SUSTAINABILITY TCFD Proposal Initiatives

To sustain the blessings of Earth for future generations, the Lawson Group will consider the environment in every aspect of our business activities and strive to achieve sustainable development and coexistence with local communities. We have made coexistence with local communities and striving to achieve sustainable development basic principles of our Lawson Group Environmental Policy.
Furthermore, in determining the Group’s material issues, we consider the issue of climate change, which is becoming more severe year by year, to be an extremely important issue. As the core company of the Lawson Group, Lawson endorsed the Task Force on Climate-related Financial Disclosures (TCFD)* in April 2020, and we are following its recommendations to promote disclosure of information on governance, strategy, risk management, and metrics and targets.

* The Task Force on Climate-related Financial Disclosures (TCFD) was established by the Financial Stability Board (an international financial supervisory body comprising national financial ministries and central banks) at the request of the G20 to examine ways in which climate-related information should be disclosed and the response of financial institutions. The TCFD released its final report in June 2017, recommending that companies disclose information on climate change-related risks and opportunities.

Governance

Lawson created the SDGs Committee in March 2019, aiming to help realize a sustainable society through its business activities. The committee meets four times a year and is under the direct supervision of the president and CEO, representative director. Its members are made up of all division managers up to the rank of director. The committee has declared its intention to engage in “sustainable environment preservation activities toward a carbon-free society,” in order to realize “Environmental (Machi) friendliness.” The committee is promoting the formulation of action plans with set targets (KPIs) and progress management.

A working group has been established under the SDGs Committee, tasked with promoting the disclosure of information related to climate change. The personnel in charge of management planning and accounting, who undertake business strategies, the personnel in charge of investor relations (IR), and the departments that manage risk are promoting disclosure of information related to governance, strategy, risk management, and metrics and targets, as recommended by the TCFD. The working group analyzes risks and opportunities related to climate, grasps their impact on business strategy and revises the strategy, and examines various countermeasures for mitigating and adapting to climate change. The working group will also lead efforts to strengthen disclosure of the results of these examinations.

On March 1, 2021, we established the position of Chief Science Officer (CSO), which has been assumed by the president and CEO, representative director. On the same day, we also established the SDGs Promotion Department as a dedicated department to further strengthen our initiatives with a new structure.

Roles of the working group

  • Analysis of risks and opportunities related to climate change
  • Ascertainment of impacts on business strategy
  • Examination of climate change mitigation and adaptation measures
  • Disclosure of information regarding climate change-related initiatives

Strategy

(1) Identification of risks and opportunities

Risks and opportunities associated with climate change include those associated with the transition to a low carbon economy, such as regulations on greenhouse gas (GHG) emissions, and those associated with the physical changes caused by climate change, such as weather disasters of increased intensity.

Lawson recognizes that these risks and opportunities will emerge at different times. In the following table, they are organized into short term (less than 3 years), medium term (3-10 years), and long-term (10 years and above) perspectives.

Main risks and opportunities Timing of emergence or realization
Transition risk Introduction and increase of carbon prices Strengthening of GHG emissions
regulations
Increase in store operation costs due to introduction of carbon prices Medium term
Increase in costs of raw material procurement and manufacturing due to introduction of carbon prices Medium term
Increase in electricity prices Increase in energy cost due to increase in electricity prices Medium term
Increase in costs of raw material procurement and manufacturing due to increase in electricity prices Medium term
Strengthening of fluorocarbon regulations Increase in investment cost for non-fluorocarbon equipment, etc., in stores Short term
Strengthening of plastic regulations Increase in procurement cost for substitute raw materials compliant with plastic restrictions Medium term
Changes in consumer lifestyles and preferences Degradation of brand image due to delayed response to environmental awareness Medium term
Physical risks Increased severity of weather disasters Damage due to flooding in stores, decrease in sales due to suspension of operations Short term
Average temperature increase Increase in electricity usage at stores, distribution centers, etc. Long term
Opportunities Introduction and increase of carbon pricing Decrease in raw material procurement costs due to increased efficiency in suppliers’ business processes and facilities Medium term
Decrease in transport cost due to increased efficiency in logistics Medium term
Technological development in renewable energy Decrease in energy cost due to installation of reduced-cost solar cells Long term
Changes in consumer lifestyles and preferences Increase in sales due to development of environmentally conscious products and services Medium term
Average temperature increase Increase in sales due to development of products and services tailored to changes in customer preferences due to higher temperatures Short term

(2) Scenario analysis

We are conducting scenario analysis for the entire Group regarding the impacts on business of risks and opportunities. To begin, we have started scenario analysis on the following analysis targets.

