Disclosure Based on TCFD Recommendations | Environment

Governance

The Sustainability Committee, which is under the direct control of the Management Council, formulates action plans addressing our Company's environmental issues and monitors the progress.

The Sustainability Committee is chaired by the Senior Executive Managing Officer, General Manager of Corporate Management Headquarters, with internal auditors always present on said Committee. A system is in place to ensure appropriate supervision by the Board of Directors, in which matters discussed at the Committee are decided and approved by the Management Council and are regularly reported to the Board of Directors.

In fiscal 2023, the committee met 11 times, and presented and reported to the Management Meeting 10 times, and reported to the Board of Directors/Director briefings 7 times.

Strategy

With reference to several existing scenarios published by the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC) at the Sustainability Committee, we envision the 2℃ and 4℃ scenarios that are the goals of the Paris Agreement, and we analyze the impact on our business and finances and consider countermeasures.

The identified risks and opportunities will be reflected in future management strategies, and will be analyzed and reviewed on a regular basis in response to future changes in the environment.

Existing scenarios referenced

	Scenario	Institution
4℃ scenario	RCP8.5 Representative Concentration Pathways 8.5	IPCC¹
1.5℃ scenario	SDS Sustainable Development Scenario	IEA²
1.5℃ scenario	NZE2050 Net Zero Emissions by 2050 Scenario	IEA²

1: Intergovernmental Panel on Climate Change
2: International Energy Agency

Identified climate-related risks / opportunities and their impact on our business and finances

Qualitative impact on the finance

Major classification	Category	Classification	Driver	Impact on business	Qualitative information	4℃	1.5℃
Major classification	Category	Classification	Driver	Impact on business	Qualitative information	Impact level
Risks	Transition risks	Development of policies / laws	Introduction of carbon price	Increase in operating costs and procurement costs due to the introduction of carbon tax, etc.	Increase in the operational costs, such as carbon taxes, due to the introduction of policies / laws and regulations to reduce greenhouse gas emissions. Increase in the procurement cost due to the increase also in the supply chain's operating costs	Medium	High
			Changes in the energy mix	Changes in the electricity rates and increase in production costs due to an increase in the proportion of power generation using equipment with low emission factors (renewable energy / new energy / next-generation energy)	Increase in the operating cost due to increase in the electricity price. Increase in the procurement cost due to increase also in the supply chain's operation cost	Medium	Medium
			Mandatory disclosure of environmental indicators	Increase in operational cost due to expanded mandatory disclosure of environment-related indicators such as GHG emissions	Increase in the operational cost that corresponds to the disclosure obligations. Risks of penalties and decline in corporate reputation due to inadequate response to disclosure	Medium	High
			Strengthening of plastic regulations	Increase in the costs due to re-evaluation of packaging materials, logistics materials, and products / accessories	Due to the strengthened plastic regulations, costs may increase due to our re-evaluation of materials, but the impact is expected to be minor as we are proactively responding to it.	Low	Medium
		Technologies	Development of new technologies with low impact on the environment	Increase in the procurement cost due to our response to the new technology	Increase in the procurement cost due to the spread of new materials and technologies with low impact on the environment, such as recycled fibers, and our company being asked to respond accordingly. Although some brands have already incorporated sustainable materials, the impact of switching in all brands at once is high	Medium	High
		Markets	Shrinking ready-made products / real store markets	Shrinkage of ready-made product sales and physical store sales due to changes in consumers	A certain degree of market change is already underway, including the shrinkage of the ready-made clothing market due to changes in consumer awareness, the shrinkage of physical store sales due to changes in [consumer] behavior, and the Covid-19 pandemic	Medium	Medium
		Reputation	Increase in ESG investors	Investment withdrawal / reduction of investment amounts due to lack of ESG initiatives	The risk of investors withdrawing increases due to our delays in responding to environment-friendly products / services. Funding may also be affected	Medium	High
		Reputation	Reputation among customers and in the society	Increase in costs in order to respond to the corporate stance and product reputation due to the spread of SNS and increased environmental awareness among consumers	Increase in the manufacturing costs due to expanded use of sustainable materials, strengthened factory audits, etc. In parallel with the expansion of corporate initiatives, there is a need for greater information disclosure than ever before	Medium	Medium
	Physical risks	Acute [risks]	Increased severity and frequency of natural disasters such as typhoons and floods (heavy rains / typhoons / floods / water shortages, etc.)	Increase in the number of store closures due to natural disasters, and increase in suspended / reduced operation due to damage caused to production and logistics facilities	Increase in the damage to stores and number of closed days due to increased natural disasters caused by climate change and increased risk of infectious diseases. Caused by decrease in sales and increase in repair costs	High	Medium
	Physical risks	Chronic [risks]	Rise in the average air temperature, seawater temperature, and sea level	Loss of in-store sales opportunities due to increased disease risks (heatstroke, infectious diseases, etc.) and loss of heavy clothing sales opportunities due to the rising temperatures	As temperatures rise, sales opportunities for our main sales channels and main products (outerwear) shrink, and our profits are lower due to lower profit margins	High	Medium
Opportunities	Opportunities	Resource efficiency	Improvement of efficiency in production and distribution processes	Development of cyclic products through the spread of recycling technologies and waste reduction by expanding secondary distribution channels	Decrease in the procurement cost for recyclable products, which are expected to be sought after as technologies spread. There are opportunities, also, to improve corporate values and expand investment by condensing purchases and reducing product wastes	Medium	High
		Products / Services	Development of new product groups and expanded sales by popularizing new functional materials and environment-friendly materials	Opportunities to expand sales by developing new product groups through popularization of low-carbon materials such as recycled materials and to develop new markets that respond to changes in consumer tastes.	Decrease in the procurement cost of recyclable products that are expected to be addressed as technologies become more widespread. There are opportunities to improve corporate values and expand investments by condensing purchases and reducing product wastes	Medium	Medium
		New markets	Expansion of the sustainable brand market	Increase in sales by expanding the ECOALF business and developing sustainable products across all brands	Expansion of sales of sustainable brands with increase in consumer awareness. There are opportunities to improve profitability by restructuring the business portfolio and concentrating management resources, such as starting sublicense transactions for ECOALF	Medium	Medium
		New markets	Expansion of the summer clothing market	Expansion of the summer clothing market due to global warming and decrease in the procurement cost due to the spread of functional materials	As average temperatures rise, consumers' tastes change, and opportunities to propose new functions / designs for summer clothing increase. The procurement cost is also expected to decrease with the spread of functional materials	Medium	Low

