TNFD disclosure | Sustainability | OBAYASHI CORPORATION

Governance

Obayashi Corporation has established the Sustainability Committee that examines and discusses environmental and social sustainability issues as an advisory body to the Board of Directors, aiming to help ensure the effective and efficient monitoring, supervision, and involvement of the Board in sustainability issues. The Sustainability Committee, chaired by Representative Director, President and CEO, comprises Independent Directors and other members who have sustainability-related expertise and experience. It convenes to identify sustainability issues, including climate-related issues, to discuss and make recommendations on Obayashi's responses to the identified sustainability issues, and to review the implementation status of such responses by the execution side (including the management of the achievement of climate-related targets). Based on discussions at the Sustainability Committee, the Board of Directors determines management policies for promoting ESG management and achieving SDGs.

On the business execution side, under the Management Meeting, the Business Plan Committee mandated by Representative Director, President and CEO, and the Environmental Management Expert Committee established in the Business Plan Committee, engage in developing, promoting, and monitoring the implementation of the Group's united measures in accordance with the management policies determined by the Board of Directors. In addition, the Audit & Supervisory Board audits the execution of duties by directors.

Governance System Concerning nature-related issues

Organization	Overview of organization	Overview of activities
Board of Directors	Comprised of Obayashi Directors	Meets about 15 times a year Supervises climate-related risks and opportunities
Sustainability Committee	Head of Committee: President Members: Independent Directors, etc Secretariat: Corporate Strategy Division	Meets twice a year or more Examines policies on how to address sustainability issues, including nature related, makes their recommendations to the Board accordingly and assesses the status of execution of these matters
Management Meeting	Head of Committee: Representative Director and President Members: Executive officers, including general managers of divisions Secretariat: Corporate Strategy Division	Meets about 30 times a year Reports, discusses, instructs, and resolves important matters regarding sustainability issues, including nature related
Business Plan Committee	Head of Committee: Executive officer responsible for business planning Members: Heads of divisions, etc Secretariat: Corporate Strategy Division	Meets about 12 times a year Formulates policies related to sustainability issues (including nature related), and manages progress of their implementation
Environmental Management Expert Committee	Placed under Business Plan Committee Head of Committee: Executive officer responsible for the environment Members: Environmental supervisors for individual departments of Head Office Secretariat: Environmental Management Division	Meets twice a year or more Formulates basic policies and measures regarding environmental management Formulates strategies and promotes environmental management based on the Obayashi Group Environmental Policy, compiles information on and evaluates the results of activities based on our environmental management system (EMS), and sets targets for and promotes activities in the subsequent fiscal year and beyond
Environment Departments	Head Office, main offices and branches (environment departments) Group companies (environment departments)	Head Office, main offices and branches and Group companies take specific actions based on the action plans and targets set by the Environmental Management Expert Committee

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Strategy

Obayashi Corporation has clarified its intention to seek to "realize sustainability of the planet, society, and people" in the Obayashi Sustainability Vision 2050. We believe that it is necessary to conduct environmentally friendly business activities and thereby contribute to nature positivity after understanding how the Group's corporate activities are supported by, and have an impact on, the natural environment.

Regarding nature-related risks and opportunities, we have analyzed dependencies and impacts on nature in our value chains using the LEAP Approach suggested by the TNFD recommendations, and identified and evaluated them as follows:

Overview of LEAP Analysis

	L Locate interface with nature	E Evaluate dependencies and impacts	A Assess risks and opportunities	P Prepare to respond and report
TNFD Requirements	Selection of buisiness areas in scope Selection of value chains in scope	Identification and evaluation of dependencies and impacts	Identification and evaluation of risks and opportunities	Preparation for disclosure and respondind to risks and oppotunities
Obayshi's Responses	Identification of value chains Selection of construction sites by construction type and extraction sites of raw materials of procured construction materials Location of the interface with nature	Evaluation of dependencies and impacts using ENCORE IBAT-based confirmation of adjacency with protected natural reserves and significant spacies	Identification of risks and opportunities and development of countermeasures based on the dependencies and impacts identified with ENCORE	Disclosure Response to the risks and opportunities

[Locate] Selection of business areas and value chains in scope

In this analysis, we focused on Domestic Construction Business (Building Construction) and Domestic Construction Business (Civil Engineering), accounting for approximately 70% of the consolidated sales of the Obayashi Group.

