Environment

Climate change initiatives ―
Disclosures based on the TCFD recommendations

The Shimamura Group believes that responding to climate change is an important management issue. Accordingly, we are promoting our own reasonable initiatives to reduce greenhouse gases.In addition, we have endorsed the TCFD recommendations and we disclose our efforts for them in line with the four disclosure items of the TCFD, so that institutional investors who perform ESG investment can make appropriate investment decisions.
*The TCFD recommendations endorse disclosures in line with four information disclosure items: governance, strategy, risk management, and metrics and targets.

1 Governance

Role of the Board of Directors: Our ESG policies are determined by the Board of Directors upon deliberations by the Management Plan Formulation Committee, which is an advisory body to the Board of Directors. We see ESG issues as management issues. Accordingly, the Management Plan Formulation Committee that discusses management plans also deliberates ESG issues. The Committee has a total of nine members who are all directors.
The Board of Directors receives reports on the contents and results worked on by each department and the ESG Promotion Team at least twice a year. It then monitors and supervises those contents and results. Furthermore, it makes decisions on important matters such as corporate strategies and corporate planning relating to ESG.

Role of the Management Committee: The policies determined by the Board of Directors are communicated to each department and are then incorporated into their respective policies. Moreover, the ESG Promotion Team, in which executive officers participate, deliberates on the policies that should be tackled across departments and then proceeds with them in cooperation with each department. The ESG Promotion Team holds a meeting basically once a month. The results are reported to the President by the Planning Section and it then receives instructions from the President as necessary.

ESG Promotion System

2 Strategy

Scenario analysis

Climate change risks include transition risks brought about by changes in policies, laws and regulations and physical risks such as damage to property due to an increase in natural disasters.
We conducted scenario analysis to identify the impact major risks and opportunities relating to climate change will have on our business and to then formulate strategies to respond to that.
We conduct the scenario analysis according to the following process.

1	The Planning Section, which is responsible for corporate planning and ESG, conducts scenario analysis.
2	The Planning Section then reports the scenario analysis results to the Board of Directors.
3	The Board of Directors deliberates the results and then makes a decision.

〈Prerequisites of scenario analysis〉

１．Scenario used

	International Energy Agency（IEA） WEO 2023	Intergovernmental Panel on Climate Change（IPCC） the Sixth Assessment Report
Decarbonization scenario （1.5℃～2℃）	NZE（Net Zero Emissions by 2050 Scenario）	SSP1-1.9，SSP1-2.6
Global warming progress scenario （2.7℃～4℃）	STEPS（Stated Policies Scenario）	SSP3-7.0，SSP5-8.5

２．Analysis target
　　Domestic business

３．Assumed period

Short-term	～2024.2（Period of the Medium-Term Management Plan）
Medium-Term	～2030.2（Period of the Long-Term Management Plan）
long-term	～2050

〈World view assumed in the scenario analysis〉*The temperature assumed in the scenario is the average rise in temperature by 2100.

Decarbonization scenario （1.5℃～2℃）	Laws and regulations	A carbon tax and strict laws and regulations are imposed to achieve decarbonization.
	Energy prices	Electric power prices rise as the shift from fossil fuels to renewable energy advances.
	Natural disasters	Natural disasters become more frequent and severe in the short- to medium-term. The intensification of natural disasters then comes to a halt in the long-term compared to the global warming scenario.
Global warming progress scenario （2.7℃～4℃）	Laws and regulations	The impact would be minor even if current laws and regulations continue and a carbon tax is introduced.
	Energy prices	Crude oil prices rise due to the continued dependence on fossil fuels.
	Natural disasters	Natural disasters become more frequent and severe over the longer term. The frequency of occurrence and damage from natural disasters are greater than in the decarbonization scenario.

