SG Holdings Group

TCFD Report
March 2022

Disclosure Based on TCFD Recommendations
Background of Initiatives
As the global transition to a carbon-free society progresses, the realization of sustainable management is becoming
increasingly important for companies. The SG Holdings Group recognized its responsibility as a group of logistics
companies handling social infrastructure, and expressed support for the Task Force on Climate-Related Financial
Disclosures (TCFD) in 2019. Seeing climate change to be a serious issue for the Group, the Group began scenario
analysis based on TCFD recommendations in July 2021. The purpose of the analysis is to ascertain the risks andopportunities related to climate in business continuity, and to take measures based on the assumption of a variety
of situations. In future, such efforts will continue in line with changes in social conditions and advancements intechnology, and be linked to business strategy, included in risk management processes and utilized to engage indeeper internal and external communication.

Reference sites▷ Ofﬁcial TCFD site (English)（https://www.fsb-tcfd.org/）▷ TCFD Consortium（https://tcfd-consortium.jp/about）

Results of FY2021 Analysis
The governance, strategy, risk management and indicators & targets for the Delivery Business and the Logistics
Business that are the Groupʼs main businesses were organized in line with TCFD recommendations. Among these,
for the strategy portion that is the center of scenario analysis, we identiﬁed the ﬁnancial impact of important risks
and considered measures to take in response.
The Group evaluated the “increased costs due to carbon tax” as being one of the important risks with a large
impact in the transition risks of the 1.5 C scenario because there are many CO2 emissions originating from fossil
fuels as a result of the Groupʼs business being centered on the Delivery Business using trucks. As a result of
estimating the effect based on measures to address climate change, the amount of carbon tax avoided due toreducing CO2 emissions exceed the expenses pertaining to measures to address climate change such as energy
conversion required for measures and capital investment costs, and it was found that promoting measures toaddress climate change has a positive impact on the Groupʼs business. The results of analysis are disclosed for eachof the TCFD recommendations as follows.
*This analysis is a simulation using forecasting data published by the International Energy Agency (IEA),
and the like, and is not an assurance of the realization of the scenarios. Furthermore, it may vary in theevent the assumed data is revised or modiﬁed.
→Please see “Reference Scenarios” on page 3 for the data used as a reference.

Governance and Risk Management Systems
The SG Holdings Group has established a CSR Committee for the purpose of creating management systems for theentire Group concerning sustainability, and the promotion of ongoing improvement activities. The committee ischaired by the Chairperson, CEO and President of SG Holdings, and meetings are held four times a year in principle.
A Groupwide specialized subcommittee (TCFD Working Group: TCFD-WG) analyzes and considers climate-relatedrisks and opportunities, and reports and submits its ﬁndings to the CSR Committee. The results considered in thecommittee are reported to the Board of Directors in a system for performing management and oversight.
Furthermore, these climate-related risks are evaluated and managed in the same manner as other business risks bysharing information with Group Risk Management Meetings that serves as the Groupʼs risk management
organization.

01

Organizational Chart of Governance Related to Climate(1) Board of Directors

Submission of matters to be resolved<Content of reports to the Board of Directors>- TCFD scenario analysis results- Progress of reduction of CO 2 emissions for
decarbonization targets(at least once per year)
etc.

Important Group meetings(2)
Management
Strategy
Meetings(3)Budget
Committee(4) Investment
Committee(6) Group Risk
Management Meetings(5) CSR Committee-

Sharing of risks andopportunities identiﬁed
Sharing of action plans

Reporting andsubmission ofcontent considered

Information sharing

Corporate
Planning-

Group
Administration
Department
Managers'
Meetings

Sharing of risks andopportunities identiﬁed
Sharing of action plans(7) Specialized
subcommittee TCFD-WG

Information sharing

Meeting Bodies in Climate-Related Governance Systems
Meeting body

Composition

Role

Meeting
Frequency(1) Board of Directors

Directors and Audit & Supervisory Board Members of
SG Holdings

Decision-making on execution of businessin generalOnce per month(2) Management Strategy
Meetings

Directors and Executive Ofﬁcers of SG Holdings,
personnel responsible for each department andPresidents of Group companies

