Environmental Management

Policy and Basic Concept

We consider efforts to conserve the global environment to be the most important issue in our management policy. This is under recognition that the business activities ITOCHU performs in Japan and overseas (e.g., the provision of various products and services, the development of resources, and business investment) are closely connected to global environmental problems.
We believe that sustainable corporate growth cannot be achieved without consideration for global environmental problems. Therefore, we established the Global Environment Department in 1990 ahead of other trading companies. We then formulated ITOCHU's Activity Guidelines on the Environment in 1993 (revised to the ITOCHU Environmental Policy in 1997). We reorganized and integrated the Environmental Policy and the Basic Policy for CSR Promotion in April 2018. This was revised into the ITOCHU Group Basic Policy on Promotion of Sustainability as a new policy based on the spirit of sampo yoshi, or the "three goods" (good for the buyer, good for the seller and good for society).
We are ensuring compatibility of both offense and defense — offense to promote environment conserving business and defense to take a precautionary approach to environmental risks — based on this policy. The aim of this is to fulfill our corporate philosophy of being committed to the global good. We are also engaged in global corporate management and activities with a constant awareness of global environmental problems. This comes from a perspective of wondering what we can leave to the next generation in addition to contributing to the good of the current generation.
We reorganized and integrated our conventional environmental management structure into a structure to promote sustainability in line with the revision to this policy in April 2018. We have built and are maintaining and operating an efficient environmental management system in accordance with the ISO14001 standards.
You can find our Basic Policy on Promotion of Sustainability on here.

Targets

Effort Targets and Achievements by Item in FYE 2018

We set environmental goals we will tackle in the medium term for environmental management. Upon that, we set concrete targets and review achievements based on those every fiscal year.

Item	FYE 2018 Environmental Target	Review	Content Implemented in FYE 2018
Prevention of environmental pollution and compliance with laws and regulations	To ensure thorough company-wide utilization of advance environmental risk assessments and the CSR and Environmental Checklist for Investments when investing. To strengthen risk management awareness over the entire supply chain with environmental risk assessments by product and to ensure their thorough company-wide utilization.	○	We performed advance environmental risk assessment with the CSR and Environmental Checklist for Investments in all investment projects. (The assessment items also include the energy consumption and CO₂ emissions situation.) The 33 check items conform to the core subjects of ISO26000 (Guidance on social responsibility). We gave feedback on CSR and environmental aspects to the departments making the applications for all investment projects. (We gave comments on 26 projects in FYE 2018.)
	To promote efforts to improve the management level by checking the environmental management system, compliance and environmental performance situation through internal audits.	○	We conducted internal audits on 59 departments (including in the form of a self-check for five departments). We checked the environmental management system operation, compliance and environmental performance management situation. We then gave advice.
	To select group companies and then perform visits and surveys on their environmental management situation.	○	We visited and surveyed four group companies and gave them a variety of advice. We implemented improvements on-site.
Promotion of environmental conservation activities	To expand the scope of things to be understood (e.g., energy emissions) in overseas local subsidiaries and major Japanese and overseas subsidiaries.	○	We collected and disclosed information from 16 overseas branches (including local subsidiaries), 65 group companies in Japan and 464 overseas group companies.
Promotion of environmental conservation activities	To set and review targets according to the Sustainability Action Plan. (To promote at least one target in each company and branch.)	○	We planned, implemented and reviewed the respective environmental conservation activities in all company divisions and branches.
Coexistence with society	To give environmental education to elementary and junior high school students.	○	We provided a summer vacation environmental workshop (July 25 / 100 participants) and set up the Kidzania Tokyo ITOCHU Pavilion Eco Shop (experienced by an annual 21,782 visitors).
Coexistence with society	To provide cooperation to local companies and governments for environmental conservation activities. (To provide cooperation in at least one case in each branch.)	○	Branches held events and volunteer activities in cooperation with local companies and governments.
Promotion of awareness activities	To give and promote learning with seminars, tours, basic environmental education and education for personnel with specific duties for ITOCHU and group company employees.	○	We gave basic environmental education (May to July / 3,960 participants) and education for personnel with specific duties (May to March / 400 participants). We also held a sustainability seminar called the Human Rights Seminar (March 1 / 250 participants).
Promotion of awareness activities	To give and promote learning with workshops on the Waste Management and Public Cleansing Law and Soil Contamination Countermeasures Act for ITOCHU and group company employees.	○	We gave sustainability e-learning (October to November 2017 / 4,853 trainees) and an Environmental and Social Risk Response Seminar (including the Soil Contamination Countermeasures Act) (July 12 / 250 participants).

