The Morinaga Group holds a Sustainability Committee meeting twice a year, in which the president serves as committee chair, the head of the Sustainability Division serves as the vice-chair, and internal directors and all division managers serve as committee members. The Sustainability Committee formulates a basic policy for sustainability activities by the Morinaga Milk Group, discusses and examines reports and proposals from subcommittees composing the committee, and reports the content of discussions to the Board of Directors toward the realization of sustainability management.

We have also established four subcommittees, that is, the Climate Change Provision Subcommittee, the Plastics Subcommittee, the Human Rights Subcommittee, and the Wellbeing Subcommittee under the Sustainability Committee. These subcommittees consisting of members selected across various departments engage in the formulation of policies, and the planning and execution of strategies, and make reports to the Sustainability Committee. When it becomes necessary to handle areas that require expert knowledge, we will establish a project under the subcommittees, and findings are to reflected in their discussion. We are discussing natural capital in the Climate Change Provision Committee.

In accordance with the LEAP approach of TNFD ver. 1.0, we have conducted research on the impact of the Morinaga Milk Group’s business activities on natural capital, and natural capital-related risks to its activities’ dependence on ecosystem services. The research was conducted by using ENCORE and WWF Risk Filter Suite, which are assessment tools based on global data, and agricultural product procurement, raw material milk procurement, manufacturing, and distribution on the Morinaga Milk Group’s value chain were assessed.
The agricultural product procurement and the raw material milk procurement include major 20 items procured by the Morinaga Milk Group. In addition, assessment of the manufacturing was conducted at main plants. The distribution refers to domestic distribution.
As the assessments using ENCORE and WWF Risk Filter Suite were performed by using representative values of the industry, their results did not adequately reflect the risks qualitatively understood in our business operations. Therefore, we separately conducted a qualitative assessment tailored to the actual status of the Morinaga Milk Group’s value chain, and reflected evaluation results in the following heat map. (Items in which risks were identified are marked with VH or H, and as for items which were changed after the actual condition survey, such marks are given in ＜＞.)

^*1 ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure)
It is an online tool created by the Natural Capital Finance Alliance (NCFA) that enables users to organize and visualize the impact of environmental changes on the economy.

^*2 Biodiversity Risk Filter
It is an online tool created by the World Wide Fund for Nature(WWF)that enables companies and financial institutions to confirm weather there are risks related to biodiversity arising in their supply chains or businesses that they have invested in,and take measures when necessary.

Assessment Related to Impact on Nature (Heat map)

※VL=Very Low、L=Low、M=Medium、H=High、VH=Very High

Assessment Related to Dependence on Nature (Heat map)

^*1 The reason that Climate change × Raw material milk procurement was assessed at VH

Since it is known that methane derived from fermentation in the gastrointestinal tract of cattle in the manufacturing process of raw material milk and manure contribute to climate change as greenhouse gas, greenhouse gas generated during the raw material milk procurement process was assessed at Very High.

• J-Milk International Dairy Report Vol.7 2022 Winter(P3-P6)
  Expectations on Environmental Initiative “Visualization” “Pathway to Net Zero” Launched
• Ministry of Agriculture, Forestry and Fisheries, MIDORI Strategy for Sustainable Food Systems Reference:
  Global Greenhouse Gas (GHG) Emissions and GHG Emissions Derived from Japanese Agriculture(P5)
• IFCN “2.2% – that’s the milk production share on all global greenhouse gas emissions (GHG)”

^*2 The reason that Pollution × Manufacturing was assessed at VH

At our domestic manufacturing plants, gas emission is legally regulated by the Air Pollution Control Act, water discharge by the Water Pollution Prevention Act, waste material by the Wastes Disposal and Public Cleansing Act, and noise by the Noise Regulation Act. They are regulations from the perspective of the protection of “human health or the living environment. ”However, since the living environment includes “flora and fauna closely related to human life and their growing environments,” items under legal restraints were assessed at High.
Example: Water pollution has been assessed by reference to Reference Materials on the Grounds for the Establishment of the Environmental Quality Standards published from National Institute for Environmental Studies, National Research and Development Agency(https://www.nies.go.jp/eqsbasis/water.html).

^*3 The reason that Fundamental services (ventilation, water flow maintenance, and water quality maintenance) × Manufacturing was assessed at H

Since a lot of water is used for washing facilities and equipment in food manufacturing, the items for water flow maintenance and water quality maintenance were assessed at High. In addition, as outdoor air is uses for the drying process, Ventilation was also assessed at High.

In FY 2024, we focused on the detailed analysis of coffee beans and coffee products, which are attracting increasing international attention in terms of natural capital-related risks, of the major 20 items procured by the Morinaga Milk Group.
In addition, to increase the resolution of coffee bean procurement-related risks, we adopted aiESG, Inc.’s Input-Output Analysis created by applying the Multi-Regional Extended Input-Output Analysis method to estimate environmental impacts (impact on cultivated land, total water usage and CO2 Emissions) up to 10th level business partners based on coffee beans.

In the risk assessment, acute risks, chronic risks, and potential risks in business considering those risks, financial impact, and strategies to deal with such risks were clearly set out for the procurement of coffee beans as well as the manufacture of coffee products. In the calculation of financial impact, we estimated risks corresponding to sales with the procurement of coffee beans and the manufacture of coffee products for the No. 1* selling chilled coffee brand, Mt. RAINIER CAFFÈ LATTE series, one of Morinaga Milk’s flagship products in mind, and then examined business opportunities considering those risks (Large Impact: 5 to 10 billion yen, Medium: 2.5 to 5 billion yen, Small: 2.5 billion yen or less).

*Source: Intage SRI＋Chilled Beverage Market (coffee-type) Total sales amount for April 2023 to March 2024

Assessment of Risk：procurement of coffee beans

*Impact of business risks on finance: Large Impact: 5 to 10 billion yen, Medium: 2.5 to 5 billion yen, Small: 2.5 billion yen or less.
*Land modification, freshwater modification, and water extraction are assessed for transition and physical risks.

Assessment of Risk:manufacture of coffee products

*Impact of business risks on finance: Large Impact: 5 to 10 billion yen, Medium: 2.5 to 5 billion yen, Small: 2.5 billion yen or less.
*Contamination (air, water, waste, water sampling) is evaluated for transfer risk.

Assessment of Opportunity