Discussion of Group management strategy

Once per month(3) Budget Committee

Directors and Executive Ofﬁcers of SG Holdings andpersonnel responsible for each department

Reviewing and reporting important mattersrelated to the Groupʼs management plans

Once per month(4) Investment Committee

Directors and Executive Ofﬁcers of SG Holdings andpersonnel responsible for each department

Reviewing and verifying the execution of
the Groupʼs proposed investment plans

Once per month

Chairman:

Reviewing the Groupʼs CSR measures
including responses to climate change, andpromoting the creation of management
systems and ongoing improvement
activities

Four times per
year

Chairperson, CEO and President of
SG Holdings
Directors and Executive Ofﬁcers of SG
Holdings and personnel responsible foreach department(5) CSR Committee

Members:(6) Group Risk Management
Meetings

Directors and Executive Ofﬁcers of SG Holdings,
personnel responsible for each department andPresidents of Group companies

Reviewing and verifying the Groupʼs risk
management including responses toclimate change

Once per month

Person in charge:

Analyzing and reporting on the Groupʼsclimate-related risks and opportunities asan organization under the CSR Committee

Six times peryear(FY2021)(7) Specialized subcommittee
TCFD Working Group

Members:

General Manager, General
Affairs Department, SG Holdings
Personnel in charge in therelevant departments

02Strategy●Preconditions of Scenario Analysis
Scope of Implementation
The Delivery Business and the Logistics Business, which collectively account for over 90% of the Groupʼs
consolidated operating revenues, were included in the analysis.

Overview of the Groupʼs Business
Flow
Customer

Entrustment

Consignor(mainly corporate)

Collection

Consolidated Operating Revenues* FY2020 results

SGH Group

Customer

Logistics solutions

Consignee

Delivery Business
Coordination

Delivery(corporate andindividual)

Other
Real Estate 5.6%
1.4%
Logistics
11.6%

Logistics Business
Provision ofbusiness
infrastructure

Ancillary logistics
services

Scope of analysis

Real Estate Business
Other

Delivery
81.4%

Segment

Business Content

Companies Subject to Analysis

Delivery BusinessExpress package delivery service, mail express, TMS, etc.

Sagawa Express*

Logistics Business

Logistics processing, distribution center operation, internationaltransport, etc.

Sagawa Global Logistics
EXPOLANKA HOLDINGS PLC*

The risks and opportunities of SG Fielder, which operates a temporary stafﬁng business for Sagawa
Express sales ofﬁces, etc., were also included in the analysis of the Delivery Business.

Climate Scenarios
In scenario analysis, it was considered important to assume the worst situation, and 1.5 C and 4 C
scenarios with the greatest impact were used to perform analysis. Substitutes were used for analysis incases where there was no equivalent scenario data.
Reference Scenarios
Warming Scenario

1.5℃

Transition risks
Physical risks

4℃

Transition risks
Physical risks

Reference Scenarios
IEA/NZE(Net-Zero Emissions by 2050 Scenario）
IEA/SDS（Sustainable Development Scenario）*１
IEA/APS（Announced Pledges Scenario )＊１
IPCC/SSP（Shared Socioeconomic Pathways）1-1.9
IPCC/SSP（Shared Socioeconomic Pathways）1-2.6*１
IEA/STEPS（Stated Policies Scenario ）*2
IPCC/SSP（Shared Socioeconomic Pathways）5-8.5*1*2

Scenarios for less than 2 C, etc.
were used as substitutes in cases
where there was no 1.5 C
scenario.
Used as a substitute because
there was no 4 C scenario.

IEA: International Energy Agency
IPCC: Intergovernmental Panel on Climate Change

03

Time Scale
The time scale was set at 2024 for the short term, 2030 for the medium term and 2050 for the long term tomatch the ﬁscal years of executing the Groupʼs Mid-Term Management Plan and the time scale of Japanʼsgreenhouse gas emission targets.
Impact Evaluation Criteria
The impact is basically rated as “small” = 2, “medium” = 5 and “large” = 8 based on the Groupʼs risk
management evaluation criteria (evaluated from 1 to 9).

