Disclosure based on TCFD recommendations

We have established the Sustainability Promotion Committee for the purpose of promoting the sustainability management of NX GROUP. The Committee is chaired by the President & CEO of NIPPON EXPRESS HOLDINGS, INC. with the Chief Managing Officer in charge of the Sustainability Promotion Division serving as Deputy Chairperson. In addition to the executive officers of NIPPON EXPRESS HOLDINGS, INC., officers in charge of sustainability promotion at major Group companies were newly added as Committee members in July 2023. The Committee discusses policies and strategies related to the promotion of the Group’s overall sustainability initiatives, including the Group’s response to climate change, and reports the results of these discussions to the Board of Directors at least once each quarter depending on report content. The Board of Directors oversees and reviews business execution of overall sustainability initiatives, including measures to address climate change, and deliberates and resolves basic policies and important matters.
Furthermore, in order to accelerate the promotion of sustainability management, in addition to performance indicators such as consolidated sales revenue, ESG-related non-financial information including climate change is also included as an indicator in the directors’ compensation system.

■ Identification of Risks and Opportunities posed by Climate Change

NX GROUP has been continuously conducting scenario analysis with the aim of evaluating and improving the resilience of its business and strategy against climate change.
In addition to the 1.5℃ scenario that our Group is aiming for, the 4℃ scenario was used as the scenario for analysis, in which decarbonization efforts do not proceed from the current level. The Group qualitatively and quantitatively evaluates the business impact of the risks and opportunities identified through scenario analysis on the Group’s business and examines relevant measures.

■ Financial Impact Analysis of identified risks and opportunities

Among the risks and opportunities identified in the scenario analysis, we conducted an analysis of the financial impact on NX GROUP regarding factors assessed to have a significant impact on business. This analysis was based on simulations based on external scenarios, etc., and the achievement of each scenario is not guaranteed.

① Financial Impact Analysis of transition risks

In order to achieve NX GROUP’s medium- to long-term targets, it is necessary to select reduction measures to be implemented in light of social trends, such as zero-emission technology for large trucks and the state of infrastructure development for new fuels. While multiple scenarios are envisioned as measures to achieve medium- and long-term goals, we conducted scenario analysis of multiple reduction measures in 2030 and 2050 for Group companies in Japan in order to understand the financial impact of each scenario.

• Analysis targets/Analysis method
  The financial impact analysis of transition risk covers reduction measures implemented in Japan to achieve Scope 1 and 2 CO₂emission reduction targets, and the financial impact in 2030 and 2050 was calculated. Based on the assumption that the world will transition to a society with a 1.5℃ global warming limit, the analysis method used was to calculate the scope of financial impact by analyzing multiple scenarios for vehicle and vessel replacement costs and energy costs to achieve NX GROUP's medium- and long-term CO₂emission reduction targets in 2030 and 2050.

• Condition of established scenarios
  During the financial impact analysis of transition risk, the BAU^※1​ scenario was used as the base scenario in which a transition will be made to a society with a 1.5℃ global warming limit without NX GROUP implementing any measures to reduce emissions (maintains status quo). In addition to the scenario described above, we have established two more scenarios to achieve NX GROUP's FY2030 CO₂emission reduction target and the goal of becoming a carbon-neutral Group by 2050 as the world transitions to a society with a 1.5℃ global warming limit. These are the Existing Technology Utilization scenario a scenario in which existing technology, including internal combustion engine technology, is actively utilized by introducing alternative fuels such as biofuels, and the New Technology Adoption scenario,^※2 a scenario in which new technology is actively introduced leading to changes such as the shift from internal combustion engine vehicles to BEV^※3 and FCV^※4 In total, three scenarios have been established.​​

*1: Business as usual
*2: Internal Combustion Engine
*3: Battery Electric Vehicle
*4: Fuel Cell Vehicle
*5: Zero-emission ships: Vessels that emit virtually zero CO2 emissions during operation since they use hydrogen fuel, ammonia fuel, and other fuels

• Analysis results
  Financial impact of transition risk in 2030
  As a result of the analysis of financial impact of transition risks in 2030, although the impact of the carbon tax on profit/loss will be mitigated by implementing reduction measures in Japan (¥0.9 to ¥1.4 billion), the total impact on profit/loss, including the cost of implementing reduction measures, was calculated to be -¥0.7 to -¥1.2 billion for 2030.In contrast, as the world transitions to a society with a 1.5°C global warming limit, we expect to be able to avoid loss associated with that transition, considering profit growth factors such as avoiding the risk of shrinking demand for high-emission services by reducing our own emissions, developing low-carbon services such as transportation, and reducing the cost of implementing reduction measures through the introduction of energy-saving technologies and solar power generation equipment.

