Climate Change Initiatives

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Climate Change Initiatives

As climate change accelerates, various impacts and damage to the natural environment, people's lives, and corporate activities are beginning to appear around the world. The Paris Agreement has been adopted as part of initiatives to address climate change, countries are taking steps to achieve net zero emissions, and the Japanese government has announced that it will raise its 2030 GHG reduction target from 26% to 46% (compared to 2013) within its Nationally Determined Contribution (NDC) target. Against this backdrop, companies are being asked to contribute to a decarbonized society through their own business activities.
As a company, Yokorei aims for sustainable growth while mitigating and adapting to climate change through its own operations. Furthermore, there is growing demand for companies to disclose information on climate-related issues. Yokorei recognizes the importance of disclosing information and is undertaking initiatives toward disclosure.

Addressing Climate Change: Responding to TCFD Recommendations

Policy for responding to climate change

We recognize that climate change is both a risk and an important management issue that can lead to new profit opportunities for the Company. We believe aggressive and proactive initiatives to address climate change will lead to medium- and long-term improvements in our corporate value, and we will collaborate appropriately with our stakeholders to bring benefits not only to Yokorei, but also to society as a whole. Through these initiatives, we aim to contribute to the achievement of the SDGs and targets set forth in the Paris Agreement.
We recognize the importance of climate-related financial disclosures and have endorsed the TCFD (Task Force on Climate-related Financial Disclosures) recommendations. We will disclose information in line with TCFD recommendations.

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Governance

Supervisory structure of the Board of Directors

The Board of Directors receives and oversees periodic reports (in principle twice a year) from the Sustainability Committee on important climate-related matters.
The Board of Directors considers climate-related matters reported by the Sustainability Committee when reviewing and directing the Company's strategies, business plans, and risk management policies, etc.
In addition, the Sustainability Committee reports to the Board of Directors on the progress toward the metrics and targets for addressing climate-related issues, thereby establishing a structure for appropriate supervision by the Board of Directors.

【Governance Structure for Climate-Related Matters】

Governance Structure for Climate-Related Matters

Role of executives

The President and Representative Director is responsible for the management of the Company in climate-related matters. This responsibility includes assessment and management of climate-related matters. The President and Representative Director shall execute the Company's strategies, business plans, risk management policies, etc. related to climate-related matters in accordance with directions from the Board of Directors with respect to matters deliberated and determined by the Board of Directors.

Sustainability Committee

The Sustainability Committee* discusses climate-related matters as part of its sustainability agenda.
The Sustainability Committee regularly (in principle twice a year) discusses and evaluates the impact of climate-related matters on the business and reports on important matters to the Board of Directors. It also deliberates on measures to address identified risks and opportunities, sets targets, monitors progress, and reviews results.

*Sustainability Committee
Committee under the direct control of the Board of Directors that advises and reports to the Board of Directors on issues related to sustainability.

Date of establishment: October 2021

Chair: President and Representative Director, CEO

Committee members: Directors, Corporate Officers, and General Managers appointed by the Executive Committee and the President and Representative Director

Frequency of meeting: Semiannually in principle. However, the chair convenes meetings as needed.

【Number of meetings of the Board of Directors and the Sustainability Committee on climate-related matters】
Committee organization	Results of meetings and reports
Board of Directors	December 2021 Endorsement of TCFD recommendations April 2022 Establishment of TCFD working team
Sustainability Committee	December 2021 Endorsement of TCFD recommendations April 2022 Establishment of TCFD working team

Strategy

We have identified climate-related risks and opportunities for our main businesses (Refrigerated Warehousing and Food Sales) and considered the impact on our businesses under selected scenarios.
In line with the TCFD framework, we considered the risks in terms of transition risks, physical risks, and opportunities, and identified each as follows. After identifying the risks and opportunities, we validated the Company's resilience by positing multiple scenarios on two axes: 1) progress in government decarbonization policies and 2) rising average temperatures and sea temperatures.

