Disclosure Based on TCFD Recommendations
SMS Group recognizes the risks and opportunities that climate change poses to its business as an important management issue, and has expressed its support for the recommendations of the TCFD (Task Force on Climate-related Financial Disclosures).
Governance
SMS Group has established a Sustainability Committee to examine policies and measures on sustainability issues, including responses to climate change issues, and to monitor progress. The Sustainability Committee, chaired by the CEO and composed of all Directors, meets quarterly.
The Sustainability Promotion Office serves as the secretariat of the Committee and supports the formulation and implementation of sustainability-related strategies and measures in cooperation with each business and corporate department. The Office and the department in charge of risk management integratedly conduct group-wide risk management related to sustainability issues.
The Board of Directors supervises these processes and provides direction as necessary.
Strategy
Since the impact of climate change is highly uncertain, we conduct analysis based on certain scenarios and qualitatively evaluate the impact on SMS group. Two scenarios were considered: i) the 4°c scenario, in which global warming progresses without additional measures beyond the current level, and ii) the less than 2 °c scenario, in which a transition to decarbonization is assumed. For physical impacts, we mainly referred to the SSP (Shared Socioeconomic Pathways) and RCP (Representative Concentration Pathways) scenarios of the IPCC (Intergovernmental Panel on Climate Change) . For transition impacts, we mainly referred to each scenario in the WEO (World Energy Outlook) published by the IEA (International Energy Agency).
The major impacts of climate change are considered as risks for SMS group. However, by taking appropriate measures, we believe we can turn them into opportunities such as increasing sales, controlling costs, acquiring customers and talent, and reducing financing costs.
| Scenario | |
| 4°c Scenario | A scenario in which climate change policies, laws, and regulations, and the transition to a decarbonized society are not implemented beyond the current level. As a result, global warming progresses further, and the average temperature at the end of the 21st century rises by about 4°c compared to pre-industrial level. Physical risks associated with climate change will become apparent. |
| Less than 2°c Scenario | A scenario in which climate change policy, laws, and regulations are significantly strengthened, global warming is controlled, and the average temperature at the end of the 21st century rises by less than 2°c compared to pre-industrial level. The world will undergo a major shift toward decarbonization and transition risks become apparent. |
| Scenario | Risk Items | Possible Changes | Potential impacts | Degree of Impact | Countermeasures |
| 4°c Scenario | Increasing frequency and severity of natural disasters | Increase in physical damage from natural disasters | ・Decrease in sales and occurrence of losses due to natural disasters ・Increase in costs related to BCP (Business Continuity Plan) |
Small | Strive to minimize total response costs by establishing measures to ensure business continuity as much as possible even in the event of a natural disaster by formulating and reviewing the BCP from time to time. |
| Increasing average temperature | Decrease in office air conditioning efficiency due to rising temperatures | ・Increase in costs associated with power usage | Small | Prevent unnecessary use of electricity in the office, such as by controlling the air conditioning by time for each floor, and automatically turning off after the time to leave work. | |
| Spread of infectious diseases and health damage due to rising temperatures | ・Decrease in sales and occurrence of losses due to lower employee utilization and productivity | Small | Promote health and productivity management so that employees can work in good mental and physical health by establishing a Health Promotion Office under the direct supervision of the CEO. Our in-house consultation desk with resident public health nurses, in cooperation with industrial doctors and the health insurance association, supports employee health through health promotion, literacy improvement, various consultations, and mental health support. |
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| Less than 2°c Scenario | Strengthening of policies and regulations | Application of carbon pricing (carbon tax, emissions trading, etc.) | ・Increase in costs associated with power usage | Small | Reduce electricity usage fees by switching office lighting from fluorescent to LED. Request office owners to introduce renewable energy. Select office buildings with renewable energy sources when relocating offices. |
| Increasing awareness of the environment | Damage to social reputation due to delay in environmental initiatives, including climate change | ・Decrease in sales due to loss of customers and decline in recruitment capability | Small | Prevent damage to our social reputation by disclosing necessary information in line with frameworks such as the TCFD. | |
| Changes in investors' criteria for evaluating companies | ・Decrease in stock prices and increase in funding costs due to the increased importance of environmental initiatives in investment decisions and the SMS Group's initiatives being deemed inadequate | Small | Aim to enable investors to make appropriate investment decisions and improve ESG rating results by disclosing necessary information in line with frameworks such as the TCFD. Stabilize the stock price and reduce funding costs by translating SMS's sustainable growth into long-term enhancement of corporate value in a timely and appropriate manner through building relationships with investors who have a long-term perspective. |
Risk Management
SMS Group considers uncertainty that has a significant impact on management, profits and losses to be a risk. In order to maximize returns while controlling its negative impact, we have established risk management regulations and conduct group-wide risk management.