Main risks and opportunities identified concerning climate change

Type of risk/opportunity		Important change (Time of occurrence)	Details	Level of impact
Type of risk/opportunity		Important change (Time of occurrence)	Details	1.5～2℃	2.7～4℃
Transition risk	Policy and regulation	Introduction of a carbon tax and greenhouse gas emission restrictions	Increase in product procurement costs as a result of rising raw material prices and logistics costs due to an increase in taxes and energy prices	very large	Large
			Increase in the cost of store/transfer center operation such as for heating and lighting due to an increase in taxes and energy prices	very large	Large
			Increase in product procurement costs as a result of a change to raw materials and packaging materials due to laws and regulations on materials with a high environmental burden	very large	Large
	Reputation	Delayed response to environmental challenges	Loss of reputation among stakeholders due to delays in addressing environmental issues	very large	Large
Transition opportunity	Product/Service	Changes in consumer behavior	Increase in opportunities to sell environmentally-friendly products due to the heightened awareness of consumers toward sustainability	very large	Large
Physical Risk	Acute risk	Increase in natural disasters caused by typhoons and heavy rains	Loss of sales opportunities due to a suspension of sales at stores in disaster-affected areas	Large	very large
			Disruptions to the product supply structure due to a suspension of operations at transfer centers in disaster-affected areas	Large	very large
			Increase in repair costs for stores and transfer centers due to damage to buildings in disaster-affected areas	Large	very large
	Chronic risk	Rise in average temperature (long term)	Increase in product procurement costs due to a decrease in agricultural produce yield	Large	very large
		Rise in average temperature (long term)	Loss of sales opportunities due to the reduced purchasing motivation for winter products as summers become longer and winters become shorter	Large	very large
		Unstable precipitation	Increase in product procurement costs due to a decrease in agricultural produce yield	Large	very large

Financial impact on our company (assumed in 2050)

Introduction of a carbon tax	Decarbonization scenario （1.5℃～2℃）	3,802 million yen ＊Carbon tax250US$/t-CO₂（NZE）＊GHG emissions（FY2023・Scope1,2）：100,481t-CO₂
Introduction of a carbon tax	Global warming progress scenario （2.7℃～4℃）	2,053 million yen ＊Carbon tax：135US$/t-CO₂（STEPS）＊GHG emissions（FY2023・Scope1,2）：100,481t-CO₂
Losses from disasters	Decarbonization scenario （1.5℃～2℃）	112million yen ＊1.5 times the rate of disasters compared to pre-industrial revolution （SSP1-1.9,SSP1-2.6）＊Loss on disaster（Average 2014-2023）：97 million yen
Losses from disasters	Global warming progress scenario （2.7℃～4℃）	202 million yen ＊2.7 times the rate of disasters compared to pre-industrial revolution （SSP3-7.0,SSP5-8.5）＊Loss on disaster（Average 2014-2023）：97 million yen

Strategies

Important risks and opportunities		Countermeasures
Risk	Increase in product procurement costs	・Risk diversification by diversifying and decentralizing producing countries and supplies (= manufacturers, trading companies and other companies from which we obtain products; approximately 600 companies) ・Take early measures in cooperation with suppliers (early reservation of materials and changes to alternative materials) to ensure materials (raw materials) procurement
	Increase in logistics costs	・Streamlining of logistics (in-house operation of transfer centers, in-house joint delivery, direct logistics and expanding modal shift of own logistics)
	Increase in heating and lighting costs	・Introduction of equipment to reduce power consumption (switching to LED lighting and energy-saving air conditioners) ・Development of sustainable stores (introduction of energy-saving equipment and increase in the use of heat shielding materials and heat insulating materials)
	Loss of sales opportunities of winter products	・Creation of motivation to make purchases other than reasons due to the weather or temperature by strengthening the capabilities to plan and propose trendy products and character products
	Loss of sales opportunities due to a suspension of store operation	・Risk diversification through multi-store expansion (approximately 2,200 stores) ・Operation of business continuity plans (BCP) which describe the structure and measures to restore business
	Disruptions to the product supply structure due to a suspension of operations at transfer centers	・Operation of business continuity plans (BCP) which describe the structure and measures such as delivery routes in the event of a disaster
	Increase in repair costs due to damage to buildings	・Operation of business continuity plans (BCP) which describe the structure and measures to restore buildings ・Opening of stores after confirming hazard maps when developing stores ・Implementation of measures against disasters such as installation of watertight plate in stores where flooding is expected
	Delayed response to environmental challenges	・Promote circular economy of resources (hanger and vinyl recycling) ・Continuation of zero product disposal (product collection and recycling)
Opportunity	Increased sales opportunities for sustainable products	・Strengthen development and sales of sustainable products

3 Risk Management

The Planning Section, which is responsible for corporate planning and ESG, holds discussions with the departments which may face future business risks and the ESG Promotion Team. Upon that, it grasps the situation relating to risks and opportunities and then reports on that to the Management Plan Formulation Committee. The selected policies to respond to important risks are deliberated by the Management Plan Formulation Committee and determined by the Board of Directors.

