Basic Approach

The AOKI Group recognizes conservation of the global environment as a priority issue and strives to reduce environmental impact in each of its  businesses. The AOKI Group endorsed the TCFD recommendations, which encourage corporations to disclose information on the effects climate change has on them, and we will further promote disclosure of information in line with these recommendations and contribute to the realization of a sustainable society.

Governance

Discussing and Responding to Climate Change via the Sustainability Committee

In December 2021, AOKI Holdings established the Sustainability Committee consisting of the directors of AOKI Holdings, department heads and the presidents of the Group companies. In general, the Committee meets twice a year. The Committee assesses the business risks and opportunities climate change poses, and also discusses annual and medium- to long-term plans and with an eye on the sustainable growth of the Group as a whole, reporting its findings to the Board of Directors.

In response to the reports of the Sustainability Committee on the important matters it discusses as well as on the progress of its plans, the Board of Directors monitors the status of initiative implementation and also drafts and implements business plans taking into consideration climate change matters.

Strategy

Climate Change Risks and Opportunities, Their Effects on Businesses, and Measures

The AOKI Group conducted scenario analyses based on TCFD recommendations to consider its business strategy and organizational resilience in light of the impacts of climate change. We assume both a 1.5°C scenario, in which the transition to a low-carbon economy advances, and a 4°C scenario, in which GHG emission reductions fall short and global warming accelerates. Based on an analysis of how the business environment would change under each scenario, we identify and assess climate-related risks and opportunities, and consider countermeasures. The risks and opportunities that are currently expected to have a large impact are shown in the table on the below.

Transition risks (1.5°C scenario)

Type Drivers Impacts of climate change Businesses concerned Time frame Magnitude of impact Solution
Regulations and policies Introduction of a carbon tax Carbon tax imposition on a company will increase costs All businesses Medium term High* ・Reduce emissions by promotion renewable energy
・Reduce costs through the use of offset programs and credits
・Implement planned GHG reductions based on medium- to long-term targets (currently working toward obtaining Science Based Targets)
Contracted obligations and regulations related to existing products and services In case stricter regulations or new regulations concerning plastic use and product recycling are introduced, compliance costs will be incurred Medium
term to long term		 Medium ・Reduce plastic consumption
・Waste reduction
・Implement 3R initiatives and zero-emission activities
・Monitor policy trends
Markets Changing customer behavior Consumers will prioritize environmentally friendly products and services, reducing demand for conventional products Medium ・Develop and strengthen sales of environmentally friendly products
・Make active use of renewable and recycled materials
・Enhance information dissemination concerning sustainable products
Declining demand for existing products like heavy clothing and delayed product development in response to warming temperatures will cause customer attrition Fashion High ・Introduce functional products suitable for high-temperature environments
・Review product mix and optimize inventory
・Achieve both environmental sustainability and enhanced product functionality by adopting sustainable materials
Rising raw material costs As the proportion of renewable energy in the energy mix increases, electricity costs will rise All businesses High ・Reduce procurement costs through competitive comparison of multiple power company contracts
・Reduce energy consumption by installing energy-saving equipment in our facilities
・Ensure stable electricity prices through non-fossil certificates and long-term contracts
Increased costs due to food procurement instability and higher food ingredient costs Entertainment Medium ・Practice local production for local consumption and diversify suppliers
・Ensure a stable supply structure through the use of freezing and preservation technologies

Physical risks (4°C scenario)

Type Drivers Impacts of climate change Businesses concerned Time frame Magnitude of impact Solution
Acute Increased severity of extreme weather events such as cyclones and floods Sales will decrease due to stagnation/suspension of business activities at our company's locations All businesses Short term to long term High ・Decide on new store openings based on locational conditions and reassess the risks of existing locations
・Minimize damage through natural disaster insurance and infrastructure investment
Chronic Rising average temperatures Warmer winters will reduce demand for winter products, increasing inventory management costs Fashion High ・Implement flexible sales periods and conduct more precise real-time demand forecasts
・Strengthen promotional activities to reduce inventory turnover
・Develop products that can be worn all year round
Increased air conditioning usage in the summer will increase the company's air conditioning costs All businesses High ・Install high-efficiency air conditioning equipment
・Optimize temperature and humidity control using EMS and IoT
・Improve insulation within stores and create energy-saving operation manuals
Winter clothing sales will decrease (coats, down jackets, sweaters, etc.) due to a shorter autumn and winter seasons Fashion High ・Balance the product lineup with seasonal items outside of autumn and winter
・Develop multi-functional products (e.g., combining warmth and breathability)
・Develop new sales channels

