FAST RETAILING CO., LTD.(UNIQLO)

Case Study Social Infrastructure / Integrated SolutionsChallenge● Necessity to reduce the environmental burden on a global scale

● Demands by customers and NGOs to disclose information on environmental initiatives

● Reinforcement of compliance with the different GHG regulations of each country

Solution● Carbon risk assessment and analysis using the Carbon Risk Management Service

● Visualization of energy and CO2 emissions at the approx. 100 consignment production facilities throughout Asia using Energy &

Greenhouse Gas Data Management Outsourcing

Key points of energy/carbon risk measures● Global compatibility

● Coordination with the factories

● Data gathering and creation of reports that are compatible with GHG protocol

Reducing the emissions of greenhouse gases (GHG) has become a universal challenge toward realizing a low carbon

society, and a corporation’s efforts toward the prevention of global warming and its energy-saving measures have become

significant factors in shaping the image that investors and customers have of the brand. The management of such carbon

risks has become a major theme in the environmental/CSR area of corporate management.

Fast Retailing Co., Ltd., which has been growing exponentially on a global scale, has begun addressing carbon risk as an

environmental conservation issue, under its basic CSR policy of “Making the world a better place.” Such efforts are

critical considering Fast Retailing’s future global development. This study highlights the initiatives taken toward

visualizing energy at the approximately 100 production facilities in Asia, including China, to which Fast Retailing

consigns its garment manufacturing.

Scope of current project

Strategy Plan formulation Implementation Operation

Energy/carbon strategy formulation

Energy & Greenhouse Gas Data Management Outsourcing (Scope 1, 2)

Energy & Greenhouse Gas Data Management Outsourcing (Scope 3)

Support for disclosures・Organizational basis (Regulatory controls/CDP/others)・Product basis (Carbon footprint)

Energy/carbon credit procurement

Support for energy management improvements

Support for energy performance verification

8

Energy/Carbon Risk Management Services provided by ABeam for global corporations

Case Study Social Infrastructure / Integrated Solutions

measures will also vary according to the size of the factory. This is the type of information we needed to gather, and in an efficient man-ner,” says Hideo Yamamoto, Senior Manager, Social Infrastructure & Services Business Unit, as he recalled the difficulty of responding to the situation.

Furthermore, the concept of the carbon footprint, is also gaining momentum. Carbon footprint refers to calculation and presentation of the sum CO2 emissions for each product for every stage from raw materials to production, transport, usage and disposal. This is also meant to provide the consumer with CO2 information to be consid-ered when selecting a product.

In this way, concrete disclosures on CO2 emissions have become indispensable as part of the CSR of global companies.

Fast Retailing had felt that with increasing global business expan-sion and corporate growth, attention was growing regarding its stance toward the environment particularly toward the initiatives it was taking. Mr. Yukihiro Nitta, Group Senior Vice President, CSR, Fast Retailing Co., Ltd. stresses the need to respond to carbon risks, “Unless we actively respond to the concerns and demands of society, including the disclosure of concrete data, we would not be accepted by society as a global company.” Mr. Nitta continues, “When we take a broad view of the environment as a whole, it becomes essential for issues such as reducing energy and water usage, and CO2 emis-sions to be taken up not only by our company but by the entire sup-

Global CO2 emissions are expected to increase 1.4-fold from 2007 to 2035. Consequently, each country is independently reinforcing its regulatory controls. This is the case, especially among the emerging countries of Asia, namely China, whose CO2 emissions are expected to increase considerably. These emerging countries, known as global factories, serve as world production bases for these global companies. Many global companies have developed supply chains in emerging countries and the status of compliance of these factories will also be-come subject of close scrutiny.

Overseas investors, in particular, are insistent on disclosure and consider compliance a criterion for assessment. The type of disclosure required is the CO2 emissions calculated on the basis of the GHG Protocol, which refers to the international guidelines for calculating and reporting the GHG emissions of corporations.

Under Scope 1 and Scope 2 of the GHG Protocol, a corporation only needed to worry about its own direct/indirect GHG emissions. However, in October 2011, Scope 3 was announced, which expanded the scope of GHG emissions to the corporation’s entire supply chain.

“The announcement of Scope 3 may be said to have increased car-bon risk for global companies. Regulatory controls differ by country among emerging countries and the awareness toward environmental

Environment: From “object of consideration” to “risk” Further tightening of each country’s regulatory controls

Compliance with GHG Protocol (Scope 3) Growing carbon risk Carbon risk measures becoming unavoidable in

global strategies

“Energy/Carbon Risk Management Service”Visualization of energy/CO2 emissions at the approximately 100 consignment production facilities throughout AsiaEnabling differentiation from competitors through compliance with GHG Protocol (Scope 3)

FAST RETAILING CO., LTD.

deteriorating evaluations by investors. The next risk to be addressed was compliance risk. In China where

regulations are getting increasingly tight, a corporation could face penalties such as having operations shutdown, unless it complies with regulations. “Engaging in the visualization of energy also means pursuing greater efficiency in energy, which relates to manufacturing costs and ultimately to providing customers with highly cost-effective products,” explains Mr. Nitta from an even wider perspective.