Risk Management

Through the Sustainability Committee, we regularly analyze climate-related risks, formulate action plans, and report them to the Management Meeting and the Board of Directors.

Regarding the response to physical risks (acute risks) caused by natural disasters, the Crisis Management Committee under the direct control of the Representative Director, President & Chief Operating Officer has established a system to carry out business continuity management such as BCP formulation.

Our risk management system

Metrics and Targets

GHG emission reduction targets

Medium-term Targets			Long-term Targets
Scope1・2	Specific reduction targets	Major reduction efforts	Scopes 1 and 2 to be net zero by 2050
Scope1・2	50% reduction from 2019 by 2030 (▲1,100t)	By 2030, change the electric power of our building to that of an electric power company with zero CO² emissions Introduction of LED lighting in our buildings
Scope3	30% reduction from 2019 by 2030 (▲34,700t)	Optimization of purchasing to avoid wasteful production and improvement of sell-through rate Reduction of annual GHG emissions per clothes by gradually replacing 30% of total production volume with environmentally friendly materials in raw material procuremen Efforts to reduce emissions throughout the whole supply chain

GHG emissions record: changes in past record

Changes in supply chain emissions

Unit: t

Scope	Category	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	FY2021	FY2022
Scope1	Direct GHG emissions by the business operators	879	738	819	594	556	432	296	310	304	339
Scope2	Indirect emissions due to the use of electricity, heat, and/or steam	3,103	4,419	3,872	3,065	2,220	2,135	1,906	1,418	1,243	1,321
Scope3	Category1 Purchased products / services	182,788	164,937	144,561	113,984	93,057	105,320	99,528	64,470	59,222	67,822
	Category2 Capital goods	1,807	2,231	3,225	4,211	3,451	5,193	7,796	1,912	538	1,234
	Category3 Fuel and energy activities other than SCOPE 1.2	1,189	1,060	1,037	814	750	637	533	472	476	490
	Category4 Transportation and delivery (upstream)	2,126	1,911	1,675	1,321	1,080	1,227	1,159	750	691	790
	Category5 Wastes from business offices	28	28	22	26	18	29	29	23	23	26
	Category6 Business trip	729	730	708	668	545	507	476	439	367	342
	Category7 Employer's commute	2,275	2,156	2,046	1,878	1,529	1,393	1,318	1,184	990	953
	Category8 Leased assets (upstream)	0	0	0	0	0	0	0	0	0	0
	Category9 Transportation and delivery (downstream)	0	0	0	0	0	0	0	0	0	0
	Category10 Processing of sold products	0	0	0	0	0	0	0	0	0	0
	Category11 Use of sold products	6,571	5,908	5,178	4,084	3,337	3,793	3,582	2,317	2,134	2,441
	Category12 Disposal of sold products	2,319	2,085	1,828	1,441	1,178	1,339	1,264	818	753	861
	Category13 Leased assets (downstream)	0	0	0	0	0	0	0	0	0	0
	Category14 Franchise	0	0	0	0	0	0	0	0	0	0
	Category15 Investment	0	0	0	0	0	0	0	0	0	0
	Total	199,833	181,046	160,280	128,427	104,944	119,437	115,684	72,385	65,194	74,959
Grand total		203,814	186,203	164,971	132,087	107,721	122,004	117,886	74,114	66,741	76,618
YoY		98%	91%	89%	80%	82%	113%	97%	63%	90%	115%

Category 5 of SCOPE 3, "Wastes from business offices", has been recalculated and revised from those of 2013

