Climate-related risks and opportunities
Recognition method
Scenario selection and analysis process
Our group recognizes climate change-related risks as an important issue that has a significant impact on our business activities, and we believe that there are two areas in which the average global temperature will rise by +1.5℃ and +4℃ compared to pre-industrial revolution levels. We selected a scenario and conducted a scenario analysis for the next 10 years. In order to identify the risks and opportunities that climate change poses to our business, and to consider strategies to address them, our group uses the "Net Zero Emissions by 2050 Scenario (NZE Scenario)" announced by the International Energy Agency (IEA) in 2021. Global warming scenario (RCP8.5) according to the UN's IPCC (Intergovernmental Panel on Climate Change)'s Fifth Assessment Report (published in 2014) and the Earth according to the Sixth Assessment Report (published in 2021) The global warming scenario (SSP5-8.5) is used as a reference.
Scenarios used as reference for scenario analysis and reasons for their selection
| Selected scenario | Reason for selection |
|---|---|
| IEA “Net Zero Emissions by 2050 Scenario” 2021 | In support of the Paris Agreement and Japan's Nationally Determined Contribution (NDC), and based on the decisions made at COP26 (the 26th Conference of the Parties to the United Nations Framework Convention on Climate Change), we have adopted a scenario that aims to achieve zero emissions before 2050. "Net Zero Emissions by 2050 Scenario" is selected. |
| IPCC “Fifth Assessment Report (2014)” IPCC “Sixth Assessment Report (2021)” |
We have selected "RCP8.5" and "SSP5-8.5", which have undergone extreme "physical changes" and have a large impact on business activities. |
IPCC climate change scenarios
Using these scenarios as a reference, we extracted multiple factors that may have an impact on our group's business, calculated the period until they materialize, and the degree of impact on our group. We also considered countermeasures for items of high strategic importance.
These processes are reviewed by the Sustainability Promotion Committee, taking into account the opinions of external experts, and reported to the Board of Directors.
Climate-related risks and opportunities assessment scale
When considering climate-related risks and opportunities, we categorize the period until an event materializes into "short term" (less than 3 years), "medium term" (3 years to less than 10 years), and "long term" (10 years or more). Classified into 3 levels. Regarding the degree of impact on our group, based on the disclosure standards of the Tokyo Stock Exchange, we will evaluate the impact to be "major" (±10% or more of consolidated sales revenue or ±30% or more of consolidated profit before tax), We evaluate companies in three levels: "medium" (±5% or more of consolidated sales revenue or ±20% or more of consolidated profit before tax) and "small" (±10% or more of consolidated profit before tax).
Evaluation scale (period until the event manifests)
| Classification | Period until manifestation (approximate) |
|---|---|
| Short term | Less than 3 years |
| Middle period | More than 3 years but less than 10 years |
| Long term | Over 10 years |
Evaluation scale (degree of impact on our group)
| Classification | Degree of impact on our group (estimate) |
|---|---|
| Big | ±10% or more of consolidated sales revenue or ±30% or more of consolidated profit before tax |
| During ~ | ±5% or more of consolidated sales revenue or ±20% or more of consolidated profit before tax |
| Small | ±10% or more of consolidated profit before tax |
Climate-related risks and opportunities
Impact analysis results
Based on the two scenarios mentioned above, the impact analysis results of climate-related risks and opportunities (scenario analysis results) are shown in the table below, "Impact analysis results of climate-related risks and opportunities." Our group operates a wide range of businesses, centering on the housing business, but based on the importance of the single-family housing business (*1) and forestry business (*2) based on scenario analysis, we decided to We identify "risks" that may have an impact on the company's business and "opportunities" that may lead to an increase in corporate value.
- *1 Single-family housing business refers to the single-family house sales business and the custom-built housing business that supplies wooden houses.
- *2 Forest business is a business that manages forests, harvests timber, and processes lumber.
1. Single-family housing business
Our group supplies approximately 40,000 detached houses annually. In the detached housing business, we are greatly affected by environmental regulations and other factors imposed on the houses themselves.
Furthermore, because the volume and variety of construction materials procured are large, the introduction of carbon taxes and other measures to regulate emissions and increase environmental protection costs will affect material costs.