○：Implemented △：Partially implemented ×：Not implemented

Environmental Performance Targets and Achievements in Offices

Quantitative Data over Time

Electricity Consumption★

[Figure] — Scope: Tokyo headquarters, Osaka headquarters, Branches in Japan, Other branches and business facilities in Japan

Waste Volume★

Paper Consumption

Water Consumption★

Please check the annexed table for the figures in group companies in Japan, overseas offices and overseas group companies.

Independent Assurance Report (846KB): The data below marked with a ★ is independently assured through KPMG AZSA Sustainability Co., Ltd. This assurance conforms to the International Standard on Assurance Engagements (ISAE) 3000 and 3410 of the International Auditing and Assurance Standards Board (IAASB).
★: Total electricity consumption and total CO₂ emissions attributable to business facilities of the Tokyo Headquarters, the Osaka Headquarters, branches in Japan, domestic branches and other business facilities, CO₂ emissions (attributable to distribution), and the volume of waste discarded, recycling rate, water consumption, gray water production volume and wastewater volume for the Tokyo Headquarters.

Independent Assurance Report (846KB): The data below marked with a ◆ is independently assured through KPMG AZSA Sustainability Co., Ltd. This assurance conforms to the International Standard on Assurance Engagements (ISAE) 3000 and 3410 of the International Auditing and Assurance Standards Board (IAASB).
◆: Total electricity consumption and CO₂ emissions attributable to business facilities of the Tokyo Headquarters, Osaka Headquarters, branches in Japan, domestic branches, other business facilities, group companies in Japan, overseas offices and overseas group companies and the ITOCHU Group in total.

Target Setting

ITOCHU sets target values for a reduction in our electricity consumption and in the volume of waste we discard, the promotion of recycling, and a reduction in our paper and water consumption. The target values are as below. ITOCHU alone and our consolidated subsidiaries as a whole have set a target of reducing our energy consumption by at least 1% on average annually at our output level. We are working to reduce our GHG emissions.

	FY2018 Results	Single Year Target	Target for the Year Ended March 2021
Electricity Consumption of Tokyo and Osaka Headquarters, Branches in Japan and Other branches and business facilities in Japan	Decrease of 2.1% compared with FY2017 levels	Reduction of at least 1% annually	Reduction of 30% compared with FY2011 levels
Tokyo Headquarters Waste Volume	33% reduction compared with FY2011 levels	10% reduction compared with FY2011 levels	20% reduction compared with FY2011 levels
Tokyo Headquarters Recycling Rate	94%	90%	90%
Tokyo Headquarters Paper Consumption	9% reduction compared with FY2011 levels	3% reduction compared with FY2011 levels	3% reduction compared with FY2011 levels
Tokyo Headquarters Water Consumption (City Water)	20.6% reduction compared with FY2011 levels	10% reduction compared with FY2011 levels	15% reduction compared with FY2011 levels

Scope of Aggregation

○:in scope of aggregation

	Electricity consumption	CO₂ emissions from business facilities	Waste volume	Paper consumption	Water consumption　and wastewater discharge
Tokyo headquarters	○	○	○	○	○
Osaka headquarters	○	○	－	－	－
Branches in Japan^*1	○	○	－	－	－
Other branches and business facilities in Japan^*2	○	○	－	－	－
Group companies in Japan^*3	○	○	○	－	○
Overseas offices^*4	○	○	○	－	○
Overseas group companies^*5	○	○	○	－	○

The branches in Japan cover all five domestic branches (Hokkaido, Tohoku, Chubu, Chugoku & Shikoku, and Kyushu).
The other business facilities cover business facilities owned or leased by ITOCHU (except facilities for residences). The number of offices including domestic branches was 12 in FYE 2015, eight in FYE 2016, eight in FYE 2017 and six in FYE 2018.
The group companies in Japan cover consolidated subsidiaries directly invested in by ITOCHU (as of March 31, 2017) for FYE 2015 to FYE 2017. The number of such companies was 73 in FYE 2015, 70 in FYE 2016 and 65 in FYE 2017. All consolidated subsidiaries are covered for FYE 2018 (coverage 100%). The number of such companies was 208.
The overseas offices cover major business offices overseas. The number of such offices was 16 in FYE 2015, 16 in FYE 2016, 16 in FYE 2017 and 15 in FYE 2018.
The overseas group companies cover consolidated subsidiaries directly invested in by ITOCHU (as of March 31, 2017) from FYE 2015 to FYE 2017. The number of such companies was 49 in FYE 2015, 44 in FYE 2016 and 46 in FYE 2017. All consolidated subsidiaries are covered in FYE 2018 (coverage 100%). The number of such companies was 299.

However, companies expected to be sold within the next five years held for investment management purposes are not included in the scope of the data. Moreover, the CO₂ emissions of non-manufacturing site offices with 10 or fewer employees are quantitatively insignificant. Accordingly, they are not included in the scope of the data.