First, we reviewed the phases with close contact with nature in the value chains (from Planning, Design, Procurement, Construction, Post-delivery management to Demolition) of both of the businesses, and selected three phases as the targets of the analysis: "Design," "Construction," and "Extraction of raw materials" in "Procurement" as it has a greater impact on nature in the phase. "Construction" is believed to have significant dependencies and impacts on the surrounding nature due to such factors as land alteration, water discharge, noise, and vibration. As for "Design," dependencies and impacts on nature during construction and after completion of a building are determined by detailed design, so we decided to analyze them collectively as "Design and construction." "Extraction of raw materials" in "Procurement" is considered to have dependencies and impacts on nature because of such factors as digging for soil and sand, mining for minerals, and deforestation.

Value chain		Business activities' connection with nature
Phase	Detailed phase	Description	Degree of impact
Planning	Development/asset management	There is no actual direct impact on nature at this phase, but the selection of a site determines that there will be a certain impact on the surrounding natural environment	Low
Design	Consulting/engineering	There is no actual direct impact on nature at this phase, but impacts on the surrounding natural environment in the procurement and construction phases will be determined by the design (indirect impacts)	High
Design	Design		High
Procurement	Extraction of raw materials (iron, concrete, sand, gravel, timber, water, etc.)	There are impacts on nature due to digging for soil and sand, mining for minerals, deforestation, etc (indirect impacts)	High
	Transport	Noise, vibration, and gas emissions have impacts on the surrounding natural environment	Medium
	Factory processing		Medium
	Distribution, transportation		Medium
Construction	Construction	Land alteration, water discharge, noise, and vibration have significant impacts on the surrounding natural environment (direct impacts)	High
Post-delivery management	Maintenance, property management, building management	Impacts from a building will remain. Noise, vibration, and gas emissions have impacts on the surrounding natural environment	Medium
Post-delivery management	Renovation	Land alteration, water discharge, noise, vibration, and gas emissions have impacts on the surrounding natural environment	Medium
Demolition	Demolition/construction waste disposal	Land alteration, water discharge, noise, vibration, and gas emissions have impacts on the surrounding natural environment. A large amount of construction waste is generated	Medium

As the subjects of the analysis for "Extraction of raw materials," we have selected raw materials of main construction materials; which are steel frames, fresh concrete, and cement; namely "Iron ore," "Coal," "Sand," and "Limestone," as well as a strategically important construction material, "Timber," totaling five items. As for "Design and construction," we identified the items ranked higher in sales of Domestic Construction Business over the recent five years by use of buildings and structures based on the Current Survey of Orders Received for Construction (Ministry of Land, Infrastructure, Transport and Tourism (Available only in Japanese)), and then selected the following subjects of the analysis: "Office and government buildings," "Factories and power plants," "Houses," "Education, research, and culture," and "Warehouses and logistics" from Building Construction Business; and "Railroads," "Roads," and "Soil and river conservation" from Civil Engineering Business.

[Evaluate] Evaluation of dependencies and impacts on nature in value chains

We visualized the subjects of the analysis for "Extraction of raw materials" and "Design and construction" in a heatmap using ENCORE (*1), a tool assessing dependencies and impacts on nature.

Obayashi's Business Activities' Dependencies and Impacts on Nature

Heatmap of analysis results using ENCORE

Dependencies/impacts:
Medium: M ■　 High: H ■　 Very High: VH ■　

[Dependencies]

Important business activities			Dependencies (*2)
Category	Subcategory	Sub-subcategory	Provisioning services		Regulating and maintenance services		Cultural services
Category	Subcategory	Sub-subcategory	Ground water, surface water, and water flow maintenance	Fibers and other materials	Flood and storm protection	Soil erosion control	Mitigation of sensory impacts
Extraction of raw materials	Steel frames	Iron ore	H
	Steel frames	Coal	H
	Fresh concrete	Sand
	Cement	Limestone
	Timber	Timber	VH	H
Design and construction	Building construction	Offices and government offices			M	M	M
		Factories and power plants			M	M	M
		Houses			M	M	M
		Education, research, and culture			M	M	M
		Warehouses and logistics			M	M	M
	Civil engineering	Roads	M		M	M	M
		Railroads	M		M	M	M
		Soil and river conservation			M	M