Process for identifying risks and opportunities

Based on internal assessment criteria, the Company identifies risks and opportunities with a material financial impact from among assumed risks and opportunities.
In identifying risks and opportunities, we also take into account the established time horizon

How climate-related issues are reflected and prioritized in the financial planning process

The Company's Board of Directors discusses climate-related matters to reflect them in its financial planning and other activities.
The Sustainability Committee discusses risks and opportunities in climate-related matters identified as having significant financial impact, based on reports from relevant departments, and reports its findings to the Directors. The Board of Directors deliberates and determines financial plans, etc., based on reports from the Sustainability Committee submitted for incorporation in financial plans, etc.
Risks and opportunities for these identified climate-related matters will be prioritized based on the financial impact of each.

Scenarios

Selected scenario	Assumed scenario
1.5°C scenario IEA NZE 2050	We selected the scenarios on the left and assumed the following as the Company's business environment. Initiatives to reduce GHG emissions are intensifying across the world, and the Japanese government's decarbonization policy is advancing rapidly. While thorough energy conservation is being promoted and the ratio of renewable energy in our power source composition has increased to nearly 70%, energy conservation of electricity used in freezing and refrigeration facilities is also being thoroughly addressed, and all electricity procured is renewable energy or fossil fuel plus thermal power generated by CCUS or hydrogen/ammonia. Carbon pricing (carbon tax and emissions trading) has been introduced in line with the Japanese government's tightening of GHG emission regulations. All refrigerators and freezers that use alternative CFCs (HFCs), a type of GHG, as refrigerants have been replaced with green refrigerants. As part of the Japanese government's transition to a low-carbon economy toward "Net Zero in 2050," subsidies have been granted for capital investment to promote energy efficiency, and we have already installed facilities with improved energy efficiency. Consumer awareness of climate change issues has increased and they are increasingly buying products with lower environmental impact if available. As such product sales are swayed by the obtainment of environment-related certifications (MSC, ASC, MEL in the fishing industry; GAP in the agriculture and livestock industries, etc.). Carbon foot-printing have also been introduced, and there is a noticeable trend for consumers to choose low-carbon products if given a choice. The degree of physical risk of climate change will maintain its current level. Because storms, floods, and temperature increases in Japan remain at current levels and the degree of physical risk of climate change remains the same, the impact of the assumed physical risk is comparable to the current level.
4°C scenario IPCC RCP 8.5	We selected the scenarios on the left and assumed the following as the Company's business environment. The Japanese government's decarbonization policy has made no visible progress, as the world as a whole has not made progress in reducing GHG emissions. Instead, economic development has become more dependent on fossil fuels. Under the situation that the renewable energy introduction rate in the power supply composition does not proceed as described in the "Basic Energy Plan," the power supply composition to be procured does not change from the current state. There is also little incentive to promote energy conservation, and energy conservation measures for freezing and refrigeration facilities have not progressed. The government's GHG emission regulations have not been strengthened, carbon pricing (carbon tax and emissions trading) has not been introduced, and Yokorei continues to use freezing and refrigeration equipment that uses alternative CFCs (HFCs) as refrigerants, which are a type of GHG. The Japanese government's policy of transitioning to a low-carbon economy toward net zero by 2050 has not been implemented, and the government's policy of granting subsidies for capital investment, etc. to promote energy efficiency has not been implemented. Consumer awareness of climate change issues remains unchanged, and carbon foot-printing is not been introduced. The environmental impact and whether a product is low-carbon are not relevant at the time of purchase, and there is no need to obtain environment-related certifications (MSC, ASC, MEL in the fishing industry, GAP in the agriculture and livestock industries, etc.), nor is there a need to contribute to low-carbon products. The physical risks of climate change are increasing. The physical risks of climate change are increasing, and storms and floods in Japan are becoming more frequent and devastating. Extreme weather events, due mainly to rising air and sea temperatures, have been occurring in many parts of the world, damaging agricultural land, fishing grounds, and livestock farms, resulting in reduced fish catches and poor growth of livestock products.

Selected scenario

Assumed scenario

1.5°C scenario
IEA NZE 2050

We selected the scenarios on the left and assumed the following as the Company's business environment.

