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Analysis Based on TNFD’s LEAP Approach
- Impacts of Nature-related Issues on the Sumitomo Forestry Group (Analysis based on TNFD's LEAP Approach)
- Identification of Priority Sites (Locate)
- Diagnosing Priority Locations (Evaluate)
- Quantitative Analysis of Environmental Impacts (Estimates Using LIME)
- Main Risks and Opportunities Identified (Assess)
- Analysis of Financial Impacts
- Sumitomo Forestry's Countermeasures (Prepare)
Impacts of Nature-related Issues on the Sumitomo Forestry Group (Analysis based on TNFD's LEAP Approach)
From the end of 2023 to 2024, we organized a working group consisting of members from the headquarters and business divisions to conduct an analysis using the LEAP approach* regarding our dependence/impact on nature, risks and opportunities. The findings of this working group were compiled in March 2024. The tools used in each process of the LEAP approach are all recommended by TNFD.
* LEAP approach: an integrated approach developed by TNFD to assess nature-related issues such as interfaces with nature and dependencies, impacts, risks, and opportunities in a business. Process consists of locate, evaluate, assess and prepare
Relationship between Sumitomo Forestry's business and nature (examples)
*1Negative impacts: temporary soil degradation due to development
Positive impacts: enhancement of forest ecosystem services through proper management
*2Risks: landslides in planted forest
Opportunities: monetization opportunities for ecosystem services, higher value-added wood products
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Identification of Priority Sites (Locate)
The "Locate" process involved taking a bird's-eye view of the Sumitomo Forestry Group's supply chain, examining interfaces with nature at each business location, and identifying locations that should be prioritized for response.
First, 148 business locations were selected for evaluation in four businesses that are considered to have particularly large interfaces with nature (timber and building materials, housing, construction and real estate, and natural resources and environment) to ensure that the number of locations was not biased toward any particular business from direct operations and locations upstream and downstream in the supply chain of each business.
| Business segment | Business | Upstream | Direct operations | Downstream | |||
|---|---|---|---|---|---|---|---|
| Scope and data source | Number of business sites subject to analysis | Scope and data source | Number of business sites subject to analysis | Scope and data source | Number of business sites subject to analysis | ||
| Timber and Building Materials Business |
Manufacturing | Supplier list | 4 | Company’s own manufacturing plants | 12 | Buyers: not subject to analysis because, like the Housing Business, a majority consists of other companies | ‒ |
| Distribution | Supplier list | 4 | Not subject to analysis | ‒ | Buyers: not subject to analysis | ‒ | |
| Housing Business | Custom-built detached houses and subdivisions | Supplier list | 4 | Subdivision housing areas where we have large blocks | 8 | Use: Not subject to analysis
Waste: Landfills where we dispose of large amounts of waste |
10 |
| Renovation | Same as custom-built detached houses and subdivisions | ‒ | Business sites with orders of 100 million yen or more | 5 | Use: Not subject to analysis
Waste: Same as custom-built detached houses and subdivisions |
‒ | |
| Greening | Supplier list for materials | 8 | Green spaces with large areas of environmental greening | 20 | Use: Not subject to analysis
Waste: Same as custom-built detached houses and subdivisions |
‒ | |
| Global Construction and Real Estate Business | Custom-built detached houses and subdivisions | Supplier list for construction materials | 6 | Custom-built detached houses and subdivision areas in the United States (16 states) and Australia (5 states) | 29 | Use: Not subject to analysis
Waste: Final disposal outside of scope |
‒ |
| FITP | Supplier list | 2 | Panels plant | 5 | Use: Same as custom-built detached houses and subdivisions | ‒ | |
| Real estate development | Supplier list for construction materials | 1 | Development business in Indonesia and Thailand | 2 | Use: Not subject to analysis
Waste: Final disposal outside of scope |
‒ | |
| Environment and Resources Business | Company-owned forests | Uses supplier list for the timber building materials business | ‒ | Company-owned forests in Japan (Hyuga, Mombetsu, Niihama) | 14 | Use: Not subject to analysis because sales are to the Company’s own timber building materials business | ‒ |
| Overseas forest management | ‒ | Overseas forest management (New Zealand, Papua New Guinea, and Indonesia) | 5 | Use: Main buyers | 2 | ||
| Biomass Power Generation | ‒ | Biomass Power Generation Plant | 6 | Waste: Main business partners | 1 | ||
| Total 29 | Total 106 | Total 13 | |||||
Next, the location information of the locations was overlaid and evaluated using geographic information systems (GIS) and other tools, and ecosystem information using nature-related risk analysis tools such as ENCORE*1. As a result, of the 148 locations listed above, we narrowed down the list to those that are financially significant or located in ecologically sensitive areas.