[Impacts]

Important business activities			Impacts (*3)
Category	Subcategory	Sub-subcategory	Ecosystems use		Disturbances	Water use	GHG emissions	Pollutants	Solid waste
Category	Subcategory	Sub-subcategory	Use of terrestrial ecosystems	Use of freshwater and marine ecosystems	Disturbances	Water use	GHG emissions	Pollutants	Solid waste
Extraction of raw materials	Steel frames	Iron ore	VH	H	H	VH	H	H	H
	Steel frames	Coal	VH	H	H	VH	H	H	H
	Fresh concrete	Sand	VH	H	H		H	H
	Cement	Limestone	VH	H	H	H	H	H	H
	Timber	Timber	H		H		H	H
Design and construction	Building construction	Offices and government offices	H	H	H	H	H	H	M
		Factories and power plants	VH	VH	H	H	H	H	M
		Houses	H	M	M	H	H	H	H
		Education, research, and culture	H	H	M	H	H	H	M
		Warehouses and logistics	VH	VH	H	H	H	H	M
	Civil engineering	Roads	VH	H	H	H	H	H	H
		Railroads	VH	H	H	H	H	H	H
		Soil and river conservation	VH	VH	H	H	H	H	M

Heatmap of analysis results using ENCORE(11.8 KB)

This analysis shows that "Extraction of raw materials" and "Design and construction" have more impacts than dependencies on natural capital, and have significant impacts particularly through "Use of terrestrial ecosystems." Looking at sub-subcategories, we learned that "Iron ore" and "Coal" extractions have large impacts from "Water use," and the extraction of "Timber" has large dependencies on "Ground water, surface water, and water flow maintenance." Moreover, it is observed in "Design and construction" that "Factories and power plants," "Warehouses and logistics," and "Soil and river conservation" have large impacts from "Use of freshwater and marine ecosystems."

*1 ENCORE (Exploring Natural Capital Opportunities, Risks and Exposure)
A tool for assessing dependencies and impacts on nature. It enables companies to draw a list and table of potential dependencies and impacts on nature by choosing from options a sector, subindustry, production process, etc. that are relevant to the company's business. In this analysis, we chose production processes of "mining," "timber production," "infrastructure construction," "housing construction," and "highway, railway construction" to conduct an analysis in reference to the output dependencies and impacts
*2 Things that depend on natural capital
This indicates what type of ecosystem services the business activity depends on. The ecosystem services represent blessings from ecosystems, which are divided into classifications such as "Provisioning services," "Regulating and maintenance services," "Cultural services," and "Infrastructure services". In the table, "Provisioning services" means services supplying food, water, raw materials, etc.; "Regulating and maintenance services" means services helping regulate the environmental, such as regulating the climate, water volume and quality, and controlling soil erosion; and "Cultural services" means the cultural services that humans can obtain through contact with nature
*3 Things that impact natural capital
This indicates what type of impact the business activity has on nature

[Assess] Identification of risks and opportunities and development of countermeasures

Based on the dependencies and impacts obtained with ENCORE, we identified about 80 nature-related risks and opportunities. Among them, we chose risks related to "Use of ecosystems," "Greenhouse gas," and "Water resources" that have especially large impacts on nature. We chose opportunities related to "Green infrastructure" and "Timber." The risks and opportunities identified are shown in the table below.

We also analyzed the probability and timeframe, but failed to obtain an adequate basis for disclosure, so we will conduct a further analysis. Recognizing the need for a scenario analysis including financial impacts on our businesses, we will work on it while closely watching trends of nature-related disclosure.

Going forward, by incorporating countermeasures for the risks and opportunities identified into specific measures, while reinforcing functions of identifying, evaluating, and managing medium- to long-term risks and opportunities related to nature and other aspects, we aim to expand business opportunities for the Obayashi Group and further enhance our organizational resilience.

