In 2019, the Group expressed its support for the final report of the Climate-related Financial Disclosure Task Force (TCFD) (TCFD recommendations). The TCFD recommendations are a global common comparable framework for climate-related information disclosure and expect all companies to disclose information in accordance with the four recommended disclosure items including “governance,” “risk management,” “strategy,” and “metrics and targets.” While using the TCFD recommendations as guidelines for evaluating the adequacy of its climate actions, the Group will actively engage in dialogue with institutional investors to effectively disclose information.

Four recommended disclosure items required of companies in the TCFD recommendations

Source: Recommendations of the Task Force on Climate-related Financial Disclosures (final report), 2017

Recommended Disclosure Item (1) Governance

(a) Process by which the Board of Directors receives reports on climate-related issues, frequency with which these issues are placed on the agenda, and monitoring of progress

To promote sustainability management across the entire group, the Company is responding to climate-related issues and incorporating initiatives in our business strategy that will lead to solutions. These actions are then deliberated and approved by the Group Management Meeting, the highest decision-making body for business execution. Furthermore, the Sustainability Committee, which meets at least twice a year, shares the policies on environmental issues deliberated and approved by the Group Management Meeting, formulates action plans for the Group's environmental issues, and monitors the progress.
The Board of Directors receives reports on the deliberations and approvals made by the Group Management Meeting and the Sustainability Committee, and discusses and monitors the Group's policies, targets, and action plans for addressing environmental issues.

Board of Directors skill matrix

In selecting candidates for the Board of Directors, we use a skill matrix to clarify the expertise and experience we expect from directors, and “environment” is one of the items. By appointing directors capable of providing appropriate supervision of specific action plans and regular reviews, and monitoring the status of initiatives for continual improvement of environmental plans, including the setting of medium- to long-term targets, we are enhancing the effectiveness of our efforts to address environmental issues.

*Skill Matrix.

JFR Group environmental management system system

(b) Management's responsibility for climate- related issues, process for receiving reports, and monitoring methods.

The President and Representative Executive Officer chairs the Group Management Meeting as well as the Risk Management Committee and the Sustainability Committee, which are both advisory panels under his direct control. The President thus bears final responsibility for management decisions related to environmental issues, including climate-related issues. Details of matters deliberated and approved by the Group Management Meeting and the Sustainability Committee are reported to the Board of Directors for final approval.

Executive remuneration system incorporating non-financial measures

Since FY2021, we have set reduction of Scope 1 and 2 emissions as one of the non-financial indicators for determining performance- linked compensation in officer remuneration. These are linked to the KPIs in the Medium-term Business Plan to clarify the responsibility of executive officers to achieve the targets for climate-related issues and to function as an incentive to realize and promote sustainability management.

*Officer Remuneration System

Meeting bodies and their roles in the environmental management system

Recommended Disclosure Item (2) Risk Management

(a) Details of the process for identifying and assessing climate-related risks and opportunities

The Company considers risk to be the starting point of strategy. We have defined risk as “uncertainty, both positive and negative, that affects the achievement of corporate management goals.” We believe that the appropriate handling of risk leads companies to sustainable growth.
With the recognition that climate-related risks and opportunities have a great impact on our business strategies, the Group identified and assessed both positive and negative aspects of climate-related risks and opportunities through the process shown below.
First, the Group extracted a comprehensive set of climate- related risks and opportunities exhaustively for each activity of the supply chain process: “product procurement,” “transportation and customer movement,” “in-stores sales,” “use of products and services,” and “disposal.” Next, we assessed them based on two criteria: “importance to the Group (degree of impact × urgency)” and “importance to stakeholders.”

*See Strategy on page 4 for details.

(b) Details of the process for managing significant climate-related risks

The Company is working to share environmental-related risks with each operating company through a more detailed study of these risks within the Sustainability Committee. Each operating company incorporates climate change initiatives into their action plan and checks the progress of the action plan through discussions in meetings headed by the president of each operating company. Progress is monitored by the Group Management Meeting, the Risk Management Committee, and the Sustainability Committee, and is finally reported to the Board of Directors.

