Natural Capital and Biodiversity (Information Disclosure Based on the TNFD Recommendations)

Policy and Basic Approach on Natural Capital and Biodiversity

ITOCHU invests in businesses and trades globally from raw materials and other areas of the upstream processes to the downstream processes. We depend heavily on renewable and non-renewable natural capital which benefits people such as plants, animals, the air, water, land and minerals. Our businesses may also have a negative impact on that natural capital.

We see addressing global environmental issues, including natural capital and biodiversity, as a top management priority. Accordingly, we have established the following Biodiversity Policy to promote conservation of biodiversity as indicated in the ITOCHU Group Environmental Policy to realize the ITOCHU mission of Sampo-yoshi (good for the seller, good for the buyer and good for society). Based on the Biodiversity Policy, we will continue to contribute to the realization of a sustainable society. We are also engaged in initiatives in business-related areas as part of our social contribution activities in communities.

Biodiversity Policy

  1. Biodiversity-friendly Environmental Management

    We recognize that our business activities depend on the blessings of biodiversity and that they may affect the ecosystem. Accordingly, we shall promote environmental management that incorporates a wide range of environmental activities (such as interrelated climate change measures, resource circulation measures and biodiversity conservation) into our business activities to build a society in which we coexist with nature.

  2. Understanding and Reducing the Impact of the Relationship between Business and Biodiversity

    We are aiming for a net positive impact on biodiversity by understanding the relationship between our business activities not only in our group companies but across our entire group and biodiversity from a global perspective. We shall strive to avoid and minimize the impact our business activities have on biodiversity. At the same time, we shall promote the restoration of the ecosystem.
    We have established a procurement policy to protect natural forests and forest resources concerning forest commodities (such as timber, natural rubber, and palm oil). We shall promote information gathering to confirm there is zero deforestation due to production from protected areas designated by law.

  3. Compliance with International Treaties and the National Laws of Each Country

    We shall promote the conservation of biodiversity by complying with international treaties on biodiversity (e.g., the Convention on Biological Diversity) and the relevant national laws of each country.
    We shall promote social contribution activities to protect endangered species in the areas in which we conduct business activities. This is in addition to not participating in transactions relating to endangered species designated by the Washington Convention (CITES)* with our business activities.

  4. Enhancement of Partnerships and Conservation of Local Ecosystems

    We shall look to share awareness of biodiversity by cooperating with industry groups, supply chains, NGOs, and international organizations. We shall then make our biodiversity conservation efforts more effective.
    We shall take into account conservation of biodiversity in the areas in which we conduct business activities. At the same time, we shall promote conservation of biodiversity from the perspective of creating communities that utilize natural resources to contribute to the realization of affluent and safe lives in local communities. We shall do this together with stakeholders such as local residents and NGOs in addition to governmental bodies.

  5. Enhancement of Information Sharing and Dissemination

    We shall promote understanding of biodiversity to local residents of the areas in which we conduct business activities in addition to our employees through awareness activities.
    We shall contribute to raising awareness of biodiversity over the whole of society by continuously disclosing the details, targets and achievement status of our efforts.
  • CITES: Convention on International Trade in Endangered Species of Wild Fauna and Flora

Tomokuni Nishiguchi
Member of the Board
Senior Executive Officer
Chief Administrative Officer

Established in April 2022

TNFD General Requirements

We considered the following items based on TNFD recommendations:

  1. Application of Materiality

    We apply the concept of double materiality to nature-related information disclosures, considering both the financial impacts of natural capital on us (financial materiality) and our impacts on natural capital (environmental and social materiality).

  2. Scope of Disclosures

    We conducted a comprehensive assessment across our entire value chain of upstream and downstream, as well as direct operation. In addition, we perform detailed analysis of risks and opportunities for individual operations that have high impacts and dependencies on natural capital based on the LEAP approach.

  3. Location of Nature-related Issues

    Given our wide range of business areas, we first identified high-priority businesses, then determined priority locations associated with these businesses, and conducted specific analyses for each business.

  4. Integration with Other Sustainability-related Disclosures

    Nature-related issues intersect with other environmental factors, including climate change and water. To build a comprehensive view, we use appropriate tools to identify and assess complex environmental issues. In parallel, we are considering integrated disclosures for TNFD and TCFD to enhance clarity, comparability and usability for stakeholders.

  5. The Time Horizons Considered

    We assess risks and opportunities over the short term and the medium-to-long term, including consideration of 2030 or 2040 future scenario, in consistent with TNFD recommendations.

  6. Engagement with Indigenous Peoples, Local Communities and Affected Stakeholders

    We place high priority on dialogue with a wide range of stakeholders, including Indigenous Peoples, Local Communities and other affected stakeholders. For further details, please refer to “Nature-related Human Rights and Stakeholder Engagement.”

Governance

Governance for Nature-related Issues

ITOCHU acknowledges addressing sustainability issues, including natural capital and biodiversity, as one of our key management issues. Therefore, our Board of Directors deliberates and makes decisions on important matters such as policies to address nature-related risks and opportunities, and annual budgets and business plans which take into account risks and opportunities.

We have given the Sustainability Committee the overall management responsibility for planning and implementing various measures to address sustainability-related matters including natural capital and biodiversity. Our Chief Administrative Officer (CAO) is a Director with responsibility for nature-related issues. Together with this, the CAO is a member of the Headquarters Management Committee (HMC) at the executive level. The CAO also serves as the Chair of the Sustainability Committee. The CAO reports the matters deliberated and decided on by the Sustainability Committee together with the situation of the main activities to promote sustainability to the Board of Directors about twice a year. The Board of Directors considers the matters deliberated and decided on by the Sustainability Committee according to those reports. Through these procedures, the Board of Directors appropriately oversees the promotion of business and investment strategies to address environmental and social risks and opportunities. This includes reviewing those strategies and making asset replacement decisions. Moreover, the managers in each Company and Headquarters’ administrative division who also serve as ESG Officers also participate as core members in the Sustainability Committee at the executive level. The Sustainability Committee receives reports about natural capital and biodiversity-related matters from the Sustainability Management Division and those in charge of promoting ESG in each Company and Headquarters’ administrative division. The committee then uses those reports to manage and monitor progress on various measures and initiatives.

The Chair of the Sustainability Committee and the managers in each Company (ESG Officers) hold a Sustainability Advisory Board once a year to enter into dialogue with external specialists. The Sustainability Advisory Board allows its members to grasp the expectations and demands society has in us. The members then promote its business with the consideration to those sustainability issues discussed in the Advisory Board.

Refer to: Governance

Nature-related Human Rights and Stakeholder Engagement

ITOCHU Group has established The ITOCHU Group Human Rights Policy based on the United Nations Guiding Principles on Business and Human Rights. This policy specifically expresses the Group’s concept of respect for human rights. We have used this policy to declare we will conduct human rights due diligence and enter into dialogue and discussions with potentially affected Groups and stakeholders.

We have also formulated “Respect for the Rights of Indigenous Peoples” as an individual policy. This policy makes it clear we will respect and consider the rights of indigenous people as stipulated in the laws of the countries and regions where the Group engages in business activities and international agreements such as the “United Nations Declaration on the Rights of Indigenous Peoples” and the “International Labour Organization (ILO) Convention 169.” When considering a new business investment project, we strictly check in advance the impact that business will have on the rights of indigenous people. We also periodically conduct human rights due diligence even after starting that business. We conducted human rights due diligence from FY2019 to FY2025 in our food-related business (Food Company), textile-related business (Textile Company), forest goods and materials-related business (General Products & Realty Company) with their high dependency on natural capital, and metals-related business (Metals & Minerals Company), consumer business (The 8th Company) and machinery-related business (Machinery Company) with its high impact on natural capital. We have also set the impact on local communities and residents as a human rights risk indicator to be investigated.

Refer to: Human Rights

Strategy

Business Evaluation Based on the TNFD Framework

ITOCHU Corporation analyzes its business as follows based on the TNFD recommendations.

Scoping

ITOCHU recognizes the importance of nature-related financial disclosures and participates in the TNFD* Forum. In order to confirm the applicability of the methodology recommended by the TNFD to us, we conducted a desktop analysis to identify the potential dependencies and impacts on natural capital across all businesses within the ITOCHU Group, using the TNFD framework as a reference. Based on this analysis, we identified high-priority businesses.

  • TNFD: Taskforce on Nature-related Financial Disclosures
Phase 1

Correlate Business Units
and Processes

  • Prepare the information necessary for analysis using the ENCORE as database.
Phase 2

Consider the Method of Evaluating the Dependency and Impact

  • Consider the details of the evaluation approach.
Phase 3

Map and Qualitatively Interpret the Dependency and Impact

  • Map the dependency and impact for each business.
  • Prepare the qualitative information to support the mapping above.

Steps of Scoping

Specifically, we used the natural capital impact assessment tool “ENCORE” developed by the United Nations Environment Programme and other organizations, to categorize the activity processes along the value chain, including both upstream and downstream of our business, according to the processes defined by ENCORE. Then, by consolidating businesses with similar processes, we formed 28 groups. For each of those groups, we calculated the score for each dependency and impact while taking into account the degree of our involvement and other factors in the businesses in our value chain. We evaluated the dependency of each business on natural capital in six stages and totaled the dependency score. We also evaluated the impact in the same way in five stages and totaled the impact score.

We organized these results with the impact score on the vertical axis and the dependency score on the horizontal axis, creating a “dependency and impact mapping” as well as a breakdown of dependency and impact scores for each part of the value chain. As shown in the figure below, the Metals and Mineral Resources business, which was identified as having high-impact on natural capital among all our businesses, was selected for trial analysis.

Dependency and impact mapping (Metal & Mineral Resources business)
Breakdown of the dependency and impact for each value chain in the Metal & Mineral Resources business
  • The dashed lines show the average dependency and impact scores of all ENCORE processes

LEAP Approach

Trial Analysis

To verify the validity of the scoping (evaluation of all businesses) using ENCORE and to deepen our understanding of dependencies and impacts on natural capital, as well as the risks and opportunities arising from them, ITOCHU conducted a LEAP approach* on our high-impact businesses. The LEAP approach comprehensively evaluates the natural capital-related issues advocated by the TNFD.

  • The LEAP approach is a method developed by the TNFD to clarify nature-related issues in applicable businesses. This method consists of four steps: Locate, Evaluate, Assess and Prepare
Locate
  • Determine the scope of analysis. Next, identify the activity areas of our businesses and value chains. Identify sensitive locations with high priority from biodiversity and water risk perspectives.
Evaluate
  • Identify the dependency and impact on natural capital in the sensitive locations with high priority.
  • Evaluate the ecosystem services, impact drivers and related natural capital to evaluate the size and scale of important dependencies and impacts.
Assess
  • Assess the short-, medium- and long-term risks based on the dependency and impact situation.
  • Confirm the current risk management situation and then consider the additional necessary measures against risks.
Prepare
  • Input the evaluation related to the important nature-related risks and opportunities to managers. Consider strategies, resource allocation and target setting.
  • Disclose in accordance with the TNFD recommendations.

Overview of the LEAP Approach
Organized by ITOCHU based on the Guidance on the identification and assessment of nature-related issues: The LEAP approachPDF file

We analyzed on mining process with an especially high impact score in our Metal & Mineral Resources business which we determined has the highest impact on natural capital in our scoping using ENCORE.

First, we identified ecologically sensitive locations in the Locate analysis. We identified these sites using the five definitions for sensitive locations in the TNFD LEAP approach guidance and the indicators in the databases which organize the criteria for those definitions*. We also identified relevant biome and ecosystem information using the IUCN Global Ecosystem Typology and the Global Map of Ecoregions for some of our business sites after taking into consideration the importance of this business and we performed the Evaluate analysis for the dependency and impact on natural capital. We refined the dependency and impact measurement results in this analysis by investigating the TNFD sector guidance for metals and mining and local environmental assessment reports. As a result, it was confirmed that the mining process of the project has a significant degree of impact on natural capital, as suggested in the scoping.

Subsequently, together with the sales representatives for the metal resource business, we conducted a sampling survey to verify the status of measures related to past environmental assessments and permits for each project. Throughout these dialogues, we could confirm that recognizing the degree of impact of our Metal & Mineral Resources business activities on natural capital we have implemented the projects with stricter environmental assessments and a mine closure policy to reduce future impacts.

Refer to: Policy on Decommissioning of Mining Operations

  • Databases used: WWF Biodiversity Risk Filter, WWF Water Risk Filter, Species Threat Abatement and Restoration, Biodiversity Intactness Index, Ecoregion Intactness Index, Critical Natural Asset layers and Integrated Biodiversity Assessment Tool

Through the trial analysis conducted for the Metals & Mineral Resources business, we confirmed the applicability of the LEAP approach in analyzing our businesses. Going forward, we will sequentially analyze and disclose each of our businesses using the LEAP approach, taking into account their respective levels of dependency and impact on nature.

