SENKO HOLDINGS

Compliance with the recommendations of the Task Force on Climate-related Financial Disclosures

Basic approach

Governance

The Group’s Sustainability Policy commits it to “deliver new value by helping realize a sustainable environment and society, working to achieve sustained growth for the Group, and connecting people and society through its various businesses,” and we follow that strategy by striving to provide value to help resolve a variety of challenges.

To implement the policy, Compliance, Risk Management, Environmental Promotion, and Social Value Improvement Committees are involved in a variety of activities related to sustainability. Furthermore, our Sustainability Promotion Council, which meets twice a year and which oversees those committees as well as the Sustainability Promotion Department, discusses important matters and reports to the Board of Directors on topics such as the content of its discussions and the results of related activities. The Board of Directors, which oversees the Council, accepts reports from the Sustainability Promotion Council on topics such as the content of its discussions and the results of related activities.

The Sustainability Promotion Council, which is chaired by the president and representative director, who has final responsibility for all sustainability-related initiatives, consists of outside directors and other executives. The Sustainability Promotion Department, which is overseen by the Sustainability Promotion Council, works on an operational level with sustainability officers and sustainability coordinators from major Group companies and business headquarters to undertake various initiatives and reports on related matters to the Sustainability Promotion Council.

Against the backdrop of the growing global importance of sustainability-related initiatives such as Environment-Social-Governance (ESG) management and the Sustainable Development Goals (SDGs), we analyzed material factors (materiality) based on the continual evolution of megatrends with the potential to impact the Group’s businesses. Specifically, we consulted standards published by the Sustainability Accounting Standards Board (SASB)* and determined that our operations span 28 of the 77 industries identified by the SASB. We estimated each industries’ importance as a percentage of our sales and its potential impact on our businesses and then identified issues that need to be addressed through our businesses based on the materiality required for those 28 sectors. We established material factors (materiality) related to environment (E), social (S), governance (G), and health (H) management based on a close examination of their relationships with key measures in the Group’s management.

* The U.S.-based Sustainability Accounting Standards Board (SASB) published a series of standards on the disclosure of non-financial information in 2018.

Risk Management

The Group treats “realizing sustained growth for the Group by helping realize a sustainable environment and society” as a core policy as it strives to create new value while connecting people and society through its various businesses.

In keeping with the above policy on sustainability, we are working to solve environment (E), social (S), governance (G), and health (H) challenges, and we consider action addressing climate change to be a top priority.

The Risk Management Committee identifies risks that the Group faces or could face in the future and undertakes appropriate preventive and remedial measures on an organizational basis to address them. Furthermore, as one way to address climate change, it has established a Natural Disaster Risk Subcommittee to boost the Group’s resilience by inspecting and reviewing business continuity plans (BCP) and other contingencies.

In addition to formulating Environmental Action Policies governing environmental protection activities and environmental impact reduction activities and spreading awareness of them among employees and other workers at worksites, the Environmental Promotion Committee manages environmental targets concerning goals such as reduction of CO₂, use of renewable energy, and recycling of waste. The Committee also reports on progress towards the Group’s environmental targets to the Sustainability Promotion Council.

The Sustainability Promotion Council discusses important matters based on reports from the Risk Management Committee, Environmental Promotion Committee, and other bodies and reports to the Board of Directors on topics such as the content of its discussions and the results of related activities. The Board of Directors accepts reports related to risk management from the Sustainability Promotion Council, which it oversees.

Scenario analysis

During FY2023, we conducted a scenario analysis of risks and opportunities associated with climate change based on the TCFD framework for our flagship Logistics business, as well as our Trading & Commerce, Business Support, and Living Support businesses, where climate change is likely to have a smaller impact. This effort entailed identifying specific transition and physical risks and opportunities and studying medium- and long-term measures to address them.

With regard to our flagship Logistics business, we evaluated the extent of financial impacts under the 1.5℃ and 4℃ scenarios for 2030 and 2050 for those risks and opportunities which we consider important and studied how to apply the results to strategies affecting investment and financing.

(Logistics business)

1. *1：We evaluated business impacts by calculating financial impacts on SENKO under each scenario in terms of effects on operating profit and evaluated the results using a three-stage scale (significant, intermediate, and low). “Significant” indicates an impact of greater than 5 billion yen; “intermediate,” an impact of 1 to 5 billion yen; and “low,” an impact of less than 1 billion yen. A dash indicates that impacts were not evaluated based on our assessment that the magnitude of any impact at present would be small.
   
   The scenario analysis drew on resources including “World Energy Outlook 2022” (crude oil prices) and “World Energy Outlook 2021” (carbon tax prices), both published by the IEA.
2. *2：Since fuel costs are expected to decline under the 1.5℃ scenario, the financial impact is positive despite being classified as a risk.

(Trading & Commerce, Living Support, and Business Support businesses)

Scenario analysis results and strategies

The SENKO Group is taking a variety of steps to reduce its CO₂ emissions in order to realize the goal of achieving a carbon-neutral society by 2050 as set forth in the Paris Agreement. In addition, we are working to ascertain the risks and opportunities posed by climate change in order to boost the resilience of our management, and we are involved in ongoing initiatives to maximize opportunities while dealing with the risks we have identified.

Among the serious risks we identified, an FY2023 assessment of the financial impact of the adoption of carbon tax throughout the Group calculated an impact of about 5 to 6 billion yen in 2030 assuming carbon tax pricing of USD 130 per ton of CO₂ in 2030 under the 1.5℃ scenario. With regard to the adoption of carbon tax, we will both participate in the GX League and assess associated trends while taking a variety of steps to reduce CO₂ emissions, for example through use of renewable energy and active adoption of environmentally friendly vehicles and resource-friendly tires, in an effort to lower our tax burden.

In addition, we will work with other companies to develop truck bodies and containers that help improve loading efficiency and contribute to the Group’s transport applications in an effort to develop technology for environmentally friendly vehicles. With regard to adoption of such vehicles, we will provide even lower-carbon logistics services to customers while actively undertaking investments to lower CO₂ emissions.

Through these initiatives, we will work to go beyond merely mitigating risk so that we can secure and expand opportunities.

Indicators and targets

We are taking a variety of steps to reduce its CO₂ emissions in order to realize the goal of achieving a carbon-neutral society by 2050 as set forth in the Paris Agreement.

Under the five-year Medium-term Business Plan that began in FY2023, we are striving to realize sustained business growth through environmentally oriented activities such as strategic investments using CO₂ emissions per unit of revenue in our ground transport business as the principal indicator, with a FY2027 target of realizing a 10% reduction relative to FY2021. We are not only assessing Scope 1 and 2 CO₂ emissions, but also calculating emissions both upstream (via procurement) and downstream (via shipment and beyond) of our corporate activities (i.e., Scope 3* emissions) in a more detailed manner. We are also moving ahead with an effort to calculate Scope 3 emissions for logistics operations in our customers’ supply chains and recommend efficient logistics measures.

* Scope 1: Greenhouse gases emitted directly by the company due to use of fuels.
Scope 2: Greenhouse gases emitted in the course of using supplied electricity.
Scope 3: Greenhouse gases emitted indirectly in the company’s supply chain. For more information about our TCFD initiatives, please see pages 33 to 35 of the SENKO INTEGRATED REPORT 2023.