JFR Group risk management system

(c) Status of integration into the company-wide risk management framework

The Group has established a Risk Management Committee to manage various risks, including climate-related risks, in an integrated company-wide manner, based on the recognition that risk management is an extremely important management issue. The Risk Management Committee deliberates on important matters such as the identification and assessment of risks and the determination of risks to be reflected in strategies, and utilizes this information for management decision-making. The Committee also positions risk as the starting point for strategy and strives to link risk and strategy to enhance corporate value through risk management.
Risks that are extremely important to the Group's management over the medium term are positioned as “critical risks” and serve as the starting point for our Medium-term Business Plan. We have incorporated important risks into “annual risks” and prioritize and implement measures to address them to clarify the risks we will respond to each fiscal year.
The deliberations of the Risk Management Committee are reported to the Group Management Meeting and shared with the Sustainability Committee.
The deliberations of the Risk Management Committee and Sustainability Committee in the above process, as well as matters approved by the Group Management Meeting, are reported to the Board of Directors in a timely manner and are reflected and addressed in Group’s strategies under the supervision of the Board of Directors.

Group-wide risk management process (PDCA)

Recommended Disclosure Item (3) Strategy

(a) Details of short-, medium-, and long-term risks and opportunities

The Company considers it important to examine climate-related risks and opportunities at the appropriate milestone occasions because of the potential impact on its business activities over the long term. Accordingly, the Company has positioned the implementation period of the Medium-term Business Plan up to FY2026 as the short term; the period up to FY2030, which is the short-term target year set by SBTi, as the medium term; and the period to FY2050, which is the SBTi net zero target year, as the long term.
The Company has formulated the group strategy for climate-related risks and opportunities by backcasting from fiscal 2050, the target year for realizing net zero, and is working to implement the strategy.

Definition of the periods for considering climate-related risks and opportunities in the JFR Group

(b) Nature and extent of impact of risks/opportunities on business, strategy, and financial plans

The Company conducts scenario analysis to understand the risks, opportunities, and impact of climate change on the group, and to examine the resilience of the its strategies and the necessity of further measures by envisioning the world in fiscal 2030. In the analysis, we referenced multiple existing scenarios announced by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), then considered two world scenarios: the below 1.5 ̊C/2 ̊C scenario that envisages the goal of the Paris Agreement of striving to limit the increase in the global average temperature to below 2 ̊C above pre-industrial levels; and the 4 ̊C scenario that envisages the GHG emissions on the present basis.
Based on these two scenarios, the Company, which is mainly engaged in the retail business such as department stores and shopping centers, extracted climate-related risks and opportunities according to the TCFD recommendations for each activity in its value chain process. In addition, we defined the transition risks (regulation policy, technology, market, reputation) and physical risks (acute, chronic) arising from climate change, as well as the opportunities (resource efficiency, energy sources, products and services, markets, and resilience) arising from responding appropriately to them.

(c) Risks/opportunities and financial impacts based on relevant scenarios and strategies/resilience against them

The Company assessed the importance of the identified climate-related risks and opportunities based on two criteria: the “importance to the Group (degree of impact × urgency)” and “importance to stakeholders.” For items that were evaluated to be of particular importance, we assessed the financial impact of two scenarios, a 1.5°C/less than 2°C scenario and a 4°C scenario, from both quantitative and qualitative perspectives for FY2030, and developed countermeasures for each scenario. Risks and opportunities for which it is difficult to obtain information to quantitatively assess the financial impact have been evaluated qualitatively, and the results are indicated in three levels according to the slope of the arrow.

Climate change risks and opportunities of particular importance to the JFR Group and their financial impacts in FY2030

Impact on JFR Group’s business and finances expected to be very large

Impact on JFR Group’s business and finances expected to be somewhat large

Impact on JFR Group’s business and finances expected to be negligible

JFR Group FY2050 Net Zero Transition Plan

The plan is current as of the end of May 2024 and may be revised depending on future business strategies.

The Company believes that it is necessary to strengthen its strategic resilience from a medium- to long-term perspective. To this end, we have formulated a transition plan to achieve net zero emissions by 2050. The plan identifies specific initiatives from short-, medium-, and long-term perspectives to capture new growth opportunities, such as proactively responding to market changes in response to positive opportunities, while developing appropriate measures to avoid negative risks in our business strategy.
Internal carbon pricing (ICP) was established in February 2024. By converting internal CO₂ emissions into monetary values, the Company aims to visualize the effect of reductions on CO₂ and the cost of reductions to foster awareness of decarbonization, and to promote decision-making linked to decarbonization investments. We believe that anticipating future carbon taxes and other incurred costs and taking proactive measures to address them will lead to cost reductions from a long-term perspective, as well as opportunities for business creation.
In addition, more than 90% of our Scope 3 emissions are from Category 1 (procured products and services). It is extremely difficult to reduce and control Scope 3 emissions by our own efforts, so it is necessary for the entire value chain to work together to reduce emissions. We will encourage our suppliers to calculate their GHG emissions, and with those that have already done so, we will ask them to set reduction targets and promote step-by-step initiatives through dialogue.