[1] 1.5℃ scenario
[Policies/Legal Regulations] Energy saving/low carbon regulations
Under the 1.5°C scenario, it will be necessary to significantly improve the insulation performance of houses, achieve substantial energy savings through the introduction of highly efficient equipment systems, and further introduce renewable energy equipment (hereinafter referred to as "renewable energy equipment"). Our group has obtained housing performance evaluations for all of the detached houses we supply, and for detached houses for which we obtain building permit applications after April 2025, we have obtained even higher ZEH (Zero Energy House) standards, namely "Insulation Performance Grade 5" and "Primary Energy Consumption Grade 6." Therefore, even if energy conservation standards are raised, we anticipate that the impact of additional investment and increased costs will be limited.
[Policies/Legal Regulations] Mandatory installation of renewable energy equipment
With regard to the mandatory installation of renewable energy facilities, an increasing number of local governments are making the installation of solar power generation facilities mandatory when building new buildings or renovating buildings of a certain size or larger. As additional costs for equipment and installation are incurred, there are concerns that, depending on support measures such as subsidies and tax incentives from the national and local governments, this could increase the economic burden on buyers and reduce housing demand. In addition, this could be a factor in pushing down the profit margins of our Group, so we believe that the financial impact will be significant.
[Research and development investment] Development of low-carbon housing
Regarding renewable energy facilities, we do not rely on suppliers, but are also conducting research and development of artificial photosynthesis technology in-house and promoting efforts toward practical application. In addition, we are considering third-party ownership models for renewable energy facilities (hereinafter referred to as PPA models) and the development of affiliated mortgage loans, etc., to build mechanisms to reduce the economic burden on purchasers. We believe that the impact of additional cost increases due to R&D investments will not be significant.
[Policies/Legal Regulations] Carbon tax/carbon emissions regulations
As for the carbon tax, the financial impact on our group will be "large." We will therefore work on further reducing GHG emissions from construction sites and factories, promoting the use of eco-cars, and other reduction measures. We will also work to reduce GHG emissions throughout the value chain by reviewing Wood processing business Glass manufacturing and sales business conditions and developing new products.
[2] 4℃ scenario
[Extreme weather changes] Impact on construction sites
The 4℃ scenario assumes sudden changes in weather conditions such as typhoons and floods, increases in average temperature, and changes in precipitation patterns, which may have an impact on business activities. Although our group supplies a large number of housing units, our development areas are scattered across the country, and our development scale (the number of housing units supplied per site) is small, so we bear the burden of restoration costs. , risks such as interest costs due to construction delays and loss of sales opportunities are diversified.
[Extreme weather changes]
Impact on supply chain
The same risks as above can be assumed in the event that a material supplier is forced to suspend operations due to a disaster or the supply chain is disrupted. We are promoting diversification, etc., and are working to reduce risks.
2. Forest related business
As forests are directly affected by climate change and are a major source of materials for single-family homes, our group could be financially affected significantly. On the other hand, our group owns approximately 4 million hectares of forest resources in the Khabarovsk region of Russia's Far East, and the use of forest resources is one of the effective means of reducing CO2 emissions, and we hope to expand the range of uses for wood in the future. We expect this to become a promising business opportunity for our group.
[1] 1.5℃ scenario
[Procurement] Material procurement costs
In the 1.5℃ scenario, aggressive CO2 reduction measures will be promoted worldwide, and demand for wood that can fix CO2 is expected to increase. As a result, it is assumed that timber procurement prices will rise, but our group has enough forest resources (cutting permit amount) to supply 50,000 to 60,000 homes annually. Therefore, we believe that the financial impact on a consolidated basis can be kept low.
[Market] Expanding demand for wood
It is expected that the use of wood will expand to include high-rise buildings that have not traditionally used wood, and that demand for wood pellets used in biomass power generation will expand, creating a business opportunity for our group in the forestry business. I hope it will be.
[Market] Carbon credits
It is possible to increase the CO2 absorption capacity of our forest resources through appropriate maintenance and management and systematic afforestation. At present, credits related to forest conservation are not subject to offset under the GHG Protocol, so the financial impact cannot be factored in. However, in the future, it has the potential to become a major business opportunity. (As this is a highly reliable factor, we have not estimated the financial impact.)
[2] 4℃ scenario
[Average temperature] Impact on forest growth environment
In the 4℃ scenario, increases in average temperature are expected to cause forest fires, outbreaks of pests, etc., and changes in the forest growing environment are also expected to lead to risks such as lengthening of the growing season and changes in material quality. Regarding the overseas forests owned by our group, it is thought that the temperature increase by 2050 will not be high enough to have a significant impact on forest cultivation compared to the current level, so there will be no significant financial impact. I judge that there is no.