For financially significant locations (B in the "Classification of Priority Areas" figure), selection was based on actual conditions, with the basic criterion that one or more of the rating items in ENCORE must be very high, and that the ratio of sales or transaction value to each business must be 10% or more, and that in the event of an emergency it is considered difficult to replace the location within one year.
For locations located in ecologically sensitive areas (C in the figure "Classification of Priority Areas"), the sensitivity of the ecosystem in which each location is located was assessed using ENCORE and IBAT*2, etc. to evaluate five requirements ([1] significance of biodiversity, [2] high integrity of the ecosystem, [3] rapid decline in ecosystem integrity, [4] significance of providing ecosystem services and [5] physical water risk) on a five-point scale [1-5]. Locations with an average score of 4 or higher for the five requirements were selected.
*1ENCORE: Exploring Natural Capital Opportunities, Risks and Exposure. A nature-related risk analysis tool developed by the Natural Capital Finance Alliance, an international financial industry organization for the natural capital sector, and others
*2IBAT: Integrated Biodiversity Assessment Tool. Integrated Biodiversity Assessment Tool developed by the World Conservation Monitoring Centre of the United Nations Environment Programme and others to integrate biodiversity information globally
Classification of Priority Areas
As a result, we identified 37 "priority locations" that need to be addressed with priority. In addition, two priority locations considered financially significant and located in ecologically sensitive areas (A in the figure "Classification of Priority Areas") were identified in overseas forest management PT. Wana Subur Lestari (WSL), PT, Mayangkara Tanaman Industri (MTI), PT. Kubu Mulia Forestri (KMF) of Indonesia and manufacturing plant Kutai Timber Indonesia (KTI) were identified.
Scores for identified priority locations and the sensitivity of the ecosystem in which each is located
| Importance of biodiversity | Ecosystem integrity (high integrity) | Ecosystem integrity (rapid decline) | Importance of providing ecosystem services | Physical water risks | Total assessment | |
|---|---|---|---|---|---|---|
| WSL/MTI/KMF | 4 | 5 | 5 | 3 | 5 | 4.4 |
| KTI | 4 | 3 | 5 | 3 | 5 | 4.0 |
Analysis tools used as an assessment criterion for ecologically sensitive areas
| Requirements for ecologically sensitive areas | Overview | Tools used in the assessment*1 | |
|---|---|---|---|
| (1) Biodiversity Importance | Areas of biodiversity importance (protected areas, areas of scientific importance, areas with endangered species, etc.) |
World Database on Protected Area (WDPA): Comprehensive database of protected areas and other protected areas on land and in the ocean around the world Key Biodiversity Area (KBA): Areas scientifically recognized as having biodiversity importance IUCN Red List of Threatened Species：A list of endangered species from around the world |
|
| Ecosystem Integrity | (2) High Integrity*2 | Areas of high ecosystem integrity (the degree to which ecosystem composition, structure, and function are within natural variability) |
Biodiversity Intactness Index: an index of ecological integrity from 0 to 1 for sites around the world IUCN Red List of Ecosystem database: a geographic compilation of trends in ecosystem collapse risk by integrating data on ecosystem area and ecosystem integrity |
| (3) Rapid Decline*2 | Areas where rapid loss of ecosystem integrity is reducing the resilience of ecosystem service provision | Biodiversity Intactness Index: an index of ecosystem integrity that uses changes in ecosystem integrity to assess changes over time by country (see above for indicators) | |
| (4) Ecosystem Service Delivery Importance*2 | Areas where ecosystem service provision is important, including indigenous communities and local communities |
ENCORE: a map showing hotspots of natural capital decline and depletion by location that are important for the provision of ecosystem services LANDMARK: a platform for information on land ownership by indigenous peoples and local residents at various locations around the world. |
|
