KOSÉ Corporation

Contents
I. KOSÉ and Nature
I-i. Sustainability of the KOSÉ Group
I-ii. Approach to Natural Capital
I-iii. Approach to Disclosure

II. General Requirements
III. GovernanceIII-i. Board of Directors

V. Managing Risk and Impact
V-i. Risk Management Framework

VI. Metrics and Targets
VI-i. Core Global Metrics: Dependency and impact
VI-ii. Core Global Metrics: Risks and opportunities
VI-iii. Medium-to-Long Term Targets

VII. Specific Initiatives

III-ii. Sustainability Committee

 Activities to Protect the Sea

III-iii. Respect for Human Rights andEngagement with Local Communities

 Activities to Protect Forests

IV. Strategy

IV-i. Scoping
IV-ii. Locate: Find points of contact with nature
IV-iii. Evaluate: Diagnose dependency and impact
IV-iv. Assess: Evaluate risks and opportunities
IV-v. Overall Business Strategy

 Activities to Protect Water Cleanup Activities
 Membership and Registration in Biodiversity-Related
Organizations

KOSÉ and NatureI-i. Sustainability of the KOSÉ Group

Since its foundation, the KOSÉ Group has received many blessings from nature in the course of its business activities. Having firstexpressed our corporate message “Creating Beauty in a Sustainable World” in 1991, we have since promoted unique activities toaddress a wide range of social issues from the two aspects of “for people” and “for the Earth.” In 2020, we announced our

KOSÉ
and Naturesustainability strategies, which set out the Group’s entire sustainability initiatives and targets up to 2030. In defining the themesthat we should work on, our corporate message, “Creating Beauty in a Sustainable World” serves as our guiding principle forsustainability, and our Group’s Behavioral Charter, “Mind to Follow the Right Path,” is positioned as a policy that forms the basis of
all our corporate activities. We are committed to promoting sustainability activities, recognizing that addressing social issues is oneof the most important management issues that is essential to achieve both business growth and realization of a sustainable society.

Guiding Principle for Sustainability

Fundamental Policy

KOSÉ is a company that delivers state-of-the-art value by creating beauty

The motto of Kozaburo Kobayashi, the founder of KOSÉ, is Mind to Follow thethrough sensuousness and intelligence, love and craftsmanship.

Right Path. The foundation of our corporate spirit since day one, these words are

We aspire to build a future where people possess confidence and positivity,
embracingboth themselves and others for who they are.
A future where all can live peacefully in a wholesome world.
To bring about that future,
we pledge to do our utmost through the intelligent creation of beauty.
The power of beauty can change the world.
More than anything, we believe in the power of beauty.

part of the Behavioral Charter that all KOSÉ Group employees must follow. They
also serve as the fundamental policy of the KOSÉ Sustainability Plan. We aregoverned by the Mind to Follow the Right Path motto of our founder that is part ofour Behavioral Charter, which is the core of the Group’s code of conduct. We
endeavor fully to become a company trusted and supported widely by society
through actions based on honest and trustworthy decisions and the respect of thehuman rights of each person involved.
To follow the right path

Flexibility and Honesty

requires

Each moment, each day,Couragedeepen your commitment

Patience

to staying on this pathWisdom and Effort

Kozaburo Kobayashi, Founder of KOSÉ

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I-ii. Approach to Natural Capital

The KOSÉ Group has established a policy for natural capital in its sustainability strategy. In this context, we have revised the KOSÉ Group Basic
Environmental Policy in 2024, considering the importance of protecting biodiversity, which is the foundation of the natural environment.

KOSÉ
and Nature

KOSÉ Group Basic Environmental Policy
The KOSÉ Group first expressed the corporate message “Creating Beauty in a Sustainable World” in 1991 and has endeavored to conserve the environment through businessactivities ever since. In all business activities, we work alongside employees and other stakeholders of the KOSÉ Group, including customers, suppliers, business partners,
collaborators, local communities, and the environment, to address a wide range of environmental issues with a view to realizing a future where everyone can live with peace of mind
on a healthy planet. This policy covers all our business activities, including mergers and acquisitions, and entry into new projects.

1

We will work with stakeholders to reduce the environmental
burden and to conserve the environment, taking into
consideration the entire value chain.

I. Climate Change ： We will contribute to climate change
mitigation by reducing greenhouse gas (GHG) emissions
through energy conservation, conversion to renewableenergy, and promotion of the use of low-carbon materials.

II. Water Resources ： We will work to conserve water
resources by using water sparingly, reusing water, andtaking other steps to improve water use efficiency, as wellas through wastewater quality management, developmentof products requiring less water during production and use,
and management of water sources.

2
3

III. Waste Reduction and Resource Recycling：We will work
toward realization of a circular economy by helping to reduce,
and improve the efficiency of, use of finite resources throughwaste and plastic reduction, recycling activities, and adoptionof lighter packaging materials. Our Measures for Circular
Economy.
IV. Biodiversity ： We will work to conserve and restore
biodiversity in recognition of our dependence and impact onnatural capital.
Ⅴ. Forest and Marine Conservation ： We will uphold No
Deforestation,
No
Peat,
No
Exploitation(NDPE)*
commitments. We will also advance initiatives contributing tomarine conservation. *No clearing of forests leading to the conversion ofnatural forests to agricultural or other non-forestry land use, no peatland
development, and no exploitation of communities.

Ⅵ. Pollution Prevention ： We will prevent environmental
pollution through proper management of pollutants occurring
within our business activities and thorough management ofchemical substances designated by law.

4

We will provide environmentallyfriendly products and services.
We will work to reduce the environmental burden
throughout the product life cycle from procurement ofmaterials, manufacturing, distribution, and logistics, tosale, use, disposal, and recycling.

We will comply with environmental laws and regulationsin Japan and overseas, agreements with stakeholders,industry norms, and self-imposed standards.
We will comply with the relevant laws, regulations, andagreements in every aspect of our business activities,
and we will run campaigns to improve the environment
around our business sites and actively support
environmental conservation projects.

