Sustainability | Fujita Kanko Inc.

Compliance with TCFD

Disclosure based on TCFD
The World View Surrounding Our Group due to Climate Change
Scenario Analysis

Disclosure based on TCFD

Climate change is an important global social issue, and the movement toward the achievement of a carbon-free society is expanding globally. Fujita Kanko Group is aware that the risks and opportunities related to climate change are among the most important management issues. We will disclose information following the recommendations of TCFD as follows.

Note: TCFD (Task Force on Climate-related Financial Disclosures) ...Companies aim to promote information disclosure and dialog with investors, understanding that responding to climate change means long-term risk management and creation of opportunities

(1) Governance

Our Group has the SDGs Promotion Committee as an advisory body to the Board of Directors. The SDGs Promotion Committee was formed as a company-wide organization crossing the head office and business departments. It deliberates and examines priority sustainability-related issues, including climate change. Also, its contents are reported to the Board of Directors appropriately, which leads the Board of Directors to oversee climate change risks.

＜Link＞Corporate Governance
https://fujita-kanko.com/investor-relations/policies/corporate-governance/

(2) Strategy

As a result of conducting climate change scenario analyses and assessment of the importance of risks and opportunities that may affect our business activities, we identified the following three topics are important risks and opportunities that may have a significant influence on our business: 1.Soaring raw material prices due to the introduction of a carbon tax and rising temperatures, 2.Changes in customer behavior and consumer preferences, 3.The increase in the frequency of disasters and damage due to typhoons and heavy rains. We will take measures against these important risks and opportunities respectively to reduce the risks and secure opportunities with certainty.

(3) Risk Management

Our Group has the Risk Management Committee as an organization to provide guidance and advice. It comprehensively and sweepingly identifies and grasps company-wide risks, selects the departments responsible for each risk, and reduces risks by the responsible departments. The Risk Management Committee identifies and takes measures for the important management of our Group's risks, and also monitors and manages sustainability-related risks and measures that the SDGs Promotion Committee deliberates and examines.

(4) Metrics and Targets

Our Group holds the following five items as priority sustainability-related issues: 1.Environmental Conservation, 2.Customers Safety and Security, 3.Diversity and Inclusion (Respecting Human Rights), 4.Contribution to Local Communities and Preservation of Cultural Assets and Historical Buildings, and 5.Compliance with Corporate Ethics. We are also working to achieve the following tasks by 2025, such as a 50% eco-cleaning(*) practice rate, a 50% decrease in the provided amount of specified plastics (compared to 2019,) and a 7% decrease in the amount of waste plastics (compared to 2019).
*Eco-cleaning: We ask our guests who stay consecutive nights to cooperate with simple cleaning for conservation of the environment (We do not clean bathrooms, make beds, or change sheets).

＜Link＞SDGs Response Policy
https://fujita-kanko.com/sustainability/sdgs.html

The World View Surrounding Our Group due to Climate Change

Scenario Analysis

(1) Definition of the scenario groups

We understand the risks, opportunities, and influence that climate change poses to us based on the request of the TCFD recommendations, and conducted a scenario analysis for the purpose of the resilience of our strategy assuming a mid- to long-term world and the needs for further measures. In the scenario analysis, we summarized the influence on our Group and the measures referring to the two different worlds in the assumed scenarios based on several current scenarios published by the Intergovernmental Panel on Climate Change (IPCC): One is assumed to limit the increase in global average temperature since the pre-industrial revolution to less than two degrees Celsius, which is the goal of the Paris Agreement (less than 2 ℃ scenario), the other is assumed to further increase global greenhouse gas emissions without any introduction of new policies or institutions (4 ℃ scenario).

