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Our Actions in Response to TCFD Recommendations

The SATO Group recognizes that climate change profoundly impacts our world and we must act on climate through our business. In 2021, we declared our support for the Task Force on Climate-related Financial Disclosures (TCFD) and started applying TCFD recommendations to our climate actions.

Communicating our climate framework helps stakeholders understand our status and helps SATO identify areas for further improvement. We use stakeholder feedback to continually strengthen our climate-related reporting.

Basic stance

Sustainability is inseparable from our business, as is made clear right in our corporate mission to "create new value for our customers through products and services of superior quality, and to contribute towards a better and more sustainable world."

Sustainability is core to our business strategy, and central to the 2030 vision in our current medium-term plan. In FY 2025, we revised our basic sustainability policy to move beyond traditional CSR and ESG frameworks. This strengthens our commitment to addressing global challenges such as climate change, resource depletion and social inequality while contributing to local communities through our business.

To build a low-carbon society and enhance corporate value, we focus on two areas.

  1. Customer impact: Help customers lower their greenhouse gas emissions with our value-added solutions that improve productivity.
  2. Operational responsibility: Reduce greenhouse gas emissions systematically across our operations and supply chain, enhance green procurement and expand recycling initiatives.
    (See "4. Metrics and targets" for how we track our progress in reducing emissions.)

Updating our materiality assessment

In our latest materiality assessment, we identified 11 topics, of which three are related to the environment: contributing to the circular economy, climate action and circular use of resources.

Updating our materiality assessment

We will enhance the quality and quantity of information we disclose by continuing climate scenario analysis, which we started based on TCFD recommendations. We will also strive to improve our sustainability performance for greater social and business value.

Climate-related disclosures, guided by TCFD principles

1. Governance

We aspire to play an essential role in society by delivering solutions that create value and address customer pain points on an ever-wider scale to continuously meet the needs of the times. Looking toward this 2030 vision, we unveiled our current medium-term management plan in FY 2024. One focus of the plan is to reinforce business fundamentals, which requires increasingly sustainable business practices such as strengthening corporate governance and human capital management and reducing emissions.

The Sustainability Promotion Committee, which reports directly to our Executive Officers Meeting, works on driving climate and environment action, green procurement and other sustainability priorities across the SATO Group. Chaired by our executive officer tasked with overseeing sustainability (the Group CEO) and overseen by our board of directors, the committee comprises members from corporate planning and key business divisions to ensure we infuse sustainability into our business growth efforts.

Starting FY 2025, we have established working groups within the committee to study and advance initiatives related to material environmental topics.

Governance

The Sustainability Promotion Committee will refer those matters that may significantly impact business strategies and management plans to the Executive Officers Meeting, providing reports and discussion outcomes to facilitate top-level decision-making at the meeting. It also regularly reports on the progress of its activities to our board of directors via the said meeting, which is chaired by our Group CEO, who also serves as our top executive for climate action.

2. Strategy

We conduct climate scenario analyses to identify climate-related risks and opportunities that may affect the AIDC (automatic identification and data capture) industry over medium- to long-term horizons (2030, 2050). We assess potential business impacts, determine strategic responses and incorporate the insights into our disclosures. Starting FY 2024, we enhanced the specificity and transparency of our disclosures by explicitly linking climate-related risks and opportunities to our materiality assessment.

Strategy

(a) Identify climate-related risks and opportunities

We evaluate how climate change may influence social, market and regulatory trends in 2030 and 2050. Based on these forecasts, we identify risks (that could materially impact business) and opportunities (that could enhance growth) over the medium and long term. Risks are categorized into transition risks and physical risks according to the TCFD framework.

Strategy

Risks and opportunities in SATO's context

We take a consistent approach to assess how policies, market dynamics, emerging technologies and other projected factors in a warmer future may affect our business and value chain. Through continuous discussions with each business division, we identify both risks and opportunities in a 1.5°C world. We also evaluate the potential physical impacts of a 4°C temperature rise on our production and logistics sites and on our key suppliers.

In doing so, we consider how climate change may impact our diverse customers and their industries over the medium to long term.

