Expressing Our Support for TCFD

Kakuyasu 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

Kakuyasu Group Sustainability Committee meets on quarterly basis. It formulates sustainability policies, activities and initiatives. The committee’s primary priority is addressing climate change issues. The Committee has established the Environment Sub-Committee composed mainly of personnel responsible for environmental issues at the Company and the Group’s operating companies. The sub-committee closely examines matters related to climate change. The Environment Sub-Committee communicates decisions related to climate change made by the committee to the whole Group.

2.Strategy

The Group aims at achieving the decarbonization of its operations as a whole. To this end, the Group has  conducted scenario analyses, considering the TCFD recommendations and conditions specific to the business environment, assuming a range of possible situations, identifying issues and developing and implementing strategies. The Group assesses transition risks by considering potential scenarios related to the trends in policy measures and new laws, technological developments related to climate change, alcoholic beverage and other markets and customer preferences. The Group also evaluates risks caused by climate change to the Company’s operations (physical risks) and identify opportunities. The following are the major risks and opportunities that the Group has currently identified.

i. Definitions of assumed scenarios

An IPCC special report on the impact of global warming of 1.5 ℃ above pre-industrial levels says that CO2 emissions must be reduced by 45% globally by 2030 from the 2010 level to limit the global temperature rise to 1.5℃ above pre-industrial levels. The Group conducts scenario analyses based on this view and reviews its strategies accordingly. The definitions of the scenarios are provided below, followed by the key risks and opportunities identified by the scenario analyses and the countermeasures the Group is taking.

ii. Transition risks

Classification: Policy and taxation

Impact: The Japanese government may introduce a carbon tax, which could decrease the Group’s earnings.

Countermeasures: The Group has started taking measures to achieve the decarbonization of its business operations. A carbon tax of 10,000 yen per t-CO2e could significantly impact the Group’s earnings. To mitigate the possible impact of this tax, the Group will save energy and reduce the greenhouse gas emissions of its distribution centers, stores and offices.

Classification: Customer and market trends

Impact: Consumers’ growing interest in sustainability could lead to their rejection of the services offered by companies that are slow to act to mitigate sustainability risks, which in turn could lead to the decline of the Group’s earnings.

Countermeasures: Many major beer manufacturers that supply beer to the Group and major restaurant chains that are key customers of the Group are implementing sustainable practices in their operations. The Group will take sustainability actions to catch up with them as quickly as possible. The Group will understand consumers’ purchasing behaviors through appropriate marketing and conduct sales activities accordingly.

ⅲ. Main physical risks

Classification: Abnormal weather

Impact: Unusual weather patterns nationwide may harm the Group’s assets and make it unable to continue its business operations, which could result in a decrease of the Group’s earnings. Restaurants, key customers of the Group, could also be impacted by abnormal weather events, and the Group may be unable to supply them with goods. This may lead to a decrease of the Group’s earnings.

Countermeasures: The Group will develop business continuity planning that considers the entire organization.

Classification: Rising average temperature

Impact: The rising average temperature could worsen the working conditions of delivery staff, adversely affecting their work efficiency and decreasing the Group’s earnings. Changes in consumers’ preferences could lead to a decline in sales of seasonal goods.

Countermeasures: The Group will explore ways to enhance working conditions in distribution facilities and stores. It will work to expand product lines. Additionally, it will determine consumers’ purchasing behaviors through appropriate marketing and conduct sales activities accordingly.

ⅳ. Opportunities

Classification: Developing services that will reduce greenhouse gas emissions

Impact: Liquor and beverage manufacturers’ reduction of carbon emissions during transportation and expansion of the reuse of containers, as well as an increase in demand for returnable containers, could lead to an increase in demand for the Group’s services, as it can deliver goods and collect used containers. As a result, the Group’s earnings could increase.

Countermeasures: The Group has already collected empty containers and has its own distribution system. Taking advantage of this strength, the Group will explore ways to develop new services.

Classification: Entering new markets

Impact: With the increasing temperatures, there has been an increase in demand for home deliveries. Entering other home delivery markets besides the liquor delivery market could increase the Group’s earnings.

Countermeasures: The Group will consider bicycle deliveries and the development of new products that involve their collection after use.

3.Risk management

The Group will use the TCFD recommendations to identify and assess climate change risks and opportunities. The individual business departments and the Kakuyasu Group Sustainability Committee’s administrative office will identify risks and opportunities for the entire Group. The Environment Sub-Committee will discuss the identified risks and opportunities and report to the Kakuyasu Group Sustainability Committee. The committee will examine the mitigation, control, transfer and acceptance of risks as needed. Risks that may significantly impact the Group are shared with the Group Risk Management Committee and managed within the risk management system of the Group as a whole.

4.Metrics and targets

More than 80% of the Group’s operations involve the delivery of liquor, other beverages and other products to customers. A major issue the Group is facing is the reduction of the greenhouse gasses emitted during deliveries. The Group has not established any short-term metrics. Its long-term goal is to achieve net zero greenhouse gas emissions by 2050. To set reference values, the Group has measured its Scope 1 emissions (direct emissions that result from the Group’s vehicles, distribution centers, offices and other business sites) and Scope 2 emissions (indirect emissions calculated based on the supply of energy, including electricity, to the Group’s facilities).

The volume of Scope 1 and 2 greenhouse gas emissions

Note: Calculation period: Fiscal year 2021 of the Company and Group companies (12 months)

The Group will examine emissions reduction targets for both Scope 1 and Scope 2. The Group will also examine whether it can measure Scope 3 emissions (greenhouse gas emissions in its supply chains, excluding Scope 1 and Scope 2 emissions).

During the calculation period, FY2021, the Group’s results were significantly affected by the COVID-19 pandemic, which may have resulted in lower emissions compared to future periods.