Responding to Climate Change

As a measure to mitigate climate change, one of the most serious global environmental risks, The CITIZEN Group is making Group-wide efforts to reduce greenhouse gas (GHG) emissions by conducting energy-saving activities at its factories and offices, introducing electricity derived from renewable energy sources, and improving the efficiency of energy use.

To express our commitment to climate change mitigation, we have joined the Japan Climate Initiative and declared our support for the Task Force on Climate-related Financial Disclosures (TCFD) recommendations in 2020. In 2022, we revised the Group's Scope 1, Scope 2, and Scope 3 CO₂ emission reduction targets, which were validated as science-based targets by the Science Based Targets initiative (SBTi) in 2023. Furthermore, in 2025, we joined RE100, an initiative to achieve 100% renewable electricity in members' business activities. In addition, measures to respond to large-scale disasters due to climate change are stipulated in our disaster business continuity plan (BCP).

Climate Change Risks and Opportunities

Governance

To efficiently promote environmental management across The CITIZEN Group, the Group Environmental Committee has been established under the Sustainability Committee. The Sustainability Committee, which meets quarterly and is chaired by the President and CEO, is responsible for identifying materiality; regularly reviewing the decarbonization strategy, including the transition plan; promoting initiatives to enhance the sustainability of existing businesses and contribute to solving social issues; and formulating and monitoring policies for addressing ESG-related issues. The chair of the Group Environmental Committee is the environmental officer appointed by the president and is also responsible for overseeing climate-related risks and opportunities. Risks and opportunities that are highly significant both in terms of their impact on stakeholders (society) and their importance to the company are managed by the department responsible for risk management. In making strategic decisions, this department considers whether any trade-offs may arise in relation to climate change-related risks and opportunities. Assessments of climate change issues and related response measures are discussed by the Group Environmental Committee, followed by discussions by the Sustainability Committee, and are then deliberated and approved by the Management Committee. The Management Committee evaluates and prioritizes climate change risks alongside other Group Significant Risks. Matters approved by the Management Committee are monitored and overseen by the Board of Directors through regular reporting twice a year and are reflected in decision-making regarding responses to environmental risks and environmental investments.

The sustainability-related skills of Citizen Watch Co., Ltd. ’s directors, including those related to climate change, are disclosed in the skill matrix of directors presented in "Governance: Enhancing Corporate Governance." In addition, the key performance indicators (KPIs) used to evaluate performance-linked stock compensation for directors and executive officers (excluding directors serving on the Audit and Supervisory Committee, outside directors, and non-residents of Japan) include the CO₂ emissions reduction rate as a non-financial ESG-related indicator.

Scenario Analysis

Recognizing that the risks and opportunities associated with climate change will have a significant impact on its business strategy, The CITIZEN Group has identified the risks and opportunities associated with climate change through the following process, and the Sustainability Committee Secretariat took the lead in analyzing and assessing the significance of the 1.5°C and 4°C scenarios.

Process of Identifying Climate Change-Related Risks and Opportunities

Step 1

We comprehensively identified the risks and opportunities associated with climate change.

Step 2

We organized the identified risks and opportunities in relation to the three business segments of Watches, Machine Tools, and Devices & Components, as well as in three time horizons: short, medium, and long terms.

Step 3

For each risk and opportunity identified, we used a 5-point scale to evaluate its impact on the company and likelihood of occurrence. As an overall evaluation, items with a high impact on the company and likelihood of occurrence were extracted, and important risks and opportunities were identified.

Selected Climate Change Scenarios

For transition risks, we conducted analysis and evaluation using a 1.5°C scenario that assumes a transition toward a decarbonized society. This scenario envisions increased costs due to stricter regulations, including the introduction of a carbon tax, and the risk of higher prices for raw materials and other resources. For physical risks, we conducted analysis and evaluation using a 4°C scenario that assumes continued global warming. This scenario anticipates risks such as disruptions to operations caused by damage to production sites and interruptions to supply chains resulting from the increasing severity of extreme weather events.

SSP1-1.9^*1 was used as a 1.5°C scenario, and SSP5-8.5^*2 as a 4°C scenario.