Initiatives to reduce GHG emissions are intensifying across the world, and the Japanese government's decarbonization policy is advancing rapidly.

While thorough energy conservation is being promoted and the ratio of renewable energy in our power source composition has increased to nearly 70%, energy conservation of electricity used in freezing and refrigeration facilities is also being thoroughly addressed, and all electricity procured is renewable energy or fossil fuel plus thermal power generated by CCUS or hydrogen/ammonia.
Carbon pricing (carbon tax and emissions trading) has been introduced in line with the Japanese government's tightening of GHG emission regulations. All refrigerators and freezers that use alternative CFCs (HFCs), a type of GHG, as refrigerants have been replaced with green refrigerants.
As part of the Japanese government's transition to a low-carbon economy toward "Net Zero in 2050," subsidies have been granted for capital investment to promote energy efficiency, and we have already installed facilities with improved energy efficiency.
Consumer awareness of climate change issues has increased and they are increasingly buying products with lower environmental impact if available. As such product sales are swayed by the obtainment of environment-related certifications (MSC, ASC, MEL in the fishing industry; GAP in the agriculture and livestock industries, etc.). Carbon foot-printing have also been introduced, and there is a noticeable trend for consumers to choose low-carbon products if given a choice.

The degree of physical risk of climate change will maintain its current level.

Because storms, floods, and temperature increases in Japan remain at current levels and the degree of physical risk of climate change remains the same, the impact of the assumed physical risk is comparable to the current level.

4°C scenario
IPCC RCP 8.5

We selected the scenarios on the left and assumed the following as the Company's business environment.

The Japanese government's decarbonization policy has made no visible progress, as the world as a whole has not made progress in reducing GHG emissions. Instead, economic development has become more dependent on fossil fuels.

Under the situation that the renewable energy introduction rate in the power supply composition does not proceed as described in the "Basic Energy Plan," the power supply composition to be procured does not change from the current state. There is also little incentive to promote energy conservation, and energy conservation measures for freezing and refrigeration facilities have not progressed.
The government's GHG emission regulations have not been strengthened, carbon pricing (carbon tax and emissions trading) has not been introduced, and Yokorei continues to use freezing and refrigeration equipment that uses alternative CFCs (HFCs) as refrigerants, which are a type of GHG.
The Japanese government's policy of transitioning to a low-carbon economy toward net zero by 2050 has not been implemented, and the government's policy of granting subsidies for capital investment, etc. to promote energy efficiency has not been implemented.
Consumer awareness of climate change issues remains unchanged, and carbon foot-printing is not been introduced. The environmental impact and whether a product is low-carbon are not relevant at the time of purchase, and there is no need to obtain environment-related certifications (MSC, ASC, MEL in the fishing industry, GAP in the agriculture and livestock industries, etc.), nor is there a need to contribute to low-carbon products.

The physical risks of climate change are increasing.

The physical risks of climate change are increasing, and storms and floods in Japan are becoming more frequent and devastating. Extreme weather events, due mainly to rising air and sea temperatures, have been occurring in many parts of the world, damaging agricultural land, fishing grounds, and livestock farms, resulting in reduced fish catches and poor growth of livestock products.

Selected scenario	Identified risks and opportunities			Driver	Time horizon	Countermeasures
Selected scenario	Type	Targeted Businesses	Overview	Driver	Time horizon	Countermeasures
1.5°C scenario IEA NZE 2050	Transition Risk (policy and regulation)	Refrigerated Warehousing	Associated with the acceleration of GHG emission controls Stronger request for energy-saving to reduce electricity consumption Increased costs of installing natural refrigerant equipment Increased costs of installing energy-saving equipment	Energy conservation regulations	Short-term ~ Medium-term	Curbing electricity consumption through the visualization of electricity consumption (BEMS) Planned equipment installation to reduce financial burden
	Transition Risk (policy and regulation)	Refrigerated Warehousing	Associated with the introduction of carbon pricing (carbon tax/emission trading), etc. Higher electricity costs for operating refrigerated warehouses	Carbon pricing	Short-term ~ Long-term	Installation of solar power generation facilities to create renewable energy Converting electricity used in refrigerated warehousing to renewable energy
	Opportunities (products/services)	Refrigerated Warehousing	Increasing demand from our customers for refrigeration and freezing services that contribute to lower carbon/decarbonization due to the need to reduce GHG emissions related to refrigeration and freezing.	GHG emission regulations	Medium-term ~ Long-term	Installation of additional freezing and refrigeration equipment that contributes to low carbon/decarbonization Contribute to reducing GHG emissions by working with carriers to consolidate dispersed storage sites and transportation networks for greater efficiency
	Opportunity (markets)	Food Sales	Increased demand from our customers for environment-related certified products	Customer demand for environment-related certified products	Medium-term ~ Long-term	Strengthening the handling of environmentally conscious products

