Disclosing Information in Accordance with TCFD Recommendations｜Environment｜Sustainability

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

Basic approach

The SENKO Group recognizes that dealing with climate change is a key priority in the effort to protect the global environment and a material factor (materiality) in its implementation of sustainable management. Consequently, the Group has undertaken a serious effort to address climate change. We have endorsed the United Nations Global Compact’s Ten Principles in four areas in October 2020, and are taking action in support of the implementation of principles related to addressing environmental issues and other priorities.

Having endorsed the Task Force on Climate-related Financial Disclosures (TCFD) in September 2022, we recognize that it is essential to identify risks and opportunities, assess impacts, and develop countermeasures, and have been conducting scenario analysis in line with TCFD recommendations since FY2023.

Governance

The SENKO Group is committed to providing value that helps facilitate the resolution of a variety of issues under our Sustainability Policy, which states: “The SENKO Group strives 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.”

To achieve this, the Group has established governance processes, controls, and procedures to monitor and manage sustainability-related risks and opportunities, as follows.

The Sustainability Promotion Council, which meets twice a year, is chaired by the President and Representative Director, who has final responsibility for all sustainability-related initiatives, and is composed of the Company’s officers, including outside directors, outside corporate auditors, and other directors and corporate auditors, and receives progress reports on the sustainability initiatives from each committee under its control, discusses them, and provides feedback. The Sustainability Promotion Council also reports to the Board of Directors on the details of discussions and results of activities related to sustainability initiatives.

The Board of Directors receives reports from the Sustainability Promotion Council on the content of discussions and results of activities, and provides supervision and instructions. In addition to the above reports from the Sustainability Promotion Council, other important sustainability-related topics are brought up or reported to the Board of Directors for discussion as appropriate.

The Environmental Promotion, Social Value Improvement, Compliance, and Risk Management Committees under the Sustainability Promotion Council implement individual sustainability-related activities. The Sustainability Promotion Department, which is overseen by the Sustainability Promotion Council, works on an operational level with sustainability officers, who are the officers in charge of major Group companies and business promotion divisions, and sustainability coordinators, who are the managers of the corporate planning and sustainability promotion divisions of each business company. Each of the above committees and the Sustainability Promotion Department will submit the progress of their initiatives to the Sustainability Promotion Council.

Sustainability promotion structure

Risk Management

The SENKO Group strives to deliver new value by connecting people and society through its various businesses in line with its basic policy of helping realize a sustainable environment and society and working to achieve sustained growth for the Group. In keeping with the above policy, we work to resolve environmental (E), social (S), governance (G), and health (H) issues.

The Risk Management Committee identifies risks and opportunities that the Group faces or may encounter in the future and takes systematic and appropriate preventive and remedial measures against the identified risks.
Furthermore, the Risk Management Committee has created a Natural Disaster Risk Subcommittee, which is working to increase the SENKO Group’s resilience by inspecting and reviewing its business continuity plan (BCP) and through other initiatives to address climate change. The committee reports on the identified risks, risk prevention measures, risk amelioration measures, and related topics to the Sustainability Promotion Council.

In addition to establishing an Environmental Initiative Policy to guide the Group’s efforts to protect the environment and reduce environmental impacts and spreading awareness of the policy among employees and other workers, the Environmental Promotion Committee manages environmental targets in areas including GHG reductions, renewable energy use, and waste recycling. The Committee also reports on progress towards the Group’s environmental targets to the Sustainability Promotion Council.

The Social Value Improvement Committee deals with key issues such as diversity and inclusion, human rights, and responsible procurement, aggregates risks related to human capital, and reports to the Sustainability Promotion Council.

The Compliance Committee monitors the status of compliance risks such as occupational health and safety, harassment, and internal reporting, and reports on its efforts to the Sustainability Promotion Council.　

The Sustainability Promotion Council discusses important matters based on the reports on sustainability-related risks and opportunities received from the above committees, and reports to the Board of Directors on the content of discussions and the results of the activities. The Board of Directors accepts reports related to risk management from the Sustainability Promotion Council, which it oversees.

