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Working today to create a decarbonized society tomorrow. Toshiro Mitsuyoshi, President and Representative Director, Sumitomo Forestry Co., Ltd.

Resolving societal issues in a time of uncertainty

The year 2020 began with the coronavirus disease (COVID-19) that shook the world, and unfortunately, ended with no signs of its containment. The emergence of variant strains has fueled the spread of infection. With the absence of definitive treatment drugs, we are having to rely on vaccinations, but their rollout has been uneven among countries and regions. Although the global economy developed and expanded, the pandemic heightened social disparities, a rise in nationalistic sentiments and other serious concerns. All around the world, forest fires intensified, and flood and other natural disasters raged unabated. In Japan, torrential rains in July 2020 caused extensive damage in the Kyushu region, primarily Kumamoto Prefecture. We are entering an era where uncertainty is the new normal not only in terms of the COVID-19, but also in terms of natural disasters, the political economy and the social environment.

Although this message began with a list of worries and concerns, please allow me shift gears to a more positive tone. Companies have a strong responsibility to society and have many opportunities to help resolve social issues through their businesses. Sumitomo Forestry Group manages approximately 280,000 hectares of sustainable forests in Japan, Indonesia, New Zealand and Papua New Guinea and conducts businesses that utilize wood as a renewable natural resource. Through the manufacture and distribution of wooden building materials both in Japan and overseas, we supply more than 20,000 wooden houses yearly in Japan, the United States and Australia. We also conduct wood biomass power generation operations and manage nursing homes in Japan. Because we are a company that provides a variety of lifestyle services, we believe we can offer the shared benefit that is composed of environmental and social value, which will help resolve some of the many societal issues we face.

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Reevaluating materiality for our next Medium-Term Management Plan

We are currently reviewing our Mid-Term Sustainability Targets as part of the Sumitomo Forestry Group 2021 Medium -Term Management Plan, which was implemented in fiscal 2019. At the same time, we are also reevaluating the Group’s material issues in preparation for our next Medium -Term Management Plan. Since formulating our material issues in March 2015, much has changed in our environment, such as the emergence of the Paris Agreement and the adoption of sustainable development goals (SDGs). In Japan, environmental, social and governance (ESG) investments have increased rapidly with the Government Pension Investment Fund (GPIF) becoming a signatory of the Principles for Responsible Investment (PRI) of the United Nations. We are working to determine what areas we can contribute by analyzing geopolitical changes, technological innovations, and the shift in preferences of employees, customers and other stakeholders, as well as by utilizing our strengths as a Group, which has grown substantially with mergers, acquisitions and capital alliances. Through surveys of stakeholders both within and outside the company, consultations with individuals and repeated discussions among directors, we plan to finalize our material issues, which will set our management direction within the framework of planetary boundaries.

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Addressing the challenges of creating a decarbonized society

In addition to the Suga Administration’s carbon-neutral declaration in October 2020, 121 countries and regions around the world have aligned with the Paris Agreement’s goal to create a decarbonized society by 2050. Our Group has already begun work on climate change initiatives in our Mid-Term Sustainability Targets, such as by endorsing the Task Force on Climate-Related Financial Disclosures (TCFD), setting science-based targets (SBT) to reduce long-term greenhouse gas emissions and becoming a member company of RE100. Currently, we are grappling with questions about how we should envision our society in 2030, the mid-way point to a decarbonized society in 2050, as well as how to position our management priorities. At the Leaders Summit on Climate in April 2021, President Biden of the United States announced ambitious new climate targets and Japan raised its emission reduction targets from 26% to 46% by 2030. Other countries followed suit, clearly signaling a commitment to resolve this issue now rather than rely on future generations. Society is placing greater hope and promise in carbon sequestration in forests and CO2 emission reduction from wood products and wooden buildings, and the utilization of biomass fuel for power generation. Through the management of forests, the manufacturing and distribution of wood building materials, the construction of wooden buildings and the operation of renewable power generation sites, our Group is effectively utilizing renewable and natural forest resources to provide societal value and contribute to the creation of a decarbonized society.

