Pigeon Group
TCFD Report 2023

Pigeon Corporation
November 24th, 2023

Contents
1 Introduction ........................................................................................................................ 1
1.1 Our Idea of Sustainability .............................................................................................. 1
1.2 Our Key Issues (Materiality) ........................................................................................... 2
1.3 Pigeon Green Action Plan .............................................................................................. 2
1.4 Supporting the TCFD Recommendations .................................................................... 3
2 Climate Change–Related Financial Information ............................................................ 4
2.1 Governance Around Climate-Related Risks and Opportunities ............................... 4
2.2 Strategy and Risk Management .................................................................................... 6
2.3 Metrics and Targets ...................................................................................................... 16

Editorial Approach
The Pigeon Group TCFD Report 2023 contains information about the Pigeon Group’s governance, strategy,
risk management, and metrics and targets, prepared according to the TCFD recommendations. The
purpose of this report is to foster an understanding of the Pigeon Group’s climate change initiatives andfurther improve our efforts through communication with our stakeholders.
The identification, analysis, and impact assessment of climate-related risks and opportunities in thisreport are based on information available to us as of July 2023.

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1 Introduction
Pigeon’s Purpose is “We want to make the world more baby-friendly by furthering our commitment tounderstanding and addressing babies’ unique needs.” Accordingly, each and every director andemployee of the Pigeon Group performs their duties every day to achieve a sustainable society throughthe Group’s business activities.

Note: For more information on Pigeon DNA and Pigeon Way, please visit our website: https://www.pigeon.com/about/pigeonway/

1.1 Our Idea of Sustainability
To seek to increase social value, economic value, and the summation of the two that is corporate value,
and to “continue to be an essential presence within society”: this is the Pigeon Group’s basic idea ofsustainability. The Group strives to achieve sustainable growth as a corporation by reducing its adverse
environmental impact and contributing to solving social problems based on the Pigeon ESG/SDGs Policy,
using Pigeon Sustainable Action as a guide to realizing its purpose through business activities.

Pigeon Sustainable Action
Pigeon’s Purpose is to make the world more baby-friendly by furthering our commitment tounderstanding and addressing babies’ unique needs.
In order to create a baby-friendly future, we aim to grow sustainably as an indispensable part ofsociety by reducing our environmental impact and resolving the social issues that affect babies andtheir families across all the countries and regions where we operate, and by embracing thechallenge of new business endeavors.

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1.2 Our Key Issues (Materiality)
The Pigeon Group has identified five key issues1 from an ESG perspective that the Group must address inthe medium to long term in order to realize its Purpose and grow sustainably as an essential presence
within society. Action plans for each key issue are incorporated into each three-year Medium-TermBusiness Plan and carried out accordingly.

Sustainable society development story, based on Pigeon ESG/SDGs Policy

With regard to the key issue of reducing environmental impact, the Pigeon Green Action Plan has
been formulated as a medium- to long-term quantitative target for the Pigeon Group as a whole. Eachbusiness segment formulates and implements action plans to achieve targets set in the Pigeon Green
Action Plan.

Key Issues to Be Addressed in the Medium to Long Term in Order to Realize Our Purpose

1.3 Pigeon Green Action Plan
Pigeon has formulated the Pigeon Green Action Plan to leave a rich Earth for the future of babies born
tomorrow. Under the Pigeon Green Action Plan, the Pigeon Group focuses on resolving the climatechange issue, the plastics issue, and declining biodiversity, all of which are particularly relevant to theGroup’s business activities, and strives to reduce its adverse environmental impacts by setting mediumto long-term targets toward decarbonization, a circular society, and coexistence with nature.2

1

For more information about our Key Issues (Materiality), please visit our website:www.pigeon.com/sustainability/policy/#headline-1581391283

2

For more information about the Pigeon Green Action Plan, please visit our website:www.pigeon.com/sustainability/environment_top/pigeon_green_action_plan/

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RSPO stands for Roundtable on Sustainable Palm Oil
RSPO Credits using the book and claim (B&C) model support certified palm (kernel) oil production by allowing end users topurchase credits issued based on the amount of palm (kernel) oil produced by RSPO-certified producers.

