Response to Climate Change

We recognize that addressing the issue of climate change is an important issue for the sustainable development of the PPIH Group and the enhancement of corporate value over the medium and long term. To accelerate and ensure these efforts, in February 2022, we declared support for the Task Force on Climate-Related Financial Disclosure (TCFD) and conducted scenario analysis and disclosure based on the TCFD recommendations.

Since this was the first attempt in the fiscal year 2021, we narrowed down the scope of analysis to identify climate change risks and opportunities in 2030 based on scenario analysis for the domestic retail business and food sector. In the future, we will expand the scope of analysis, improve the accuracy of financial impact assessment, and reflect it in our business strategies. We will also proactively disclose the details of our assessment and engage in dialogue with our stakeholders to achieve sustainable growth.

Governance : ESG Promotion Framework (as of February 2022)

Under the control of the CFO, who is the officer in charge of ESG promotion, each committee and the headquarters in charge of ESG promotion plans and formulates measures, which are reflected in the business activities of Group companies. In addition, each committee regularly reports on its activities to the Board of Directors, and formulates and implements policies and targets, as well as important initiatives which are also discussed and approved by the Board of Directors.

In terms of addressing climate change, the Sustainability Committee, established in July 2021, is leading efforts to analyze scenarios based on the TCFD Recommendation, consider measures to address identified risks and opportunities, reduce CO₂ emissions, and reduce waste.

Strategy : Scope of Analysis(1.5℃ and 4℃ scenarios)

(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℃ 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.

Transition risk
Less than 2℃ / 4℃ Based on IEA scenarios
・World Energy Outlook2021 ・Net Zero by 2050 ・Energy Technology Perspectives

Physical risk
The main source is the IPCC. Domestic data was supplemented by government documents (e.g., MLIT "Study Group on Flood Control Planning in Light of Climate Change").
・IPCC AR6 Interactive-atlas

Strategy : Identification of Significant Risks/Opportunities

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.

1.5°C scenario, as of 2030

Risk Items		Anticipated Changes in the Social Environment	Risks/Opportunities for the Business
Transition Risks Policy and Legal	Greenhouse gas (GHG) emission reduction requests	• Introduction of regulations to reduce GHG emissions • Introduction of regulations to reduce food loss • Introduction of regulations for reduction of HFCs (chlorofluorocarbons)	Risks: • Higher store operating costs due to carbon dioxide emission regulations • Higher costs due to stricter regulations on food disposal • Higher equipment costs due to replacement with natural refrigerant equipment
	Introduction and increase of a carbon price	• Introduction of a carbon tax • Introduction of a carbon border tax	Risks: • Higher store operating costs due to carbon price burden • Increase in procurement costs for products (beef, dairy products) Opportunities: • Demonstrating superiority by building a resilient supply chain through individual store management • Expanding customer base of discounters due to growing preference for lower prices
	Introduction of plastic-free regulations (one-way plastic regulations)	• Introduction of procurement and disposal regulations for one-way plastic materials • Increased demand for renewable plastic materials • Establishment of plastic recycling technology for various materials	Risks: • Cost increase due to replacement of plastic containers, packaging, and promotional materials with renewable resources Opportunities: • Enjoying cost advantages by creating a system for recycling plastic products and services in cooperation with POP lamination suppliers • Reduce costs and increase sales by developing products with slimmer containers and packaging that take advantage of the discount business model
Transition Risks Technology	Increase in demand for renewable energy and expansion of the amount created through the establishment of technologies	• Rising demand for renewable energy and rising electricity prices due to fossil fuel regulations • Grid parity between renewable energy and normal electricity	Risks: • Soaring electricity prices, rising costs due to power certificate purchases Opportunities: • Enjoying incentives through early replacement of electricity derived from renewable energy sources
Transition Risks Market and Reputation	Change in reputation among stakeholders (investors, business partners, local communities, etc.)	• Establish investment behavior, purchasing behavior, and hiring practices that take into account climate-related risks	Risks: • Reputational damage due to delayed disclosure of information. Negative impact on fundraising, branding, recruitment, and product handling Opportunities: • Expand fan base by enhancing sustainable products targeting young people in stores with high affinity for young people

4℃ scenario, as of 2030

Risk Items		Anticipated Changes in the Social Environment	Risks/Opportunities for the Business
Physical Risks Acute	Storm and flood disaster	Frequent occurrence of abnormal weather • Frequent occurrence of large typhoons and hurricanes • Increased frequency of flooding	Risks: • Increase in damage to facilities due to wind and flood damage, and damage to profits due to business stoppage Opportunities: • Ensure resilience against disasters by delegating authority to each store, and increase reliability as a lifestyle infrastructure
	Storm and flood disaster		Risks: • Business shutdown due to supply chain damage
	Insurance Premium Burden		Risks: • Increase in property insurance premiums
Physical Risks Chronic	Rising Temperatures and High Tides	Chronic extreme weather events • Increase in average temperature • Rise in sea level	Risks: • Increase in store operating costs (cooling costs, etc.)
	Rising Temperatures and High Tides		Risks: • Increase in flooding damage
	Decline in Agricultural Productivity	• Food supply-demand crunch • Decline in production of grains (rice, wheat, beans, corn, etc.)	Risks: • Increase in procurement cost of food materials Opportunities: • Sales expansion due to increased demand for water and beverages

Risk Management

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.

Metrics and Targets

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.

■PPIH Group decarbonization targets

50% reduction of CO₂ emissions from stores by 2030 (compared to FY2013)

Reduce the total amount of CO₂ emissions from stores to zero by 2050

Subject: Domestic, including offices and a logistics center

【Major initiatives to achieve the target】

①Energy conservation in store operations through the introduction of energy-saving equipment and eco-tuning
②Creation of renewable energy through the use of solar panels and other store facilities
③Replacement with renewable energy through the use of non-fossil certificate transactions

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.