Information Disclosure Based
on TCFD
Recommendations

Addressing Climate Change(Initiatives Based on TCFD Recommendations)

In June 2023, we expressed our support for the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD). We recognize the various impacts of climate change as a high-priority issue for our Group, which contributes to a future of greater happiness by delivering nature’s blessings ー the source of our business ー in various forms to society at large. Based on this recognition, since FY2022, we have been conducting scenario analyses and assessing risks and opportunities in line with TCFD recommendations, and disclosing the results. We integrate these insights into our operational risk management and corporate strategies, and we will proactively disclose our progress going forward. We aim to achieve further growth while contributing to the decarbonization of society as a whole.

①Governance

Our Group recognizes that addressing sustainability challenges such as climate change and human rights is a key management issue that reduces risk and drives corporate growth. We have established the sustainability management system shown on the right. Matters examined and deliberated by the Sustainability Committee are submitted as recommendations to the Management Meeting and then further reviewed and deliberated by the Management Meeting and the Board of Directors.

Roles and Functions of Each Organization Related to Sustainability

[Board of Directors]
The Board of Directors receives reports on the Basic Sustainability Policy, material issues, targets for these issues, and policies for responding to risks and opportunities. These matters are approved by the Management Meeting based on recommendations from the regularly held Sustainability Committee. Through this process, the Board oversees the executive management’s initiatives regarding overall sustainability.
[Sustainability Committee]
We have established the Sustainability Committee as an advisory body to the Management Meeting. The Sustainability Committee meets regularly and is chaired by the Representative Director , President & CEO. It is composed of directors, executive officers, and external experts appointed by the Chair. The Committee is responsible for the following:
  • Formulation of the Group’s promotion structure and operational policies
  • Formulation of basic policies and activity themes regarding sustainability for the Group
  • Formulation of policies regarding climate-related risks and opportunities
  • Establishment of action plans to resolve material issues and achieve KPIs related to sustainability, including climate change
  • Monitoring of progress
  • Discussion on major activities related to sustainability management
[Corporate Sustainability Division]
To promote sustainability initiatives across our Group, we have established the Corporate Sustainability Division within Mitsui DM Sugar Co., Ltd. In collaboration with Group subsidiaries, this division formulates basic policies, material issues, targets, strategies, and action plans for sustainability management. It also promotes specific activities, plans sustainability training and awareness-raising activities, and handles external communications. In addition, implemented activities and future plans are regularly reported to the Board of Directors through the Sustainability Committee and the Management Meeting. The Board of Directors then discusses, evaluates, and improves them to ensure they contribute to our sustainable growth.
②Risk management
Regarding the risk management system for our sustainability strategy, we have established risk management regulations covering all risks, including climate change and human rights violations. With the Representative Director and President serving as the Chief Risk Management Officer, we implement risk management activities such as conducting regular risk assessments and maintaining relevant internal regulations. Each department and Group subsidiary reviews risks and mitigation measures annually. We will continue our efforts to conduct regular risk assessments and maintain relevant internal regulations.
③Strategy
Our Group recognizes climate change as a material risk. This is because most of our raw materials are agricultural products, which are highly susceptible to the physical risk [*1] of climate change. Furthermore, our manufacturing, processing, and sales processes consume significant amounts of energy, making us highly exposed to climate-related transition risk [*2]. In identifying climate-related risks and opportunities, the Group has defined the short- to medium-term timeframe as the period up to FY2030, and the long-term timeframe as the period up to FY2050. These timeframes are aligned with our Medium-term Management Plan, as well as external factors such as the target years of the Paris Agreement and the Japanese government.

Identification of Material Risks

To identify climate-related risks and opportunities, we compiled a comprehensive list covering the Group’s core businesses: the domestic and overseas sugar business and the Life Energy business. Next, we assessed the financial impact of all risks and opportunities referencing publicly available information [*3] and other sources. Taking into consideration the impact on the Group’s business, we then extracted and organized the following items.

Physical Risks
Period Category Item Type Potential Risks and Opportunities Financial Impact
Physical: 4°C
Transition: 1.5°C		 Countermeasures and Opportunities
Short-term