Opportunities

Type Drivers Impacts of climate change Businesses concerned Time frame Magnitude of impact Solution
Resource efficiency Using more efficient transportation methods (modal shift) Shift to more fuel-efficient transportation to reduce environmental impact and delivery costs All businesses Medium term to long term High ・Review transport routes and vehicles and formulate modal shift plans
・Design optimal transport schedules in collaboration with logistics companies and IT companies
Using more efficient production and distribution processes Introduce energy-saving equipment to use less energy and reduce costs Short term to long term Medium ・Introduce cutting-edge energy-saving technology
・Energy efficiency monitoring
Recycling Actively promote the collection of used products to establish a brand image as an environmentally conscious company Fashion Short term Medium ・Introduce recycling acceptance and incentive systems at stores
・Build a resource-recycling business based on refurbishing collected products
Using more efficient production and distribution processes Introduce demand response to reduce costs by optimizing energy usage Fashion / Entertainment Short term to long term High ・Optimize peak power consumption through participation in demand response programs
・Establish an electricity monitoring system
Energy sources Using lower-emission energy sources Reduce the impact of rising fossil energy prices by using low-carbon energy sources All businesses Medium
term to long term		 High ・Expand electricity procurement using renewable energy options and non-fossil certificates
・Diversify procurement by adopting power purchase agreements (PPAs)
Using new technologies Manage energy consumption and achieve efficient operations by utilizing IoT-based energy consumption visualization and optimization technologies Short term to long term High ・Optimize store energy consumption through air conditioning and lighting control using IoT-enabled smart buildings
Products and services Developing and/or expanding low-emission products and services Increase sales through the expansion of eco-friendly products Fashion / Bridal Medium
term to long term		 Medium ・Expand lineup of environmentally conscious products that reflect market trends
・Introduce product tags and certification displays from an ESG perspective
Markets Accessing new markets Demand for summer products will increase due to rising temperatures Fashion Short term to long term High ・Optimize inventory through improved demand forecast accuracy
・Expand summer products and develop product strategies tailored to warm regions
Resilience Participate in renewable energy programs and implementing energy efficiency measures Using renewable energy sources to reduce our greenhouse gas emissions and lower the costs of combating climate change. Implementing energy efficiency measures to reduce wasteful energy consumption and result in cost savings All businesses Low ・Introduce renewable energy
・Upgrade to high-efficiency equipment (LEDs, air conditioning systems, etc.)
・Optimize energy consumption through energy monitoring

*The impact of introducing a carbon tax is estimated to be approximately ¥1.3 to ¥1.5 billion

【Scenario analysis setting】

  • Time frame
    Short term: 1 to 3 years, Medium term: 3 to 10 years, Long term: 10 to 30 years
  • Impact
    High: Matters that could significantly reduce revenue from the company’s own business, result in costs that could substantially strain management, and cause major financial losses to the business, potentially making its continuation difficult
    Medium: Moderate financial losses may occur and could affect business operations
    Low: Will have a slight impact on sales or profits, but will not significantly affect business operations
  • Usage scenarios
    1.5°C scenario (IEA WEO 2023 Net Zero Emissions by 2050, etc.), 4°C scenario (IPCC AR6 SSP5-8.5 scenario, etc.)

Risk Management

Managing Climate Change Risks through Four-Committee Cooperation

Group-wide risks are managed by the Compliance Committee, Risk Management Committee and Information Security Committee. With regard to risks from climate change, the Sustainability Committee assesses the degree of impact they will have on businesses and determines appropriate policies. The advancement of these policies is shared between the Compliance Committee, Risk Management Committee and Information Security Committee. The Sustainability Committee informs the Board of Directors about major risks it has identified and proposes responses to these risks. In turn, with the approval of the Board of Directors, the Sustainability Promotion Department, the Sustainability Committee’s secretariat, plays a central role in said responses.

