Information Disclosure Based on the TCFD Recommendations

Initiatives for Information Disclosure in Line with TCFD Recommendations

Governance

Led by the Executive Officer in charge of sustainability, we are promoting sustainability initiatives, such as initiatives to address climate change and other environmental issues.

Strategies

Identifying climate change-related risks and opportunities, and conducting scenario analysis

We collected information on examples given in the TCFD recommendations and climate change-related risks and opportunities in the writing instrument industry, and identified these risks and opportunities for our Company. Of the identified risks and opportunities, we assessed their importance on two axes: possibility of occurrence and impact on business. Following are the risks and opportunities evaluated as highly important. On the time axis considered when organizing risks and opportunities, short term: 0 to 1 year, medium term: 1 to 3 years, long term: 3 years or more.

Additionally, in order to consider the impact of climate change-related risks and opportunities on our business, we conducted a scenario analysis targeting our domestic writing instruments business. The target year for the analysis is 2030 in conjunction with our group's 2030 Vision. For the analysis, we set two scenarios: a "decarbonized society scenario (average temperature rise of 1.5°C to 2°C compared to pre-industrial revolution)" and a "society-as-usual scenario (average temperature rise of 4°C)." In setting the image of society for each scenario, we referred to megatrend reports on social trends from 2030 onwards and the temperature rise scenarios of the IPCC (Intergovernmental Panel on Climate Change).

Important risks related to climate change

[Legend]✓：Applicable, –: Not applicable

Item		NO.	Minor category	Time axis	Impact on business	Scenarios of high importance
Major category	Medium category					Decarbonized society	Society -as-usual
Transition risks	Political and legal risks	1	Introduction of carbon tax, strengthening tax on fuel and energy	Medium term to long term	Increased operating costs due to carbon tax and strengthened ta x on fuel and energy	✓	–
					Increased raw material costs due to carbon tax and other taxes being imposed on business partners
					Decreasing profits if increased operating costs cannot be passed on to product prices
		2	Strengthened and stricter legal regulations, such as the strengthened obligation to report emissions	Medium term to long term	Increased costs associated with new capital investments and res tructuring of production bases for complying with stricter legal regulations, such as the strengthening of the obligation to report emissions	✓	–
					Rising raw material costs due to restrictions on the use of raw materials such as resins and packaging materials made from fossil fuels, and s witching to environmentally friendly raw materials
					Rising prices due to increased demand for renewable electricity and carbon credits (increased operating costs)
	Market risks	3	Changes in behavior of customers, etc. in the market	Short term to long term	With increased interest in sustainability, changes in lifestyles and technological development, the need for products that take sustainability into consideration is increasing, as is the use of electronic devices instead of paper, resulting in a decrease in sales of traditional writing instruments.	✓	–
					Increased R&D costs of environment-friendly products
					Due to the growing interest in sustainability, product prices a nd other factors that were previously considered market signals have changed, an d market analysis based on conventional interpretations is no longer val id, leading to increased marketing costs and costs associated with rebuilding sales networks.
		4	Increasing raw material costs	Short term to long term	Increased raw material costs for fossil fuel-based resins and packaging materials	✓	–
					Increased raw material costs due to increased demand for environmentally friendly raw materials (bioplastics, etc.)
Physical risks	Acute risks	5	Intensified natural disasters such as typhoons and floods	Short term to long term	Damage to plant equipment, etc., reduction in assets, and decrease in sales due to intensifying typhoons, heavy rains, and floods In particular, production bases near rivers are at increased ri sk of flooding, and the above damages are expected.	✓	✓
					Supply chains are disrupted due to intensifying typhoons, heavy rains, and floods, production volume is reduced due to shortages of raw materials and procured goods, product delivery is delayed, and sales are reduced.
					Cutting off of lifelines (electricity, gas, water, Internet, etc.) and losses for employees (decreased sales due to business closures and lost business opportunities) due to intensifying typhoons, heavy rains, and floods
	Chronic risks	6	Changing precipitation patterns	Long term	Flooding at production bases due to the increased frequency of sudden rains. This will make it difficult to continue operations, and th e cost of recovery will increase. Additionally, it will be necessary to r elocate in the long term, and the cost of relocation will increase.	–	✓
		7	Rising average temperature	Long term	Energy costs increase due to the need to maintain an appropriat e working environment and manage equipment and products. In addition, as a countermeasure, investment in air conditioning equipment will increase.	–	✓
					Increase in health hazards such as heat stroke and infectious diseases, and decrease in production efficiency in summer