Medium-term		 Acute Increase in scale and frequency of natural disasters Risk Increased damage costs to Group factories and facilities due to intensifying severe weather disasters High ◦Strengthen regular maintenance of facilities
◦Strengthen backup systems across six domestic sugar refineries
◦Regular BCP drills and reviews
◦Collaboration with raw material suppliers and multiple sourcing
Risk Occurrence of losses to the Group due to operational suspension or other disruptions at supply chain partners Medium ◦Collaboration with raw material suppliers and multiple sourcing
◦Securing alternative raw and auxiliary materials with high dependency, and verifying and securing alternative production methods
Chronic Sea level rise Risk Decline in supply capacity for raw materials and products, driven by a reduction in production sites due to loss of arable land and a decrease in logistics hubs Low ◦Formulation of BCP plans
◦Gathering information to secure alternative arable land, and securing alternative logistics routes
Long-term shifts in climate patterns, such as average temperatures and precipitation patterns Risk/Opportunity Fluctuations in the supply of raw materials (sugar beets and sugarcane) due to changes in average temperatures and other climate factors High ◦Introduction of crop varieties with high resilience to climate and temperature changes (sugar beets and sugarcane)
◦Establishment of farming practices adaptable to climate changes (sugarcane)
◦Introduction of crop varieties with high resistance to diseases and pests (sugar beets)
◦Review of products and pricing structures in anticipation of raw material price fluctuations (international market rates) driven by changes in supply volume
Risk/Opportunity Fluctuations in sales driven by changes in sugar consumption behavior due to rising temperatures Low ◦Balanced sales policies for end products, such as beverages and foods consumed across various temperature ranges (leveling of sales portfolios)
◦Joint development of products that suppress the increased risks of diseases associated with rising temperatures (e.g., beverages for heatstroke prevention)
Risk Increased costs driven by the strengthening of heat countermeasures, primarily in production divisions, due to rising average temperatures Low ◦Continued implementation and horizontal expansion of heat countermeasures
◦Promotion of labor-saving production processes to reduce the risk of human injuries
Transition Risks
Period Category Item Type Potential Risks and Opportunities Financial Impact
Physical:4°C
Transition:1.5°C		 Countermeasures and Opportunities
Long-term Policies and legal systems Increase in carbon pricing Risk Increased costs due to the introduction of carbon taxes and emissions trading systems, etc. High ◦Adoption of energy creation, energy conservation and decarbonization energy
◦Reduction of CO2 emissions in collaboration with suppliers
◦Review of products and pricing structures
◦Fundamental review of manufacturing processes to reduce CO2 emissions (efforts toward process innovation)
◦Fundamental review of raw material procurement methods to reduce CO2 emissions
Technological advancements Development of new low-carbon and decarbonized production technologies Risk/Opportunity Increased R&D expenses for new technology development
Reduced manufacturing costs through energy cost reductions		 Medium ◦Cost reduction through detailed review of fuel switching implementation costs
◦Promotion of joint research with industry peers and companies in other industries in non-competitive areas
◦Boiler fuel switching in manufacturing plants (promoting defossilization)
Risk Increased raw material procurement costs due to the use of raw materials (sugarcane) for bioethanol as a renewable fuel Low ◦Review of products and pricing structures in anticipation of rising raw material prices (international market prices) due to reduced supply
Technological innovation related to low-carbon and decarbonization Opportunity Suppressing increased business costs, including through joint delivery with business partners within the Group supply chain, modal shifts, and optimized order placements Medium ◦Promotion of joint delivery and modal shift
◦Consideration of joint delivery and other measures with industry peers and companies in other industries in non-competitive areas
Market changes Social demand for environmentally friendly products Risk Costs incurred by shifting consumer behavior toward environmentally friendly products Low ◦Appropriate transition to environmentally friendly products
◦Promotion of high added value through the development of new environmentally friendly products
Reputation Reputational risk arising from a passive corporate stance toward decarbonization Risk Decline in corporate image and decrease in corporate value due to a passive stance toward decarbonization Medium ◦Timely disclosure of information related to decarbonization initiatives and expansion of communication channels
◦Strengthening sustainability management and enhancing communication with all stakeholders, including investors

Furthermore, we identified risks with particularly significant financial impacts as material risks, and evaluated them based on climate change scenarios as follows (a 4℃ scenario [*4] for physical risks and a 1.5℃ scenario [*5] for transition risks).
We then confirmed our framework for minimizing risks and exploring opportunities.

