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

To promote sustainability management across the entire JFR Group, discussions on and decisions about specific measures to address environmental issues are made in 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 discussed and decided 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 discussions and decisions made by the Group Management Meeting and the Sustainability Committee, and discusses and oversees the Group's policies and action plans for addressing environmental issues.
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 1) specific action plans, 2) regular reviews, and 3) the status of initiatives for continual improvement regarding environmental plans, including the setting of medium- to long-term targets, we are enhancing the effectiveness of our efforts to address environmental issues.

(b) Management's responsibility for climaterelated 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. He thus bears final responsibility for management decisions related to environmental issues. Details of matters discussed and decided by the Group Management Meeting and the Sustainability Committee are reported to the Board of Directors for final approval.

JFR Group environmental management system 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

The Group considers risk to be the starting point of strategy, and we have defined it as “uncertainty that affects the corporate management’s achievement of goals, having both positive and negative sides.” We believe that 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 climate-related risks and opportunities through the process shown below and assessed their importance.
Firstly, the Group extracted a comprehensive set of climate-related risks and opportunities exhaustively for each activity item of the supply chain process: “product procurement,” “transportation and customer movement,” “instores sales,” “use of products and services,” and “disposal.” Next, from those we identified the risks and opportunities that are important for the Company. Finally, we assessed the importance of the identified climate-related risks and opportunities based on two assessment criteria, “degree of impact on the Group and the probability of occurrence” and the “degree of impact on stakeholders.”

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

The Group 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.

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

The Group has established the Risk Management Committee based on the importance of building a Group-wide structure for managing risk. The Risk Management Committee identifies comprehensive risks and opportunities, including climate-related risks, and discusses countermeasures from the perspective of the likelihood and timing of potential risks and the business impact, based on environmental analysis conducted annually. Also, those risks that are extremely important to the Group's management over the medium term are reflected in the medium-term business plan as "corporate risks" and are addressed accordingly. The discussions of the Risk Management Committee are reported to the Group Management Meeting and shared with the Sustainability Committee.
The contents of discussions by the Risk Management Committee and the Sustainability Committee in the above series of processes, as well as resolutions by the Group Management Meeting, are reported to the Board of Directors in a timely manner, and are reflected and addressed in the Group's strategies under the supervision of the Board of Directors.

Risk management system

Recommended Disclosure Item (3) Strategy

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

The Group 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 Group has positioned the implementation term of the Mediumterm Business Plan up to FY2023 as the short term, the period up to FY2030, which is 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 Group 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 Group

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

The Group conducts scenario analysis to understand the risks, opportunities, and impact of climate change on the Group, and to examine the resilience of the Group’s strategies and the necessity of further measures by envisioning the world in fiscal 2030.
In the scenario 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 Group extracted climate-related risks and opportunities according to the TCFD recommendations for each activity in its supply chain process. In addition, we defined the transition risks (technology, market, reputation, policy regulation) 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 it.

Overview of climate-related risks and opportunities in the Group

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

The Group exhaustively extracted climate risks and opportunities and assessed their importance based on two assessment criteria: the “degree of impact on the Group and the probability of occurrence” and the “degree of impact on stakeholders.” For items that were evaluated to be particularly important, the Group has conducted both quantitative and qualitative analyses of the financial impact in fiscal 2030 assuming a 1.5˚C/less than 2˚C scenario and a 4˚C scenario.
The qualitative financial impact is presented in three levels by the direction of the arrow symbols.

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

JFR Group FY2050 Net Zero Transition Plan

The Group believes that it is necessary to strengthen its strategic resilience from a medium- to long-term perspective under both the 1.5°C/less than 2°C scenario and the 4°C scenario to achieve net-zero emissions in 2050.
To this end, we have formulated a transition plan that identifies specific initiatives from short-, medium-, and long-term perspectives to capture new growth opportunities such as proactively respond ing to market changes in response to positive opportunities while developing appropriate measures to avoid negative risks in our business strategy.

Recommended Disclosure Item (4) Metrics and Targets

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

The Group 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 performancelinked remuneration in officer remuneration.

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

Since fiscal 2017, the Group has been calculating its total emissions. Our Scope 1 and 2 emissions in fiscal 2022 were 109,785t-CO² (down 10.6% from fiscal 2021 and down 43.5% from fiscal 2017). Furthermore, our Scope 3 emissions in fiscal 2022 were 2,761,669t-CO (up 14.1% from fiscal 2021 and down 5.7% from fiscal 2017). The ratio of renewable energy was 33.6%.
The Group has received third-party assurance for its Scope 1, 2, and 3 GHG emissions and renewable electricity consumption in FY2022.

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 in accordance with “Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain ver. 3.3 (March 2023, Ministry of the Environment and Ministry of Economy, Trade and Industry)” IDEAv2.3 (for supply chain GHG emissions calculation).

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

Since fiscal 2018 the Group has set long-term GHG emission reduction targets to achieve the global below 1.5 ˚C /2˚C target, and its Scope 1, 2, and 3 emission reduction targets 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% reduction to a 60% reduction compared with fiscal 2017 (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 greenhouse gas emissions.
To achieve these long-term targets, the Group 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 that aims to source 100% renewable energy to power business operations by 2050

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

Realization of Decarbonized Society

• Aiming to Achieve Net Zero by 2050

• Environment Management System

• Information Disclosure in Line with TCFD Recommendations

• Environmental Data

• Acquisition of Third-Party Assurance