Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental issues such as climate change
• Respect for human rights
• Consideration of employees' health and environment, and fair and appropriate treatment working
• Fair and appropriate transactions with suppliers
• Crisis management in response to natural disasters

Social Achievements

• Launched new ladies' product "Feelin", which was a big hit, receiving a record-high number of monthly inquiries.
• Implemented various initiatives to improve customer satisfaction.
• Strengthened technical skills through the use of video manuals and remote training to improve workplace skills.
• Raised mandatory retirement age from 60 to 65 (extension of retirement age).
• Introduced training to improve basic skills in areas such as planning and management for the development of head office human resources.

Governance Achievements

• Formulated Sustainability Commitment and introduced initiatives to address various issues.
• Enhanced sustainability information, introduced Company Research and Analysis Report and stepped up communication of information to institutional investors as part of measures to strengthen IR activities.
• Digitized various documents to comply with the Act on Book and Record Keeping through Electronic Methods.

Climate Goals & Targets

Environmental Challenges

• Domestic and overseas economic downturn
• Stagnation in market size
• Intensifying competition with other industries
• The rise of alternative products and services
• Shrinking labor market
• Intensifying competition to secure employees
• Rapid change by technological innovation
• Overhaul of personnel systems and information systems failed to materialize
• Failed to secure the number of stylists needed to deal with customers due to changes in the recruitment environment

Mitigation Strategies

• Further expand business area and establish the foundation for “innovating ARTNATURE for the next generation”
• Strengthen the recruitment
• Personnel training
• Dialogue with the market
• Business innovation
• Various recruitment measures
• Strengthening on-site human resources: Cultivating trusted human resources
• Strengthening human resources at the head office
• Business innovation by paperless and systematization
• Reconsideration of regular work
• Build stable hiring system
• Employee retention: Increase job satisfaction
• Considered M&A deals in Japan and overseas but did not implement any M&A
• Enhanced sustainability information, introduced Company Research and Analysis Report and stepped up communication of information to institutional investors as part of measures to strengthen IR activities
• Formulated Sustainability Commitment and introduced initiatives to address various issues

Supply Chain Management

Responsible Procurement

• To carry out traceability checks for human hair and human rights checks on the supply chain, including production

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Environmental Metrics

ESG Focus Areas

• Sustainable growth in corporate value
• Realization of a sustainable society (SDG practices)
• Compliance with CG Code
• Development of successors

Environmental Achievements

• Energy saving (LED lighting, etc.)
• Plastic reduction (use of recycled PET and eco-friendly bottles for containers, etc.)
• Resource conservation efforts (water: introduction of water-saving showerheads, paper: digitization of paper documents, etc.)

Social Achievements

• Establishment of a new service framework (considering the possibility of adopting new technology, reevaluating services at the company’s permanent stores, etc.)
• Realization of an equal society (enhanced support system for the disabled, opening of hair salons in hospitals, etc.)
• Promotion of health and productivity management (promotion of health checkups, prohibition of long working hours, etc.)
• Promotion of women’s participation and advancement in workplace (promotion of the use of male childcare leave, etc.)
• Promotion of the social participation of patients (handling of medical wigs to improve the quality of life of patients, etc.)

Governance Achievements

• Promote sustainability initiatives, including climate change, respect for human rights, and human capital
• Improve our risk management system by identifying business and other risks, creating a risk matrix, and prioritizing risks
• Develop human resources through reskilling and train successors for key posts in each head-office division to maintain and strengthen the head-office function

Climate Goals & Targets

Environmental Challenges

• Number of salon visitors not back to pre-pandemic numbers
• Expansion into new business areas yet to be realized
• Strengthening recruitment and business innovation remained hurdles
• Employee retention support measures remained a challenge
• Failed to achieve a radical business renewal in the human resource system

Mitigation Strategies

• Stabilizing and strengthening the customer base by emphasizing customer satisfaction
• Enhancement of product lineup/Expansion of sales channels
• Emphasizing brand penetration and recognition
• Venture into new businesses outside the existing fields to lay the foundation for the next generation
• Raised starting salaries for new hires, reviewed recruitment channels, etc.
• Reviewed training programs, implemented video/remote training sessions, etc., held the nationwide Technical Competition 2022
• Developed head-office personnel for next-generation leadership
• Digitized documents and visualized business workflows

Supply Chain Management

Responsible Procurement

• Diversify production bases (consider new contractors and new plants outside the Philippines) and improve a stockpiling system for raw materials

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Sustainable Products & Innovation

• Development of sustainable materials and products
• Research and verify new, environmentally friendly, next-generation hair products

Environmental Metrics

ESG Focus Areas

• Climate change
• Respect for human rights
• Human capital
• Sustainable production

Environmental Achievements

• Endorsed the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) (May 2023)
• Announcement of new plant in Bangladesh for sustainable growth (September 12, 2023)

Social Achievements

• Established the ARTNATURE Group Human Rights Policy (April 2023)
• Improved compensation (base salary increases) for all employees to reflect rising prices (effective from July 2023)
• Initiated a global talent development program (since April 2023)