Basic evaluation of
impactWhen the three levels
are broken down for
more detailed
evaluation

Small

1

2

Small

Medium3

4

5

Large Small

Large

6

7

8

Large Small

9
Large

The Groupʼs Risk Management Evaluation Criteria
Evaluation Guideline

ImpactPeopleʼs
Health &Safety9LargeQuantitative
Evaluation

Qualitative Evaluation- Levelaffectinghuman life8

7

- Severe injury
level

6

- Minor injury
level

Medium 5- Level leading
to feelingunwell

Civil, Criminal and Administrative
Disposition

Social Criticism- Level of suspending activities at all
business sites- Level reported nationwide by major media
outlets such as newspapers and television- Level of suspending activities of a salesofﬁce- Level subject to boycotting by consumer
groups, etc.

Percentage ofLosses vs.
Operating Income
Plan

5% or more

- Level reported locally by some media
outlets- Level not reaching suspension ofactivities (improvement order/ﬁne level)- Level of receiving many complaints andinquiries at call centers

1% or more andless than 5%

4

3

Small

2

- Level not covered by the media- No injury
level- Level of warning or guidance- Level not noticed by societyLess than 1%

1* Basic evaluation is Large = 8, Medium = 5 and Small = 2, each of which can be adjusted by 1.
* Quantitative evaluation is implemented voluntarily when the anticipated size of the loss can be converted into a monetary amount.

04

●Steps of Initiatives
Climate-related risks and opportunities of the relevant businesses were analyzed using the following steps.

1

Scenario deﬁnition

Use of 1.5 C and 4 C
scenarios

2[Qualitative analysis]
Identiﬁcation ofimportant risks

Identiﬁcation of risks andopportunities, and ratingof importance3[Quantitative analysis]
Evaluation of ﬁnancial
impactCalculation of ﬁnancial
impact of important
items

4

Consideration of
response measures

Consideration of
decarbonization
measures, technology
investment, etc.

●Details of Scenario Analysis
STEP1: Scenario deﬁnition
Use of 1.5 C and 4 C scenarios
STEP2: [Qualitative analysis] Identiﬁcation of important risks and opportunities
We identiﬁed risks and opportunities anticipated to arise due to climate change as follows by referring toforecasts of socioeconomic trends related to the businesses covered. As a result, it was found that transition
risks are large in the 1.5 C scenario. We think one main factor is that the world has already begun thetransition to becoming carbon neutral, and that the impact has already been seen.

05

Identiﬁed Climate-Related Risks and Opportunities and Rating of Their Impact* In quantitative evaluation, there are some areas with a large impact in the Logistics Business due to evaluation of the percentage of
operating income.
(★) The risks and opportunities of SG Fielder, which operates a temporary stafﬁng business for Sagawa Express sales ofﬁces, etc.,
were also included in the analysis of the Delivery Business.

Climate-Related Risks and Opportunities

Increase in cost of responses such as
strengthening the monitoring systemassociated with GHG emission
regulations

Increase in operating costs associatedwith rise in carbon tax(Scope1+2)

Increase in operating costs associatedwith rise in carbon tax(Scope 3: Only consigned transport)

Increase in operating costs associatedwith rise in carbon tax(Scope 3: Other than the above)
Replacement of commercial air
conditioning and refrigerators with thoseusing natural refrigerants due tostrengthening of regulation of CFCs
* Including refrigerated vehicles

Impact of carbon border tax on crossborder e-commerce<Risks and opportunities>

Policy/Legal

Transition risks

Increase in operating costs associatedwith GHG emission regulations ininternational marine transportation

Increase in operating costs associatedwith GHG emission regulations ininternational air transportation

Time
Scale

Impact (1.5 C)

Impact (4 C)

Delivery

Logistics

2

2

Medium 2

2

Long

2

2

Short

5

8

Medium 8

8

Long

8

8

Short

8

8

Medium 8

8

Long

8

8

Short

5

Short

Delivery

Logistics

Medium 5
Long

8

Short

2

2

Medium 5

8

Long

2

2

Short

2

2

Medium 2

2

5

5

Long
Short

2

Medium

5

Long

5

Short

2

Medium

5

Long

5

06

Identiﬁed Climate-Related Risks and Opportunities and Rating of Their Impact

Climate-Related Risks and Opportunities

Time
Scale

Reduction of fuel associated withdecarbonization of vehicles (EVs, FCVs)<Opportunities>