Important opportunities related to climate change

[Legend]✓：Applicable, –: Not applicable

Item		NO.	Minor category	Time axis	Impact on business	Scenarios of high importance
Major category	Medium category					Decarbonized society	Society -as-usual
Opportunities	Products and services	8	Expanding development and implementation of environmentally friendly products and services	Short term to long term	Increased opportunities for joint development of environmentally friendly products and services with business partners and other stakeholders	✓	–
					Maintaining or expanding market share by expanding development and sales of environmentally friendly products
		9	Expanding circular economy	Short term to long term	Increased opportunities for pen recycling and other programs in collaboration with business partners and schools, etc.	✓	–
					Consumers' sustainable behavior is being encouraged, and in writing instruments, there is increased demand for durable and long-lasting products and repair services instead of disposable products.
					Increased demand for products that are easily recyclable or products that use scrap wood and recycled materials with the expansion of the circular economy
	Market	10	Changing consumer preferences	Short term to long term	Increased sustainability orientation among consumers, and increased demand for environmentally friendly products and services, leading to increased sales	✓	–
					Increased understanding of the shift from excessive packaging to simple packaging among consumers, leading to reduced packaging costs
					By promoting business activities aimed at realizing a carbon-free society, we have gained recognition from consumers and other stakeholders, and our sales have increased.
	Resilience	11	Enhancing BCP	Short term to long term	We have established a system that allows us to continue operations even in emergencies such as disasters, reducing the risk of losing business opportunities due to interruptions to operations.	✓	✓
					Improvement in the workplace environment through repairs to building and equipment, leading to improved employee safety and productivity. The risk of damages to assets in the event of disasters has also decreased
					By diversifying raw material suppliers, we can reduce the risk of supply chain disruptions in the event of a disaster and the risk of losing business opportunities.

Measures to address climate-related risks and opportunities

We considered countermeasures for highly significant climate-related risks and opportunities identified through scenario analysis. We intend to promote and manage countermeasures to reduce risks and capture business opportunities.

Measures to address climate-related risks

NO.	Minor category	Countermeasures
1	Introduction of carbon tax, strengthening tax on fuel and energy	Establishing greenhouse gas emission reduction targets and considering and implementing measures to reduce emissions
		Use of renewable energy (procurement of renewable energy, installation of solar panels, conversion of business vehicles to EVs in conjunction with procurement of renewable energy power, etc.)
		Reduction of raw material usage (promotion of recycling at production sites, changes in design specifications, etc.)
		Strengthening procurement functions (appealing to suppliers using the PILOT Group Sustainable Procurement Policy Agreement, etc.)
		Continuous energy-saving activities (LED ceiling lighting, switching to energy-saving equipment)
2	Strengthened and stricter legal regulations, such as a more stringent obligation to report emissions	Maintaining and improving compliance with environmental laws and regulations in the ISO14001 environmental management systems
		Strengthening procurement functions (appealing to suppliers using the PILOT Group Sustainable Procurement Policy Agreement, etc.)
		Promoting plastic-free packaging materials and promotional goods
		Continuous energy-saving activities (LED ceiling lighting, switching to energy-saving equipment)
3	Changes in behavior of customers, etc. in the market	Collaboration with other companies (combination of analog and digital)
		Strengthening development capabilities for environmentally friendly products such as the BEGREEN series and Super Grip G Ocean Plastic
		Enhancing after-sales services (such as providing repair services for writing instruments)
		Building new consumer contact points
4	Increasing raw material costs	Improving the value added to products
		Collaborating with suppliers
		Review of products, packaging materials, and promotional materials, including raw materials
5	Intensified natural disasters such as　typhoons and floods	Establishing a business continuity plan, including a review of the Business Risk Management Regulations and the accompanying detailed rules and manuals
		Establishing disaster prevention infrastructure and building a supply chain based on BCP
		Building an optimal production system from the perspective of BCP, etc.
6	Changing precipitation patterns	Establishing a business continuity plan, including a review of the Business Risk Management Regulations and the accompanying detailed rules and manuals
		Establishing disaster prevention infrastructure and building a supply chain based on BCP
7	Rising average temperature	Continuous energy-saving activities (switching to energy-saving equipment)
		Improving employee working environment (environmental considerations with revisions in dress code)
		Improving the facility infrastructure

