Declaration of Biodiversity and Biodiversity Action Guidelines

Sumitomo Forestry established its policy on Biodiversity Conservation in Company-owned Forests in Japan in fiscal 2006, and its Wood Procurement Philosophy and Policy in fiscal 2007. The Company also revised its Environmental Policies in fiscal 2007 to incorporate biodiversity considerations. Then in March 2012, the Sumitomo Forestry Group established its Declaration of Biodiversity, setting out the Sumitomo Forestry Group's understanding of and stance on biodiversity; Biodiversity Action Guidelines, specifying an internal set of guidelines; and Biodiversity Long-Term Targets as specific goals of activity.

In July 2015, the Group initiated the Sumitomo Forestry Group Environmental Policy, bringing together the Environmental Philosophy*, the Environmental Policies, the Sumitomo Forestry Group Declaration of Biodiversity, and the Sumitomo Forestry Group's Biodiversity Action Guidelines. Therefore, the efforts in biodiversity are also operated based on the policies integrated in the Sumitomo Forestry Group Environmental Policy.

* The Sumitomo Forestry Group formulated the Environmental Philosophy in 1994 and the Environmental Policies in 2000

Company Structure for Biodiversity Conservation

In accordance with our environmental management structure, the Representative Director and President is the person in charge of Sumitomo Forestry Group's biodiversity conservation initiatives, and the Executive Officer in charge of the Sustainability and the General Manager of the Sustainability Department manage Sumitomo Forestry Group company activities.

Commitment to Protected Areas

To manufacture and secure wood resources, Sumitomo Forestry Group owns or manages many forests both in Japan and overseas. None of these forests is located in areas designated as world heritage sites. Furthermore, we have not and will not operate in areas designated as world natural heritage sites. Regardless of land ownership, national parks in Japan, which has a small land area, operate under the Regional Natural Park System and many national parks include private property. A portion of Sumitomo Forestry's Company-owned forests are located inside national park areas, and as is the case for other areas designated as protected forests etc., we operate in strict compliance with all legal regulations.

Furthermore, in terms of risk assessment, in areas determined to be important from a biodiversity perspective, we not only strictly adhere to all legal regulations, but also work to mitigate our impact through reevaluation, minimization, revitalization, offsetting and other efforts.

Zoning Management According to Forest Purpose

The borders of these lands set by the government do not always match the boundaries of the ecosystem. The Indonesian subsidiaries PT. Wana Subur Lestari (WSL), PT. Mayangkara Tanaman Industri (MTI), and Kubu Mulia Forestry (KMF) conducted thorough animal and plant surveys that included conservation forest neighboring areas under governmental management before defining preservation areas and business areas. WSL and MTI also worked with local organizations to build a conservation network that defines a net of green corridors to prevent closed off islands which would isolate the regions where orangutans, long-nose monkeys and other rare flora and fauna live.

Forest Management Area in Indonesia

Conservation Network

Evaluation of Initiatives by Stakeholders

The concept and specific initiatives of the Conservation Network proposed by WSL and MTI are attracting attention at home and abroad as a rare world wide initiative. At the 25th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP25) in Madrid, Spain in 2019, we presented as a representative of the private sector at the Indonesia Pavilion and were highly appreciated by international organization representatives, researchers, and NGOs. We also presented our technical approach to the challenges surrounding tropical forests and our initiatives at COP27 in Sharm El Sheikh, Egypt in 2022.

In addition, in our urban landscaping business, we are striving to improve the quality of our greening efforts through third-party certification by actively encouraging our customers to register for "Ikimono Kyosei Jigyousho^®" certification set by the Association for Business Innovation in Harmony with Nature and Community (ABINC) or the Social and Environmental Green Evaluation System (SEGES) green certification implemented by the Organization for Landscape and Urban Green Infrastructure.