We will establish environmental management systems
and engage in ongoing implementation andimprovement of environmental conservation activities
wherever we do business in Japan and overseas.

5

We will place importance oncommunicating with society.

6

We will enhance the environmental awareness of
employees through education and awareness-raising
activities.

We will strive to enhance society’s trust in the KOSÉGroup by disclosing environmental information to
stakeholders in a timely and appropriate manner andpromoting stakeholder understanding throughdialogue and collaboration.

We will strive to raise employee awareness based on
the idea that all activities begin with employees.

President & CEO, KOSÉ Corporation
Kazutoshi Kobayashi

We operate under an environmental management
framework centered on the Sustainability Committee,
which adheres to the KOSÉ Group Basic Environmental
Policy in its supervision of overall sustainability
management. The Sustainability Committee is chairedby the President & CEO and reports to the Board of
Directors.

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I-ii. Approach to Natural Capital
The KOSÉ Group utilizes natural capital in its business activities, including the use of water and plant-derived ingredients as raw materials forcosmetics and in the production of cosmetics, in the formulation of cosmetic paper boxes, and in the procurement of energy. In accordance

KOSÉ
and Nature

with 「KOSÉ Group Basic Environmental Policy」, the KOSÉ Group has formulated 「KOSÉ Group Biodiversity Policy」 to clarify the Group's stanceon the importance of preserving biodiversity, and is promoting initiatives in this area.
KOSÉ Group Biodiversity Policy
Our beautiful global environment is the source of healthy living for everyone. Because water and many other ingredients in cosmetics
come from nature, we benefit from the natural environment every day in our business activities. Acknowledging biodiversity andconservation and restoration as a major issue for management, we incorporate biodiversity considerations into our business activities in
keeping with the following KOSÉ Group Biodiversity Policy.

1. We will establish frameworks for ascertaining our dependence andimpact on biodiversity across the entire value chain, for assessing
biodiversity-related risks, and for avoiding or mitigating negative
impacts on biodiversity of our business activities, and we will work to
restore or revive biodiversity by implementing these frameworks.
2. Based on the results of biodiversity risk assessments and scenario
analyses, we will set performance indicators and targets for
integration into specific countermeasures and strategy.
3. Seeking harmony with the natural environment and ecosystems inareas where we operate, we will coordinate and collaborate with all
our different stakeholders to engage in activities for biodiversity
conservation.

4. We will promote supply and technological development of
products with minor impact on biodiversity across the entire
product life cycle from procurement of materials through todisposal and recycling.
5. We will comply with laws, regulations, and pacts in Japanand overseas.
6. We will actively disclose biodiversity-related information andinitiatives.
7. We will enhance the biodiversity awareness of employees
through education and awareness-raising activities.

We will continue to aim for balance between aspirations for a sustainable society and business growth bycontributing to the realization of a nature-positive society that exists in harmony with nature.
※This policy has been approved by the Board of Directors.
※This policy applies to the entire KOSÉ Group, suppliers, and other stakeholders.

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I-iii. Approach to Disclosure
KOSÉ
and Nature

Amid the international community agreeing to halt and reverse the loss of biodiversity and achieve a “nature positive”
state, the G7 2030 Nature Compact in 2021 and the COP15 Kunming-Montreal Global Biodiversity Framework in 2022
call for corporate initiatives and information disclosure on natural capital. Based on the recommendations of theTaskforce on Nature-related Financial Disclosure (TNFD), the Group has identified its dependency and impact onnature and analyzed and assessed its risks and opportunities. We will also participate in the TNFD Forum and register
as a TNFD Adopter, and promote initiatives and information disclosure concerning natural capital and biodiversity.

6General Requirements

The TNFD provides general requirements that organizations should consider when applying the framework,
regardless of sector. The following six general requirements were considered in the disclosures in this Report.
1. Application of materiality

GeneralRequirements

Ever since the KOSÉ Group first expressed its corporate
message of “Creating Beauty in a Sustainable World“ in 1991,
the Group has worked for environmental conservation
through its business activities. In this report, based on the
double materiality approach, we evaluated not only the
impact of nature-related issues on the KOSÉ Group’ businessactivities, but also the impact of our business activities onnature.

2. Scope of disclosure
In this Report, evaluation and disclosures have been made forthe KOSÉ Group’s upstream and direct operations (including
surrounding areas).
Going forward, we plan to review downstream evaluations, while
continuing with upstream investigations.

3. Location of nature-related issues
In direct operational locations, which were designated aspriority locations, evaluations were made, taking into accountthe specific geographical conditions of the location. In theevaluation of dependency and impact, we evaluated theimpact of the Gunma Factory’s operations on the surrounding
environment by using secondary data published by Isesaki
City in Gunma Prefecture, where the factory is located. We
also conducted scenario analysis on the KOSÉ INDUSTRIESCO., LTD.’s Gunma Factory to create a scenario that reflects
the characteristics of the relevant local government andlocations, and to identify potential future risks andopportunities.

4. Integration with other sustainability issues
We recognize that climate change and natural capital areinterrelated and impact each other. We also recognize therisk that the cost of procuring palm oil—a key raw
material in cosmetics—may change as yields of palm oilfluctuate in various parts of the world due to risingtemperatures. Climate change negatively impacts thenatural environment, and natural capital provides valuable
measures to counter climate change. Recognizing theimportance of considering both in a holistic manner, we
will continue to work on both.

5. Time horizons considered
In this Report, we conducted evaluations based on thefollowing time horizons: short-term of three years of less,medium-term of about 3–10 years, and long-term of 10
years or longer.

6. Engagement with indigenous peoples, local
communities and stakeholders involved in
identifying and assessing the organization’s
nature-related issues
In governance, we have made disclosures about our stakeholder
engagement process.