In order to address these carbon risks, the current project aimed to gather energy data of the overseas factories to which Fast Retailing consigns its manufacturing and to calculate CO2 emissions in accor-dance with Scope 3 of the GHG Protocol.

ABeam consulting was then selected as the partner for this project. “Since we were dealing with our overseas factories, we not only had to deal with differences in the language but also other details such as energy items and units, setting of conversion factors that we would not have been able to deal with on our own. It was extremely reas-suring to be able to outsource this task to professionals, who were fa-miliar with the overseas energy situation,” says Mr. Nitta, emphasiz-ing his trust in ABeam.

ABeam’s offshore unit in Shanghai (GDC) was responsible for the actual data gathering. “Members of GDC are fluent in Japanese, English and Chinese and provide services not only in China but also in North America and Europe. Therefore they have overseas infor-

ply chain. And this is why, we commenced this project.”

Fast Retailing has established the “Code Conduct for Production Partners” and the “Environmental Guidelines for Fabric Production Factories.” These guidelines encompass the company’s environmental protection initiatives, including the management of wastewater/in-dustrial waste as well as the management of chemical substances and monitoring of material producing- and garment producing factories. Monitoring is conducted in accordance with the environmental reg-ulations of each country but Fast Retailing will go above and beyond such regulations, when deemed necessary, in demanding improve-ments.

In addition to the above, the current project also involved the vi-sualization of energy. “The production stage is thought to pose the highest environmental burden and we have always thought that un-less we visualized this stage we would not be addressing environmen-tal problems in the true sense of the word,” explains Mr. Nitta.

In commencing the project, ABeam had drawn up a carbon strate-gy in advance. In other words, advance research/ analysis had been conducted on possible carbon risks that may occur in the future.

One of the most important risks at this stage was social risk. There are now a number of third-party institutions that assess an entity’s initiatives toward the environment and rank the entities in each in-dustry. And unless an entity is in the upper ranks, there is always a risk that the entity’s corporate value would deteriorate as a result of

Case Study Social Infrastructure / Integrated Solutions

SCOPE 2INDIRECT

PURCHASEDELECTRICITY,STEAM, HEATING &COOLING FOR OWN USE

CO2 CH4 N2O HFCS PFCS SF6

Source: The World Business Council for Sustainable Development (WBCSD) and World Resources Institute (WRI)WBCSD: Organization of approximately 170 transactional corporations WRI: U.S. think tank

Scope 1 (Direct emissions)

●Emissions from the business owned or under the control of the reporting company

(E.g. emissions from boilers, furnaces, vehicles and other forms of combustion)

Scope 2 (Indirect emissions)

●Emissions from consumption of acquired or purchased electricity, steam, cold or hot water, etc., by the reporting company

(E.g. Purchased electricity, steam, cold water, etc.)

Scope 3 (Other indirect emissions)

●Emissions other than that of Scopes 1, 2 from the entire supply chain

(E.g. Extraction of purchased raw materials, production, transport, use of sales merchandise, disposal, etc.)

UPSTREAM ACTIVITIES DOWNSTREAM ACTIVITIESREPORTINGCOMPANY

Upstream DownstreamReporting Company

SCOPE 3INDIRECT

SCOPE 1DIRECT

PURCHASEDGOODS &SERVICES

FUEL & ENERGYRELATED ACTIVITIES

TRANSPOTATION & DISTRIBUTION

WASTE GENERATED IN OPERATIONS

BUSINESS TRAVEL

EMPLOYEECOMMUTING

LEASED ASSETS

INVESTMENTS

COMPANYFACILITIES

COMPANYVEHICLES

CAPITAL GOODS

SCOPE 3INDIRECTTRANSPOTATION &

DISTRIBUTION

PROCESSING OF SOLD PRODUCTS

USE OF SOLD PROCUCTS

END OF LIFE TREATMENT OF SOLD PRODUCTS

LEASED ASSETS

FRANCHISES

Scopes defined by operational boundary in GHG Protocol

Predicting carbon risks through advances in research/analysis

Utilization of ABeam’s offshore units in ChinaCentralized data management using online tools

Ms. Aiko Ueda CSR DepartmentFast Retailing Co., Ltd.

Fast Retailing Co., Ltd.

Mr. Yukihiro Nitta Group Senior Vice PresidentCSRFast Retailing Co., Ltd.

Hideo Yamamoto Senior Manager, Social Infrastructure & Services Business UnitABeam Consulting Ltd.

Marie Kage Senior Consultant, Social Infrastructure & Services Business UnitABeam Consulting Ltd.