Metrics and Targets

This figure includes results from the consolidated second quarter of fiscal 2022 due to the subsidiary acquisition of RUNSYSTEM CO., LTD. in June 2022.

Mainly, AOKI, KAIKATSU FRONTIER and RUNSYSTEM, ANNIVERSAIRE are engaged in the Fashion Business, Entertainment Business and Bridal Business, respenctively.

Current Status of the AOKI Group

CO2 Emissions (Scope1+Scope2）

（t-CO2）
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024
Entire AOKI Group 124,381 112,989 119,324 111,430 111,562

Scope1

（t-CO2）
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024
Entire AOKI Group 2,370 2,890 3,178 2,996 2,931
AOKI Holdings and AOKI 953 662 723 557 592
KAIKATSU FRONTIER 381 1,738 1,797 1,735 1,704
ANNIVERSAIRE 1,036 490 506 559 554
RUNSYSTEM - - 152 144 80

Scope 2 (Market Base)

（t-CO2）
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024
Entire AOKI Group 122,011 110,099 116,146 108,434 108,631
AOKI Holdings 720 909 423 262 317
AOKI 38,476 28,617 25,311 20,781 22,783
KAIKATSU FRONTIER 76,562 76,693 82,884 80,675 79,366
ANNIVERSAIRE 6,253 3,880 4,016 3,649 4,024
RUNSYSTEM - - 3,512 3,067 2,143

Scope2 (Location Base)

（t-CO2）
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024
Entire AOKI Group 128,924 110,646 115,821 112,742 109,858
AOKI Holdings 833 830 428 443 390
AOKI 42,550 28,199 25,746 24,874 25,373
KAIKATSU FRONTIER 78,819 77,759 82,719 80,558 77,932
ANNIVERSAIRE 6,722 3,858 3,431 3,749 4,061
RUNSYSTEM - - 3,496 3,117 2,101

Greenhouse Gas Emissions

（t-CO2）
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024
Scope 1 2,370 2,890 3,178 2,996 2,931
Scope 2 (Market Base) 122,011 110,099 116,146 108,434 108,631
Scope 3 - - 325,079 373,410 371,824
Category 1 Purchased products and services - - 250,912 276,672
2 Capital goods - - 24,956 48,869
3 Fuel and energy related activities not included in Scope 1 and 2 - - 18,970 17,714
4 Upstream transportation and distribution - - 2,497 2,504
5 Waste from opereations - - 12,731 13,408
6 Business trips - - 1,179 1,192
7 Employee commuting - - 3,031 3,072
8 Upstream leased assets - - 0 0
9 Downstream transportation and distribution - - 442 342
10 Processing of sold products - - 0 0
11 Use of sold products - - 0 0
12 End-of-life treatment of sold products - - 4,843 4,701
13 Downstream leased assets - - 0 0
14 Franchises - - 5,518 4,936
15 Investments - - 0 0
Scope 1+2+3 - - 444,403 484,840 483,386

*Scope3 category figures will be reported after verification

Metrics

The AOKI Group is promoting the reduction of greenhouse gas (CO2) emissions in order to reduce its environmental impact. The AOKI Group is aiming to reduce its per-store Scope 1 and Scope 2 emissions by 50% in comparison to FY2017 (ended March 31, 2018) levels by FY2030. In addition, as of FY2022, the Group is also carrying out Scope 3 disclosure. Furthermore, starting in FY2024, we are responding to the corporate questionnaire from CDP (on climate change) and have received a score of "B-".

Per-store CO2 emissions

Actual Targets
FY2017
(base year)		 FY2021 FY2022 FY2023 FY2024 FY2030 FY2050
Entire AOKI Group (t-CO2) 124,381 112,989 119,324 111,430 111,562 - 0
Numbers of corresponding AOKI Group stores (Locations) 1,257 1,329 1,352 1,335 1,333 - -
Per-store (t-CO2) 99.0 85.0 88.3 83.5 83.7 49.5 0.0

Targets

CO2 Reduction Targets (Per-Store)

The AOKI Group will continue to consider metric and target items.