Governance

Structure

To promote responses to social issues, the Company has appointed the President and CEO as CSO (Chief Sustainability Officer), who leads sustainability-related initiatives across the Group. In addition, the Sustainability Committee, whose core members include the heads of departments related to sustainability, deliberates and determines directions for important sustainability issues such as decarbonization, natural capital, and biodiversity. Working groups and similar bodies are established under the Committee to examine measures for particularly important issues and to advance initiatives.

Strategy

Understanding Dependencies and Impacts on Natural Capital

In conducting business activities, our Company affects the natural environment through store construction and operations, while also relying on natural resources such as timber, water, and other raw materials in the development and sale of products. These business activities are heavily dependent on the rich blessings of the Earth, and without biodiversity, our business itself would not be sustainable.
Throughout the entire value chain—from raw material procurement, product manufacturing, and distribution to store operations—we identify dependencies and impacts on natural capital and promote initiatives for its conservation and regeneration (see “Analysis of Dependencies and Impacts Across the Group’s Businesses” below for details). At the raw material procurement stage in particular, we are strongly dependent on natural capital within the value chain, so we have established the Lawson Group Procurement Policy*⁴. Under this policy, we are working on the development and sale of products using certified materials that consider biodiversity, responsible use of resources, and waste reduction.
Going forward, we will continue to actively pursue initiatives to achieve nature-positive outcomes*⁵—halting and reversing biodiversity loss to put ecosystems on a path to recovery.

*4 Find out more about “Lawson Group Procurement Policy”

*5 Nature-positive outcomes: Halting and reversing biodiversity loss to place nature on a recovery trajectory.

Risk Management

Management Structure

To identify risks that significantly affect business management, analyze their potential impacts, and take appropriate responses according to risk characteristics, the Company has established a Company-wide Compliance and Risk Management Committee under the CRO (Chief Compliance and Risk Officer). This committee annually identifies risks associated with business activities and creates risk scenarios, including those related to climate change, biodiversity, human rights, and other social issues. Each risk scenario is assessed based on impact level and frequency of occurrence. Those deemed to have the potential for significant impact on financial conditions, business performance, cash flow, or strategy are designated as material risks, and we take measures to prevent their occurrence or mitigate damage if they arise.

Metrics and Targets

Environmental Vision

Targeting 2025, the Company’s 50th anniversary, and 2030, the SDGs milestone year, we have established social and environmental goals (KPIs) and are working diligently toward their achievement. As an additional long-term goal, we formulated the Environmental Vision “Lawson Blue Challenge 2050!”*⁶to help build a carbon-free society by 2050 and pass on a blue, abundant global environment to the future. We are advancing initiatives to address environmental challenges such as reducing CO2emissions, reducing food loss and waste, and reducing use of plastic in containers and packaging and plastic shopping bags, while striving to achieve the targets for 2025, 2030, and 2050.

*6 Find out more about the Environmental Vision “Lawson Blue Challenge 2050!”

Evaluation of Dependencies and Impacts

The coffee value chain was broken down into land development, raw material production, processing and roasting, distribution, and sales, and the relationships of dependencies and impacts were clarified.
It was found that in the upstream stages of land development and raw material production, the degree of dependence on and impact to nature is particularly high. Dependencies are high on GHG (functions for stable and regulated climate) and water supply. On the other hand, impacts are high for solid waste (waste emissions), direct adverse impacts on biodiversity (noise and light), and water use.
Since the evaluation by ENCORE is based on general figures, some qualitative assessments have been conducted in light of the characteristics of the Group’s value chain, and the results are reflected in the table below.

●Relationship Between Coffee Value Chain and Nature

Dependencies and Impacts in the Coffee Value Chain (Very High and High only, extracted)

Detailed Analysis of Major Risks

In the coffee value chain, dependence and impact on water resources are significant and greatly influence the risks and opportunities identified for this value chain. The severity of water risks varies significantly by region.
The Company operates an in-store freshly brewed coffee service, MACHI café, and the countries and regions from which coffee beans are procured are important areas for the Company’s business. Using the water risk assessment tool Aqueduct*⁹, an analysis was conducted of the risks related to water resources at the 12 coffee farms (Sites A – L) located in Brazil, Colombia, Guatemala, and Tanzania, which are the Company’s main coffee bean procurement sources.