8GovernanceIII-i. Board of Directors
The KOSÉ Group Board of Directors meets once each month, in principle, to decide on matters stipulated in laws and regulations
and the Articles of Incorporation and important management-related matters, as well as to supervise the execution of duties bydirectors. The scope of this supervision includes the execution of business operations related to sustainability, with a focus on

Governanceclimate change, resource recycling, and biodiversity, and supervisory matters regarding the division of duties and responsibilities of
directors are defined.
The Board of Directors is chaired by the President & CEO. The Board of Directors supervises the execution of business operations,which are controlled by the Management Committee and several other subordinate bodies and committees, including the Executive
Committee, the Sustainability Committee, and the Risk Management and Compliance Committee.
General Meeting of Shareholders
Election/Dismissal

Election/Dismissal

Audit & Supervisory
Board

Supervision

Governance
Audit

Management
Committee

Resolution/
Approval

Cooperation

Audit

A

P

Resolution/Approval

Sustainability Committee
Risk Management and Compliance
Committee

Proposals

Cooperation
ReportingE

Reporting

Resolution/Approval

Cooperation

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Nomination andRemuneration Committee

Board of Directors
ReportingAccounting Auditor

Management Supervision

Election/Dismissal

Audit

Strategy Review
Meeting

Supervision
Consultation

Executive
Committee
Guidance/Instruction

Audit Office

Departments/Subsidiaries

Oversight

Business Execution10

III-ii. Sustainability Committee
Governance

The KOSÉ Group views issues related to sustainability as
management issues and has established a system forpromoting solutions to these issues. Specifically, we haveestablished a Sustainability Committee chaired by the
President & CEO, which proposes sustainability strategies tothe Management Committee for approval and reports to theBoard of Directors. The Board of Directors is responsible foroverseeing the company’s overall sustainability promotion
activities by reporting and deliberating on various material
issues related to sustainability strategies, including climatechange, resource recycling, and biodiversity. The President,
who chairs the committee, is also responsible for assessing
and monitoring risks and opportunities related to issues, andGovernancereports at least once a year at Board of Directors meetings fordiscussion and review of initiatives. In addition, based on the
KOSÉ Group’s sustainability strategies, the Sustainability
Promotion Committee has established subcommittees andprojects for each individual theme to promote more effective
cross-departmental initiatives.

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Board of Directors

Sustainability
Committee
Role: Formulate policies and strategies for sustainability
promotion activities, and determine progress
Chairperson: President & CEO
Members: Board of Directors members and executive officers

Sustainability
Promotion
Committee
Role:Implement sustainability promotion activities
throughout the Group and manage the progress of
subcommittees and projects on key themes
Chairperson: General Manager, Corporate Planning Department
Members : Managers from each department,including
affiliated companies

Sustainability
Subcommittees
and Projects
Role: Promote cross-departmental activities andcoordination to address separate themes
Members: People from relevant departments

11III-iii. Respect for Human Rights andEngagement with Local Communities
Governance

The KOSÉ Group recognizes that business activities that respect human rights are extremely important. To this end, we
formulated the KOSÉ Group Action Guidelines in 2005 and have been committed to respecting the human rights of all people
associated with the KOSÉ Group, including employees, business partners, and customers, and to acting accordingly. Respect forhuman rights is promoted in all our business activities. In 2020, we formulated the KOSÉ Group Human Rights Policy withreference to international norms such as the United Nation’s Guiding Principles on Business and Human Rights (UNGPs) to morestrongly promote human rights initiatives in the KOSÉ Group Action Guidelines. The policy has been approved by the Board of
Directors and signed by the President & CEO.
The KOSÉ Group conducts human rights due diligence in keeping with the procedures outlined in the UNGPs and based on thelaws and regulations of each country in which we do business, and since FY2021, we have conducted a Human Rights Risk
Assessment in order to determine possible negative impacts and issues to be addressed. We recognize the human rights risks forthe communities and residents near where our bases are located, including “living conditions, water access, and health impacts”
and “impacts from environmental burdens,” and we conduct our business activities with an awareness of our coexistence withlocal communities.

Governance

We have also established consultation and reporting channels for any cases of negative human rights impacts should they occur,and the number and content of such consultations and the responses to them are regularly reported to the Board of Directors.

KOSÉ Group Action Guidelines

https://corp.kose.co.jp/en/sustainability/management/
Respect for Human Rights

https://corp.kose.co.jp/en/sustainability/rights/
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StrategyIV-ⅰ. Scoping
We assessed the KOSÉ Group’s dependency and impact on natural capital in our production activities and inactivities in the upstream value chain. In the assessment, we used Exploring Natural Capital Opportunities, Risks

Strategy

and Exposure (ENCORE), the High Impact Commodity List (HICL) defined by the Science Base Targets Network(SBTN) and other tools to identify dependency and impact. Then, based on the two perspectives of importance toour business and ecologically sensitive location, we determined that water resources and palm oil have higher
priority in our production activities and raw material procurement, respectively.

Dependency

Impact

HICL

Other

Very
high
High

MediumGroundwater
Surface water

GHG emissions
Waste
Water use

Palm oil

Plant-derived materials

Non-greenhouse gases, air
pollutants
Soil pollutants
Water pollutants

Soybeans

Strategy

Low

Dilution effectVery low

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Dependency and impact results in the manufacture of cosmetics,
using ENCORE

Mica
Deep sea water
Thermal springwater
Main raw materials we use in the manufactureof cosmetics(Dependency was assessed by taking into account the sales ratioof the brands that use the raw materials and the procured
volume)14

IV-ii. Locate: Find points of contact with nature
Priority locations were selected from among the KOSÉ Group’s main

Water sites of direct operations based on the perspectives of locations that

Strategy

Ultimately, there were no
significant differences among
the sites in terms of ecologicalimportance and sensitivity.

are ecologically important and sensitive and locations that areimportant and ecologically important and sensitive to the KOSÉGroup.
Several tools were used to compare natural conditions, biodiversity

As a result of comparing the natural conditions

risks, and water risks around each manufacturing site. The results

surrounding the sites, whether or not water isshowed that there were no significant differences among the sites,

taken from groundwater, the volume of water

so they were prioritized by volume and source of water intake (Isused, the volume of wastewater discharged,

water taken from groundwater as well as tap water?), and by

and the importance of the plant within thevolume and destination of effluent (Is water discharged directly into

company, the Gunma Factory was positioned

a nearby river instead of sewage?) (High volume ≒ Highas the most important site as it is highly

dependence, high impact).

dependent on water, takes water from

Tools used・ Think Nature’s J-BMP (biodiversity map)・ WWF Biodiversity Risk Filter (used to assess the status of biodiversity atdomestic manufacturing sites)
・ AQUIEDUCT, WWF Water Risk Filter (used to assess water risk at domestic
manufacturing sites)
・ IBAT (used to assess biodiversity risk at domestic manufacturing sites)

Strategygroundwater and discharges it into rivers, andis the company’s mother factory.

