To enhance the effectiveness of sustainability management, including with respect to climate change, the Morinaga Milk Group has established two bodies: the Sustainability Committee, which discusses medium- to long-term direction, and the Sustainability Promotion Council, which discusses the promotion of concrete execution measures.

◇ Sustainability Committee
This committee is chaired by the lead external director, with members including the President and multiple internal and external directors; it also includes outside experts. Led by management, the committee examines medium- to long-term direction and, leveraging external insights, articulates the desired future state and long-term vision of the Morinaga Milk Group. It meets twice a year, and the matters discussed are addressed through consultations with, and recommendations to, the Board of Directors.

◇ Sustainability Promotion Council
This council is chaired by the President and comprises all division heads. Led by the executive team, it plans and drives implementation measures to achieve the policies decided by the Sustainability Committee. It also deliberates on and considers reports and proposals from its subcommittees. The council meets four times a year, the matters discussed are reported to the Board of Directors, and are subject to the Board’s oversight.

For key issues related to the Morinaga Milk Group’s sustainability management, we have established five subcommittees linked to the Sustainability Promotion Council—the Climate Change Subcommittee, the Dairy Farm Services Subcommittee, the Plastics Subcommittee, the Human Rights Subcommittee, and the Well-being Subcommittee—comprising members drawn from across departments to formulate policies and to develop and execute strategies.

On climate-related issues, the Climate Change Subcommittee (Scope 1, 2, and 3) and the Dairy Farm Services Subcommittee (Scope 3) play central roles, examining and promoting measures to reduce greenhouse gas emissions and to adapt to climate change. For areas that require specialized knowledge, we establish projects under the subcommittees and apply their results in subcommittee deliberations.

Furthermore, to provide a stronger incentive to achieve the Sustainability Medium- to Long-Term Plan 2030, we incorporate external evaluations of our sustainability activities (FTSE, MSCI) as indicators for evaluating the remuneration of directors (excluding external directors). The management team itself takes responsibility for promoting sustainability management, and has put in place a governance structure that contributes to the Morinaga Milk Group’s sustainable growth and the enhancement of corporate value over the medium to long term.

In addition, the results of the assessment of climate-related risks and opportunities are also submitted through the Sustainability Promotion Department to the Risk Management Subcommittee, a subordinate body under the Internal Control Committee that is responsible for risk management of the Morinaga Milk Group.

Matters discussed at the Sustainability Promotion Meeting (*)

April 2022	Decided on the TCFD disclosure content
April 2022	Decided on the Sustainability Medium- to Long-Term Plan 2030
September 2022	Decided to issue the Morinaga Milk Group’s first green bond
April 2023	Decided to participate in GX-ETS
April 2023	Decided on the domestic ICP price
May 2024	Decided on the TNFD disclosure content
October 2024	Discussed the review of the Sustainability Medium- to Long-Term Plan 2030 and decided to raise targets and expand the scope
October 2024	Carbon Neutral Roadmap 2050 (Scope 1 and 2) was decided
October 2024	Decided to switch 100% of the electricity purchased at domestic manufacturing sites to renewable energy sources
August 2025	Decided on the policy for responding to GX-ETS Phase 2
February 2026	TCFD disclosure update details decided

（*）Formerly the Sustainability Committee
(Renamed to the Sustainability Promotion Meeting from FY2025 following reorganization of the meeting bodies.)

The Morinaga Milk Group has been advancing its response to the TCFD recommendations through a TCFD subcommittee established in 2020. With the rapid progression of climate change and growing public concern over the climate crisis, and given the characteristics of our business as a food company—with a relatively large impact on greenhouse gas emissions—we have positioned climate change as an even more important management issue. In line with this, to promote the identification of ever-changing risks and impacts, and responses to them together with stakeholders, we revamped our analysis in 2025.