The businesses analyzed using the LEAP approach are as follows.

Natural rubber is also included in the High Impact Commodity List compiled by the Science Based Targets Network (SBTN)*, identifying commodities with a significant impact on natural capital. In general, the cultivation of natural rubber is associated with serious social issues, such as human rights and poverty issues for smallholders. Considering these factors, we determined that conducting a LEAP analysis on the natural rubber business would be highly significant to deepen understanding of its dependence and impact on natural capital, and to reduce risks and create opportunities. The results of our assessment of the dependence and impact of the natural rubber business on each of the business processes indicate that the procurement (natural rubber cultivation) and manufacturing (rubber processing) processes are particularly dependent on the natural capital. Therefore, in this analysis, we focused on these two processes.

  • Global initiative to develop science-based targets for nature
Dependency and impact mapping (Natural rubber business)
Breakdown of the dependency and impact for each value chain in the natural rubber business
  • The dashed lines show the average dependency and impact scores of all ENCORE processes
Locate

The natural rubber handled by ITOCHU is mainly produced in Indonesia. We identified sites associated with ecologically sensitive locations using database in the table below, covering all rural villages in the country of procurement and the processing plant of PT. Aneka Bumi Pratama (ABP), a subsidiary of ITOCHU. ABP is a natural rubber processing company.

Criteria for Sensitive Locations Database used
1. Importance for Biodiversity
  • WWF Biodiversity Risk Filter
  • STAR (Species Threat Abatement and Restoration) metric
2. High Ecosystem Integrity
  • BII (Biodiversity Intactness Index)
3. Rapid Decline in Ecosystem Integrity
  • Ecoregion Intactness Index
4. High Physical Water Risks
  • WWF Water Risk Filter
5. Importance for Ecosystem Service
Provision, Including Benefits to Indigenous
Peoples, Local Communities and Stakeholders
  • Critical Natural Asset layers

We rated all rural villages and processing plants on a five-point scale using indicators from each database. As a result, approximately 89% of the rural villages fell into the “2. High Ecosystem Integrity,” and approximately 85% of the rural villages, based on a procurement weight, were included in this category. We also found that many factory sites located near rural villages are also close to protected areas and fall into the category of sensitive location as “1. Importance for Biodiversity.” Areas important for biodiversity are regions of high conservation value that may also contain significant opportunities to protect environmental assets and maintain ecosystem services. We are working to protect the ecosystems and biodiversity of natural rubber production sites through PROJECT TREE, an initiative to prevent uncontrolled growth of farm land, over-cultivation and illegal logging near protected areas.

Evaluate

We evaluated dependencies and impacts on natural capital by natural rubber cultivation and rubber processing processes through literature reviews.
We used the “Environmental Risk Assessment of Natural Rubber Production and Processing” published by GPSNR (Global Platform for Sustainable Natural Rubber).
The review found that the cultivation process of natural rubber is highly dependent on biomass provisioning, genetic material, climate condition, soil quality regulation, and purification and disaster mitigation services. Also, land use change and solid waste emissions have significant impacts on nature.
In addition, the processing process of natural rubber is highly dependent on water sources (rivers), and water consumption and pollution of soil are found to have significant impacts on nature. Furthermore, based on these literature reviews, our employee, who has several years of expat experience in the field, conducted a close examination of those dependencies and impacts in our operations from the practical perspective.

Assess

Based on the findings of the general dependencies and impacts of natural rubber cultivation and processing processes identified in the Evaluate phase, we examined the nature-related risks and opportunities for our business. Specifically, using the LEAP approach guidance and Additional Sector Guidance – Food and Agriculture by TNFD, we developed a comprehensive list of risks and opportunities for natural rubber business and refined the content to reflect the actual situation, in the same way as in the Evaluate phase.
Furthermore, we have evaluated the significance of risks and opportunities on a three-point scale (Low, Medium, and High), assuming a future scenario as of 2030.
The TNFD developed four scenarios based on two critical uncertainties: “Ecosystem Service Degradation (physical risk)” and “Alignment of Market and Non-Market Forces (transition risk).” We determined that we are in a Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital) and assessed the magnitude and likelihood of these risks and opportunities.
The desktop analysis conducted in the Evaluate phase indicated that, for example, soil pollution has a significant impact on nature. However, the results of the Assess phase showed that the factory we operate has appropriate wastewater treatment and other measures in place, and that the risk is not significant.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDF file: ITOCHU’s Approach

Finally, for risks and opportunities evaluated as having medium importance or more, we organized and considered response measures. Specifically, to ensure effective risk identification and mitigation, this section focused on those rated “Medium” and “High” for risks, and those rated “High” for opportunities.
Detailed responses to each risk and opportunity are summarized in the table below. In our natural rubber business, including the Group companies, comprehensive measures are taken for nature-related risks and opportunities. Additionally, we work to realize opportunities by launching a sustainable natural rubber production project called PROJECT TREE starting in 2019. Details on how each risk and opportunity is addressed are provided in the tables below.

<Risk>
Type Business Process Description Status of Response Importance
Physical Risks Acute Risks Procurement Decrease in natural rubber yield due to the spread of pathogens and viruses, resulting from the vulnerability to diseases of rubber farm formed by clone individuals. Conduct educational activities on the importance of proper farm management to prevent the spread of pathogens and viruses in PROJECT TREE. Medium
Decrease in yield and quality due to reduced microbial diversity in the soil and spread of white root rot disease, resulting from the continued monoculture of Para rubber tree. Recommendation for farmers to grow diverse crops, including agroforestry to prevent white root rot disease in PROJECT TREE. Medium
Loss of continuity in natural rubber cultivation due to the increase in natural disasters such as heavy rainfall, floods, and typhoons. Distribution of purchasing areas in factory suburbs and throughout southern Sumatra. Medium
Poor growth and lower yields of rubber trees resulting from deviation from optimal growing temperatures, lack of sunlight, changes in rainfall patterns caused by climate change. Conduct educational activities on proper farm management in PROJECT TREE. Medium
Processing Damage to factory infrastructure and factory shutdowns due to extreme weather and natural disasters caused by climate change. Confirmed prompt response capability to natural disasters such as flooding during past events. Medium
Inability to appropriately intake water during flooding.
Pollution of rivers and watershed soil due to discharge of wastewater exceeding water quality standards into rivers. Equipped with wastewater treatment facilities and conducts hourly water quality inspection. Medium
Chronic Risks Procurement Decrease in natural rubber yield and quality resulting from degradation of surrounding water and soil quality due to excessive use of chemical fertilizers by the rubber plantation, and industrial activities in the area. Conduct educational activities on chemicals that cause pollution and wastewater treatment in PROJECT TREE. Medium
Decrease in natural rubber yields due to increased pathogens, pests, and vermin. Conduct educational activities on proper farm management in PROJECT TREE. Medium
Transition Risks Policy/
Laws and Regulation		 Procurement Introduction and tightening of regulations on sustainability and traceability. Further expansion of PROJECT TREE that is an activity to ensure traceability and increase the sustainability of natural rubber, promotion of TREE+* implementation High
Introduction or modification of laws and regulations along with strengthening of reporting obligations, to protect the environment around rubber farm. Through PROJECT TREE, promote regulatory compliance by informing and educating smallholders about laws and regulations. Medium
Processing Introduction or modification of laws and regulations, along with the strengthening of reporting obligations, to protect against the negative environmental impacts caused by rubber processing plants. Developing environment-related data and improving it as needed. Medium
Market Procurement Changing customer preferences, including increased demand for products produced and manufactured in sustainable methods with lower impacts on nature. Spreading sustainable natural rubber production methods to smallholders and supplying the product to the market through PROJECT TREE. Medium
Decrease in procurement sources as rubber farmers shift crops due to changes in profitability. Adequate compensation to farmers by PROJECT TREE prevents rubber farmers from crop shifting (redistributing a portion of the sales, etc.) Medium
Processing Transition to nature-positive production methods, including the establishment of manufacturing processes with less environmental impact and the introduction of equipment to improve resource efficiency. Already using biomass as a heat source for natural rubber drying, considering transition to nature-positive production methods in every situation. Medium
Technology Procurement Delay in promotion of traceability assurance due to stagnation in smartphone penetration among rubber farmers. Planning to provide free smartphones to farmers. Medium
Reputation Procurement Increased criticism from consumers and investors and decrease in brand value due to procurement of natural rubber from rural farm with inadequate nature management practices. Risk assessment of farmers in PROJECT TREE to identify and improve farms with inadequate natural management. Medium
Criticism of greenwashing due to unsustainable projects claiming to be sustainable. PROJECT TREE is promoted with the cooperation and guidance of international NGOs, namely, Proforest and SNV. Medium
Processing Cancellation of certification or damage to corporate value due to poor environmental management or resulting from environmental accidents. In addition to ISO audits by an external organization, PT. Aneka Bumi Pratama (ABP), a natural rubber processing company, conducts annual internal audits to reduce the risk of certification revocation. Medium
Liability Procurement Lawsuits and fines from local communities due to odors and water pollution caused by waste and pollutants discharged from upstream suppliers. Conduct educational activities on sewage and waste treatment for farmers in PROJECT TREE. Medium
Processing Lawsuits and fines from surrounding communities due to health hazards derived from toxic pollutants by the plant and endocrine disruptors. Properly dispose of sewage, exhaust, and waste in accordance with rules, laws and regulations. Medium
  • Natural rubber that ensures traceability and complies with the EUDR (EU Deforestation Regulation)
<Opportunity>
Type Business Process Description Status of Response Importance
Business Performance Resource Efficiency Procurement High efficiency of natural rubber supply by PROJECT TREE. In PROJECT TREE, deploying agricultural technology support and educational activities that contribute to increased yields of natural rubber. High
Breeding (resistance to natural disasters, disease and high temperatures as well as sterilization, etc.) In PROJECT TREE, major suppliers of ABP are planning to distribute improved varieties developed on their own farm to smallholders. High
Promote traceability using blockchain and other technologies. Collecting data using a traceability system based on blockchain technology developed in-house. Considering the use of data to improve logistics efficiency and reduce CO2 emissions. High
Processing Improved efficiency of waste tires collection process and reconditioning. Considering the collection of waste tires and the sale of them to used tire shops, utilizing the tire distribution network for Nalnet Communications, a company in which ITOCHU has capital participation. High
Products and Services Procurement Increased sales volume of sustainability-certified natural rubber. Focusing on the supply of EUDR compliant products through PROJECT TREE. Responding to strong demand from tire manufacturers for EUDR compliant products. High
Processing Increased sales volume of recycled products through the waste tires collection. Of the collected waste tires, those still usable are planned to be resold to consumers via used tire shops. High
Market Procurement Maintain brand value and market leadership by supplying sustainable natural rubber Increased incentive income for smallholders from increased distribution of natural rubber certified as origin by PROJECT TREE due to the enhanced brand value of PROJECT TREE. High
Develop business strategies aligned with Kunming-Montreal Global Biodiversity Framework (GBF) 2030 and 2050 goals. PROJECT TREE aims to “halt agricultural land development and illegal logging around protected areas,” and can promote GBF “Target 1: Plan and Manage all Areas To Reduce Biodiversity Loss.” High
Capital Flow and Financing Procurement Access to nature-related and environmentally-conscious funds, bonds, or loans. Expecting financial institutions to offer and increase the overall financing capacity, such as proposing sustainability-linked loans for companies participating in PROJECT TREE. High
Sustainability Performance Sustainable Use of Natural Resources Procurement Transition to processes that increase positive impacts and reduce negative impacts on nature. PROJECT TREE contributes to being nature-positive by avoiding illegal logging in protected forests and is constantly considering a transition to nature-positive production methods. High
Processing Transition to processes that increase positive impacts and reduce negative impacts on nature through the establishment of recycling systems. Aiming to reduce environmental impact by reusing tires that were previously discarded. High

Prepare

In order to mitigate significant risks and create opportunities, it is important to ensure traceability and reduce environmental impacts in collaboration with farmers. The core global indicators that TNFD recommends for disclosure and our specific collection indicators that we have considered based on the results of our analysis are as follows:

<Metrics>
Metric No. Category／Indicator Collection Metrics (Reference) Related Risks and Opportunities
C3.1 Quantity of high-risk natural commodities sourced from land/
ocean/freshwater
  • A procurement of natural rubber through ABP (approximately 197 thousand tons)
  • Loss of continuity in natural rubber cultivation due to the increase in natural disasters such as heavy rainfall, floods, and typhoons.
  • Extension of capital investment cycle period due to reduced deterioration of own infrastructure.
C1.1
FA.C1.0		 Land/freshwater/
ocean-use change (regenerative and sustainable land management)
Deforestation-free Products
  • Loss of continuity in natural rubber cultivation due to the increase in natural disasters such as heavy rainfall, floods, and typhoons.
  • High efficiency of natural rubber supply by PROJECT TREE.
  • Extension of capital investment cycle period due to reduced deterioration of own infrastructure.
  • Stabilization of factory operations through the availability of a stable amount of water by the development of reservoirs to store rainwater and river water, etc.
  • Expanding the use of electricity derived from PKS (Palm Kernel Shell), a renewable energy source from biomass.
  • Improving efficiency of waste tires collecting process and reconditioning processing.
A22.0, A22.1, A22.2, A22.3, A22.4 Value Chain
  • Loss of continuity in natural rubber cultivation due to the increase in natural disasters such as heavy rainfall, floods, and typhoons.
  • High efficiency of natural rubber supply by PROJECT TREE.
  • Improvement of business continuity against natural disasters through the development of infrastructure such as reservoirs, rice paddies, and water sprinklers.
  • Extension of capital investment cycle period due to reduced deterioration of own infrastructure.
  • Stabilization of factory operations through the availability of a stable amount of water by the development of reservoirs to store rainwater and river water, etc.
Company-specific Physical Risks
  • Decrease in natural rubber yield due to the spread of pathogens and viruses, resulting from the vulnerability to diseases of rubber farm formed by clone individuals.
  • Poor growth and lower yields of rubber trees due to deviation from optimal growing temperatures, lack of sunlight, changes in rainfall patterns caused by climate change.
  • Decrease in yield and quality due to reduced microbial diversity in the soil and spread of white root rot disease, resulting from the continued monoculture of Para rubber tree.
  • Pollution of rivers and watershed soil due to discharge of wastewater exceeding water quality standards into rivers.
  • Decrease in natural rubber yield and quality resulting from degradation of surrounding water and soil quality due to excessive use of chemical fertilizers by the plantation, and industrial activities in the area.
  • Decrease in natural rubber yields due to increased pathogens, pests, and vermin.
  • Increased criticism from consumers and investors and decrease in brand value due to procurement of natural rubber from rural village with inadequate nature management practices.
Company-specific Transition Risks
  • Response to the introduction and tightening of regulations on sustainability and traceability.
  • Introduction or modification of laws and regulations to protect the environment around rubber farm, and strengthening of reporting requirements.
  • Changing customer preferences for products produced and manufactured in sustainable methods with less negative impact on nature.
  • Actions to shift to nature-positive production methods, including the establishment of manufacturing processes with less environmental impact and the introduction of equipment to improve resource efficiency.
  • Stagnation in promotion of traceability assurance due to slow growth of smartphone penetration among rubber farmers.
  • Increased criticism from consumers and investors and decrease in brand value due to procurement of natural rubber from rural village with inadequate nature management practices.
  • Cancellation of certification or damage to corporate value due to poor environmental management or resulting from environmental accidents.
  • Lawsuits and fines from surrounding communities due to toxic pollutants by the plant and health hazards derived from disturbances.

In addition, we collect other metrics on water consumption, CO2 emissions, etc. We also intend to consider setting measurable targets.

PROJECT TREE

To sustainably procure natural rubber, it is important to appropriately assess and manage dependencies and impacts on natural capital, and to reduce negative impacts on both the environment and human rights. To this end, it is important to ensure that natural rubber is not produced in protected areas and that child labor is not employed in its production. However, since most natural rubber cultivation is carried out by smallholders, ensuring traceability is challenging. We have established the Natural Rubber Procurement PolicyPDF, and joined GPSNR, a new global platform for sustainable natural rubber, as the only Japanese trading company founding member.

In addition, we are focusing on PROJECT TREE, which utilizes a supply chain management system uniquely developed for our natural rubber business. To further promote this initiative, we established PT PROJECT TREE INDONESIA (PTI), a sustainability services company, which began operations in June 2025. Going forward, PTI will play a central role in expanding PROJECT TREE and advancing sustainability across the natural rubber supply chain, contributing to the overall sustainability of the industry. PROJECT TREE utilizes a blockchain-based traceability system developed by our company.

This initiative utilizes our proprietary system developed in-house based on blockchain technology. Through a smartphone application, information such as farm locations, transaction details, dates, and other supply chain data is recorded on the blockchain and can be checked on a map, thus achieving advanced traceability across the supply chain. Raw materials delivered from smallholders via collectors and dealers are processed by ABP, our subsidiary, and sold to tire manufacturers as natural rubber with information of origin. A portion of the sales proceeds from PROJECT TREE supporting tires is returned to participating smallholders in the form of additional incentive, helping to improve their livelihoods and economic resilience. Additionally, as part of the project, we conduct training activities on capacity building of farm management and wastewater treatment, collaborating with farmers to realize a sustainable society in harmony with nature.

Refer to: PROJECT TREEopen in new window

The real estate business utilizes various natural capital—including land and water—through land development, utilization, and building operations. ITOCHU recognizes that our business both depends on and impacts natural capital, creating potential nature-related risks. In particular, risks associated with ecosystem loss or degradation due to land use change, as well as environmental pollution from construction work, are identified as significant. In the mapping of dependency and impact, the real estate business is classified as having a high impact score.

Based on these considerations, we conducted a LEAP analysis of the real estate business to deepen our understanding of its dependency and impact on natural capital to reduce risk and create opportunities. Our real estate business centers on the development of commercial facilities and residential properties. Accordingly, this analysis focused on real estate development and the upstream procurement of building materials.

Dependency and impact mapping (Real Estate Business)
  • The dashed lines show the average dependency and impact scores of all ENCORE processes
Breakdown of dependency and impact for each value chain in the Real Estate Business
Locate

For the Locate phase in the real estate business, ITOCHU focused the analysis specifically on timber procurement activities. The evaluation results are detailed in the subsequent Commodity Analysis section.
Upstream production activities in the building materials (“Construction materials production” and “Production of forest and wood-based products”) are identified as having significant nature-related issues, such as logging and landslides. Among these, ITOCHU and our subsidiaries are engaged in “Production of forest and wood-based products”. Given its strategic importance to us, we conducted a dedicated analysis for this sector, independent of the broader real estate business. Furthermore, timber is also included in the Science Based Targets Network (SBTN)* High Impact Commodity List, which identifies commodities with substantial dependency and impact on natural capital.
For risk assessments related to each residential property developed by the Group’s real estate, please refer to the ESG report of ITOCHU REIT Management Co., Ltd. (Climate Change and Natural Capital InitiativesPDF file).

  • Global initiative to develop science-based targets for nature.
Evaluate

Working with real estate business personnel, ITOCHU subdivided business activities along the value chain according to ISIC（International Standard Industrial Classification）. For each industrial activity, we mapped the dependencies and impacts identified in ENCORE, assigning importance on a five-level scale (Very low, Low, Medium, High, and Very high).
Upstream procurement of building materials depends heavily on ecosystem services such as rainfall patterns and water purification. The extraction of raw materials for construction—such as timber, sand, and minerals—may negatively impact habitats through their natural capital use and the emission of pollutants. Regarding direct operations in real estate development, there is a dependency on water purification, and noise and dust could adversely affect the natural environment.

Assess

Based on the results of the Evaluate phase and the TNFD recommendations, ITOCHU identified nature-related risks and opportunities across the entire value chain of our real estate business. Furthermore, assuming a future scenario as of 2030, we evaluated the significance of these risks and opportunities on a three-point scale (Low, Medium, and High).
The TNFD developed four scenarios based on two critical uncertainties: “Ecosystem Service Degradation (physical risk)” and “Societal Alignment towards Transition.” We determined that we are in the Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital) and assessed the magnitude and likelihood of these risks and opportunities. This assessment was conducted by personnel of real estate business, reflecting actual business situation.
In scenario analysis for real estate development, one example of risk identified was potential damage from flooding or landslides due to high dependency on rainfall patterns. However, since we conduct rigorous disaster risk assessments during site selection process, and review of past cases confirmed that both the likelihood and significance of these risks remain low.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDFファイル: ITOCHU’s Approach

Finally, for risks and opportunities evaluated as having medium importance or more, we organized and considered response measures. Specifically, to ensure effective risk identification and mitigation, this section focused on those risks and opportunities rated as “Medium” and “High”.
Detailed responses to each risk and opportunity are summarized in the table below. In our real estate business, including the Group companies, comprehensive measures are taken for nature-related risks and opportunities.

<Risk>
Type Business
Process		 Description Status of Response Importance
Physical Risks Acute Risks Upstream Construction delays due to extreme weather or natural disasters Medium
Physical Risks Acute Risks Upstream Project delays due to supply chain disruptions caused by natural disasters Medium
Physical Risks Chronic Risks Upstream Tighter underwriting and increasing premium rate in the construction and liability insurance market
  • Site selection considering hazard maps
  • Proactive implementation of disaster risk reduction measures (such as disaster-resistant design)
  • Enrollment in long-term insurance policies
 Medium
Transition Risks Policy/
Laws and Regulations		 Upstream Construction period restrictions or changes to planned construction sites due to the discovery of habitats for natural monuments or rare species
  • Conduct thorough pre-assessment to prevent development in habitats of natural monuments or rare species, including compliance with the Act on Protection of Cultural Properties
  • Sufficiently examine project site selection and choose areas where negative impacts on ecosystems are considered relatively minor
 Medium
Transition Risks Reputation Upstream Criticism from local residents and society due to destruction or negative impact on valuable ecosystems at construction sites, affecting not only contractors but also clients
  • Conduct thorough pre-assessment to prevent development in habitats of natural monuments or rare species, including compliance with the Act on Protection of Cultural Properties
  • Secure opportunities for dialogue and explanations with stakeholders (local residents and municipalities) from the pre-construction phase
  • Sufficiently examine project site selection and choose areas where negative impacts on ecosystems are considered relatively low
 Medium
Transition Risks Market Upstream Increase in material and energy prices due to strengthened regulations, including EUDR
  • Distribution of procurement sources
  • Monitor price fluctuations
  • Stabilize procurement prices through long-term contracts and futures transactions
  • Utilize recycled or alternative materials
  • Monitor trends in lows and regulations
 Medium
Transition Risks Market Upstream Instability in material procurement due to increased demand for decarbonized and sustainable materials Medium
Transition Risks Policy/
Laws and Regulations		 Upstream Increase in upstream costs and changes in requirements due to nature-related regulations and standards (biodiversity considerations, offsets, TNFD, etc.)
  • Actively collect information on revisions to laws and standards
  • Refine cost estimation at the project planning stage
 Medium
Transition Risks Policy/
Laws and Regulations		 Upstream Growing social pressure for sustainable procurement Medium
Transition Risks Laws and Regulations/
Liability Risks		 Upstream Identification of soil and groundwater pollution due to inadequate environmental due diligence
  • Engage experienced consultants and conduct preliminary environmental due diligence and environmental assessments for soil and groundwater
 Medium
Transition Risks Policy/
Laws and Regulations		 Upstream Tightening regulations and permits for public land, urban parks, preserved trees, and protected areas
  • Conduct prior research on relevant laws and ordinances
  • Conduct preliminary consultations with authorities
  • Confirm and strictly comply with the licensing and permitting process
    ＜Examples＞
    DAIKEN Corporation’s participation in public greening projects
 Medium
Transition Risks Technology Upstream Introduction of energy-saving building materials, equipment, and green technologies (technologies and methods that mitigate negative impacts on nature)
  • Energy-efficient and environmentally high‑performance products are integrated as standard across all operations.
 Medium
Transition Risks Technology Upstream Delays in the introduction of energy-saving building materials, equipment, and green technologies (technologies and methods that mitigate negative impacts on nature)
  • Energy-efficient and eco-friendly products are integrated as standard across all operations.
  • Actively monitor and promote the adoption of new technologies and construction methods on a routine basis.
 Medium
Transition Risks Laws and Regulations Upstream Strengthened biodiversity protection and invasive species controls (tighter quarantine and customs clearance)
  • Implement invasive species prevention measures as part of routine operations (material management, plant selection, etc.)
  • Ensure strict plant quarantine and customs clearance procedures
 Medium
Physical Risks Acute Risks Direct Operation Damage to company-owned properties caused by floods, landslides, typhoons, and other natural disasters
  • Site selection considering hazard maps
    ＜Examples＞
    For sites identified as high risk on hazard maps, equipment is installed in locations that do not flood during the development period, and disaster response during construction is meticulously implemented
  • Formulation of BCP
  • Introduction of disaster prevention and mitigation facilities (such as flood barriers and enhanced drainage)
  • Enrollment in insurance covering natural disasters
 Medium
Transition Risks Policy/
Laws and Regulations		 Direct Operation Increased difficulty in site selection and planning due to tighter land use regulations from a nature conservation perspective
  • Conduct thorough research on land use and regulations at the site selection stage
 Medium
Transition Risks Reputation Direct Operation Environmental destruction and reputational damage due to modification of natural environments. Medium
Transition Risks Policy/
Laws and Regulations		 Direct Operation Compliance with nature-related standards and disclosure requirements (such as TNFD, CSRD, etc.)
  • Actively collect information and respond promptly to disclosure-related laws and standards
  • Promoting the insourcing of information disclosure processes
 Medium
Transition Risks Policy/
Laws and Regulations		 Direct Operation Strengthening regulations related to greening, nature conservation, and biodiversity
  • Actively collect information on revisions to laws and standards
  • Enhancing the accuracy of cost estimations at the project planning phase.
 Medium
Transition Risks Policy/
Reputation/
Liability Risks		 Direct Operation Inadequate contractual risk allocation forof nature-related risks
  • Clarification of the demarcation of responsibilities in contracts.
 Medium
Transition Risks Reputation/
Liability Risks		 Direct Operation Identification of arbitrary use of manipulated nature-related information or data Medium
Transition Risks Policy/
Laws and Regulations		 Direct Operation Inconsistency with regional planning and green requirements
  • Confirm regional development plans and green requirements in advance (third-party checks as needed)
 Medium
Transition Risks Market/
Reputation		 Direct Operation Stricter terms of investment and financing by investors and financial institutions due to rising social environmental awareness (expansion of the green bond market) Medium
Transition Risks Market Direct Operation Market value erosion of properties with poor environmental performance Medium
Physical Risks Acute Risks Downstream Operational disruptions due to natural disasters such as heavy rainfall, flooding, and storm surges Medium
Physical Risks Chronic Risks Downstream Deterioration of the surrounding environment, such as worsening urban heat island effect. High
Physical Risks Chronic Risks Downstream Underwriting restrictions in the insurance market for properties (such as in areas frequently affected by flooding)
  • Site selection considering hazard maps
  • Formulate BCP/BCM
  • Introduce disaster prevention and mitigation facilities (such as flood barriers and enhanced drainage)
  • Backup and redundancy of critical equipment
 Medium
Transition Risks Market Downstream Tenant attrition and rent decline due to insufficient consideration for natural capital Medium
Transition Risks Policy/
Laws and Regulations		 Downstream Changes and strengthening of local governments’ regional biodiversity strategies (such as changes in administration or plan revisions)
  • Monitor trends in regional policy (build and strengthen relationships with local governments through communication with them)
 Medium
<Opportunity>
Type Business Process Description Status of Response Importance
Opportunity Resource Efficiency Upstream Promotion of sustainable material procurement (e.g., certified timber) Appropriately implement within business activities Medium
Opportunity Products and Services Upstream Collaboration with construction contractors to introduce green technologies Medium
Opportunity Reputation Upstream Implementation of environmental measures based on engagement with local residents and NGOs Medium
Opportunity Sustainable Use of Natural Resources Upstream Introduction of recycling technologies for construction materials Medium
Opportunity Products, Services and Reputation Direct Operation Increased demand for wooden structures using domestically certified timber Medium
Opportunity Products, Services and Reputation Direct Operation Construction plans that consider nature and biodiversity Medium
Opportunity Products, Services and Reputation Direct Operation Acquisition of biodiversity certification systems (e.g., JHEP certification, ABINC certification) Medium
Opportunity Capital Flow and Financing Direct Operation Expansion of sustainability finance through enhanced disclosure of nature-related information and initiatives Medium
Opportunity Reputation Direct Operation Gaining customer trust and securing talent through the promotion of “nature-positive management,” and improving employee retention by enhancing job satisfaction, motivation, and loyalty Medium
Opportunity Reputation Downstream Increase in rent and occupancy rates of facilities designed with consideration for nature and biodiversity Medium
Opportunity Products and Services Downstream Stabilization of facility operations by strengthening disaster resilience of facilities and surrounding environments Medium
Prepare

