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1. The Application of Material Issues

One of the Sekisui House Group’s material issues^*1 is “Contributing to a Sustainable Society,” and we also put a strong focus on nature-related initiatives. In our TNFD disclosures and analyses, which are based on the LEAP approach, we apply the principle of double materiality—recognizing both our impact on nature and our dependence on it.

2. The Scope of Disclosures

We evaluated the impacts and dependencies of all direct operations within our Group's business portfolio and conducted an analysis of associated risks and opportunities. In addition, after taking into account the scale of our operations and their financial significance, we performed an upstream evaluation of impacts and dependencies, along with a risk and opportunity analysis in our housing business. We also conducted a detailed analysis of impacts and dependencies on nature in wood procurement, which represents significant impacts and dependencies in the upstream value chain.

3. The Location of Nature-related issues

We have identified high priority locations in upstream value chain raw material procurement, particularly for wood, which has a significant impact and dependence on nature. Moving forward, we plan to further analyze and assess the impacts of other priority locations related to non-wood raw material procurement and the direct operations of our business.

4. Integration with other sustainability-related disclosures

This disclosure is based on the TNFD recommendations, and we are analyzing the alignment, synergies, and trade-offs of environmental issues such as climate change, resource circulation, and water security. Moving forward, we are considering integrating the nature-related disclosures into other sustainability-related disclosures.

5. The time horizons considered

The time horizons considered are short term: 3 years from 2024; medium term: up to 2030; and long term: up to 2050.

6. The engagement of Indigenous Peoples, local communities and affected stakeholders in the identification and assessment of nature-related issues

The Group places importance on “coexisting with local communities” as a key aspect of our material issue “Contributing to a Sustainable Society.” By accurately understanding the needs and issues of regional communities and building trust with local stakeholders, we are able to appropriately adjust business and activity plans while forming strong partnerships with regional communities. In addition, we conduct risk management to address regional issues, achieving sustainable business activities through initiatives that consider the impact on regional environments.

The Group has established the ESG Promotion Committee as an advisory body to the Board of Directors to determine and implement action policies while confirming that all ESG management initiatives are reasonable and in line with societal expectations. The committee meets once every three months. Along with climate change, addressing nature-related issues is one of the key topics discussed by the committee. The committee evaluates the appropriateness of action policies and progress, and reports important matters to the Board of Directors. Additionally, the Human Rights Policy respects international norms, such as the International Bill of Human Rights, the ILO (International Labour Organization) Declaration on Fundamental Principles and Rights at Work, and Guiding Principles on Business and Human Rights, and supports the Ten Principles of the United Nations Global Compact. The CSR Procurement Guidelines and the Wood Procurement Guidelines also establish policies and standards aimed at preventing human rights violations. By following these policies and guidelines, the Group strives to have zero biodiversity-related and natural resource-related human rights violations in our business activities and procurement. In particular, the Wood Procurement Guidelines stipulate that free, prior, and informed consent (FPIC)^*2 be followed regarding all stakeholders, including indigenous peoples, near procurement sites. Additionally, we have established wood procurement policies that ensure we do not procure wood from any conflict areas.

Figure 1. The Scope of Our Group’s Businesses

As with climate change, regarding biodiversity and natural capital, the Sekisui House Group works to clarify the appropriateness of its strategy and issues therein by anticipating various situations that may occur in order to make steady progress toward a world where people live in harmony with nature.
　　Accordingly, the Company considers risks and opportunities related to nature as well as assesses its impact and dependency based on the LEAP approach in the TNFD (Figure 2). In Value Report 2024, we screened and evaluated nature-related dependencies and impacts (1‒1), organized initiatives and used scenario analysis to prioritize our responses to risks and opportunities (3‒1). We conducted an advanced analysis of wood procurement in the material procurement process, which is one of the four stages of our housing business (material procurement, manufacturing and processing, construction, and demolition) and has a high impact and dependency on nature, using big data on biodiversity possessed by Think Nature Inc.¹ Through this, the Company identified points of contact with nature that bear particular importance and evaluated impacts and dependencies (1‒2, 2‒1, 2‒2), as well as qualitatively assessed the financial impact of risks (3‒2). This report locates and evaluates nature-related impacts and dependencies across the direct operations of all businesses (1‒3). It also identifies risks and opportunities, and quantitatively assesses the financial impact on these businesses (3‒3, 3‒4). In FY2025, we discussed and reviewed our response to the risks and opportunities identified in 3‒3 (3‒5).