Strategy

(b) Define scenarios of potential future climate states

We reference reports from the Intergovernmental Panel on Climate Change (ICPP) to establish two contrasting climate scenarios for the AIDC industry: a 1.5°C scenario (RCP1-1.9) and a 4°C scenario (RCP4-7.3). These scenarios enable us to plan for a range of "what-if" futures and strengthen our resilience against unforeseen events.

As we are committed to limiting global temperature rise to 1.5°C and achieving carbon neutrality by 2050, we also use the International Energy Agency (IEA) Net Zero Emissions scenario as a benchmark when defining our assumptions.

Strategy
Strategy

Since the gap between the 1.5°C and 4°C scenarios widens significantly after 2030, our analysis emphasizes the long-term outlook, focusing on how our industry and customers could be affected under each scenario in 2050.

(c) Assess business impact under each scenario

We analyze the qualitative and quantitative impacts of climate-related risks and opportunities on our business from a risk management perspective, reviewing formulas and parameters applied in the previous year and updating them as necessary based on the latest information.

Starting FY 2025, we will introduce five defined impact levels based on potential financial gains or losses to enhance the clarity and specificity of our disclosures.

Impact level 5: More than JPY 20 billion
Impact level 4: JPY 10 to 20 billion
Impact level 3: JPY 5 to 10 billion
Impact level 2: JPY 1 to 5 billion
Impact level 1: Less than JPY 1 billion

We also classify risks and opportunities by urgency, according to when their impacts are likely to materialize.

Urgency level 3: Before 2030
Urgency level 2: Between 2030 and 2035
Urgency level 1: After 2035

The 1.5°C scenario presents substantial risks associated with rising production costs. At the same time, this scenario also presents significant opportunities as demand increases for eco-friendly products, sustainable solutions and traceability systems that underpin the circular economy. These trends align closely with our core competencies in tagging, offering opportunities for business expansion and innovation.

In contrast, the 4.0°C scenario poses physical and business continuity risks, which would lead to sharp increases in our operating costs. Even today, rising mean temperatures and climate-related hazards are already huge problems for society. It is of urgency that we work to strengthen supply chain resilience, with a focus on our production and logistics networks.

In both scenarios, our consumables business, which accounts for a key part of our revenue, will face risks if forest resources become scarce and paper costs increase. We need to explore ways to work with paper manufacturers to make our consumables business more sustainable over the long term.

(d) Plan actions to manage risks and opportunities

As part of our mission to contribute toward a better and more sustainable world, we will pursue measures that are consistent with the 1.5°C scenario while also planning for the 4°C scenario from a risk management perspective. Our priority is to address high-impact and urgent climate-related risks and opportunities in line with action plans we developed for the material environmental topics identified in our materiality assessment.

Actions we can take to mitigate risks include reducing our greenhouse gas emissions and building a socially responsible procurement framework. Possible actions for capturing related opportunities, on the other hand, center on delivering value to customers and society through, for example, developing and offering more products and solutions that help reduce waste and expanding business for data collection or utilization.

Strategy

Key action (1): Track and reduce greenhouse gas emissions

For Scope 1 and 2 emissions, we will build on the progress made with adopting renewable energy in Japan to raise employee awareness about energy conservation and continue to reduce emissions. Outside Japan, we will study the emissions data and situation at each business site and work with local teams to cut emissions systematically, starting with the highest-emitting sites.

For Scope 3 emissions, we will measure carbon footprint at product level for all our mechatronics and consumables products and track emissions by category so that we can start more targeted efforts to lower emissions.

(See "4. Metrics and targets" for how we track our progress in reducing emissions.)

Key action (2): Expand recycling of products and their packaging materials

To reduce emissions associated with the end-of-life treatment of sold products, we will use more recycled materials and design products that can be easily disassembled for repair, refurbishment and component reuse or recycling.

We will also minimize product packaging and invest in returnable transport items to cut packaging waste

Key action (3): Offer more products/solutions that contribute to the environment

Our auto-ID solutions play a big role in visualizing everything that moves through supply chains. Businesses can use our solutions, for example, to collect information on inventory items (what, how many, where), so they do not over-order and carry too much excess inventory. On top of reducing waste and unnecessary stock transfers, our solutions are also key to realizing the circular economy.