For the real estate business, ITOCHU is currently collecting information on the following indicators recommended for disclosure by TNFD.

<Metrics>
Metric No. Category/Indicator Collection Metrics (Reference) Related Risks and Opportunities
EH.A1.0
RE.A1.1		 Green space creation Track record of “Chikyugi” forest creation activities (Japanese only)open in new window
  • Strengthening regulations related to greening, nature conservation, and biodiversity
  • Deterioration of the surrounding environment, such as worsening urban heat island effects
  • Implementation of environmental measures based on engagement with local residents and NGOs
  • Acquisition of biodiversity certification systems (e.g., JHEP certification, ABINC certification)
A22.0 N/A Ratio of suppliers cooperating with sustainability surveys in real estate-related businesses
  • Instability in material procurement due to increased demand for decarbonized and sustainable materials
  • Growing social pressure for sustainable procurement
  • Promotion of sustainable material procurement (e.g., certified timber)
  • Introduction of recycling technologies for construction materials
EH.A22.0 Value chain certification
  • Instability in material procurement due to increased demand for decarbonized and sustainable materials
  • Growing social pressure for sustainable procurement
  • Promotion of sustainable material procurement (e.g., certified timber)
  • Introduction of recycling technologies for construction materials
A22.1 N/A Ratio of suppliers cooperating with sustainability surveys in real estate-related businesses
  • Instability in material procurement due to increased demand for decarbonized and sustainable materials
  • Growing social pressure for sustainable procurement
  • Promotion of sustainable material procurement (e.g., certified timber)
FP.A22.1 Non-certified wood/fiber covered by due diligence and traceability systems
  • Instability in material procurement due to increased demand for decarbonized and sustainable materials
  • Growing social pressure for sustainable procurement
  • Promotion of sustainable material procurement (e.g., certified timber)
A22.2 N/A
A22.3 N/A
A22.4 N/A Ratio of suppliers cooperating with sustainability surveys in real estate-related businesses
  • Instability in material procurement due to increased demand for decarbonized and sustainable materials
  • Growing social pressure for sustainable procurement
  • Promotion of sustainable material procurement (e.g., certified timber)
MM.A23.4 Suppliers screened for nature-related risks
  • Project delays due to supply chain disruptions caused by natural disasters
  • Growing social pressure for sustainable procurement
  • Introduction of energy-saving building materials, equipment, and green technologies (technologies and methods that mitigate negative impacts on nature)
  • Promotion of sustainable material procurement (e.g., certified timber)
Real Estate Development Case Studies
Shibata Town Gymnasium in Miyagi Prefecture
Introducing DAIKEN’s High-Efficiency Flooring for Improved Air Conditioning Performance
PPP Projects

ITOCHU is strengthening its value chain in the construction and real estate sectors, positioning public facility development as a key initiative. Through the ITOCHU Group’s comprehensive capabilities and business development expertise, and in collaboration with diverse stakeholders, we promote PPP (Public Private Partnership) projects tailored to the specific needs of local government. Building design incorporates disaster resilience and environmental performance. For example, at the Shibata Town Gymnasium in Miyagi Prefecture, we have introduced high-efficiency underfloor air conditioning system, manufactured by DAIKEN Corporation, a Group company. By delivering conditioned air directly from the floor to the occupied zone, this system optimizes comfort and achieves approximately 10% energy savings compared to conventional convection-based systems.

ITOCHU women’s dormitory built with timber construction
Employee Dormitories

ITOCHU’s employee dormitories also feature designs focused on decarbonization. For the women’s dormitory completed in March 2025, designed and constructed by Nishimatsu Construction Co., Ltd., a Group company. By adopting a new timber construction method and using timber for the majority of the structural frame (excluding joints), CO2 emissions were reduced by 458 tons compared to steel structures. This method offers high strength, rigidity, and toughness compared to conventional timber construction, contributing to disaster resilience, longevity, and reduced materials and costs for repairs.

Commodity Analysis

ITOCHU handles a wide range of products and commodities, including agricultural and forestry products with high dependencies and impacts on nature in the upstream value chain. For these commodities, we individually conducted detailed assessments of nature-related risks as “commodity analysis”. While the LEAP approach focused on direct operations and assessed risks and opportunities on a business-unit basis, the commodity analysis targets the procurement stage of the upstream value chain, which directly interfaces with the natural environment. For each commodity, we considered the geographical characteristics of key procurement sites and relevant regulations. Based on this, we identified dependencies and impacts on nature and the risks that could arise if these materialize. Based on scenario analysis, we then organized the potential risks to our company and the corresponding response measures. The commodities subject to the analysis have significant impacts on the natural environment and stakeholders, and fall under the SBTN High Impact Commodity List, and are related to procurement regulations or certification schemes. As a result, timber, palm oil, cocoa beans, and coffee beans were selected.

Identification of Commodity-Specific Dependencies and Impacts
  • Identify the characteristics of each commodity’s dependency and impact on natural capital through ENCORE analysis and desktop research.
  • Examine how each dependency and impact may translate into risks, taking into account the characteristics of each region.
Evaluation of Natural Conditions in Procurement Regions
  • Extract items with high dependency or impact and aggregate those with similar characteristics.
  • Link aggregated results to the TNFD’s priority region criteria, and use appropriate databases to identify priority regions.
Scenario Analysis of Business Impacts
  • Identify key external environmental factors for each assumed scenario and examine possible changes.
  • Assess potential business impacts and their likelihood in procurement regions, as well as the financial impact on the company.
Confirmation of Responses and Measures
  • Link identified risks and business impacts with the company’s existing measures.
  • Ensure that efforts are being made to reduce nature-related risks and negative impacts, and that risks are being appropriately managed.

In addition, for commodities with high dependencies and impacts on nature, such as products of relevance to forest conservation, food products, and textile raw materials, we have established procurement policies for each product and strive to procure products certified by international third-parties which allow us to identify the procurement area through traceability.

Reference: Procurement Policies by Product Type

The details of the commodity analysis are as follows:

Identification of Commodity-Specific Dependencies and Impacts

First, ITOCHU identified the dependencies and impacts on natural capital and their importance in general timber procurement and processing, using ENCORE with a five-point scale: Very Low, Low, Medium, High, and Very High.
As a result, we found that the procurement stage is highly dependent on the supply of biomass from trees and on the function of maintaining soil quality. We also confirmed that timber procurement and harvesting activities can have significant impacts on nature through land-use change caused by logging and the release of air pollutants through the use of agrochemicals and heavy machinery.

Evaluation of Natural Conditions in Procurement Regions

We procure timber mainly from North America and Southeast Asia. We have identified the location of procurement areas and processing plants for these timber products using satellite imagery and other sources, and examined the extent to which the procurement areas correspond to dependencies and impacts assessed as “High” or “Very High,” as well as the types of risks that could arise.
In this assessment, we compared the dependencies and impacts related to timber procurement described above and processing with the TNFD criteria for sensitive locations, and used the following databases:

  • BII (Biodiversity Intactness Index)
  • Ecoregion Intactness Index
  • Global Forest Watch
  • Landmark
  • WWF Biodiversity Risk Filter
  • WWF Water Risk Filter

Through desktop analysis using these databases, we evaluated the natural conditions in the procurement areas and examined potential risks. As a result, we confirmed that our procurement areas are particularly highly dependent on hazard regulation functions of nature. In addition, we determined that in approximately 70% of the areas, there is a high risk that floods and landslides may destabilize production and procurement volumes, and that the biological resource extraction and the discharge of pollutants may adversely affect local communities.

Scenario Analysis of Business Impacts

Nature-related risks are expected to materialize as external conditions change. For each of the six external factors affecting the business environment—political, economic, social, technological, legal, and environmental—we developed future scenarios for 2040 based on the above risk assessment results for the procurement areas and relevant literature. We then assessed what kinds of business impacts could arise in the procurement areas and evaluated their likelihood on a three-point scale: Low, Medium, and High. These results were reviewed in detail by those in charge of timber-related businesses based on actual conditions on the ground.
The scenario used in this analysis, consistent with the LEAP approach, was “Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital)” as assumed in the TNFD guidelines.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDFファイル: ITOCHU’s Approach

Furthermore, with regard to impacts assessed as having a “High” likelihood, those in charge of timber-related businesses also closely examined the financial risks that we could potentially bear if such impacts were to occur in the procurement areas. Regarding the instability of production and procurement volumes due to natural disasters, which was identified above as a high risk in many procurement areas, financial risks to the company such as reduced sales are the concerns. However, our suppliers have dispersed their procurement and manufacturing sites and therefore have resilience against production and procurement instability caused by natural disasters. Accordingly, we concluded that the likelihood of such financial risks materializing is extremely low. In addition, in the timber business, a reduction in available forest resource areas due to overharvesting, disease, and other factors is generally regarded as a financial risk because it may lead to lower transaction volumes. However, the suppliers with whom we conduct business are primarily companies of sufficient scale to proactively address regulatory requirements and implement sustainable forest management, such as obtaining certifications, reforestation, and long-term forest resource planning. Furthermore, government support for forestry is available, and the limited number of new entrants due to scale advantages contributes to stable, long-term management aligned with natural capital. Therefore, we have confirmed that the level of sustainability maturity in this sector is very high.

