Addressing Climate Change

Task Force on Climate-related Financial Disclosures (TCFD) Initiatives

We position our efforts to address climate change as essential both for our own business development and for the sake of a sustainable society. Therefore, in FY 2022, we endorsed the TCFD’s recommendations to assess and disclose the financial impact of climate change-related risks and opportunities on our management, and we will take an active role in the climate change initiative to disclose this information.

Governance

Board of Directors supervision of climate change-related issues

The Group has integrated climate change into its governance process, and the Board of Directors, as the governing body for risk management, is involved in the process of managing climate change-related risks and opportunities. The Sustainability Promotion Committee, which is subordinate to the Board of Directors, plans, discusses, and makes decisions on climate change-related matters and manages and supervises efforts to address climate change.

Decisions on climate change-related issues

The President receives reports on climate change-related issues from the Sustainability Promotion Committee, makes decisions (verifies and approves) on specific countermeasures and target management pertaining to climate change-related risks and opportunities as the chief executive officer, and reports to the Board of Directors twice a year.

Strategies

The Group has conducted scenario analyses for a future with high uncertainty due to the transition to a decarbonized society, considering the global warming scenarios of 1.5°C and 4°C compared to preindustrial levels. These analyses target the Group’s three main businesses (Dormitory, Hotel, and Senior Life) and consider events and their impacts across the entire supply chain. Given the long-term nature of the impacts of climate change-related events, the Group has set out three time periods—short term (through 2026), medium term (through 2030), and long-term (through 2050).

Envisioned scenario	Adopted scenario	Scenario description	Target businesses	Envisioned timelines
1.5℃	IEA NZE	Developed countries achieve net-zero CO2 emissions by 2050 by expediting their introduction of energy-saving and electrification measures and renewable energy, hydrogen, bioenergy, and other forms of green energy	Dormitory Hotel (Dormy Inn and resorts) Senior Life	Short term: Through 2026 Medium term: Through 2030 Long term: Through 2050
	SSP 1-1.9
4℃	IEA STEPS	Climate change progresses because, despite the reflection of climate change policy initiatives in individual countries’ policies, fossil fuel-dependent development cannot be curtailed
	SSP 5-8.5

Risks and Opportunities in the 1.5°C Scenario

Perspective	Expected Events	Risks	Opportunities	Expected Financial Impact	Businesses Affected				Anticipated Time Frame & Scale of Financial Impact
					Dorm	Inn	Resort	Senior	Short- Term	Medium- Term	Long- Term
Policy/legal regulations	Taxation on greenhouse gas emissions such as carbon taxes	✓		Carbon tax levied according to greenhouse gas emissions (Scopes 1 and 2)	✓	✓	✓	✓	ー	Medium	Large
		✓		Rising prices for food, amenities, and equipment due to carbon taxes on business partners	✓	✓	✓	✓	ー	Small	Medium
	Tighter regulations on food waste	✓		Reviewed cooking methods and new investments to reduce waste	✓	✓	✓	✓	ー	Small	Medium
	Tighter regulations on plastic waste	✓		Promote reuse and reduction of plastic to mitigate impact from regulations	✓	✓	✓	✓	ー	Small	Medium
Technology	Improved production efficiency of renewable energy		✓	Lower renewable energy prices make reducing carbon tax burden easier	✓	✓	✓	✓	ー	Small	Medium
	Improved efficiency of energy-saving equipment	✓	✓	Equipment efficiency improvements may lead to both efficiency gains through replacements and stranded assets from replacing existing products	✓	✓	✓	✓	ー	Small	Medium
Market	Shift in customer values due to growing climate crisis awareness and concerns	✓		Greenhouse gas emission reduction efforts appeal to customers choosing residences	✓			✓	Small	Small	Medium
Reputation	Increased climate change concerns among investors and job applicants	✓		Climate change response affects stock prices and recruitment efforts	✓	✓	✓	✓	Small	Medium	Medium

Risks and Opportunities in the 4°C Scenario

1. In the Senior Life Business, we have a policy of not building facilities in locations with high risk of disaster.

Perspective	Expected Events	Risks	Opportunities	Expected Financial Impact	Businesses Affected				Anticipated Time Frame & Scale of Financial Impact
					Dorm	Inn	Resort	Senior	Short- Term	Medium- Term	Long- Term
Acute	Increased frequency and expanded damage from typhoons, torrential rain, and accompanying floods and landslides	✓		Facility damage leading to repair costs	✓	✓	✓	(*)	Small	Small	Medium
		✓		Facility damage leading to business suspension	✓	✓	✓	(*)	Small	Small	Medium
		✓		Supply chain disruptions due to traffic blockages preventing food and materials from being delivered, resulting in business suspension	✓	✓	✓	(*)	Small	Small	Medium
		✓		Traffic blockages preventing employees from commuting, resulting in business suspension			✓		Small	Small	Medium
Chronic	Rising average temperature due to global warming	✓		Increased risk of heatstroke for customers, leading to behavioral changes and poorer health	✓	✓	✓	✓	ー	Small	Medium
		✓		Increased risk of heatstroke for employees, leading to changes in commuting and working styles	✓	✓	✓	✓	ー	Small	Medium
		✓		Increased air conditioning costs	✓	✓	✓	✓	ー	Small	Medium

Risk Management

Identification & Evaluation

The Group recognizes that climate change is an important issue for the survival of corporations and believes that responding appropriately to climate change, not only in terms of risks but also opportunities, will lead to sustainable growth. The Sustainability Promotion Committee, which is delegated by the Board of Directors, discusses the identified risks and opportunities, and comprehensively evaluates the challenges facing the Group and impacts on the Group’s management in terms of both financial impact and likelihood of occurrence to determine the priorities. Business risks and opportunities are identified by comprehensively considering factors such as challenges facing the Group, requests and expectations of stakeholders, and results of environmental impact assessments, then are managed and addressed in future management plans.

Management

The Sustainability Promotion Committee, in response to the requests from the Board of Directors, discusses and approves various policies, targets, and measures related to sustainability, and reports to the Board of Directors.

Process

The Group believes that it is important to consider climate change from the perspectives of both risks and opportunities. To this end, we not only monitor climate change risks but also evaluate opportunities by strengthening collaboration with relevant departments and Group companies. Instructions are given to relevant departments after issues are deliberated and approved by the Sustainability Promotion Committee and reported to the Board of Directors.

Indicators and Targets

The Group aims to reduce greenhouse gas (Scopes 1 and 2) emissions by FY 2030 by 46% compared to FY 2013.

Indicator	Description
Scope 1 emissions	GHG emissions from fuel (city gas, LPG, kerosene, and A-fuel oil) used by the Company. Usage is based on actual results, and emission factors are based on the “Accounting Methods and List of Emission Factors under the Mandatory GHG Accounting and Reporting System” published by the Ministry of the Environment.
Scope 2 emissions (market-based)	GHG emissions from electricity and other energy used by the Company. Usage is based on actual results, and emission factors are based on the “List of Emission Factors by Electric Power Supplier” and the “Accounting Methods and List of Emission Factors under the Mandatory GHG Accounting and Reporting System” published by the Ministry of the Environment.

GHG emission trends（t-CO₂）