Strategy

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) in 2022 based on the continual evolution of megatrends with the potential to impact the Group’s businesses. Specifically, we determined that the Group’s business segments fall into 28 of 77 sectors identified by the SASB Standards*. We estimated each industry’s 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 SASB Standards are standards for the standardization of non-financial information disclosure released in 2018 by the Sustainability Accounting Standards Board (SASB) of the United States.　

Environment (E)	Society (S)	Governance (G)	Health (H)
・Climate change measures ・Circular economy	・Diversity & inclusion ・Assurance of safety ・Responsible procurement structures	・Risk management ・Compliance ・Information disclosure	・Infectious disease measures ・Management of employees’ physical and mental health

The Company has been working earnestly to address climate change, and at its May 2024 meeting, the Board of Directors resolved that the Group should proactively work on Scope 1+2 emissions by aiming for carbon neutrality by 2050 and implementing the basic policy to achieve this goal, and set emission reduction rates for interim periods with FY2023 as the base year.

The basic policy for achieving the targets is as follows.

Scenario analysis

In FY2024, from a cross-sectional perspective across the non-logistics businesses (Trading & Commerce Business, Life Support Business, and Business Support Business) and our Manufacturing Business, which was newly established when Chuo Kagaku Co., Ltd. became a consolidated subsidiary, we conducted a scenario analysis on the risks and opportunities due to climate change based on the TCFD framework to identify specific transition risks, physical risks, and opportunities, and we studied medium- and long-term countermeasures.

Also, with regard to our flagship Logistics Business, we deepened our scenario analysis in FY2023 and evaluated the extent of financial impacts under the 1.5℃ and 4℃ scenarios for 2030 and 2050 for those risks and opportunities we anticipated facing in FY2022 which we deem to be serious and studied how to apply the results to strategies affecting investment and financing, and reviewed the risks and carbon tax impacts for achieving carbon neutrality by 2050.

(Logistics business)