As countermeasures for the risks and opportunities identified based on the dependencies and impacts in this analysis, Obayashi Corporation has been working to mitigate impacts on nature by protecting and regenerating nature and conserving biodiversity through all of its business activities. We endeavor to conduct businesses by incorporating the concept of nature positivity that helps maximize nature and biodiversity value, in addition to our ongoing efforts to mitigate dependencies and impacts on nature.

Obayashi's Nature-related Risks and Opportunities

Category	Sub category	Dependencies/ impacts	Risks and opportunities [Categories in scope]	Countermeasures	Probability	Timeframe	Relevant pages
Transition risks	Policy	Use of ecosystems, Disturbance	[Procured materials (iron ore, coal, limestone)] Increase in procurement cost due to growing needs for after-the-extraction care in extraction sites of raw materials, such as backfilling and reforestation	Establish a sustainable procurement system by enhancing supply chain engagement Facilitate the use of materials ensuring traceability and certified materials satisfying the requirements for resource preservation and respect for human rights Develop technologies for recycled materials and alternative materials contributing to resource recycling and facilitate their use Promote circular economy in the construction business by improving the recycling rate of construction waste and other measures Establish design and construction techniques contributing to nature positivity, such as wooden structures and interiors, and develop a supply chain Protect forest resources in Japan and abroad by facilitating sustainable use in the entire supply chain and appropriate forest stewardship for domestic timber ready for logging Develop technologies for nature positivity and green infrastructure and facilitate their use	Medium to high	Medium- to long-term	a, h, i, k, l
			[Procured materials (sand)] Increase in procurement cost due to the need for replacement of suppliers and the search for alternative resources caused by nature conservation and tighter regulations in extraction sites of raw materials		High	Short-term	a, h, i, k, l
			[Procured materials (timber)] Replacement of suppliers and increase in procurement cost due to nature conservation and tighter regulations for timber procurement		Medium	Medium- to long-term	a, e, h, i, k, l
		GHG emissions	[Procured materials (iron ore, coal, sand, limestone)] Increase in procurement cost due to higher procurement prices of raw materials resulting from the introduction of a carbon tax		Medium to High	Short- to long-term	a, h, i, k, l
		GHG emissions	[Procured materials (timber)] Increase in procurement cost due to reduction in volume of timber distributed in the market caused by tightened preservation policy of forests as GHG sink		Medium	Short-term	a, e, h, i, k, l
	Reputation	Use of ecosystems, Disturbance	[Procured materials (sand, timber)] Lower reputation in case of significant impact on ecosystems in extraction sites of raw materials or procurement without confirmation of legality		Medium	Short- to long-term	k, l
	Market	Use of ecosystems, Pollution, Solid waste	[Design and construction (building construction, civil engineering)] Increases in monitoring and environmental management costs due to further needs for environmental monitoring in areas surrounding a site under construction as a result of growing interest in nature positivity Cost incurred for addressing the loss of the regulating function of nature because of any change in a surrounding environment caused by the construction or structure itself	Improve competitiveness with construction methods and management technologies mitigating and eliminating the impact on the environment Facilitate the development of quantitative evaluation of biodiversity, environmental monitoring technologies, and related technologies in each phase from planning through demolition Promote technological development contributing to nature positivity and green infrastructure, and proactively distribute information to stakeholders and make technical proposals to customers	Medium	Medium- to long-term	a, b, c, d, e, f, g
Physical risks	Chronic	Provisioning services/ Use of ecosystems	[Procured materials (iron ore, sand)] Increase in procurement cost or downscaling of business operations due to the requirement for searching for alternative resources or developing new construction methods / technologies as a result of resource depletion of main procured construction materials in the construction business	Develop technologies for recycled materials and alternative materials contributing to resource recycling and facilitate their use Promote the development of construction methods / technologies contributing to utilization of sustainable alternative resources or nature positive resources	High	Short- to long-term	a, h, i, k, l
	Chronic	Water use	[Design and construction (building construction, civil engineering)] Difficulties or cost increase in the construction business arising from restricted water use caused by depletion of water resources	Establish construction methods / construction techniques consuming less water such as water recycling Manage water risks in construction by receiving a heads-up about restrictions on use of water resources and depleted areas using a water stress map, etc.	Medium	Medium- to long-term	c, f
	Acute	Use of ecosystems	[Design and construction (building construction, civil engineering)] Increased nature-related damage in construction sites due to increased frequency and severity of natural disasters	Develop technologies for responding disaster preparedness and recovery such as remotely operable construction machines Strengthen our business continuity capabilities in case of a disaster by building a strong network working together with the supply chain	High	Short-term	j
Opportunities	Market		[Design and construction (building construction, civil engineering)] Expanded business opportunities due to growing needs for nature positivity and green infrastructure	Implement design and construction considering living in harmony with nature and resource recycling Promote circular economy in the construction business by improving a recycling rate of construction waste Promote the development of technologies contributing to nature positivity and green infrastructure, and proactively distribute information to stakeholders and make technical proposals to customers	Medium	Medium- to long-term	b, c
	Reputation		[Design and construction (building construction, civil engineering)] Enhanced reputation due to growing awareness of construction methods and management techniques contributing to mitigation and elimination of the impact on the environment as well as technologies for green infrastructure		Medium	Medium- to long-term	b, c
	Resource efficiency/ Sustainable use of natural resources		[Design and construction (building construction, civil engineering)] Expanded business opportunities due to growing needs for technologies to use sustainable timber	In utilizing timber, aim to build a circular model (Circular Timber Construction®) including the optimized supply chain under OBASYASHI WOOD VISION, promote the development of technologies and their commercialization in the three phases of upstream (tree planting, cultivation), midstream (processing, procurement), and downstream (construction, power generation, reuse, and recycling)	Medium	Medium- to long-term	e

