Responding to TNFD

Having recognized the preservation of biodiversity as one of the issues requiring countermeasures in the process of identifying material issues, the Sumitomo Rubber Industries Group implements initiatives to achieve it.
The Sumitomo Rubber Group has analyzed the impact of our business operations on nature, based on the LEAP approach recommended by the Taskforce on Nature-related Financial Disclosures (TNFD).
As the results of analysis, tire business particularly has a significant dependence and impact on nature so that we identify material issues and perform analysis on their locational characteristics.
The Sumitomo Rubber Group has also registered as a TNFD Adopter, which adopts the disclosure recommendations released by the TNFD in September 2023 and announced as an “Early Adopter” at the Annual Meeting of the World Economic Forum, which is being held in Davos, Switzerland in January 2024.
Going forward, we intend to expand the depth and scope of the risk assessment conducted at the time of the initial disclosure, and take an approach aimed for further enhancing information disclosure.

In December of 2020, the Sumitomo Rubber Group established “Our Philosophy,” a new corporate philosophy framework that will serve as a major driving force to propel us forward with ever greater speed toward the accomplishment of our groupwide business strategy while also placing particular emphasis on engaging in sustainable business activities that promote harmonious coexistence with society and with the natural environment. Our Philosophy defines our Purpose (i.e. the very reason for our existence) thusly: “Through innovation we will create a future of joy and well-being for all.” With this Purpose serving as the basis behind our every decision and as the impetus behind our every action, the Sumitomo Rubber Group will continue working to enhance not only our economic value, but also our value to society so that we may contribute to the development of a more sustainable society.
We will also continue to carry out activities for greening and the preservation of endangered species and strive to preserve biodiversity through business activities in collaboration with our stakeholders in areas of biodiversity and nature.

The Sustainability Promotion Committee meets twice a year to share material issues, including nature-related issues and the goals of the Long-Term Sustainability Policy to be tackled through sustainability activities undertaken around the globe, and to confirm progress in such activities.
With the Director in charge of sustainability serving as the committee chair, officers in charge of each division are appointed as committee members. The Board of Directors receive reports on the status of sustainability issues, including nature-related issues and supervise progress and provides instruction.
The Director in charge of ESG serving as the committee chair is also responsible for nature-related issues including preservation of biodiversity.
The president participates in discussions and deliberations at meetings of the Sustainability Promotion Committee, and those approved in the deliberations are set out in the entire Group's Policy.

ESG-Based Business Management Structure

In step with advances in the mobility industry around the world, tire demand is expected to grow. Accordingly, demand for natural rubber, the primary tire raw material, is likely to grow even stronger.
This prospect has prompted looming concerns about the impacts on forests and other natural ecosystems and the emergence of human rights and labor rights issues in regions where natural rubber is produced.
As a tire manufacturer, the Sumitomo Rubber Group aims to curb these problems, and to this end has implemented a variety of initiatives to help the entire natural rubber supply chain improve and update itself into a more sustainable industry.

The Sumitomo Rubber Group formulated the Human Rights Policy in December 2023. This policy was established in consultation with the Board of Directors, based on the Universal Declaration of Human Rights, the OECD Guidelines for Multinational Enterprises, the various treaties of the International Labour Organization and the 10 principles of the United Nations Global Compact.
This policy tangibly describes the Sumitomo Rubber Group's concepts on respect for human rights and serves as the highest policy governing all other regulations and guidelines enforced within the Group regarding how we ensure respect for human rights.
In this policy, the Sumitomo Rubber Group highly value the human rights of every stakeholder, and expect our business partners to support this policy, and we also expect that our suppliers understand and comply with this policy.

Initiatives to Ensure Respect for Human Rights

In August 2021, we updated our SNR Policy to reflect a policy framework approved by the GPSNR, with the aim of gearing up efforts to resolve issues in regions where natural rubber is produced, such as environmental problems caused by the destruction of forests and human rights problems in the working environment.
In line with our updated SNR Policy, we will proactively promote collaborative initiatives with companies in our supply chain to realize a society in which natural rubber is procured in a sustainable manner.

Supply Chain Management

The Sumitomo Rubber Group promotes the assessment of nature-related business risks and opportunities.
To identify topics that could be designated as a material issue of the Group, we first performed risk assessment of nature-related themes, closely related to the tire, sports, and industrial products businesses. This analysis was based on the use of ENCORE, an assessment tool for nature-related risks.

Then, we investigated business risks that are closely related to our businesses for each theme subject to analysis and identified potential business risks to the entire Group's value chain while analyzing and examining the magnitude of the potential business impacts to designate material issues of our businesses for assessment.
Furthermore, publicly available tools such as IBAT (Integrated Biodiversity Assessment Tool) and Aqueduct were used to analyze on locational characteristics and identify hotspots where ecosystems of conservation importance are located. Those hotspots were prioritized for further action.