4 Metrics and Targets

Climate change evaluation indicators and targets

We have established the following indicators to manage climate-related risks and opportunities.

1	GHG emissions（Scope1＋2）（*1）	60% reduction compared to FY2013 by FY02/2027
2	Amount of excess inventory wastes	zero
3	Complete recycling ratio of designated color hangers（*2）	75％ in FY2/2027
4	Complete recycling ratio of designated plastics （*3）	50％ in FY2/2027
5	Purchase ratio of sustainable products（*4）	40％ in FY2/2024

*1　Scope 2 is location-based
*2　Plastic hangers in the Company's designated colors that come with products (hangers which are used repeatedly as fixtures do not count.)
*3　Transparent plastic for product protection used at the time of delivery (made of polypropylene)
*4　Private brand (PB) products across all businesses.

Water and land are also included in the climate change evaluation indicators. However, we are in the retail industry. Accordingly, we have a small impact on water and soil pollution. Therefore, we have not counted them in the evaluation indicator.

GHG（Greenhouse Gas）emissions

〈Scope１,２〉

FY	2013	2019	2020	2021	2022	2023
Scope1	2,899	652	561	763	775	744
Scope2 Location Standard	180,956	104,532	102,212	99,314	96,170	96,971
Scope2 Markets Standard	163,883	106,142	104,711	103,049	98,619	99,737

（Scope）
Scope1 : Kerosene, gas and other fuels for air conditioners, fuel for forklifts used at transfer centers
　　　　　Gasoline consumption in company-owned cars (Gasoline consumption of company-owned cars is not included before FY2020.)
Scope2 (Location Standard): Electricity for stores, transfer centers and the Head Office x National average coefficient
Scope2 (Markets Standard): Adjusted emission factor
　　　　　(Specified business operator periodic reports in the Act on the Rational Use, etc. of Energy, Excluding Scope1)

〈Scope３〉
We performed a Scope 3 calculation to identify what categories are important among the 15 Scope 3 categories.
There are many companies related to the supply chain (even primary product suppliers alone: approximately 600). Accordingly, we have used a simple calculation which uses the emissions intensity and expenditures cited from the Ministry of the Environment's emission intensity database and IDEAv2 instead of an incremental formula (fact-finding survey based on interviews with related-supply chain).

Category	2022 Emissions	2022 Composition ratio	2023 Emissions	2023 Composition ratio
１：Purchased products and services	2,376,515	93.1	2,476,283	93.2
２：Capital goods	13,405	0.5	20,222	0.8
３：Activities related to fuel and energy not included in Scope 1 and 2	15,306	0.6	15,268	0.6
４：Upstream transportation and distribution	52,612	2.1	54,237	2.0
５：Waste generated in operations	2,970	0.1	2,894	0.1
６：Business trips	3,999	0.2	5,146	0.2
７：Employee commuting	17,489	0.7	16,969	0.6
８：Upstream leased assets	-	-	-	-
９：Downstream transportation and distribution	-	-	-	-
10：Processing of sold products	-	-	-	-
11：Use of sold products	-	-	-	-
12：End-of-life treatment of sold products	68,569	2.7	65,923	2.5
13：Downstream leased assets	-	-	-	-
14：Franchises	-	-	-	-
15：Investments	-	-	-	-
Scope３ Total	2,550,869	100.0	2,656,942	100.0