GHG emissions results: method of calculating supply chain emissions

Reference: 2022 sales

Scope	Category	Type	Primary unit	Sales	Unit	CO₂emission volume	Remarks
Scope1	Direct GHG emissions by the business operators	City gas	Per fuel usage 2.234 t-CO₂/K m³	123	K m³	275	*1
		LPG	Per fuel usage 2.999 t-CO₂/t	20	t	60	*1
		Kerosene	Per fuel usage 2.490 t-CO₂/kl	0	kl	0	*1
		Gasoline	Per fuel usage 2.322 t-CO₂/kl	1	kl	3	*1
Scope2	Indirect emissions from the use of electricity, heat, and/or steam supplied by other companies	Electricity, heat, and/or steam	Emission factors for the calculation, reporting, and the publication system under the Act on Promotion of Global Warming Countermeasures and emission factors for each electricity company			1,321	*2
Scope3	Category1 Purchased products / services	Products	Per number [of clothing] 0.024 t-CO₂/piece	2,815,309	piece	67,124	*3 (25.5kg×0.935)
		Made of paper Shopper	Per purchaser price 3.965 t-CO₂/M yen	93	M yen	369	*1 Other paper containers
		Made of plasticShopper	Per purchaser price 4.005 t-CO₂/M yen	1	M yen	2	*1 Plastic products
		Made of polyester Shopper	Per purchaser price 9.752 t-CO₂/M yen	28	M yen	270	*1 Synthetic fiber
		Waterworks / smaller water supply	Per purchaser price 1.502 t-CO₂/M yen	4	M yen	6	*1
		Sewer system	Per purchaser price 12.274 t-CO₂/M yen	2	M yen	22	*1
		Property insurance	Per purchaser price 0.726 t-CO₂/M yen	39	M yen	29	*1
	Category2 Capital goods	Capital investment amount	Per capital good price 2.924 t-CO₂/M yen	422	M yen	1,234	*1
	Category3 Fuel and energy activities other than SCOPE 1.2	Electric power	Per energy volume 0.068 t-CO₂/K kWh	3,587	K kWh	245	*1
		Steam	Per energy volume 0.033 t-CO₂/GJ	7,461	GJ	244	*1
		Gasoline	Per fuel usage 0.557 t-CO₂/kl	1	kl	1	*4
	Category4 Transportation and delivery (upstream)	Product transportation	Per number [of clothing] 0.000 t-CO₂/piece	2,815,309	piece	790	*3 (25.5kg×0.011)
	Category5 Wastes from business offices	General garbage (incinerated)	Per waste weight 1.336 t-CO₂/t	5	t	6	1 4
		Paper wastes (incinerated)	Per waste weight 0.250 t-CO₂/t	42	t	11	1 4
		Paper wastes (recycled)	Per waste weight 0.021 t-CO₂/t	17	t	0	*1
		Glass (recycled)	Per waste weight 0.010 t-CO₂/t	0	t	0	*1
		Metal (recycled)	Per waste weight 0.009 t-CO₂/t	7	t	0	*1
		Plastic (recycled)	Per waste weight 0.149 t-CO₂/t	7	t	1	*1
		Other (recycled)	Per waste weight 0.149 t-CO₂/t	49	t	7	*1
	Category6 Business trip	Number of employees	Per employee 0.130 t-CO₂/person/year	2,626	person	342	*1
	Category7 Employer's commute	Commuter traffic expenses	Per allowance amount for transportation 1.854 t-CO₂/M yen	514	M yen	953	*1
	Category8 Leased assets (upstream)	Included in SCOPE 1.2
	Category9 Transportation and delivery (downstream)	Not included in this calculation
	Category10 Processing of sold products	Not included in this calculation
	Category11 Use of sold products	Cleaning	Per number [of clothing] 0.000867 t-CO₂/piece	2,815,309	piece	2,441	*3 (25.5kg×0.034)
	Category12 Disposal of sold products	Product disposal	Per number [of clothing] 0.000306 t-CO₂/piece	2,815,309	piece	861	*3 (25.5kg×0.012)
	Category13 Leased assets (downstream)	Not included in this calculation
	Category14 Franchise	Not included in this calculation
	Category15 Investment	Not included in this calculation
Total					76,618 t-CO₂

Discharge database for calculating greenhouse gas emissions, etc. of an organization through the supply chain (Ver.3.3)
From the "Energy Saving Law Periodic Report (2022)" scheduled to be submitted in July 2023 to the Kanto Bureau of Economy, Trade and Industry, excluding SCOPE 1 "City gas", "LPG", and "Kerosene"
Ministry of the Environment's 2020 research work on fashion and the environment: "Fashion and the Environment" survey results:
prepared by Japan Research Institute, Limited "CO² emissions over the life cycle of clothing supplied domestically are estimated to be 25.5 kg per garment produced". Note that *3 Total shortfall (0.008) is CO² emissions related to stores and is included in SCOPE 1 and SCOPE 2
LCI database IDEA v2 (for calculating greenhouse gas emissions by the supply chain)