Governance Achievements

• Transition from the Prime Market to the Standard Market (October 20, 2023)
• Established a new dividend policy and revised the dividend forecast for this fiscal year
• Disclosing the cost of capital cost as new information

Climate Goals & Targets

Environmental Challenges

• Struggling new sales of custom-made wigs for both men and ladies due to resurgence of individual consumption and lack of innovation in sales promotion
• Non-compliance with one of the listing and maintenance criteria (average daily trading volume) leading to concerns about delisting risk

Mitigation Strategies

• Launch new focus products in the second half for each business and introduce new sales promotions
• Capture the replacement demand for Feelin, a custom-made wig for ladies
• Enhance collaboration between ladies’ businesses
• Continue to control expenses in consideration of increased transaction costs and the impact of foreign exchange rates
• Strengthen recruitment, invest in systems and concentrate management resources in the area of staff development
• Postponing the disposal of treasury stock
• Initiated discussions with some of our major shareholders regarding the possibility of selling their holdings on the market

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Environmental Metrics

ESG Focus Areas

• Climate change
• Respect for human rights
• Human capital

Environmental Achievements

• Plastic reduction (use of recycled PET and eco-friendly bottles for containers)
• Resource conservation efforts (water: introduction of water-saving showerheads, paper: digitization of paper documents)

Social Achievements

• Realization of an equal society (enhanced support system for the disabled, opening of hair salons in hospitals)
• Promotion of health and productivity management (promotion of health checkups, prohibition of long working hours)
• Promotion of women’s participation and advancement in workplace (promotion of the use of male childcare leave)
• Promotion of the social participation of patients (handling of medical wigs to improve the quality of life of patients)

Governance Achievements

• Promote sustainability initiatives, including climate change, respect for human rights, and human capital
• Improve our risk management system by identifying business and other risks, creating a risk matrix, and prioritizing risks
• Development of successors for key posts

Climate Goals & Targets

Environmental Challenges

• Salon visitors were not back to pre-pandemic numbers
• Expansion into new business areas has yet to be realized
• Strengthening recruitment and business innovation remained hurdles
• Employee retention support measures remained a challenge
• Digitization of documents and visualization of business workflows, but only identified issues in digital transformation, not fully renewing the system
• Failed to achieve a radical business renewal in the human resource system

Mitigation Strategies

• Raised starting salaries for new hires, reviewed recruitment channels
• Reviewed training programs, implemented video/remote training sessions, held the nationwide Technical Competition 2022
• Developed head-office personnel for next-generation leadership
• Diversify production bases (consider new contractors and new plants outside the Philippines) and improve a stockpiling system for raw materials
• Start production of partially custom-made wigs using the world’s first automatic wig hair transplanter
• Improve labor productivity (i.e. sales per worker) by raising operational efficiency with the use of the latest technologies and investment in information systems, thereby concentrating on high value-added operations
• Improve administrative efficiency by updating information and administrative systems and improving the workplace environment

Supply Chain Management

Responsible Procurement

• Diversify production bases (consider new contractors and new plants outside the Philippines) and improve a stockpiling system for raw materials

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Sustainable Products & Innovation

• Development of sustainable materials and products
• Research and verify new, environmentally friendly, next-generation hair products

Environmental Metrics

ESG Focus Areas

• Sustainability

Governance Achievements

• Changed market from Prime market to Standard market in October 2023
• Announced plan to comply with listing maintenance standards in March 2023

Climate Goals & Targets

Environmental Challenges

• Decline in sales and profits
• Struggle for new sales in both men's and women's business
• Inability to fully translate the revitalization of personal consumption into wig purchases
• Inadequate response to web inquiries from seniors
• Country risks (natural disasters and political risks) in the Philippines where production is concentrated

Mitigation Strategies

• Increasing sales volume through improved advertising content and collaboration with facilities opening new stores
• Construction of a new plant in Bangladesh to mitigate country risks in the Philippines and secure production lines
• Replacing raw materials to curb cost increases
• Considering price revisions for existing models
• Efficient use of SG&A expenses
• Staffing replacements and compensation improvements
• Improving the system for accepting new customers and strengthening the response to web inquiries

Supply Chain Management

Climate-Related Risks & Opportunities

Environmental Metrics

ESG Focus Areas

• Sustainability
• Corporate Governance
• Human Capital

Environmental Achievements

• Established a new factory in Bangladesh to diversify manufacturing locations and enhance sustainable production.

Social Achievements

• Implemented employee compensation improvements.
• Set a new dividend policy to enhance shareholder returns.

Governance Achievements

• Strengthened corporate governance code compliance.
• Implemented SDGs initiatives.
• Improved information disclosure.

Climate Goals & Targets

Environmental Challenges

• Decreased new customer sales in 2024 due to post-pandemic consumer shifts towards services and insufficient adaptation to increased web inquiries.
• Increased competition in the hair industry.