| (5) Water Physical Risk | Areas of high physical water risk, including water use restrictions, flooding, and poor water quality | Aqueduct: a comprehensive water risk score calculated by combining 13 water risk indicators, including water quantity, water quality, and reputational risk at each business site | |
*1Comprehensive assessment criteria were extracted from the tools described in the TNFD LEAP Guidance based on the availability of data, natural capital to be evaluated, and other factors
*2For (2) high integrity and (4) significance of providing ecosystem services, a 50 km buffer was established around the location to determine overlap with the data set for assessment. Regarding (3) rapid decline, the year 2000, when our overseas forest management and administration were in full operation, was used as the base year, and the year 2023 was used as the comparison year
*The table above was compiled based on Guidance on the identification and assessment of nature-related issues: The LEAP approach v1.0
*Company-owned forests covering large areas were analyzed by establishing centroids and 30-50 km buffers for each geographic mass, with individual centroids for enclaves not included in the buffers, and integrating the results in favor of higher-risk results
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Diagnosing Priority Locations (Evaluate)
The Evaluate process assessed the dependence and impact of the Group's operations on nature at 37 priority locations. Based on ENCORE results from the Locate process and regional characteristics from analytical tools such as Aqueduct and IBAT, we qualitatively assessed the dependence and impact of each priority location. Impacts were evaluated both positively and negatively, including the analytical tools as well as the company's own knowledge through its business. The results of the Evaluate process are shown below.
Regarding Access and Benefit-Sharing (ABS), there were no particular regions of concern related to genetic resources held by Indigenous peoples or local communities; however, considering the extensive areas required for forest and timber resources, ABS remains an important issue, and we will continue to make efforts to build relationships going forward.
| Business segment | Dependence | Positive impacts | Negative impacts |
|---|---|---|---|
| Timber and Building Materials Business |
Timber supply service driven by forest ecosystems Soil maintenance and flood prevention services |
(Not applicable because it mainly engages in production activities) |
Alteration of surrounding forests and soil degradation due to procurement of logs Water pollution to surrounding water bodies due to wastewater from manufacturing plants |
| Housing Business, Global Construction and Real Estate Business | Soil maintenance and landslide prevention services | Maintain and improve ecosystem services (rainwater recharge, water purification, habitat provision) by enhancing natural symbiotic functions (greening, water retention/permeable pavement, biodiversity initiatives, etc.) within housing and construction sites | Waste discharge, water use, and invasion of non-native species associated with subdivision development |
| Environment and Resources Business |
Surface water and soil provision service driven by forest ecosystems Raw material supply service for power generation fuel (wood, PKS*, coal) Surface water supply service for steam turbine-based power generation |
Maintain and improve ecosystem services (carbon storage, water cycle, disaster prevention, habitat provision) through sustainable forest and peatland management Supporting the demand for wood resources through the use of wood chips in power generation projects promotes sustainable forest management in the region |
Impacts on livelihoods of forest-dependent communities Habitat fragmentation for plants and animals due to tree cutting Waste emissions and water and air pollution resulting from power generation facilities |
*PKS: Palm Kernel Shell
Quantitative Analysis of Environmental Impacts (Estimates Using LIME)
With the aim of understanding the quantitative environmental impacts on nature from our business activities, we are advancing estimations of Life Cycle Assessment (LCA) using LIME3.*1
In 2025, we attempted a quantitative evaluation using LIME3 for raw materials in the upstream value chain and for electricity and fuel mainly in manufacturing operations, focusing on the balance of input and output analysis results of the Sumitomo Forestry Group.
