DISCLOSURES ALIGNED WITH THE TNFD RECOMMENDATIONS

Strategies

The LEAP approach designed by the Taskforce on Nature-related Financial Disclosures (TNFD) enables us to identify our dependencies and impacts on nature and our nature-related risks and opportunities, and informs our deliberations on measures to reduce our environmental footprint and to address these risks and opportunities.
In implementing the LEAP approach, we determine the business assets and regions and the commodities (natural resources at the furthest upstream reaches of our supply chain) for analysis with reference to the TNFD general requirements for disclosure and analyze by business segment.
In fiscal 2024, we conducted the LEAP analysis on our Stationery Businesses (manufacture, procurement and sale of notebooks and other office supplies), having identified paper as a commodity with significant impact on nature and because paper-related products account for a large share of KOKUYO Group’s entire inventory.
The entities analyzed were the main group production assets for these businesses and the supply chain for key raw material paper. The analysis involved researching and analyzing the environmental impacts of the chain of business processes and the anticipated risks and opportunities.
Figure 1 shows the series of processes in the LEAP survey and analysis. Table 1 shows the external tools and databases we used in the survey and analysis.

Figure 1. LEAP processes

Table 1. External tools and information used in analysis

• *1
  IBAs are areas that are important for the conservation of birds and biodiversity.
• *2
  Derived from the IBA concept, KBAs are areas that are important for non-bird species.

The LEAP analysis we conducted on the stationery business indicated that five KOKUYO Group assets have a high water risk. One is in Thailand, one in Shanghai, and three in India. Another key finding concerned the procurement of the timber used in notebooks and other products in our stationery business. That is, timber supply sources in Southeast Asia run the risk of driving deforestation and violating the rights of local communities. These findings have given us clarity on how we can better contribute to nature positivity. It is clear, for example, that the business assets in question should devise measures to use less water and reduce harmful discharges and that we should communicate more effectively with supply-chain partners.

1.Identifying Dependencies and Impacts

When identifying material dependencies and impacts in our value chain, we use global databases and take into account the nature of our business activities in the region and location of interest, the nature-related inputs to and outputs from our business activities.
We used the external Exploring Natural Capital Opportunities, Risks and Exposure (ENCORE) tool in evaluating the dependencies and impacts on nature throughout the KOKUYO group value chain. We evaluated the dependencies and impacts for each business activity with reference to the typical business sector values provided by ENCORE. Guided by ENCORE’s logic model for business-specific dependencies and impacts, we assessed the inputs to and outputs from the actual business activities of each KOKUYO Group asset of interest. We then compiled these evaluations in a heatmap, which helps us see where we should be particularly concerned about our dependencies and impacts. The heatmap is shown below.

Table 2. Dependencies and impacts heatmap

The ENCORE analyses of production assets in the stationery business have highlighted environmental impacts such as air pollution, waste, and water use. However, all these concerns pertain to emissions from pulping processes, which has limited relevance to KOKUYO Group’s actual business activities. Among the operations in the stationery business, production of paper products (such as notebooks) involves procuring semi-finished paper products (products already processed from pulp) and processing them into finished products (mainly by printing). As such, the main inputs are limited to use of general water and energy infrastructure. Both use of water and emissions of toxic pollutants to water and atmospheric emissions are low compared to the typical business sector values provided by ENCORE. Taking this into account, we assumed that if there is an interface of concern in KOKUYO Group’s production of paper products, then it is the environmental impact of the handling and disposal of waste. It is also true that assessments of plants producing glue tape and drawing and painting equipment indicate high dependencies and impacts in atmospheric pollution, emission of toxic pollutants to water, and use of water. Taking this into account, and considering also the use of chemical substances in production, we recognized this as a dependency and impact of concern.
Analysis of supply channels for paper (as a raw material) indicate a very high level of environmental impact associated with production activities involving forest resources (tree felling, afforestation) and a very high level of dependency of such activities on ecosystem services. These findings are consistent with our own view of the situation.
Pulping is, as mentioned above, something that takes place in our upstream supply chain. We therefore recognize as a concern environmental impacts of paper production such as atmospheric pollution, emission of toxic pollutants to water, and use of water.

