Response to TCFD Recommendations

Climate change initiatives and response to TCFD Recommendations

The Group recognizes that addressing climate change is an important management issue. In this regard, the Group is strengthening its governance system to contribute to realization of a decarbonized society, and is analyzing the impact of climate change on its business, capturing growth opportunities, and taking appropriate actions to address risks.
In March 2022, the Group announced our support for the recommendations of the TCFD (Task Force on Climate-related Financial Disclosure) established by the FSB (Financial Stability Board). Going forward, the TCFD recommendations will be actively utilized to enhance information disclosure and promote the Group’s climate change initiatives, as well as to promote sustainability management.

Governance

In January 2022, Kitamura Holdings (“KHD”) established a Sustainability Committee chaired by the Representative Director to promote sustainability management across the Group. In addition, a cross-Group Sustainability Promotion Office has been established as a department for promoting specific initiatives, in line with the Basic Sustainability Policy approved by the KHD Board of Directors. An officer in charge has been appointed to oversee the Sustainability Promotion Office.
The KHD Board of Directors receives reports on the resolutions made by the Sustainability Committee, decides on and gives instructions regarding Basic Sustainability Policy, and discusses and supervises the Group’s policies and action plans for dealing with environmental issues.

Strategy

The Group classifies risks and opportunities related to climate change as high, medium, or low based on the financial impact, which also indicates its impact and monetary business impact. The Group categorizes risks as physical or transition risks and divides opportunities into two categories in its business strategy: the growth area of “Camera & Resale,” and the stable area of “Photo-life Services.” The Group’s responses and the associated timeframes are organized as follows to demonstrate the Group’s resilience.

The premise for these considerations is a scenario analysis of whether warming can be limited to 1.5 degrees Celsius or will exceed 3.0 degrees Celsius in 2050.
The scenario analysis used group scenarios that combine the temperature scenarios (RCP) and socioeconomic scenarios (SSP) of the Intergovernmental Panel on Climate Change (IPCC). Specifically, to prepare for a wide range of future visions related to climate change, two scenarios were developed: the 1.5/2°C scenario, in which society as a whole transitions to decarbonization and succeeds in controlling the temperature rise, and the 3°C scenario, in which economic development takes priority and the global temperature rise and its impacts continue to worsen.
For the 1.5/2°C scenario, the IPCC AR5 RCP2.6 and AR6 WG1 SSP1-1.9 scenarios were referenced, while for the 3°C scenario, the IPCC AR5 RCP6.0 and AR6 WG1 SSP2-4.5 scenarios were referenced.
We conduct ongoing scenario analysis on an annual basis.

Risk management

The Group regards risk management as an important initiative for improving its corporate value, and identifies and assesses risks, prioritizes them based on their frequency of occurrence and impact, determines countermeasures such as avoidance, mitigation, transfer, and retention, and manages progress. These processes are regularly reported to the KHD Board of Directors by the Risk Management Group, which is the KHD department in charge.
Furthermore, with regard to risks related to climate change, the KHD Sustainability Promotion Office monitors, assesses, and identifies the key risks, which, together with other risks, are reported to the KHD Board of Directors and reflected in the Group’s strategy.

Metrics and targets

For greenhouse gas (GHG) emissions (Scope 1 and 2), we are targeting a 60% real reduction by 2030 compared to the fiscal year that ended March 31, 2020, and net zero emissions by 2050. For Scope 3, our interim target is a 25% real reduction by 2030 compared to the fiscal year that ended March 31, 2023. We will continue to cooperate with our business partners to reduce greenhouse gas emissions from our stores, supply chain, and product offerings, promote energy conservation, and improve energy efficiency in our operations.

In addition, to promote sustainability management, the Group sets ESG KPIs for some executive officers who are responsible for business execution, which is reflected through the equivalent of 5% to 10% of their incentive compensation, depending on the level of achievement.