Governance

We have developed a governance structure, centered on oversight by the Board of Directors and management by the Sustainability Promotion Committee, to promote basic policies and priority topics related to the environment, including climate change, in accordance with our Environmental Policy and Action Guidelines.

Climate Change Management Structure

Chaired by the director in charge of sustainability, the Sustainability Promotion Committee’s membership consists of Group company CEOs and other executives. The committee meets twice a year to discuss risks and opportunities related to climate change and reports its findings to the Board of Directors, which oversees related activities.

Executive Compensation Linked to the Achievement of Environmental Indicators

In light of the importance of climate change and other global environmental issues, the Group has established a compensation system in which compensation for the president and representative director is linked to a rating score that is based on the ESG evaluations of the Group provided by various types of external rating agencies, including their evaluations of climate change-related efforts. This promotes the achievement of nonfinancial KPIs across the organization, with the president and representative director actively ascertaining progress on measures to implement strategies for deploying renewable energy and reaching climate change targets.

Strategies

*1 World Energy Outlook 2021 of the International Energy Agency
*2 Sustainable Development Scenario
*3 Announced Pledges Scenario
*4 Net Zero Emissions by 2050 Scenario
*5 Fifth Assessment Report of The Intergovernmental Panel on Climate Change
*6 Representative Concentration Pathway
*7 Stated Policies Scenario

Business Impact Assessment

Based on the scenario analysis, we qualitatively analyzed the financial impacts on our businesses and, for items for which estimation was possible, performed calculations using mathematical models. We then evaluated the impact on revenues expected in 2030 by item. Identified risks and opportunities are shown in the following table.

Item			Impact			Evaluation ※1
Category	Subcategory	Sub-subcategory	Time axis ※2	Indictor	Considerations	4℃	1.5℃
Migration risks	Policy/regulatory	Carbon pricing	Medium term	Expenditures	[Groupwide] Rising costs related to electricity, fuel use, etc. at logistics facilities, farms, and other business sites due to carbon pricing	Low	Medium
		Responding to GHG emissions restrictions	Medium term - long term	Expenditures Assets	[Groupwide] Rising costs associated with measures to improve the environmental performance of logistics facilities, farms, and other facilities to meet more rigorous GHG reduction requirements	Low	High
		Plastic restrictions	Medium term	Expenditures	[S-Pool Logistics, Inc.] Cost of responding to regulations governing use of plastic and other packing materials	Low	Medium
	Markets	Changing energy costs	Short term - Medium term	Expenditures	[Groupwide] Higher selling expenses due to the rising cost of the fuel used in temperature controls	Medium	Medium
		Changing customer behavior	Short term - Medium term	Revenues	[Groupwide] As environmental awareness grows among clients, risk of declining revenue due to inability to shift to services and products with lower environmental impact	Low	High
	Reputation	Changing reputation among investors	Medium term - long term	Revenues Expenditures	[Groupwide] Falling stock prices or rising fundraising costs if investors determine our initiatives are inadequate based on their growing interest in environmental initiatives	Medium	High
Physical risks	Acute	Intensifying abnormal weather events	Short term - long term	Revenues Expenditures Assets	[Groupwide] Weather-related damage leading to the suspension of operations at farms, logistics facilities, etc.; reduced earnings due to suspended operations at client facilities	High	Medium
	Chronic	Worsening working and construction conditions	Short term - long term	Revenues Expenditures	[S-Pool Plus, Inc.] Lower productivity or higher hiring costs due to fewer applicants as rising temperatures lead to worsening working environments inside greenhouses	High	Medium
Opportunities	Energy source	Use of renewable energy	Short term - Medium term	Revenues	[S-Pool Logistics, Inc.] Sales growth achieved by providing differentiated services using renewable energy	Low	Medium
	Products/Services	Decarbonization services	Short term - Medium term	Revenues	[S-Pool Logistics, Inc.] Sales growth achieved by using non-plastic packing materials in response to growing demand for ethical consumption	Low	Medium
		Disclosure	Short term - Medium term	Revenues	[S-Pool Blue Dot Green Inc. / S-Pool, Inc.] Greater demand for disclosure consulting services to meet corporate disclosure obligations	Low	High
	Market	emissions trading	Short term - Medium term	Revenues	[S-Pool Blue Dot Green Inc. / S-Pool, Inc.] Sales growth for emissions trading brokerage services	Low	High
	Resilience	Adapting abnormal weather events	Short term - Medium term	Revenues	[S-Pool Plus, Inc.] Providing services in urban areas based on indoor farms, which are less susceptible to climate change risks	Medium	Low

※1 Time horizon: Short-term = 1 to 3 years Medium-term = 3 to 10 years Long-term = 10 years and up
※2 Financial Impact Assessment: Large=More than 100 million yen, Medium=Less than 100 million yen, Small=Minor or no impact

