 80% of the HitoMile Group's sales. The Group faces the issue of reducing its greenhouse gas emissions, chiefly the emissions of its delivery operations.

The Group measures its greenhouse gas emissions (Scope 1 and 2) as indicators for managing its climate change risks and opportunities. At present, the Group has set a long-term target of achieving net zero greenhouse gas emissions by 2050, is taking steps to achieve that target.

■The volume of Scope1 and Scope2 greenhouse gas emissions

Note: Calculation period: Fiscal year 2024 of the Company and Group companies (12 months)

*Target companies: Identical to companies covered by consolidated financial statements for each fiscal year

*Scope 2 emissions are on a market basis.

Scope 1 emissions have been trending upward as a result of the reinforcing delivery system, which was done in response to the recovery and expansion of demand for dining out. On the other hand, the Group recognizes that reducing the environmental impact of delivery is an important task. As a measure for this purpose, the Group is introducing electric light vehicles (kei-cars) and hybrid vehicles for delivery in a stepwise manner, as part of its efforts to control greenhouse gas emissions.

Scope 2 emissions were reduced by 95 t-CO2 from the level of the previous fiscal year. In FY2024, the Group switched power consumed at its 14 major business sites, including the headquarters building, delivery centers, and stores, to power from renewable energy sources. This resulted in a reduction of approx. 874 t-CO2. However, this reduction is not included in the calculation, which is why the reduction value is 95 t-CO2. Other sites will also make the switch one by one, which is expected to reduce Scope 2 greenhouse gas emissions significantly in the future.

In addition, emissions per 100 million yen of sales have been trending lower. This means that progress has been made in initiatives for balancing business growth and environmental considerations.

■Trend in GHG missions and Emissions per 100 million yen of Revenue

※Note: Scope: HitoMile Co., Ltd. and Kakuyasu Co., Ltd.

※Note: Calculation period:Fiscal year 2023

In FY2024, the Group began to calculate its Scope 3 emissions and determined the value for FY2023. Through this calculation, the Group aims to determine the environmental impacts of its overall business activities for future reduction initiatives.

■The volume of Scope 3 greenhouse gas emissions

The Group provides a service that leverages two-way logistics, with strengths not only in delivery but also in collection, thereby helping to reduce the environmental impact and contribute to resource recycling. The Group will seek to continue to grow this service and will also consider initiatives encompassing the overall supply chain, as it seeks to become a sustainable corporate entity.