__ GREEN
GreenBusinesses
BUSINESS

Green Businesses Based on TCFD Recommendations
Designed to Create Happiness for the Future    If we do not take action, the average global temperature is projected to rise to 4°C above pre-industrial levels by the turnof the century, which would be devastating to the global environment. A global movement to prevent this catastrophic
outcome by limiting the rise in the average global temperature to 2°C above pre-industrial levels was kicked off in 2015
with the adoption of the Paris Agreement.* Accordingly, combating climate change is becoming particularly importantamong environmental, social, and governance (ESG) issues. This situation prompted MARUI GROUP to declare its support for the recommendations of the TCFD and to begin taking concrete action.
* An international agreement for combating climate change adopted at the 2015 United Nations Climate Change Conference held near Paris, France

Future-Oriented Action
In August 2018, Greta Ernman Thunberg, a then-15-yearold girl from Sweden, held up a sign urging students
around the world to take part in a school strike to promote
the fight against climate change. Later taking to the stage
at the World Economic Forum in January 2019,
Ms. Thunberg delivered a speech calling for action among
younger generations worldwide, stating “Since the climate
crisis has never once been treated as a crisis, people aresimply not aware of the full consequences on our everyday
life… I want you to act as you would in a crisis. I want youto act as if our house is on fire. Because it is.” This speech
inspired people of her generation across the globe to takepart in a series of simultaneous “Fridays for Future” demonstrations, spreading support for her cause.

Ms. Thunberg passionately
asserting that it is her generation
who will be most threatened by
the climate crisis
Photograph provided by CTK NEWS;
Kyodo News Images Inc.

climate change in order to facilitate ESG-minded institutional investors in making appropriate investment decisions. The final TCFD report, Recommendations of theTask Force on Climate-related Financial Disclosures, wasreleased in June 2017.
In November 2018, MARUI GROUP became the firstJapanese retailer to declare its support for the recommendations of the TCFD. This move was meant to allow
for accurate assessments and verification of financial
impacts on our green businesses. As of August 31,
2019, more than 800 institutions had announced support for these recommendations, including theGovernment Pension Investment Fund, which manages
the world’s largest portfolio of pension funds, and theMinistry of the Environment in Japan as well as financial,non-financial, government, international, and publicsector organizations in 50 countries across the globe.
Concern regarding climate change is notably high inJapan, as seen in theestablishment of theTCFD Consortium.
Global Warming Leading Up to the End of
the 21st Century(°C) 6.0

One of simultaneous “Fridaysfor Future” demonstrations
held in over 2,000 locations in
125 countries with more than
1.6 million participants
Photograph provided by Deutsche
Presse-Agentur; Kyodo NewsImages Inc.

Declaration of Support forRecommendations of TCFD

Let’s join hands to build a happier future
for current and future generations!

50

Following the adoption of the Paris Agreement inDecember 2015, there was a rise in institutional investors evaluating the potential impacts of climate changeon the assets of investees.
Amid this trend, the TCFD was established by theFinancial Stability Board based on the intentions of theG20. The goal of this task force was to encourage companies to disclose financial information pertaining toModel resultsfor past
periods
4.0

Averagetemperatureof 4°C above
pre-industrial
levels resulting
from inaction

RCP2.6*
RCP8.5*

2.0

Averagetemperatureof 2°C above
pre-industriallevels

0.0

MARUI GROUP’s
goal (averagetemperature of1.5°C above
pre-industrial
levels)–2.0
195020002050

2100* Please refer to Figure 1 on page 52 for more information on the RCP2.6 andRCP8.5 scenarios.
Source: P repared by MARUI GROUP CO., LTD., based on Summary for Policymakersof the Working Group I of IPCC Fifth Assessment Report released byIntergovernmental Panel on Climate Change (official Japanese-languagetranslation provided by the Japanese Meteorological Agency)

51

Green Businesses
Climate Change-Related Risks and Opportunities    MARUI GROUP has identified and organized the climate change-related risks and opportunities faced in its green businesses, which are a central part of its inter-generational businesses, based on the four recommended thematic areas fordisclosures of the TCFD. In identifying these risks and opportunities, we used the multiple scenario analysis methodology
recommended by the TCFD to analyze three potential scenarios leading up to 2050 in order to measure the financial
impact on our green businesses in 2050.
For more information on the four recommended thematic areas for disclosures of the TCFD, please refer to “TCFD Management” on page 54.

