FOR SUSTAINABLE DEVELOPMENT GOALS Sumitomo Forestry Group CSR Report 2018 Contents 2 Message from the President 52 Governance 179 Social Report 53 Corporate Governance 180 Human Rights Initiatives CSR Activity Hightlight 63 Risk Management 184 Health and Safety 4 HIGHLIGHT 01 Adapting to Climate Change 68 Compliance 197 Employment and Human Resources 6 HIGHLIGHT 02 Promoting MOCCA Development (Timber Solutions) Business 73 Business Continuity Management 210 Social Contribution 8 HIGHLIGHT 03 Biodiversity Conservation 76 Sharing, Protection, and Security of Information Acquisition of Quality-Related HIGHLIGHT 04 Responsible Timber Procurement 230 10 Certication Intellectual Property Management 12 HIGHLIGHT 05 Transition to Renewable Power 79 232 Social Data Generation 81 Return to Shareholders and IR Activities 14 HIGHLIGHT 06 Promotion of Work Style Reforms Sumitomo Forestry Group CSR Material Issues 239 Environmental Report 16 84 Contribution Through Our Businesses and Mid-Term CSR Management Plan (FY2017 result) 240 Environmental Management 85 Overall Business and Scope of Impact 251 Responding to Climate Change 18 CSR Management 88 Housing and Construction Business 272 Responding to Waste and Pollution 19 Corporate Philosophy and CSR Management 129 Distribution Business 293 Biodiversity Conservation 23 CSR-related Policies 141 Manufacturing Facilities Stakeholder Engagement 300 Efcient Use of Water Resources 28 150 Forest Management Initiatives to Achieve Sustainable 303 Environmental Related Data 36 Energy Business Development Goals (SDGs) 169 Business Responding to an Aging Society 39 CSR Material Issues and Mid-Term CSR 177 Management Plan 313 Corporate Prole 41 Material Issue 1 315 Editorial Policy 44 Material Issue 2 317 External Recognition 48 Material Issue 3 322 GRI Content Index (GRI Standards) 50 Material Issue 4 342 Independent Assurance Report 51 Material Issue 5 Boundary of the Report and Publication Date Boundary of the Report: Although this report focuses mainly on Sumitomo Forestry Co., Ltd., the Company considers it important to cover the activities of the entire Sumitomo Forestry Group, and hence has been expanding its reporting scope. Publication Date: November 2018 Reporting Period: April 2017 to March 2018 (The period also includes some activities from April 2018 as well as future expectations.) Contact: CSR Department Sumitomo Forestry Co., Ltd. Phone: +81-3-3214-3980 URL: http://sfc.jp/english/ 1 Contribution Message from CSR Activity CSR Environmental Governance Through Our Social Report Other the President Hightlight Management Report Businesses Message from the President Utilizing timber as “the gift of time” to realize Timberized Eco City through W350 plan for a sustainable future Akira Ichikawa President and Representative Director 2 Contribution Message from CSR Activity CSR Environmental Governance Through Our Social Report Other the President Hightlight Management Report Businesses The Sumitomo Forestry Group utilizes wood as a healthy and environmentally friendly natural resources to Corporate provide diverse range of lifestyle-related services that contributes to the realization of a sustainable and Philosophy prosperous society. All our efforts are based on Sumitomo’s Business Spirit, which places prime importance on fairness and integrity for the good of society. A Step Towards Future with Renewed charm will appear as it ages and become a precious asset. Sumitomo Corporate Philosophy Forestry calls a value that can be passed down over generations as "the gift of time." In April this year, the Sumitomo Forestry Group has reviewed its value Trees take long time to grow but it can be cut, used, planted, and structure which was established in 2001 and revised part of its Corporate grown again as a renewable natural resource. It also absorbs CO2 and Philosophy and Action Guidelines. In comparison to when our main fixes it during their growth, playing an important role in mitigating businesses were in timber & building materials, custom-built housing, and global warming. We believe it is our duty and responsibility to engage forestry, business areas and countries we operate in have expanded and in sustainable forest management, procurement, and logistics to seek the number of employees and net sales have nearly doubled. We have the expansion of use of wood from housing to medium to large-size entered housing markets in the U.S. and Australia while in Japan also buildings so more people can feel the value of wood. entered new areas of businesses, such as private-pay elderly care facilities with nursing and day service as well as wood biomass power generation business. Concurrently, social and economic environment in Japan and W350 Plan to Pursue Possibilities of Wood overseas has changed