Obayashi's Nature-related Risks and Opportunities(21.0 KB)

Relevant pages

Location Analysis in Design and Construction (IBAT)

On the basis of the analysis results of dependencies and impacts on nature in the value chains, regarding the use of terrestrial ecosystems in "Design and construction" and "Extraction of raw materials," we used IBAT (Integrated Biodiversity Assessment Tool) (*1) to carry out an analysis of impacts on nature by location based on such metrics as the number of threatened species (*2), protected areas (*3), and KBAs (*4). Results of the analysis have been classified by usage of a building or structure (*5) based on geographical features of each site.

The analysis using IBAT shows that on average 209 threatened species registered in the IUCN Red List are living within a one-kilometer radius of each site, and there seems to be no particular pattern by use of buildings and structures.

The numbers of protected areas and KBAs located within a one-kilometer radius of each site are shown in the table below. Construction sites covered by the analysis in Building Construction Business are classified into "Office and government buildings," "Factories and power plants," "Houses," "Education, research, and culture," and "Warehouses and logistics," which are more likely to be located in urban and coastal areas, whereas in Civil Engineering Business, the sites covered are classified into "Roads," "Railroads," and "Soil and river conservation," which are more likely to be located in mountainous areas. These sites are rarely adjacent to internationally protected areas (*6), but more likely to be adjacent to protected areas of IUCN category IV or below (*7). In addition, even if a site is constructed in a place adjacent to protected areas, the construction will be unlikely to significantly damage ecosystem services in such protected areas, and therefore our businesses are considered to have minor dependencies on nature. We will continue to evaluate our environmental impact, protect the environment, and facilitate eco-friendly construction technologies.