Confirmation of Responses and Measures

With respect to the impacts of the timber business on nature, as described above, the characteristics of our suppliers generally prevent our financial risks from materializing. In addition, as preventive measures, we have established a Sustainable Procurement Policy on Natural Forests and Forest Resources and have notified suppliers of the Sustainability Action Guidelines for Supply Chains. We have also implemented sufficient measures, including commitments to sustainable forest management and enhanced traceability, such as the procurement of certified timber.
Based on these analyses, details of the impacts judged to have a high likelihood of materializing in the procurement stage, the factors on the supplier side that help suppress the materialization of risks, and our initiatives to mitigate risk are as follows:

External Factors Impact Judged Likely to Manifest in the Procurement Process Main Factors for Suppressing the Manifestation of Risks Initiatives to Reduce ITOCHU’s Risks
Political / Legal
  • Stricter supplier selection criteria due to strengthened climate-related regulations and increased carbon costs.
  • Growing demand for low-carbon and environmentally friendly production in production regions.
  • The procurement region is an area where forestry is a key industry, and responses through administrative cooperation are possible.
  • Business partners mainly consist of major forestry companies and have sufficient capacity to adapt to regulatory strengthening and changes in the social environment.
  • Wood procurement has large scale merits, and high entry barriers limit new entrants.
  • Formulation of procurement policy regarding natural forest and forest resource.
  • Notification of the Sustainability Action Guidelines for Supply Chains.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Expansion of land use restrictions, including new land development, due to the expansion of protected areas and stricter land use regulations.
  • Short-term decrease in production volume due to promotion of ecosystem management and restoration at existing sites.
  • Increase in inspections in logistics due to the routine implementation of quarantine and biosecurity measures.
  • Prolongation of transportation periods due to stricter material management.
  • Measures such as heat treatment and fumigation have already been implemented.
  • Wood procurement has large economies of scale, and high entry barriers limit new entrants.
 ー
  • Increase in the local procurement ratio of wood through expanded use of recycled materials and by-products.
  • Promotion of stricter waste disposal, and mandatory measures for soil erosion and runoff risk.
  • Business partners mainly consist of major forestry companies and have sufficient capacity to adapt to regulatory strengthening and changes in the social environment.
  • Wood procurement has large scale merits, and high entry barriers limit new entrants.
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Notification of supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Expansion of the use of by-products and local procurement.
    ＜Examples＞
    MDF production at DAIKEN Corporation utilizing wood offcuts and residues.open in new window
  • Concentration of procurement in certified regions where traceability to primary production is ensured.
  • Acceleration of producer withdrawal and consolidation in regions not meeting strict traceability requirements.
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Notification of supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Strengthened monitoring from external stakeholders due to standardization of public disclosure of nature-related data.
  • Increased operational burden for data collection for disclosure.
  • Appropriate information gathering and disclosure under the supervision of the CAO.
Economic / Social
  • Concentration of demand for certified and low-impact materials for EUDR compliance and similar requirements.
  • Non-certified production areas are excluded from the market as high-risk products, leading to a widening gap in brand value.
 ー
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Establishment of joint monitoring by NGOs, companies, and local governments.
  • Growing demand for highly transparent reporting through enhanced monitoring of grievance mechanisms and their procedures and timeliness.
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Notification of supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Expansion of financing for conservation and restoration projects, and preferential treatment of nature-conscious projects by local financial institutions.
  • Acceleration and standardization of the establishment of a sustainable supply chain foundation.
  • Business partners mainly consist of major forestry companies and have sufficient capacity to adapt to regulatory strengthening and changes in the social environment.
 ー
  • Enhancement of environmental requirements in procurement regions.
  • Active implementation of long-term contracts and collaborative projects involving purchasing companies.
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Notification of supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
Technological
  • Stabilization of wood production and curbing of wood prices due to technological innovation.
  • Decline in demand for wood due to the spread of alternative materials.
  • Demand for wood is maintained regardless of the spread of alternative materials in the market.
  • Wood procurement has large scale merits, and high entry barriers limit new entrants.
 ー
Environmental
  • Reduction in available resources due to overharvesting and the spread of diseases.
  • Progression of supply instability due to longer logging bans.
  • Greater vulnerability to external environmental factors and increased quality variability due to loss of genetic diversity.
  • Proper management is implemented in procurement regions to ensure that the volume of logging does not exceed the growth volume.
  • Business partners mainly consist of major forestry companies with the systems and capabilities to implement sustainable forest management.
 ー
  • Increase in turbidity, pathogens, and chemical load in rivers and irrigation water.
  • Increase in shipment suspension of wood due to growth disorders and exceeding chemical/agrochemical residue limits .
  • Decline in soil fertility due to reduced soil organic matter and salt accumulation.
  • Expansion of overharvesting and illegal, unreported, and unregulated (IUU) logging of wood.
  • Intermittent implementation of logging bans and supply suspension due to depletion of mature timber.
  • Business partners mainly consist of major forestry companies with the systems and capabilities to implement proper forest management and appropriate logging volume control.
  • Formulation of procurement policy regarding natural forest and forest resource protection.
  • Notification of supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Implementation of human rights due diligence for business partners*.
  • Initiatives to address the impact on local communities in procurement regions.
  • Deterioration of wildlife habitats and disruption of ecosystem balance around production areas due to night lighting and noise.
  • Lawsuits from local communities due to decline in ecosystem services.
  • Business activities in protected areas and regions important for biodiversity are extremely limited.
  • Instability in quality and yield, and increased control costs due to invasion and establishment of alien species and pests.
  • Prolongation of transportation periods due to strengthened quarantine.
  • The procurement region is an area where forestry is a key industry, and responses through administrative cooperation are possible in case of problems.
  • Fragmentation of ecosystems due to expansion of land use prioritizing efficiency.
  • Collapse of ecosystem balance due to decrease in native species, uneven distribution of water resources, and severe soil degradation.
  • Health hazards and conflicts over water resources caused by environmental deterioration in local communities.
  • Business partners mainly consist of major forestry companies with the systems and capabilities to implement proper forest management.
  • Instability in production volume due to increased soil runoff and damage to forestry infrastructure caused by floods, landslides, and cyclones, and reduced yield due to wildfires.
 ー
  • Dispersal of business locations to mitigate the risk of simultaneous damage from disasters.

Going forward, we will continue stable procurement through the conservation of the natural environment, harmonious coexistence with local communities, increasing the ratio of certified products procured, deepening collaboration with suppliers, and monitoring trends in environmental regulations in procurement areas.

Identification of Commodity-Specific Dependencies and Impacts

First, ITOCHU identified the dependencies and impacts on natural capital and their importance in general palm oil procurement using ENCORE, TNFD’s Food & Agriculture Sector Guidance, and academic papers on environmental risks in oil palm cultivation. The assessment was conducted on a five-point scale: Very Low, Low, Medium, High, and Very High. As a result, it was found that oil palm, which is often cultivated in tropical, humid, and high-rainfall regions, is highly dependent on water flow regulation functions, as drainage management is crucial to prevent growth stress and disease caused by waterlogging.

Evaluation of Natural Conditions in Procurement Regions

We procure palm oil mainly from Malaysia. We have identified these major procurement areas as the subjects of the analysis. We examined the extent to which the procurement areas correspond dependencies and impacts assessed as “High” or “Very High,” as well as the types of risks could arise.
In this assessment, we compared the dependencies and impacts related to palm oil production described above with the TNFD criteria for sensitive locations, and selected the following databases:

  • BII (Biodiversity Intactness Index)
  • Ecoregion Intactness Index
  • Landmark
  • WWF Biodiversity Risk Filter
  • WWF Water Risk Filter

Through desktop analysis using these databases, we evaluated the natural conditions and potential risks in the procurement areas. As a result, we found that major procurement areas for palm oil are exposed to risks such as floods, landslides, and outbreaks of pests and diseases.

Scenario Analysis of Business Impacts

Nature-related risks are expected to materialize as external conditions change. For each of the six external factors affecting the business environment—political, economic, social, technological, legal, and environmental—we developed future scenarios for 2040 based on the above risk assessment results for the procurement areas and relevant literature. We then assessed what kinds of business impacts could arise in the procurement areas and evaluated their likelihood on a three-point scale: Low, Medium, and High. These results were reviewed in detail by those in charge of sustainability for food-related businesses.
The scenario used in this analysis, consistent with the LEAP approach, was “Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital)” as assumed in the TNFD guidelines.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDFファイル: ITOCHU’s Approach

Furthermore, with regard to impacts assessed as having a “High” likelihood, those in charge of sustainability for food-related businesses also closely examined the financial risks that we could potentially bear if such impacts were to occur in the procurement areas. The analysis indicated that landslides and the invasion of pests and diseases in procurement areas could lead to decreased yield and quality of palm oil. When these risks materialize, the impact on sales would be the main financial risk for us. However, as oil palm cultivation is often undertaken by smallholder, there are certain limitations to the risk mitigation measures that suppliers can implement.

Confirmation of Responses and Measures

As described above, regarding the risks in palm oil procurement, it is important not only to rely on preventive measures by suppliers, but also to proactively implement our own countermeasures. We engage in activities through the Roundtable on Sustainable Palm Oil (RSPO) and supplier surveys to prevent the materialization of significant financial risks that could affect our business.

Details of the impacts evaluated to have a high likelihood of materializing in the procurement process, the risks to us, and our responses are as follows:

External Factors Impact Judged Likely to Manifest in the Procurement Process Risks for ITOCHU Adaptation and Countermeasures for Risks
Political / Legal
  • Strengthened monitoring from external stakeholders due to standardization of public disclosure of nature-related data.
  • Increased operational burden for data collection for disclosure.
  • Loss of trust from stakeholders, decline in corporate reputation, and drop in stock price if information disclosure is insufficient.
  • Proactive information gathering and prompt response to disclosure-related laws and standards.
  • Enhancement and streamlining of disclosure responses.
Economic / Social
  • Establishment of joint monitoring by NGOs, companies, and local governments.
  • Growing demand for highly transparent reporting through enhanced monitoring of grievance mechanisms and their procedures and timeliness.
  • Loss of sales opportunities due to changes in procurement sources by business partners resulting from delayed responses or lack of transparency.
  • Formulation and notification of palm oil procurement policy and the supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers
  • Procurement of certified raw materials
  • Strengthening traceability (achievement of 100% traceability at the mill level).
  • Membership in the Roundtable on Sustainable Palm Oil (RSPO).
  • Disclosure of fact sheets regarding sustainable procurement of palm oil.
  • Implementation of human rights and environmental due diligence for primary to tertiary suppliers in FY2024.
Technological
  • Stabilization of crop production and suppression of crop prices due to technological innovation.
  • Delay in the introduction of new technologies among small suppliers.
  • Temporary decline in gross profit margin due to increased crop cultivation management costs from the introduction of advanced technologies and their reflection in direct procurement prices.
  • Rapid information gathering and prompt response to market fluctuations.
Environmental
  • Occurrence of crop failures due to higher frequency of high temperatures, heat waves, localized heavy rainfall, and storms.
  • Increased fruiting failure and lodging damage in existing production areas due to shifts in suitable growing regions.
  • Loss of sales opportunities due to inability to secure the required volume to meet customer needs.
  • Penalties and deterioration of contract terms if unable to fulfill contracted quantity due to reduced yield.
  • Lower gross profit margin and disposal losses due to repeated inspection failures and returns caused by quality deterioration.
  • Rapid information gathering and prompt response to market fluctuation.
  • Diversification of procurement areas.
  • Instability in production volume due to increased soil runoff and damage to agricultural infrastructure caused by floods, landslides, and cyclones.
  • Increased GHG emissions due to peat fires, land conversion, and fertilization.
  • Instability in production due to frequent localized disasters caused by climate change.
  • Sales decrease due to changes in procurement sources by customers concerned about the land conversion history of new farmland suppliers, stricter contract renewal conditions, and suspension of contract renewals.
  • Temporary losses such as compensation payments, import suspension, and sales suspension due to lawsuits arising from farmland conversion in production areas.
  • Formulation and notification of palm oil procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers.
  • Procurement of certified raw materials.
  • Strengthening traceability (achievement of 100% traceability at the mill level).
  • Membership in the Roundtable on Sustainable Palm Oil (RSPO).
  • Disclosure of fact sheets regarding sustainable procurement of palm oil.
  • Implementation of human rights and environmental due diligence for primary to tertiary suppliers in FY2024.
  • Instability in quality and yield, and increased control costs due to the invasion and establishment of alien species and pests.
  • Prolongation of transportation periods due to strengthened quarantine.
  • Temporary losses such as compensation payments, import suspension, and sales suspension due to lawsuits arising from environmental destruction in production areas.
  • Fragmentation of ecosystems due to expansion of land use prioritizing efficiency.
  • Collapse of ecosystem balance due to decrease in native species, uneven distribution of water resources, and severe soil degradation.
  • Health hazards and conflicts over water resources caused by environmental deterioration in local communities.
  • Sales decrease due to changes in procurement sources by customers avoiding suppliers suspected of deteriorating living environments of residents in procurement regions, stricter contract renewal conditions, and suspension of contract renewals.
  • Temporary losses such as compensation payments, import suspension, and sales suspension due to lawsuits arising from human rights violations in production areas.