Wang Yi Offshore Staff, Global Development Center (Shanghai)

ABeam core members

Hideaki Kajiura Principal/Executive OfficerABeam Consulting (Shanghai)

2012.1 Copyright©2012 by ABeam Consulting Ltd., All rights reserved.

Case Study Social Infrastructure / Integrated Solutions

mation that is always up-to-date and abundant global know-how. As this project was to take place mainly in China, GDC served as the base and operations were conducted by coordinating with Tokyo Head Office. Business in China is conducted differently from that in Japan, which was another factor that needed to be considered,” ex-plains Mr. Hideaki Kajiura, Principal, ABeam Consulting (Shang-hai), about the project structure.

The project looked at the approximately 100 production facilities in China, Vietnam and Bangladesh that produce UNIQLO products and gathered data on every aspect of energy use as well as the water supply data for a total of up to 11 items at each factory. In order to enable centralized management of the data, online tools in ASP for-mat were used. The person in charge at the factory input the data di-rectly into the tools.

Marie Kage, Senior Consultant, Social Infrastructure & Services Business Unit, who gathered information recalls, “At first, they would have problems logging in or inputting data, but we persisted through frequent phone calls and e-mails and were able to gather the necessary data.”

“This was an unfamiliar task, which could not be forced on the factories. It was important to let them know that it was a joint task to the end of improving energy efficiency. Thanks to the frequent follow-ups by the ABeam GDC staff, we are now able to gather in-formation smoothly,” says Ms. Aiko Ueda, CSR Department, Fast Retailing.

Data was gathered once every 3 months. For the first data-gathering session, electricity and other utility bills were obtained and carefully verified against the input data. The gathered data and analysis were fed back to the factories. The more environmentally conscious factories welcomed such data as effective data for considering future measures to improve energy efficiency and become cooperative in terms of data input. Such ecologically minded factories were also able to effectively utilize such data in the recruitment of human resources.

The gathered data is automatically aggregated and calculated with-in the online tools and output as a monthly report, which is also compatible with the GHG Protocol. Continuing this task would en-able year-on-year comparisons and consideration of optimal energy procurement. Furthermore, it would take into account the emissions trading system and developments in renewable energy.

“This project was a big step forward for the visualization of ener-gy,” says Mr. Nitta. “However, this project only took up the garment manufacturing factories and did not include the material producing factories. When we consider the scale of each factory, the material-producing factories are thought to pose an even greater environmen-tal burden than the garment manufacturing factories. Therefore, we hope to include the material-producing factories in our project in the future. Then we will need to figure out reduction measures that cover the entire supply chain. And furthermore, if we are able to coordi-nate and integrate our activities with logistics, sales and disposal, it would lead to grasp carbon footprint.”

Additionally, in recent years, the Carbon Disclosure Project (CDP) is being recognized as another type of necessary disclosure. Under this Project, institutional investors send questionnaires to corpora-tions asking, “How they will respond to climate change risks and op-portunities.” Mr. Nitta is also considering participating in this Proj-ect and spoke enthusiastically of the social implications of environmental measures:

“One of the missions of Fast Retailing is "To enrich people's lives through our unique corporate activities, and to seek to grow and de-velop our company in unity with society." Therefore we hope to be able to disclose these series of environmental measures as best prac-tice to the industry and to society.”

●Voice (Customer Evaluation)“We were pleased with ABeam’s specialized know-how and objectivity during this

Project and we also have high hopes for what ABeam can do for us in the future.

From now on, we will need to engage in appropriate energy reduction measures

based on the unique energy situation of our local stores and factories. We hope

that ABeam will give us advice as our partners. We also hope to learn more about

examples of carbon risk and from a global perspective.”

(Mr. Nitta, Fast Retailing Co., Ltd.)

“We are grateful for ABeam’s efforts in confirming the contents of the data input

by the factories and detailed checking in order to enhance their reliability. Their

superior communication skills, especially with the factory staff, helped facilitate

this project.”

(Ms. Ueda, Fast Retailing Co., Ltd.)

●Client DataCompany overviewCompany name: FAST RETAILING CO., LTD.Head office: 717-1 Sayama, Yamaguchi City,

Yamaguchi 754-0894, JapanTokyo office: Midtown Tower, Akasaka 9-7-1, Minato-ku ,

Tokyo 107-6231, JapanEstablished: May 1963Line of business: Product planning and sales of apparelPaid-in capital: 10,273 million yenNet sales: 820,349 million yen

(Consolidated, as of August 31, 2011)

Employees: 14,612 (Consolidated, as of August 31, 2011)

Project overviewSummary: Energy/Carbon Risk Management ServiceTime frame: From October 2010 – ongoing

ABeam Consulting Ltd.Yurakucho Building, 1-10-1 Yurakucho, Chiyoda-ku, Tokyo 100-0006, JapanTel: 81-3-5521-5555 Fax: 81-3-5521-5563URL: www.abeam.com

* Information (including corporate information, name of divisions and positions) stated in this leaflet was accurate at the time of first printing.

We hope to further visualize energy and make it the best practice in environmental measures