The Sustainability Committee identifies and evaluates risks related to sustainability. Identified risks are integrated into the group-wide risk management system in cooperation with the department in charge of risk management. Management of measures against important risks, promotion of risk management, operation of the internal control system, etc. are discussed, and the details are reported to the Board of Directors as necessary.
Indicators and Targets
SMS Group uses greenhouse gas (GHG) emissions as a key indicator for climate change. The results of our GHG emissions (Scope 1, Scope 2, and Scope 3) are shown below. For the fiscal year ended March 31, 2026, Scope 1 and Scope 2 emissions decreased year on year, while Scope 3 emissions increased. The decrease in Scope 1 emissions was due to improved accuracy in measuring fluorocarbon leakage. The decrease in Scope 2 emissions was mainly due to lower electricity consumption at our overseas locations and improvements in electricity emission factors. The increase in Scope 3 emissions reflected higher Category 1 (purchased goods and services) emissions, driven by continued growth in advertising investment and the expansion of services across our business areas.
Regarding our targets, we have set the following Science Based Targets (SBTs), which are GHG emissions reduction targets consistent with the levels required by the Paris Agreement:
・Scope 1 and Scope 2: Reduce emissions by 42% by the fiscal year ending March 31, 2031, using the fiscal year ended March 31, 2024 as the base year
・Scope 3 Category 1 (purchased goods and services): Reduce emissions by 25% by the fiscal year ending March 31, 2031, using the fiscal year ended March 31, 2024 as the base year
These targets were validated by the Science Based Targets initiative (SBTi) in April 2025.
Greenhouse Gas Emissions (Unit: t-CO2)
| FY03/2024 | FY03/2025 | FY03/2026 | |
| Scope 1+2 | 1,674 | 1,388 | 1,231 |
| Scope 3 | 23,311 | 30,632 | 32,591 |
| Category 1 | 18,029 | 24,942 | 27,283 |
| Scope 1+2+3 | 24,985 | 32,020 | 33,823 |
1. GHG emissions are calculated based on the GHG Protocol, using emission factors published in the Ministry of the Environment's "Emission Factor Database for Calculating Greenhouse Gas Emissions, etc., through the Supply Chain," the "Input-Output Tables," and those published by IGES (Institute for Global Environmental Strategies).
2. In calculating Scope 2 emissions, we in principle adopt the market-based method to reflect reduction efforts such as the introduction of renewable energy. (Note: emissions for overseas sites are calculated using the location-based method, based primarily on country-specific average emission factors.)
3. For Scope 1 emissions in FY03/2024 and FY03/2025, emission factors were updated to align with the latest international standards under the GHG Protocol, and the figures were retroactively restated.
4. For Scope 3 Category 1 in FY03/2024 and FY03/2025, figures were recalculated using primary data obtained from major suppliers and retroactively restated to improve accuracy.
5. Due to the restatements described above, some figures in this data differ from those previously disclosed.
For detailed results data on GHG emissions (Scope 1 through 3, and Scope 3 by category), please refer to ESG Data.