We will continue to ensure stable procurement of palm oil through the procurement of certified products and sustainability assessments.

Identification of Commodity-Specific Dependencies and Impacts

First, ITOCHU identified the dependencies and impacts on natural capital and their importance in general cocoa bean procurement using ENCORE, TNFD’s Food & Agriculture Sector Guidance, and academic papers on environmental risks in cocoa cultivation. The assessment was conducted on a five-point scale: Very Low, Low, Medium, High, and Very High. As a result, it was found that cocoa beans are extremely sensitive to waterlogging; floods can cause root rot, indicating a high dependency on the natural water flow regulation functions.

Evaluation of Natural Conditions in Procurement Regions

We procure cocoa beans from Ghana and other West African countries. We have identified these major procurement areas as subjects of the analysis. We examined the extent to which the procurement areas correspond dependencies and impacts assessed as “High” or “Very High,” as well as the types of risks could arise.
In this assessment, we compared the dependencies and impacts related to cocoa bean production described above with the TNFD criteria for sensitive locations, and selected the following databases:

  • BII (Biodiversity Intactness Index)
  • Ecoregion Intactness Index
  • Landmark
  • WWF Biodiversity Risk Filter
  • WWF Water Risk Filter

Through desktop analysis using these databases, we evaluated the natural conditions and potential risks in the procurement areas. As a result, we found that in the major cocoa bean procurement areas, there is a high risk of natural disasters such as floods, landslides, and droughts, as well as a risk of decreased yield and quality due to deterioration of soil and water quality caused by agrochemicals and waste.

Scenario Analysis of Business Impacts

Nature-related risks are expected to materialize as external conditions change. For each of the six external factors affecting the business environment—political, economic, social, technological, legal, and environmental—we developed future scenarios for 2040 based on the above risk assessment results for the procurement areas and relevant literature. We then assessed what kinds of business impacts could arise in the procurement areas and evaluated their likelihood on a three-point scale: Low, Medium, and High. These results were subsequently reviewed in detail by those in charge of sustainability for food-related businesses.
The scenario used in this analysis, consistent with the LEAP approach, was “Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital)” as assumed in the TNFD guidelines.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDFファイル: ITOCHU’s Approach

Furthermore, with regard to impacts assessed as having a “High” likelihood, those in charge of sustainability for food-related businesses also closely examined the financial risks that we could potentially bear if such impacts were to occur in the procurement areas. The analysis indicated concerns about decreased yield and quality of cocoa beans due to water and soil quality deterioration and natural disasters in many procurement areas. When these risks materialize, reduced sales would be the main financial risk for us. However, cocoa bean cultivation is often undertaken by smallholder, there are certain limitations to the risk mitigation measures that suppliers can implement.

Confirmation of Responses and Measures

As described above, regarding the risks in cocoa bean procurement, it is important not only to rely on preventive measures by suppliers, but also to proactively implement our own countermeasures. We provide guidance to suppliers with high nature-related risks through supplier surveys, promote the procurement of sustainable cocoa beans, and diversify procurement areas to prevent the materialization of significant financial risks that could affect our business.
Details of the impacts evaluated to have a high likelihood of materializing in the procurement process, the risks to us, and our responses are as follows:

External Factors Impact Judged Likely to Manifest in the Procurement Process Risks for ITOCHU Adaptation and Countermeasures for Risks
Political / Legal
  • Concentration of procurement in certified regions where traceability to primary production is ensured.
  • Acceleration of producer withdrawal and consolidation in regions not meeting strict traceability requirements.
  • Occurrence of temporary losses due to export suspension, confiscation, fines, or contract breaches if handling raw materials not complying with local regulations.
  • Proactive information gathering and prompt response to relevant laws and regulations.
  • Formulation and notification of cocoa bean procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Strengthening traceability.
  • Strengthened monitoring from external stakeholders due to standardization of public disclosure of nature-related data.
  • Increased operational burden for data collection for disclosure.
  • Loss of trust from stakeholders, decline in corporate reputation, and drop in stock price if information disclosure is insufficient.
  • Proactive information gathering and prompt response to disclosure-related laws and standards.
  • Promotion of operational efficiency and in-house handling of disclosure responses.
Economic / Social
  • Expansion of financing for conservation and restoration projects, and preferential treatment of nature-conscious projects by local financial institutions.
  • Acceleration and standardization of the establishment of a sustainable supply chain foundation.
  • Decline in corporate reputation and stock price due to insufficient sustainability efforts or greenwashing.
  • Monitoring of market trends.
  • Implementation of environmental measures at industry standard levels.
Technological
  • Stabilization of crop production and suppression of crop prices due to technological innovation.
  • Delay in the introduction of new technologies among small suppliers.
  • Temporary decline in gross profit margin due to increased crop cultivation management costs from the introduction of advanced technologies and their reflection in direct procurement prices.
  • Rapid information gathering and prompt response to market fluctuations,
Environmental
  • Reduction in available resources due to the spread of diseases.
  • Increased frequency of cultivation suspension and greater supply fluctuations among production areas.
  • Decline in genetic diversity and uneven resistance to environment and diseases, leading to greater variability in quality.
  • Loss of sales opportunities due to inability to secure the required volume to meet customer needs.
  • Penalties and deterioration of contract terms if unable to fulfill contracted quantity due to reduced yield.
  • Lower gross profit margin and disposal losses due to repeated inspection failures and returns caused by quality deterioration.
  • Rapid information gathering and prompt response to market fluctuations.
  • Diversification of procurement areas.
  • Chronic shortage of irrigation water due to uncertainty of rainfall and excessive pumping of groundwater.
  • Increased suspension of water intake and more restrictions on water distribution due to intensified competition for water.
  • Occurrence of crop failures due to higher frequency of high temperatures, heat waves, localized heavy rainfall, and storms.
  • Increased fruiting failure and lodging damage in existing production areas due to shifts in suitable growing regions.
  • Increase in turbidity, pathogens, and chemical load in rivers and irrigation water.
  • Increase in shipment suspension due to growth disorders and exceeding pesticide residue limits.
  • Decline in soil fertility due to reduced soil organic matter and salt accumulation.
  • Instability in production volume due to increased soil runoff and damage to agricultural infrastructure caused by floods, landslides, and cyclones.
  • Progression of eutrophication, pesticide runoff, and accumulation of heavy metals.
  • Quality deterioration due to disease occurrence caused by worsening irrigation water quality or exceeding pesticide residue limits.
  • Increased burden of water and soil restoration costs and monitoring expenses.
  • Sales decrease due to changes in procurement sources by customers avoiding suppliers with a history of environmental pollution incidents or suspected environmental contamination, stricter contract renewal conditions, and suspension of contract renewals.
  • Formulation and notification of cocoa bean procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Strengthening traceability.
  • Increase in open burning and illegal dumping of agricultural residues and waste.
  • Lawsuits from local communities due to decreased productivity of surrounding farmland caused by soil and water deterioration.
  • Sales decrease due to changes in procurement sources by customers avoiding inappropriate management of agricultural residues and waste, stricter contract renewal conditions, and suspension of contract renewals.
  • Temporary losses such as compensation payments and import suspension due to lawsuits arising from inappropriate waste management in production areas, and sales suspension.
  • Fragmentation of ecosystems due to expansion of land use prioritizing efficiency.
  • Collapse of ecosystem balance due to decrease in native species, uneven distribution of water resources, and severe soil degradation.
  • Health hazards and conflicts over water resources caused by environmental deterioration in local communities.
  • Sales decrease due to changes in procurement sources by customers avoiding suppliers suspected of deteriorating living environments of residents in procurement regions, stricter contract renewal conditions, and suspension of contract renewals.
  • Decline in reputation and stock price due to criticism by NGOs and media attributing responsibility to the procuring side.

We will continue to ensure stable procurement of cocoa beans through the procurement of certified products and sustainability assessments.

Identification of Commodity-Specific Dependencies and Impacts

First, ITOCHU identified the dependencies and impacts on natural capital and their importance in general coffee bean procurement using ENCORE, TNFD’s Food & Agriculture Sector Guidance, and academic papers on environmental risks in coffee cultivation. The assessment was conducted on a five-point scale: Very Low, Low, Medium, High, and Very High. As a result, it was found that coffee cultivation requires large amounts of water, resulting in a high dependency on water resources, and that irrigation is also necessary in dry seasons and high-altitude areas.

Evaluation of Natural Conditions in Procurement Regions

We procure coffee beans mainly from Brazil and Guatemala. We have identified these major procurement areas as subjects of the analysis. We examined the extent to which the procurement areas correspond dependencies and impacts assessed as “High” or “Very High,” as well as the types of risks could arise.
In this assessment, we compared the dependencies and impacts related to coffee bean production described above with the TNFD criteria for sensitive locations, and selected the following databases:

  • BII (Biodiversity Intactness Index)
  • Ecoregion Intactness Index
  • Landmark
  • WWF Biodiversity Risk Filter
  • WWF Water Risk Filter

Through desktop analysis using these databases, we evaluated the natural conditions and potential risks in the procurement areas. As a result, we found that in major coffee bean procurement areas, there are high risks of water and soil quality deterioration due to excessive agrochemical use, as well as risks of decreased yield and quality from natural disasters such as landslides, forest fires, and floods.

Scenario Analysis of Business Impacts

Nature-related risks are expected to materialize as changes in the external conditions change. For each of the six external factors affecting the business environment—political, economic, social, technological, legal, and environmental—we developed future scenarios for 2040 based on above risk assessment results for the procurement areas and relevant literature. We then assessed what kinds of business impacts could arise in the procurement areas and evaluated their likelihood on a three-point scale: Low, Medium, and High. These results were subsequently reviewed in detail by those in charge of sustainability for food-related businesses.
The scenario used in this analysis, consistent with the LEAP approach, was “Scenario #2 (characterized by the significant damage from nature destruction, and high corporate interest in natural capital)” as assumed in the TNFD guidelines.

Scenario #1

  • Positive progress on carbon and climate accelerates, with an increase in policies and regional environmental initiatives for nature-positive outcomes. Companies are proactively conducting business with natural capital in mind.

Scenario #2

  • Due to the ongoing degradation of nature, immediate activities for recovery are required, and companies recognize the importance of restoration and regeneration of natural capital, including climate change.

Scenario #3

  • Natural capital is being degraded, but policy and financial responses do not progress.
  • Companies externalize costs and negative impacts, resulting in the excessive short-term consumption of natural capital.

Scenario #4

  • Companies place a low priority on natural capital. While there is some progress in financing, technological advancement, and corporate transformation toward decarbonization, companies refrain from formulating long-term strategies related to nature due to cost considerations.
Overview of the four scenarios based on the Guidance on scenario analysisPDFファイル: ITOCHU’s Approach

Furthermore, with regard to impacts assessed as having a “High” likelihood, those in charge of sustainability for food-related businesses also closely examined the financial risks that we could potentially bear if such impacts were to occur in the procurement areas. The analysis indicated concerns about decreased yield and quality of coffee beans due to deterioration of water and soil quality as well as water shortages in many procurement areas. When these risks materialize, reduced sales would be the main financial risk for us. However, coffee cultivation is often undertaken by smallholder, there are certain limitations to the risk mitigation measures that suppliers can implement.

Confirmation of Responses and Measures

As described above, regarding the risks in coffee bean procurement, it is important not only to rely on preventive measures by suppliers, but also to proactively implement our own countermeasures. We provide guidance to high nature-related risk suppliers identified through supplier surveys. In addition, through UNEX, S.A., we provide technical support to smallholder and promote environmentally regenerative agriculture—such as the use of shade trees and compost—in harmony with the natural environment. These efforts help popularize sustainable coffee production and stabilize farmers’ livelihoods (preventing farm abandonment), thereby establishing a framework to proactively prevent the materialization of risks that could have significant financial impacts on our business.

