Calculation of Greenhouse Gas Emissions Based on the GHG Protocol

The Sumitomo Forestry Group calculates the amount of its GHG emissions for each of the Scopes* based on the GHG Protocol, which is the standardized framework for calculating greenhouse gas (GHG) emissions used widely across the world. In light of the increasing demand for renewable energy in recent years, the Sumitomo Forestry Group launched the wood biomass power generation business in 2011. Mombetsu Biomass Electric Power Co., Ltd., which is a consolidated subsidiary of Sumitomo Forestry, uses coal as a supplementary fuel at its biomass power plant to ensure the smooth operation of the plant and reduce the maintenance burdens imposed on it. After the commercial operation of the plant began in fiscal 2016, the Group’s Scope 1 and 2 emissions significantly increased. However, as a result of reducing the coal usage at the plant and introducing renewable energy at its overseas manufacturing facilities, the Group’s Scope 1 and 2 emissions for fiscal 2025 decreased by 6% compared to fiscal 2024. By business, our manufacturing facilities in Japan and the power generation business accounted for 30.6% of our Scope 1 and 2 emissions, and our overseas manufacturing facilities accounted for 37.6% of the emissions.

We began calculating Scope 3 emissions in fiscal 2013. We have found from the analysis of the calculation results that the impact of category 11 emissions, specifically, the impact of "Emissions during occupancy of sold detached houses" is particularly significant, and we are working to reduce these emissions by promoting the Net Zero Energy House (ZEH) concept in our housing business. In addition, we expanded the scope of calculation for Scope 3 in fiscal 2022. After estimating GHG emissions for nearly 100% of the Sumitomo Forestry Group's operations for fiscal 2021, we excluded the items with low emissions that were unlikely to have an impact on the total amount of emissions from the new scope of calculation. As a result, the calculation coverage rate, which was around 85.9% in fiscal 2021, increased to approximately 97% in fiscal 2025.

Going forward, we will continue our efforts to achieve our science-based targets (SBT) by further reducing our GHG emissions.

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

Scope 1 and Scope 2 CO₂ Emissions

*Following the update in December 2023 of the heat conversion factor and the greenhouse gas emission coefficients as stipulated in the Act on Promotion of Global Warming Countermeasures, we recalculated the data for fiscal 2022 and fiscal 2023 retrospectively. For these fiscal years, we had received third-party assurance for the data before recalculation.

Breakdown of Scope 1 and 2 Emissions
(FY2025)

Scope 3 Emissions by Category
(FY2025)

* Since fiscal 2024, refrigerant leakage from the air conditioners of sold houses has been included in the scope of calculation.

FY2025 Total Greenhouse Gas Emissions from Corporate Activities

Energy Used in Business Activities and the Adoption of Renewable Energy

Energy consumption by the Sumitomo Forestry Group in fiscal 2025 was 2,725,378 MWh*, remaining flat year on year. For fiscal 2025, the renewable energy adoption rate reached 81.4%. In the power generation business, we use energy for power generation, and the use of energy in this business is excluded from the reduction target. In addition to the adoption of renewable energy, we will monitor the use of energy and conduct a range of energy conservation activities across the Group, including having regular meetings at our manufacturing facilities that account for a large percentage of our total energy consumption and introducing energy-saving equipment to them, thereby reducing our energy use.

*In a material balance sheet, energy input is calculated in TJ based on the Ministry of the Environment's Environmental Reporting Guidelines. Both calculated based on the same data on energy use.

Energy Consumption and Adoption of Renewable Energy

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 on a medium- to long-term basis 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) and are obligated to submit reports to the Japanese government.
Sumitomo Forestry sets an annual target to reduce its per-unit energy consumption*3 in transportation by 1% or more year on year. Sumitomo Forestry Crest and Sumitomo Forestry Wood Products also set a target to reduce their per-unit energy consumption compared to the previous fiscal year.

In fiscal 2024, Sumitomo Forestry's per-unit energy consumption decreased to 97.6% of the previous fiscal year ‘s level, and Sumitomo Forestry Crest's to 93.6%, while Sumitomo Forestry Wood Products' per-unit energy consumption increased to 111.5%. Sumitomo Forestry reduced its per-unit energy consumption by transshipment at intermediate log yards and also due to a decrease in the log transportation volume. Going forward, we will work with transporters to further reduce our CO₂ emissions by improving loading efficiency, fostering modal shift from trucks to rail and ship transportation, and transporting waste by using the return trips of trucks used for the delivery of building materials.

In contrast, at Sumitomo Forestry Wood Products, per-unit energy consumption increased due to the extension of supplier-purchaser transportation distance, which was caused by a lumber shortage in fiscal 2022.