Countermeasures for Identified Material Risks

  • Increased damage to Group factories and facilities due to intensification of weather disasters
    In the past, our domestic factories have suffered storm surge damage, as well as wind damage to facilities caused by major typhoons. In the future, there is a possibility that such damage will become even more apparent, not only at domestic factories but also at overseas factories.
    To address these climate-related risks, the Group conducts regular equipment maintenance as a preventive measure. We have secured a supply network consisting of six facilities, which includes our own factories in Chiba, Kobe, and Fukuoka, as well as contract sugar refineries. Additionally, we have established a framework to ensure the rapid recovery of our core businesses in the event of a weather disaster. This includes conducting and reviewing regular BCP drills, collaborating with raw material suppliers, and implementing multi-sourcing strategies.
    Furthermore, we believe that building trust as a supplier ー by establishing an emergency supply framework and ensuring the stable supply of sugar, a fundamental seasoning and a vital energy source for the human body ー presents a climate-related opportunity.
  • Fluctuations in the supply volume of raw materials (sugar beets and sugar cane) due to changes in average temperatures and other climate factors
    Regarding sugar beets, according to projected sugar beet yield in the 2030s [*6], while global warming is expected to increase the yield, high temperatures from summer onward may reduce the sugar content in the roots. As a result, the overall sugar yield is estimated to increase slightly. On the other hand, the incidence of diseases (such as Cercospora leaf spot, leaf rot, root rot, black root rot) is expected to rise, along with an anticipated increase in feeding damage from insect pests such as armyworms.
    To address these risks, our Group company, Hokkaido Sugar Co., Ltd. is promoting the introduction of sugar beets with high resistance to diseases and pests. Going forward, we will refine our impact assessments through further information-gathering while working closely with research institutions.
    As for sugarcane, our other raw material, it grows well in warm climates. As with sugar beets, its yield is expected to increase due to the higher effective accumulated temperature resulting from the rise in average temperatures. On the other hand, the rise in average temperatures may exacerbate growth-limiting factors (such as typhoons, cyclones, droughts, and diseases and pests). For example, in major production regions such as Australia, Thailand, and Brazil, sugarcane yields are projected to decline due to climate change factors.
    To address these risks, we are working with local farmers, research institutions, and other partners to develop farming methods that can adapt to climate change and increasingly severe weather events. [*7]
    Furthermore, the effects of climate change may pose risks not only to growth conditions but also to the post-growth harvesting and processing stages, such as disruptions in transportation routes and breakdowns of production-related facilities caused by increasingly severe weather events.
    To address such uncertainties in raw material procurement caused by climate change, the Group will promote stable procurement by continuing to communicate with suppliers and advancing considerations such as the diversification of our procurement sources.
  • Increased costs due to the introduction of carbon taxes and emissions trading systems
    Because our core sugar refining business requires a significant amount of energy, mainly in the production processes, we have been working to calculate our CO2 emissions. For FY2024, our total Scope 1 and 2 emissions were 229,709 t-CO2. Of this amount, we have obtained third-party verification for the non-consolidated emissions of the Company (67,422 t-CO2) to ensure the reliability of calculations. Based on these calculation results, we will promote initiatives aimed at achieving net-zero CO2 emissions by FY2050 through energy generation and conservation, and the adoption of decarbonized energy (such as purchasing green electricity and biomass fuels). Furthermore, we will also work to minimize financial risks by reducing CO2 emissions in cooperation with our suppliers and reviewing our product and pricing structures.
    (Sustainability data)
Going forward, we will continue to further examine material risks and assess other climate-related risks and opportunities,
working to strengthen our Group’s resilience to climate change.

*1 Risks of direct damage to assets and business operations resulting from natural disasters and other events induced by climate change.

*2 Risks associated with changes in policies, legal frameworks, technological innovation, and market preference arising from the transition to a low-carbon society.

*3 Ministry of Agriculture, Forestry and Fisheries, “Introduction to Information Disclosure on Climate-Related Risks and Opportunities in the Food, Agriculture, Forestry and Fisheries” (June 2021).

*4 For the projected rate of increase in estimated damage in coastal and river basin areas where the applicable facilities are located, refer to “Aqueduct Floods” by the World Resources Institute (WRI) [ https://www.wri.org/applications/aqueduct/floods/ ].

*5 For projected future carbon prices, refer to the Net Zero Emissions scenario in “World Energy Outlook 2025” by the International Energy Agency (IEA).

*6 Hokkaido Research Organization, Agricultural Research Department, Central Agricultural Experiment Station, “Report on Research Program for Evaluating the Impact of Global Warming on the Changes in Agricultural Productivity in Hokkaido for the decades 2030s” (Misc. Pub. of Hokkaido Agri. Exp. Stn. No. 39, October 2011)

*7 The Future of Sugarcane Farming on Ishigaki Island ー Balancing Sustainable Agriculture and Environmental Conservation
[ https://sustainability.msdm-hd.com/topics/571/ ]

④Metrics and targets
The Sustainability Committee formulates policies for risks, establishes KPIs related to sustainability, including climate change, and monitors progress. Matters examined and deliberated by the Committee are reported to the Management Meeting and the Board of Directors and are reflected in management’s actions based on the Board’s opinions and advice.
Our Group [*1] has established the following climate-related KPIs: reducing CO2 emissions by 46% by FY2030 compared with FY2015 levels, and achieving carbon neutrality by FY2050.
Actual Scope 1 and Scope 2 CO2 emissions for FY2024 are as follows:
The Company67,422 t-CO2
The Group229,709 t-CO2
(third-party assurance has only been obtained for the Company’s figures)
In addition, we have established the following two environmental KPIs.
  • Water usage*2
    Reduce water usage by 20% compared to FY2015 levels by FY2030.
  • Reduction of waste
    Achieve zero waste*3 by FY2030.

Our Group is committed to realizing a sustainable society by achieving these targets.

*1 For these KPIs, the scope covers Mitsui DM Sugar Co., Ltd., Kanmon Sugar Manufacturing Co., Ltd., and Hokkaido Sugar Co., Ltd.

*2 Water usage is defined as water resources used in conjunction with production activities (based on wastewater volume).

*3 Zero waste means a waste recycling ratio of 98% or higher.