Taskforce on Nature-related Financial Disclosures (TNFD) /LEAP Initiatives

Changes in biodiversity and the natural environment affect corporate performance in various ways. The TNFD was established in June 2021 by Global Canopy, the United Nations Development Programme (UNDP), the United Nations Environment Programme Finance Initiative (UNEP FI), WWF, and others to examine a framework for each company to disclose information on biodiversity and other natural capital. Several draft versions of the information disclosure beta framework have been released, with final recommendations expected in September 2023.

The Sumitomo Forestry Group has been closely following the development of initiatives related to biodiversity and the natural environment, including signing on to the Business for Nature " Call to Action" in September 2020. As of February 2022, we participate in the TNFD Forum, a collective of stakeholders who support TNFD discussions, and we are working on information collection on TNFD through various domestic and international networks.

In conjunction with the information disclosure framework, the TNFD recommends the LEAP* approach, a method for analyzing and assessing a company's dependence on and impact on nature, as well as risks and opportunities. The Sumitomo Forestry Group first took this LEAP approach on a trial basis in preparation for future TNFD disclosures.

* It stands for Locate, Evaluate, Assess, and Prepare and is composed of four phases: Locating the interface with nature (L), Evaluating dependencies and impacts (E), Assessing material risks and opportunities (A), and Preparing to respond and report (P)

Interaction between Business and Biodiversity

The Sumitomo Forestry Group is engaged in the distribution business, which purchases and sells wood from Japan and overseas; the wood building materials manufacturing business in Japan and overseas; the construction and sale of detached houses in Japan, the United States, and Australia; the development of multi-family housing and commercial and mixed use complexes; and medium- to large-scale construction projects. In looking at the supply chain as a whole within these Sumitomo Forestry Group businesses, we decided to go forward with the trial of the LEAP approach with respect to our wood procurement business, which depends on and has impact on biodiversity and natural capital in the most extensive and significant volumes around the world.

Risk Assessment by Region

(1) Canada (British Columbia)

In this region, deforestation has been caused by forestry business and forest fire over the past 20 years, resulting in a deforestation rate of 2% to 0.5% per hectare over the past 20 years. Bordering the Pacific Ocean to the west and the Rocky Mountains to the east, the region has many protected and conserved areas and is at high risk with respect to wood availability and landslides.

(2) New Zealand (Tasman and Nelson regions)

In these regions, deforestation in forestry business has been significant, with the deforestation rate per hectare over the past 20 years ranging from 2% to 0.5% in the Tasman region. However, with some forests restored in the Nelson region, the overall increase of 0.5% to 2% has been noted. The risk of landslides is high in this lush area dotted with national parks.

(3) Indonesia

・West Kalimantan

In this equatorial region, tropical rainforests are widespread. However, deforestation caused by large-scale land conversion to farmland has been significant, resulting in a deforestation rate of 5% to 2% per hectare over the past 20 years. Because of its largely undeveloped nature, the area has limited access to wood and is susceptible to landslides and extreme heat.

・Central Kalimantan

In this equatorial region, tropical rainforests are widespread. As in West Kalimantan, deforestation caused by large-scale land conversion to farmland has been significant, resulting in a deforestation rate of 5 % to 2% per hectare over the past 20 years. Because of its largely undeveloped nature, the area has limited access to wood and is susceptible to landslides and extreme heat.

・East Java

In this region, there has been a lot of forest harvested due to large-scale land conversion to farmland and forestry, and although reforestation has been observed in some areas, the deforestation rate per hectare over the past 20 years has ranged from 5% to 2%. The area has a high risk of forest fire and water scarcity.

・Central Java

In this region, deforestation has been often caused by urbanization and forestry business, resulting in a deforestation rate of 2% to 0.5% per hectare over the past 20 years. The area is dotted with volcanoes and has a high risk of fires and landslides.

(4) Malaysia

・Sarawak

Deforestation caused by large-scale land conversion to farmland and forestry business has been significant, resulting in a deforestation rate of 5% to 2% per hectare over the past 20 years. Because of its largely undeveloped nature, the area has limited access to wood and is susceptible to landslides.