Details of the impacts evaluated to have a high likelihood of materializing in the procurement process, the risks to us, and our responses are as follows:

External Factors Impact Judged Likely to Manifest in the Procurement Process Risks for ITOCHU Adaptation and Countermeasures for Risks
Political / Legal
  • Concentration of procurement in certified regions where traceability to primary production is ensured.
  • Acceleration of producer withdrawal and consolidation in regions not meeting strict traceability requirements.
  • Occurrence of temporary losses due to export suspension, confiscation, fines, or contract breaches if handling raw materials not complying with local regulations.
  • Proactive information gathering and prompt response to relevant laws and regulations.
  • Formulation and communication of coffee bean procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Procurement of certified raw materials (KPI: switching to sustainable coffee beans by 2030 to 50%).
  • Strengthening traceability.
  • Strengthened monitoring from external stakeholders due to standardization of public disclosure of nature-related data.
  • Increased operational burden for data collection for disclosure.
  • Loss of trust from stakeholders, decline in corporate reputation, and drop in stock price if information disclosure is insufficient.
  • Proactive information gathering and prompt response to disclosure-related laws and standards.
  • Promotion of operational efficiency and in-house handling of disclosure responses.
Economic / Social
  • Establishment of joint monitoring by NGOs, companies, and local governments.
  • Growing demand for highly transparent reporting through enhanced monitoring of grievance mechanisms and their procedures and timeliness.
  • Loss of sales opportunities due to changes in procurement sources by business partners resulting from delayed responses or lack of transparency.
  • Formulation and notification of coffee bean procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Procurement of certified raw materials (KPI: switching to sustainable coffee beans by 2030 to 50%).
  • Strengthening traceability.
Technological
  • Stabilization of crop production and suppression of crop prices due to technological innovation.
  • Delay in the introduction of new technologies among small suppliers.
  • Temporary decline in gross profit margin due to increased crop cultivation management costs from the introduction of advanced technologies and their reflection in direct procurement prices.
  • Rapid information gathering and prompt responses to market fluctuations.
Environmental
  • Reduction in available resources due to the spread of diseases.
  • Increased frequency of cultivation suspension and greater supply fluctuations among production areas.
  • Decline in genetic diversity and uneven resistance to environment and diseases, leading to greater variability in quality.
  • Loss of sales opportunities due to inability to secure the required volume to meet customer needs.
  • Penalties and deterioration of contract terms if unable to fulfill contracted quantity due to reduced yield.
  • Lower gross profit margin and disposal losses due to repeated inspection failures and returns caused by quality deterioration.
  • Rapid information gathering and prompt response to market fluctuations.
  • Diversification of procurement areas.
  • Technical support for smallholder farmers (initiatives by UNEX (Guatemala), S.A.)
  • Chronic shortage of irrigation water due to uncertainty of rainfall and excessive pumping of groundwater.
  • Increased suspension of water intake and more restrictions on water distribution due to intensified competition for water.
  • Occurrence of crop failures due to higher frequency of high temperatures, heat waves, localized heavy rainfall, and storms.
  • Increased fruiting failure and lodging damage in existing production areas due to shifts in suitable growing regions.
  • Increase in turbidity, pathogens, and chemical load in rivers and irrigation water.
  • Increase in shipment suspension due to growth disorders and exceeding pesticide residue limits.
  • Decline in soil fertility due to reduced soil organic matter and salt accumulation.
  • Instability in production volume due to increased soil runoff and damage to agricultural infrastructure caused by floods, landslides, and cyclones.
  • Decrease in beneficial microorganisms and increased habitat fragmentation due to reduced ecosystem integrity and connectivity, leading to more pest and disease outbreaks and lower seedling establishment rates.
  • Rapid information gathering and prompt response to market fluctuations.
  • Diversification of procurement areas.
  • Loss of biodiversity and carbon emissions due to farmland conversion and peatland development.
  • Expansion of production areas subject to increased international criticism, loss of certification, or import restrictions.
  • Sales decrease due to changes in procurement sources by customers concerned about the land conversion history of new farmland suppliers, stricter contract renewal conditions, and suspension of contract renewals.
  • Sales decrease due to suspension of contract renewals.
  • Temporary losses such as compensation payments, import suspension, and sales suspension due to lawsuits arising from farmland conversion in production areas.
  • Formulation and notification of coffee bean procurement policy and supply chain sustainability action guidelines.
  • Annual sustainability surveys for key suppliers and requests for corrective actions to non-compliant suppliers.
  • Procurement of certified raw materials (KPI: switching to sustainable coffee beans by 2030 to 50%).
  • Strengthening traceability.
  • Implementation of human rights due diligence for business partners (2020)*.
  • Initiatives to address impacts on local communities in procurement regions.
  • Fragmentation of ecosystems due to expansion of land use prioritizing efficiency.
  • Collapse of ecosystem balance due to decrease in native species, uneven distribution of water resources, and severe soil degradation.
  • Health hazards and conflicts over water resources caused by environmental deterioration in local communities.
  • Sales decrease due to changes in procurement sources by customers avoiding suppliers suspected of deteriorating living environments of residents in procurement regions, stricter contract renewal conditions, and suspension of contract renewals.
  • Temporary losses such as compensation payments, import suspension, and sales suspension due to lawsuits arising from human rights violations in production areas.
  • Decline in reputation and stock price due to criticism by NGOs and the media attributing responsibility to the procuring side.

We will continue to ensure stable procurement of coffee beans through the procurement of certified products and sustainability assessments.

Initiatives for Businesses with a High Dependency

ITOCHU’s businesses with a high dependency on natural capital are the procurement, manufacturing, processing and distribution of forest commodities (food, timber, natural rubber, palm oil, etc.). We have established procurement policies for each product to improve the sustainability of these businesses. We strive to procure products certified by international third-parties which allow us to identify the procurement area through traceability.

Refer to: Procurement Policies by Product Type

We categorize and organize initiatives in businesses with a high dependency on natural capital into four: avoid, reduce, restore & regenerate and transform. We perform this categorization using the framework of the Mitigation Hierarchy* in the AR3T Action Framework published by the Science Based Targets Network (SBTN) in the Science-Based Targets (SBTs) for Nature.

Avoid
Prevent negative impacts from happening in the first place; eliminate negative impacts entirely
Example: Adopt sustainable alternative raw materials and packaging materials
Reduce
Minimise negative impacts that cannot be fully eliminated;
Example: Reduce waste and pollutant emissions
Restore & Regenerate
  • Initiate or accelerate the recovery of an ecosystem with respect to its health, integrity and sustainability, with a focus on permanent changes in state;
    Example: Improve the soil or plant trees in land modified during business activities
  • Take actions designed within existing land/ocean/freshwater uses to increase the biophysical function and/or ecological productivity of an ecosystem or its components, often with a focus on a few specific ecosystem services.
    Example: Protect endangered species
Transform
Transformative action, which covers the ways organizations can contribute to needed systemic change inside and outside their value chains.
Example: Develop sales and manufacturing models and participate in initiatives

Overview of the Mitigation Hierarchy
Organized by ITOCHU based on the Science Based Targets Network websiteopen in new window and TNFD RecommendationsPDF file

  • This is a tool to reduce the negative impacts from business on natural capital. It indicates the approach to predict and avoid or minimize risks to biodiversity (loss of wildlife habitats etc.) and impacts on local communities (release of pollutants which may impact health). It also shows the approach to recover as far as possible from any negative impacts which do occur

As a result of the above analysis, we have found that we are actively taking actions relating to “avoid” and “reduce” which should be given top priority under the SBTs for Nature to reduce nature-related risks. We will continue to further promote AR3T actions in the future to realize nature positivity.

Analysis on Our Initiatives in Line with the AR3T Action Framework
Major Category Commodity Specific Initiatives
Forest resources Timber Avoid Achieving a handling ratio of certified or highly controlled materials of 100%
Transform Engaging with NPOs
Natural rubber Transform Participating in GPSNR as a founding member and cooperating in formulating and operating platform standards
Palm oil Avoid Achieving 100% traceability at the mill level
Transform Joined RSPO and promoting initiatives
Biomass fuel Avoid Procuring legally accepted woody biomass fuel according to PEFC, FSC and other third-party certification
Food Cocoa beans and coffee beans Avoid Enhancing traceability of cocoa beans
Avoid Enhance the handling of sustainable certified coffee beans
Transform Providing technical support to small farmers such as by giving them agricultural technology to improve productivity
Dairy products Reduce Reducing ecological degradation by raising dairy cows while changing their grazing land regularly in New Zealand
Meat Avoid Built a system to enable 100% trace back to the production stage for all meat suppliers
Marine products Avoid Acquired distributor certification from MSC and CoC
Transform Encouraging fishermen about skipjack and yellowfin for which MSC certification is limited
Fruits and vegetables Reduce Using clean energy in our Dole business
Textile raw materials Cotton Avoid Acquired GOTS certification and achieving 100% traceability for our procurement of organic cotton in India
Environmentally-friendly materials Reduce Launched the RENU® project with the aim of realizing a circular economy and started to develop recycled polyester
Apparel Outdoor apparel Restore &
Regenerate		 Planning and selling charity goods and then using some of the proceeds in the funds to purchase land for tropical rainforest restoration and the protection of Borneo elephants

Initiatives in Business-related Areas

ITOCHU is working with stakeholders to protect endangered wildlife.

Risk and Impact Management

ITOCHU monitors the risks to our business from changes in natural capital and biodiversity in each country and business site. We manage the nature-related risks we have identified as major risks (environmental and social risks) in ITOCHU Group risk analysis. We consider and evaluate the nature-related risks we have identified during the investment decision process. We utilize risk identification, evaluation, information management and monitoring systems in each department responsible for managing these risks on a consolidated basis.

Identification and Evaluation of Nature-related Risks

ITOCHU acknowledges risk management as a key management issue. Therefore, we have established a basic risk management policy for the ITOCHU Group and develop the necessary risk management systems and techniques based on the concept of the COSO-ERM framework. As stated in the ITOCHU Group Environmental Policy, we collect information on laws and regulations related to environmental conservation and then comply with them. We have also introduced an environmental management system (EMS) based on ISO 14001. We recognize the impact our business activities may have on the environment and society. We also work to grasp the status in Group companies.

For example, we grasp and evaluate water risks at manufacturing sites using the WRI Aqueduct tool developed by the World Resources Institute (WRI). We also periodically identify and evaluate other nature-related risks in line with the frameworks established by the international organizations we mention later.

Refer to: ITOCHU Group Risk Management

Integrating Nature-related Risk Management into the ITOCHU Group Risk Management System

Due to the nature of our broad-based operations, ITOCHU is subject to various risks, including market risks, credit risks and investment risks. In addition to establishing various internal committees and designated responsible departments, we have created a risk management organizational structure and management methods necessary to address these risks. This organizational structure includes outlining management regulations, investment standards, risk limits, and transaction limits, as well as establishing structures for reporting and monitoring to enable integrated Group risk management.

Nature-related risks are one of the major risks (environmental and social risks) subject to Group risk management. We incorporate this risk management into the evaluation methods for each business phase shown in the table below, which can broadly cover our business activities including management of investment, trading products, logistics, Group companies, supply chain, business strategy, portfolio, etc.

Nature-related Risk Management Procedures and Evaluation Methods for Each Business Phase

Business Phase Evaluation Method
Business start
  • Environmental and social risk assessments including nature-related risks for new investment projects
Business management
  • Environmental risk assessments for handled products (LCA evaluation for the overall supply chain)
  • ITOCHU Group company environmental status surveys (2, 3 companies per year)
  • Supply chain sustainability surveys (supplier)
  • Internal environmental audits based on ISO 14001
Review business strategy
  • Consider business strategy, portfolio restructuring

Nature-related Risk Management Systems

Business Start Phase (Evaluation of the Impact on Biodiversity for New Business Investment Projects)

ITOCHU uses the ESG Checklist for Investments to evaluate in advance the impact our business investment projects will have on the environment and society. This evaluation includes, for example, grasping the impact a project will have on the ecosystem and whether it will have an impact on the natural environment and biodiversity such as by depleting resources. If we find there will be an impact, we conduct a risk assessment. If necessary, we take measures such as requesting additional due diligence from an external specialist agency to confirm there will be no problems. Only then do we invest in the projects.

Business Management Phase (Assessment of the Impact on Biodiversity in the Value Chain)

Assessment of Sustainability Risk in Products ITOCHU Handles

ITOCHU conducts a sustainability risk assessment for each new product we will handle. We use LCA* analytical methods to evaluate the impact the product will have on the environment and society, compliance with environmental laws and regulations, relationships with stakeholders, and more. This evaluation covers the stages of the product from the procurement of its raw materials to its manufacturing, use and disposal. If there is a significant nature-related risk in the value chain, we subject that product to priority management. We then formulate and implement various regulations, procedure manuals, education on the specific work operational factors, and other measures.

  • Life Cycle Assessment (LCA): This is the technique to assess the impact of one product on the environment in all stages of its lifecycle — from raw materials to manufacture, transportation, use, and disposal or reuse.
Sustainability Survey for Suppliers

Each Company at ITOCHU and applicable ITOCHU Group companies select important suppliers based on certain guidelines, including high-risk countries, handled products, and handled amounts, to grasp the status of our suppliers. Those in charge of sales at each Company and those in charge at overseas subsidiaries and Group companies visit those suppliers and interview them. Those in charge also conduct sustainability surveys with questionnaires on important suppliers. We check the situation of initiatives for natural capital including biodiversity. We make continuous improvements by asking suppliers to address issues as necessary.

