Skylark Group's Materiality

Materiality

To realize a sustainable society and improve our corporate value through the provision of food and food-related services, based on our Sustainability Policy, we have identified our materiality from an analysis of their importance, for Skylark Group and for its stakeholders.

	Theme	Materiality	Contribution to SDGs
Society	Help All People Lead Enriched Lives	Food Safety & Security
		Health & Nutrition
		Customer Orientation
		DX
	Contribute to Realizing an Enriched Society	DX
		Workstyle Reform
		Responsible Procurement
Environment	Environmental Conservation	Food Loss & Waste Reduction
		Plastic Counter measures
		De- carbonization
		Water Resource Conservation
		Biodiversity

Steps in Identifying Our Materiality

STEP1 Identifying Issues

• From a single materiality perspective, we identify material issues for our business based on societal expectations such as the SDGs and assessment items from ESG rating agencies. Then, from a double materiality perspective, we identify issues that have a significant impact on society and the environment.
• Each division identified issues from their own business areas from a long-term perspective

STEP2 Ordering by Priority

Identified issues are then analyzed and prioritized based on their importance to Skylark Group and importance to its stakeholders.

“Importance to Skylark Group” is evaluated from the perspective of policies and strategies, social demands and issues to be addressed by capturing the nature of the business, and environmental and social considerations, while “Importance to Stakeholders” is evaluated from the perspective of trends in the world, stakeholders' expectations of the Company, and impact on the environment and society.

“Issues of Extreme Importance to Skylark Group.”
Food safety and security, responsible procurement, customer orientation, food loss reduction, decarbonization, nutrition, health maintenance and promotion, success and development of diverse human resources, improvement of working environment, DX, response to changing food preferences, health management, stable logistics.

“Issues of Very High Importance to Our Stakeholders.”
Food safety and security, responsible procurement, customer orientation, food loss reduction, decarbonization, plastic countermeasures, pollution prevention and environmental considerations, water conservation, biodiversity, education, child and forced labor.

*Scope of business activities considered: Operations, Products/Services, and Supply Chain
  Stakeholders and scope of impact evaluated: Environment, Society, Consumers, Organizations within the supply chain

STEP3 Identifying Materiality

Prioritized issues are discussed by executives of relevant divisions and then deliberated at the Sustainability Committee before being determined as materiality and reported to the Board of Directors for approval.
In identifying the materialities, the company exchanged opinions with external stakeholders at executive study sessions and added “DX” and “biodiversity” to the list.

We review this same process every year and the materiality for 2025 is described below.

Skylark Group's Materiality and Risks/Opportunities

Materiality	Main Risks	Main Opportunities
Food Safety and Security	Reduction in customer trust based on food-related accidents	Gain customer trust
Health & Nutrition	Reduction in customers based on late response to creating health-oriented menus	Increase in customers based on creating health-oriented menus
Customer Orientation	Loss of customers due to late response to customer feedback/needs Customer Overall Satisfaction Level	Increase customer satisfaction Gain customer trust
DX	Decline in competitiveness due to delayed response	Ensure competitive advantage in overall business
Workstyle Reform	Slow growth due to lack of human resources and lack of diversity Increase in labor costs	Acquisition of excellent human resources Improved productivity Improved employment and retention rates
Responsible Procurement	Decline in trust in the Company and suppliers due to delayed response to social and environmental issues	Stable product offerings Increase in customers based on creating menus focused on ethical eating
Food Loss Reduction	Reduction in customers based on late response to food loss	Gain customer trust Decrease in costs and increased earning capacity
Plastic Countermeasures	Reduction in customers based on late response to reducing plastic consumption	Gain customer trust
Decarbonization	Stricter regulations and increased costs related to decarbonization efforts Business and distribution network stoppages due to natural disasters	Gain customer trust Cost reductions based on energy-savings
Water Resource Conservation	Business stoppages due to natural disasters Reduction of product quality due to deterioration of water quality Business stoppages due to water use limitations	Stable water use due to decrease in water risks Cost reductions due to water conservation
Biodiversity	Decrease in customers due to delay in responding to biodiversity issues Difficulty in procuring food ingredients and rising ingredient costs	Gain customer trust Increase in customers based on creating menus focused on ethical eating

Goals based on Materiality Issues

The Sustainability Committee conducts an annual materiality analysis and reviews the materiality-based goals.