Category	Explanation of the calculation method and non-applicable cases
１：Purchased products and services	・Calculation targets：Products (clothes, bedding, other textile products, shoes, bags, etc.), office supplies, fixtures and furnishings ・Calculation method：Quantity or monetary amount of purchased products × Emissions intensity
２：Capital goods	・Calculation targets：Buildings, structures, ancillary equipment, machinery and vehicles ・Calculation method：Monetary amount of capital goods × Emissions intensity
３：Activities related to fuel and energy not included in Scope 1 and 2	・Calculation targets：Fuel and electric power purchased and used ・Calculation method：Amount of fuel and electric power purchased × Emissions intensity
４：Upstream transportation and distribution	・Calculation targets： ①Transportation of products from overseas factories to our transfer centers (transportation by other companies and consignor: other companies) ②Transportation of products from our transfer centers to stores (transportation by other companies and consignor: our company) ・Calculation targets： ①Distance between the overseas port and domestic port with a large purchase composition rate × Amount of cargo (estimate from the amount purchased) × Emissions intensity ②Use of specified consignor periodic reports in the Act on the Rational Use, etc. of Energy
５：Waste generated in operations	・Calculation targets：Waste generated from our business ・Calculation method：Waste disposal expenses × Emissions intensity
６：Business trips	・Calculation targets：Employee business trips ・Calculation method：Traveling expenses and accommodation expenses × Emissions intensity
７：Employee commuting	・Calculation targets：Employee commuting ・Calculation method：Traveling expenses × Emissions intensity
８：Upstream leased assets	Not applicable because it is subject to the calculation for Scopes 1 and 2.
９：Downstream transportation and distribution	Not applicable because emissions associated with the operation of transfer centers are Scopes 1 and 2, and transportation from transfer centers to stores is category 4.
10：Processing of sold products	Not applicable because we do not handle intermediate products.
11：Use of sold products	It is necessary to wash and dry the clothes we sell. However, this is not applicable because no scenario has been established in industry groups.
12：End-of-life treatment of sold products	・Calculation targets：Products sold ・Calculation method：Monetary amount of products sold × Emissions intensity
13：Downstream leased assets	Not applicable because it is subject to the calculation for Scopes 1 and 2.
14：Franchises	Not applicable because we do not operate franchises.
15：Investments	Not applicable because we are not a financial institution.

Initiative for reduce GHG emissions

〈In-house efforts〉

Reduction of power consumptionScope2

Energy saving of air conditioners
The Shimamura Group is working to reduce power consumption and CO₂ emissions by replacing conventional air conditioning equipment with high energy-saving air conditioning equipment when opening new stores or remodeling stores.
Switch to LED lighting
We are working to save energy (reduce CO₂) by changing from conventional lighting to LED lighting. With the exception of some stores, the switch to LED lighting has been completed at stores and transfer centers.
Promotion of environmental consciousness in stores and transfer centers
We are conducting research and development of sustainable stores into which we will introduce energy-saving equipment to further reduce the CO₂ emissions from our stores and transfer centers.
Reduction of GHG emissions in in-house logisticsScope3 Category4

Increasing the efficiency of logistics

At transfer centers, we have introduced a mechanism of "in-house joint delivery." In this mechanism, packages delivered from multiple suppliers are put on trucks chartered by the Shimamura Group, and are delivered to each store. In this way, we are working to increase the efficiency of truck delivery routes and to improve the loading rate. We started introducing EV trucks on some delivery routes to reduce CO₂ emissions from 2022.
We are also striving to reduce CO₂ emissions throughout overall logistics in Japan by using "direct logistics," in which containers transported from overseas to Japan are delivered directly to our transfer centers without passing through the suppliers' distribution centers, and "modal shift," in which transportation between some transfer centers is switched from trucks to marine shipping or railroads.

See Distribution

〈Supply chain efforts〉

Reduction of GHG emissions when manufacturing productsScope3 Category1
The Shimamura Group purchases almost all of the products it sells from its suppliers and does not own our own factories or manufacture products. Nevertheless, we recognize that consideration for the environment throughout our supply chain is an important ESG issue.
Therefore, we established the Shimamura Supplier Code of Conduct (CoC) in 2019. Under that CoC, we are working to improve the environment in our supply chain in cooperation with our suppliers.
In order to certify PB product production factories, the staff from our Merchandise Management Department responsible for quality control visit factories. They then confirm the production control of those factories and evaluate the status of compliance with the CoC such as the consideration for the working environment and human rights of employees.　We will further strengthen our environmental initiatives in the future. 　We will begin with the management of energy and water in factories from FY2023. In addition, we will introduce initiatives of excellent factories at briefing sessions for suppliers to improve the level of initiatives over the whole supply chain.

View details of the CoC compliance structure
Reduction of GHG emissions accompanying the disposal of products soldScope3 Category12
We thoroughly implement inventory management so that excess inventory does not arise to reduce our environmental burden. This means we do not dispose of products. On the other hand, we also recognize that the environmental burden of disposing of clothing products which are no longer used is an important ESG issue.
We do not currently collect the products we have sold. However, we are conducting research on the effective reuse of recalled products to reduce our environmental burden.

View details of zero product disposal