1.4 Supporting the TCFD Recommendations
In recent years, the effects of climate change have become visible around the world, with various natural
disasters causing loss of life and property. The frequency and severity of such natural disasters is only
expected to increase. Policy changes and new regulations to address climate change are expected incountries around the world, along with social changes such as market shifts and changes in consumerawareness in the medium to long term.
To realize our Purpose and continue to exist into the future despite these changes, we consider itvital to recognize the risks and opportunities stemming from climate change that could affect ourbusiness strategy or financial planning over the medium to long term, and manage these risks andopportunities appropriately.
For this reason, in 2021, we publicly declared our support for the recommendations of the Task
Force on Climate-Related Financial Disclosures (TCFD). We continue to communicate with our
stakeholders on climate change issues as we report on our understanding and management of thebusiness risks and opportunities posed by climate change through this Report, our corporate website,
and the CDP Climate Change Questionnaire.

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2 Climate Change–Related Financial Information
2.1 Governance Around Climate-Related Risks and Opportunities
2.1.1 Management by the Risk Management Committee and Sustainability Committee
We have established a GHO (Global Head Office) Risk Management Committee chaired by the Director
responsible for GHO, under the supervision of the president and CEO. This committee is responsible forshort- to medium-term risk management across all of the Group’s businesses. Beneath the GHO Risk
Management Committee are individual risk management committees for each business segment, eachchaired by the head of operations for that segment. These committees identify and assess risks for eachcompany within a business segment, examine and implement measures to address these risks, andmonitor progress made. Climate-related risks that are both likely to occur in the short or medium termand directly linked to business continuity, such as operational disruptions due to flooding, areincorporated into the risk management process led by these Risk Management Committees.
Because climate-related risks and opportunities and other aspects of reducing our adverse
environmental impact must be managed from a long-term perspective that cuts across multiple businesssegments, we have also established a Sustainability Committee chaired by the Director responsible for
GHO and comprising the directors and managing officers responsible for operations in each businesssegment along with the Business Strategy Division Manager, under the supervision of the president andCEO. The Sustainability Committee sets medium- and long-term targets for the Group related toenvironmental conservation, including climate change response, identifies and reviews our key issues(materiality), and monitors Group-wide and business segment–level progress against non-financial
targets. Beneath the Sustainability Committee are individual sustainability committees for each businesssegment, each chaired by the director or managing officer responsible for that business segment. These
individual Sustainability Committees discuss progress on initiatives and future action plans within theirbusiness segment.
Figure 1: Corporate Governance Organization Chart (as of July 2023)

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2.1.2 Oversight by the Board of Directors
The Director responsible for GHO reports annually to the Board of Directors on the results of deliberations
by the GHO Risk Management Committee, which meets at least once a year, and the Sustainability
Committee, which meets at least twice a year, as well as the overall progress of the Pigeon Group’s
initiatives. The Board of Directors performs oversight of climate-related risks and opportunities for theGroup based on the reports received from these two committees.
Figure 2: Reporting structure for the GHO Risk Management Committee and Sustainability Committee (as of July 2023)

For instance, the Pigeon Group is striving to reduce its Scope 1 and Scope 2 greenhouse gas
emissions in order to contribute to mitigating climate change. The Director responsible for GHO, whochairs the Sustainability Committee, reports annually to the Board of Directors on the Group’s progressagainst its greenhouse gas emissions reduction target. The Pigeon Green Action Plan (see p. 3), a set of
medium- and long-term environmental targets developed by the Sustainability Committee in 2022, wasalso reported to the Board of Directors, who approved it.