• SSP1-1.9 is a scenario in which CO₂ emissions reach net zero around the middle of this century after a slight overshoot of global warming. Under this scenario, the global average temperature increase by 2100 is projected to be approximately 1.5°C relative to 1850–1900 levels, while global mean sea level rise is projected to be 0.28–0.55 meters relative to the 1995–2014 average.
• SSP5-8.5 is a high-level reference scenario for the situation without implementation of additional climate policies. Under this scenario, the global average temperature increase by 2100 is projected to be approximately 4.4°C relative to 1850–1900 levels, while global mean sea level rise is projected to be 0.63–1.01 meters relative to the 1995–2014 average.

• Source: Figure SPM.7 (a) in the Summary for Policymakers (SPM), Intergovernmental Panel on Climate Change Assessment Report 5 (IPCC AR5) – Working Group I (WGI)

Scenario Analysis Results

Financial Impact Analysis

Based on the results of the scenario analysis, we have identified risks related to the following two items that could significantly affect The CITIZEN Group’s finances.

Transition Risk

Cost increase due to the introduction and strengthening of new regulations

Transition Risk

Increase in the cost of raw materials, etc., supply shortages, and supply disruptions

Through the introduction of ICP, we will promote appropriate low-carbon investment and raise awareness among employees.

Impact of Introducing the Carbon Tax on Scope 1, 2, and 3 Emissions

The financial impact of the carbon tax was estimated based on the following calculation criteria.

We compared the International Energy Agency (IEA)'s carbon price projections for each scenario with the financial impact if The CITIZEN Group's CO₂ emissions reduction targets were achieved or not achieved. The cost of the carbon tax was calculated based on the carbon taxes in the countries where The CITIZEN Group emits CO₂ (Japan, Thailand, China, the Philippines, and Vietnam), as the amount varies from country to country.

Scope 1 and 2 emissions

We estimated the likely impact of any carbon tax on our production operations in 2030, 2040, and 2050.

The CITIZEN Group aims to achieve carbon neutrality by 2050 and has established a roadmap for reducing CO₂ emissions (CITIZEN Group Environmental Goals 2030). Taking these as a standard, we set the CO₂ emissions for each year and calculated the financial impact.

Scope 3 emissions

We estimated the financial impact of any carbon tax, using the bases of our Scope 3 Category 1 CO₂ emissions and material purchase costs, on the supposition that a cost increase due to the carbon tax will be passed on to the purchase prices.

Sustainable Products

The CITIZEN Group defines sustainable products as products and services that contribute to solving social issues linked to its materiality (key issues)^*1 and contribute to business growth, and it aims to have sustainable products account for 31% of the Group’s total sales by FY2027. In FY2025, sustainable products accounted for 27.8% of the Group’s total sales. Of this amount, products that address climate change^*2 represented more than 90% of sustainable product sales.

• Of the five material issues identified by the Group, the three material issues to be addressed through products and services are (1) responding to climate change and contributing to a recycling-oriented society, (2) contributing to better quality of life, and (3) providing solutions in the industrial sector
• Products that correspond to the materiality "responding to climate change and contributing to a recycling-oriented society"

• Sustainable Products & Sustainable Factories

Carbon Footprint

Since 2016, our brand CITIZEN L, which has positioned sustainability at the core of its philosophy, has visualized lifecycle CO₂ emissions through a carbon footprint (CFP) assessment. By identifying processes with significant emissions, the brand works to reduce emissions throughout the supply chain. In calculating the CFP, the validity of the calculation methodology and rules was reviewed by Mizuho Research Institute, an organization within Mizuho Bank, Ltd. For further information, please visit the website below.

• Citizen L CO₂ Emissions Disclosure

Strategy (Measures and Policies of the Company)

We have formulated CITIZEN Group Environmental Vision 2050 with a view to achieving carbon neutrality by 2050. The CITIZEN Group aims to achieve virtually zero CO₂ emissions from its factories and offices by 2050. We are also working to identify climate-related risks throughout our supply chain.

The Group sees the transition to a low-carbon economy as an opportunity to invest in renewable energy and energy-saving equipment, and it is also working to promote low-carbon financing and to improve product competitiveness through the development and production of environmentally friendly products.

