Information Disclosure Following the TCFD Recommendations

Scenario Analysis
Morinaga Group’s Important Risks
Morinaga Group’s Important Opportunities
Basic Approach to Initiatives and Progress

The Morinaga Group recognizes that climate change is an important issue that affects the continuity of its operations and sustainable growth. In April 2022, we endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), which was established by the Financial Stability Board (FSB). Since then, we have been addressing the TCFD recommendations, including conducting climate change scenario analysis.

Area	Details
Governance	At the Morinaga Group, important sustainability matters are overseen by the Board of Directors, under which we have established the Sustainability Committee chaired by Representative Director, President. This Committee forms the foundation for our company‑wide structure for examining and promoting sustainability initiatives. Under the Sustainability Committee, five subcommittees have been established by theme, each conducting examination and promotion activities by leveraging expertise in their respective areas. For climate change, natural capital, and biodiversity, we established the “TCFD Subcommittee”* in FY 2021, chaired by the Director, Senior Executive Officer, responsible for the Sustainable Management Division. In line with the recommendations of TCFD and TNFD, the subcommittee analyzes climate‑related risks and opportunities, assesses dependencies and impacts on natural capital, sets metrics and targets, and examines, promotes, and monitors progress on related initiatives. The results of the subcommittee’s examinations and its progress are regularly reported to the Sustainability Committee, where they are deliberated. Among the matters deliberated by the Sustainability Committee, those that may have important implications for the Group’s management strategy, business plans, or investment decisions are reported to the Board of Directors twice a year. Based on these reports, the Board approves policies, issues necessary instructions, and continuously oversees the status and progress of the initiatives. *The “TCFD Subcommittee” was renamed the “TCFD/TNFD Subcommittee” in FY2022.
Strategy	In the process of identifying the risks and opportunities of climate change, Morinaga established the 4℃, 2℃,and 1.5℃ scenarios for its domestic food manufacturing business. Based on the information released by the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA), we use these scenarios to analyze the impacts in Japan in 2030 and 2050. As a result, the 4℃ scenario identified the risks of a reduction in quality of agricultural produce, changes in yield caused by changes in weather patterns, and increasing frequency of extreme weather events. The 2℃ and 1.5℃ scenarios found that rising costs due to stricter energy conservation policy and carbon taxes will have a larger impact on business operations. In response to these risks, we will strive to reduce our own CO₂ emissions and address the risks and opportunities that are important.
Risk Management	The Morinaga Group established the Total Risk Management Committee, which is chaired by the Representative Director, President. This committee identifies risk, evaluates risk‑level, considers countermeasures, and monitors progress, while ensuring the appropriate management and response to risks. Climate‑related risks are also appropriately managed as management risks within the same Committee, and responses are promoted. In addition, risks identified through analysis and evaluation under TCFD and TNFD are managed by the “TCFD/TNFD Subcommittee,” and are deliberated by the Sustainability Committee. The matters deliberated by both committees are reported to the Board of Directors, which oversees the status of risk management. Through these processes, our Group appropriately manages company‑wide risks at the management level and operates our business accordingly.
Indicators and targets	To mitigate climate change risks, the Morinaga Group has established targets to reduce CO₂ emissions (Scope 1 and 2) by 30% from FY2019/3 in Japan by 2030 and to achieve net-zero GHG emissions by 2050. We are actively improving energy efficiency at our production sites (preventing air leaks, adding insulation, etc.), by upgrading our infrastructure and utilizing new and efficient equipment, thus highlighting our shift away from fossil fuel. At the same time, we are considering the introduction of renewable energy and implementing measures to achieve these targets.

Scenario Analysis

We established the 4℃, 2℃ and 1.5℃ scenarios for Morinaga & Co., Ltd.’s domestic food manufacturing business to analyze the impacts in 2030 and 2050.
We referenced scenarios of government institutions and research institutes for the identification and evaluations of climate change risks and opportunities and for the analysis of the impact on the Morinaga Group’s business, strategies and financial standing caused by these risks and opportunities.

*Referenced scenarios, etc.
4℃	Stated Policy Scenario (STEPS)（IEA、2020） SSP5-8.5（IPCC 2021）(Equivalent to former RCP8.5)
2℃	Sustainable Development Scenario (SDS)（IEA、2020） SSP1-2.6（IPCC 2021）(Equivalent to former RCP2.6)
1.5℃	Net Zero Emission by 2050 case (NZE2050)（IEA、2021） SSP1-1.9（IPCC 2021）