Construction Sites Adjacent to Key Biodiversity Areas (KBAs)

			Proportion of sites adjacent to protected areas or KBAs (%) (*8)	World Heritage (%)	Ramsar (%)	UNESCO (%)	Proportion of sites adjacent to internationally protected areas (%) (*8)	Proportion of sites adjacent to protected areas (%) (*8)							Interpretation of IBAT analysis
				World Heritage (%)	Ramsar (%)	UNESCO (%)		Ia	Ib	II	Ⅲ	IV	V	VI	Interpretation of IBAT analysis
Design and construction	Building construction	Office and government buildings	33	-	-	-	-	-	-	-	-	33	-	7	As large rivers and seas adjacent to urban areas are designated as protected areas, about 30% are adjacent to protected areas and KBAs. The proportion of adjacency is low, and the protected area categories are low at IV or VI.
		Factories and power palnts	50	-	-	-	-	-	-	-	-	23	20	23	As seas, etc. are designated as protected areas or KBAs, about 50% of factories and power stations located in coastal areas are adjacent to such areas. The proportion of adjacency is medium, and the protected area categories are low at IV through VI.
		Houses	47	-	-	-	-	-	-	-	-	53	13	7	As large rivers and seas adjacent to urban areas are designated as protected areas, about 50% are adjacent to protected areas and KBAs. The proportion of adjacency is low, and the protected area categories are low at IV through VI.
		Education, research, and culture	20	-	-	-	-	-	-	-	-	17	-	7	About 20% are adjacent to protected areas and KBAs including large rivers and mountains. The proportion of adjacency is low, and the adjacent protected area categories are low at IV or VI.
		Warehouses and logistics	30	-	7	-	-	-	-	-	-	23	7	7	The proportion of adjacency is low, but sites in coastal areas are more likely to be adjacent to protected areas, with two sites adjacent to wetlands registered under the Ramsar Convention. The proportion of sites adjacent to KBAs is higher than other building construction business lines.
	Civil engineering	Roads	63	-	3	-	-	-	-	-	-	57	33	7	Sites across mountainous and urban areas are adjacent to protected areas. The protected area categories are low, but the proportion of sites adjacent to protected areas is high. Some parts are constructed within protected areas.
		Railroads	43	-	-	-	-	-	-	-	-	37	7	7	Sites across mountainous and urban areas are adjacent to protected areas. The proportion of sites adjacent to protected areas is low, and the protected area categories are low. Some parts are constructed within protected areas.
		Soil and river conservation	70	-	-	3	-	-	-	10	-	50	33	17	Sites across mountainous and urban areas are adjacent to protected areas with two sites adjacent to category II protected areas. The proportion of sites adjacent to protected areas is high and, due to the nature of the business, some cases are constructed within protected areas.
Extraction of raw materials		Iron ore	25	-	-	-	-	-	-	-	-	-	-	3	Sites in mountainous areas are adjacent to protected areas. About 20% are adjacent to protected areas and KBAs. The proportion of adjacency is low, and the bordering protected area category is low at VI.
		Coal	22	3	-	-	-	-	3	-	-	-	-	-	Sites in mountainous areas are adjacent to protected areas with one adjacent to a World Heritage site. The proportion of sites adjacent to protected areas is low, but some cases are constructed within protected areas.
		Pit sand	100	-	-	-	-	-	-	-	-	-	-	3	Sites in mountainous areas are adjacent to protected areas. All sites are adjacent to protected areas, but the number of sites is fewer than others.
		Crushed limestone sand	100	-	-	-	-	-	-	-	-	-	-	3	Sites in mountainous areas are adjacent to protected areas. All sites are adjacent to protected areas, but the number of sites is fewer than others.
		Limestone	100	-	-	-	-	-	-	-	-	-	-	3	Sites in mountainous areas are adjacent to protected areas. All sites are adjacent to protected areas, but the number of sites is fewer than others.

Construction Sites Adjacent to Key Biodiversity Areas (KBAs) (26.2 KB)

IUCN protected area management categories

Ia: Strict nature reserve	Its features were formed without human involvement and may degrade or collapse with any impact of human activities. All native species live and all ecosystems exist in the area where they should live and exist. They are mostly kept intact and have complete ecosystem processes
Ib: Wilderness area	Nature is preserved in a somewhat pristine condition, and primitive ecosystems are well-preserved and complete. Native flora and fauna are unmodified or slightly modified. They are areas large enough to preserve biodiversity, ecological processes, and ecosystem services
II: National park	The composition, structure, and functions of biodiversity are very close to their "natural" state. An area is large enough to maintain ecological functions and effects and has ecological quality
III: Natural monument or feature	They are generally small areas, which are not wide ecosystems, but ecological environments related to one or some distinct natural characteristics. The expression "natural" in this context refers to both those completely natural and those affected by humans
IV: Habitat/species management area	Flora, fauna, and habitats deemed important at a global, national, or regional level. They come in various sizes. An area is likely to be smaller
V: Protected landscape/seascape	They are areas that have acquired ecological, biological, cultural, and scenic value as a result of people's interaction with nature over time. The balanced interaction of people and nature is kept intact
VI: Protected area with sustainable use of natural resources	They are vast natural areas, such as rainforests, deserts, wetlands, coasts, open seas, and boreal forests. Most of the area is in a natural condition.

