Disclosure Based on TCFD Recommendations

Takenaka Group has established five categories of material issues (materiality) to be reviewed in 2022, in order to solve social issues and realize a sustainable society based on the Takenaka Group CSR Vision. One of these is “Harmony with the Environment, ” which aims to realize a sustainable society by providing environmentally conscious buildings and services and reducing environmental impact through integrated decarbonization, resource circulation and coexistence with nature.

In 2019, Takenaka Corporation started to analyze the business impact of climate change, risks and opportunities, and consider how to reflect them in its strategies. In January 2021, Takenaka Corporation endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and began disclosing related information.

The status of efforts in the fields of the global environment, biodiversity, and resource circulation is comprehensively monitored by Company-wide and Cross-group Working Groups established for each field, and reported to the Global Environment Expert Committee. The Global Environment Expert Committee meets four times a year, chaired by the corporate sustainable officer, to discuss activities and measures related to global environmental issues, including responses to climate change. Important policies and plans related to sustainability, including those related to the global environment, are discussed and drafted by the Sustainability Central Committee (formerly the CSR Promotion Central Committee). The committee meets three times a year, chaired by the President and Representative Director. The Corporate Sustainability Department of the Corporate Strategic Planning Division is in charge of the secretariat of these committees. Among the results of deliberations by these committees, important decisions are made by the Board of Directors after deliberations by the Management Plan Central Committee, and reported to the President and Representative Director. Decisions and instructions are disseminated through each committee and the Company-wide and Cross-group Working Groups.

In setting important issues (materiality) and analyzing risks and opportunities, we consider the long-term time axis (after 12) that the Environmental Concept aims to achieve carbon neutrality by 2050, the medium-term time axis (from 3 years to 11 years ahead) that the Group Milestones for 2030 take into account the SDGs with 2030 as the target year, and the short-term time axis (up to 2 years ahead) that is the drafting cycle of the 3-year management plan. 2050 and 2030 are also the target years for our group's long-term CO2 reduction targets.

The former CSR Promotion Central Committee, which was reorganized as the Sustainability Central Committee in March 2024, the Global Environment Expert Committee under the former CSR Promotion Central Committee, and the Global Environment Promotion Working Group under the Global Environment Expert Committee, as well as the Company-wide and Cross-group Working Group, identify risks and opportunities related to climate change as well as quality, safety, and other risks related to our business, evaluate them, and consider measures to be taken, and reports to the Board of Directors for decision making.
In 2019, the Global Environment Promotion Working Group, which was established under the Global Environment Expert Committee, examined key issues (materiality) related to our company business and long-term risks and opportunities across head office divisions, taking into account the opinions of outside experts. The relationship between these issues and the Paris Agreement agreed upon in 2015 and the Sustainable Development Goals (SDGs) was also arranged, and deliberated at the former CSR Promotion Central Committee.

In recent years, severe typhoons and torrential rains have occurred almost every year in Japan due to abnormal weather caused by climate change. The Takenaka Group has constructed many high-rise buildings and civil engineering structures, which are significantly affected by wind from typhoons, and large-scale underground buildings, which are significantly affected by flooding caused by torrential rains. As temperatures rise and natural disasters become more severe, health risks such as heat stroke increase at construction sites, and the risk of construction delays due to disruptions in transportation networks is assumed.
Meanwhile, in Japan, the reduction of CO2 emissions in the residential and commercial sectors has become an urgent issue, and the revision of the “Building Energy Conservation Law” has expanded the scope of mandatory compliance, as well as the need to further improve the energy consumption performance of buildings. The energy conservation performance of buildings has a significant impact on the greenhouse gas emissions of customers (building owners) over the life of the building, and steel and concrete, which are the main materials procured during building construction, are also characterized by large greenhouse gas emissions during manufacturing. In addition, fuel for heavy equipment used at construction sites and electricity used for general operations are major sources of GHG emissions in the company's own operations.

Two scenarios were established to identify risks and opportunities, and impact levels and response measures were established.