Impact analysis results of climate-related risks and opportunities
[Risks due to climate change]
| Scenario classification | Business risks due to climate change | Potential financial impact | Actualized period | Financial impact |
|---|---|---|---|---|
| 1.5℃ (Transition risk) | [Policies/Legal Regulations] Carbon tax/carbon emissions regulations | If a carbon tax is introduced, the increase in tax will have the effect of reducing profits (profit margins). | Middle period | Big |
| [Policies/Legal Regulations] Energy saving/low carbon regulations | While raising insulation standards for houses would incur additional costs and thus reduce profits (profit margins), all detached houses for sale that obtain building permits after April 2025 will meet ZEH standards (insulation performance grade 5 or higher and primary energy consumption grade 6 or higher under the Housing Performance Labeling System), so the impact can be kept to a small level. | Short term | Small | |
| [Policies/Legal Regulations] Obligation to install renewable energy equipment | If ZEH is made mandatory for newly built single-family homes, the cost of installing renewable energy equipment will increase the selling price, and depending on subsidies and tax incentives, this will not only reduce housing demand but also increase profits ( This could lead to a decline in profit margins.) | Short term | Big | |
| [Research and development investment] Development of low carbon housing | It is expected that there will be a demand for low-carbon housing with higher insulation performance and lower energy consumption, but we are already systematically promoting research and development aimed at responding to ZEH, etc. The financial impact of major investments and expenses is small. | Short term | Small | |
| 【market】 Changes in customer needs and purchasing behavior | Ethical consumption orientation is spreading to the housing sector, and it is expected that corporate activities, including environmental measures, will have a significant impact on consumer purchasing decisions. The financial impact of investments and expenses is small. | Middle period | Small | |
| [Procurement] Increase in material procurement costs | As global warming countermeasures accelerate, the demand for wood that can fix CO2 will increase, and wood prices are expected to rise. However, as we own our own forest resources, we are unable to consolidate the Group. The financial impact on a base basis is limited. | Middle period | During ~ | |
| 4℃ (Physical risks) | [Extreme weather changes] Impact on construction site | Although recovery costs and the risk of delivery delays are expected due to damage to construction sites, our company is financially stable because the scale of each construction site is small and our sales area is spread across the country, which allows us to diversify risks. The impact is small. | Short term | Small |
| [Extreme weather changes] Impact on supply chain | In the event that a supplier factory is affected by a disaster and operations are halted or the supply chain is disrupted, this could have a financial impact, such as delays in housing delivery due to construction delays or an increase in interest costs on loans. | Short term | During ~ | |
| [Changes in precipitation patterns] Impact on our material factories | Although damage from river flooding and inland water is expected, the risk of long-term suspension of operations is low due to the location of our factory, and the financial impact will be small. | Middle period | Small | |
| [Increase in average temperature] Impact on work at the construction site | There is a risk of decreased work efficiency at construction sites, increased costs for health damage caused by heatstroke, and delays in delivery, but the financial impact is small. | Middle period | Small | |
| [Increase in average temperature] Impact on forest growing environment | It is expected that the growing environment for coniferous trees used in housing construction will change, but assuming 2050, the impact will be limited and the financial impact will be small. | Long term | Small |
[Opportunities due to climate change]
| Scenario classification | Business opportunities due to climate change | Potential financial impact | Actualized period | Financial impact |
|---|---|---|---|---|
| 1.5℃ | [market] in the detached house market Growing demand for low-carbon housing | The detached house market has been slow to respond to ZEH, but our company has already implemented insulation and reduction of primary energy consumption, so the additional cost required is relatively small, so the sales price is relatively low. This will increase the company's competitive advantage and create an opportunity to expand the number of buildings sold. | Middle period | Big |
| [market] Expanding demand for wood | As measures to reduce greenhouse gases are strengthened, demand for wood that can fix CO2 is expected to increase. If new demand for wood is created for high-rise buildings that have not traditionally used wood, sales of the company's wood business are expected to expand. | Middle period | Big | |
| [market] Through artificial photosynthesis technology Expansion of application fields | Artificial photosynthesis technology not only does not emit CO2, but also absorbs it, making it more environmentally effective than solar panels. If we can develop a device with higher power generation efficiency per unit cost than alternative methods, we can expect to increase the added value of homes and increase sales of the device alone. | Middle period | Small | |
| [market] Improving the appeal value of wooden houses | Our group fixes 650,000 tons of CO2 annually through the construction of approximately 40,000 wooden houses. As consumer environmental awareness increases, the appeal value of our houses will increase, which is expected to have a sales promotion effect. | Short term | Small | |
| [market] Contributing to the environment by utilizing forest resources | Owned forest resources are management resources that contribute to the fixation of CO2, and their appeal to environmentally conscious consumers is high. | Short term | Small | |
| [market] Creating CO2 credits through forests | If forest credits can be used to reduce GHG emissions in the future, direct financial benefits are expected (however, as this is uncertain at present, no estimates of the financial impact have been made). | Short term | - |
Against climate-related risks and opportunities
Strategic/financial planning
1. Our group's strategic policies and countermeasures
Based on our business concept of "realizing a society where everyone can afford to own a home," our group has provided Customer with living environments where they can live in safety, comfort, and health. We believe that this business concept of "something everyone should take for granted" is extremely important in realizing a sustainable society. Our company believes that in order to prevent global warming, it is not enough for only a few environmentally conscious companies and consumers to take action; this theme can only be achieved if all companies and consumers participate in the efforts. The group is thinking.