2.1.3 Reflection of non-financial performance in director remuneration
To incentivize medium- and long-term performance by the Group and increases in corporate value, stock
remuneration is paid to directors (excluding independent outside directors) when they step down. During
the 8th Medium-Term Business Plan (2023–2025), performance is evaluated on the basis of 80% financial
indicators and 20% non-financial indicators related to Key Issues (Reducing our Environmental Impact,
Contributing to the Resolution of Social Issues, Managing talent and Cultivating the Right Culture for our
Purpose).Evaluation of performance on “Reducing our Environmental Impact” is based on progress
toward the targets set in the Pigeon Green Action Plan, which means that the Pigeon Group’s Scope 1 andScope 2 greenhouse gas emissions reduction performance is reflected in director’s remuneration.3

3

For more information about executive remuneration policy, please visit our website:www.pigeon.com/sustainability/files/pdf/Executive_remuneration_policy_e_1.pdf

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2.2 Strategy and Risk Management
2.2.1 Processes for identifying and assessing climate-related risks and opportunities
Business risks that require countermeasures with a short- to medium-term time base are identified,analyzed, and assessed as part of our risk management activities (company-wide risk assessment), andaction plans to address major risks are considered and implemented.
Given that climate-related impacts occur over the long term, risks and plans must be consideredwith a long-term perspective that cuts across multiple business segments. For this reason, separate fromthe specified process for identifying risks in risk management activities, we have identified and analyzed
the potential financial impact of long-term climate-related risks concerning our business, within aprocess for identifying climate-related risks and opportunities and performing scenario analysis,
incorporating input from external consultants with insight into climate change, and in coordination with
relevant departments.
Because the Pigeon Group provides a wide range of products and services to customers in over 90
countries and regions around the world, our analysis has focused on manufacturing and sales of nursing
bottles, 4 nipples, and skincare sold in Japan and China, which account for a relatively significant
proportion of sales in those regions. However, the impact of carbon pricing and electricity price increases,
as well as the impact of higher freight rates, has been analyzed for all Pigeon Group sites. The context andtime frame adopted for impact analysis was the global environment and society in 2030. Physical risks
were also analyzed with reference to the year 2050.
Under our climate-related risk and opportunity identification process, based on the transition risks,physical risks, and opportunities provided as examples by the TCFD, we extracted risks and opportunities
related to our nursing bottle, nipple, and skincare business models.
Of the extracted risks and opportunities, those expected to have a financial impact in future andthose our investors are thought to take a strong interest in were identified as climate-related risks andopportunities that should be prioritized for impact analysis (see Table 1).
Table 1: Climate-related risks and opportunities identified for impact analysis
Transition Risks
Introduction of carbon pricing mechanisms

Strengthening of regulations around GHG
emissions
Increase in electricity prices due to climate policychangeIncrease in material prices due to climate change
and climate policy change

Introduction of regulations on plastics
Increase in freight rates due to climate policychangeChanges in consumer preferences toward
products made with consideration for theenvironment

4ｰ

A “nursing bottle” is defined as a feeding bottle equipped with nipple, cap, and hood.

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Physical Risks
Damagetomanufacturing
properties,
operational stoppages at factories, andinterruptionofproduct/mainmaterial
procurement routes due to flooding
Inundation and operational stoppages atfactories due to sea level rise

Shortages of water needed for production due todrought

Operational stoppages at factories due to the
spread of new infectious diseases accompanying
climate change

Opportunities
Changes in consumer preferences toward
products made with consideration for theenvironment
Increased demand for products to protect
babies from heat, humidity, and dryness due torising average temperatures

Increased demand for products capable of saving
water, due to water shortages
Increased demand for products that can contributeto preventing infection by infectious diseases

2.2.2 Climate scenarios used for impact analysis
To analyze the impact of climate-related risks and opportunities on our nursing bottle, nipple, andskincare businesses, we considered two scenarios: one in which the average global temperature increaseis limited to 1.5°C above pre-industrial levels by 2100 (the “1.5°C scenario”), and one in which average
global temperature reaches 4°C above pre-industrial levels by 2100. We refer to these as the 1.5°C scenario
and the 4°C scenario, respectively.
Referring to external sources like the Net Zero Emissions by 2050 scenario in the World Energy

Outlook published by the International Energy Agency and the Intergovernmental Panel on Climate
Change (IPCC)’s RCP8.5, SSP1-1.9, and SSP5-8.5 scenarios, we envisioned the worlds of the 1.5°C and 4°C
scenario in 2030 as shown in the table below. Based on this, we used forecast values for variables in 2030
(and, for some variables, in 2050) to quantitatively analyze the financial impact of climate-related risks
and opportunities on our nursing bottle, nipple, and skincare businesses under each scenario.
Table 2: 1.5°C scenario and 4°C scenario worlds
1.5°C scenario world

4°C scenario world

 Environmental awareness among consumers
rises.