Extracted from table 1. Kaku IUCN hogochiiki category no tokucho (Characteristics of IUCN protected area management categories) of Hiroyuki Azuma (2019) "Hogochiiki towa donoyouna chiikika: IUCN hogochiiki kanri category no gaisetsu (What is a protected area: An illustration of IUCN protected area management categories)"

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*1　IBAT is a tool that uses a map to comprehensively show protected zones, areas designated for preservation including KBAs, the distribution of threatened species located peripherally in the relevant point. In this analysis, we confirmed them within a one-kilometer radius of each of our past construction sites
*2　We confirmed threatened species including Threatened Species I to Least Concern (LC), Conservation Dependent (CD), and Extinct in the Wild (EW). Threatened Species I, Threatened Species II, and Near Threatened (NT) are subject to the disclosure
*3　They are protected areas designated by the Natura 2000 network (a network of wildlife protection areas in Europe), Regional Seas Programme (UNEP), World Heritage, Ramsar Convention on Wetlands, UNESCO MAB (UNESCO's Man and the Biosphere), Emerald Network (an ecological network of special conservation areas initiated by the Council of Europe), and IUCN (International Union for Conservation of Nature)
*4　KBAs stands for Key Biodiversity Areas which are key areas to biodiversity conservation. They comprehensively and systematically include IBAs (Important Bird and Biodiversity Areas) established by BirdLife International working to conserve birds and their habitats, IPAs (Important Plant Areas), and AZE (Alliance for Zero Extinction) sites where endangered species only exist at one location on Earth, as well as natural reserves that are not included in the protected areas but have significance in biodiversity conservation
*5　Design and construction are classified into eight categories (i.e., Private and government offices; Factories and power stations; Dwellings; Education, research, and cultural facilities; Warehouses and distribution facilities; Roads; Railways; Erosion control and flood control) and the analysis covers cases ranked 30th or higher in the value of orders received in each category
*6　Internationally protected areas include sites designated by the Natura 2000 network, Regional Seas Programme, World Heritage
*7　IUCN has clarified definitions of protected areas. The smaller in number an area is, the more strictly it is protected
*8　Figures under each item are average values obtained by dividing the total number by the number of locations

Risk Management

Obayashi is committed to accurately assessing the risks associated with our business activities, preventing those risks from materializing, and minimizing the impact if they do. These efforts are key to enhancing our corporate value and fulfilling our social responsibility to stakeholders. As such, we have built a risk management system covering the entire Group.

Important decisions are referred to the Board of Directors and Management Meeting for discussion. These bodies determine and evaluate the risks of each agenda item. They discuss whether we have found a response that would be appropriate in case a risk is manifested, and then a decision is made on the item. As for risks associated with environmental and social sustainability, including nature-related risks, our Sustainability Committee specifies risks and opportunities, conducts relative evaluation, identifies the sustainability challenges, and formulates policies to address them. Then the Committee evaluates execution status and reports the results to the Board of Directors.

Each department assesses the risks inherent to its business processes and builds any necessary avoidance and mitigation measures into those processes before performing them. It reports any risk information to the Head Office risk management committee for each function and expert committee in various sustainability-related fields (the Environmental Management Expert Committee for nature-related risks), which gives instructions and supervision to main offices, branches, and Group companies. The Audit & Supervisory Board and Internal Control Audit Department audits each department's risk management functions.

We will continue to enhance risk management and strengthen our risk management system.