LIME3 quantifies human health damage, social asset depletion due to resource consumption, biodiversity loss and the disruption of primary production in trees measured by species extinction probability with each represented by its respective indicator.
Regarding biodiversity loss and primary production of trees, assuming a 50% reforestation rate after forest harvesting, timber accounts for the majority of the impact. The integrated results of all the indicators reaffirmed that timber has a significant impact. On the other hand, it was also confirmed that the loss of biodiversity and the impact on primary tree production was less when the reforestation rate was estimated at 100%. We will continue to promote sustainable timber procurement, and we aim to understand its quantitative impacts by using life cycle assessment methods such as LIME.
LIME3 currently provides coefficients only at the national level, and the impacts related to land-use change and maintenance through afforestation in timber production are still under investigation, so average values by region are used. Therefore, we recognize the need to continue improving the analysis going forward.
We participate as a member company in the "Development and Demonstration Project of Nature Footprint Based on the Promotion of Nature-related Information Disclosure by Financial/Investment Institutions and International Standardization" (Cabinet Office BRIDGE*2), and we are proceeding with estimations using LIME. In this project, the development of biodiversity and ecosystem service footprints at a more detailed regional level than the national level is planned, and we also intend to conduct evaluations focusing on the upstream value chain of our timber business.
*1LIME3 (Life Cycle Impact Assessment Method Based on Endpoint Modeling 3): Developed in Japan as a life cycle impact assessment method, LIME3 utilizes the latest knowledge and analytical techniques from natural and social sciences. It is applied not only in LCA but also in various fields, such as environmental efficiency, environmental accounting, and full cost assessments.
*2Cabinet Office BRIDGE: It is a program that leverages the leadership function of the Council for Science, Technology and Innovation (CSTI) of the Cabinet Office of the Japanese government to promote and accelerate the implementation of policies by various ministries and agencies in areas expected to see increased public-private R&D investment. It aims to bridge innovative technologies and outcomes generated through initiatives such as the Strategic Innovation Promotion Program (SIP) and other governmental R&D measures for solving societal issues, creating new businesses, and ultimately realizing Japan’s future vision (Society 5.0)
Impact Assessment of Our Entire Business Using LIME3
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Main Risks and Opportunities Identified (Assess)
The Assess process identified business risks and opportunities arising from the dependence and impacts on nature determined in the Evaluate process, each of which was qualitatively assessed, with the main ones identified. First, we conducted a risk/opportunity analysis for 25 locations, which were selected evenly from priority locations to avoid bias toward specific businesses. Based on what had already been addressed, a qualitative assessment was made of the remaining risks and the priority of obtainable opportunities.
The residual risks were qualitatively prioritized based on the criteria of "degree of impact" for financial impact on the business and "probability of occurrence" for past cases and existing initiatives. For potential opportunities that could materialize, we qualitatively prioritized them based on the criteria of "business attractiveness" in terms of the amount of increase in market size* by 2030, and "our strength" in terms of our advantage in capturing such opportunities.