KOSÉ INDUSTRIES CO., LTD.

Sensitive
locations
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Material
locations

Areas of water stress
Biodiversity
riskPhysical
Reputation

Water dependence

ADVANCE Co., Ltd.

ALBION Co., Ltd.

Gunma Factory

Sayama Factory

Iriso Factory

Kumagaya Factory

Moderate

Moderate

Moderate

Moderate

2.95
2.41

2.98
2.66
High
Water intake:Medium

2.98
2.66

3.48
2.62
High
Water intake:MediumVery highWater intake: High

MediumWater intake: Low

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IV-ii. Locate: Find points of contact with nature
Palm oil

Strategy
In terms of nature-related issues in the upstream value chain, we focused on palm oil, which is procured as araw material for cosmetics, and which is listed on the SBTN’s HICL. Palm oil-derived raw materials are used in
the Group’s main brands, which use many plant-derived raw materials, with 50% of all palm oil procured
coming from Indonesia and 30% from Malaysia.
Both Indonesia and Malaysia, which are major palm oil producers, are areas that nurture importantbiodiversity as they are home to large areas of tropical rainforests (an important biome in Southeast Asia).
However, the extensive clearance of forests to cultivate oil palms (the source of palm oil) has become a global
problem, with the deforestation encroaching on the habitats of wild animals, affecting endangered species
such as orangutans.1 On the island of Borneo, 50% of forests has been lost, primarily due to the developmentof palm plantations.2 Although the scale of development in rainforests has been decreasing in recent years, itremains a serious problem.

Strategy

1. From WWF Japan’s website

https://www.wwf.or.jp/activities/basicinfo/2484.html
2. From WWF Japan’s website

https://www.wwf.or.jp/activities/basicinfo/4339.html

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IV-iii. Evaluate: Diagnose dependency and impact
Water

Strategy

Water intake (dependency)
The KOSÉ INDUSTRIES CO., LTD. Gunma Factory uses tap water and groundwater. (2023 water intake = Tap water: 18,618
m2, Groundwater: 166,202 m2)

Tap water

Tap water is sourced from and relies on the ecosystemservices provided by the forests in the Mikuni Mountains in
Minakami Town, Tone-gun.

Groundwater

Groundwater is sourced from and relies on the
groundwater veins in the layers of gravel
underneath Isesaki City.

The Gunma Factory draws a lot of groundwater and is expected to increase its use of groundwater in the future.

Wastewater (impact)
On the other hand, wastewater is treated at a water treatment facility on the premises before being discharged into the nearby
Kasukawa River (2023 wastewater: 99,589 m2)

Impact on nearby ecosystems
Drawing water and discharging wastewater could potentially have an impact on the ecosystems around the Kasukawa River. Especiallywhen using groundwater, fluctuations in the water table and pumping up of groundwater may lead to land subsidence and decrease theamount of spring water in the surrounding area. Some organisms are dependent on spring water for their habitat and reproduction, anda decrease in springs could affect their ecosystems.
In addition, although the Iyoku Wetlands are located nearby and it is assumed that there is a connection between the wetlands andendemic and rare species unique to the region, the local government has not implemented any specific activities to protect surroundingorganisms, and we must consider the ecological impact of our factory.
Consequently, there was concern about the following impacts at the Gunma Factory from a long-term perspective.
Strategy

1. Decrease in aquatic organisms that are

Result of
document study

dependent on spring areas anddisappearance of habitats, due to land
subsidence and the decrease and depletionof spring water in surrounding river areas
caused by groundwater use

2. Deterioration of water quality to the
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Kasukawa River, into which wastewaterfrom the factory is discharged (if the BOD
of wastewater exceeds the BOD of the
Kasukawa River, there could be anegative impact on organisms)

1. A survey by the city government was unable to confirm any land subsidence.1 It also showed thatthe volume of groundwater intake in Isesaki City as a whole is on a downward trend.2 On theother hand, it was found that no studies of impacts on spring-dependent organisms had been
conducted in the past. As an indicator of biota, many spring-dependent organisms that survived in
Gunma Prefecture are endangered or extinct. The absence of spring-dependent species offreshwater fish in the Kasukawa River, which have been observed to inhabit other surrounding
rivers (with the exception of the Lefua echigonia (a type of loach) which is moderately dependent
on spring water), suggests that the spring environment has been affected in some way.3

2. Wastewater was being discharged from the factory to a destination with a BOD value higher

than the lower limit of river water near the outlet (2.3 mg/L).4 Consequently, lowering the BOD
value before discharging the wastewater could help to purify the water in the Kasuga River.
1, 2. https://www.pref.gunma.jp/uploaded/attachment/100712.pdf
3. See species listed in the Ministry of Environment’s RDB and extinct species in Gunma Prefecture, Maebashi City 2018
Natural Environment Survey (Fish and Aquatic Life) Report (Draft)
4. https://www.city.isesaki.lg.jp/material/files/group/29/R4isesakisinokankyou.pdf

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IV-iii. Evaluate: Diagnose dependency and impact
Palm oil

Strategy
Palm oil-derived raw materials are used in the Group’s mainbrands, which use many plant-derived raw materials, and our

Dependency

annual procurement of the raw material in FY2023 was 2,640
tons on a palm oil equivalent basis. In addition, the value of
products using this raw material account for more than 40% of
the Group’s sales. Our business is so highly dependent on thisnatural resource that it would be difficult to continue
manufacturing if we could not procure this item.