drastically and we have reached an age where a Sumitomo Forestry has announced its W350 Plan in February 2018 as a company's raison d'être are put to question. technology roadmap to realize Timberized Eco City. This is a long-term In response to these changes, we revised our corporate philosophy from project that aims to build a 350-meter-tall wooden high-rise building in future-oriented and global perspectives, taking in new elements while also 2041, which will mark the 350th anniversary of our foundation. We will maintaining our core values. The Sumitomo's Business Spirit underlies our engage in research and development in wide range of fields including business approach, represented by one aspect, "seeking benefits for the construction methods, environmentally-friendly technologies, and new individual, the nation and society as a whole." wood materials. The Sustainable Development Goals (SDGs) set by the United Nations in We hope to bring innovation in both the forest management and use of September 2015 are 17 global goals that the world should achieve by 2030. wood to make living in cities and the lives of people sustainable ones. In addition to the nations’ efforts, companies are expected to contribute as With this in mind, we will continue to advance the W350 Plan to create well and these goals matches the aim of our Group's corporate philosophy. Timberized Eco Cities where people, trees, life and the plant can coexist. The Sumitomo Forestry Group will cooperate with various stakeholders to We have set for the first time a long-term target for 2030 to reduce contribute in achieving the SDGs targets. greenhouse gases. Our target of 21% reduction compared to fiscal 2017 Our Responsibilities of Handling by 2030 is recognized by the Science Based Targets (SBT) initiative and consistent with the Paris Agreement of keeping global temperature "the Gift of Time" increase below 2 degrees Celsius compared to pre-industrial level. "Sustainability" became a frequently used term as represented in the The CSR Report 2018 is published as a measure to communicate with all SDGs. I believe this is a reflection of our regrets of focusing too much of our various stakeholders, from shareholders, customers and business on short-term gains which resulted in negatively affecting various partners to employees and local communities, by focusing on our non- social and environmental aspects. That is why we are taking more financial initiatives. We have also published an integrated report that long-term perspective, recognizing the value in taking proper time. includes information for both our efforts toward ESG and our corporate For example, while new timber has its own beauty, ten years later, performance since the previous year. We hope you will make use of both there will be different kind of charm to it. With the knowledge in reports to better understand the future of the Group we envision and how characteristics of the wood and with proper maintenance, a different we strive to reach that goal. 3 Contribution Message from CSR Activity CSR Environmental Governance Through Our Social Report Other the President Hightlight Management Report Businesses HIGHLIGHT 1 Adapting to Climate Change Increasing Environmentally - friendly Houses As the Sumitomo Forestry Group engages in the sales of housings, one of the areas which we can con- tribute the most in reducing envi- ronmental impact is the reduction of greenhouse gases emissions from housings that people live in. We aim to standardize Net Zero En- ergy House (ZEH) which enables household's consumption of primary energy to be net zero or less, and contributes to mitigating climate Contribute in economic benefits and change. To achieve this, we are raising environmental awareness strengthening our efforts through business activities by setting a stan- Initiatives in Oita Branch, dardization target of 80% by fiscal Which has the Most ZEH Orders 2020. The Sumitomo Forestry Group is promoting the diffusion and sales of ZEH and 33% of housing orders in Japan were ZEH in FY 2017. In particular, Oita Branch had an extremely high rate of 84.7%. Oita Branch thoroughly explains the characteristics and merits of the ZEH to the customer during proposal. One of the characteristics of Sumitomo Forestry's ZEH is two power generation systems using solar panels and fuel cell units (Ene-Farm) for households. The largest benefit is that the use of both electricity and gas allows reduction of heating and lighting costs compared Example: SDG targets 7.3 to all-electric house. Another strength is design capabilities cultivated through custom-built By 2030, double the global rate of improvement in housings and insulation efficiency from the use of wood. energy efficiency. These benefits are based on first-hand