2.Understanding our Relation to Sensitive Locations

The TNFD advocates four criteria for recognizing sensitive locations: biodiversity importance, ecosystem integrity, water risk, and cultural importance of ecosystem service. Using this set of criteria, we investigated where our businesses interface with IUCN protected area categories and KBAs, the levels of flood risk and water stress, and the level of alteration to the natural environment, with reference to external mapping analysis tool.
The results are shown below. For each location, the analysis covered the area within a 1 km radius of the center of the asset location.

Table 3. Business assets in sensitive locations

• *
  Water risk assessment utilizing World Resources Institute Aqueduct Water Risk Atlas framework indicators.

2.1 KOKUYO Group Business Assets

The assets in KOKUYO Group’s stationery business mainly comprise plants and distribution centers. In plants, the main operations are printing and stationery production. At the plants in Japan and the plant in Shanghai, namely KOKUYO Commerce (Shanghai) Co., Ltd., paper goods are processed. Overseas plants other than the one in Shanghai produce writing tools, crayons, glue tape, and correction tape.
The results indicated that two plants used for processing paper products (KOKUYO Product Shiga and KOKUYO MVP’s Tottori Plant ) and one distribution center in the Tokyo metropolitan area (KOKUYO Supply Logistics) are located in or near a wildlife sanctuary. Another finding was that plant used for processing paper products (KOKUYO MVP’s Aoya Plant) is located near the coastline of the Sea of Japan and the vicinity lies within a common fishery right area and a prefectural natural park. However, these assets have a limited impact on protected ecosystems, in that they emit no or only limited toxic substances into the air or water and because one of the assets has measures in place to protect birds.
As for overseas assets, an Aqueduct analysis of water risks indicated highly concerning flood and water risks in the Shanghai plant (used for processing paper products) and in the KOKUYO-IK’s plant (Thailand), which produces clear books, PP file folders, glue tape, and correction tape. KOKUYO-IK, in its use of water, was revealed to be discharging toxic substances into the water. We concluded that this asset requires attention.
We also analyzed water risks in the 1 km radius around KOKUYO Camlin (India), which produces crayons and art equipment. The analysis indicated that such risks are lower than those pertaining to the Thai and Shanghai plants. However, the broader geographic context raises some concerns. The asset is located in the Maharashtra, which is prone to droughts. The drought risk in turn creates a risk of water restrictions being imposed in downstream areas. Taking this factor into consideration, we concluded that risk is similar to that in the Thai and Shanghai locations.

2.2 Areas Where Tier-1 Suppliers Operate

The assets in KOKUYO Group’s stationery business mainly comprise plants and distribution centers. In plants, the main operations are printing and stationery production. At the plants in Japan and the plant in Shanghai, namely KOKUYO Commerce (Shanghai) Co., Ltd., printing is undertaken. Overseas plants other than the one in Shanghai produce writing tools, crayons, glue tape, and correction tape.
The results indicated that three plants used for printing (KOKUYO Product Shiga, Iwami Paper Industries, and KOKUYO MVP’s Tottori Plant ) and one distribution center in the Tokyo metropolitan area (KOKUYO Supply Logistics) are located in or near a wildlife sanctuary. Another finding was that plant used for printing (KOKUYO MVP’s Aoya Plant) is located near the coastline of the Sea of Japan and the vicinity lies within a common fishery right area and a prefectural natural park. However, these assets have a limited impact on protected ecosystems, in that they emit no or only limited toxic substances into the air or water and because one of the assets has measures in place to protect birds.
As for overseas assets, an Aqueduct analysis of water risks indicated highly concerning flood and water risks in the Shanghai plant (used for printing) and in the KOKUYO-IK’s plant (Thailand), which produces clear books, PP file folders, glue tape, and correction tape. KOKUYO-IK, in its use of water, was revealed to be discharging toxic substances into the water. We concluded that this asset requires attention.