Enhancement of Efforts Targeting 1.5°C Scenario
Based on Scenario Analysis

Figure 1: Analyses of Three Scenarios
and Projected Risks
End of 21st Century
High physical risks
High impact on theenvironment

4°C Scenario

temperatures below 1.5°C above pre-industrial levels.
(see Figure 1).

Risks and Financial Impacts of 1.5°C Scenario
Risks associated with climate change include damages toassets from extreme climate events and other physicalrisks as well as transition risks brought about by changes
in government policies and regulations. In the 1.5°C scenario, transition risks will be higher than physical risks,
especially when compared to the 2°C and 4°C scenarios.
MARUI GROUP has defined those risks associated withthe 1.5°C scenario that may have a particularly highimpact on the Company. These risks primarily fall into
two categories: (1) increases in renewable energy costsand (2) the introduction of a carbon tax in Japan.
MARUI GROUP has put forth a target of sourcing 100%of the electricity used in its business activities from renewable sources by the fiscal year ending March 31, 2031,
along with two intermediary goals. Accordingly, increases inrenewable energy costs will have a significant financial
impact (see Figure 2). Our climate change scenario estimates that the price of renewable energy will peak around

RCP8.5, IPCC

Average global temperature
4°C above pre-industrial levels

2°C Scenario(Low stability scenario)
IPCC scenario based on targetof keeping warming below 2°C
above pre-industrial levels

52

Average global temperature
below 1.5°C
above pre-industrial levels

Increases in renewable energy costs: Approx. ¥0.8 billion
Estimates based on current renewable energy prices*• Large-scale power providers focusing on hydropower: +¥3–¥5/kWh• Blockchain: +¥2.5/kWh

SR1.5, IPCCScenario based on IPCC
special report

Annual electricity
consumption

200 million kWhApprox. ¥0.8billion

Maximum increase estimated to be around ¥4/kWh* Estimates use projections for peak-hour usage around 2030

Introduction of carbon taxes: Approx. ¥2.2 billion

Total Electricity
Consumption
200 million kWh100%• Procurement frompower companies

FY2019(1 store)

FY2020(8 stores)

20%

FY2021(13 stores)

Risks

Opportunities

Increase in renewableenergy costs

Co-creation withpower retailers+¥4 × 200 million kWh= ¥0.8 billion

Reduced carbon taxes +Increased card revenues= ¥4.2 billion

Introduction ofcarbon taxes

Entry into power
retailing business¥20,000 × 110,000 tons
= ¥2.2 billion

Reduced intermediary
costs = ¥0.3 billion¥3.0 billion¥4.5 billion

Minna-denryoku,etc.

Directprocurement
and sales ofelectricity

110,000 tons

Approx. ¥2.2billion

Further increase leading to taxes of around

Message from an Employee ¥20,000/t-CO2 in 2050

Co-creation with power retailers: Approx. ¥4.2 billion

Ratio ofrenewableenergy usage
1%

Figure 5: Risks and Opportunities in Green BusinessesHideyuki Inami

Total Electricity
Consumption
170 million kWh50%• Procurementfrom powercompanies• Directprocurement
by MARUIGROUPAs explained, the financial benefits of opportunities forgreen businesses under the 1.5°C scenario will amountto ¥4.5 billion, exceeding the financial impacts of ¥3.0
billion from risks (see Figure 5).

Annual CO2 emissions

Estimates based on IEA’s Sustainable Development Scenario
Projections for carbon taxes in developed countries• ¥6,000/t-CO2 in 2025 • ¥14,000/t-CO2 in 2040

Figure 4: Financial Benefits from OpportunitiesSustainable
Development Scenario,
IEA
Sustainable IEA scenario
based on the Paris Agreement

1.5°C Scenario

Figure 3: Financial Impacts of Risks

Opportunities of Green Businesses Exceeding Risks

Total: ¥3.0 billion

Scenario Employed

RCP2.6, IPCCHigh transition risks
High impact fromregulations

MARUI GROUP is encouraging EPOS cardholders to switch
to renewable energy. This switch would increase the numberof cardholders using their EPOS card to make recurring payments along with the number of Gold cardholders, thereby
contributing to higher LTV for credit cards and consequentlyan increase in profit of approximately ¥2.0 billion.
In addition, if we achieve our goal of sourcing 100%of our electricity from renewable sources by 2030, wewould not be impacted by potential carbon taxes, reducing costs by around ¥2.2 billion. We also expect to beFigure 2: Roadmap toward Goal ofUsing 100% Renewable Energy(High warming scenario)
IPCC scenario based on
maximum greenhousegas emissions