Migration risks: Risks generated from reassessment of the financial value of assets with high levels of GHG emissions, accompanied with migration to low-carbon economy
Physical risks: Direct impact such as property damage caused by flooding, heavy wind and rain, and other weather conditions; indirect impact such as global supply chain disruptions and resource depletion
Thinking of financial impact (small, medium, large): Relative impacts assessed through quantitative and qualitative analysis

4℃ scenario: A scenario under which global mean temperatures by the end of this century are about 4℃ higher than before the industrial revolution due to the lack of progress on measures to counter climate change. While this scenario poses high physical risks, including intensification of abnormal weather events and rising sea levels, it also assumes no additional restrictions on corporate and consumer behavior from current levels.
1.5℃ scenario: A scenario under which global mean temperatures by the end of this century are about 1.5℃ higher than before the industrial revolution due to active initiatives toward achieving carbon neutrality. While this scenario envisions a controlled increase in physical risks, it also assumes stronger restrictions on corporate and consumer behavior through means such as taxation policies, laws, and regulations.

In assessing the scale of impacts through use of quantitative business impact estimates, we regard a financial impact of ¥100 million or more as high. Qualitative impacts assume the same definition. The risks estimated are shown below. For physical risks (extent of damage due to flooding or high tides, extent of damage due to suspended operations), we averaged annual expected damages based on the relative evaluation by taking into account the probability of the disasters occurring.

As Groupwide impacts, physical risks include damage from natural disasters such as flooding and other water-related hazards. In particular, in the event of a disaster, business suspensions at farms or logistics centers could occur, potentially resulting in losses that would put pressure on finances. With respect to transition impacts associated with decarbonization, additional expenditures may be required due to the introduction of carbon pricing schemes, while rising energy costs are also a concern. Electricity, which is the Group’s primary energy source, is expected to drive higher expenditures due to increased use of air conditioning as temperatures rise and higher electricity prices associated with the transition to renewable energy.
On the other hand, as decarbonization progresses, various measures are being considered across industry and government agencies. These developments are expected to lead to expanded application of administrative services and greater corporate information disclosure. Against this backdrop, demand is anticipated to increase for the Group’s decarbonization support services for local governments as well as for the environmental management support services offered by S-Pool Blue Dot Green.
Impacts identified for each business are as follows.

• Special Needs Employment Services

  Under the 4℃ scenario, this business is expected to face chronic impacts primarily in farm operations, such as a deterioration of working conditions due to increased risk of heatstroke caused by rising temperatures, and difficulties in temperature control for crop cultivation, which could result in operational suspensions.
  In contrast, under the 1.5℃ scenario, while operating costs are expected to increase due to the establishment of tax systems aimed at decarbonization and rising energy prices, we have identified opportunities for revenue growth and enhanced corporate value through the development of services that respond to changes in customer behavior and shifting perceptions regarding reputation.

• Logistics Outsourcing Services

  Under the 4℃ scenario, we reconfirm that this business faces high physical risks, including operational suspensions, countermeasure costs, and significant damage in the event of disasters caused by intensifying extreme weather, such as damage to our logistics warehouses or destruction of infrastructure. However, even under this scenario, we have identified potential for social contribution through changes in customer behavior, such as expanded use of e-commerce, as well as organizational reinforcement, including strengthened business continuity planning (BCP).
  In contrast, under the 1.5℃ scenario, while operating costs are expected to increase due to carbon pricing introduced as part of the transition to decarbonization, we have identified opportunities to enhance corporate value through improvements in the environmental performance of packaging materials and equipment.

The results of these analyses and deliberations will be enhanced resilience for future uncertainties by incorporating the results of deliberations in management strategies.

Specific Strategies and Initiatives

Based on the risks and opportunities identified in the scenario analysis above, the Group has begun to integrate the following strategies.

• 

  Our response to transition risks, such as carbon pricing systems, is to promote Groupwide decarbonization. Since the fiscal year ended November 2023, our head office has been switching to renewable energy programs and purchasing non-fossil fuel certificates. As a result, in the fiscal year ending November 2024, approximately 9% of the electricity we used was derived from renewable energy sources.
  To capture opportunities, in addition to our traditional services for corporate clients, we began providing decarbonization transition support services for municipal authorities in the fiscal year ended November 2023. These services support the promotion of zero-carbon cities by enabling municipalities to calculate and reduce their GHG emissions. In the fiscal year ending November 2024, we concluded new comprehensive cooperation agreements with six municipal authorities aimed at realizing zero-carbon cities, bringing the total number of such agreements to 18 nationwide.

• 

  As for physical risks, we envision wind and water damage such as flooding. The physical impact on the farms of S-Pool Plus is of particular concern. Therefore, we have been establishing indoor farming facilities that use less water and are less susceptible to the impact of disasters. For example, in fiscal 2019 we formulated indoor farm selection criteria that take into account areas prone to flooding in the event of torrential rain or river overflows. In fiscal 2024, three of the seven farms we opened were indoor farms. As with indoor farms, when selecting locations for outdoor farms, we are mindful of which areas are prone to flooding in the event of torrential rain or river overflows. The criteria enhance the resilience of our farms to wind and water damage and ensure the safety of farm workers.

