Endorsement of TCFD recommendations and participation in the TCFD Consortium

In June 2023, Mitsui DM Sugar Holdings Co., Ltd. (Representative Director, President & CEO: Taku Morimoto; Head office: Minato Ward, Tokyo; hereinafter, the “Company”) declared its support of the Task Force on Climate-related Disclosures (TCFD)*1 and joined the TCFD Consortium*2. We recognize the varied impacts of climate change to be a high priority for our Company, which conducts its main business while carefully utilizing nature’s blessings. Since 2022, we have been analyzing scenarios and reviewing risks and opportunities in line with TCFD recommendations. We reflect these in our risk management and management strategies for business promotion, and we will proactively disclose our progress going forward. We are committed to the further growth of the Company while contributing to the decarbonization of society as a whole.

• *1: The TCFD was established by the Financial Stability Board (FSB) at the request of the G20. The TCFD recommends that companies evaluate how climate-related risks and opportunities impact their businesses and disclose their governance, strategies, risk management, and metrics and targets.
• *2: The TCFD Consortium was established in 2019 to discuss appropriate information disclosure for companies endorsing the TCFD recommendations and efforts to help financial institutions and other entities make appropriate investment decisions.

TCFD Measures

1. Governance

The Group recognizes that responding to climate change, human rights, and other sustainability challenges is a key management issue that leads to risk reduction and corporate growth. We have established the sustainability management system shown below and created a Sustainability Committee as an advisory body to the Management Meeting.

The Sustainability Committee is chaired by the Representative Director, President & CEO and is made up of sustainability officers, executive officers, and outside experts. The committee receives reports on initiatives for the following management issues related to sustainability from the Sustainability Planning Department of Mitsui DM Sugar Holdings and deliberates and reviews these reports in response to consultations from the Management Meeting.

• Formulation of the Group’s basic sustainability policy as well as policies on activity topics (drafts)
• Formulation of a promotion system and operation policies (drafts)
• Formulation of individual activity policies (drafts) for materiality, goal setting, information disclosure, and so forth (formulating policies on climate change risks and opportunities, setting KPIs for priority sustainability items including climate change, and monitoring progress)

The Sustainability Committee meets quarterly to report the results of its deliberations and reviews to the Management Meeting. The Management Meeting reports and/or proposes to the Board of Directors the results of its deliberations based on the details of the reporting by the Sustainability Committee.

2. Strategy

The Company recognizes climate change to be a significant risk because most of the raw materials used in the Group’s businesses are agricultural products that are greatly impacted by the physical risks*1 of climate change and because the Group consumes large amounts of energy in the process of manufacturing, processing, and sales, and is thus greatly affected by transition risks*2 due to climate change. In identifying risks and opportunities related to climate change, the Group has established a short- to medium-term period of up to FY2030 and a long-term period of up to FY2050; this has been done to ensure consistency in timing with our medium-term management plan as well as external environmental factors such as the target years set by the Paris Agreement and by the Japanese government.

The risks and opportunities related to climate change are comprehensively listed based on publicly available information*3, focusing on the domestic sugar refining business, which is our main business. In addition, in terms of the magnitude of the financial impacts on our business, during the current fiscal year, the Company specifically identified “increased damage to Group plants and similar due to severe weather disasters” as a short- to medium-term physical risk and “increased costs due to the introduction of a carbon tax system” as a long-term transition risk.

The Group has assessed significant risks based on scenarios. Impacts on the Company are estimated using parameters determined from publicly available information, namely the percentage increase in estimated damage*4 in Japan’s coastal areas under the 4°C scenario due to the location of the Group’s sugar refining plants in coastal areas in terms of physical risks, and the carbon price*5 under the 1.5°C scenario in terms of transition risks.

In addition, the Group has established a system to minimize risks, and implementation of measures is already underway.

Regarding the risk of “increased damage to Group plants and similar due to severe weather disasters,” in the past, our domestic plants suffered storm surge damage, and our facilities suffered wind damage due to large typhoons. While there is always a possibility such risks may manifest, they are difficult to predict.

In response to the uncertainty of risk manifestation due to climate change, the Group has established a system for early restoration of its main business in the event of a weather disaster. This includes performing regular maintenance on facilities for preventative purposes; ensuring a supply network of six company plants including locations in Chiba, Kobe, and Fukuoka as well as contract sugar refineries; regular BCP training and review; and coordination with raw material suppliers and multiple purchasing.

In addition, we believe that building trust as a supplier by establishing an emergency supply system and ensuring a stable supply of sugar, a basic ingredient and important source of energy, provides a climate-related opportunity*6.

Regarding “increased costs due to the introduction of a carbon tax system,” we are working to minimize financial risk by promoting initiatives to achieve virtually zero CO2 emissions by 2050 through creating and conserving energy as well as through the use of decarbonized energy (purchasing of green electricity and biomass fuels, etc.) because our core refined sugar business requires large amounts of energy mainly in the production process, and also by reducing CO2 emissions in cooperation with our suppliers and reviewing our product and pricing structure.

In the future, we will further elucidate significant risks and examine other climate-related risks and opportunities. We are committed to strengthening the Group’s resilience to climate change.

3. Risk management

Mitsui DM Sugar Holdings has established risk management rules for all general risks, and it is committed to risk management through regular risk assessment and maintenance of rules and regulations. The Representative Director, President & CEO serves as the chief risk management officer. A review of risks and measures is performed once a year for departments and group subsidiaries. Climate-related risks and opportunities are currently being addressed as described below. We are considering managing these together with other risks in the future.

The Sustainability Planning Department of Mitsui DM Sugar takes the lead in identifying climate-related risks and opportunities in cooperation with relevant departments and Group companies as well as assessing their statuses. This information is reported to the Sustainability Planning Department of Mitsui DM Sugar Holdings.

The Sustainability Planning Department of Mitsui DM Sugar Holdings compiles all data on sustainability activities of the Group, including climate-related activities. The department reports and provides recommendations to the Sustainability Committee of Mitsui DM Sugar Holdings. In turn, the Sustainability Committee promotes sustainability throughout the entire Group by making proposals to the Management Meeting and the Board of Directors by making recommendations to the Management Meeting as described above.

Through this system, the Group appropriately manages climate-related risks.

4. Metrics and targets

To measure and manage climate-related risks and opportunities, the Group has established the following targets.

Physical risks: Increased damage to Group plants and similar due to severe weather disasters. The Group will establish and maintain a system for early restoration of business in the event of a weather disaster (regular maintenance of facilities, ensuring multiple supply networks of company plants and contract sugar refineries, regular BCP training and review, and coordination with raw material suppliers and multiple purchasing).

Transition risks: Increased costs due to the introduction of a carbon tax system.The Group’s targets are to reduce CO2 emissions by 46% compared to the 2015 level by FY2030 and to achieve carbon neutrality by FY2050 (for Scopes 1 and 2).

In addition, we have established the following two KPIs related to CO2 reduction.

• Reduction of water discharge
  Reduce water usage by 20% compared to the FY2015 level by FY2030.

  (Water usage refers to water resources used in relation to production activities (based on wastewater volume).)

• Reduction of waste
  Achieve zero waste by FY2030.

  (Zero waste refers to a waste recycling ratio of 98% or higher.)

By achieving these targets, our Group is committed to realizing a sustainable society.