Categories		Anticipated risks and opportunities	Impact on the Group	Business impact*1				Countermeasures
				2030		2050
				1.5℃	4℃	1.5℃	4℃
Transition risk	Political and legal/regulatory (carbon pricing)	● Abrupt changes in fuel prices ● Electrical fees due to adoption of environmentally friendly vehicles	● Fluctuations in shipping fuel costs	Intermediate(+) *2	Intermediate	Intermediate	Intermediate	● Promotion of transition to environmentally superior vehicles (EVs, HVs, LNG-powered vehicles, environmentally friendly DSLs, etc.) and tandem-trailer trucks ● Implementation of a modal shift ● Study on adoption of environmentally superior ships (FCVs, LNG/ammonia-fueled ships, etc.) ● Initiatives as a GX League participating company
	Political and legal/regulatory (carbon pricing)	● Introduction of regulations such as carbon taxes	● Increased cost burden	Significant	－	Low	－
	Technical (delays in renewable energy and energy-saving technologies)	● Difficulty in achieving greenhouse gas reduction targets	● Increased cost of procuring renewable energy, energy savings, and carbon credits	－				● Management of the Group’s energy use and implementation of energy-saving measures ● Acquisition of renewable energy-derived power
	Market (growth/contraction of customer base)	● Selection of lower-carbon logistics services by customers	● Stagnation in market share if we fail to provide low-carbon logistics services	Significant	－	Significant	－	● Disclosure of GHG emissions, including Scope 3 ● Pursuit of the visualization of GHG emissions ● Providing options geared to further decarbonization, such as use of environmentally superior vehicles and ships, introduction of clean fuels, implementation of a modal shift, consolidation of logistics facilities, etc.
Physical risk	Acute (extreme weather)	● Interruptions in road, rail, marine, and air freight service	● Increased cost of continuing to operate our logistics business (equipment damage not covered by insurance, etc.)	－	－	Low	Low	● BCP development and training ● Acquisition of supplies ● Support and partnership among facilities ● Decentralization of facilities ● Provision of alternative shipping routes
	Chronic (sea level rise)	● Need for measures to prevent flood and salt damage at logistics facilities and reassess facility layouts	● Increased costs, for example to assess risk at, and relocate, logistics facilities	－
	Chronic (temperature rise)	● Heat illness risk ● Increased employee attrition	● Increased employee health impacts ● Increased costs in areas such as insurance premiums and hiring	－				● Realization of a safe labor environment ● Promotion of automated and unmanned technologies ● Cultivation of employee awareness of health and safety; strengthening of initiatives to promote health
Opportunities	Technical (adoption of renewable energy and energy-saving technologies)	● Increased use of renewable energy and energy-saving technologies, for example switching to renewable energy	● Stable supply of low-cost, low-GHG energy ● Revenue from the sale of self-generated renewable energy power	－				● Installation of solar power facilities and large-capacity storage batteries for shifting to self-consumption of generated power ● Transition to LED lighting and energy-saving air conditioning equipment ● Transition to solar power, wind power, and other renewables
	Technical (progress in next-generation technologies)	● Increased adoption of next-generation logistics technologies that improve vehicle loading and operational efficiency, for example joint logistics services	● Savings in logistics costs, for example due to implementation of a modal shift and adoption of tandem-trailer trucks ● Reduction of GHG emissions	Intermediate	－	Intermediate	－	● Proposal of logistics services that take into account climate change risk, for example optimized shipping patterns and optimized shipping routes
	Market (next-generation energy transport)	● Increased demand for liquefied hydrogen shipped by tanker trucks as fuel cell-powered trucks enter into widespread use ● Increased demand for liquefied ammonia shipment via ships	● Increased revenue related to liquefied hydrogen and liquefied ammonia shipment	Low	－	Intermediate	－	● Expansion of existing businesses and development of next-generation energy (hydrogen, ammonia, etc.) transport structures
	Market (circular economy)	● Increased demand for “waste distribution” due to expansion of the reuse/recycling markets for EV batteries, solar panels, and waste plastic	● Increased revenue related to logistics services related to reuse and recycling	Low	－	Low	－	● Targeting of existing and new customers based on demand for measures to deal with climate change ● Development of “waste distribution” platforms ● Strengthen engagement with collection sources and recyclers
	Reputational (stakeholder reputation)	● Praise from investors and others in response to accurate disclosure of information about how we are addressing climate change risk	● Increased corporate value and fund procurement under better terms	－				● More extensive disclosure of information to stakeholders ● Fund procurement using means such as green bonds

*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 2023” (crude oil prices, carbon tax prices) published by the IEA.
*2：Since fuel costs are expected to decline under the 1.5℃ scenario, the financial impact is positive despite being classified as a risk.

(Non-Logistics Business)