Logistics

52

Medium 8

2

Long

8

2

Short

2

Medium 8

Short

1

2

1

2

Medium 1

2

1

2

Long

1

2

1

2

Short

2

8

2

2

Medium 5

8

2

2

Long

5

8

2

2

Short

2

2

2

2

Medium 5

5

5

5

2

2

5

5

Short
2
Reduction of energy and carbon costs
through automation and improvement ofMedium 5
efﬁciency utilizing robots, drones, etc.
<Opportunities>
Long
5

2

2

2

5

5

5

5

5

5

2

2

2

2

Medium 5

5

2

2

Long

5

5

2

2

Short

2

2

Medium 5

5

Long

2

2

Short

5

5

Medium 8

8

Long

8

8

Short

5

5

Medium 5

5

Long

8

8

Short

5

5

Medium 8

5

8

8

Cost of responding to power supply risks
such as in the event of a disasterTechnology

Long

Conversion from cardboard to returnable
packaging<Risks and opportunities>

MarketLogistics

8

Increase in power demand due to
implementation of EVs, etc. and increaseof costs associated with the introductionof renewable energy

Impact of transition to carbon-free society
on markets<Risks and opportunities>

Loss of stakeholder trust and decline inbranding power associated with delayedmeasures to address climate change (★)

Strengthening of demand from business
partners for decarbonization duringtransportation

Reputation

DeliveryLong

Increase of cost of introduction of EVs
and fuel cell (FC) forklifts

Transition risks

Impact (4 C)

Delivery

Short

Increase in costs associated withdecarbonization of vehicles (EVs, FCVs)

Impact (1.5 C)

Increased difﬁculty securing personnel
due to heightened sense of crisis aboutclimate change among younger
generations (★)

Short

Long

07

Identiﬁed Climate-Related Risks and Opportunities and Rating of Their Impact

Climate-Related Risks and Opportunities

Delivery

Logistics

Medium

2

2

2

2

Long

2

2

5

5

Sites of business partners affected bystorm and ﬂood damage(★)

Medium

2

2

2

2

Long

2

2

5

5

Suspension of business due to an entire
region being affected by storm and ﬂood
damage (★)

Medium

2

2

2

2

Long

5

5

5

5

Contribution of transportation of supplies Medium 2
in areas affected by storm and ﬂoodLongdamage (Opportunities)
2

1

2

1

1

4

1

Impact of the escalation of scale of storm
and ﬂood damage on global logistics

Acute

Impact (4 C)
Logistics

Trucks being affected during delivery due
to sudden storm and ﬂood damage (★)

Medium

2

2

Long

2

2

Medium

2

2

Long

2

5

Medium

2

2

Long

2

5

Impact of rising sea levels on sites (salesofﬁces, transfer centers) located on the
coastline

Long

2

2

5

5

Impact of rising sea levels on business
partnersʼ sites located on the coastline
(★)

Long

2

2

5

5

Impact of rising sea levels and risingtemperatures on global logistics (marinetransportation, air transportation)Long

Impact of temporary staff being affectedby disasters (★)

Restrictions on outdoor work due torising temperatures (★)
Increase of cost of air conditioning andcool express costs

Chronic

Impact (1.5 C)
Delivery

Sites (sales ofﬁces, transfer centers)
affected by storm and ﬂood damage (★)

Physical risks

Time
Scale

Impact on decline in business partnersʼ
shipments due to the impact on GDP (★)

2

5

Medium

2

2

5

2

Long

2

2

5

5

Medium

2

2

2

2

Long

5

5

8

8

Medium

2

2

2

2

Long

5

5

5

5

08

STEP3: [Quantitative analysis] Evaluation of ﬁnancial impact
Of the climate-related risks and opportunities identiﬁed in STEP2, the ﬁnancial impact was calculated for thefollowing items that have a large and quantiﬁable impact centered on the impact on transportation costs
associated with the transition to a carbon-free society such as carbon tax.