Figure 2. Nature-related management approach in line with the TNFD LEAP

1-1　Screening and evaluation of nature-related dependencies and impacts of the housing business （Locate・Evaluate）

For the housing business (detached houses and rental housing), we screened potential impacts and dependencies using ENCORE^*3 and other such methods on procurement data^*4 and created a heatmap of our findings (Figure 3). Specifically, we split processes in the housing business into four phases—material procurement, manufacturing and processing, construction, and demolition—and analyzed each phase’s impacts and dependencies. For impacts on nature, we analyzed the impacts of land conversion in land, freshwater, and ocean areas, as well as of air, water, soil, and waste pollution. We also analyzed dependencies on ecosystem services including water supply, natural resources, soil regulation, flood control, and climate regulation. As a result, we confirmed that the material procurement process in particular may depend on several ecosystem services, and that it may have impacts on land conversion in land, freshwater, and ocean areas through wood harvesting and mineral extraction, as well as on air, water, soil, and waste pollution.

Figure 3. Potential impact drivers and dependencies on natural capital in all businesses (direct operations)

1-2　Identifying ecologically sensitive locations in wood procurement (Locate)

To start, we evaluated the biodiversity importance2 and the biodiversity integrity (hereafter referred to simply as “importance” and “integrity” respectively) of natural forests (Figures 4 and 5), focusing on the top 11 countries1 that accounted for 90% of our wood procurement in FY2022. In plantation forests, we only evaluated the importance (Figure 5). The distribution of the evaluation results for the 11 countries is shown in Figures 6 and 7. Our findings revealed that, out of the 11 countries evaluated, the highest conservation priority areas for natural forests are Indonesia and Malaysia, and the highest conservation priority areas for plantation forests are Indonesia, Malaysia, Japan and Vietnam. Understanding the impact in these areas is therefore of the utmost importance.

Results of Biodiversity “Importance” and “Integrity” Analysis in Top 11 Countries by Procurement Volume

For natural forests, sites with high importance (red areas in the figure) and high integrity (dark indigo areas in the figure) are deemed as having high conservation priority. For plantation forests, sites with high importance (red areas in the figure) are considered a high conservation priority. The 11 countries we procure wood from are colored on both maps.

1-3　Screening and evaluation of nature-related dependencies and impacts across all businesses (Locate/Evaluate)

We categorized all of the Group’s direct operations into four business classifications and used ENCORE to analyze nature-related impacts, such as the conversion of land and pollution, as well as dependencies on ecosystem services, such as rainfall regulation (Figure 9). From these analyses, we found that many of our direct operations are related to impact and dependency factors concerning water cycles and soil, as well as ecosystem services.

Figure 9. Potential impact drivers and dependencies on natural capital in all businesses (direct operations)

2-1　Evaluation of the impact of wood procurement on nature (Evaluate)

ENCORE identifies terrestrial ecosystem use,^*5 GHG emissions, water pollution, and soil pollution as four factors having a significant impact within the forestry-related sector. We analyzed the scale of these impacts and impact distribution in our top 11 wood procurement countries. As a result, we identified terrestrial ecosystem use as having a particularly significant impact, and found that impact levels are high in all countries identified above as being sensitive wood procurement locations from a biodiversity perspective (Indonesia, Malaysia, Japan, and Vietnam). Specifically, we have observed relatively large impacts on plantation forests throughout Malaysia; natural forests in Kalimantan, Indonesia; plantation forests in central Java, Indonesia; and plantation forests in the Chugoku and Shikoku regions of Japan as well as on the Pacific side of Honshu, south of the Kanto region. We recognize that wood production in these regions may pose a threat to the regional terrestrial ecosystems.
　The Company conducts onsite due diligence as part of our commitment to achieving the zero-deforestation goal outlined in our Wood Procurement Policy. In FY2025, we carried out onsite due diligence at plantation forests in Vietnam, which have been identified as having a significant impact on terrestrial ecosystems due to wood procurement activities and being highly important in terms of biodiversity, as well as plantation forests in southern Thailand near Malaysia, also identified as being highly important.