With the aim of mitigating risks and creating opportunities in response to the impacts of climate change on society and the Morinaga Milk Group, we are examining medium- to long-term risks and impacts and our policies for addressing them. In particular, conscious of solving social issues through our business activities, we will address climate change challenges under strategies based on the Sustainability Medium- to Long-Term Plan 2030.

To forecast business risks and opportunities posed by climate change uncertainty, the Morinaga Milk Group adopts 4°C and 1.5°C scenario analysis methods. Based on this, we conduct scenario analyses from the perspectives of transition risks anticipated from social interest and policy promotion, and physical risks such as the impacts of changes in weather patterns caused by climate change. To enhance resilience to climate change, we have defined the scenarios as follows, with 2030 and 2050 as milestones.

Scenario Analysis: Assumptions

Through scenario analysis, we assess the financial impacts of climate-related business risks and opportunities on a relative basis and identify material issues for the Morinaga Milk Group. Specifically, following the definition of materiality judgments, we evaluate and organize them along two axes: impact and likelihood.

Detailed considerations carried out for each analysis are arranged below.

4°C scenario

The Morinaga Milk Group’s considerations regarding the main risks and opportunities under this scenario and the corresponding response policies are as follows.

【Intensification of extreme weather】 – Risk –

Climate change is expected to increase the frequency of extreme weather events such as flooding and storm surges, as well as intensify the severity of damage. This intensification may not only result in damage at manufacturing sites but also carry the risk of opportunity losses due to operational shutdowns.
Investigations using hazard maps and Aqueduct revealed that some of the Morinaga Milk Group’s manufacturing sites are located in areas with flood risk. Furthermore, the intensification of extreme weather affects not only the Morinaga Milk Group’s manufacturing activities but also the entire supply chain, raising concerns about the risk of disruptions to raw material procurement networks.
To address such risks, we will conduct additional studies of floods and storm surges to more closely assess the extent of potential damage at manufacturing sites that are at risk, and we will strengthen measures such as installing flood barriers and the development of manuals to enable early restoration of business activities.

【Increase in raw material procurement costs】 – Risk –

Yields of the Morinaga Milk Group’s raw materials are expected to decline as average temperatures rise. As a result, suppliers may pass on higher costs, increasing procurement expenses for raw materials. To address such risks, we will promote the optimization of procurement countries/regions, suppliers, and production systems; recognize the importance of sustainable procurement with collaboration throughout the supply chain; and continue to advance our initiatives.

Our analysis of risks related to each raw material are presented below.

〇 Raw milk and dairy ingredients

For raw milk, rising average temperatures caused by climate change make dairy cows more susceptible to heat stress in summer. As a result, increased energy expenditure for thermoregulation and reduced appetite are expected to lead to a medium- to long-term decline in raw milk production volume. Feed for dairy cows, such as corn, is also expected to experience decline sin yield due to climate change, which will increase feed costs. These impacts pose a risk of higher procurement costs.
To address these risks, beginning in FY2025 we established a new Dairy Farm Services Subcommittee as part of our working groups, strengthened close collaboration with relevant government ministries and organizations, and advanced support for dairy operations and raw milk production through routine visits to dairy farmers and dairy organizations.

The Morinaga Milk Group also sources dairy ingredients from overseas, and, given trends in raw milk, we anticipate risks of higher procurement costs and even difficulty procuring overseas dairy ingredients themselves. As one countermeasure, we are diversifying our procurement countries and enhancing flexibility by manufacturing various dairy ingredients at MILEI, a Morinaga Milk Group company in Germany. In 2021, MILEI also increased its production capacity for the functional ingredient lactoferrin, which we are leveraging to help address health issues.