<Items subject to quantiﬁcation>A)Transportation costs: Amount of transportation-related effect arising due to carbon-free transitionB)Site operation costs: Effect of CO2 emissions and renewable energy purchasing in facilities
C)Impact of storm and ﬂood damage: Property damage caused by storms and ﬂoodingD)Air conditioning cost: Effect of air conditioning expenses caused by rising temperatures

1.5 C Scenario: Cost Effect in 2030 (Increase or Decrease)+4.9 Byen

Decrease by 5.5 billion
yen compared to if
measures are not taken-1.7 Byen

0-1.2 B
yen

-60 M
yen

2B
yen

-200 Myen-300 M
yen

900 M
yen

-500 M
yen

200 M
yen

30 M
yen

10 M
yen

200 M
yen

C

D

Total
costs

Without
decarbonization

Total impact of climate change*

Property damage caused by storms andﬂooding

Impact of carbon price on GHG
emissions not from electric power

Impact of carbon price on GHG
emissions from electric power

Cost of purchasing renewable energy

Change of cost of conventional electricpower

Use of BEVs, PHVs and FCVs

Use of biofuels

Improvement of ICE fuel efﬁciency

Gasoline and diesel prices (carbon price)

Gasoline and diesel prices (actual price)Air
conditioning
costs

Total impact of climate change

B Site operation cost

Air conditioning costs

A Transportation cost

Impactof storm
andﬂood
damage* Impact of carbon tax of $130/t-CO 2

09

1.5 C Scenario: Cost Effect in 2050 (Increase or Decrease)

Decrease by 5.6 billion
yen compared to if
measures are not taken

0
0
0
0

0

900 M
yen

D
C

Total impact of climate change*

Total impact of climate change

B Site operation cost

Gasoline and diesel prices (actual
price)

Gasoline and diesel prices (carbon
price)

Improvement of ICE fuel efﬁciency

Use of biofuels

Use of BEVs, PHVs and FCVs

Change of cost of conventional
electric power

Cost of purchasing renewable energy

Impact of carbon price on GHG
emissions from electric power

Impact of carbon price on GHG
emissions not from electric power

Property damage caused by storms
and ﬂooding

Air conditioning costs

Without

Total
costs

decarbonizationAir
conditioning
costs
Impactof storm
andﬂood
damageA Transportation cost

13.2 B
yen
700 M
yen

0

60 M
yen
90 M
yen

1.1 B
yen

7.6 B
yen
4.7 B
yen

* Impact of carbon tax of $250/t-CO 2

10

4 C Scenario: Cost Effect in 2030 (Increase or Decrease)

0

2.3 B
yen
900 M
yen

Total impact of climate change

Total
costs

Air conditioning costs

Total impact of climate change

Gasoline and diesel prices (actual
price)

Gasoline and diesel prices (carbon
price)

Improvement of ICE fuel efﬁciency

Use of biofuels

Use of BEVs, PHVs and FCVs

Change of cost of conventional
electric power

Cost of purchasing renewable energy

Impact of carbon price on GHG
emissions from electric power

Impact of carbon price on GHG
emissions not from electric power

Property damage caused by storms
and ﬂoodingAir
conditioning
costs

D
C

Air conditioning costs

Property damage caused by storms
and ﬂooding

Impact of carbon price on GHG
emissions not from electric power
Impact of carbon price on GHG
emissions from electric power00

Impactof storm
andﬂood
damageB Site operation cost
A Transportation cost

Cost of purchasing renewable energy
Change of cost of conventional
electric power

Use of BEVs, PHVs and FCVs

Use of biofuels

Improvement of ICE fuel efﬁciency
Gasoline and diesel prices (carbon
price)
Gasoline and diesel prices (actual
price)

ICE: Internal Combustion Engine; BEV: Battery Electric Vehicle; PHV: Plug-in Hybrid Vehicle; FCV: Fuel
Cell Vehicle

*

1B
yen

0
0
0
0
0

0

B Site operation cost

200 M
yen
200 M
yen

Total
costs

D
C

Air
conditioning
costs

Impactof storm
andﬂood
damageA Transportation cost

900 M
yen
600 M
yen

0
0
0
0
0

20 M
yen
40 M
yen

0
0
200 M
yen

4 C Scenario: Cost Effect in 2050 (Increase or Decrease)* The above analysis of ﬁnancial impact is a simulation using forecasting data made public by the IEA,
and the like, and is not an assurance of the realization of the scenarios. Furthermore, it may vary in
the event the assumed data is revised or modiﬁed.