| Size of impact | Probability of occurrence | ||
|---|---|---|---|
| Definition | Financial impacts in business (sales of business sites and replaceability) |
Presence of examples of similar incidents occurring in the past and existing initiatives | |
| Standard | Large | Impacts amounting to 10% or more of the division’s sales | No existing initiatives implemented in the past |
| Medium | Less than 10%, but difficult to replace within a year/ More than 10% but can be replaced within a year |
Occurred in the past but there are existing initiatives in place/ Has not occurred in the past and there are no existing initiatives |
|
| Small | Can be replaced within a year | Has not occurred in the past and there are existing initiatives | |
| Attractiveness of business | The Company’s strengths | ||
|---|---|---|---|
| Definition | Amount of increase* in market value by 2030 | The Company’s competitiveness in acquiring opportunities | |
| Standard | Large | 30 trillion yen or higher | Has relevant resources and existing initiatives |
| Medium | 5 to 30 trillion yen | Has relevant resources but no existing initiatives/ Does not have relevant resources but has existing initiatives |
|
| Small | Up to 5 trillion yen | ||
*Estimated based on Identifying Biodiversity Threats and Seizing Business Opportunities published by AlphaBeta in July 2020 and New Nature Economy Report II: The Future of Nature and Business published by the World Economic Forum in July 2020
| Division*1 | Business | Transition Risks | Physical Risks | Opportunities | |
|---|---|---|---|---|---|
| Timber and Building Materials Business | Distribution and manufacturing of timber and building materials | N |
Costs increase to comply with stricter soil and water pollution laws and regulations Sales decrease due to friction with local communities and NGOs caused by the construction of forest roads in areas that affect the surrounding ecosystem Increased costs of dealing with litigation and complying with stricter laws and regulations due to the impact of waste, water use, soil contamination, and land alteration on protected areas, etc. |
Sales decrease due to less water available in the surrounding area as a result of reduced water availability Sales decrease due to shutdowns caused by fire, land subsidence, tsunami, and landslides in the event of an earthquake Sales decrease due to shutdown of operations caused by fire and volcanic ash during a volcanic eruption |
Procurement costs decrease due to conversion from natural wood to wood from planted forests Reduction of water procurement costs through further water conservation in manufacturing processes and reduced and more efficient water use Costs decrease by maintaining stable raw material procurement in conjunction with resident-involved timber production (social forestry) |
| C ・ N |
Costs increase due to compliance with stricter laws and regulations related to illegal and unsustainable forest harvesting Costs increase due to higher wood procurement prices in response to increased demand for wood products to promote decarbonization, etc. |
Sales decrease and restoration costs increase due to severe flood damage from heavy rain and other factors or due to shutdown of operations Sales decrease and restoration costs increase due to suspension of operations following landslide in planted forests near plants Procurement costs increase due to reduced wood supply resulting from disasters and ecological degradation at procurement sites |
Sales increase owing to biorefinery technology and new product development Sales increase due to development of new products for the mass timber market Sales increase due to development of new products that contribute to the circular economy in the construction market |
||
| Housing Business | Custom-built houses, subdivision houses, greening (in Japan) |
N | Costs increase due to compliance with stricter laws and regulations associated with adverse impacts on surrounding communities and ecosystems due to waste, water use, and soil contamination | ― |
Reduced industrial waste disposal costs by curbing waste generation and promoting the conversion of waste into valuable resources Costs (e.g., greenkeeping) decrease through green space management with reduced ecological impact (e.g., reduced use of pesticides and fertilizers, less intense pruning, etc.) Sales increase owing to the increased trust of client companies and the realization of long-term contracts as a result of an increase in the number of users from the development of the environmental education business, as well as the identification and protection of rare and native plant species in parks in the designated management operations |
| C ・ N |
― |
Sales decrease due to construction delays caused by increased disaster risk Increased costs of premium payments to insurance companies due to increased disaster risk |
Sales increase due to sales at premium prices in conjunction by enhancing natural symbiotic functions (greening, water retention/permeable pavement, biodiversity initiatives, etc.) within housing and construction sites | ||