The Risk Management Committee, chaired by the President, meets twice to supervise risk management activities and to confirm that the risk management system is functioning effectively.
The long list of risks assessed and managed by the committee also includes nature-related risks, which the committee treats as controlled if they are assessed as significant risks in its analysis of management risks.
The Sustainability Promotion Committee reports on the status of management of nature-related risks on a regular and ongoing basis and discusses management methods as necessary.

Management risks involving product quality, law, the environment, credit, accidents, disasters, etc., that may materially and adversely affect our business activities, shall be addressed by the significant division and/or subsidiary in advance, via the analysis of those risks and the planning of countermeasures in accordance with the Regulations Concerning Risk Control, which define risk management methods for the entire Sumitomo Rubber Group.
The Risk Management Committee shall oversee Groupwide risk management activities and, on an as necessary basis, investigate and confirm whether the risk management system is functioning effectively. If any material risk affecting the Sumitomo Rubber Industries Group emerges or is expected to emerge, the President shall establish a risk control headquarters pursuant to the Regulations Concerning Risk Control.

To begin addressing the TNFD, we first screened for nature-related risks and opportunities in our tire, sports, and industrial products businesses.
Next, we assessed the nature–related dependencies and impacts considered important to each business, using the Natural Risk Assessment Tool (ENCORE), and create heatmaps.

As the results of ENCORE analysis, we found that the tire business has a significant dependence and impact on nature.
Therefore, our first year of addressing the framework developed by the TNFD, we conducted a risk assessment on the tire business in line with the LEAP approach recommended by the TNFD.
To embody the Group's material issues, we examined incidents of risk occurrence that may have a significant impact on the tire business in addition to assess dependencies and impacts using ENCORE.
We also assessed significant nature-related risks and opportunities after the relationship between nature-related themes and the value chain was organized.
Based on the results of these research and analyses, the results of the ENCORE analysis were used as the vertical axis "stakeholders' interests" and the results of the risk materiality assessment based on the LEAP approach were used as the horizontal axis "relationship with the company's business". Additionally, "violation of indigenous rights" was added as a theme to organize nature-related risks related to the tire business into the materiality map shown in the figure below.
Then, from the results of locational assessment mentioned above, we identified the following four items as material issues for the tire business related to nature: land use including forest, local ecosystems, violation of indigenous peoples' rights, and water resources and wastewater.

We discussed the potential impact of each risk and opportunity on the tire business in reference to the TNFD's classification of nature-related risks and opportunities.

With respect to the identified material issues, we first conducted analysis on locational characteristics and explored relevant issues to consider and promote these countermeasures for the tire business at particularly high risk.
Next, from the results of locational assessment mentioned below, we organized the identified material issues at each stage of the value chain: upstream, direct operations, and downstream.
Then, we assessed our bases of operations in areas with biodiversity risks at each stage of the value chain and identified hotspots by using tools such as IBAT.

For natural rubber suppliers, where there were particularly many hot spots, we will conduct risk assessment and mitigation activities using Rubberway® software, which enables mapping of the natural rubber supply chain, and promote the establishment of a sustainable procurement network.
For our bases of direct operations, the long-term sustainability policy is to reuse 100% of wastewater from seven plants worldwide with high water risk by fiscal 2050.
Our Turkey Factory, one of the most water-stressed factories in the Sumitomo Rubber Group, began trial operations in 2018 to establish recycling technology and achieved 100% water recycling rate by using concentrated water from the wastewater recycling facility for watering trees and toilets within the factory.
Since then, the factory has maintained the 100% factory wastewater recycling rate.
We will continue to consider and promote countermeasures related to the material issues identified by this analysis.

The Sumitomo Rubber Group discloses GHG emissions, waste emissions and water usage out of the TNFD's core global disclosure metrics in the global environmental data.
As for the core global disclosure metrics that are not currently disclosed, preparatory measures are now under way to disclose by collecting data and conducting more detailed analyses.

The Sumitomo Rubber Group has set targets for increasing the sustainable raw material (biomass and recycled raw materials) of our tires at 100% by 2050.
In direct operation bases with high water security risks, we have identified a target of achieving a 100% factory wastewater recycling rate.
Going forward, we are promoting discussions to set indicators and targets in accordance with the TNFC Framework.

Sustainable Raw Material Content Targets

In line with the final TNFD recommendations, the tire business will continue working to increase sophistication of analysis and enhance information disclosure.
As part of specific initiatives to this end, the project will also set targets and determine management indicators, in addition to examining strategies based on scenario analysis and developing measures to address the risks identified in this analysis, in the tire business.
Going forward, we will also analyze the sports and industrial products businesses in line with the LEAP approach, with the aim of identifying nature-related risks and opportunities for the entire business units.