1.5°C scenario

This scenario envisions increased costs due to stricter regulations, including the introduction of a carbon tax, and the risk of higher prices for raw materials and other resources. To achieve the goals set forth in CITIZEN Group Environmental Goals 2030 and CITIZEN Group Environmental Vision 2050, The CITIZEN Group is promoting various decarbonization initiatives. In 2026, the Group is considering introducing an internal carbon pricing system to promote investments in GHG emissions reductions, with implementation scheduled for next fiscal year.

4°C scenario

Under this scenario, in order to stably secure raw materials, we will promote diversified procurement sources and appropriate parts and materials procurement management. In addition, we are promoting BCP measures, including those for weather-related disasters, and investment related to disaster countermeasures.

Roadmap for Emissions Reduction

To achieve carbon neutrality by 2050, we have established a roadmap (transition plan) for reducing GHG emissions. The roadmap focuses on Scope 1 and Scope 2 emissions, which are the Group’s primary sources of emissions, as well as Category 1 (Purchased Goods and Services) and Category 11 (Use of Sold Products) within Scope 3, which account for a significant portion of Scope 3 emissions.
This roadmap is intended to reduce climate-related risks and create medium- to long-term business opportunities. It will be implemented in phases while maintaining alignment with the Group’s business strategy and capital investment plans.
Recognizing that achieving these targets requires not only the Group’s own efforts but also collaboration across the entire value chain, including suppliers and customers, we will continue to strengthen stakeholder engagement.

Initiatives to reduce Scope 1 and Scope 2 emissions

• Introduction of energy-efficient and high-performance equipment, together with the planned replacement of aging equipment
• Optimization of energy usage through the review and improvement of production and business processes
• Expansion of renewable energy use, including on-site consumption and diversification of procurement methods

Initiatives to reduce Scope 3 emissions

• Promotion of emissions measurement and reduction measures through engagement with suppliers (Category 1)
• Promotion of the development and provision of sustainable products that contribute to reducing emissions during the product-use phase (Category 11)
• Reduction of emissions associated with procurement through expanded use of sustainable resources and raw materials (other categories)

Through these measures, we aim not only to reduce climate-related risks but also to create business opportunities by providing products and services that support the transition to a low-carbon society.
Going forward, the company will continue to monitor emissions and manage progress toward its targets. The roadmap will be regularly reviewed and enhanced in response to changes in the external environment and regulatory trends.

Risk Management

The CITIZEN Group has established a Group risk and crisis management system to consolidate and promptly address risks with the aim of promoting sustainable management and ensuring the achievement of the Group-wide business goals and sustainable development. Of the significant risks, we regard climate change among the most significant, and we work to identify risks of this kind and strengthen countermeasures against them.
Climate-related risks are closely linked to The CITIZEN Group’s materiality. Taking into consideration changes in social conditions, the views of external experts, and developments within the industry, the Group positions climate change as one of its significant risks. These considerations are incorporated into the Group’s strategy and addressed appropriately.

• Strengthening Risk Management

In accordance with ISO 14001, climate-related risks and opportunities are identified once a year by the environmental manager and the secretariat on a short- to long-term timeline, based on the environmental aspects, laws and regulations to be complied with, issues in the external and internal environments, and needs and expectations of stakeholders.

Specific measures to minimize risks and maximize opportunities are determined by the Management Committee, which includes directors and operates under the oversight of the Board of Directors. Following these decisions, the relevant departments implement the measures under the supervision of the executive officer responsible for environmental affairs. For Group-wide themes, we utilize the established ISO14001 mechanisms and the environmental management system that conforms to the standard so that we can ensure efficient functioning of the PDCA (plan-do-check-act) cycle.

Indicators and Targets

The CITIZEN Group has set the following targets regarding climate change.