4°C scenario IPCC RCP 8.5	Physical risks (acute)	Refrigerated Warehousing	Associated with the intensification of torrential rains and typhoons in Japan Decrease in sales due to the suspension of refrigerated warehousing operations Repair expenses incurring for refrigerated warehousing facilities	Frequency of wind and flood damage	Short-term ~ Long-term	Construction of disaster-resistant refrigerated warehouses
	Physical risks (acute)	Food Sales	Associated with extreme weather events around the world Higher purchase prices due to decreased catches and production marine, livestock, and agricultural products Increased costs from procurement of substitutes	Frequency of extreme weather events	Short-term ~ Long-term	Development of aquaculture business in countries and areas with few natural disasters
	Physical risks (chronic)	Refrigerated Warehousing	Associated with an increase in temperatures in Japan Higher electricity costs for operating refrigerated warehouses	Rise in average temperature	Medium-term ~ Long-term	Reduction of electricity costs by introducing energy-saving equipment
	Physical risks (chronic)	Food Sales	Associated with changes in the natural environment and outbreaks of viruses and pests Higher purchase prices due to decreased catches and production of marine, livestock, and agricultural products Increase in procurement costs of aquaculture and livestock products	Rise in average temperature Rise in sea temperature	Medium-term ~ Long-term	Strengthening collaboration with producers to ensure stable procurement Diversification of suppliers and development of new suppliers
	Opportunities (products/services and markets)	Refrigerated Warehousing	Associated with an increase in average temperatures in Japan Increasing demand for low-temperature management of food products	Rise in average temperature	Medium-term ~ Long-term	Expansion of freezing and refrigerated warehouses to meet increased demand

Selected scenario: ・WEO NZE 2050 scenario formulated by the International Energy Agency (IEA)
・RCP 8.5 scenario formulated by the Intergovernmental Panel on Climate Change (IPCC)

Time horizon: Short-term = 1~3 years (to 2025) Medium-term = 2030 (same period as Japan's NDC interim target) Long-term = 2050 (same period as the target set in the Paris Agreement and Japan's NDC)

Financial impact: We are currently evaluating and reviewing the financial impact of each of the risks and opportunities (to be disclosed in FY2023).

(1) Selected scenarios and reason for scenario selection

Yokorei selected the WEO NZE 2050 scenario (1.5°C scenario) developed by the International Energy Agency (IEA), which is aligned with the Paris Agreement scenario to "limit the increase in global average temperature to 1.5°C above pre-industrial levels" and with Japan's NDC submitted on October 22, 2021. With this in mind, we aim to reduce greenhouse gas emissions by 46% by FY2030 versus FY2013, as an ambitious target consistent with carbon neutrality in 2050.
As a scenario opposite to the above scenario, we selected IPCC RCP 8.5 (4°C scenario), in which the goal of "limiting the increase in global average temperature to 1.5°C above pre-industrial levels" and Japan's NDC are not achieved, and the average temperature becomes the highest.
(2) Results of scenario analysis