Morinaga Group’s Important Risks

Category	Sub-category	Risk factors	Impact on operations	Importance	Response
Transition risks	Policy and regulation	Spread of GHG emissions pricing and stricter GHG emissions reporting obligations	Rising energy costs and logistical costs caused by the introduction of carbon taxes (Medium to long term)	Medium	Consider and implement ways to reduce CO₂ emissions by 30%^1 by 2030 and to achieve net-zero GHG emissions by 2050^2 Promote visualization of CO₂ emissions at factories, implement energy conservation measures, and establish highly efficient production system through reorganization Consider use of renewable energy Establish more efficient logistics system/transport and deliveries with fewer environmental impacts (improve loading rate using modal shift and joint deliveries with other companies, design product specifications for high loading rates, and introduce demand forecasting using AI for optimal inventory allocation and upgrade supply operations, etc.)
		Stricter energy conservation policy	Rising cost of capital investment for manufacturing facilities due to the company’s response to energy conservation driven by stricter energy conservation policy(Medium to long term)	Large
		Decarbonization-related mandates and regulations on existing products and services	Rising packaging costs due to regulations on the use of plastics derived from petroleum(Medium to long term)	Large	Promote raw materials procurement in consideration of the environment in line with Procurement Policy and Supplier Guidelines Promote initiatives aimed at a 25% reduction in plastics usage for in Jelly products by 2030^3 Expand the use of biomass plastics Promote initiatives aimed at 100% sustainable procurement of cacao beans, palm oil and paper by 2030^4
	Markets	Changes in consumer behavior	Increased environmental awareness among consumers leads to a decline in sales due to consumer defection from products that have been slow to respond to the environment and a decrease in the adoption of such products by retailers(Medium to long term)	Large
Physical risks	Acute	Rising severity and frequency of extreme weather, such as cyclones and flooding	Loss of opportunities and decrease in sales due to the suspension of procurement, production, logistics, and sales activities caused by damage to factories, warehouses, and employees due to extreme weather, disruption of logistics, etc.(Short to long term)	Medium	Continuously review BCP for natural disasters and promote BCM Design buildings and electrical equipment at the time of manufacturing base relocation or new establishment based on hazard map Decentralize manufacturing bases of mainstay products Purchase raw materials from multiple suppliers (or multiple sites)
Physical risks	Chronic	Changes in rainfall patterns and extreme changes in weather patterns	Rising raw material and development costs due to poor crop quality and reduced yield caused by changes in weather patterns and frequent occurrences of extreme weather(Short to long term)	Large	Promote raw materials procurement in consideration of the environment in line with Procurement Policy and Supplier Guidelines Promote initiatives aimed at 100% sustainable procurement of cacao beans, palm oil and paper by 2030^*4 Purchase raw materials from multiple suppliers (or multiple sites) Strengthen collaboration with suppliers and increase communication aimed at risk response Consider shifting milk ingredients to plant-based materials

*1Scope 1 and 2 (domestic Group consolidated basis; compared to FY2019/3)
*2Group consolidated basis
*3Target: usage of plastics in packaging materials (intensity, compared to FY2020/3, including shift to biomass plastics)
*4Group consolidated basis; paper covers product packaging
*The periods described in “Impact on operations” are the periods during which risks and opportunities are expected to materialize.

Morinaga Group’s Important Opportunities

Category	Opportunity factors	Impact on operations	Importance	Response
Resource efficiency	Development and use of efficient production and distribution processes	Declining manufacturing and transport costs due to development of efficient manufacturing and distribution processes(Short to long term)	Large	Promote efficient production activities by rebuilding the production system and creating smart factories^1 Promote initiatives aimed at 70% reduction in food loss and waste by 2030^2 Establish more efficient logistics system/transport and deliveries with fewer environmental impacts
Products and services	Changes in consumer preferences	Rising demand for eco-friendly products amid increasing environmental awareness among consumers including Generation Z(Short to long term)	Large	Implement “One Chocolate for One Smile” campaign^*3 Develop eco-friendly products
Products and services	Adaptation to climate	Rising demand for in Jelly and frozen desserts due to global warming(Short to long term)	Medium	Increase sales of in Jelly and frozen desserts
Resilience	Substitution/ Diversification of resources	Increasing capacity of operations under various conditions from review of substitution/diversification of raw materials(Short to long term)	Large	Consider substitution and diversification of raw materials based on climate change risks
Resilience	Substitution/ Diversification of resources	Increased trust in supply chain and fewer opportunity loss due to formulation of resilience plan (BCP)(Short to long term)	Large	Continuously review BCP for natural disasters and promote BCM

*1Smart factory: Using IoT and AI technologies to upgrading technologies with utilizing digital data of production equipment to ensure stable operations and increase production efficiency.
*2Scope: Food loss and waste occurring from receipt of raw materials to delivery (distribution) (domestic consolidated basis; intensity; compared to FY2020/3). Food loss and waste is defined as food waste that is disposed of thorough incineration or landfill, excluding food waste recycled into fertilizer or feed, etc.
*3“One Chocolate for One Smile” campaign: Donates a part of sales of eligible products to support children in cacao-producing countries by improving their educational environment, etc.
*The periods described in “Impact on operations” are the periods during which risks and opportunities are expected to materialize.

Going forward, we will also consider deepening our response and expanding the scope of our scenario analysis.

Scenario Analysis

Morinaga Group’s Important Risks

Morinaga Group’s Important Opportunities

Basic Approach to Initiatives and Progress

Conserve the Global Environment

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