Sumitomo Forestry Crest reduced its per-unit energy consumption by implementing the measures to (1) reduce transportation frequency by making adjustments to increase loading efficiency; (2) reduce the amount of industrial waste by incinerating sawdust internally for waste heat utilization; and (3) review the product packaging methods.

*1Consigners as defined in the Act on the Rational Use of Energy of Japan are those who consign the transportation of their cargo to transporters on a continual basis.

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

*3Sumitomo Forestry and Sumitomo Forestry Wood Products calculate their energy consumption per unit of volume handled. Sumitomo Forestry Crest calculates its energy consumption per unit of net sales.

*The calculation period is "fiscal year (April to March)" as specified in the Act on the Rational Use of Energy of Japan and is from April 2024 to March 2025.

Establishment of an Efficient Delivery System

For Sumitomo Forestry homes, we have established a system in which materials from multiple manufacturers are gathered at approximately 30 relay centers across Japan and delivered in mixed loads, thereby reducing CO₂ emissions during the transportation process.

Home Eco Logistics provides logistics services mainly for the Sumitomo Forestry Group’s housing business. The company proactively makes proposals for efficient logistics operations to material manufacturers, housing builders and building material distributors. As of December 31, 2025, Home Eco Logistics provides a total of approximately 115 companies (other than Sumitomo Forestry Group companies) with logistics services. The company also offers a logistics support service through a delivery matching system that directly connects shippers with drivers and carriers online, thereby helping shippers make delivery requests in a more efficient manner as well as emergency delivery requests. As of the end of December 2025, this service is utilized by approximately 80 companies (at approximately 325 sites).

Going forward, we will proactively work on joint delivery by multiple companies, as our transportation volume will decrease due to a decline in the number of housing starts.

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 the full-scale operation of Green Delivery Service, which is a tree delivery service that aims for low-carbon linehaul by modal shift from trucks to railroads and ships. In fiscal 2025, we transported trees from southern Kyushu to the Tokyo metropolitan area by train on one occasion and 93 times by ship (via several routes and shipping companies). We will continue to promote modal shifts to reduce our CO₂ emissions and as a countermeasure against the logistics disruption risks caused by the shortage of delivery drivers.

Climate Change-Related Risks and Strategies

The Sumitomo Forestry Group is aware of the risks posed to its business activities from environmental changes such as climate change and biodiversity loss and works to gather related information, and then analyze the obtained information as required to evaluate its business risks.

Each of our departments sets specific measures and evaluation metrics for the risks that may pose to their daily operations and report on the progress on the measures to the Risk Management Committee each quarter. For the risks that may occur on a medium- to long-term basis, the Sustainability Committee formulates measures to deal with them. The risks that have a large impact on our business are reported to the Board of Directors for the discussion of countermeasures by the Board.

Risks Related to Energy Supply Shortages and Emission Reduction Mandates

In June 2022, tight supply-demand warning was issued for four consecutive days in the service area of Tokyo Electric Power Company, which implies that Japan is in a power crisis. Due to factors such as extreme weather events, there is a risk that disruptions of power transmissions may cause the Sumitomo Forestry Group's exhibition sites and factories to suspend operations.

Furthermore, as the reduction of greenhouse gas emissions advances globally, there is the possibility that emission reduction obligations will be imposed upon businesses in countries where the Sumitomo Forestry Group has bases. If Group companies with bases in these countries are unable to meet such obligations, they will be required to purchase emission credits, creating the risk of increased business costs.

In regard to Japan, carbon pricing has also been implemented following the introduction of the tax for climate change mitigation in October 2012. In addition, an emissions trading system was launched in April 2026. Toward the achievement of the targets outlined in the Paris Agreement, the tax rate might be raised and new levies and emissions trading might be introduced, which could influence business activities and costs.

The Sumitomo Forestry Group does not fall under the category of "companies with annual CO₂ emissions of 100,000 tons or more," which will be subject to the emissions trading system started in Japan in fiscal 2026. However, as a measure against this, each company and division within the Sumitomo Forestry Group has set its respective greenhouse gas emission reduction targets and is advancing reductions in accordance with the numerical targets set for each year. We are also promoting reductions in electricity consumption by installing solar panels at our exhibition sites and on the roofs of our factories. In April 2026, we introduced internal carbon pricing to promote reduction in greenhouse gas emissions for our sustainable growth.

Risk Related to the Deterioration of the Corporate Image

Any failure in addressing climate change-related risks may be detrimental to the corporate image and directly affect sales and other performance indicators.

Through its Risk Management Committee and ESG Promotion Committee, the Sumitomo Forestry Group comprehensively analyzes and addresses environmental, social, and governance risks from short-term to medium- and long-term perspectives. We also engage in dialogues with our stakeholders, including investors, as necessary and solicit feedback from third parties on the Sumitomo Forestry Group.