 Environmental awareness among consumers
does not rise as much as in the 1.5°C scenario.

 Regulations on greenhouse gas emissions andcombustion and materials derived from fossil
fuels are introduced and greatly strengthened.

 Strong regulations toward decarbonization are
not introduced.

 Regulations on oil palm plantations intended toensure sustainable production are greatly
strengthened.

 Much greater severity and frequency of natural
disasters, including floods and droughts.
 Uncertainty about the future for babies may
become a factor in decreasing birth rates.

 Greater severity and frequency of natural
disasters, including floods and droughts.

2.2.3 Specific climate-related risks and opportunities and their impact on business(1) Risks and opportunities relating to consumer markets for nursing bottles, nipples, and skincare
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Under the 4°C scenario, significant changes to the climate and environment are expected, including more
frequent and severe natural hazards and extreme heat waves. For this reason, uncertainty about the
future for babies may become a factor in decreasing birth rates, which could affect sales of nursing bottles
and nipples.
Under the 1.5°C scenario, consumer awareness of environmental concerns is expected to rise amid
the transition to a zero-carbon society, resulting in a stronger preference for products manufactured withconcern for the environment across the supply chain. To respond to these consumer preferences, it will
be important for companies to make manufacturing more environmentally friendly across the entire
value chain—by switching to environmentally friendly packaging, expanding the use of non-fossil fuel–derived and recycled materials, and decarbonizing the production process, among other measures—andalso develop communication strategies that convey environmental value to consumers.
Additionally, under both the 1.5°C and the 4°C scenario, higher average global temperatures are
expected to make natural hazards more prevalent and severe than today due to changes in climate andincreasingly frequent extreme weather events. For this reason, higher demand is expected for skincare
products that protect against heat, humidity, and dryness, as well as rehydrating products for hot periods.
Meanwhile, higher demand is expected for cleansers, products for disinfection, and breastfeeding-related
items that require no or little water, as water shortages are due to droughts and floods become more
frequent.
Table 3: Risks and potential financial impacts in consumer markets (in 2030)
Scenario

Climate-related risks and potential financial impacts
Greater severity and frequency of natural hazards
results in uncertainty about the future for babies, whichbecomes a factor in decreasing birth rates, which in turncauses and nursing bottle and nipple sales fall.

4°C
scenario

Marketrisk

1.5°
scenario

Consumers seek to shop more ethically, resulting inTransition lower sales of products that use virgin plastic derived
riskfrom fossil fuels, whether in the product itself or the
packaging.

Financial impact
Lower sales(difficult toquantify)
Lower sales(difficult toquantify)

Table 4: Opportunities and potential financial impacts in consumer markets (in 2030)
Scenario

Climate-related opportunities and potential financial impacts

1.5°C
scenarioand 4°C
scenario

Heat, humidity, or dryness increases in more areas
due to rising average global temperatures, resulting
Products in higher demand for skincare products to protect
against heat, humidity, and dryness, as well as
rehydrating products for hot periods.
Water shortages become more frequent due todroughts and floods, resulting in higher demand for
Products
cleansers, disinfection products, and breastfeedingrelated items that require no or little water.

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Financial impact(annual)Higher sales
Up to ¥3.9 billion1

Higher sales
Up to ¥50 million1

1.5°C
scenario

Consumers seek to shop more ethically, resulting inhigher demand for products manufactured with
Products
concern for the environment, such as products using
non-fossil fuel-derived plastic or recycled materials.

Higher sales(difficult toquantify)

1: These calculations incorporate the expected growth of the global skincare market by 2030 (using forecasts by
research companies).