2.3 Analysis of Forest Resource Procurement Areas

Timber resources are the most important of the natural resource to KOKUYO Group’s businesses. We need to observe socioenvironmental developments affecting forest plantations and communities where forest workers are active, as such developments constitute one of the most critical variables in whether we can continue to use paper as resource for our products. We are working to establish traceability in our timber procurement so that we can be assured that the resources we procure were produced in sustainable and sound ways. When assessing the dependencies and impacts of the sites from which we procure forest resources, we apply our Sustainable Procurement Policy alongside the LEAP approach.
The raw materials used to make the paper products that we trade in the stationery business are mainly derived from broad-leaved pulpwood. However, woodchips prepared for pulping are an assortment sourced from forests in multiple locations, making it unfeasible to distinguish the breakdown by procurement source. Accordingly, we have created a rough breakdown derived in part from qualitative information gleaned from interviews with major paper suppliers. The main procurement locations for paper are shown in Figure 2.

Figure 2. Map of locations from which woodchips are sourced

• *
  The above figures do not represent actual values; they represent estimates gleaned from interviews with tier-1 suppliers and from publicly available information. Because the woodchips are all pulped together, regardless of where they came from, it is unfeasible to determine the exact breakdown. The above data may therefore differ from the reality.

The above results show that the procurement of forest resources used in our paper products is concentrated in Southeast Asia (Vietnam and Indonesia) and that a fair proportion of the resources come from Australia, Chile, and South Africa. With this information, we used the WRI’s Global Forest Watch app to check the condition of the forests in these source areas. In Table 5, we have shown the tree cover loss we observed along with contextual information. Deforestation is most striking in the Southeast Asian locations, and it is driven by the conversion of woodland into commercial land and by forestry practices. The developed nations of Australia and Canada have committed to forest conservation, with regulations that limit the areas in which forestry can be practiced. However, global warming has increased the prevalence of forest fires, which could negatively impact the prospects for sustainably procuring the forest resources.

Table 4. Forest condition in assumed locations from which tier-1 suppliers procure woodchips

• *1
  These percentages do not represent actual values; they represent estimates gleaned from interviews with tier-1 suppliers.
• *2
  The tree cover loss figures were obtained from desk-based research using Global Forest Watch. They were compiled according to the Global Forest Watch data as of February 2025.

3. Risks and Opportunities

Our assessment of the nature-related risks and opportunities in the KOKUYO group value chain is based on the main dependencies and impacts we have identified and the outcomes of our research into forest conditions in nearby sensitive locations and resource procurement locations. We thereby identify and evaluate both the risks to our group value chain and the impacts our group business and actions have on the environment and society (double materiality).
When identifying the relevant risks and opportunities, we use the relevant risk and opportunity categories in the TNFD risk and opportunity registers and the TNFD sector-specific guidance. When analyzing how the risks and opportunities affect KOKUYO Group, we use the scenario analysis outlined in the TNFD’s guidance on scenario analysis.
When evaluating the materiality of each risk, we take into account the materiality of the dependencies and impacts and the scale of the inputs and outputs, using the region-specific risk indicators set out in the WWF Risk Filter Suite.
The TNFD guidance on scenario analysis recommends using exploratory scenarios to describe uncertainties and plausible futures, taking into account the characteristics of the region and asset as well as factors that are of significance to the business model.

In accordance with this approach, the scenario analysis we conducted in fiscal 2024 first clarified what form the risks and opportunities for the business facilities and regions we see as particularly important to our operations are likely to take. This is based on an assessment of our dependencies and impacts and a survey of sensitive locations. It then examined the potential financial impacts for the KOKUYO group and how likely they are to materialize.
Following the example approach set out in the TNFD guidance for scenario analysis, we adopted two critical uncertainties, each with two possible states. The first was ecosystem service degradation, which describes the extent of the physical impact (moderate or severe). The second was alignment of market and non-market driving forces, which describes the extent to which driving forces are transitioning to nature-positive actions (transition risk: high or low). We combined these two critical uncertainties to create a 2×2 matrix with four scenarios for consideration. We then plotted onto this matrix the key assets and regions relevant to the value chain of our stationery business. We then analyzed the interactions between them and identified the four plausible future scenarios shown in Figure 3.

Figure 3. Plausible future scenarios

4. Scenario Analysis

Table 5 summarizes the risks and opportunities we think are key issues for the KOKUYO group’s Stationery Businesses as a result of this analysis.
“Impact” describes the potential social and environmental impacts of KOKUYO Group’s activities. “Risks” and “opportunities” describe the financial impacts on KOKUYO Group. “Severity” takes into account the score for the relevant risk item in the WWF Risk Filter Suite, the scale of the KOKUYO Group activities concerned, and the risk probability according to the scenario analysis.

