Greenhouse Gas Emissions per Scope Based on the GHG Protocol

The Sumitomo Forestry Group has ascertained the volume of its GHG emissions according to different scopes* based on the GHG Protocol, a set of widely used international accounting tools for quantifying GHG emissions. In light of the increasing demand for renewable energy in recent years, the Sumitomo Forestry Group entered the biomass power generation business in 2011. Since starting operations in 2016, the Mombetsu Biomass Electric Power, a consolidated subsidiary company, has significantly increased Scope 1 and Scope 2 emissions of the Group because coal is used as a secondary fuel to ensure smooth operation and maintenance. In fiscal 2023, Scope 1 and 2 emissions were reduced by 5.7% from fiscal 2022 due to a reduction in coal consumption at Mombetsu Biomass Electric Power. When looking by business, our plants in Japan and the power generation business make up 50.8% while our plants overseas compose 32.3%.

In addition, we began calculating Scope 3 in fiscal 2013. We are aware that the impact of category 11 "Emissions during occupancy of sold detached houses" is particularly significant, and we are working to reduce CO₂ emissions during occupancy by promoting ZEH (Net Zero Energy House) in our housing business. The scope of calculation for Scope 3 was expanded from fiscal 2022. After estimating approximately 100% coverage for the Sumitomo Forestry Group's operations in fiscal 2021, the new scope of calculation excludes items with low emissions which are unlikely to have an overall impact. As a result, the coverage ratio for the conventional calculation scope was around 85.9% in fiscal year 2021, whereas it increased to approximately 96.6% in fiscal year 2023.

We continue to work to achieve the Science Based Targets (SBT) by further reducing greenhouse gas emissions.

*The GHG Protocol requires businesses to disclose their greenhouse gas emissions according to the following categories
Scope 1: Direct GHG emissions of a company, including emissions from fuel consumption. e.g.: Emissions from the use of gasoline for company vehicles
Scope 2: Indirect GHG emissions from the generation of purchased electricity and heating. e.g.: Emissions from the use of electricity by offices
Scope 3: GHG emissions occurring in the supply chain. e.g.: Emissions generated during the use of products sold

Scope 1 and Scope 2 CO₂ Emission Trends

The Sumitomo Forestry Group's greenhouse gas emissions are calculated by using heat conversion factor and carbon dioxide emission factors stipulated in the Act on Promotion of Global Warming Countermeasures, and the heat conversion factor measured at the biomass power generation plant. The greenhouse gas emission factor for biomass combustion is being considered to be changed to the factor used in the National Greenhouse Gas Inventory Report of JAPAN (NIR) submitted by the Japanese government under the United Nations Framework Convention on Climate Change (UNFCCC), and to exclude the equity-method affiliates currently included in the scope of calculation; the emissions calculated using this factor are also disclosed for reference.

(Reference) Changes in Scope 1 and 2 emissions, calculated using the change in emission factor for biomass combustion and excluding equity-method affiliates

Scope 1 and 2 Breakdown by Business (FY2023)

Scope 3 Emissions by Category

*1 The calculation method for Category 1 emissions of Scope 3 was revised to apply Accounting Standards for Revenue Recognition (Corporate Accounting Standard No.29) as of fiscal 2019 (retroactively reflected in the values for fiscal 2019). In fiscal 2021, the scope of application of the Accounting Standard for Revenue Recognition was reviewed and the method of calculating Scope 3 Category 1 was revised again

*2 Since the scope of calculation was expanded from fiscal 2022, figures calculated within the previous scope and figures calculated by revising the scope are shown together. The greenhouse gas emission factor for biomass combustion is changed to the factor used in the National Greenhouse Gas Inventory Report of JAPAN (NIR) submitted by the Japanese government under the United Nations Framework Convention on Climate Change (UNFCCC) and to exclude the equity-method affiliates currently included in the scope of calculation. The emissions calculated using this factor are also disclosed for reference, shown in parentheses

*3 From fiscal 2021 onward, a percentage decrease in travel costs was applied to reflect the impact of coronavirus disease (COVID-19) in the calculation

*4 From fiscal 2021 onward, a percentage decrease in attendance was applied to reflect the impact of the COVID-19 in the calculation

FY2023 Total Greenhouse Gas Emissions Accrued from Corporate Activities

Energy Used in Business Activities and the Adoption of Renewable Energy

Energy consumption by the Sumitomo Forestry Group in fiscal 2023 was 2,862,493 MWh*, the same level as the previous year. With regard to energy consumption in businesses other than power generation, we are striving to reduce energy consumption through various energy conservation activities. In addition, the adoption rate of renewable energy in fiscal 2023 is 78.1%.