Figure 10. Example Analysis of Impacts on Terrestrial Ecosystems (Plantation Forest Areas in Indonesia)

2-2　Evaluation of the dependency of wood procurement on nature (Evaluate)

To identify areas that are deficient in ecosystem services and vulnerable to dependencies on nature, we analyzed forestry-dependent ecosystem services, as identified by ENCORE. As a result of this analysis, we found areas in the following regions to be lacking in essential functions that wood procurement activities depend on: soil stabilization and erosion control in the Chugoku and Shikoku regions of Japan, pest control functions in the central and southern parts of Sweden, as well as in all natural forests in the United States and plantation forests in its northern and western regions, and flood protection functions in the northern parts of Austria.

Figure 11. Analysis of pest control functions (Plantation Forest Areas in Sweden)

3-3　Identification and assessment of risks and opportunities across all businesses (Assess)

We have compiled a list of items with significant environmental impacts and dependencies in our direct operations (1‒3), along with potential risks and opportunities related to raw material procurement, which has been identified as having a substantial impact on nature (1‒1). Subsequently, we highlighted the items from this list that are particularly important to our Company and identified the corresponding specific risks and opportunities. As part of the process to identify these major risks and opportunities, we established a cross-functional working group consisting of 52 members from 23 departments within the Group. We have held 16 workshops in total, creating a platform for discussions on future nature-related risks and opportunities, as well as our resilience in addressing them.

3-4　Financial impacts of risks and opportunities (Assess)

Through Company-wide workshops and scenario analysis, we identified key risks and opportunities and assessed their potential financial impact. The results are displayed on the following page. The Company will further advance internal discussions to gain deeper insights into nature-related impacts and dependencies linked to each risk and opportunity, refine priority areas and approaches, and formulate action plans for issues requiring further attention. Financial impacts will also be examined in greater detail.
　The financial impact is defined as follows.

　Financial impact: Large: ¥30 billion or more; medium: ¥10 billion or more; small: less than ¥10 billion

As part of the Group-wide risk management process, the Group implements assessments to determine nature-related risks and opportunities as well as impact and dependency assessments based on the TNFD’s LEAP approach. First, we identified activities throughout the entire value chain that have potential nature-related impacts or dependencies. For wood, we conducted a geographic assessment to identify points of interface with ecologically sensitive locations based on detailed procurement information. After identifying impacts and dependencies, we evaluated their significance based on qualitative and quantitative analyses.
　　The identification of risks and opportunities was conducted across the Group using scenario analysis, with the relevant departments of each business unit taking the lead. The results are consolidated within the Environmental Subcommittee, where financial impact assessments are performed. Key risks and opportunities identified through this process are reviewed by the ESG Promotion Committee and are subsequently shared with the Board. Necessary discussions regarding risk mitigation and responses are considered as needed. In addition, matters related to operational risks and hazard risks are shared with the Risk Management Committee as appropriate, and are reviewed and managed within the Group-wide risk management framework.
　　We will continue to strengthen our engagement with key stakeholders, including suppliers related to our business activities. Currently, we are implementing initiatives that create opportunities and contribute to risk reduction, as outlined below. Moving forward, we will actively consider and execute new initiatives.