Structures and Systems

ITOCHU was the first trading company to introduce an environmental management system (EMS) based on ISO14001 in 1997 to strive for continuous improvement. This system seeks to comply with environmental related laws and regulations, to take a precautionary approach to environmental risks (including those relating to climate change) and to promote environment conserving businesses. Specifically, we recognize that our business activities can have an impact on the global environment and so are looking to take a precautionary approach to environmental risks. To that end, we have built a mechanism to assess in advance the impact in regards to new investments in particular together with the products we handle. It is a system in which we formulate targets for items in terms of both offense and defense every year. These items relate to a precautionary approach to environmental risks, environment conserving businesses, saving energy, saving resources, CO₂ emissions reduction and other climate change related risks. We then assess and analyze the progress situation. Finally, we move through the PDCA cycle to reliably achieve our targets. Through this, we operate and manage our targets.

Environmental Management Structure

We have reorganized and integrated our environmental management structure into a structure to promote sustainability in the same way as with the Environmental Policy since April 2014. This has led to the establishment of a new structure to promote sustainability. You can find this from here.

Group companies subject to the environmental management system: CI Textile Service Co., Ltd., ITOCHU Automobile Corporation, ITOCHU Metals Corporation, Food Management Support Corp., ITOCHU Orico Insurance Services Co., Ltd., ITOCHU Financial Management Inc., ITOCHU Treasury Corp., ITOCHU Human Resources & General Affairs Services Inc. and ITOCHU Taiwan Corporation
No. of companies that have acquired ISO14001 in our group: 61 out of 522 companies (coverage :12%).

External Audits

We undergo an ISO14001 certification review every year by the BSI Group Japan K.K. (BSI). In FYE 2018, this corresponded to a maintenance (surveillance) review. (We undergo a maintenance review in the first and second years and then a renewal review in the third year; this cycle then repeats). This review led to the continuation of our certification.

Internal Audits

We conduct internal environmental audits every year based on ISO14001. In FYE 2018, we audited all 59 departments (including in the form of a self-check for five departments).Members of the Sustainability Management Department constitute the audit team and conduct them with emphasis on compliance audits. The implementation of internal environmental audits over half a year leads to a precautionary approach to environmental risks.

Environmental Accounting

Environmental Conservation Costs

The environmental conservation costs in all offices in Japan of ITOCHU in FYE 2018 are as follows.

(Unit: 1,000 yen)

Classification	Amount
Costs inside business areas	690,574
Up/downstream costs	14,676
Management activity costs	131,935
Research and development costs	500
Social activity costs	7,810
Costs to address environmental damage	8,457
Total	853,952

Summarized based on the Environmental Accounting Guidelines - 2005 Edition from the Ministry of the Environment.
Scope of Calculation: All domestic branches
Target period: April 1, 2017 to March 31, 2018

Environmental Conservation and Economic Effects

The environmental conservation effect and economic effect of our paper and electricity consumption and the volume of waste we discard in ITOCHU in FYE 2018 is as follows.

	Environmental Conservation Effects	Economic Effects (Unit:1,000JPY)
Paper Usage	1,991,000sheets	1,413
Electricity Usage	300,000kWh	6,002
Waste Emissions	-24t	-1,200
Water Usage	14,526m³	5,762

Environmental conservation and economic effects are calculated by subtracting actual values for the current fiscal year from those for the previous fiscal year.
Scope of Calculation: Paper and Water Usage - Tokyo Headquarters building, Electricity Usage, Waste Emissions - All of domestic branches.

Understanding the Situation of our Environmental Obligations

We do not limit ourselves to just supporting statutory requirements in regards to the environmental risks in the tangible fixed assets (e.g., land and buildings) of ITOCHU alone and our group companies — in particular, asbestos, PCB and soil contamination; we also look to understand the situation through surveys voluntarily and then aim to respond in a way that is helpful to prompt management policy decisions and judgments. We again promoted the sharing of relevant information through various training programs, such as an Environmental and Social Risk Response Seminar, in FYE 2018.

Efforts

Environmental Education and Awareness

We provide various educational programs to encourage employees to conduct environmental conservation activities. In addition, we hold environmental law and ordinance seminars and global environmental problem awareness seminars for group employees. Through these efforts, we are striving to improve environmental awareness over the entire ITOCHU Group.

Workshops

We proactively hold workshops. The aim of these is to thoroughly inform ITOCHU Group employees about environmental related law and ordinance requirements and to raise their compliance and environmental awareness.