Categories		Anticipated risks and opportunities	Impact on the Group	Impacted businesses				Countermeasures
Categories		Anticipated risks and opportunities	Impact on the Group	Trading & Commerce	Living Support	Business Support	Manufacturing	Countermeasures
Transition risk	Political and legal/regulatory (carbon pricing)	● Increased shipping and procurement costs due to stricter regulations ● Increased costs associated with regulatory strengthening	● Increased logistics costs	〇			〇	● Consolidation of logistics network into SENKO’s logistics group ● Reassessment of shipment frequency
			● Increased energy procurement costs	〇	〇	〇	〇	● Solar power generation at Group facilities ● Use of renewable energy self-consignment within the SENKO Group
			● Increased raw material procurement costs	〇	〇		〇	● Pursuit of joint procurement within the SENKO Group
			● Increased taxation costs for products and goods using virgin plastic				〇	● Reduced use of virgin plastic and strengthened development of products and goods that use recycled plastic and plastic alternatives
	Technologies (Development of environmentally friendly products, goods, and services*)	● Increased development costs for products, goods, and services	● Increased development costs for products, goods, and services	〇	〇	〇	〇	● Establishment of a system for the development of environmentally friendly products, goods, and services* ● Pursuit of joint research within the Group ● Visualization of GHG emissions and reduction contributions throughout the supply chain and assurance of reliability ● Implementation of GHG emissions reductions throughout the supply chain
	Markets (Increased demand for environmentally friendly products, goods, and services*)	● Selection of environmentally friendly products, goods, and services by customers ● Marginalization of non-environmentally friendly products, goods, and services from the market	● Stagnating market share if SENKO fails to supply environmentally friendly products, goods, and services*	〇	〇	〇	〇
Physical risk	Acute (extreme weather)	● Extensive damage to facilities, plants, equipment, inventory, real-estate properties, etc.	● Increased costs associated with business continuity	〇	〇	〇	〇	● BCP development and training ● Acquisition of supplies ● Decentralization of suppliers and facilities ● Cooperation among facilities and plants within the SENKO Group ● Development of a safe labor environment ● Cultivation of employee awareness of health and safety; strengthening of initiatives to promote health
		● Interruptions to business due to supply chain disruptions	● Sales opportunity losses due to interruptions in store, facility, and plant operation	〇	〇	〇	〇
		● Increased human toll for employees and customers due to extreme weather	● Increased employee health impacts and attrition	〇	〇	〇	〇
	Chronic (sea level rise)	● Need for measures to prevent flood and salt damage at stores, facilities, and plants and reassess facility layouts ● Development of structures (information and logistics networks) for supplying products in a sustainable manner	● Increased costs, such as for assessing risk at and relocating stores, facilities, and plants		〇	〇	〇
	Chronic (temperature rise)	● Increase in heat illness risk experienced by employees due to rising temperatures ● Human toll of increased tropical infectious diseases	● Increased employee health impacts and attrition	〇	〇	〇	〇
Opportunities	Technical (adoption of renewable energy and energy-saving technologies)	● Increased demand for accurate assessment of GHG emissions, including Scope 3	● Increased demand for services related to the accurate assessment, visualization, and reduction of GHG emissions			〇		● Development and provision of services that utilize expertise accumulated through SENKO’s logistics business
		● Utilization of green energy ● Progress in equipment incorporating energy-saving technologies	● Reduced costs due to SENKO’s adoption of equipment with green energy and state-of-the-art energy-saving technologies at stores, facilities, and plants ● Potential for creation of GHG emissions reduction/absorption business	〇	〇	〇	〇	● Research into, and active adoption of, next-generation energy and next-generation technologies
	Markets (Circular economy, environmentally friendly products, goods, and services*)	● Increased demand for GHG reductions through products, goods, and services	● Increased revenue from accommodating growing customer demand for environmentally friendly products, goods, and services* ● Increased demand for products and goods made from non-petrochemical raw materials (reduced use of petrochemical raw materials) ● Increased demand for environmentally friendly products, goods, and services* that contribute to resource recycling	〇			〇	● Reduced use of petrochemicals and boosting of development and realization of products and goods that use recycled plastic, biomass plastic, and plastic alternatives ● Providing products, goods, and services that are expected to reduce GHG emissions in the entire supply chain ● Establishment of a recycling model that leverages the Group’s collective strengths and utilizes its waste distribution network to provide low-cost, high-quality recycled plastic products and goods to the market ● Strengthen engagement with collection sources and recyclers
	Market (increased catastrophic damage)	● Increased demand for facilities that can better withstand frequent typhoons and torrential rainfall	● Increased revenue due to increased use of disaster-resilient facilities			〇		● Strengthening of disaster measures and resilience at existing facilities
	Reputational (stakeholder reputation)	● Improvement in reputation as a result of providing environmentally friendly products, goods, and services* ● Improvement in reputation as a result of factors including improvements in the occupational health environment ● Improved reputation from the perspective of business partners due to the realization of stable supply in the event of natural disasters	● Increased brand value ● Increased corporate value and fund procurement under better terms	〇	〇	〇	〇	● More extensive disclosure of information to stakeholders ● Fund procurement using means such as green bonds