Mitigation Strategies

• Revamped marketing strategies focusing on web and SNS, strengthened collaboration with stylists and counselors, and launched new brands and products.
• Improved response to web inquiries and in-store customer interactions.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Sustainable Products & Innovation

• Hair Union
• Stylia

Environmental Metrics

ESG Focus Areas

• Sustainability Promotion
• Digital Transformation
• TCFD recommendations
• Corporate Governance Code
• SDG initiatives
• Human Capital

Social Achievements

• Promoted digital transformation to achieve sustainable growth of corporate value (Value creation utilizing AI and other cutting-edge technologies, as well as our data)
• Created a two-way digital channel for communicating with customers and introduced a dedicated app to enhance convenience.
• Created a user-friendly portal screen dedicated to stylists.

Governance Achievements

• Established measures for the TCFD recommendations and developed a multi-stakeholder policy
• Promoted compliance with the Corporate Governance Code

Climate Goals & Targets

Environmental Challenges

• Second quarter results showed a year-on-year decline in both sales and profits.
• New (first-time) sales were lower than projected in the ladies' custom-made wigs business.
• Sales promotions and other initiatives targeting middle-aged and elderly individuals did not result in an improvement in responses from potential customers.

Mitigation Strategies

• Introduced a new actor in our advertising and implemented a promotion strategy targeting young people (men's business).
• Strengthened issue-specific training for individual salespeople (men's business).
• Implemented various initiatives targeting middle-aged and elderly individuals (ladies' business).
• Implemented initiatives to strengthen the repeat sales system in the ladies’ ready-made wig business (increasing staff motivation, enhancing sales skills, and improving in-store operations).
• Actively developing hybrid stores that handle both custom-made and ready-made wigs.
• Launching new products to focus on in each business in the second half and develop new promotions
• Aiming to enhance new sales performance in the ladies’ business, which was poor in the first half, by developing new sales channels and strengthening collaboration between businesses
• Continuing to curb various expenses, while continuing to invest in systems to drive digital transformation and concentrate management resources in growth areas
• Improving cost efficiency by updating systems, etc. and keeping total costs within the annual plan

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

Sustainable Products & Innovation

• HAIR no heya
• AI hairstyle simulation tool

Environmental Metrics

ESG Focus Areas

• Climate change
• Human rights
• Human capital

Social Achievements

• Strengthened recruitment by increasing starting salaries and reviewing recruitment channels; focused on attracting employees; strengthened on-site workforce through online training sessions; developed human resources at the head office for next-generation leadership.

Governance Achievements

• Promoting initiatives around sustainability; promoting each of the sustainability items in the Corporate Governance Code, such as climate change, respect for human rights, and human capital, as well as upgrading risk management.

Climate Goals & Targets

Environmental Challenges

• Number of salon visitors did not reach pre-COVID-19 levels; unable to make inroads into new business areas through M&A; not completely filling positions; not achieving drastic renewal of human resource and information systems; average daily trading value not exceeding JPY20 million.

Mitigation Strategies

• Continuing to address challenges related to customer numbers and new business development; accelerating efforts in new business areas; increasing corporate value, increasing the number of shares in circulation, considering additional shareholder return measures, and engaging in dialogue with the market; investing in system improvements and human capital; promoting automation of production system; establishing a system for regular development of unique products; improving labor productivity and administrative efficiency; promoting reskilling and training of successors for key posts.

Supply Chain Management

Climate-Related Risks & Opportunities

Sustainable Products & Innovation

• Next-generation new hair products that are environmentally friendly

Environmental Metrics

ESG Focus Areas

• Sustainability Promotion
• Dialogue with the Market
• Value Creation
• Climate Change
• Human Rights
• Human Capital

Environmental Achievements

• Announced agreement with TCFD recommendations
• Established a new plant in Bangladesh to distribute production risk and secure labor, also to increase production capacity for custom-made and ready-made wigs.

Social Achievements

• Formulated a Human Rights Basic Policy
• Improved working conditions of employees
• Increased activity level in events, including the JULLIA OLGER 15th Anniversary Gratitude Festival and the ARTNATURE Festival 2023 in Osaka.

Governance Achievements

• Established a new dividend policy to strengthen shareholder returns
• Switched listing to Tokyo Stock Exchange Standard Market to engage in efforts to increase its corporate value over the medium to long term.

Climate Goals & Targets

Environmental Challenges

• Struggle to introduce new customers
• Slump in new sales in the Men’s and Ladies’ businesses
• Inability to recover increases in various expenses
• Chronic labor shortage
• Increases in cost of sales and SG&A expenses due to a weak yen and soaring resource prices
• Decrease in the number of customers in the future due to population decline
• Intensifying competition from new entrants

Mitigation Strategies

• Strong “repeat sales” and cost controls
• Revising prices of existing models to manage rising costs of raw materials
• Creating a salon environment where customers feel safe and secure
• Increasing the number of employees to accommodate more customers
• Strengthening promotional activities for wigs
• Developing and launching new products
• Strengthening collaboration among businesses
• Expanding store numbers
• Strengthening sales strategies for existing customers
• Improving productivity by reviewing the product supply system and the content of after-sales maintenance services
• Revising human resource training and customer approach methods
• Concentrating management resources in growth areas
• Controlling other expenses

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: TCFD

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