Average global temperature
2°C above pre-industrial levels
as consented to underParis Agreement

Benefits of 1.5°C Scenario

able to lower costs by approximately ¥0.3 billion byentering into the power retail business. The combined
financial benefits of these opportunities would amount to¥4.5 billion (see Figure 4).
Furthermore, we are examining the possibility of introducing large-scale storage batteries at stores that could becharged at night to reduce electricity bills. The estimatedbenefit would be a reduction of around 7% in annual per
store electricity bills.

Green businesses

The TCFD encourages all companies to identify thefuture climate change-related risks and opportunities
they may face and to evaluate their financial impact.
It also recommends disclosures based on the four thematic areas of governance, strategy, risk management,and metrics and targets.
Based on these recommendations, MARUI GROUP
performed scenario analyses using three scenarios for2050: (1) the world with average temperatures 4°C
above pre-industrial levels described by theIntergovernmental Panel on Climate Change (IPCC) andthe International Energy Agency (IEA), (2) a world withaverage temperatures 2°C above pre-industrial levels
based on the Paris Agreement, and (3) the world illustrated in the IPCC special report on the impacts of global
warming of 1.5°C above pre-industrial levels.
Recognizing how damaging climate change would bein a world with average temperatures 4°C above preindustrial levels, we realized the importance of­contributing to a global movement for keeping average

2030 and will reach levels as high as ¥4 per kWh.
Calculated based on the Company’s current annual electricity consumption level of 200 million kWh, such prices would
result in a total increase in costs of approximately ¥0.8 billion. Meanwhile, the introduction of a carbon tax in Japan
could have an impact on MARUI GROUP amounting toaround ¥2.2 billion (see Figure 3).

• Procurementfrom powercompanies• Directprocurement
by MARUI
GROUP

FY2031(All stores)

Increase in recurring payment transactions due to customers
switching to renewable energy▼
Rise in EPOS Gold cardholders▼Higher credit card LTVApprox.
¥2.0 billion

Reduction in carbon taxes from achieving zero CO2 emissions

Approx.
¥2.2 billion

Entry into power retailing business: Approx. ¥0.3 billion
Direct procurement as power retailer
Reduction in intermediary costs(commissions): Approx. 10%

Annual power costs
Approx. ¥3.0 billion

Approx.
¥0.3 billion

RE Development Section
Eco Management Division,Planning Department
MARUI FACILITIES Co., Ltd.

The RE Development Section was established after we introduced renewable energy, and this section has been garnering
attention within the Company. The rise in environmental awareness among employees has led to an increase in the number ofpeople wanting to work in the RE Development Section. On apersonal note, my son once came home boastful that he had
won a commendation in his junior high school speech competition by talking about how his dad’s job is contributing to theenvironment through renewable energy. I didn’t expect this position to elevate my position in my own family.

Total: ¥4.5 billion

53

Green Businesses
TCFD Management

Strategy The four thematic areas recommended for disclosures by
the TCFD are governance, strategy, risk management,and metrics and targets. Based on these recommendations,
MARUI GROUP is enhancing the information it discloses
through a variety of media, including its annual securities
reports, co-creation management reports, co-creation sustainability reports, ESG data books, and corporate website.
In addition, the TCFD recommendations are used as abenchmark for assessing the appropriateness ofMARUI GROUP’s climate change response activities.

MARUI GROUP is enhancing its efforts to realize the1.5°C scenario for climate change. To this end, theCompany tracks the impacts of climate change-relatedrisks and opportunities on its business activities andformulates and discloses strategies accordingly. In addition, analyses of various trends will be performed periodically in the future in order to revise assessments anddisclose information on risks and opportunities related toother areas.
Risk Management Governance The Sustainability Committee was established in May
2019 as an advisory body to the Board of Directors
tasked with examining and deliberating on basic policies
and important items regarding climate change. This committee is chaired by the president and representative
director and features members including executive officers and the chairman of the Central Executive Committeeof MARUI GROUP UNION. Under the SustainabilityCommittee, the Environment and CSR Committee wasformed as an organization for managing relevant risks
and carrying out the instructions of the SustainabilityCommittee. The members of this committee include officers from Group companies (retailing, facility operation,distribution, building management, etc.) and from MARUIGROUP UNION. Through this framework, we arestrengthening governance of climate change-related
activities by making business strategy and investment
and financing decisions based on comprehensive deliberations taking into account the MARUI GROUP
Environmental Policy and important items pertaining toclimate change.
Newly Established Sustainability Committee