Risk Management System

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Metrics and Goals

Seeking to "realize sustainability of the planet, society, and people" under the Obayashi Sustainability Vision 2050, the Obayashi Group will manage the risks confirmed in the strategy based on the following KPIs.

Obayashi Corporation's goals and results in line with the core global disclosure metrics in TNFD recommendations are as shown below. In addition to the table below, environment-related KPI and records are disclosed in the ESG Databook.

[Core global disclosure metrics and our KPI and records]

TNFD core global disclosure indicators			Meric	Targes and results
Metric no.	Driver of nature change	Indicator	Meric	Targes and results
	Climate change	GHG emissions	GHG emissions	Targets: CO2 emissions reduction rate Results: CO2 Emissions by Scope (Consolidated)
C2.0	Pollution/ pollution removal	Pollutants released to soil split by type	Compliance with laws related to soil and water pollution	Not released (*1)
C2.1		Wastewater discharged	Compliance with laws related to soil and water pollution	Not released (*1)
C2.2		Waste generation and disposal	Waste Emissions/Recyclede amount and rate	Targets: Ratio of mixed waste in construction waste Results: Waste Emissions (Consolidated)
C2.2		Waste generation and disposal	Amount of Consumption of Substances Subject to the PRTR Law	Results: Chemical substances management
C2.3		Plastic pollution	Plastic waste/ Recycle and reuse rate	Results: Construction waste emissions (Non-consolidated)
C2.4		Non-GHG air pollutants	NOx and SOx emission	Results: Air pollutant
C2.4		Non-GHG air pollutants	CFC and Halon Gases Collected and Processed	Results: Chemical substances management
C3.0	Resource use/ replenishment	Water withdrawal and consumption from areas of water scarcity	Water Consumption	Results: Water consumption (Consolidated)
C3.1	Resource use/ replenishment	Quantity of high-risk natural commodities sourced from land/ ocean/ freshwater	Major Construction Materials	Results: Major construction materials

*1 Appropriately managed in accordance with environmental laws and regulations. The number of violations of environmental laws and regulations is disclosed in the ESG data book

[Ratio of nature symbiosis-related expenses to total R&D expenses]

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Nature-Related Information Disclosure (Disclosure Based on TNFD Recommendations)

Obayashi's Environmental Efforts

General Requirements

Application of materiality

Disclosure scope

Location of nature-related issues

Integration with other sustainability-related disclosures

Engagement with indigenous peoples, local communities and affected stakeholders in identifying and assessing the organization's nature-related issues

Governance

Governance System Concerning nature-related issues

Strategy

Overview of LEAP Analysis

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E

A

P

[Locate] Selection of business areas and value chains in scope

[Evaluate] Evaluation of dependencies and impacts on nature in value chains

Obayashi's Business Activities' Dependencies and Impacts on Nature

[Assess] Identification of risks and opportunities and development of countermeasures

Obayashi's Nature-related Risks and Opportunities

Relevant pages

Location Analysis in Design and Construction (IBAT)

Construction Sites Adjacent to Key Biodiversity Areas (KBAs)

IUCN protected area management categories

1 - 8

Risk Management

Risk Management System

Metrics and Goals

Nature-Related Information Disclosure (Disclosure Based on TNFD Recommendations)

Obayashi's Environmental Efforts

General Requirements

Application of materiality

Disclosure scope

Location of nature-related issues

Integration with other sustainability-related disclosures

Engagement with indigenous peoples, local communities and affected stakeholders in identifying and assessing the organization's nature-related issues

Governance

Governance System Concerning nature-related issues

Strategy

Overview of LEAP Analysis

L

E

A

P

[Locate] Selection of business areas and value chains in scope

[Evaluate] Evaluation of dependencies and impacts on nature in value chains

Obayashi's Business Activities' Dependencies and Impacts on Nature

[Assess] Identification of risks and opportunities and development of countermeasures

Obayashi's Nature-related Risks and Opportunities

Relevant pages

Location Analysis in Design and Construction (IBAT)

Construction Sites Adjacent to Key Biodiversity Areas (KBAs)

IUCN protected area management categories

*1 - *8

Risk Management

Risk Management System

Metrics and Goals

1 - 8