〇 Coffee beans

Coffee beans prefer cool, rainy climates and are cultivated at high altitudes in low-latitude regions; yet with rising average temperatures, the areas suitable for cultivation are expected to gradually shrink. As a result, supply volumes may decline, posing a risk of higher procurement costs.
To address these risks, we support producers by using certified coffee beans grown with sustainable cultivation methods and engage in tree-planting and other activities, striving to secure stable supplies. In addition, working with suppliers, we will expand support—such as building more climate-resilient farmland at coffee estates through the use of biochar to guard against risks such as droughts and heavy rains—and consider developing new products, including coffee-alternative beverages.
For coffee beans, we also utilize the TNFD LEAP approach to analyze our dependencies on, and impacts on, nature.
https://www.morinagamilk.co.jp/english/sustainability/resources_and_the_environment/tnfd/

〇 Cacao

Cacao requires hot, humid conditions with stable rainfall year-round, and is cultivated in low-latitude regions near the equator. However, climate-change-driven rises in average temperature, changes in rainfall patterns, and the spread of pests and diseases are expected to shift suitable growing areas and increase instability in yields and quality. Consequently, there are concerns about risks such as rising procurement costs and increasing difficulties in ensuring stable supplies.
The Morinaga Milk Group mainly procures cacao as processed products and does not have direct contact with production regions; however, in light of such risks, we will begin by interviewing our primary suppliers regarding initiatives at their sourcing locations, to better identify on-the-ground realities.

〇 Other raw materials

At the Morinaga Milk Group, palm oil and timber (paper) are also major raw materials we procure, and, given the trends observed for the materials analyzed in this assessment, we anticipate that other raw materials in general may likewise experience future supply declines due to climate change, resulting in a risk of higher procurement costs. In response, we will promote sustainable raw material procurement by switching to RSPO mass balance certification for palm oil and to environmentally friendly paper—such as FSC-certified paper—for product paper containers and packaging.

Mitigating health risks associated with rising average temperatures — Opportunity —

As average temperatures rise, heat tends to build up in the human body, making body temperature more likely to increase; increased sweating to regulate temperature leads to the loss of fluids and minerals. It also reduces appetite and impairs digestive function, making it easier to fall short on essential nutrient intake and raising the risk of heat-related illness. Furthermore, dehydration and nutrient deficiencies disrupt the balance of gut bacteria and worsen the gut environment; climate change is therefore expected to intensify summer health issues.
Meanwhile, milk and yogurt are particularly effective for hydration, fluid retention, and nutrition as beverages and foods to counter these effects, while ice cream is effective for body temperature regulation. In addition, yogurt and functional ingredients such as Bifidobacteria and lactulose are expected to deliver health benefits by improving the intestinal environment.
The Morinaga Milk Group manufactures and sells milk, yogurt, beverages, ice cream, and functional ingredients such as Bifidobacteria and lactulose. Believing we can help address these health issues, we will work to develop a supply system capable of meeting growing demand and to enhance our brand value.

【Increased demand for the e-commerce business due to people refraining from going out】 - Opportunity -

We expect that, due to climate change impacts such as extreme heat and heavy rainfall, consumers will have fewer opportunities to go out. Accordingly, demand for the e-commerce business is expected to increase.
The Morinaga Milk Group will accurately gauge changes in consumer behavior driven by climate change and promote the development of a supply system to prepare for rising demand for e-commerce products.

【Mitigating health risks from summer foodborne illness outbreaks】 - Opportunity -

The increase in average temperatures raise concerns about the growth in foodborne illnesses in summer, such as those caused by enterohemorrhagic E. coli O157, Campylobacter, Salmonella, and Staphylococcus aureus.
The Morinaga Milk Group believes we can help mitigate health risks by expanding sales of the slightly acidic electrolysed water generator PURESTER, which helps suppress these types of bacteria.

1.5°C scenario

The Morinaga Milk Group’s considerations regarding the main risks and opportunities under this scenario and the corresponding response policies are as follows.