| Global Construction and Real Estate Business | Detached houses business (overseas), building materials manufacturing (United States), real estate development (Japan and overseas) | N |
Increased pollution control costs due to delay in introduction of technologies to reduce environmental impact Costs increase due to delays in introducing technologies to reduce the impact on ecosystems (e.g., noise and vibration control, dust control, planting with native species, etc.) |
― |
Costs decrease through promotion of efficient construction methods (panelization and trussing) during construction Sales increase from the development of new products reusing waste materials Sales increase owing to improved reputation among customers as a result of procurement of certified wood, use of recycled wood, and certification of plants |
| C ・ N |
Costs increase due to higher wood procurement prices in response to increased demand for wood products to promote decarbonization, etc. | Increased costs of insurance premium payments for properties under construction due to increased risk of natural disasters | Sales increase owing to the acquisition of new customers who value the natural environment following enhanced natural symbiotic functions (greening, water retention/permeable pavement, biodiversity initiatives, etc.) within housing and construction sites | ||
| Environment and Resources Business | Forest management, seedling production, and biomass power generation | N |
Sales decrease due to unplanned shutdowns following criticism from local communities and NGOs for timber production that violates the rights of indigenous and local people Sales decrease and costs increase as a result of delays in introduction of woody biomass fuels with less impact on ecosystems |
― |
Sales increase owing to sales of forest management technologies such as remote sensing, drone surveys, satellite applications, etc. Sales increase through payment program development (PES) from companies and local governments that benefit from the forest's public benefits (groundwater recharge, habitat provision, landslide prevention, etc.) Sales increase through the provision of industrial tourism and eco-tourism products (e.g., sales of products utilizing traditional knowledge and culture) Reduced industrial waste disposal costs by promoting the conversion of incineration ash into valuable resources Sales increase by promoting the credit market through participation in rulemaking for biodiversity credits |
| C ・ N |
Costs increase due to compliance with stricter laws and regulations following the introduction of policies to promote certification of woody biomass feedstock and PKS Costs increase due to higher fuel costs resulting from increased demand and tougher competition for woody biomass feedstock and PKS Costs increase due to further changes in forest management practices to meet the growing demand for sustainable timber Costs increase due to delays in the introduction of efficient and advanced forestry technology |
Sales decrease due to shutdown of operations caused by forest fires or landslides | Sales increase from the generation of carbon credits in connection with the promotion of forest and peatland management and forest fund operations |
(N): Items identified only through analysis based on TNFD's LEAP approach
(C/N): Items identified from both TCFD scenario analysis and analysis based on TNFD's LEAP approach
*The Lifestyle Services Business underwent TCFD scenario analysis only
Analysis of Financial Impacts
There were 71 remaining significant risks and 36 potential opportunities identified from the qualitative assessment results, of which 30 risks were rated as high priority in terms of "degree of impact" and "probability of occurrence" based on the following qualitative assessment criteria, and 34 opportunities were rated as high priority in terms of "business attractiveness" and "strengths of the company."
We also attempted to quantify the financial impacts of eight of the above risks and 11 of the opportunities listed in the table below. This includes those that cannot be quantified at this time and those for which quantification has not yet been completed.
Among the remaining risks, for example, in the Timber and Building Materials Business, under the scenario of manufacturing sites shutting down due to increased risk of inland flooding caused by climate change, the financial impact of "reduced sales and increased recovery costs due to the shutdown of four direct operation sites" was indicated as significant.
Among the potential opportunities that could materialize, for example, in the same Timber and Building Materials Business, under a scenario where the promotion of wood use is promoted as a policy around the world as a means to achieve carbon neutrality and nature positive, the financial impact of "increased sales from new product development related to the mass timber market, such as CLT" was significant.
Regarding scenarios, we utilize some of the scenario analysis for physical risks from TCFD that has been already conducted, and we plan to conduct a full-scale scenario analysis for TNFD in the future.