Recommended Disclosure Item (4) Metrics and Targets

(a) Metrics used to manage climate-related risks and opportunities

The Company has established two metrics for managing climate-related risks and opportunities: Scope 1, 2 and 3 GHG emissions, and the ratio of renewable energy to total electricity used in business activities.
Also, to clarify the responsibility of executive officers regarding the issue of climate change, Scope 1 and 2 GHG emission reduction targets were set as one of the non-financial indicators for determining performance- linked compensation in officer remuneration.

(b) GHG emissions (Scope 1, 2, and 3)

The Company has been calculating its total emissions since fiscal 2017. Our Scope 1 and 2 emissions in fiscal 2023 were 82,757 t-CO₂ (57.4% reduction vs.FY2017) and Scope 3 emissions were 2,898,436 t-CO₂(1.0% reduction vs. FY2017). In addition, the ratio of renewable energy was 52.9%.
Third-party assurance has been obtained for FY2023 Scope 1, 2, and 3 emissions and renewable electricity consumption.

JFR Group’s Scope 1, 2 and 3 GHG emission results and forecast^*1 （Unit：t -CO₂ ）

*1 Obtained third-party assurance from LRGA Limited.
*2 Calculated based on “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain ver. 2.6 (March 2024, Ministry of the Environment and Ministry of Economy, Trade and Industry),” “Emission Unit Database for Calculating Greenhouse Gas Emissions of Organizations through Supply Chains Ver. 3.4 (March 2024),” IDEAv2.3 (for supply chain GHG emissions calculation)

(c) Targets and results used to manage climate-related risks and opportunities

Since fiscal 2018 the Company has set long-term GHG emission reduction targets to achieve the global below 1.5 ̊C /2 ̊C target, and our reduction targets for Scope 1, 2, and 3 emissions were certified by the SBTi in fiscal 2019. In fiscal 2021, in line with the advancement of our materialities, we raised our target for reducing 2030 Scope 1 and 2 emissions from the previous 40% to 60% compared with FY2017(base year), and it was approved as the 1.5°C target that is the new standard set by the SBTi. Moreover, in February 2023, we also obtained certification for the 2050 Net Zero Target for Scope 1, 2, and 3 GHG emissions.
To achieve these long-term targets, the Company started procuring renewable energy-sourced electricity for its own facilities in fiscal 2019, and in October 2020 we joined RE100*, which aims to achieve a 100% renewable energy share for electricity used in business activities by fiscal 2050. Moreover, as an interim target, we aim to achieve a 60% renewable energy share for electricity used in business activities by fiscal 2030.
Looking ahead, we will work to expand procurement of renewable energy-sourced electricity towards achieving net zero by fiscal 2050.

* A global initiative with the goal of 100% renewable energy for electricity used in business activities by 2050.

Targets used by the JFR Group to manage climate-related risks and opportunities

FY2023 Results and Future Targets

FY2023 Scope 3 Emissions by Category (Unit: t-CO₂ %)

*Category 8 is excluded from the calculation because it is calculated under Scope 1 and 2
*Category 10, 14, and 15 are excluded from the calculation because they are not applicable to the JFR Group's business processes

Under the supervision of the Board of Directors, the Company will continue to strengthen its governance in environmental management and promote company-wide initiatives, including the formulation and promotion of action plans to achieve medium- and long-term goals.

Creating a society that co-exists with the environment

• Aiming to Achieve Net Zero by 2050

• Environment Management System

• Information Disclosure in Line with TCFD Recommendations

• The Circular Economy the Group aims to create

• Proposal for Environment-Friendly Lifestyles

• Reduction of Wastes and Water Usage

• Information Disclosure in line with TNFD Recommendations (Biodiversity Conservation)

• Environmental Data

• Acquisition of Third-Party Assurance