* Environmentally friendly products, goods, and services: Products, goods, and services that are expected to reduce environmental impact in the entire supply chain

* Results of scenario analysis, strategy

In order to contribute to the realization of a carbon-neutral society by 2050 and to enhance the resilience of our management, the SENKO Group is working to understand the risks assumed due to climate change and to mitigate these risks through the implementation of various initiatives.
Also, we will continue our efforts to seize opportunities and maximize our business opportunities, such as energy transport for ammonia, hydrogen, and other substances, which is a business that is expected to contribute to the realization of carbon neutrality in the future by leveraging our long track record of experience in chemical logistics, and the provision of products, goods, and services that are expected to reduce GHG emissions in the entire supply chain.

In FY2024, we reexamined our medium- to long-term GHG emission reduction targets and reassessed the financial impact of the adoption of the carbon tax on the Group as a whole under the 1.5℃ scenario, assuming a carbon tax price in 2030 of 140 USD/t-CO₂, and the impact was calculated to be approximately 5 to 6 billion yen in 2030, unchanged from the previous year’s assumption. In addition, the impact in 2050 was changed from “significant” to “low” due to the goal of achieving carbon neutrality by 2050. There are no other changes in business impact.

Indicators and targets

During the period of this Medium-Term Business Plan, the SENKO Group is targeting a 10% reduction in CO₂ emissions from its mainstay land transport business per unit of revenue by FY2027 compared with the FY2021 level. We believe it is important to set targets for the entire SENKO Group, which is engaged in a wide range of businesses. Therefore, in addition to the above-mentioned indicators, the Board of Directors passed a resolution in May 2024 to set medium- to long-term targets for GHG emission reductions for the Group and prepared a roadmap for achieving these targets. With FY2023 as the base year, we aim to reduce Scope 1+2 emissions by 35% by FY2031 and by 55% by FY2036 as interim targets toward achieving carbon neutrality by 2050.

In the event of a change in boundaries due to mergers and acquisitions, for instance, we plan to disclose the base year emissions retroactively as appropriate. Because NAGASAKI UNSOU CO., LTD. and Ohnami Corporation were newly included in the calculation for FY2024, the figures for the base year will be reviewed and disclosed in the Integrated Report to be released in the future and on this website.

We will continue to calculate GHG 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.

Note: CO₂ emissions from the land transport business per unit of revenue: The value obtained by finding the total CO₂ emissions of operating companies in the domestic logistics, cold logistics, and other logistics segments in the Logistics Business segment and dividing by the total directly managed sales of these operating companies.

GHG emission reductions for the SENKO Group, whose core business is logistics, are largely dependent on the commercialization and widespread adoption of environmentally friendly technologies for vehicles, ships, and fuels. However, we will effectively utilize our diverse assets to take on a variety of challenges and verify by collaborating with other companies, participating in and making proposals for demonstration experiments, and investing in companies with technologies that could potentially contribute to our Group’s carbon neutrality. We will then determine the most appropriate technologies for the SENKO Group and aim to fully convert the energy sources of our vehicles and ships, thereby contributing to the realization of decarbonization of the SENKO Group and the logistics industry as a whole. We will also continue to implement the procurement and purchase of renewable energy power and the installation and conversion of energy-saving facilities and equipment.
We will continue to collect the latest information on our targets, measures, and investments, and will continue to study and review them as appropriate.

(Reference Information)
In FY2024, in addition to our existing efforts such as switching to low-carbon diesel vehicles, transitioning to EV vehicles, and proactively adopting renewable energy at logistics centers, we implemented measures to minimize increases in GHG emissions, such as energy-saving ship operations, in parallel with business expansion for achieving reductions of more than 10,000 t-CO₂ for Scope 1+2 emissions compared with the business-as-usual (BAU) scenario (in-house calculation).

For more information about our initiatives and their various data, please visit this website.
* Sustainability: Environment (https://www.senkogrouphd.co.jp/en/sustainability/environment/)