| Item (risks) | Items for which attempts were made to quantify the financial impacts | Business | Size of impact | Probability of occurrence | |||
|---|---|---|---|---|---|---|---|
| Transition Risks | Policies | Change in raw material procurement | Procurement costs for PKS increase due to compliance with stricter laws and regulations following the introduction of policies to promote certification | Short to medium term | Environment and Resources (biomass power generation) | ||
| Legal responsibilities | Introduction of environmental regulations | Costs increase due to compliance with stricter laws and regulations in response to the use of timber related to illegal and unsustainable forest harvesting | Short term | Timber and Building Materials (manufacturing and distribution) | |||
| Market | Change in raw material procurement | Costs increase due to higher fuel costs resulting from increased demand and tougher competition for woody biomass feedstock and PKS | Short to medium term | Environment and Resources (biomass power generation) | |||
| Physical Risks | Acute | Occurrence of disasters | Sales decrease and restoration costs increase due to shutdown of operations caused by severe and more frequent flood damage from heavy rain and other factors | Short to long term | Timber and Building Materials (manufacturing) | Large | Medium |
| Sales decrease and restoration costs increase due to suspension of operations following landslide in planted forests near plants | Long term | Timber and Building Materials (manufacturing) | |||||
| Chronic | Occurrence of disasters | Increased costs of insurance premium payments for properties under construction due to increased risk of natural disasters | Short to medium term | Housing (custom-built detached houses), Global Construction and Real Estate (detached and subdivision houses) | |||
| Sales decrease due to construction delays caused by vulnerable construction infrastructure and increased risk of natural disasters resulting from land modification in the surrounding areas | Long term | Global Construction and Real Estate (detached and subdivision houses and real estate development) | |||||
| Change in raw material procurement | Procurement costs increase due to reduced wood supply resulting from disasters and ecological degradation at procurement sites | Long term | Timber and Building Materials (manufacturing) | ||||
| Item (opportunities) | Items for which attempts were made to quantify the financial impacts | Business | Attractiveness of business | The Company’s strengths | |||
|---|---|---|---|---|---|---|---|
| Business performance | Market | Expansion of consulting market | Sales increase owing to sales of natural symbiosis site consulting in Japan | Short to medium term | Environment and Resources (company-owned forests in Japan) | Medium | Large |
| Expansion of credit market | Sales increase by promoting the credit market through participation in rulemaking for biodiversity credits | Medium to long term | Environment and Resources (company-owned forests in Japan and overseas forest management) | ||||
| Change in wood product market | Sales increase owing to new product development such as biorefinery, CLT or reuse of waste materials, etc. | Medium to long term | Timber and Building Materials (manufacturing) | ||||
| Products and services | Change in wood product market | Sales increase owing to sales of forest management technologies such as remote sensing, drone surveys, satellite applications, etc. | Short to medium term | Environment and Resources (company-owned forests in Japan and overseas forest management) | |||
| Spread of NbS | Sales increase from the provision of industrial tourism and eco tourism products | Medium to long term | Environment and Resources (company-owned forests in Japan) | Large | Medium | ||
| Sales increase through payment program development (PES) from companies and local governments that benefit from the forest's public benefits | Short to long term | Environment and Resources (company-owned forests in Japan and overseas forest management) | |||||
| Resource efficiency | Shift to efficient use of resources | Reduction of water procurement costs through further water conservation in manufacturing processes and reduced and more efficient water use | Medium to long term | Timber and Building Materials (manufacturing) | Medium | Large | |
| Costs decrease due to conversion from natural wood to wood from planted forests | Medium to long term | Timber and Building Materials (manufacturing) | |||||
| Costs decrease through promotion of efficient construction methods (panelization and trussing) during construction | Medium to long term | Global Construction and Real Estate (real estate development) | |||||
| Reduced industrial waste disposal costs by promoting the conversion of incineration ash into valuable resources | Short term | Environment and Resources (biomass power generation) | |||||
| Reputation | Spread of green infrastructure | Sales increase owing to the acquisition of new customers who value the natural environment following enhanced natural symbiotic functions (greening, water retention/permeable pavement, biodiversity initiatives, etc.) within housing and construction sites | Medium to long term | Global Construction and Real Estate (detached and subdivision houses and real estate development) and Housing (custom-built detached houses) | |||
*All risks and opportunities at direct operation locations are quantified and shaded
*Short-term: from the end of 2023 to 2024 ("Mission TREEING 2030 Phase 1"), medium-term: from 2025 to 2030 ("Mission TREEING 2030 Phase 2" and beyond), and long-term: from 2031 to 2050
Sumitomo Forestry's Countermeasures (Prepare)
In our analysis based on TNFD's LEAP approach, we utilized the existing TCFD scenario analysis performed for physical risks. To promote businesses that contribute to a nature positive world under the Medium-Term Management Plan "Mission TREEING 2030 Phase 2" (2025 -2027), we continue to implement TNFD scenario analysis and will set targets by utilizing quantitative assessments, such as LIME3, a life cycle impact assessment method.