Pigeon’s strategy regarding risks and opportunities in consumer markets (Japan/China)
The nursing bottles and nipples that are Pigeon’s core products are essential to babies and families
regardless of climate or politics. Birth rates are falling in Japan and China due to various factors not all
related to climate change. While Pigeon has the largest share of the nursing bottle market globally, thatshare is still only around 11％5 (2022). This indicates an extremely high number of babies and families yet
to be approached, and Pigeon believes that there is significant room for expansion of nursing bottle andnipple sales. The Pigeon Group’s 8th Medium-Term Business Plan (2023–2025) has among its objectives
increasing nursing bottle and nipple sales and profits by executing on strategies such as developing newmarkets and expanding sales of high-profitable nursing bottles (wide-necked nursing bottles) in existing
markets.
Meanwhile, the skincare market is expected to grow globally through 2030. Under the PigeonGroup’s 8th Medium-Term Business Plan, the Group will focus on further growing its skincare category,addressing consumer need for a wide variety of product functions.
Turning to environmentally friendly products, as part of the Pigeon Green Action Plan (see page 3),
the Pigeon Group is engaged in initiatives to increase the usage rate of plant-derived and recycledmaterials in product packaging, and to reduce carbon emissions across its entire value chain, including
both Pigeon Group sites and their supply chain. Through these initiatives, the Group will respond to rising
environmental awareness among consumers.

(2) Transition risks and potential financial impact
The 1.5°C scenario envisages the introduction of strict regulations and policies aimed at decarbonization
around the world. Conceivable risks for the Pigeon Group arising from such regulations and policies
include an increase in operating costs due to the introduction of carbon pricing and new regulations (orthe strengthening of existing regulations) on the use of plastics.
■Carbon pricing
At present, no Pigeon Group sites are subject to carbon taxes based on GHG emissions or part of any GHG
emissions trading (cap-and-trade) scheme.
However, one risk envisaged under the 1.5°C scenario is the introduction of carbon pricing
mechanisms globally, resulting in the Pigeon Group becoming subject to a carbon tax on either Scope 1
or Scope 1 & 2 GHG emissions, or needing to buy emissions allowances as part of an emissions trading

