Participation and Sponsorship to Climate Change-Related Initiatives

Expressing Support for the TCFD and TNFD

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Expressing Support for the TCFD and TNFD

Setting Science Based Targets (SBT)

As the impact of climate change becomes more serious globally, companies are being asked to reduce their emissions of greenhouse gases. The Sumitomo Forestry Group had set its groupwide greenhouse gas emission reduction targets (for Scopes 1, 2 and 3) toward 2030, and the targets were approved as SBTs in July 2018. In order to accelerate our decarbonization efforts, we raised our Scope 1 and 2 emission reduction targets for 2030 from a 21% reduction to a 54.6% reduction compared to 2017 levels in alignment with the 1.5°C target, with a view to achieving net zero emissions by 2050. We set this reduction target in the medium-term management plan that started in 2022. We also formulated a transition plan to achieve the 2030 target and realize a carbon-neutral society by 2050.
Furthermore, the Sumitomo Forestry Group newly established a goal to achieve net zero greenhouse gas emissions across the entire value chain by 2050. In accordance with the SBT Guidance, we updated our short-term targets for 2030, and we obtained SBT certification for the targets in November 2024. The Sumitomo Forestry Group is implementing measures to reduce its greenhouse gas emissions and mitigate climate change to achieve its SBTs, including conducting energy saving activities and promoting the use of renewable energy.

Sumitomo Forestry Group's SBT

Net Zero Target

Scope 1+2 Reduction Targets: 90% reduction in emissions by 2050 compared to 2021 levels (total amount)
Scope 3 Reduction Targets: 97% reduction by 2050 compared to 2021 levels (emission intensity per floor area of houses sold) [categories to be reduced: 1, 4, 11]
Neutralizing residual emissions*¹ to achieve net-zero emissions

Short-term target

Scope 1+2 Reduction Targets: 42% reduction by 2030 compared to 2021 levels (total amount)
Scope 3 Reduction Targets: 51.6% reduction by 2030 compared to 2021 levels (emission intensity per floor area of houses sold) [categories to be reduced: 1, 11]

FLAG Sector Target

In accordance with the FLAG Sector Guidance*², we have signed the declaration required by the SBT Initiative to halt deforestation by December 31, 2025.

*1The term "residual emissions" refers to emissions within the Group's value chain that cannot be reduced by the target year. The concept of achieving net zero involves "neutralizing" these residual emissions outside the value chain through the use of forest carbon sequestration, carbon removal technologies, and other methods.

*2Guidance for setting greenhouse gas reduction targets based on scientific evidence in the forestry, land use, and agriculture sectors

Achievement of 2030 Targets (Scope 1 and 2: Down 42% by 2030 Compared to 2021 Levels) and Path to Carbon Neutrality*¹ (Summary version)

Item	Measures (Greenhouse Gases Reduction Items)	Greenhouse Gas Emissions Reduction Rate	Impact on profit/loss*² (million yen / year)	Note
Measures to achieve 42% reduction compared to 2021	Electricity from renewable energy sources (RE100); excluding in New Zealand	-36.6%	-51	The profit/loss impact is calculated as when everything is procured with renewable energy certificates (price fluctuates depending on the time of year, required quantity, etc.)
	Priority 1: Installation of solar power generation equipment			Installation at own facility, including PPA model
	Priority 2: Purchase of RE100 compliant electricity			Procurement through Sumirin Denki in Japan
	Priority 3: Purchase of renewable energy certificates
	Reduction of coal co-firing rate at the Mombetsu Biomass Electric Power Plant (10% to 0%)	-25.0%	-17
	Introduction of electric vehicles for company-owned vehicles in Japan (powered by RE100-compatible electricity)	-5.0%	321	The profit/loss impact is limited to the difference between increased electricity consumption and reduced gasoline and diesel fuel consumption. Excluding vehicle price increases and the cost of installing recharging facilities
	Introduction of electric vehicles for sales personnel's private cars for sales use (in Japan) (powered by RE100-compatible electricity)	-0.5%	35	Assuming a 30% adoption rate in 2030 to achieve the Japanese government's goal of 100% electric vehicles in new car sales by 2035
	Subtotal	-67.1%	289
Additional measures to go carbon neutral	Reduction of coal co-firing rate at the Mombetsu Biomass Electric Power Plant (10% to 0%): additional reduction	-13.6%
	Electrification of non-electric energy demand (RE100 compatible electricity), etc.	-12.8%
	Manufacturing plants, etc.: equipment, heavy machinery, vessels, boilers, backup power sources, etc.	-4.3%
	Introduction of electric vehicles for sales personnel's private cars for sales use: 100%	-1.1%
	Heating at offices and exhibition sites, and laboratory experiments, etc.	-1.5%
	Introduction of electric vehicles in company-owned vehicles (overseas)	-3.0%
	Use of natural gas in nursing homes	-1.0%
	Forestry Business: Heavy equipment, motor boats, fuel for power generation, etc.	-1.6%
	Biomass power generation/start at power generation	-0.2%
	Biomass power generation/wood fuel (nitrous oxide, methane)	-0.7%		Consideration of creating new credits using BECCS*³, offsetting by forests, etc.
	Manufacturing facilities/biomass boilers, etc. (nitrous oxide, methane)	-1.3%		Same as above
	New Zealand (country) electricity RE100 conversion	-4.6%		Target: to be achieved in 2035
	Performance and business growth			In principle, increase will be absorbed by each division unit, since neither business conditions nor scale (emission amount) are known
	Emission trading			Consider trading of emission credits based on achievement of SBT lines at division unit level, if necessary
	Subtotal	-33.0%
	Total	-100%

*1Transition plan formulated by Sumitomo Forestry to achieve the fiscal 2030 target set in the Medium-Term Management Plan.