• Financial impact of transition risk in 2050
  As a result of the analysis of financial impact of transition risks in 2050, although the impact of the carbon tax on profit/loss will be mitigated by implementing reduction measures in Japan (¥12.6 to ¥38.4 billion), the total impact on profit/loss, including the cost of implementing reduction measures, was calculated to be -¥19.7 to + 10.0 billion for 2030. In contrast, as the world transitions to a society with a 1.5°C global warming limit, we expect to be able to avoid loss associated with that transition, avoiding the risk of shrinking demand for high-emission services by reducing our own emissions, developing low-carbon services such as low-carbon transportation, and reducing the cost of implementing reduction measures by introducing new technologies and fuels on a trial basis while monitoring the market and infrastructure development trends, leading to efficient introduction and operation when full-scale.

② Financial impact analysis of acute physical risks

Among the physical risks (acute) identified through scenario analysis to assess the Group's resilience to risks from weather-related disasters, we conducted a financial impact analysis of the risk of business interruption due to weather-related disasters such as heavy rains, floods, and typhoons, and the risk of cost increase due to damage to company assets. The Group selected 70 warehouses that would be significantly impacted in Japan (accounting for 30% of NX GROUP's warehouse bases), and established a scenario where flooding occurs near the target sites, causing damage to the facilities.

From the analysis, we found that the risk of suspension of business activities due to weather disasters is limited and that the risk of damage to our own assets at main warehouses in Japan within the scope of this calculation was calculated to be ¥0.72 billion. In the future, the Group plans to expand the scope of calculation, etc., and continue evaluation and confirmation.

③ Financial Impact Analysis of opportunities (products and services)

The nature and results of the financial impact analysis of identified climate-related risks and opportunities, including transition risks, physical risks, and opportunities (products and services)

NX GROUP has established a system to develop and provide low-carbon transportation products designed to reduce Scope 3 emissions. In particular, the use of SAF^※12is important as a measure to reduce CO₂emissions in the aviation field. As a result, our Group is actively promoting such initiatives. Therefore, we estimated the financial impact of the opportunity to increase revenues from the sale of air transportation products using SAF. As a result, we expect a revenue opportunity^※13of between ¥3.22 billion and ¥6.45 billion. The Group will focus on this area and continue to consider other services in order to take advantage of market changes due to decarbonization and to gain a competitive edge.

*12: Sustainable aviation fuel
*13: Increase in revenue for a single year assuming a SAF adoption rate of 15% in 2030, considering market trends and the achievement of the Group's Scope 1, 2, and 3 reduction targets.

■  NX GROUP CO₂ Emission Reduction Targets

In order to contribute to the achievement of the global goal of limiting the global average temperature rise to 1.5°C compared to pre-industrial levels, NX GROUP set medium- to long-term targets for the entire Group in January 2023 although reduction targets had previously been set for Nippon Express Co., Ltd. alone.

■   NX GROUP CO₂Emission Reduction Results

* Scope 3 emissions have been calculated in accordance with the GHG Protocol
* From FY2024, emissions from Category 11 have been included in Scope 3, resulting in a significant increase in reported values
* For Scope 3 emissions broken down by category, please refer to our company website

The NX Group has set medium- to long-term targets for reducing _CO2 emissions across the entire group, in order to transition to a society where the global average temperature increase is limited to 1.5°C compared to pre-industrial levels. These targets are a 50% reduction in the group's own _CO2 emissions by 2030 (compared to 2013 levels) and a contribution to the realization of a carbon-neutral society by 2050.
As a transition plan toward achieving our group's medium- to long-term goals, we have formulated a reduction roadmap outlining key measures and milestones at present. Specific reduction efforts include the proactive introduction of environmentally friendly vehicles, including BEVs, the switch to LED lighting, and the introduction of renewable energy.

In addition, in NX GROUP Business Plan 2028, we plan to invest ¥25 billion in sustainability, including measures to address climate change, such as the introduction of eco-friendly vehicles.
Moving forward, we will steadily move forward with the transition toward achieving the 1.5°C target, and will review and update our roadmap and CO2 emission reduction measures as appropriate, taking into account scientific progress, technological trends, and social trends.