5 Source: Global Info Research survey

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9scheme. The Group has estimated the potential impact of carbon pricing mechanisms under two
scenarios: Scenario A, in which only Scope 1 emissions are subject to carbon taxation, or Scenario B, inwhich both Scope 1 and 2 emissions are subject to carbon taxation. In both Scenario A and Scenario B,
the assumption was that such taxation would apply to emissions at all Group sites.
■Regulations on plastics
Because plastic contains carbon, its incineration results in CO2 emissions. Environmental pollution due
to microplastics is another concern. Accordingly, the 1.5°C scenario envisages stronger regulations
around the globe on both the use and disposal of plastics, to reduce both GHG emissions andenvironmental pollution.
Three specific scenarios for 2030 were envisioned: (1) A tax on the use of virgin plastics derived fromfossil fuels (applying to both products and packaging); (2) A ban on the use of virgin plastics derived fromfossil fuels in product packaging; and (3) Regulations requiring collection and recycling of products andpackaging once they were no longer needed. The expected financial effect of each scenario on the PigeonGroup’s nursing bottle, nipple, and skincare businesses in both Japan and China has been estimated.
Currently, most of the packaging for skincare products sold by the Pigeon Group’s Japan Business
and China Business (bottles, caps, and refill pouches) uses virgin plastic derived from fossil fuels. The
financial impact of risk 2 above (a ban on virgin plastic derived from fossil fuels) was assumed to be theamount of investment that would be required at Pigeon Home Products to deploy manufacturing
equipment capable of handling new packaging materials and shapes, assuming that fossil fuel–derived
plastic containers would be replaced by paper containers. This we call Scenario A. Scenario B is that
Pigeon switches from virgin plastic packaging to biomass plastic packaging for all skincare products
manufactured by Pigeon Home Products and PIGEON MANUFACTURING (SHANGHAI), and the impact forthis scenario was estimated as the increased cost of purchasing packaging.
To estimate the financial impact of risk 3 above (obligatory collection and recycling of plastic
products and packaging), we assumed that obligations for collecting and recycling all plastic products
and packaging, whether derived from fossil fuels or plants, would fall on manufacturers of finishedproducts. Accordingly, we estimated the cost of collecting and recycling all plastic nursing bottles, nipples,and plastic packaging for skincare products sold by our Japan Business and China Business.
■Increased electricity and material prices
Strict regulations aimed at decarbonization, including carbon pricing mechanisms, could increase
operational costs for electricity companies, resulting in higher electricity prices.
In the World Energy Outlook published by the International Energy Agency (IEA), under the scenario
in which GHG emissions are reduced to net zero by 2050, electricity prices in 2030 are forecast to be higher
than they were in 2018. We estimated the impact of these increased prices based on the amount ofelectricity forecast to be purchased by the Pigeon Group as a whole in 2030, accounting for expectedbusiness growth.
There is also the risk that suppliers of plastic materials could become subject to carbon pricing
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mechanisms or plastic taxes, which, along with rising electricity prices, would increase their
manufacturing costs and ultimately increase the price of the plastic materials and plastic productpackaging materials purchased by the Pigeon Group.
Palm oil is a raw material for ingredients used in skincare products, but oil palm plantation
development has been linked to deforestation and GHG emissions from peaty land. Under the 1.5°C
scenario, there is a risk that restrictions on the use of land for oil palm cultivation could be strengthened
in order to reduce GHG emissions from the agricultural sector, and that carbon pricing mechanisms
applied to manufacturers of ingredients derived from palm oil could increase their manufacturing costs
and thus increase the price of skincare materials derived from palm oil.
We estimated the financial impact of these increases in the prices of plastic materials and palm oil–derived materials for all the plastic nursing bottles, nipples, plastic packaging, and skincare products
using palm oil–derived materials sold by our Japan Business and China Business.

■Increase in freight rates
Because the Pigeon Group was unable to obtain freight rates forecasts for 2030 based on the 1.5°C
scenario, the financial impact of freight rates increases due to climate-related policy changes could not
be estimated. However, under the 4°C scenario, the world is expected to still be dependent on fossil fuels
and unable to transition to a decarbonized society. In this scenario, the IEA has published predictions thatdemand for fossil fuels will rise and crude oil prices will be higher in 2030 than they are now. We estimatedthe financial impact on the Pigeon Group as a whole of higher freight rates based on these IEA estimates.
Table 5: Transition risks and potential financial impacts (2030)
Scenario

Transition risks (regulations and policy)

1.5°C
scenario

Climate risks and potential financial impacts

A carbon tax is applied to Pigeon’s Scope 1 or
Scope 1 & 2 GHG emissions.

A plastic tax is applied to virgin fossil fuel-based
plastics used in Pigeon products and packaging.
Virgin fossil fuel-based plastics is banned fromuse in product packaging, so Pigeon mustswitch to another packaging material. To do so,
it must either invest in new facilities or face
increased purchase costs for biomass plastic.
Manufacturers of products using virgin fossil
fuel-based plastic are obligated to collect andrecycle those products, so that Pigeon must
spend money on collecting and recycling plastic
nursing bottles and nipples.

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Financial impact (annual)(Scenario A) Only Scope 1 taxed:
Operating cost increase
Up to ¥100 million1, 2, 3
(Scenario B) Scope 1 & 2 taxed:
Operating cost increase
Up to ¥400 million1, 2, 3
Operating cost increase
Up to ¥400 million(Scenario A) Capital investment
for switch to paper packaging:¥80 million+ (Japan business only)(Scenario B) Switch to biomass
plastic packaging:Operating cost increase
Up to ¥1.3 billion4

Operating cost increase
Up to ¥800 million

Transition risks (market)

1.5°C
scenario

Operating cost increase
Up to ¥150 million2,3

Operational costs for resin manufacturer risedue to decarbonization policy, increasing theprice of plastics.