11

STEP4: Consideration of response measures
Through STEPs 1-3, we identiﬁed the Groupʼs risks and opportunities associated with climate change, andascertained the size of the impact and the ﬁnancial impact. In addition to continuing existing initiatives aimed
at reducing emissions, we perceive climate-related risks and opportunities to be important management
issues, and will consider effective measures aimed at the mitigation of medium- to long-term negative impact
and the creation of new business opportunities.
Major Risks
Category

Risk

Future Action

Policy/Legal

Increase in operating costs associated with risein carbon tax(Scope 1, 2 and 3)

Formulation of Decarbonization Vision and CO2 emission reduction
targets in March 2022. Execution and continuation of emission
reduction measures.
<Targets>- 2030: 46% reduction (compared to FY2013)- 2050: Aim to become carbon neutral<Measures>- Introduction of environmentally friendly vehicles- Procurement and generation of electric power from renewableenergy sources- Creation and utilization of CO2 offset credits such as forest credits
etc.

Technology

Costs associated with decarbonization ofvehicles (EVs, FCVs)- Utilization of subsidies when introducing environmentally friendly
vehicles- Consideration of means to procure alternative fuels such as nextgeneration biofuels

Technology

Increase in power demand due to
implementation of EVs, etc. and increase ofcosts associated with the introduction ofrenewable energy- Installation of solar panels in logistics facilities owned by theGroup, promotion of private power generation, consideration ofmeans to generate renewable energy within the company

Acute

Sites (sales ofﬁces, transfer centers) affected bystorm and ﬂood damage- Risk analysis of major sites- Consideration of medium- to long-term impact of climate change
when relocating and establishing sites

Major Opportunities
Category

Opportunity

Efﬁciency of
resources- Reduction of the number of vehicles and distance traveled through the creation of an efﬁcient transportation network
such as the establishment of new transfer centers- Reduction of distance traveled and improvement of fuel efﬁciency through optimization of delivery routes utilizing AI

Energysources- Reduction of fuel through decarbonization of vehicles (EVs, FCVs)

Market- Access to funding related to green projects such as green bonds- Acquisition of trust of customers and enhancement of corporate value through early implementation of measures toaddress climate change

Resilience- Contribution to transportation of supplies in areas affected by storm and ﬂood damage

12

Indicators and Targets
The transportation sector including private vehicles accounts for approximately 20% of Japanʼs CO2
emissions. As the transition to a carbon-free society accelerates, the SG Holdings Group has announced a“Group Decarbonization Vision” as a statement of intent to engage in decarbonization. It explicitly outlines
medium- to long-term emission reduction targets in line with Japanʼs targets, and the direction of emission
reduction measures, and we will implement measures as a logistics group handling social infrastructure.
Scope

Targets

Scope 1 and 2

2030:
2050:

Scope 3Engage in reduction of emissions throughout the entire supply chain

46% reduction in CO2 emissions (* compared to FY2013)
Aim to become carbon neutral* Reduction level and prerequisites- Reduction level:

In line with Japanʼs emission reduction targets
Including offsets using carbon credits, etc.

- Prerequisites:

Realization of the 2030 power generation mix* in the Sixth Strategic Energy Plan(* 59% non-fossil: 36-38% renewable energy, 20-22% nuclear power, 1% hydrogen andammonia)

If there are changes in the reduction level of prerequisites due to social conditions, the emission reduction
target may be reviewed.

Reference sites▷ Decarbonization Vision(https://www.sg-hldgs.co.jp/csr/mission/environment/climate/)▷ Please refer to ESG BOOK for details of greenhouse gas emissions data
(https://www.sg-hldgs.co.jp/ir/library/esg-book/)[Revision history]
1st Edition:

30/03/2022

2nd Edition:

15/06/2022

Updated “impact of temporary staff being affected by disasters,” and “restrictions on
outdoor work due to rising temperatures” (Page 8)13