According to the annual report*1 of the United Nations Environment Programme (UNEP), the world’s total building floor area is forecasted to more than double by 2060.

Floor area is increasing at a faster pace than population growth, and most of the construction will take place in urban areas. Currently, the building and construction sector accounts for 38% of the world’s greenhouse gas emissions and more than 70% of that is from energy usage in buildings*2. Energy conservation technologies and initiatives have advanced significantly, and with the popularization of renewable energy, CO2 emissions should fall. However, embodied carbon, the amount of greenhouse gases released throughout the supply chain from the procurement of raw materials to its processing, transport, construction and disposal, remains a significant issue. Europe and the United States have already implemented green building standards, certification requirements and policy incentives. However, in Japan, Australia and other countries where the Sumitomo Forestry Group conducts its businesses, discussion about embodied carbon has just begun. We will actively make policy recommendations to trigger greater movement towards creating a decarbonized society.

*1 First mentioned in the 2017 Global Status Report for Buildings and Construction, directed by the United Nations Environment Programme and issued by the Global Alliance for Buildings and Construction (GABC), which was launched at COP21 in 2015, the year the Paris Agreement was adopted.

*2 According to the 2020 Global Status Report for Buildings and Construction issued by GABC.

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Building a resilient organization based on diversity and partnerships

To reduce embodied carbon and realize a circular bioeconomy, we must go beyond sustainable forest management, which absorbs CO2, and the supply of wooden buildings, which contributes to carbon fixation. We must also cooperate with suppliers and companies in other industries. Furthermore, we must work with employees, business partners and stakeholders with diverse backgrounds and experiences to respond broadly to societal changes. In March 2021, working with Kumamoto Gumi, a company with which we have a capital alliance, we jointly developed and launched a mid- to large-scale wood building brand called “with TREE” based on the concept of environmental and health-conscious buildings. From materials procurement to design, construction and consulting, we will propose buildings that provide users both environmental value and well being.

With a rapidly changing operating environment, people are the most important element in creating a resilient organization. In terms of diversity management, starting with our Declaration on Empowering Women, we are working to embrace a wide range of work styles to allow time for nursing, childcare and other commitments. We are also reducing long working hours for healthy management. With the COVID-19, work style reform has accelerated. Given our operations based on renewable and natural forest resources, our Group’s sustainability initiatives have been self-evident for some time. But with one of the basic principles of our Medium-Term Management Plan being to promote the integration of our ESG initiatives, the level of passion and earnestness to achieve these sustainability goals has risen dramatically within the Group. In terms of governance, we have increased the number of outside directors to three and now the ratio of outside directors and female directors is 33% and 22%, respectively.

The world’s population is forecasted to exceed 9 billion people by 2050. Housing is the foundation of people’s well-being. In addition to providing societal value through the supply of housing, the creation of employment opportunities, safe labor conditions and healthcare, we are striving to contribute environmental value through sustainable forest management and carbon sequestration, carbon fixation from wooden building materials and other efforts; It means that we provide “shared benefits”.

It is important for Sumitomo Forestry Group employees, business partners, members of the local community and all stakeholders to be focused on a common goal. By working together, we will be able to accelerate transformation and achieve bigger results.

Sumitomo Forestry Group has been supplying detached houses for half a century, but these homes are no longer just a place to return to and relax after a day’s work at the office. The spatial boundaries of daily life that separate where we sleep, commute, work, and enjoy family life and leisure are blurring with more people working from home or conducting remote work. Lifestyles are now characterized by pockets of time that are fragmented and mixed between work and non-work activities.

With this and other societal changes in mind, we will supply housing and non-housing spaces and communities that maximize resource efficiency and create a decarbonized society. As Sumitomo Forestry Group forges its future, look forward to the positive changes ahead.

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