MARUI GROUP performs scenario analyses to track andaccess the impacts of climate change on its business andidentify climate change-related risks and opportunities.
The identified risks and opportunities are managed interms of strategy formulation and individual business
operations through a promotion system centered on theSustainability Committee. In addition, the results of discussions at the Environment and CSR Committee are periodically reported to the Sustainability Committee, which
deliberates on this information. Reports and advice areprovided to the Board of Directors as necessary for specific items. Going forward, strategies and measures will be
examined based on a myriad of factors. External factors onwhich information will be shared include climate change
and other trends that may impact corporate strategies aswell as legal and regulatory revisions. Internal factors
examined will include progress in the measures of Group
companies and future risks and opportunities.

Renewable Energy with Visibility of Producers
In its green businesses, MARUI GROUP has set atarget of sourcing 100% of the electricity it uses fromrenewable sources by the fiscal year ending March 31,2031. To accomplish this mission, we have begunswitching to renewable energy at all Marui and Modi
stores across Japan, beginning with Shinjuku Marui
Main Building. Furthermore, MARUI GROUP concluded a business and capital alliance with Minnadenryoku, Inc., the first company in the world torealize the traceability of electricity with its proprietary
blockchain technology, in December 2018. We havethereby created a framework for procuring renewableenergy in a consistent and prioritized manner.
The future is projected to see society as a whole
embracing decarbonization. MARUI GROUP will

Provision of Sustainable Options
Referral of customers considering switching to renewable energy through MARUI GROUPMARUI GROUPMARUI GROUP has set medium-term, long-term, andultralong-term targets for its green businesses.

6.9 millioncardholders(As of March 31, 2019)

ReportRealization of Lifestyles with Visibility of Producers

Eiji Oishi

54

CEOMinna-denryoku, Inc.

Committee Membershipwww.0101maruigroup.co.jp/pdf/committee_members_en.pdf

Instruct

Environment andCSR Committee

Pay monthly electricity bill with credit card

Message from a Business Partner  or more information, please refer to “1. Green Businesses—Options forFCoexistence with the Global Environment” on page 49.

Report / Advise

Sustainability
Advisors

Customer

Metrics and Targets 

Board of Directors

Sustainability
Committee

Minna-denryoku, Inc.
Recommend switch to renewable energy

EPOS card

Ordinary General
Meeting ofShareholders

Nominating andCompensation
Committee

contribute to this trend by using renewable energy
itself and also by encouraging the 6.9 million EPOS
cardholders nationwide to switch to renewableenergy. These efforts will be complemented by ascheme that allows customers to pay their monthly
electricity bills with their EPOS card. In addition tothe benefit for customers of accruing EPOS card
points when they pay their monthly power bills, thisscheme also makes it possible for them to learn
exactly from which producer the renewable energy
they use each month is procured, making the producers visible. In this manner, we are providing sustainable options for coexistence with the global
environment while simultaneously investing in support for local power producers.

With its proprietary blockchain technology, Minna-denryoku was the first company in theworld to commercialize an electricity traceability system, thereby giving visibility to power
producers. In other words, we created new value in the form of connections between theproducers and consumers of electricity. However, there were not many that realized the valueof our efforts. MARUI GROUP was the first to recognize this value, promptly switching to ourrenewable energy with the visibility of producers at Shinjuku Marui Main Building. That store
is now linked to various power producers. I hope to work together with MARUI GROUP tocreate sustainable businesses in the future. Efforts in this regard could include planningpower producer tours for store customers or encouraging EPOS cardholders to use ourrenewable energy with the visibility of producers.
Furthermore, I aim to evolve this scheme to achieve traceability of food, clothing, andother products to realize lifestyles with the visibility of producers in order to contribute to asociety in which the work and commitment of producers is properly recognized.

MARUI GROUP Environmental Policy
www.0101maruigroup.co.jp/en/sustainability/theme03/
environment_01.html#environment155