*Energy input in the Balance of Input & Output is calculated in TJ based on the Ministry of the Environment's "Environmental Reporting Guidelines." Both calculated from the same energy use

Energy Consumption and Renewable Energy Usage Trends

Reducing Greenhouse Gas Emissions

All business sites of Group companies in Japan disposed of standard settings for gasoline vehicles in fiscal 2019 and have been advancing the introduction of fuel-efficient vehicles. To date, 428 of the 463 company-owned vehicles introduced during 2023 were fuel-efficient vehicles (Introduction ratio of fuel-efficient vehicles: 92.4%).

The Group will continue to reduce greenhouse gas emissions by such means as reducing prolonged working hours and raising awareness among employees.

Reducing greenhouse gas emissions from transportation

Under the revised Act on the Rational Use of Energy in Japan, consigners*¹ are required to reduce per-unit energy consumption by an annual average of 1% or more in the medium to long term in relation to the transportation of goods. Sumitomo Forestry, Sumitomo Forestry Crest and Sumitomo Forestry Wood Products fall under the category of "specified consigner" (annual freight transportation volume is 30 million ton-km*² or more), obligating them to submit reports to the Japanese Government. Sumitomo Forestry therefore sets a target each fiscal year to reduce per-unit energy consumption*³ in transportation by 1% or more compared to the previous year. Sumitomo Forestry Crest and Sumitomo Forestry Wood Products also set targets to reduce per-unit energy consumption compared to the previous year.

In fiscal 2022, Sumitomo Forestry's per-unit energy consumption was 101.8% compared to the previous year and Sumitomo Forestry Crest's was 112.3%. Sumitomo Forestry Wood Products' was 138.6%, all falling short of their targets.
As reasons for not achieving the target, Sumitomo Forestry said, "We lost business with companies that had less emissions and big handling volume." Sumitomo Forestry Crest said, "Although amount of transportation decreased, impact of revision in factor reveled to energy consumption calculation remained, price pass-through of sales was unable to keep up with year-on-year change in energy consumption." Sumitomo Forestry Wood Products said, "In the aftermath of the Wood Shock, concerns over the supply of imported timber increased, and demand for substitute domestic timber increased. As a result, lots of long-distance transportation from source of supply to supplier."

In the future, we will work with transporters to further reduce CO₂ emissions by improving loading efficiency, modal shift from trucks to rail and ship transport, and waste transport using return trips for building material deliveries.

*1Cosigners as defined in the Act on the Rational Use of Energy in Japan is someone who transports cargo to carriers for our businesses

*2Freight transportation volume (ton-kilometers) = freight weight (tons) × distance travelled (km)

*3Sumitomo Forestry and Sumitomo Forestry Wood Products measure energy consumption per unit of volume handled. Sumitomo Forestry Crest measures energy consumption per unit of net sales

*Calculation period is "fiscal year (April to March)" / April 2022 to March 2023 as specified in Act on the Rational Use of Energy in Japan

Establishment of an Efficient Delivery

Sumitomo Forestry is reducing the CO₂ emissions in its transportation processes by bringing together materials for Sumitomo Forestry homes from multiple manufacturers momentarily at relay centers in approximately 30 locations throughout Japan with a system to consolidate and transport shipments.

Home Eco Logistics takes on logistics operations for the Sumitomo Forestry Group with the housing business at the core and also actively puts forward proposals for efficient logistics operations to material manufacturers, housing builders, housing construction companies and building material distributors. There are approximately 90 logistics contractors as of December 2023, excluding the Sumitomo Forestry Group. We also provide logistics support through a delivery matching system that directly connects shippers with drivers and carriers via the web, improving the efficiency of delivery request operations and providing emergency delivery services. As of December 2023, approximately 190 companies (approximately 270 on a location basis) are using this service.

In the future, we will actively strive in cooperative distribution through multiple companies because of insufficient shipment capacity forecast due to a decrease in the amount of new housing construction.

Modal Shift in Tree Transportation

In March 2022, Sumitomo Forestry Landscaping, in collaboration with Nippon Freight Railway Company, Kawasaki Kinkai Kisen Kaisha, Ltd. and Nippon Express Co., Ltd. started full-scale operation of "Green Delivery Service." "Green Delivery Service" is a tree delivery service that aims for low-carbon by modal shifting from trucks to railroads and ships for trunk line transportation. In fiscal 2023, we transported trees from southern Kyushu to Tokyo metropolitan area five times by railroads and 102 times by ship (including several routes and shipping companies). We will continue to promote modal shift to reduce CO₂ emissions and address the Year 2024 issue for long-distance drivers.