Three Businesses

Scenario Adopted by MARUI GROUP (1.5°C Scenario)

Recognizing that a 4°C rise in the global temperature above pre-industrial levels resulting from climate change would have an enormous impact on society, MARUI GROUP believes it is important to work together to contribute to the movement seeking to limit global warming to below 1.5°C above pre-industrial levels. In order to facilitate our efforts to tailor our actions based on scenarios with increases below 2°C above pre-industrial levels (with a target of 1.5°C), we will identify the impact of climate-related risks and opportunities on our business and proceed to formulate relevant strategies.

Enhancement of Efforts Targeting 1.5°C Scenario

MARUI GROUP performed scenario analyses using three scenarios for 2050: (1) the world with average temperatures 4°C above pre-industrial levels described by the Intergovernmental Panel on Climate Change (IPCC) and the International Energy Agency (IEA); (2) the world with average temperatures 2°C above pre-industrial levels based on the Paris Agreement; and (3) the world illustrated in the IPCC special report on the impacts of global warming of 1.5°C above pre-industrial levels.

MARUI GROUP's Business Strategies

MARUI GROUP aims to create a new business model integrating retailing and fintech with co-creative investment that fuels mutual development by investing in start-ups and other companies with which it can share its corporate philosophy and vision. Climate change poses such risks as damage to stores and other facilities from floods caused by typhoons and torrential rains and increases in costs due to the introduction of carbon taxes stemming from tightened regulations. Conversely, MARUI GROUP sees business opportunities to be seized by providing goods and services that respond to increased consumer environmental awareness and by investing in eco-friendly companies.

Analysis of Risks and Opportunities

MARUI GROUP has performed analyses of the potential impacts of climate change with consideration paid to climate change scenarios and other factors. Following these analyses, the estimated impacts on earnings leading up to 2050 were calculated based on the assumptions described below.

Climate Change-Related Risks

Risks associated with climate change include damage to assets from extreme climate events and other physical risks as well as transition risks brought about by changes in government policies and regulations. In the 1.5°C scenario, transition risks will be higher than physical risks, especially when compared to the 2°C and 4°C scenarios (see Co-Creation Management Report 2020 for more information). However, it can be expected that flood damage will be incurred as a result of sudden and severe typhoons and rains even if we are successful in limiting the rise in the global temperature to below 1.5°C above pre-industrial levels.

Physical Risks

– Store closures

MARUI GROUP operates stores and other facilities in its retailing business. Accordingly, it recognizes the risk of closures being seen at certain stores due to flood damage.

Transition Risks

– Increases in renewable energy prices

It can be expected that renewable energy prices will increase as tighter greenhouse gas emissions regulations are implemented in conjunction with the move to realize a carbon-free society. Meanwhile, MARUI GROUP has announced its goal of sourcing 100% of the electricity used in its business from renewable energy by 2030. Accordingly, increases in renewable energy prices will have an impact on MARUI GROUP's finances.

– Institution of carbon taxes

Based on the IEA's Sustainable Development Scenario, MARUI GROUP has estimated the potential amount of impact of increased tax expenses related to greenhouse gas emissions if the tightening of environmental regulations led to the introduction of a carbon tax in Japan and if the Company's rate of renewable energy usage were to decline to 0%. These estimates are as follows.

Climate Change-Related Risks

Climate change is expected to stimulate increased environmental awareness and lifestyle changes among consumers. Given this trend and the characteristics of MARUI GROUP's business, we anticipate that climate change will create various opportunities for us to take part in sustainable initiatives. Furthermore, new opportunities will likely also arise to be capitalized on by responding to the change in the electricity market and government environmental policy stemming from the popularization of renewable energy.

Proposal of Sustainable Lifestyles

– Earnings growth achieved by attracting tenant promoting eco-friendliness

MARUI GROUP is advancing a store development strategy that entails actively attracting direct-to-consumer (D2C) and other tenants that offer eco-friendly products and services. We anticipate that increases in the numbers of such tenants will create opportunities for earnings growth.

– Increase in credit cardholders with high sustainability awareness

As younger generations with high sustainability awareness become more sympathetic toward the ideals of companies and tenants fighting climate change, it can be expected that we will see an increase in EPOS cardholders as customers apply for cards out of a desire to use the services of such companies and tenants. MARUI GROUP has calculated the long-term increase in earnings expected to result from this trend as follows.

– Returns from investments in companies engaged in environmental initiatives

MARUI GROUP aims to create a new business model integrating retailing and fintech with co-creative investment that fuels mutual development by investing in start-ups and other companies with which it can share its corporate philosophy and vision. Potential targets for such investment include D2C brands and other companies engaged in environmental initiatives. MARUI GROUP has calculated the estimated investment returns from taking advantage of opportunities to invest in such companies as shown below.

Response to Household Renewable Energy Demand

The rise in environmental awareness among consumers is expected to drive an increase in demand for renewable energy at ordinary households. MARUI GROUP is encouraging EPOS cardholders to switch to renewable energy. As shown below, we have calculated the long-term earnings estimated to be generated as cardholders increasingly use their EPOS card to pay for renewable energy on a recurring basis and are thus inspired to upgrade to Gold cards.

Entry into Electricity Retailing Business

Group company MARUI FACILITIES Co., Ltd., entered into the electricity retailing business in September 2019. MARUI GROUP has calculated the estimated reductions in electricity procurement costs to result from this move as follows.

Introduction of Carbon Taxes

In July 2018, MARUI GROUP joined RE100, declaring its target of sourcing 100% of its electricity from renewable energy by 2030. MARUI GROUP has calculated the carbon tax savings estimated to be realized by accomplishing this goal and reducing greenhouse gas emissions to zero as follows.