Strategy

We recognize that we are indirectly impacting local forest

Impactecosystems and biodiversity as well as local communities throughthe procurement of palm oil. Our response to this is described in thefollowing section, Assess.

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IV-ⅳ. Assess: Assess risks and opportunities
Water Having evaluated the dependency and impact of the KOSÉ Group’s business on natural capital in the earlier sections ofLocate and Evaluate, based on this, we diagnosed the risks and opportunities in our business in light of forecasts of future

Strategyinternational and regional biodiversity trends. The results of these assessments are used as input information in thecompany-wide risk management process.
Risk and opportunity
categories
Physical risks

Chronic

Transition
risks

Policy andregulation

Degreeof impact

Term

Water intake restrictions due to the depletion of groundwater＋Long term

Substantial cost increase due to switching to tap water－Long term

Cost increase due to switching to tap water because of restrictions on the use of groundwater (settingof upper limits through ordinances, etc.)－

Long term＋

Medium/longterm

ーMedium/longterm＋Medium/longterm

Description of risks and opportunities in business

Implement measures to improve the biodiversity of spring-dependent ecosystems, aiming for factories

Opportunities

Strategy

Protection, that exist in harmony with the surrounding ecosystem
restoration,
Support sustainable community development and biodiversity restoration in the forests in the Mikuni
andMountains, which are the source of the main course of Tone River (which supplies the tap water)
rehabilitationof ecosystems Help purify the river environment by discharging water with BOD values lower than the standard when
discharging water into the Kasukawa River

MarketImprove responsiveness to market changes (greater ethical consumption, etc.) by promoting ourcontribution to the protection, restoration, and rehabilitation of ecosystems to end users throughmarketing, etc.

＋

Medium/longterm

Reputational
capitalEnhance corporate value through our efforts for the protection, restoration, and rehabilitation of
ecosystems＋

Medium/longtermCountermeasures
We understand how important water that is nurtured by ecosystems around our factories is in the manufacturing of cosmetics. We havetherefore undertaken initiatives to minimize the amount of water used in the manufacturing process, and we have implemented measures tominimize our impact on the environment by properly treating the water we use.

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(Reduction target and results of reducing water consumption) Specifically, we have set a target to reduce our water consumption (water intake)for the responsible use of water resources by 12% by 2030 (compared to 2018, per production unit).
In the future, we will work with local communities and contribute to the maintenance of healthy ecosystems by having a symbiotic relationshipwith surrounding ecosystems, such as our employees participating in activities for the conservation of surrounding ecosystems.

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IV-ⅳ. Assess: Assess risks and opportunities
Palm oil

Strategy

Risk and opportunity
categories

Degree ofimpactTerm

Chronic

Risk of resource depletion over the long term due to the destruction of ecosystems and loss of
biodiversity＋

Medium/long
term

Acute

Disrupted supply of raw materials due to more severe extreme weather events (hurricanes, etc.)＋

Short/mediu
m/long term

Policy andregulation

Increased compliance costs as a result of new laws and regulations for environmental protection－

Medium/longterm

Reputation

Loss of consumer and investor confidence with respect to environmental destruction＋

Medium/longterm＋Medium/longterm＋Medium/longtermPhysical risks

Transition
risks

Description of risks and opportunities in business

Sustainable
Potential for long-term sustainable procurement of palm oil by promoting the procurement ofuse of natural sustainable palm oilcapitalOpportunities
MarketImproved product appeal when the use of sustainable palm oil becomes a condition of purchase for
consumers and retailers

Countermeasures

Strategy

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Risk initiatives

Opportunity initiatives

 As a countermeasure that considers the potential
impact on palm oil farmers and local processing
plants, we have established purchasing routes thatcan withstand the physical impact of climate change,such as the occurrence of large hurricanes, storm
surges, floods, landslides, and wildfires. To diversify
procurement routes, we have already secured
multiple suppliers for palm-derived raw materials, atypical material used in large quantities.

 As a strategy for realizing opportunities, we launched a working group to address palm oil issues,
as a subordinate body of the Sustainability Committee which promotes the KOSÉ Group’s
sustainability initiatives. In May 2019, we became a member of the RSPO, and in June 2019, we
also joined JaSPON, a domestic network for the sustainable procurement of palm oil.

 As part of our response to the sustainableprocurement of palm oil, we have also clarified oursustainability strategy and shared our Basic
Procurement Policy and Guidelines for Suppliers to
suppliers, and in accordance with this policy, we
conduct an annual survey of suppliers using a
Supplier Questionnaire and evaluate their
responses.

 As an example of the implementation of this strategy, in 2020, we started purchasing RSPO
certification credits through the Book and Claim model, and in 2021, we initiated the massbalance model to purchasing by obtaining SC certification at our main factories. In 2023, we
renewed our accreditation after passing a follow-up SC certification assessment at our main
factories.
 The total of procured certified palm oil and purchased RSPO certification credits through theBook and Claim model was 30.2%, an increase of 9.5 points from 20.7% in 2022.
 After attending the RSPO General Assembly in Indonesia in late November 2023, we participatedin a WildAsia tour to visit small-scale farmers and factories in Malaysia. We engaged in dialogue
with various stakeholders about the current situation and issues/needs on the ground, and we
deepened our awareness of the issues.

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IV-v. Overall Business Strategy
Strategy

To achieve sustainable management, the KOSÉ Group emphasizes not only analyzing the risks and opportunities ofexisting business models, but also confronting actual or potential nature-related issues that exist in the market andenvisioning new market challenges that leverage the KOSÉ Group’s unique strengths and creativity. To this end, we helda workshop across business divisions, aimed at creating business opportunities for a nature-positive society. The
workshop was attended by about 20 members from various sectors of the value chain, including Group companies, whoshared their knowledge, insights, and ideas on sustainability and biodiversity.

