Climate change (information disclosure based on TCFD recommendations)

We recognize that addressing climate change is a material issue for the PPIH Group's sustainable development as well as the enhancement of corporate value over the medium to long term. In order to accelerate and ensure our efforts, we endorsed the Task Force on Climate-related Financial Disclosures("TCFD")in February of 2022 and conducted scenario analysis and disclosure based on the TCFD framework. We will continue with our efforts to address climate change and expand disclosures.

To address climate change, the Sustainability Committee, under the Executive Officer and CFO, who is in charge of ESG promotion, leads efforts to analyze scenarios based on the TCFD Recommendation, consider measures to address identified risks and opportunities, and reduce CO₂ emissions, waste, and plastic use, and reflects them in the business activities of Group companies. The Sustainability Committee also regularly reports to the Board of Directors on measures and activities to address climate change issues, and important initiatives are discussed and approved by the Board of Directors before being formulated and implemented.

(Sourced from the IPCC AR6 Interactive-atlas)

According to the Intergovernmental Panel on Climate Change (IPCC), the changes in global average temperature until 2100 will follow five scenarios depending on the fluctuation of CO₂ emissions. The scenario with the highest emissions causes a temperature rise of about 4.3°C which increases the physical risks due to the frequent occurrence of super typhoons.
On the other hand, the scenario with the lowest emissions will only rise by about 1.6°C. At this time, the world is said to be dramatically shifting to a decarbonized society, with the introduction of new regulations such as carbon taxes and the mainstreaming of EVs.
Although there are scenarios in between,(1)it is not strategic to plan countermeasures for all possible multiple futures, and(2)if countermeasures are taken at both ends, it will be easier to deal with the situation when the outcome falls in between (called a bookend scenario), so in this scenario analysis, we used the future projections of 4°C and 1.5°C.

PPIH has identified risks and opportunities based on changes in the social environment in 2030 for the 1.5°C scenario, which assumes that strict policies and regulations will be implemented to move toward a decarbonized society, and the 4°C scenario, which is an extension of current policies. In the future, we will consider countermeasures in order to ensure business continuity under either scenario.
In addition to addressing risks, we will also make the most of the PPIH Group's unchanging "The ability to adapt" in order to respond flexibly and swiftly to changes in the social environment brought about by climate change as well as expand business opportunities.

In terms of transition risks, we have calculated the impact of the introduction of carbon tax and its price increase for the purpose of reducing GHG emissions, as they are considered to be the greatest transition risks, For our estimate, we calculated the impact of carbon tax, assuming the tax would amount to $100/t in 2030, $144 in 2050, and we also calculated based on the assumption that emission factors for scope 2 electricity would be 51% lower than the present level.

2030: 3.93 billion yen, 2050: 5.621 billion yen

-Amount of carbon tax *1: $100/t in 2030, $144/t in 2050
-Electric power CO₂ emission factor *2: 51% reduction from the current level

As stated in the "PPIH Group decarborization targets, "we aim to reduce 50% of CO₂ emissions from stores by 2030(compared to FY2013)and reduce the total amount of CO₂ emissions from stores to zero by 2050, and through the promotion of initiatives to achieve our decarbonization targets, we expect that the burden of carbon tax will eventually be eliminated. We will monitor our environmental performance and report regularly on GHG emissions related issues. We will also consider the introduction of internal carbon pricing to meet our decarbonization targets more efficiently.

For physical risks, we identified the increase of natural disasters due to frequent occurrence of large typhoons, flood, etc. as the biggest risk and calculated the impact. we assume that by 2050, rainfall at a level that occurs only once every 10 to 100 years in the present scenario will occur by the year 2050, as the IEA data shows that the flood frequency in Japan will be about four times the current level*1. Based on the planned scale (rainfall of about once every 10 to 100 years) of the hazard map (flood inundation area) by the Ministry of Land, Infrastructure, Transport and Tourism, we calculated(1)business loss due to business suspension,(2)merchandise damage due to flooding inside the store, and(3)damage to store facilities due to flooding that stores in the "Tokyo Metropolitan Area (Arakawa River)," "Chukyo Area (Shonai River)," "Kinki Area (Yodo River)" and "Kyushu Area (Chikugo River)" will suffer.

-GMS stores: 2.44 billion yen

-DS Stores: 1.66 billion yen

-Small Stores: 202 million yen

To address the above risks, we have installed watertight panels, watertight doors, and other flood prevention equipment, as well as distributing sandbags at stores with a particularly high risk of flooding. Furthermore, in store areas where flooding has occurred in the past, we have changed display methods in order to prevent damage to products caused by flooding. We will continue to steadily implement measures to prevent damage from flooding.

In the PPIH Group, the Risk Management Headquarters is responsible for risk management. The Risk Management Headquarters gathers information on risk incidents that occur at stores and bases, decides on risk responses and countermeasures, and stores and bases implement countermeasures based on these directions. Progress is monitored by the Risk Management Headquarters and reported to the Board of Directors as necessary.
In response to risks related to climate change, in the event of a large-scale disaster, we have a business continuity plan (BCP)as a basic principle, and in accordance with our management philosophy of "delegation of authority", our stores are able to flexibly assess the situation and respond quickly.
In the future, we will incorporate climate-related risks into our company-wide risk management, for example, the Sustainability Committee will identify, evaluate and manage climate-related risks, and we will establish a system to share issues with the Risk Management Headquarters.

In order to address the risks related to CO₂ emissions identified this time, the PPIH Group has set the following decarbonization targets, and the entire group will work together to achieve the targets and disclose progress on a regular basis. The PPIH Group will also consider countermeasures for other risks, formulate quantitative targets, disclose efforts to achieve the targets as needed, and promote measures to cope with climate change.

Solar panels (MEGA Don Quijote Kofu)

In the future, we will expand the scope of our scenario analysis to include categories other than food products and overseas businesses to identify risks and opportunities. We will also work with our suppliers to build an environmentally friendly supply chain and improve the accuracy of our disclosure of Scope3 emission reductions.