Under the IEA NZE 2050 scenario, which is expected to increase transition risk, it is expected that the cost of introducing natural refrigerants and energy-saving equipment will increase in the Refrigerated Warehousing Business as GHG emission control accelerates. In addition, if carbon pricing (carbon tax and emissions trading) is fully introduced, there is concern that electricity costs necessary to operate refrigerated warehousing facilities will increase.
Notwithstanding such potential risks, even if GHG emission controls and related regulations are introduced, Yokorei is well-positioned to respond to them because it leads its competitors in implementing initiatives that contribute to low-carbon and decarbonization. One specific initiative is the active introduction of eco-friendly equipment, including natural refrigerants and solar power generation. As for natural refrigerant facilities, since 2000, we have installed ammonia-based natural refrigerants at all new logistics centers. And as of 2022, we have made steady progress: our natural refrigerant installation rate is over 68%, compared with the industry average in the 40% range. In addition, Yokorei refrigerated warehouse facilities across Japan from Hokkaido to Kagoshima are obtaining Green Management Certification. The Green Management Certification System promotes management that contributes to the environment (green management) by recognizing business operators that implement environmental initiatives which exceed certain standards. We are advancing voluntary, ongoing environmental conservation activities and improving the internal environment and reforming environmental awareness within the Company by setting targets for environmentally-friendly business management and regularly assessing performance. We therefore view the introduction of GHG emission control and related regulations as a business opportunity to take advantage of our initiatives.
In the Food Sales Business, we anticipate increased consumer behavior to combat climate change and rising demand for environmentally certified products from our customers. We have obtained chain of custody (CoC) certification to handle ASC-certified aquaculture products that are farmed in a manner that minimizes pollution of the natural environment, overuse of resources, and the impact on society. We believe obtaining environmental certification for these and other food products we handle is an opportunity to expand sales of our products

【Acquisition of ASC CoC Certification | https://www.yokorei.co.jp/en/csr/environment/coc/ 】
(3) Yokorei's resilience to climate-related risks

Under the Yokorei Sustainability Vision 2030, we have identified coexistence with the global environment as a materiality, set quantitative targets, and formulated measures to address climate-related risks. Details are shown in the table.
Although there are risks assumed in the scenario where the transition risk accelerates (IEA NZE 2050), we believe it is possible to mitigate the impact of risks by taking appropriate measures. Furthermore, under this scenario, we believe it is an opportunity to utilize freezing and refrigeration facilities that contribute to low carbon and decarbonization, which are Yokorei's strengths, and that it is an opportunity to expand sales of our products by acquiring environmental certification in the Food Sales Business.
In addition, under IPCC RCP 8.5, where average temperatures will not stop rising and physical risks will increase, we will be able to reduce risks by implementing appropriate measures for our refrigerated warehousing facilities and raw material procurement for our Food Sales Business, and expand business opportunities by capturing demand for cold storage management as temperatures rise. Thus, we have confirmed that our businesses are resilient and can continue to grow under both scenarios.

Risk Management

Method for identifying climate-related risks

Process
The Sustainability Committee oversees climate-related matters and works with relevant internal departments to assess climate-related risks. Climate-related risks are discussed and decided by the Sustainability Committee. The Sustainability Committee then reports to the Board of Directors, which deliberates and approves the risks and ultimately identifies them as climate-related risks for the Company. We consider the following items in the deliberations of our Sustainability Committee.
- Existing and new regulatory requirements (e.g., carbon pricing, HCFC gas regulations)
- Short-, medium-, and long-term time horizons
- Transition risks (policies and regulations, technology, markets, reputation)
- Physical risks
  
  Acute risks, chronic risks
Method for determining materiality
We consider the following in assessing and determining the materiality of climate-related risks.
- Potential for risks to materialize
- Degree of financial impact

Management process for climate-related risks

Method for responding to risks
The Sustainability Committee, in collaboration with the relevant internal departments, will consider how to mitigate, transfer, accept, and control each of the identified climate-related risks. The Sustainability Committee reports the results of its study of the identified climate-related risks to the Risk Management Committee, which deliberates on them, and the Board of Directors ultimately decides on a management policy.
Formulation of priorities
The Sustainability Committee decides on the priority of climate-related risks to be addressed by the Company. In doing so, each risk is evaluated and prioritized from two perspectives: potential financial impact and the likelihood that the risk will materialize.