The workshop featured the following actions and explored a variety of strategies and approaches to address
nature-related issues.

1

Understand the nature-related
issues and delve deeply into theircauses2

Verbalize the value that we aredelivering to customers and society
plus the value we want to continue todeliver3

Consider approaches to resolving
the issues without compromising
our distinctive uniqueness and thevalue we provide

Strategy

We will continue to brush up on the ideas generated in the workshop with a view to their implementation andpromote initiatives for sustainable management and for the realization of a nature-positive society.
L

E

A

P
21

IV-v. Overall Business Strategy
The business environment is becoming increasingly complex and changes that are difficult to predict are affecting the industry.
In this context, we emphasize having a highly resilient strategy and an awareness and structure that can respond quickly tochange in order to adapt to change and maintain sustainable growth.

Strategy

We conducted a scenario analysis workshop to assess the resilience of our strategies to nature-related risks and opportunities.
For this scenario analysis, we utilized a 2×2 framework in accordance with TNFD guidelines.
The vertical axis of the 2x2 framework was set to “Aligning care and priority for nature in the world” and the horizontal axis
was set to “degree of ecosystem services degradation.” Among our factories, KOSÉ INDUSTRIES CO., LTD. Gunma Factory
was selected as the location with the highest degree of nature-related dependency and impact.
On this occasion, scenario analysis was conducted only for the second and third quadrants.
High

Alignment of care and priority for nature in the world

Shared directionality#1 Over-regulation scenario#2 Increased crisis scenario

Regulations are in place and care is high, but actual losses are low.
There is growing skepticism among companies that the measuresfor nature are excessive.

Natural crises are evident. They are positioned as a “major problem”
integrated with climate and are the focus of policy.
Actions for nature are urgently needed. Investment in naturepositive technologies is surging.

Low

Strategy

Marginal cost

#4 Climate change focused scenario#3 Consensus breakdown scenario

There has been meaningful progress in reducing greenhouse gas
emissions, with indirect positive effects on nature.
The strategies of companies are only to reduce short-term
adverse impacts on nature.

L

E

A

P

Degree of ecosystem services degradation

High
Disruptive cost

Natural crises are evident. However, policy and financial action isslow and halting.
Companies are incentivized to externalize the costs of temporary
stopgap measures in response to severe adverse impacts on nature.
The gap in natural capital between developing and developed
countries is widening.

Low
Conflicting directionality
Prepared by KOSÉ based on TNFD guidance22

IV-v. Overall Business Strategy[Process for creating scenarios for eachquadrant] Risks and opportunities
StrategyHigh
Shareddirectionality

Alignment of care and priority for nature in the world
Degree of ecosystem services degradation#2 Increased crisis scenario
Social change While laws and regulations
become stronger, there is a trend
toward municipal ordinances.
 Ethical consumption isaccelerating and there is demand
for sustainable products.
 There is competition for
procurement as prices ofsustainable raw materials rise.

Risks to business

Opportunities for businessCharacteristics

 Personnel expenses increase dueto the need for specialists in legal
compliance.
 Equipment expenses increase tocomply with environmental
regulations.
 Increased risk of greenwashingcriticism. Companies need tounite and work together in asustainable manner.

 Gain a market advantage bycomplying with laws andregulations earlier.
 Gain an advantage by promoting
sustainability and community
contribution ahead of othercompanies.

As social consensus is reached on
environmental considerations and they
become an “obligation” and “common
sense,” and as they become recognized
as an “obligation” and “common sense”
for companies, competition for
procurement intensifies. In addition,
securing an advantage through early
adaptation is important, and the risk ofgreenwashing increases.

#3 Consensus breakdown scenario
Social change

Strategy

LE Different people have different
levels of care in ethical issues.
 A company with a mixture ofenvironmentally friendly products
and non-compliant products hasneither a good nor bad
reputation.
(That is the standard.)

A

P

Risks to business Personnel expenses increase dueto the need to comply withcountry- and region-specificregulations, which requires
information gathering andresponse planning.
 Equipment expenses increase tocomply with environmental
regulations.

High
Destructive cost

Opportunities for businessCharacteristics

 Having a brand portfolio thatis responsive to diverse
values is widely accepted.
 Becoming a company that
embodies the spirit of “doing
what's right” will ensure
empathetic employees.

Since environmental considerations
are not an “obligation” or “common
sense,” it is possible to differentiate
oneself from other companies bytaking action for them. While the riskof greenwashing is relatively low,
there is a certain number ofstakeholders who view environmental
considerations critically.

Low
Conflicting
directionality23IV-v. Overall Business Strategy[Points common to both quadrants]
Strategy

Risks

 There is a risk of instability and increased costs in raw material
procurement due to the combined effects of climate change anddegradation of ecosystem services, as well as increased
demand from a growing global population.
 As one of Japan’s leading cosmetics companies, notconducting business and implementing initiatives that takethe natural environment into consideration, and falling behindin ESG measures, would be a major reputational risk.
 Participants voiced their concerns about damage tocorporate/brand value due to greenwashing criticism (being
flamed on social media), and recognized that society will
demand more substantive efforts in the future.

Opportunities
 KOSÉ has been working earnestly on sustainability andhas been communicating this outside the company. In
the cosmetics business, a company’s brand image isextremely important, and we believe this will be astrength for KOSÉ.
 KOSÉ’s strength is its ability to develop and propose
broad product lineups for diverse consumers, and thiswill be a strength as needs for environmentallyfriendly products and brands increase in the future.

It seems that three initiatives need to be strengthened in order to address the risks and shape theopportunities seen in the two quadrants.
sustainability
1 Secure
professionals andStrategy

conduct awarenessraising andeducational activities
for all employees.