Target businesses Domestic convenience store business
Scope of analysis Lawson and franchise stores
Analysis period 2030, 2050
Analysis target Impact on stores of the increase in store operation costs due to carbon price introduction, increase in energy cost due to increased electricity prices, and increased intensity of weather disasters
Referenced scenarios IEA WEO 2019, SDS STEPS (2°C), CPS (4°C) IPCC Fifth Assessment Report, RCP2.6 (2°C) RCP8.5 (4°C)
Carbon prices and energy cost

For the Lawson and franchise stores analyzed above, we recognize that the majority of our GHG emissions are derived from electricity. Therefore, if a carbon price is introduced for emissions to mitigate climate change in the future, we would incur additional costs in the procurement of electricity. The degree of impact of this would depend largely on our own circumstances, such as whether we can reduce out electricity usage, as well as the CO2 emission factor and price of the electricity procured.

We conducted a scenario analysis of the case where Lawson conducts initiatives to save energy, which it is implementing as a material issue, and the case where it does not conduct the initiatives, taking into account the future carbon prices, electricity sector emissions, and projected electricity prices. We also conducted an analysis of the procurement cost of the renewable energy needed to achieve 100% reduction in CO2 emissions per store by 2050, which Lawson has set as an initiative for promoting the SDGs. The result of this analysis indicates that if a carbon price of $100 to $140 per ton of CO2 were introduced to keep the increase in temperature below 2°C at both 2030 and 2050, even taking into consideration a decrease in emissions factors for the electricity sector due to decarbonization, the Company will experience a certain amount of financial impact if it does not take measures to reduce energy consumption.
On the other hand, if the company has taken steps to save energy, it will be able to reduce not only the store operation cost due to introduction of carbon prices, but also electricity charges, allowing the financial impact to be controlled within a tolerable range. Furthermore, to achieve a 100% reduction in CO2 emissions per store by 2050, we must not only promote energy saving, but also procure renewable energy. We found that although the fluctuation in procurement prices causes a small variation in the impact amount, the financial impact can be controlled within a tolerable range.

Weather disasters

As a group, we not only prepare for large-scale disasters, but also aim to quickly restore damaged stores and resume (or continue) operations by taking various disaster response measures so as to fulfill our role as a lifeline for the community in the event of a disaster. Steps we intend to take include confirming the safety of franchise store and headquarters employees and the status of damage in the event of a disaster, as well as ascertaining the status of product deliveries at suppliers.

Currently, we are assessing the impact of severe weather disasters on our stores by store and by region, with the goal of building a resilient store network that can continue operations and recover quickly in the event of a disaster.

Our analysis results shows that the financial impact of increased flood damage under both the 2°C and 4°C scenarios through to 2050 is limited and within a tolerable range. On the other hand, an analysis by region showed that there are some cases where stores are located in areas with high risk of water damage. We will therefore examine further disaster prevention countermeasures going forward.

(3) Policy and initiatives going forward based on analysis results

Lawson has identified climate change-related risks and opportunities, and conducted analysis of their impact on business based on the 2°C and 4°C scenarios. This initiative has only just started, and it will be necessary to further enhance and examine the content of the initiative going forward.

In addition, with the recent increase in momentum on climate change issues around the world, there has been significant activity in Japan and globally in terms of creating policies, laws, and regulations regarding climate change. Under these conditions, we will work to revise our business strategies and increase the accuracy of our analysis, partly to promote countermeasures that contribute to climate change mitigation and adaptation. Furthermore, by disclosing the results of this analysis, we aim to respond to the demands of our stakeholders.

Metrics and Targets

We are pursuing steady efforts to achieve the KPIs we determined in fiscal 2019 with respect to the issues and conditions faced in the social environment in 2030. Furthermore, in an effort to contribute to the formation of a decarbonized society and the vision of the SDGs, we have taken on the challenge of even higher targets (reducing CO2 emissions, reducing food waste, reducing plastic) in our Environmental Vision, Lawson Blue Challenge 2050! ? “Save our blue planet!”

KPIs

Reducing CO2 emissions

2030

Reduce CO2 emissions per store by 50% v. 2013 levels
(Target revised upward in June 2021)

2050

Reduce by100%
Reducing food waste

2030

Reduce food waste by 50% v. 2018 levels

2050

100% reduction of the same
Reducing plastic

2030

Reduce plastic for containers and packaging by 30% v. 2017 levels

Use 50% eco-friendly materials for plastics used in original product containers and packaging

2030

Reduce plastic shopping bags by 100%

2050

Use 100% eco-friendly materials for plastics used in original product containers and packaging



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