List of Environmental Seminars and Training Programs Held in FYE 2018
Title		Dates	Main Targets	No. of Participants
Environmental Managers Conference		April 24, 2017	Environmental managers and eco leaders	116
Basic Environmental Education		May to October 2017 Total of 58 times	Employees and group company employees	Approx. 4,000
Education for Personnel with Specific Duties		May 2017 to March 2018 Total of 31 times	Employees and group company employees	Approx. 400
Environment and Social Risk Response Seminar		July 22, 2017	Employees and group company employees	Approx. 200
Waste Management and Public Cleansing Law	e-learning	October to November 2017	Employees	Approx. 4,380
Sustainability Seminar		March 1, 2018	Employees and group company employees	Approx. 200
Other workshops for specific departments and group companies		As needed	Employees and group company employees	20

Sustainability Seminar

Please check Spreading Sustainability at ITOCHU for the Sustainability Seminar.

Reduction of Environmental Risks in the Supply Chain

We recognize that the business activities over our entire group can have an impact on the global environment. Accordingly, we are working on activities aimed at taking a precautionary approach to environmental risks for group employees. This is addition to the environmental risk assessments for the products handled by ITOCHU.

Environmental Risk Assessments for the Products We Handle

ITOCHU deals in a wide variety of products on a global scale. Therefore, we believe it is vital that we assess the impact on the global environment of each product, our environmental related laws and regulation compliance situation, and our relationships with stakeholders. Accordingly, we conduct our own environmental impact assessments on all our products. We use LCA* analytical techniques from the procurement of raw materials concerning the applicable product to their manufacturing process, use and disposal. These analysis assessment items include those related to climate change (e.g., the decrease in tropical rainforests, desertification and global warming) to assess such related risks. If the results of these assessments show that the impact on the global environment will be greater than a specific score, we formulate various regulations and procedure manuals with the applicable product being subject to priority management.

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.

Investigations into the Actual Conditions in Group Companies

We have continued to visit and investigate group companies since 2001. The aim of this is to prevent environmental pollution by these group companies. We analyze about 200 companies with a relatively high impact and burden on the global environment from among our group companies (326 companies as of the end of FYE 2018). We then conduct investigations into the actual conditions on approximately 10 companies a year. We have investigated a total of 282 offices over the past 17 years up to the end of FYE 2018. We assess companies in these investigations by investigating their factory and warehouse facilities, their situation of drainage to rivers, and their compliance with environmental laws and regulations in addition to holding a question and answer session with their management.

Environmental Risk Assessments on New Investment Projects

We assess in advance the impact on the market, society and the environment by business investment projects in Japan and overseas engaged in by ITOCHU and our Japanese subsidiaries. We do this with the ESG Checklist for Investment (The assessment items are related to climate change risks and also include the energy consumption and CO₂ emissions situation). We revised and started operating this checklist in FYE 2014. The revision means it now contains 33 check items including elements of the seven core subjects in ISO26000 (organizational governance, human rights, labor practices, the environment, fair operating practices, consumer issues, and community involvement and development). We make requests to external specialist organizations to conduct investigations in advance for projects requiring a professional point of view. The project is then only undertaken upon confirming that there are no problems in the results of those investigations.

Inquiries from Inside and Outside the Company and Our Response to Them

We received a total of 39 inquiries from outside the company in FYE 2018. These consisted of investigations and inquiries from the industrial world (15), administrative and industry organizations (8), and the media and investigation companies (2), and ISO14001 registration certification requests from business partners (14). There were no environmental related accidents, troubles or lawsuits in our company. Meanwhile, the contents of consultations from in the company and group companies were responded to appropriately for Waste Management and Public Cleansing Law related cases (84) and business investment related cases (5).

Other Efforts

Effort for the Tokyo Metropolitan Government Program to Prevent Global Warming

ITOCHU submitted a plan to the Tokyo Metropolitan Government to reduce the CO₂ emissions in our Tokyo Headquarters by approximately 15% from the reference value (average value from FYE 2003 to FYE 2005) over five years from FYE 2016 to FYE 2020 based on the Ordinance on Environmental Preservation. Our emissions in FYE 2017 were 6,459 t-CO₂. This is an approximately 39% reduction compared to the reference value.

The documents we have submitted to the Tokyo Metropolitan Government so far are as follows.

In addition to the Tokyo Headquarters, the adjacent commercial facility of CI PLAZA is also subject to the Greenhouse Gas Emission Reduction Plans submitted to the Tokyo Metropolitan Government.

Participation in COOL CHOICE

ITOCHU participates in the Ministry of the Environment-led COOL CHOICE climate change campaign aimed at realizing a low-carbon society. We are striving to adjust our air conditioning in the summer and winter and to switch off unnecessary electricity. We also conduct environmental conservation activities from the things that all employees can do in their daily lives. For example, we encourage separation of waste in offices and promote recycling.

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