【Introduction of a carbon tax】 - Risk -

As the move toward a decarbonized market accelerates and society seeks to reduce greenhouse gas emissions, the use of fossil-fuel-derived energy will become regulated. In addition, a carbon tax is expected to be introduced in Japan and other countries as a funding source to support areas such as renewable energy. According to estimates by the International Energy Agency (IEA) in WEO 2024, a levy of around $140 per ton of CO2 is assumed for advanced economies, including Japan, by 2030. Taking our Scope 1 and 2 into account, we recognize this as one of the climate risks with the greatest impact.
To address these risks, guided by our Carbon Neutrality Roadmap 2050, we are proactively promoting measures such as the use of renewable energy, green electric power, and green bonds. We will also work to formulate an optimal reduction mix strategy combining operational, equipment, and procurement improvements, and to review and utilize ICP.

【Implementation of plastic recycling regulations】 - Risk -

As part of regulatory compliance, we may need to switch the plastics used for product packaging from conventional petroleum-derived materials to alternative materials such as bioplastics. In that case, higher material costs would be expected to add to overall expenses.
Even if such regulations are not enacted and fossil-fuel-derived plastics continue to be used, we recognize the risk of a de facto cost burden if suppliers pass through price increases attributable to the carbon tax.
To address these risks, we will continue to promote lighter weight and material changes for plastic packaging, and replacement with biomass-based plastics and recycled plastics.

【Reputational shifts among customers and investors】 - Risk -

While a large-scale shift in consumer behavior—such as “avoiding the use of raw milk”—seems unlikely, we recognize latent risks in growing social concern over the environmental impact of dairy farming and the possibility of stricter regulations.
To address these risks, starting in FY2025 we established a new Dairy Farm Services Subcommittee as a subcommittee, work to reduce the environmental burden of dairy farming—for example by utilizing MO Lagoon for Diary—and aim to increase the number of initiatives that enhance the nutritional and social value of dairy farming and the dairy industry.

【Advancements in low-carbon technologies】 - Opportunity -

In the food industry too, interest in low-carbon technologies is expected to grow, increasing the need for long-life products that can be distributed and stored at room temperature and for extended shelf life.
Compared with chilled products, room-temperature long-life products do not require refrigeration or freezing, resulting in lower greenhouse gas emissions during logistics, storage, and sales. Moreover, extending shelf life helps reduce food loss and lowers greenhouse gas emissions at the time of disposal.
The Morinaga Milk Group already offers products domestically with the industry’s longest shelf life (as of December 2025), including room-temperature long-life milk with a 120-day shelf life and room-temperature tofu with a 216-day shelf life. Our room-temperature tofu manufactured in the United States has an even longer shelf life of 455 days, and is exported not only within the United States but also to Europe and the Middle East. As the shift toward low-carbon, sustainable lifestyles advances, we believe these products stand out from ordinary offerings. We will continue to focus on extending shelf life across other products as well.

【Reputational shifts among customers and investors】 - Opportunity -

As climate change heightens awareness of decarbonization and increases public attention, investors and financial institutions are expected to scrutinize sustainability issues, including climate change, even more closely in their financing and investment decisions. As a result, promoting efforts toward decarbonization is expected to create financing opportunities and lead to changes in our reputation among stakeholders to a certain extent. Accordingly, the Morinaga Milk Group recognizes that responding swiftly to these concerns will help us secure opportunities.

The Climate Change Subcommittee is responsible for identifying and assessing climate change-related risks and opportunities within the Morinaga Milk Group. For the evaluation of risks and opportunities, we define the financial impact of each risk on the Morinaga Milk Group as "impact," and employ a two-axis evaluation methodology that also takes into account the "likelihood" of occurrence. Based on the evaluation results, we prioritize and identify material issues.

Impact

Likelihood of Occurrence

Time Horizon

For climate-related risk management, response measures are deliberated primarily on material issues at the Sustainability Promotion Council.
In addition, for medium- to long-term risks, we incorporate the evaluation results into strategic discussions at the Sustainability Committee to strengthen medium- to long-term risk management.
In contrast, highly uncertain risks that may materialize in the short term—such as physical risks—are reported via the Risk Management Subcommittee to the Internal Control Committee, reviewed under the same framework as other risks, and then integrated into the company-wide risk management system.