IEA NZE (2050 net zero emissions scenario) was adopted as the scenario with the highest transition risk due to various policies being taken to achieve the 1.5°C target set forth in the Paris Agreement. IEA NZE assumes a wide range of changes in the energy system necessary to achieve net zero emissions by 2050.
In line with this scenario, we assume a business environment in which the market demands significant improvements in energy efficiency (Pursuing initiatives to promote efficient design, use, and recycling) that contribute to CO2 reduction, with strengthening of existing laws and regulations and the enactment of new laws and regulations as inputs, and investment in technology development is promoted to achieve this.
In 2022, we reviewed the material issues identified in 2019. One of the key issues related to climate change is "harmony with the environment." To analyze the risks and opportunities of business transitions and to consider strategies to resolve these issues, we adopted IEA NZE as a climate change-related scenario.

The IPCC SSP5-8.5 assumes a business environment in which economic growth is prioritized, fossil fuel use continues, and greenhouse gas emissions remain at extremely high levels. It is very likely that the average temperature will increase by more than 1.5°C by around 2030 to 2040, and further increase by more than 4°C by the end of the 21 century. In the medium to long term, it is assumed that heavy rain and typhoons will intensify, and natural disasters such as floods will increase the impact on urban infrastructure.
To assess the potential physical risks of climate change, we adopted the most conservative scenario for climate change countermeasures among the 5 scenarios assumed in the IPCC AR6 (Sixth Assessment Report).

As a result of the scenario analysis, we identified 5 risks and 4 opportunities.

With regard to the financial impact of risks and opportunities, our company defines significant financial risks as events that have a negative impact on planned costs of sales and processes in the construction business, which is our core business and accounts for more than 90% of net sales.

These results are reflected in our business strategies, such as increasing investment in technology development to capture business opportunities and avoid risks. As part of our technology development, we have set a budget specifically for climate change measures such as reducing CO2 emissions.

The Takenaka Group Environmental Strategy 2050 sets targets and specific measures for the three key issues that make up Harmony with the Environment. This strategy is presented by the Sustainability Central Committee, deliberated by the Management Plan Central Committee, and decided by the Board of Directors. It is also incorporated into the Medium-Term Management Plan. The measures and target values are incorporated into the three-year plans of each division, and the progress of the initiatives is managed through the activities of the Company-wide and Cross-group Working Groups established under the umbrella of the Global Environment Expert Committee.

For company-wide risk management, the Risk Management Committee meets twice a year on a regular basis, and on an ad hoc basis as necessary, such as when a serious risk occurs. The Risk Control Committee grasps and evaluates risks related to the quality, safety, and other aspects of the business, including risks and opportunities related to climate change, and considers responses, and reports the results to the Board of Directors for decision making.

In December 2019, we established a long-term CO2 reduction target, and in March 2021 we raised the target to achieve a 100% reduction in CO2 emissions by 2050 (Corbon Neutral). In December 2022, we expanded the target to include the entire Takenaka Group (consolidated). In March 2024, we obtained SBT certification for our 2030 targets.

The Takenaka Group's Long-Term CO2 Reduction Targets (December 2022)
Scope 1+2: 46.2% reduction by 2030 and 100% reduction by 2050
Scope 3: 27.5% reduction by 2030 and 100% reduction by 2050
(Base year: 2019)

Scope 3 includes Category1 (purchased products and services), Category2 (capital goods), Category3 (fuel and energy-related activities not included in Scopes 1 and 2), Category4(Transport, Delivery (Upstream)), Category5 (business waste), Category6 (business trips), Category7 (employer commutes), Category11 (use of sold products), Category12 (disposal of sold products), Category13 (leased assets (downstream)), and Category15 (investments) (Categories 8-10 and 14 are not calculated because they are not related to our business.). Category1 and Category11 emissions account for the largest portion.

The scope of calculation covers the entire Takenaka Group, including consolidated group companies (However, for Scope3 Categories 1, 4, 5, 11, and 12, overseas construction projects with a small composition ratio and a large calculation load are excluded from the scope of calculation.).