Measures to address climate-related opportunities

NO.	Minor category	Countermeasures
8	Expanding the development and implementation of environmentally friendly products and services	Providing recycling-oriented products and services by grasping and analyzing consumer purchasing behavior
		Strengthening development capabilities for environmentally friendly products such as the BEGREEN series and Super Grip G Ocean Plastic
		Enhancing after-sales services (such as providing repair services for writing instruments)
9	Expanding the circular economy	Utilizing recycled resources (initiatives such as establishing a used pen recycling system that makes a significant contribution)
		Providing recycling-oriented products and services by grasping and analyzing consumer purchasing behavior
		Enhancing after-sales services (such as providing repair services for writing instruments)
10	Changing consumer preferences	Providing recycling-oriented products and services by grasping and analyzing consumer purchasing behavior
		Enhancing after-sales services (such as providing repair services for writing instruments)
11	Enhancing BCP	Improving employee safety and productivity by regularly reviewing BCP
		Establishing disaster prevention infrastructure and building a supply chain based on BCP

Risk Management

In accordance with the Business Risk Management Regulations and the attached detailed rules and manuals, we monitor the risk situation across the organization and respond to risks related to important management issues. In addition, we review internal rules such as related detailed rules and manuals as necessary, and strive to build and maintain a system that can thoroughly manage crises and encourage more ethical behavior by informing employees. We will continue to promote overall sustainability initiatives, including those related to climate change.

Indicators and Targets

Reduction targets for greenhouse gas emissions

In February 2023, as a climate change-related target, we established new greenhouse gas emission reduction targets for fiscal year 2030, with the approval of the Board of Directors. The scope of the target covers all of our domestic bases.

Medium-to-long-term target	Reducing Scope 1 and 2 emissions (total) by 25% by 2030 compared to fiscal year 2021

Actual results for greenhouse gas emissions (Scope 1, 2 and 3)

Scope 1: Direct greenhouse gas emissions from the use of fuels, etc. by the company
Scope 2: Indirect greenhouse gas emissions from the use of electricity and heat purchased by the company
Scope 3: Indirect emissions other than scopes 1 and 2 (emissions by other companies related to the activities of the business)

Energy consumption and greenhouse gas emissions (2021 to 2023)

(Note) Data scope: Domestic bases of PILOT Corporation

	2021	2022	2023
Energy consumption
City gas(1,000 m3)	164	84	37
LP gas (ton)	231	244	250
Gasoline (1,000 kl)	0	0	0
Kerosene (1,000 kl)	0	0	0
Diesel (1,000 kl)	0	0	0
Electricity (MWh)	29,520	28,982	28,844
Greenhouse gas emissions(t-CO2)
Total emissions(Scope 1 + 2)	14,524	14,488	12,515
Scope 1	1,467	1,269	1,074
Scope 2	13,057	13,218	11,440
Intensity of emissions(t-CO2/million yen)
Emissions per sales unit	0.194	0.168	0.158

Scope 3 emissions (2023)

(Note) Data scope: Domestic bases of PILOT Corporation. The calculation method is to multiply the activity data for each category by the intensity of emissions to calculate emissions.

Category		Scope(*Uncalculated or non-applicable category)	Emissions(t-CO2)
Scope 3 total			185,988
1	Purchased products and services	Procured items such as raw materials and consumable goods	170,164
2	Capital goods	Purchase and increase of fixed assets	10,246
3	Fuel and energy activities not included in Scope 1 and 2	Upstream process of procured fuel and electricity	2,253
4	Transportation and distribution (upstream)	Of the logistics from our company to sales stores, etc., the logistics for which the company bears the costs	1,316
5	Waste generated from business	Outside-company transportation and processing of waste generated at production sites	78
6	Business trips	*Related to business but not yet calculated	–
7	Employee conveyance	Employee conveyance to domestic bases	785
8	Leased assets (upstream)	*Already calculated for Scope 1 and 2	–
9	Transportation, distribution (downstream)	*Related to business but not yet calculated	–
10	Processing of sold products	*Sales ratio is limited, and determined not to be applicable to our company	–
11	Use of sold products	*Sales ratio is limited, and determined not to be applicable to our company	–
12	Disposal of sold products	Major products sold, packaging materials for shipping, and service items	1,146
13	Leased assets (downstream)	*Determined as not applicable since this business is not being conducted	–
14	Franchise	*Determined as not applicable since this business is not being conducted	–
15	Investment	*Determined as not applicable since this is not the main business	–