Information Disclosure Based on TCFD Recommendations

Climate-related Board of Directors and Committee Meetings Held

Matters related to the Group’s ESG and SDG materiality, including important matters related to climate change, are in principle discussed and resolved by the Sustainability Committee twice a year, and reported to the Board of Directors at least once a year. Since the establishment of the Sustainability Committee in September 2021, that Committee has been actively discussing issues, adopting resolutions, and reporting to the Board of Directors. The main climate-related matters are as follows:

Performance-Linked Executive Compensation

Compensation for executive directors and corporate officers will consist of a fixed "base salary," a performance-linked "bonus," and additional "stock-based compensation," while compensation for non-executive directors, such as outside directors, will consist of only a base salary. In order to strengthen incentives and ensure the effectiveness of our medium-term management plan, we have set three financial indicators and two non-financial indicators as KPIs for assessing compensation. They are, respectively, consolidated operating profit, consolidated net sales margin, consolidated ROIC, individual evaluation, and ESG indicators (rate of CO² emissions reduction, etc.). The following table shows the approximate ratios of each type of compensation. (Assuming that 100% of payment is based on measured performance and qualitative evaluation)

Scenario analysis process

In order to assess the financial and business impact of climate-related risks and opportunities on our Group under different scenarios and to enhance our Group's resilience, we conduct scenario analysis according to the following steps.

Reference Scenario

Scenario Analysis Steps

1. STEP 1 Identification of significant climate-related risks/
   opportunities and establishment of parameters
   • Identify climate-related risks and opportunities
   • Assess high significance risks/opportunities
   • Set parameters related to highly significant risks/opportunities
2. STEP 2 Setting climate-related scenarios
   • Based on the information in STEP 1, etc., identify scenarios that are closely related to the existing scenarios
   • Establish climate-related scenarios (social vision)
3. STEP 3 Assessment of financial
   impact for each scenario
   • Analyze the financial impact of each scenario based on the scenarios established in STEP 2 and the key climate-related risks/opportunities and related parameters identified in STEP 1
4. STEP 4 Assessment of the resilience of the strategy to climate-related risks and opportunities and further measures to address them
   • Assess the resilience of our strategy to climate-related risks and opportunities
   • Consider further response measures

Business impact associated with climate-related risks and opportunities and the Group's response

In FY2021, the Company conducted scenario analysis for its main business areas, and in FY2022, the scope was expanded to include all businesses.

Climate-related risk

Climate-related opportunities

Decarbonization transition plan (Scope 1 and 2)

In March 2023, we created a roadmap toward decarbonization, aiming to achieve carbon neutrality by 2050 in line with our long-term goal of reducing greenhouse gas emissions. We will continue to replace existing equipment with energy-efficient substitutes, improve productivity, and save energy through research, component development, and introducing innovative manufacturing methods and equipment. Regarding the introduction of renewable energy, we will give first priority to introducing new equipment, followed by switching over to renewable energy power at our domestic sites, and then make the same transition to renewable-based power at our overseas sites. We will also switch from fossil fuels to decarbonized fuels and low-carbon fuels, aiming to achieve carbon neutrality by 2050.

Scope 1, 2 GHG emissions (t-CO²)
results FY2018-FY2022

In order to achieve our long-term emissions reduction goals, we need to reduce our greenhouse gas emissions by 8.4% from the 2020 levels. In fiscal year 2022 we far surpassed that goal, achieving an 11.6% reduction compared to 2020 (to a total of 96,589 metric tons of CO²). This achievement highlights the results of our ongoing energy-saving efforts and our proactive adoption of renewable energy sources.
In FY2022, we continued to aggressively expand this program. Our three domestic watchmaking facilities signed renewable energy supply contracts, and we expanded on-site solar power generation at our two overseas facilities. Furthermore, we increased use of non-fossil fuel certificates in our facilities and stores. As a result, our overall renewable energy ratio more than doubled — from 7.3% in 2021 to 15.3% a year later.

Scope 1: Direct emissions by reporting companies (e.g., fuel combustion)
Scope 2: Indirect emissions resulting from the use of electricity, etc. supplied by other companies
*The total amount of CO²emissions and the total of the breakdown may not match due to the processing of fractions.
*In accordance with the revision of CO²emission coefficients, CO²emissions before FY2019 were retroactively recalculated.
*Due to the revision of CO² emission coefficients, we have retroactively recalculated CO² emissions for years before 2019.
*There are no emissions of biogenic greenhouse gases (GHGs).

• Note 1:

  Emission factors

• Electricity:

  For Japan, the adjusted emission factors of emission factor by electric utility specified by the Law Concerning the Promotion of the Measures to Cope with Global Warming is used.
  For overseas, IEA (International Energy Agency) emission factors for each country are used

• Fuel:

  Both for Japan and overseas, the calorific value by fuel type and emission factor for fuel use specified by the Law Concerning the Promotion of the Measures to Cope with Global Warming are used.
  However, if information such as calorific value is provided by the suppliers, it is used.

• Chilled/heated water:

  Emission factors provided by suppliers are used.

• Note 2:

  Starting in FY2020, tenants, stores, warehouses, etc. have been added to the scope of calculation. Company vehicles are included, but energy use by outsourcing is not included.

• Note 3:

  For stores, warehouses, etc., where the amount of electricity used cannot be specified, the amount of electricity is estimated from the floor space.

• Note 4:

  Domestic facilities include 6.5 gas. Overseas facilities include only CO² deriving from energy use.