*9 A water risk analysis tool provided by WRI (World Resources Institute). Based on location data, it evaluates the specified types of risk at the given site on a six-level scale from Low to Extremely High.

●Water Risk Analysis by Site

Collaboration with Coffee Farms

Since its launch in 2011, our in-store freshly brewed coffee service, MACHI café, has worked to improve the human rights of producers and workers, adopted farming methods aimed at conserving natural capital and biodiversity, and used coffee beans from Rainforest Alliance Certified farms*¹⁰that comply with the Rainforest Alliance’s sustainable agriculture standards. Each year, we have increased the proportion of certified farm beans, and in 2015 we achieved 100%*¹¹use of certified beans for coffee and café latte (hot and iced), a practice that continues today.
We also designate farms and production regions and build medium- to long-term trading relationships to secure farms’ economic stability, while providing support for human rights and biodiversity conservation efforts.

*10 Find out more about “ra.org” (external link)
Find out more about initiatives related to “Rainforest Alliance Certification”

*11 Mocha Blend is not of the scope.

Our coffee value chain depends on natural capital and is supported by many stakeholders, including coffee producers.
At the same time, nearly 80% of deforestation is said to be caused by agricultural activity, and risks such as forced and child labor, overuse of resources, and improper waste management cannot be eliminated in coffee sourcing.
To avoid these issues and risks, respect human rights, and conserve the natural environment—i.e., to procure sustainable coffee beans—we promote the use of beans from Rainforest Alliance Certified farms.
Of course, we recognize that the use of certified beans alone does not resolve all issues and risks. Beyond Rainforest Alliance initiatives, we are committed to contributing to the creation of a more sustainable society through various efforts.

Response to Water risks

In the water risk analysis by production region conducted with Aqueduct, coffee farms were identified as being particularly exposed to river flood risk and water quality risk. However, we have confirmed that Rainforest Alliance certification requirements, as well as farm-specific measures, ensure that countermeasures are in place to cover these high-risk areas.

●Measures against Water Risks – Rainforest Alliance Certification Requirements

Examples of Appropriate Water Resource Use at the Ipanema Farm in Brazil

●Drip Irrigation Equipment

Irrigation equipment has been introduced for coffee tree cultivation, and the irrigated area has been expanding each year. By using irrigation equipment, the farm prevents the drying of coffee trees, thereby improving production efficiency and stabilizing yields. The drip irrigation system adopted at the Ipanema Farm delivers water directly to the roots of the coffee trees, making it three to four times more efficient than the pivot method, contributing to water conservation.

●Processing Equipment

In the processing stage, where coffee beans are extracted by removing pulp and other components from the cherries, large amounts of water are used for washing after harvest, sorting by water flotation, and fermentation to remove the mucilage surrounding the beans. At the Ipanema Farm, water use in each step is monitored and adjusted to optimal levels, reducing annual water consumption in processing. In 2023, the farm reduced water use per liter of coffee cherries by about 40% compared with 2019.

Social and Environmental Measures Beyond Water Risks

Support for Addressing Social Issues on Coffee Farms

Each farm undertakes initiatives to support workers and local communities to improve living conditions. As a company that uses coffee beans, we help enhance the sustainability of producing regions and producers by supporting these initiatives.
In 2022, to mark the 10th anniversary of MACHI café, we launched the “Let’s Say Thank You to Coffee Producers Project,” and the theme “A future where everyone can easily and safely wash their hands and drink water!” was selected by our customers via voting. At the AVIV Farm in Tanzania, we installed water tanks and provided water delivery by truck, ensuring that all people involved in coffee production, including those far from wells, can access safe water.
Other initiatives include donating books to orphanages to support education and making donations to farm workers.

Environmental Initiatives on Coffee Farms

The Ipanema Farm in Brazil was an early recipient of certifications granted to producers that take environmental considerations into account. The farm practices sustainable coffee cultivation with minimal impact on nature and people through responsible use of resources, while actively working on environmental conservation and biodiversity protection.
Since 2002, the farm has planted more than 455,000 trees*¹²to conserve biodiversity. It has built facilities for raising seedlings of native forests and established an environmental monitoring center to collect data on weather, forest seeds, and wildlife. In addition, the farm maintains 270 beehives to promote pollination of various native plants and enhance biodiversity.

*12 Cumulative total from 2002 to 2023