Operating cost increase
Up to ¥400 million

To reduce GHG emissions, regulations on oilpalm plantations are strengthened, which alongwith decarbonization policy increases
operational costs for palm oil producers. As aresult, the price of skincare materials derived
from palm oil increases.

Operating cost increase
Up to ¥40 million

Fossil fuel prices rise due to increased demand,increasing freight rates.

Operating cost increase¥100 million or more3Operational costs for electricity generationcompanies rise due to decarbonization policy,
increasing the price of electricity.

Market risk

4°C
scenario

1. Calculated by multiplying the Pigeon Group’s forecast Scope 1 and Scope 2 CO2 emissions in 2030 (both Scope 1
and Scope 2 emissions were estimated as 1.7 times emissions in 2021, i.e., without assuming that the
decarbonization targets in the Pigeon Green Action Plan will be achieved) by the estimated carbon prices for 2030
given by the IEA in its World Energy Outlook (140 USD/tonne CO2 for advanced economies; 90 USD/tonne CO2 foremerging market and developing economies with net zero emissions pledges, and 25 USD/tonne CO2 for otheremerging market and developing economies).
2. Calculated by multiplying the Pigeon Group’s forecast electricity costs in 2030 (estimated as 1.7 times electricity
costs in 2021, on the assumption that electricity costs will rise proportional to the growth of the Group’s business) by
the estimated electricity price rise rates given for 2030 by the IEA in its World Energy Outlook.
Financial impact amounts marked with neither “1” nor “2” are estimated based on 2021 figures, with no adjustment
for expected business growth.
3. Costs estimated for the entire Pigeon Group. Amounts not marked with “3” are calculated solely for the PigeonGroup’s nursing bottle, nipple, and skincare businesses in Japan and China.
4. Estimated for skincare products manufactured by Pigeon Home Products and PIGEON MANUFACTURING(SHANGHAI). Excludes products whose manufacture is contracted out to OEMs.

Pigeon’s strategy regarding transition risks
Assessing climate-related transition risks under the 1.5°C scenario showed that strict regulations or
policies aimed at decarbonization could have a financial impact on the Pigeon Group due to rising costs
on many fronts and the need for new facilities investment.
In order to contribute to the decarbonization of society, the Pigeon Green Action Plan includes
among its targets reducing our total Scope 1 & 2 GHG emissions to 50% of 2018 levels by 2030, and to net
zero by 2050. We continue our efforts to save energy, generate more of our own electricity withphotovoltaic systems, and purchase electricity generated from renewable sources as part of pursuingthese targets. These efforts will not only contribute to a reduction in GHG emissions, they will also help
to lessen our carbon tax liability or the amount of allowances we would have to purchase if a carbon
pricing mechanism were introduced at some point.

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12Regarding the risk of regulations on plastic usage, our initiatives toward Pigeon Green Action Plan
targets such as ensuring that packaging is at least 50% plant-derived or recycled materials by weight, and100% reusable/recyclable/compostable, by 2030 will reduce the potential financial impact of a potential
ban on virgin fossil fuel-based plastics or obligations to collect and recycle plastic packaging.
We are aware, however, that we cannot avoid or reduce all the potential financial impacts
associated with transition risks by meeting the targets set in the Pigeon Green Action Plan. We recognize
the need to prepare against cost increases due to rising electricity and plastic material prices and otherincreases in operating costs due to climate-related factors. We see reducing other costs and expanding
the proportion of high-profit products sold as the best way to absorb increased costs across our entire
business, but we may also need to consider passing certain costs along in product prices and sharing theburden with consumers. For that reason, we see a need to convey the importance and value of ourdecarbonization initiatives in our communications with consumers, actively preparing the ground so that
consumers will more readily accept costs incurred in pursuit of decarbonization.

(3) Physical risks and potential financial impact
Under both the 1.5°C scenario and the 4°C scenario, average global temperatures rising above even theircurrent levels is expected to result in both acute issues, in the form of more frequent and severe extreme
weather events and natural hazards, and chronic issues, in the form of changes in climate. For this reason,
the probability of supply chain disruption due to floods, droughts, or outbreaks of new communicablediseases is expected to rise

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