Currently, as a preparatory step for target setting, we are designing pilot projects aimed at quantifying and monitoring the specific impacts of our business activities on nature, excluding indicators such as water which we have already quantitatively assessed and set targets for. Furthermore, in accordance with TNFD guidance, we will also proceed with considering the formulation of a nature transition plan.
Key measures to address identified priority risks and opportunities include the following.
| Risks & opportunities | Proposed measures | ||
|---|---|---|---|
| Timber and Building Materials Business (Manufacturing) | Risks | Sales decrease and restoration costs increase due to shutdown of operations at SRP, ASTI, RPI, and VECO, four sites at high risk of internal flooding as a result of severe flooding from heavy rains, etc. |
Consider flood risk when selecting sites for operations and enhance disaster prevention measures Establish a business continuity plan (BCP) in the event of a major disaster and establish a rapid recovery system |
| Global Construction and Real Estate Business (FITP) | Opportunities | Sales increase and costs decrease owing to development of new products that reuse waste materials and development of technologies for more efficient use of resources, etc. | Promote the development of products that make effective use of resources in cooperation with the recycling industry to differentiate products in the market |
| Environment and Resources Business (Company-owned forests in Japan, and overseas forest management) | Opportunities | Sales increase owing to sales of smart forest technologies such as remote sensing, drone surveys, satellite applications, etc. |
Develop a service package that supports accurate understanding of forest health and resource quantity by utilizing the latest remote sensing, drone survey, and satellite technologies, and propose to improve the efficiency and accuracy of forest management Deploy marketing activities for service packages targeting local governments and companies with large company-owned forests |
| Environment and Resources Business (Biomass Power Generation) | Risks | Costs increase due to higher fuel costs at Mombetsu Biomass Electric Power Plant and Hachinohe Biomass Electric Power Plant, following increased demand and intensified competition for unused wood chips and imported PKS |
Diversify raw material procurement by developing alternative fuels and new sources of supply Utilize long-term and forward contracts to manage the risk of fuel cost volatility |
Comment from experts
The Sumitomo Forestry Group reported to and obtained advice from external stakeholder experts on the process of narrowing the Locate and Evaluate processes of the TNFD LEAP approach conducted from December 2023 to February 2024.
■Mutai Hashimoto, Lead, Sustainable Finance, WWF Japan
For many years, Sumitomo Forestry has implemented a procurement policy aimed at avoiding negative impacts on nature in wood procurement, and its disclosures are in line with SBT for Nature's recommended framework for actions to achieve a nature positive world (AR3T). Although many of the nature-related opportunities listed have a clear business connection at this point in time, it is expected that the restoration of nature itself will be extracted as a nature-positive opportunity more broadly, and that these opportunities will be linked to business opportunities in the future.
■Makino Yamanoshita, Joint Programme Director, Biodiversity & Forests, Institute for Global Environmental Strategies
While it is academically recognized that climate change measures and the conservation of biodiversity and ecosystem services are interdependent, I found it very interesting that Sumitomo Forestry's efforts to find common analytical results in the analytical process from the business perspective corresponding to the TCFD and TNFD, and to report these results in an integrated manner. As the Company moves ahead with further analysis, there may be a need to consider tradeoffs in addition to synergies. Furthermore, I believe that true nature positive can be achieved by utilizing nature-related information and on-the-ground experience accumulated by Sumitomo Forestry in its overseas forest management operations and other activities at project sites, which are not represented in the database and other information presented by the TNFD, in future analyses and by implementing countermeasures.
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