Table 5. Risk and opportunity evaluation outcomes

5. Current Actions to Address the Issues

We are addressing the key issues identified in the analysis by promoting sustainable procurement across KOKUYO Group. To that end, we established the KOKUYO Group Policy on Timber Procurement in 2011 and the KOKUYO Group Standards for Paper and Timber Procurement in 2024. We have also started engaging with stakeholders across our supply chain. In the stationery business, we promote sustainable use of forest resources. The Forest Stewardship Council (FSC) has certified our printer and copy paper and notebooks.
We also support community action. In 2006, we launched a project to conserve a private forest in the Taisho district of Shimanto, Kochi Prefecture. In this project, we thin the forest and make effective use of the resulting timber. In 2007, the project was certified by the FSC. KOKUYO Product Shiga participates in a project to conserve the reedbeds in Biwa Lake in line with Shiga Prefecture’s ordinance on reedbed protection. The project involves protecting the reedbeds and promoting their sustainable use in order to preserve Lake Biwa’s environment.
Learn more about these initiatives on the following pages: Implementing the basic policy, Yui-no-Mori Project, and ReEDEN Project (FSC® C004748).

• Supply Chain Management
• FSC Certification
• Yui-no-Mori Project
• ReEDEN Project

6. Future Actions

The LEAP-based analysis revealed concerns regarding the procurement of woodchips used for our paper products. These findings remind us of the need to engage with stakeholders at the various stages of timber resource procurement. Of particular concern is the risk that procurement activities in Vietnam, Indonesia, and other parts of Southeast Asia could be abetting deforestation. The findings also give us the hope that, with effective communication, we can promote sustainable use of forest resources and make our supply chain more resilient. We have therefore concluded that we should develop robust due-diligence processes for the regions identified as high-priority regions.
The LEAP analysis we conducted in 2024 was limited to the stationery business. We will conduct a similar analysis in the furniture businesses and other businesses to increase the quality of our disclosures. See here for information about use of forest resources in the furniture business.

Risks and Impacts Management

Our Environment Subcommittee (a subcommittee of the Sustainability Committee) identifies and evaluates our dependencies and impacts on nature and our nature-related risks and opportunities with the participation of managers responsible for each business division. This is guided by the findings of regular internal and third-party research.
This regular research identifies and evaluates matters based on the findings of LEAP-based research and analysis in response to issues and requests raised by our governance and due diligence processes. We have evaluated the identified nature-related issues by severity and frequency, taking into account the importance of each risk and opportunity as shown in Table 5. The severity score takes into account a range of factors, including the scale of the business activities in KOKUYO Group and its supply chain (the scale of procurement, monetary amount of procurement, amount of natural resources used) and the output results of external evaluative tools related to nature. The frequency score is the result of a qualitative analysis that includes the scenario analysis and takes into account the relevant KOKUYO Group business activities and local factors (regulatory landscape, market trends). Items that scored high in both indicators were defined as high-priority items.
Once the risks are identified and evaluated, they are communicated to the business divisions concerned. The strategic implications of the risks are incorporated into strategic planning by the Environment Subcommittee, while business-specific implications are addressed by the relevant business divisions. For groupwide risk management, the Risk Management Committee has been organized to steer efforts across the corporate group.
To integrate nature-related risk management into this existing system for groupwide risk management, the Risk Management Committee will now coordinate with the Environment Subcommittee. The Environment Subcommittee provides the Risk Management Committee with reports about important risk-management matters and the state of compliance with environmental laws and regulations.

Metrics and Goals

Table 6 shows the KPIs for tracking the progress of our efforts to address our fifth material issue: contribute toward a society that coexists with nature.

Table 6. Contribute toward a society that coexists with nature (material issue)

Every year, we upload to the ESG databank section of our website about our use of natural resources, emissions of toxic substances, and other disclosures. Table 7 lists nature-related metrics (identified in the LEAP analysis) for the disclosure indicators set out in the TNFD guidance, along with links to the relevant ESG disclosures.

Table 7. Related indicators

• Environmental Actions