*2Impact on profit/loss excludes personnel and other indirect expenses

*3Bioenergy with Carbon Capture and Storage. Technology to capture CO₂ emitted during the use of biomass fuels and store it underground

Progress Towards SBT

In fiscal 2025, our Scope 1 and 2 emissions decreased by 6.0% compared to fiscal 2024 due to a reduction in coal consumption and the introduction of renewable energy at the Mombetsu Biomass Power Plant. The emission intensity per unit of floor area of houses sold in Scope 3 Categories 1 and 11 decreased by 14.9% compared to fiscal 2024 due to reductions in emission intensity in the construction and real estate businesses (in North America and Australia).

Progress toward our science-based reduction target: Scope 1 and 2

42% reduction by 2030 compared to 2021 (total emissions)

*The numerical figures for fiscal 2022 and fiscal 2023 were retrospectively changed following the changes made (in December 2023) to calorific value conversion factors and greenhouse gas emission coefficients based on the Act on Promotion of Global Warming Countermeasures. The third-party assurance for the fiscal years was obtained on the previous figures.

Progress toward our science-based target: Scope 3 (Categories 1 and 11) emissions per unit of floor area of houses sold

Reduce Category 1 and 11 emissions per unit of floor area of houses sold by 51.6% by 2030 compared to 2021

Participation in Race to Zero

Race to Zero is an international campaign calling on companies, municipalities, investors, universities, and other nongovernmental actors around the world to commit themselves to halving their emissions by 2030 and achieving virtually zero greenhouse gas emissions by 2050, and to take immediate action to achieve this goal.

Sumitomo Forestry participated in Race to Zero through Business Ambition for 1.5°C in September 2021, ahead of the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in Glasgow, UK.
By signing the Business Ambition for 1.5°C, we declared our commitment to net zero by 2050, and our participation in Race to Zero was announced at COP26, held in October to November 2021.

Aiming for 100% Renewable Energy and Joining the RE100

The Sumitomo Forestry Group positions the realization of carbon neutrality by leveraging forests and wood resources as one of its material issues and engages in energy-saving activities and use of renewable energy. As part of these initiatives, we joined the international RE100* initiative, which aims for 100% of electricity used to be from renewable energy, in March 2020 to accelerate our efforts to reduce greenhouse gases.

By 2040, we aim to use 100% renewable energy for the electricity used for our Group’s business activities and for the fuel used for our power generation business.

*RE100 is an international initiative run jointly by The Climate Group and CDP, which are global environmental NGOs.

Progress Towards the RE100 Goal

In fiscal 2025, the ratio of renewable energy-sourced electricity to the total amount of electricity used in the Sumitomo Forestry Group's business activities reached 43.6% as a result of introducing solar panels to model homes and using the power generated by the Group’s biomass power plants (including the adjacent wood chip fuel manufacturing facilities). This is an increase of 3.8 percentage points from the fiscal 2024 level. In addition, the ratio of biomass-derived fuel to total fuel consumption in the power generation business is 95.6% (calorific value conversion).

In the Mid-Term Sustainability Targets Phase 2 (2025 -2027), which started in 2025, we set a target of 66.3%* for the rate of the Group's electricity consumption from renewable energy sources in FY2027, with the aim of attaining the RE100 target that is achievable through our own efforts by 2030.

*Excluding our facilities in New Zealand, where the national government is aiming for RE100 in 2035 and most of electricity supplied is sourced from renewable energy based on the power supply agreements. (The renewable energy adoption rate for fiscal 2025 excluding these facilities is 52.7%.)

Ratio of renewable energy-sourced electricity to the total amount of electricity consumed by the Sumitomo Forestry Group
(FY 2025)

43.6%

Approach to Use 100% Renewable Energy

In order to achieve 100% renewable energy for the electricity used for Sumitomo Forestry Group's operations, we are planning to utilize Sumirin Denki, which we launched in 2019, and install solar power generation systems at our domestic and overseas plants. Furthermore, we will consider a diverse range of procurement methods that take advantage of relevant programs in each country we operate, while aiming to use 100% renewable energy.

Utilizing Sumirin Denki Solar Power Generation for Domestic Electricity Use

Sumitomo Forestry launched the Sumirin Denki service in 2019 for owners of Sumitomo Forestry homes and those who had Sumitomo Forestry Home Tech install solar power generation equipment at their houses. The service offers surplus electricity purchase and power supply agency sales service for owners whose solar power generation purchase period expires under the feed-in tariff (FIT) for renewable energy. We are allocating electricity purchased through the Sumirin Denki service to Sumitomo Forestry Group companies in Japan as part of our RE100 efforts.