Materiality	Initiatives for 2030 KPI	Indicator	Performance		KPI
			2020 (2018)	2024	2025	2026	2030	2050
Food Safety and Security	Continuous updating of quality assurance system and continuation of appropriate labeling	Serious food accidents	Zero	Zero	Zero	Zero	Zero	Zero
		Mail-order/external sales recalls	Zero	Zero	Zero	Zero	Zero	Zero
Health and Nutrition	Product refinement, evolution of promotions, expansion of menu items that consider health and nutrition, promotion on websites, etc., expansion of nutritional information labeling	Number of products contributing to a healthy diet (number of products per brand)	3 items	3.3 items	5 items	5 items	10 items	20 items
Customer-Oriented	Thorough improvement of QSC (Quality, Service, Cleanliness), strengthening the system to utilize "customer feedback" in management, promoting the provision of products and services based on customer feedback	Customer evaluation*	ー	8.6	9.0	9.5	12.0	15.0
DX	Promotion of DX throughout the company and in all business formats	Number of trials for DX	0	252	280	280	280	280
Work Style Reform	Promotion of diversity, promotion of health and productivity management, promotion of work-life balance	Female manager ratio	10%	14.9%	15%	18%	30%	50%
		Smoking rate	33%	19%	14%	13%	10%	Zero
		Overtime hours improvement	31 hours	32 hours	26 hours	24 hours	20 hours	Zero
		Paid leave acquisition rate	60%	63%	66%	68%	80%	100%
Responsible Sourcing	Implementation of supplier surveys, thorough supplier management in terms of human rights, labor, environment, food safety, and ethics	Supplier CSR survey	0%	86%	90%	100%	100%	100%
		Supplier human rights due diligence	0%	45%	50%	100%	100%	100%
Reduction of Food Loss	Reduction of food loss, promotion of recycling of discarded food ingredients	Food waste (stores) - Loss	6,397t (2018)	4,158t	3,838t	3,710t	2,079t	1,040t
		Food waste (stores) - Other than loss	15,731t (2018)	14,992t	13,785t	13,085t	9,685t	4,842t
		Food waste (factories) - Loss	131t (2018)	92t	88t	84t	46t	23t
		Food waste (factories) - Other than loss	4,468t (2018)	3,108t	2,958t	2,808t	1,554t	777t
		Recycling implementation rate	38.9% (2018)	50.2%	49.3%	49.5%	50%	75%
Plastic Counter measures	Reduction in the use of disposable petroleum-based plastics. Promotion of transition to environmentally friendly materials. Promotion of recycling of waste plastics.	Disposable petroleum-based plastic usage (packaging)	1,870t	1,601t	1,499t	1,309t	935t	Zero
		Introduction rate of environmentally friendly products (consumables, shopping bags)	20%	35%	40%	50%	100%	100%
De- carbonization	Promotion of energy-saving activities at stores, factories, and headquarters. Reduction of gasoline consumption in home delivery and store delivery, and promotion of the introduction of environmentally friendly vehicles. Active introduction of renewable energy.	Scope 1 reduction	138,482t	115,783t	97,768t	91,952t	68,687t	Net Zero
		Scope 2 reduction	303,823t	217,233t	214,499t	201,738t	150,696t	Net Zero
		Scope 3 reduction	1,030,149t	980,936t	852,348t	826,519t	723,204t	Net Zero
		Cumulative number of facilities with renewable energy introduced (including offsets by environmental value)	0	158	300	600	2,000	All facilities
		Electricity consumption (stores)	391,979 MWh	442,702 MWh	391,979 MWh	391,979 MWh	391,979 Mwh	391,979 MWh
		Gasoline consumption (RS/company vehicles)	1,900kl	1,718kl	1,800kl	1,740kl	1,479kl	1,314kl
		Electricity consumption (factories)	34,481 kWh	39,896 kWh	39,580 kWh	33,795 kWh	35,520 kWh	31,574 kWh
Conservation of Water Resources	Reduction of water consumption at stores, factories, and headquarters	Water intake (stores)	8,321,067t	6,287,450t	5,842,943t	5,828,036t	7,488,960t	6,656,854t
		Water intake (factories)	792,810t	765,277t	759,139t	619,898t	713,529t	634,248t
Biodiversity	Expansion of handling of certified ingredients and materials	Domestic vegetables: JGAP or equivalent certification ratio (by weight)	20%	20%	25%	30%	50%	100%
		Palm oil: RSPO certification ratio	0%	0%	5%	5%	100%	100%
		Paper products: FSC/PEFC certified product usage ratio *Target: 25 items	40%	44%	45%	50%	75%	100%

＊Average store recommendation score by customers who visited the store

Initiatives on Materiality Issues and Evaluation Linkage

The remuneration for our Chairman and CEO, our President and COO, other Directors (excluding Outside Directors and Directors who are Audit and Supervisory Committee Members), Executive Officers, and presidents of Group companies is composed of a fixed basic remuneration and a performance-linked remuneration that varies according to company performance and other factors. The performance-linked remuneration consists of a bonus based on consolidated business results for each fiscal year, and a phantom stock plan in which the payment and its amount are determined in linkage with the stock price over a certain period.
Starting with the phantom stock plan in 2022, in addition to stock price requirements, we have incorporated evaluations from international ESG rating agencies such as DJSI and CDP Climate Change. Furthermore, from 2024, we have added the achievement of "employee engagement targets," "customer satisfaction targets," and "CO2 emission reduction targets" as ESG indicators, introducing a system that links the promotion of our sustainability management with executive remuneration.

For example, regarding the achievement of the "CO2 emission reduction targets," we have set and disclosed a KPI to reduce Scope 1 and 2 emissions by 4.2% annually, in line with SBT standards. The progress toward this KPI is directly reflected in the remuneration of the Chairman and CEO, the President and COO, and other directors, thereby reinforcing our commitment to CO2 emission reduction as a critical performance indicator.

Furthermore, KPIs related to materiality issues identified by the Sustainability Committee, such as decarbonization and food loss reduction, are set for each responsible Executive Officer and Director (department manager level), and their achievement is linked to individual performance evaluations. This evaluation affects not only the variable range of bonuses but also the individual's annual performance rating. The KPIs set for each Director are also shared with their team members to promote these initiatives throughout the departments.