• 

  As a climate change mitigation measure, we are promoting environmental management aimed at achieving net zero CO₂ emissions. As part of our voluntary environmental initiatives, we have participated in the “RE Action—Declaration of 100% Renewable Energy” since 2020, and in 2023 we began introducing renewable energy at major sites through the use of FIT non-fossil fuel certificates. In addition to gradually switching to renewable energy, we are also pursuing automation to reduce labor needs, thereby working to lower CO₂ emissions.
  Furthermore, as a new initiative toward realizing carbon neutrality, we plan to establish zero-emission warehouses designed to minimize environmental impact, with the goal of achieving zero CO₂ emissions. At the same time, we are making forward-looking investments in anticipation of advances in automation technologies to build a sustainable operational framework. In the event that logistics are disrupted by natural disasters, we will prioritize employee safety and cargo protection while minimizing impact through the prompt sharing of delivery status.

We pursue the following initiatives to reduce greenhouse gas emissions and energy consumption and to improve efficiency.

Category	Initiatives
Mitigation	[All companies] Promoting paperless offices through use of laptops, tablets, and other technologies and devices Encouraging employees to wear cooler clothing [S-Pool, Inc.] Production of printed materials using ethical materials (LIMEX, FSC certified paper) Reducing emissions from commuting and other sources by adopting remote work [S-Pool Logistics, Inc.] Adoption of renewable energy with a 100% renewables use target Air conditioning temperature controls (28℃ in summer, 20℃ in winter) Purchasing ethically sourced materials (use of FSC-certified materials) Eliminating burnable waste through waste segregation Reducing emissions from commuting and other sources by adopting remote work Adoption of eco-friendly containers, packaging, and materials Reducing electricity and water use
Adaptation	[S-Pool Plus, Inc.] Vegetable cultivation in water-saving indoor farms less susceptible to natural disasters Use of recycled rock debris at Work Happiness Farms

Risk Management Process

The Sustainability Promotion Committee identifies and assesses significant climate change-related risks and opportunities. In doing so, the committee uses the scenario analysis described in Strategies, 1. Scenario Analysis on page 48 to collect and analyze information on social conditions and the market environment, which enables early detection of significant issues related to businesses, identification of comprehensive risks, and qualitative and quantitative assessment of the scale of financial impact. Finally, along with the results of this assessment, the likelihood of occurrence and the timing of actualization are taken into consideration to select the issues that most urgently require countermeasures. An order of priority is then established for these issues. All the selected priority issues identified as risks are entrusted to the Risk Management Committee, which integrates them into a Groupwide risk management process. This committee, which meets semiannually, conducts comprehensive risk assessments that include climate change-related risks. Based on these assessments, the committee considers measures to prevent the actualization and mitigate the impact of risks with potentially significant impacts and collaborates with the Sustainability Promotion Committee as necessary. Similarly, priority issues identified as opportunities are placed under the management of the Sustainability Promotion Committee, which considers measures to be taken. In both cases, under the supervision of the Board of Directors measures are considered and then deployed to the relevant business sections and subsidiary sections.

Indicators and Targets

The GHG emissions reduction target for the S-Pool Group as a whole calls for a 40% reduction by 2030 in Scope 1 and Scope 2 emissions compared to the base year of fiscal 2021.We also plan to achieve carbon neutrality Scope 1 and Scope 2 emissions by 2050.
* In light of domestic and international trends, the base year has been revised to the fiscal period ended November 2021. Reduction targets have been revised upward.
* The scope of targets is identical to the scope of calculations of greenhouse gas emissions provided below.

To achieve these targets, we are carrying out practical efforts to achieve use of 100% renewable energy in Group business activities by 2030.Please refer to our ESG data page for actual results and progress on targets for each indicator.

Participation and support of industry organizations, initiatives, etc.

The S-Pool Group participates in and supports the following industry organizations and initiatives to promote initiatives to address climate change.

Task Force on Climate-related Financial Disclosures (TCFD)

In March 2022, we announced our support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). Future plans call for continuing to incorporate initiatives to address climate change in our business strategies and disclosing information based on TCFD recommendations.

Japan Climate Initiative

In February 2021, we participated in the Japan Climate Initiative. Through this initiative, we will proactively work to achieve a low-carbon society.

RE Action - Declaring 100% Renewable

S-Pool Logistics is a participant in RE Action – Declaring 100% Renewable, declaring its intent and taking actions to convert to 100% electricity from renewable energy sources.

We review our participation in and support for industry associations regularly for any major conflicts in thinking between the industry associations and the Company, with consideration for consistency with our business objectives, priority areas, and business activities. We consider withdrawal of our participation and support if any major deviations have been identified.