L

E

A

P

the current international framework, trends in each
2 Givencountry, and information disclosure trends, environmental
regulations and information disclosure requirements are
expected to strengthen at least through 2030. We will therefore
invest resources to ensure that we can respond properly,
thereby reducing risk and achieving a first-mover advantage.

transparency and3 Increase
strengthen supplierengagement throughtraceability as a response to
raw material procurement
risks.

We recognized the importance of sensing changes in the market and customer base by collecting data on
laws, local government trends and ordinances, consumer trends and other information as appropriate.
24

Managing Risk and Impact

V-i. Risk Management Framework
Managing
Risk and
Impact

The global risks of the KOSÉ Group, including risks related to climate change, resource recycling, biodiversity, and other sustainability-related risks, are definedin the Risk Management and Compliance Regulations based on the enterprise risk management (ERM) framework. Risks are subdivided into major risk
categories and individual risk items from a short-, medium-, and long-term viewpoint in terms of frequency of occurrence, and the entire Group is covered using
the Risk Assessment Sheet. Once a year, we assess the impact and likelihood of an event and identify risks that need to be addressed. These assessments are
conducted by the Risk Management and Compliance Committee (the “Risk Committee”), and responsibility for them lies with the President & CEO, who chairs
the Risk Committee. Under the ERM framework, the Risk Management and Compliance Regulations clearly provide that risks are to be considered, not only fordirect operations, but also upstream (suppliers) and downstream (specific business partners, consumers, etc.) in the value chain. The process for determining
the identified risks involves the Risk Committee developing a Risk Response Plan from the Risk Assessment Sheet, which is approved by the President & CEO(chair of the Risk Committee) and then reported to the Management Committee and Board of Directors for deliberation and approval. The risks are reviewed atleast once a year.
In addition, as part of the company-wide risk management, the Sustainability Committee actively engages in discussions to resolve sustainability issues,
including climate change issues at each company, with its subordinate organizations, the Sustainability Promotion Committee—which is composed of
Sustainability Committee members from each Group company and manages progress in addressing sustainability issues across the Group—as well as six
subcommittees. Committee resolutions are reported to the Management Committee and the Board of Directors for approval. Progress is evaluated at meetingsof the Sustainability Committee, the Sustainability Promotion Committee, and its subcommittees. This process enables us to identify and visualize the risks thatare important to our organization. The management program is evaluated annually, and constant improvements are made through a PDCA cycle ofperformance and adherence to operational procedures, internal audits, and management reviews.

Board of Directors
Management Committee
Managing Risk
and Impact

Sustainability Committee

Mutualcooperation

Risk Management and Compliance Committee

Sustainability Promotion Committee
L

E

A

P

Sustainability Subcommittees and Projects
26

Metrics and Targets

VI-i. Core Global Metrics: Dependency and impact
Metrics andTargets

Metric
no.
C1.0
C1.1

A

Total spatial footprint (km2)
Extent of land/freshwater/ocean change

See Sustainability Data
0.32 km2

No change for the 2020 transition

4,663 m2

2020 as the base year

No emissions from KOSÉ factories

C2.1

Wastewater

See Sustainability Data

Waste generation and disposal

See Sustainability Data

C2.3

Plastic pollution

Response in progress

C2.4

Total non-greenhouse gas air pollutants

See Sustainability Data

Water withdrawal and consumption from areas ofwater stressSee Sustainability Data

Quantity of high-risk natural commodities sourced
from land/ocean/freshwaterxx tons

C3.1

E

Land/freshwater/ocea
n change

Greenhouse gas emissions

KOSÉ Group disclosures

Pollutants released to soil

C3.0

L

Climate change

Metric

C2.0

C2.2

Metrics andTargets

Driver of naturechangePollution/pollution
removalResource
use/replenishmentP28

VI-ii. Core Global Metrics: Risks and opportunities
Metrics andTargets

Metricno.

Driver of naturechangeMetricValue of assets, liabilities, revenue, andexpenses that are assessed as vulnerable tonature-related transition risks (total andproportion of total)

C7.0

Risk

E

A

 In direct operations, restrictions may be placed on theuse of groundwater (upper limits set by ordinances, etc.),
and the increase in costs when switching to tap water
could have a financial impact: Calculate the increase incost when all water is switched to tap water.
 In upstream, the use of palm oil is considered vulnerable:
Amount is the same as C7.0

C7.1

C7.2

Description and value of significant
fines/penalties received/litigation action in theyear due to negative nature-related impacts

Nil

C7.3

Amount of capital expenditure, financing orinvestment deployed towards nature-related
opportunities (by type of opportunity)

Response in progress

Increase and proportion of revenue fromproducts and services producing demonstrable
positive impacts on nature (with a descriptionof impacts)

Response in progress

C7.4

L

 In upstream, the use of palm oil is consideredvulnerable: Palm oil-related materials are used in about
40% of products. Consequently, approximately 120
billion yen, or 40% of sales of 300.4 billion yen in 2023.

Value of assets, liabilities, revenue andexpenses that are assessed as vulnerable tonature-related physical risks (total andproportion of total)

Opportunity

Metrics andTargets

KOSÉ Group disclosures

 In direct operations, production being stopped due todisasters is considered vulnerable: Estimation of amount tobe considered in the futureP29

VI-iii. Medium-to-Long Term Targets
Metrics andTargets

The following metrics and targets are used to manage nature-related dependency/impact and risks/opportunities.
Activity Theme

Commitment

Indicators(Target for total emission reduction vs. 2018)2030

Carbon Neutrality

2040

Scope3-30％(Target for total emission reduction vs. 2018)2030

Scope1･2･3

Net Zero

2050

Reduce use of water resources through responsible practices-12%(Production units vs. 2018)

2030

Procure sustainable palm oil toprotect the environment and growwith society.

100%

2030

100%

2030

50%

2030

-50%

2030

20 activities or more

2030

Reduce CO2 emissions

Sustainability-conscious design forplastic packaging materials
Metrics andTargets
L

E

A

P

Environmental
programs
where KOSÉ
operates

Achieveby-55％
Scope1･2

Lower theoverallenvironmental
impact ofbusiness
operations

TargetWe will coexist and prosper withlocal communities, conducting
environmental conservation activities
with a focus on production facilities,
which affect the environment.