Integration into company-wide risk management

The Risk Management Committee meets regularly (at least twice a year) to evaluate the Company's risks reported by each department, identify Company-wide risks, discuss appropriate responses, and report to the Board of Directors. As with other risks, climate-related risks are discussed and evaluated by the Risk Management Committee. Ultimately, a Company-wide risk management policy is determined by the Board of Directors and managed by the Risk Management Office in accordance with the Company's risk management standards.

Metrics and targets

Metrics

Metrics used to measure and manage climate-related risks and opportunities
We use the following metrics to measure and manage climate-related risks and opportunities.
- GHG emissions (Scope 1, Scope 2, Scope 3)
- Percentage of renewable energy
- Regulatory risks
  
  Carbon pricing and HCFC gas regulations
- Opportunities
  
  Growth in earnings from products or services that support the transition to a low-carbon economy

GHG emissions

GHG emissions(t-CO2) at Yokorei are as follows.

(Unit：t-co2)
Scope	FY2021	FY2022	FY2023
Scope 1	479	533	542
Scope 2	58,696	57,104	56,491
Scope 3	-	485,881	581,704
Scope1+2	59,175	57,637	57,032
Scope1+2+3	-	543,518	638,737

The emissions data only covers our company (Yokorei Co., Ltd.) due to insufficient data from our overseas subsidiaries

Targets and associated metrics

We have set the following targets to mitigate and adapt to climate-related risks and maximize climate-related opportunities.

Targets		Metrics
Targets 1	By 2030, reduce GHG emissions by 40% (compared to 2015)	GHG emissions per storage capacity in the Refrigerated Warehousing Business
Targets 2	By 2030, achieve an 85% usage rate of natural refrigerants (at approximately 69% as of 2023)	Storage capacity in the Refrigerated Warehousing Business using natural refrigerants
Targets 3	By 2030, achieve solar power generation capacity of 20MW (at approximately 9.3MW as of 2023)	Solar power generation capacity in the Refrigerated Warehousing Business

Targets 1 through 3 are all based on the Refrigerated Warehousing Business, which represent a high portion of environmental impact (GHG emissions from this business account for 99% of the Company's total GHG emissions).

If GHG emissions reductions continue in line with current results, GHG emissions in FY2030 compared to FY2015 are expected to be 47% lower versus the targeted 40% reduction, as shown in the graph below.

Trend in GHG emissions targets

Measures to Mitigate Climate Change

Yokorei supports policies that are based on an array of agreements concerning measures to prevent global warming, including the Paris Agreement.
Yokorei also supports the Japanese government's new commitment to decarbonization and complies with legislation pertaining to climate change, namely the Act on the Rational Use of Energy and the Act on Promotion of Global Warming Countermeasures.
The Refrigerated Warehousing business is working to reduce greenhouse gas emissions by deploying up-to-date equipment at its refrigerated warehouses and reorganizing existing equipment, as well as actively participating in initiatives by the Ministry of the Environment such as receiving a ZEB assessment for the office building of the Chiba Research Park Logistics Center (name pending) and aiming to go 100% renewable (RE100) in Yokohamamirai Satellite Logistics Center.

Environmental Assessments Received

Assessment	Rank	Business Locations that have Received the Assessments
CASBEE Fukuoka	A	Yokorei Fukuoka ISLAND CITY Logistics Center
CASBEE	A	Yokorei Chiba Research Park Logistics Center
CASBEE Fukuoka	A	Yokorei Hakozaki FACILITY Logistics Center

CASBEE (Comprehensive Assessment System for Built Environment Efficiency) is a method of evaluating and rating buildings' environmental performance. It is used throughout Japan and was developed by government, industry, and academia based on guidance from the Ministry of Land, Infrastructure, Transport and Tourism. A building's environmental performance is rated on a five-point scale based on an assessment of its environmental quality and impact. CASBEE Fukuoka provides ratings based on the city of Fukuoka's own priority criteria, in addition to environmental performance.