Risk Reduction: Sustainable wood procurement

Sustainable wood procurement

We are committed to sourcing ‘FairWood’, which not only complies with legal standards, but also contributes to biodiversity conservation and the development of local communities. In 2007, we established the Wood Procurement Guidelines (10 principles) to promote the use of sustainable wood in procurement, and since then we have positioned the guidelines as the basis for our FairWood procurement.
　　In 2023, we formulated the Wood Procurement Policy as our basic policy for wood procurement. We reorganized our previous guidelines into specific approaches based on this policy.
　　In 2025, we added “Deforestation and Conversion Free” to our Wood Procurement Policy to strengthen our environmental considerations in the procurement of wood. In addition to further clarifying the policy’s position, this addition more clearly demonstrates our approach to wood procurement as we aim to contribute to a sustainable society, which is one of our material issues.
　　We believe that sustainable procurement efforts also enhance our risk resilience from the perspective of resource efficiency. In procurement areas where we have identified significant impacts and dependencies, we will closely monitor information based on these guidelines and verify details individually as necessary to work on risk reduction.

Opportunity creation:

Measuring the biodiversity effects of the Gohon no Ki Project

Since 2019, in collaboration with the Kubota Laboratory of the Faculty of Science of University of the Ryukyus and Think Nature Inc., we have been engaged in joint research to analyze the quantitative effectiveness of biodiversity conservation. This project has demonstrated that the Gohon no Ki Project can contribute to the recovery of biodiversity in urban areas where ecosystem degradation is severe, and that expanding the project in the future will further enhance its effectiveness. In June 2024, we jointly developed an internal tool called the “Biodiversity Visualization Tool,” which aims to maximize the biodiversity conservation effects of trees and other plants in customers' gardens by visualizing these effects from the design stage. We are currently reviewing future developments and objectives based on pilot tests and result analyses. Additionally, we are conducting joint research on biodiversity and well-being with the Laboratory of Conservation Ecology in the Graduate School of Agriculture and Life Sciences / Faculty of Agriculture, The University of Tokyo. In 2024, we found that planting native tree species fosters interaction with nearby nature, enhancing the well-being of residents and their environmental awareness. The Gohon no Ki Project, which contributes to biodiversity while providing a rich living environment, not only creates brand value for our Company but also has the potential to contribute to society's nature-positive initiatives as a Nature-based Solution (NbS). We will actively engage in new areas, including the verification of the social aspects of nature-related initiatives.

At the Sekisui House Group, our Sustainability Vision 2050^*7 sets goals for 2050 that aim not only for No Net Loss (ensuring that ecosystem values are not diminished) but also for becoming Nature Positive (to enhance the value of the ecosystem through our business operations). We are committed to maximizing ecosystem networks through our business activities, focusing on the landscaping and greening initiative the Gohon no Ki Project, and sustainable wood procurement through FairWood. Additionally, we will promote decarbonization across all business activities, including our supply chain, and advance our efforts toward a circular economy.

4-1　Setting Metrics and Targets (Prepare)

The Group aims to properly evaluate and manage risks and opportunities that have large nature-related impacts and dependencies. To achieve this, we establish appropriate assessment metrics in line with recommendations from the TNFD and disclose actual results, mainly focused on the core global disclosure metrics.
　　We will disclose all TNFD-established core global disclosure metrics that are relevant and important to the Company. We have established assessment metrics from two perspectives: indicators that should be monitored to achieve our Sustainability Vision 2050 and metrics that should be monitored to stabilize business foundations and ensure responsible business activities.
　　We have disclosed results for some of the core global disclosure metrics that can be presently calculated (Table 3). Going forward, we will calculate results for core global disclosure metrics that were not disclosed at this time as well as results for important assessment indicators, which we will include as additional global disclosure metrics. We are also considering setting targets and monitoring progress using assessment metrics that are most closely related to the identified risks and opportunities
　　In addition, as a non-indicator-based target, we had designated achieving a rate of zero deforestation as a KPI starting in FY2023, with the 2030 goal of reaching zero deforestation in natural forests, as set forth in our Wood Procurement Policy.
　　In line with recent international sustainability standards and stakeholder expectations, in FY2025, we changed our KPI to “the rate of Deforestation and Conversion Free (DCF),” and continue to manage its progress. In pursuit of this target, we are advancing a range of initiatives, including strengthening supplier engagement, conducting thorough due diligence in regional areas, and switching.

Indicators established by the Company in accordance with TNFD core indicators