Responsible palm oil
procurement
Use of containers andpackaging materials
aligned with the 4Rs
Usage rate of recycled
and biomass plastic
Amount of usage of
petroleum-based virginplastic
Local community
environmental
conservation activities

30

Specific Initiatives

Activities to Protect the Sea
Specific
Initiatives

SEKKISEI SAVE the BLUE Ocean ProjectProtecting Coral in Okinawa
The SEKKISEI SAVE the BLUE: Ocean Project is asummer campaign that has been run since 2009, with aportion of sales of eligible SEKKISEI brand products
purchased during the campaign period being donated tofund coral cultivation activities in Okinawa. As of
FY2023, a total of 20,211 coral polyps had been planted
over the 15 years of activities (covering an area of
122,696,123 cm2 1).

SEKKISEI SAVE the BLUE Snow ProjectContributing to the use of renewable energy forthe power of the Hakuba Valley
In 2022, we launched a winter campaign called the Sekkisei
SAVE the BLUE Snow Project. Part of the proceeds of salesof certain Sekkisei products during the campaign period
were used to aid in switching to renewable energy sources
for the Hakuba Valley, a resort in the foothills of theNorthern Alps mountain range in northern Nagano.
Switching to renewable energy helps reduce CO2 emissions.

1. Equivalent to approximately 32.7 25-meter
regulation-size swimming pools
Release dated May 8, 2024

Release dated Oct. 30, 2023

SEKKISEI 「SAVE the BLUE～Ocean Project～」

SEKKISEI 「SAVE the BLUE ～Snow Project～」https://corp.kose.co.jp/ja/news/8627/

https://sekkisei.jp/site/p/savetheblue_oceanproject.aspx

https://corp.kose.co.jp/ja/news/8298/

https://sekkisei.jp/site/p/savetheblue_snowproject.aspx
32

Activities to Protect Forests
Specific
Initiatives

BIOLISS PEACEFUL GREEN Project Treeplanting in Bioliss Forest in Fuefuki City,
Yamanashi Prefecture

Environmental Conservation Activities in
Totoro’s Forests, Dotted in and around the
Sayama Hills

KOSÉ donated part of the proceeds from sales to"Present Tree," a forest restoration project carriedout by NPO Environmental Relations. 37 employees in
Ashigawa-cho, Fuefuki City, Yamanashi Prefecture,
participated in the project, planting trees under the
direction of the Central Forestry Association. They
planted a total of 400 deciduous tree saplings(Japanese beech, Mongolian oak, Yamazakura cherrytrees, Amur cork trees, and maples). The project,which began in 2022, has planted 3,300 m2 of forest.

Totoro’s Forests are dotted in and around the Sayama Hills,
close to the Sayama Factory where we manufacture
cosmetics. We have been providing donation support withthe aim of contributing to environmental conservation at
Totoro’s Forests to protect the rich nature and many floraand fauna.

BIOLISS PEACEFUL GREEN Project

https://www.bioliss.jp/peacefulgreen/

KOSÉ Sustainability ｜ Together with the Community

ttps://corp.kose.co.jp/ja/sustainability/community/
33

Activities to Protect Water

Cleanup Activities

Participation and collaboration in national water
environment survey conducted by the National
Water Environment Map Implementation Committee

Participation and Sponsorship of the BLUESANTA Beach Cleanup Event by ALBIONPHILOSOPHY

Since 2023, we have participated and collaborated in thenational water environment survey conducted by the
National
Water
Environment
Map
Implementation
Committee. We investigate the water environment andwater resource situation in nearby areas, using our findings
to contribute to the protection of local environments.

As part of its sustainability promotion activities, ALBIONPHILOSOPHY, the brand’s flagship store, carried out cleanup
activities as a way of contributing to the local communityand environment in which it operates.
The company has registered for the Machikado Clean Day
project organized by Chuo City in Tokyo, with ALBION staff
taking part in the monthly cleanup activities.

Specific
Initiatives【Study locations】

・Sayama factory ・Gunma Factory ・Minami-Alps Factory
Iruma River
Hirose River
Midai River
Furo River
Kasu RiverKOSÉ Sustainability ｜ Efforts in manufacturinghttps://corp.kose.co.jp/ja/sustainability/environment/
production/

Release dated June 1, 2023

http://www01.rashisa.albion.co.jp/wp/wpcontent/
uploads/2023/06/20230601.pdf
34

Membership and Registration in
Biodiversity-Related Organizations
Specific
Initiatives

Sustainable palm oil initiatives
Dialogues with small-scale Malaysian farmers
aimed at solving the problems they face

Participating in Biodiversity Initiatives,

After attending in the RSPO General Assembly held inIndonesia in late November 2023, KOSÉ participatedin the Wild Asia tour. We toured small Malaysian
farms and factories and talked with various
stakeholders about the state of their work, thechallenges they faced, and their needs.

In 2024, KOSÉ joined the Taskforce on Nature-related
Financial Disclosures (TNFD) Forum to identify biodiversityrelated risks related to the Group’s business activities andto create opportunities to contribute to a nature-positive
society. We are acknowledged as an Early Adopter, aiming
for early disclosures, and we promote information
disclosure.

KOSÉ Sustainability ｜ Response to Sustainable Palm Oil

https://corp.kose.co.jp/ja/sustainability/scm/

and Promoting Group-wide Initiatives

We also support 30by30—a pledge to conserve at least
30% of our land and sea areas as healthy ecosystems—and
we have joined the 30by30 Alliance for Biodiversity. In
addition to preparing to obtain certification for the areas
where we currently conduct environmental conservation
activities as Nature-Symbiosis Sites, we are promoting
activities to reduce biodiversity risks in line with thecharacteristics of each area and encourage nature positivity.

35

KOSÉ Corporation

Published September 2, 2024