The surplus electricity purchased from owners of Sumitomo Forestry homes is utilized at Sumitomo Forestry’s offices and exhibition sites. In 2025, the number of Sumirin Denki service contracts concluded with owners of Sumitomo Forestry homes reached 8,939, an increase of 1,671 from the fiscal 2024 level. In addition, the number of Sumirin Denki service contracts concluded by Sumitomo Forestry Group companies in Japan totaled 73. Furthermore, we have been supplying renewable energy-derived electricity purchased from the owners of Sumitomo Forestry homes to our exhibition sites across the country and to some of our sales offices since 2023 (271 exhibition sites and 12 sales offices as of December 2025).

Going forward, we will further promote the "Sumirin Denki" service to the owners of Sumitomo Forestry homes to expand the supply of renewable energy.

Expanding the Use of Renewable Energy at Manufacturing Plants in Japan

At Sumitomo Forestry Group, manufacturing facilities account for about 38% of its total greenhouse gas emissions. To achieve RE100, it is vital that we conserve energy and expand the use of renewable energy at the facilities.

In September 2020, the Kashima Plant of Sumitomo Forestry Crest, which manufactures interior materials for houses, introduced solar power generation equipment under the Power Purchase Agreement (PPA) model*. Also, for electricity from other energy sources, the Kashima Plant and the Shizuoka Plant of the company had achieved the RE100 targets by December 2025 by switching to the purchase of renewable energy-sourced electricity from electricity retailers as well as by purchasing trackable non-fossil fuel certificates. These initiatives contributed to a reduction of 1,966 t-CO₂ emissions in fiscal 2025.

*A system whereby a host loans out factory rooftop space to a power generation company to install solar power generation panels and then purchases the electricity generated from these panels for its own use

Initiatives Implemented at Overseas Sites

The manufacturing business of the Sumitomo Forestry Group accounts for approximately 80% of its total CO₂ emissions from electricity consumption. In light of this fact, we are encouraging the use of renewable energy also at our overseas manufacturing facilities.

In particular, at our manufacturing facilities in Indonesia and Vietnam, where a large amount of electricity is consumed and the emission coefficient is high, we are making efforts to reduce their CO₂ emissions. Specifically, at AST Indonesia in March 2024, we completed the introduction of a 2.2 MW rooftop solar power generation system under the JCM equipment subsidy project adopted for fiscal 2021 by the Japanese Ministry of the Environment and reduced the on-site CO₂ emissions by about 1,800 tons in fiscal 2025. Also, at other manufacturing facilities we reduced their CO₂ emissions by a total of about 25,000 tons through the purchase of renewable energy certificates (I-REC).

We will continue to make examinations for the introduction and expansion of solar panels at Sumitomo Forestry Group manufacturing facilities in and outside Japan to increase our renewable energy usage rate.

Rooftop solar power generation equipment at AST Indonesia Plant 1 — External view of the Kashima Plant

In the United States and Australia where we are primarily engaged in the housing business, we plan to steadily shift to the use of renewable energy as it is possible to procure renewable energy at low costs in these countries, where a sufficient number of renewable energy certificates and the like is also issued.

Participation in the GX League

In order for Japan to go carbon neutral by 2050 and contribute to global carbon neutrality while enhancing its industrial competitiveness, it is important for companies and others in the country to lead the green transformation (GX) of the entire economic and social system for all stakeholders, not limited to their own.

In February 2022, the Ministry of Economy, Trade and Industry (METI) announced the GX League Basic Concept. The GX League is a forum for companies that are taking on GX challenges and aiming to achieve sustainable growth in the present and future society to collaborate with a group of companies, governments, and academia that are making similar efforts. Under the Emissions Trading Scheme (GX-ETS), participating companies set their own emission reduction targets, disclose their progress, and work to achieve the targets.
Sumitomo Forestry has been participating in the GX League since 2023 and has been making efforts to reduce its emissions.

METI launched the GX Acceleration Declaration Framework to visualize the companies that are proactively creating demand for GX products, and Sumitomo Forestry made the GX Acceleration Declaration in the gold grade in December 2025:

Sumitomo Forestry’s GX Acceleration Declaration

1. We aim to achieve 100% electric vehicle rate for the vehicles leased by our company for use in our business by fiscal 2030.

2. When the preconditions to procure next generation solar cells (Perovskite) in the housing market are met, we will build a cooperative system with suppliers to consider and proactively use perovskite solar cells for the houses that we build.

*In consideration of the fact that the use of fuel cell vehicles (FCVs) is still difficult at some of our sites due to the lack of hydrogen fueling stations in the local areas, which we cannot easily establish on the land not owned by ourselves, we include EVs, FCVs, plug-in-hybrid vehicles (PHEVs) and also hybrid vehicles (HVs) in the definition of electric vehicles. On the other hand, we exclude vehicles used in forests from the electrification target, as they are difficult to replace with electric vehicles for safety reasons.

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Responding to Climate Change