(2) Risk and Opportunity Topics and Business Influence

Note:＜Term＞Short-term: to 2025, Mid-term: to 2030, Long-term: 2050

Risk and Opportunity Topics			Term	Influence on our Group		Influence Degree
Category		Topic	Term	Influence on our Group		Influence Degree
Transition risk	Policy, legislation, and technology	Soaring raw material prices due to the introduction of a carbon tax	Mid- to long-term	Risk	If the raw material prices of foodstuffs and customer goods soared because of shifting procurement prices due to the introduction of carbon tax, costs would increase.	Large
		Cost increase due to tighter regulations	Short- to long-term	Risk	Due to tighter regulations on GHG emissions, the rent increase by shifting rent for leased properties and soaring prices of imported part materials or delivery delays when constructing new properties may tighten the regulations on plastic resource recycling. Therefore, if we shifted to alternative products such as recycled plastics and biomass plastics, costs would increase.	Medium
		Cost increase due to tighter regulations	Short- to long-term	Opportunity	If regulations on recycling were tightened and efforts by society progressed, costs would be mitigated by the use of recycling and waste reduction due to promotion of efforts to reduce food loss.	Medium
	Market and reputation	Changes in customer behavior and consumer preferences	Short- to long-term	Risk	If our efforts to address climate change are seen as inadequate, it would lead to customer churn and a decrease in our brand reputation and image, and make it difficult to secure human resources who want to work at our company. Also, if transportation and infrastructure costs rise due to rising fuel costs for climate change, the consumers' increasing burdens will result in a decrease in demand for business trips or travel and the frequent use of high-priced accommodation facilities, and customer churn, which leads to sales decrease.	Large
		Changes in customer behavior and consumer preferences	Short- to long-term	Opportunity	Positive engagement in climate change and PR activities of our Group will improve our brand reputation, image, and power, which will lead to an increase in human resources and stable recruitment. Also, if the demand for sustainable tourism and the popularity of products that respond to climate change increases due to priority on climate change initiatives, the products we develop and sell in response to such demand will increase sales.	Large
		Changes in the investors’ evaluation	Short- to long-term	Risk	If our efforts to address climate change are seen as inadequate, it would lead to a decrease in our brand reputation, a fall in stock prices, or difficulty in procuring funds from financial institutions.	Medium
		Changes in the investors’ evaluation	Short- to long-term	Opportunity	Positive engagement in climate change and PR activities of our Group will improve our brand reputation, a rise in stock prices, and easier procurement of funds from financial institutions.	Medium
Physical risk	Urgent	The increase in the frequency of disasters and magnitude of the damage due to typhoons and heavy rains	Short- to long-term	Risk	If there are any damages to facility buildings, landslides on property, increased repair costs, delays or interruptions in renovation and restoration work, payment increases for non-life insurance, and business suspensions because of physical damage or human injury due to an increase in the frequency of disasters and the magnitude of damages, a sales decrease and cost increase will occur. Also, in the case of that transportation infrastructure (railways and airlines) is suspended or power outages occur due to an increase in the frequency of disasters and the magnitude of damages, reservation cancellations and a decrease in demand for business trips or travel will decrease sales.	Large
	Urgent		Short- to long-term	Opportunity	Making local contributions will lead to an improvement of our brand reputation, such as providing facilities as a shelter for those who are unable to return home and water supply spots for people due to the occurrence of a disaster.	Medium
	Chronic	Rising temperatures	Long term	Risk	If there is an increase in utility costs such as air conditioning and in management costs for gardens and golf courses due to a rise in summer temperatures, costs will increase. It will also increase response costs if there is an increase in health hazard risks for employees and customers, and possibly a restriction of electricity usage issued from the government due to an electricity shortage. If securing foodstuffs becomes difficult because of crop shortages due to rising temperatures and drought expansion, and yields decrease due to the progression of ocean warming, providing traditional menus would be more difficult and rising material prices will increase costs. Also, a decrease in demand for usage of our facilities by refraining from outing on extremely hot or midsummer days, due to a rise in summer temperatures, will decrease sales.	Medium
		Rising temperatures	Long term	Opportunity	In response to rising temperatures in summer, taking full consideration of the environments and the health of customers and employees will lead to earning evaluations from the customers who are positive about our efforts on climate change.	Medium
		Water shortage and drought	Long term	Risk	If there is a depletion of wells and hot springs due to water shortages or droughts, business using water resources or hot springs will face downsizing or management difficulties. The response costs will also increase from a rise in water charge and restriction of water use issued from the government.	Medium

(3) Details and responses of risk and opportunity topics that have a significant influence

1.Soaring raw material prices due to the introduction of a carbon tax and rising temperatures

The prices of raw material we use are expected to increase due to price shifts in the cost of raw materials because of the introduction of a carbon tax and poor or decreased production of raw materials due to rising temperatures. Considering soaring raw material prices will affect us to a certain extent because of the nature of our business, we will continue to study product development, such as purchasing methods and pricing.

2.Changes in customer behavior and consumer preferences

Efforts toward sustainability, like initiatives for climate change, are getting more attention every year, and is becoming a factor that customers consider when choosing facilities and products, such as accommodation and leisure which is our area of business. We have been implementing eco-cleaning, switching to environmentally friendly straws and amenity products, and reducing plastic waste. Considering that the development of products that meet the demands of customers and social issues has an important influence on us, we will continue to make further efforts.*
*Eco-cleaning: We ask our guests who stay consecutive nights to cooperate with simple cleaning for conservation of the environment (bathroom cleaning, bed making and cleaning without changing sheets).

3.The increase in the frequency of disasters and magnitude of the damage due to typhoons and heavy rains

In the event of an increase in disaster damage due to future climate change and more frequent strong typhoons and heavy rains, not only will sales decrease, but also more expenses for the restoration of our facilities and real estate are expected. Typhoon No.19 occurred in 2019 caused the profit decrease of approximately 600 million yen, and the amount of damage will likely increase due to an increase in the frequency and intensity of future disasters.

(As of March 2023)

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