Countermeasures against Risks

The Sumitomo Forestry Group is addressing sustainability issues, including biodiversity conservation, in its wood procurement.

Major Movements

(2005)

Established "Wood Procurement Standards”

(2007)

Established "Wood Procurement Philosophy and Policy"

(2015)

Revised "Wood Procurement Philosophy and Policy" to "Sumitomo Forestry Group Procurement Policy"

(2017)

Established "Sumitomo Forestry Group Code of Conduct"

May 2019

Formulated "Wood Procurement Action Plan"

End of 2021

Achieved 100% handling ratio of timber and wood products from sustainable forests in direct imported wood, etc.

The Sumitomo Forestry Group has established its own wood procurement standards and conducts due diligence from the perspectives of compliance, respect for human rights, labor practices, biodiversity conservation, and impact on local communities. The Wood Procurement Committee conducts risk assessments from the perspective of sustainability, and by reconsidering contracts with suppliers that do not meet this standard, we have achieved a 100% sustainable timber and wood products procurement rate by the end of fiscal 2021(97.8% for the full year) . In fiscal 2022, we maintain 100% for the full year.

Actions for Biodiversity Conservation

In order to coexist in harmony with nature, the Sumitomo Forestry Group is implementing various initiatives to achieve Nature Positive, which aims to reduce the loss of nature to zero and to turn it into a recovery. We have organized those activities in accordance with the framework of actions to achieve nature positivity recommended by SBT for Nature, as follows.

Support of Related Initiatives and Cooperation with Organizations

Sumitomo Forestry participates in many organizations that are actively involved in biodiversity conservation. In the Keidanren Committee on Nature Conservation, the chairperson of Sumitomo Forestry serves as vice-chairperson and sends members to the planning subcommittee, which is responsible for its operation. In June 2020, Sumitomo Forestry committed to the Keidanren Declaration of Biodiversity and Action Policy (Revised Edition) proposed by the Keidanren Declaration on Biodiversity Initiative. We also participate in the Japan Business Initiative for Biodiversity (JBIB) and conduct joint research on corporate biodiversity initiatives in subcommittee meetings.

In addition, Sumitomo Forestry Landscaping is striving to the registration of "Ikimono Kyozon Jigyousho^®" certification for Sustainable Business Sites promoted by the Association for Business Innovation in harmony with Nature and Community (ABINC) and the SEGES Green Certification promoted by the Organization for Landscape and urban Green Infrastructure for properties undertaken with the environmental greening business. Moreover, the Chief Corporate Advisor of Sumitomo Forestry acts as the chairman of the Organization for Landscape and Urban Green Infrastructure.

Participation in Drafting the Guidelines for Private Sector Engagement in Biodiversity

The Ministry of the Environment drafted the Guidelines for Private Sector Engagement in Biodiversity (Ver. 1) in 2009 for business proprietors as a means to advance biodiversity conservation and sustainable use with recognition that corporate activities play a vital role in those efforts. Sumitomo Forestry was involved in drafting these guidelines as a member of the investigative committee.

The Guidelines for Private Sector Engagement in Biodiversity brings together basic information and approaches necessary to conserve biodiversity and reduce loss in a way that is easy for private sector organizations not yet addressing biodiversity issues to understand while also offering a means for business proprietors already engaged in efforts to play an even more effective role.

In December 2017, the second version was released in light of growing interests and expectations about conserving biodiversity driven by the SDGs and other international targets. These guidelines presented the sustainable wood procurement of Sumitomo Forestry as one excellent example initiative.

Signing of Commitment to the Business for Nature's Call to Action

Business for Nature is a global business coalition founded in July 2019 for the purpose of bringing together the voices of business and conservation organizations and forward-thinking companies as one to amplify their call to governments. In May 2020, the Coalition devised a Call to Action to encourage the adoption of legislation to reverse nature loss in this decade when formulating the Post-2020 Global Biodiversity Framework. Sumitomo Forestry signed its commitment to the Call to Action in September 2020.