Based on this idea, we aim to make products and services with high environmental performance readily available to everyone, in other words, to balance the cost burden necessary for environmental measures with affordability that everyone can enjoy. This is a key strategic theme for our group. Our group's main strategic policies toward our goal of achieving carbon neutrality in 2050 are as follows.
[1] Compatibility with ZEH standards for single-family houses supplied
All detached houses that the Group already supplies have achieved grade 4 or higher in the insulation performance grade and grade 5 or higher in the primary energy consumption grade under the Housing Performance Indication System. In addition, all detached houses for which confirmation applications are submitted after April 2025 will achieve ZEH standards (*3).
Additionally, in preparation for the mandatory installation of renewable energy facilities, we are promoting research and development into power generation equipment that utilizes artificial photosynthesis technology. In order to deal with the uncertainty of technological development, we intend to consider multiple options, including collaboration with suppliers of alternative products such as solar power generation equipment.
Additionally, we plan to consider developing PPA models and affiliated home loans as a way to reduce Customer costs associated with installing renewable energy equipment.
- *3 ZEH level means that the property satisfies the ZEH level (both "Insulation performance grade 5" and "Primary energy consumption grade 6") in the energy saving grade of the Housing Performance Indication System.
[2] Improving wood self-sufficiency rate
Demand for wood that can fix CO2 is expected to increase, so we are investing in processing lines to ensure that we can stably and cost-effectively procure the wood needed for single-family homes from our own forest resources. , we will build and strengthen logistics.
Furthermore, we view the demand for wood in new application fields as a business opportunity and aim to promote the spread of wood.
[3] Efforts to reduce GHG emissions
Our group's efforts to reduce GHG emissions include promoting energy conservation, introducing eco-cars, switching to renewable energy, introducing solar power generation in factories, and promoting wooden houses to fix and absorb carbon. In addition to forest conservation, our policy is to promote ZEH standard housing, reduce waste, and strengthen efforts to reduce emissions from the use and demolition of housing supplied by our group.
In addition, in order to achieve net zero, which means GHG emissions are virtually zero, it is essential to reduce emissions throughout the supply chain, including suppliers, and we are considering initiatives to reduce environmental impact in tandem with suppliers. We aim to achieve sustainable management.
[4] Strengthening BCP response in response to changes in the weather environment
Climate change is leading to more severe natural disasters such as large typhoons, storm surges, torrential rains, and inland flooding, resulting in factory shutdowns, lower operating rates, and supply chain disruptions, as well as increased daytime construction difficulties and work efficiency due to an increase in extremely hot days. There is a possibility of a decrease.
Continuously reviewing our BCP, such as strengthening collaboration with suppliers and securing decentralized procurement sources, will strengthen our business even in the event of an event that our group cannot deal with alone, such as a disaster in our supply chain. We will continue to strive to reduce climate change risks, recognizing that this is a measure to strengthen our management.
2. Our group's financial plan
When adding up the burden of investment funds for ZEH standardization of the housing we supply, development of renewable energy equipment, installation of processing lines for forest resources, development of logistics networks, etc., the financial burden on our group is expected to be large. It will be. However, as it is assumed that the scale of this will be covered within the scope of cash flow generated from business activities, we have determined that there is no need for additional financing at this time.
The impact on business results is a complex effect of various factors other than climate change factors (business confidence, financial markets, real estate market conditions, technology trends, existence of competitors, etc.), so only climate-related items are broken down into elements. Although it is difficult to make a comprehensive estimate, the results of comprehensive judgment are reflected in the medium-term management plan and annual plan.