Metrics and Targets

ITOCHU is committed to preserving biodiversity by promoting product certification and ensuring traceability including throughout the supply chain. In addition, we conducts social contribution activities in business related areas. We consider forest resources (wood, wood products, paper raw materials and paper products, natural rubber, palm oil), dairy products, meat, marine products, and textile raw materials as important commodities for biodiversity and strive to disclose information and set goals for them.

Targets in Business Activities

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Theme Target FY2025 Results SDGs
Biodiversity Conservation
Reduce the impact of ITOCHU’s products and projects on biodiversity conservation across our supply chain 		By 2025, conduct a follow-up ESG risk assessment for all investment projects subject to high biodiversity risk (e.g., hydropower, mines, ships), where biodiversity should be a material risk item assessed, and implement a plan for improvement if necessary.
  • Revised the ESG Checklist and created a scheme to understand the status of biodiversity risk in new business investment.
  • Participated in the TNFD Forum and started investigating tools for analyzing risks and opportunities related to natural capital.
Sustainable Use of Natural Resources
Implement initiatives to improve the sustainable use of natural resources in order to stably produce and supply commodities related to forestry, fishing, and agriculture in the future
  • Timber, Timber Products, Raw Materials for Papermaking, and Paper Products: Aim to achieve 100% coverage of our products that are either certified or confirmed to be under progressive management standards by 2025.
  • Palm oil: Aim to switch all palm oil procured by ITOCHU to sustainable palm oil*1 by 2030. In particular, we aim to align our procurement to the NDPE principle*2.
  • Coffee Beans: Aim to achieve 50% procurement of sustainable coffee beans by 2030.
  • Fisheries raw materials handled by ITOCHU: Increase the MSC*3 /CoC*4 certified products to 10,000 tons per year by 2026.
  • The handling ratio of certified or highly controlled forestry products are 100% for pulps, chips and woods.
  • Palm oil has 100% traceability to mill level in FY2025.
  • The ratio of sustainable coffee beans in our coffee bean procurement in FY2025 was 34%.
  • The volume of MSC/CoC in fisheries raw materials in FY2025 was 10,600 tons.
  1. Sustainable palm oil: palm oil supplied from supply chains compliant to RSPO and RSPO-equivalent standards
  2. NDPE (No Deforestation, No Peat, No Exploitation): zero deforestation, zero peatland development, zero exploitations
  3. MSC (The Marine Stewardship Council): an international NPO established in 1997 to work on spreading sustainable fishing
  4. CoC (Chain of Custody Certificate): A certification for processors and distributors to ensure the traceability of MSC certified marine products and other products in the management of processing and distribution processes specified by MSC

Refer to: Procurement Policies by Product Type

Targets in Business-related Areas

Performance Data

Performance Data in Business Activities

Performance Data on Business-related Areas

Action Plan

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Materiality SDGs Targets Impact Classification Issues to Address Business Area Commitment Specific Approach Performance Indicators Degree of Progress
Textile Company
Ensure Stable Procurement and Supply
Prevention of Pollution and Circulating Society Reducing our environmental burden by circulating society Textile products in general We will contribute to realize a Circulating Society through our sustainable textile products and recycling of them. Promote sustainable products and projects leading to the recycling of resources. Promote the sustainable products such as RENU, a recycled polyester derived from textile, and set up schemes to recycle textile products.

  • The environmental impact of handling recycled polyester through the RENU project is as follows (estimated for FY2025).

    • Waste volume to be made into RENU: equivalent to 4.8 million pieces of T-shirts
    • CO2 reduction: 1,491 tons
    • Water usage reduction: 5,018 kiloliters
  • Approximately 6,000 collection points for Wear to Fashion, the clothing recycling service (as of March 2026).
  • We are currently operating a joint project called the ARChemia Project, which involves textiles and chemicals, and transforms used clothing into chemical products with high environmental added value. At Expo 2025 Osaka, Kansai, some of the used uniforms from the Expo staff were recycled through this project, contributing to the realization of a circular society.
Metals & Minerals Company
  • Respect and Consider Human Rights
  • Ensure Stable Procurement and Supply
  • Mining
  • Electric Power/Mining/Oil and Gas Fields
 Sustainable mine development that pays continuous careful attention to the risks in occupational safety and health and environmental risks, and that contributes to local communities’ well-being Mining business
  • We will promote sustainable development of natural resources by fully committing to EHS (environment, health, occupational safety) and harmonious coexistence with local communities in areas which our mines operate.
  • We will improve local infrastructure such as medical care and education.
  • Ensure the thorough application of the EHS guidelines and employee education.
  • Contribute to local communities through activities for improving medical care, education and infrastructure.
  • Implementation of annual internal seminars to ensure our employees are fully aware of the EHS guidelines.
    • EHS seminar attendance rate: 100%.
    • Rate of checks implemented on EHS compliance in existing and operating projects to be possessed in long term and new mining business: 100%.
  • Donations to medical care and education, and building infrastructure in local communities.
    • Carry out CSR activities in all existing and operating projects to be possessed in long term (100%).
  • We held internal EHS (environment, health and occupational safety) guidelines training courses for supervisors and staffs engaged in mining projects. The attendance rate of the training was achieved 100%.
  • We checked the proper compliance to the EHS guidelines for nine existing projects and one another resource-related project.
  • We carried out social activities at the communities where our projects are located.
Food Company
Address Climate Change (Contribute to a Decarbonized Society)
GHG Emissions Taking countermeasures against climate change Fresh food field We will examine and promote measures that contribute to tackling climate change. Dole will utilize green energy in our processed food business.
  • Residue input volume to the Dole Philippines biogas plant.
  • GHG emissions reduction amount by introduction of clean energy.

Result in FY2025

  • Utilization of processed pineapple residue: 117,666 t
    Due to improved pineapple yield, the amount of residue input has decreased.
  • GHG emissions reduction from Renewable Energy installation: 68,526 t-CO2e
    Reduction volume decreased due to lower residue input volume.
  • Respect and Consider Human Rights
  • Ensure Stable Procurement and Supply
Supply Chain Establishing a supply chain reflecting consideration for human rights and the environment Provisions field We will develop a procurement structure compliant with third-party body certification and supplier-specific codes of conduct.
  • We will promote procurement compliant with supplier-specific codes of conduct in coffee bean and cacao bean producing countries.
  • We will strengthen the handling of oil certified by the RSPO - a third-party certification organization for palm oil.
  • We will support the establishment of a promotion and distribution system in Japan for MSPO/ISPO in cooperation with domestic industrial associations. The aim of this is to encourage the use of certified oil systems in producing countries.
  • Coffee beans: Promotion of procurement of products compliant with supplier-specific codes of conduct or certified products based on our procurement policy.
  • Cacao beans: Promotion of procurement of products compliant with supplier-specific codes of conduct (sustainable products) based on our procurement policy.
  • Palm oil: Procurement of palm oil based on our procurement policy. Promotion of the disclosure of the set KPI indicators and supplier information.

Targets for 2030

  • Coffee beans: Aim for a 50% switch to sustainable coffee beans.
  • Cacao beans: Aim for a 100% switch to sustainable coffee beans.
  • Aim for a 100% switch to sustainable palm oil.

Result in FY2025

  • Coffee Beans (certified products): procurement ratio 34%
  • Cacao beans (traceable products): procurement ratio 55%
  • RSPO Certified Palm Products/Oleo chemicals: Palm Oils 38%
    Oleo Chemical Products 63%

Support Achievements to Each Producing Country (Qualitative)

  • Coffee Beans
    To contribute more directly to Ethiopia’s coffee industry, we partnered with related company to donate coffee seedlings.
  • Respect and Consider Human Rights
  • Ensure Stable Procurement and Supply
Supply Chain Responsible Fisheries Procurement Fresh food field We will develop a procurement structure compliant with third-party body certification and supplier-specific codes of conduct. Promote procurement in accordance with the supplier’s own code of conduct in the country of origin of the tuna. Develop a tuna procurement policy and promote procurement of products and certified products that comply with the policy. In FY2025, we handled 10,600 t of MSC certified tuna in total.
(Increasing to 9% volume in our total handling)
General Products & Realty Company
  • Address Climate Change (Contribute to a Decarbonized Society)
  • Ensure Stable Procurement and Supply
Forest Using sustainable forest resources
  • Pulp
  • Woodchips
  • Wood products & materials
 We deal in sustainable forest resources to reduce the impact on the environment and prevent the increase of GHG. Handle certified or highly controlled forest products. Ensure a 100% handling ratio of certified or highly controlled forest products. In FY2025, 100% of our Pulp, Woodchips and Wood Products & Materials transactions were handled as certified or highly controlled forest products.
  • Respect and Consider Human Rights
  • Ensure Stable Procurement and Supply
  • Forest
  • Supply Chain
 Realization of sustainable supply of natural rubber Natural Rubber
  • We will endeavor to establish measures to identify and avoid procuring rubber from any suppliers who dispossess indigenous people and develop High Conservation Value (HCV) areas, High Carbon Stock (HCS) areas and peatland.
  • We support or offer a training to improve yields and quality for natural rubber producers, especially smallholders. We also offer a risk-assessment education that includes the modern slavery issue.
  • We will establish a traceability system to make uncertain raw material procurement supply chains transparent.
  • We will achieve our commitment through the sustainability activity of our unique initiative “PROJECT TREEOpen in a new window.”
  • We aim to procure raw materials with traceability and sustainability ensured in our natural rubber processing business. (Aiming to achieve 100% traceability for the natural rubber raw materials which we procure by 2028 through an original block chain-based traceability system.)
  • We will increase the number of smallholders receiving sustainability training and education, and contribute to achieving sustainability in the natural rubber industry.
  • Traceability of the natural rubber raw materials’ procurement reported by suppliers reached 100%.
  • Traceability of the natural rubber raw materials’ procurement using our system reached 24% of the monthly purchasing volume up to the smallholders.
  • Implemented sustainability training and education for 8,223 smallholders (based on the performance from January 2025 to December 2025), accumulatively 28,135 smallholders (*based on the performance from January 2021 to December 2025).

Collaboration with Outside Initiatives

Initiative Participation (Activities Through Business and Industry Groups)

Keidanren Initiative for Biodiversity Conservation Logo

ITOCHU participates in the Japan Business Federation (Keidanren). We support nature conservation projects in developing areas mainly in the Asia-Pacific region and in Japan through the Keidanren Committee on Nature Conservation that was established in 1992 when the United Nations Conference on Environment and Development (Earth Summit) was held in Rio de Janeiro in Brazil. The Keidanren Committee on Nature Conservation has been working to build an environment in which the business community strives to conserve nature. This has included exchanges with NGOs, the holding of seminars and symposiums, and the announcement of the Declaration of Nature Conservation by Keidanren, the Declaration of Biodiversity by Keidanren and the action guidelines for them (revised in October 2018). In addition, we have declared our approval of the Keidanren Initiative for Biodiversity Conservation announced on June 11, 2020. We are also participating in the TNFD Forum, which was established in September 2021, to accelerate discussions in the TNFD. In October 2024, ITOCHU registered as TNFD Adopters, declaring our intent to disclose information based on TNFD recommendations.

Cooperation with External Organizations

It is especially important for the entire value chain to work together to realize sustainable business activities for businesses with a high dependency on natural capital such as forest commodities (food, timber, natural rubber, palm oil, etc.).

ITOCHU joined in the Roundtable on Sustainable Palm Oil (RSPO) in 2006. We have set a target of handling only RSPO certified palm oil or palm oil equivalent to that by 2030. We are working on the procurement and supply of sustainable palm oil through cooperation and collaboration with other member companies. We are also participating in the Sustainable Palm Oil Transparency Toolkit (SPOTT). This is a project by the Zoological Society of London (ZSL) that assesses major palm oil related companies in terms of more than 50 indicators based on data released to the public. We disclose information to stakeholders relating to the palm oil industry through two-way communication.

In addition, we also joined as a founding member in the GPSNR. We have agreed to the 12 principles stipulated by this platform about natural rubber and comply with the applicable policy components.

Initiatives related to forest commodities are also disclosed in the form of responses to CDP questionnaires, a global corporate disclosure system for companies and organizations.

We have also joined the Organization for the Promotion of Responsible Tuna Fisheries (OPRT) established for the sustainable use of tuna resources in 2012 in our skipjack and yellowfin business. We are promoting initiatives that comply with OPRT’s voluntary management regulations.

Through cooperation with external organizations as described above, we aim to achieve the goals set forth in the “Metrics and Targets” section.