We will develop more products/solutions that contribute to the environment, using sensors and other newer forms of auto-ID technology.

New traceability system designed for the circular economy

In July 2025, we launched a Trace Eye traceability system for tracking waste collection and reuse.

The system captures data and tracks the entire recycling process from identifying/weighing collected waste and disassembly/sorting to converting into recycled materials and shipping them out for reuse. After successful proof-of-concept trials, we plan to leverage this system to promote recycling and reuse, thereby helping to reduce waste and associated greenhouse gas emissions.

Key action (4): Support sustainable forest management

As part of our green procurement efforts to prioritize materials and components with lower environmental impact, we have obtained Forest Stewardship Council (FSC®) chain-of-custody certification (license no. FSC-C135435) for our labels and stickers, ensuring we use FSC®-certified paper in production. The FSC is a worldwide recognized system that certifies forest products have been harvested in an environmentally sustainable and socially responsible manner, free from risks such as deforestation and illegal logging.

We have maintained our own environmental management standard since 2005 to keep toxic substances out of our products and packaging. This standard prohibits the use of toxic substances subject to regulations in various countries while identifying substances that need to be controlled by their use and amount contained and setting forth how we control them.

Around the world, our employees also take part in tree-planting and other forest conservation activities.

Harmony with Nature
Playing our part in the world

Key action (5): Strengthen business continuity planning across our supply chain

Given that climate change can cause heavy rain and snowfall leading to floods and traffic isolation, we have started using Aqueduct floods hazard maps to assess water risks across our 140 manufacturing sites (120 in Japan and 20 internationally), taking into account their respective production capacities. Results show that our factory in Kitakami, Japan, along with our logistics centers in eastern and western Japan are not at risk of extensive water damage even during severe storms and floods.

Some of our partner factories producing consumables are, however, in at-risk locations, and we will be working with them to develop the necessary flood protection strategies. We will also take measures to flood-proof high-risk sales offices in Japan and keep our Kitakami factory operational and safe from potential snow hazards.

3. Risk management

As the world around us grows increasingly complex and diverse, we must make efforts at the group level to manage a broad range of internal and external risks to execute our business strategies and achieve our financial goals.

Through ongoing climate scenario analyses, we regularly update the parameters and assumptions — such as those concerning policy changes — that underpin our risk assessments to evaluate the quantitative impacts of climate-related risks on our future business and financial position.

Findings are reported to not only the Executive Officers Meeting but also the board of directors, ensuring that processes for managing climate-related risks are integrated into our risk management framework. Our Risk Management Committee is also involved in managing physical risks and drawing up crisis countermeasures as needed.

The Sustainability Promotion Committee will continue to enhance the accuracy of climate scenario analyses to further embed the findings into our strategic planning processes.

Risk Management

4. Metrics and targets

Reducing greenhouse gas emissions is essential to tackling global warming and making our society sustainable. We understand that we are responsible for the environment, and work to monitor and cut greenhouse gas emissions from our business operations (Scope 1 and 2).

While taking into account the emission reduction target announced by the Japanese government in April 2021, we are aiming higher with the medium/long-term goal of halving group-wide Scope 1 and 2 emissions from FY 2019 levels by FY 2030. In addition, we have pledged to achieve carbon neutrality (net zero) by FY 2050 through plans to expand use of renewable energy and promote energy efficiency and conservation.

As part of our FY 2030 goal, we also aim to cut emissions from our supply chain (Scope 3) — primarily those associated with purchased goods and services (Category 1), use of sold products (Category 11) and end-of-life treatment of sold products (Category 12) — by 30 percent from FY 2019 levels via various actions such as engaging and collaborating with suppliers for green procurement, using refurbished components, making/selling printers that consume less energy, and promoting recycling.

Greenhouse Gas Emissions

As the products and solutions we provide customers help reduce greenhouse gas emissions at their worksites, we aim to add these avoided emissions (which we are working to quantify) and Scope 3 emissions to our carbon neutrality plan so that we become carbon negative over the long term. We will also look into disclosing important metrics that we identify from the climate scenario analysis as well as materiality KPIs that we set, together with their progress updates.

Last updated: Oct 31, 2025