GHG emissions for Scopes 1, 2, and 3 are calculated and reported based on a management control approach, with the reporting boundary primarily comprising the Group's consolidated manufacturing sites. Going forward, we plan to expand the reporting boundary to include sales sites as well.
The CITIZEN Group has also set cost reductions through the promotion of energy conservation as an indicator for climate-related opportunities and the amount of capital investment in energy conservation and renewable energy as an indicator for capital allocation. We will continue to monitor these indicators.
Progress toward each target, including FY2025 results and interim milestones for achieving the targets, is disclosed in the Progress against the Roadmap section of the Environmental Vision and Environmental Goals page.
In FY2023, we obtained validation from the Science Based Targets initiative (SBTi) for CITIZEN Group Environmental Goals 2030, which outline the Group’s GHG emissions reduction targets for 2030, in recognition of their alignment with science-based standards for achievement of the Paris Agreement targets. Additionally, in FY2024, the Group’s Scope 1, 2, and 3 emissions underwent a third-party review by an external reviewing organization.

• Environmental Vision and Environmental Goals

Reduction of GHG Emissions

1.To achieve the 1.5°C scenario, we are promoting the reduction of GHGs, which are believed to cause global warming. In addition, we are preparing for the implementation of energy-saving activities at each of the Group's business sites, the introduction of energy-saving equipment and facilities, such as LED lighting, and capital investment to establish manufacturing processes that are environmentally friendly.

In FY2024, we replaced 4,800 fluorescent lights with LED ones at the Tokorozawa Works, achieving a shift to 100% LED lighting at the site. In addition, all newly constructed Group factories are equipped with solar power generation systems to increase energy self-sufficiency and reduce CO₂ emissions. CITIZEN FINEDEVICE CO., LTD.'s headquarters and Kawaguchiko Factory, which started operation in January 2022, have reduced CO₂ emissions by 7.7 tons per year, and CITIZEN MACHINERY CO., LTD.'s Karuizawa Factory in Nagano Prefecture, which was constructed in April 2023, has reduced CO₂ emissions by 220 tons per year. CITIZEN WATCH MANUFACTURING CO., LTD.'s Miyota Saku Factory in Nagano Prefecture, which started operation in December 2023, contributes to a CO₂ emissions reduction of approximately 620.8 tons per year, the largest among the Group's business sites. Moreover, CITIZEN MICRO CO., LTD.'s Hidaka Factory, which started operation in August 2024, contributes to a CO₂ emissions reduction of approximately 41 tons per year.

We also calculated the overall Scope 3 emissions of The CITIZEN Group in order to reduce GHG emissions throughout the supply chain. Major companies within The CITIZEN Group have identified key suppliers and have been engaging with them since FY2023 as part of surveys related to climate change and water security.
In FY2024, recognizing that many suppliers had not yet calculated their GHG emissions, we held briefing sessions on emissions accounting. These sessions covered global trends, the fundamentals of decarbonization management, and methodologies for calculating GHG emissions. The FY2024 briefings were attended by 102 suppliers to The CITIZEN Group, and this number increased to 187 in FY2025. We are also working to develop sustainable products and services that contribute to our business growth, which we recognize as a suitable opportunity to solve the material issue of responding to climate change and contributing to a recycling-oriented society.

Scope 1 and 2 GHG Emissions

In FY2025, our Scope 1 emissions were 16,614 t-CO₂e and Scope 2 emissions 70,403 t-CO₂e (by market-based calculation), totaling 87,017 t-CO₂e. Among the total emissions, The CITIZEN Group’s direct emissions of GHGs other than CO₂ from energy sources (i.e., methane, dinitrogen monoxide, hydrofluorocarbons, perfluorocarbons, sulfur hexafluoride, nitrogen trifluoride, and CO₂ from non-energy sources) totaled 1,782 t-CO₂e, which accounted for 2% of the Group’s total Scope 1 and 2 emissions.

For further details, please refer to the ESG Data.

• ESG Data

Calculation of Scope 3 GHG Emissions

In reducing GHG emissions, it is important to monitor not only the GHG emissions from a company's own manufacturing stage but also indirect GHG emissions from the entire supply chain (Scope 3 emissions). Therefore, we calculated the GHG emissions from all The CITIZEN Group operations in FY2024. Based on these calculations, the total indirect GHG emissions of the entire supply chain amounted to approximately 1,040,000 tons. Among these, emissions from purchased goods and services (Category 1) accounted for 49% of the total Scope 3 emissions, the largest share, followed by emissions from the use of sold products (Category 11) accounting for 40%, which together accounted for about 90% of the total.
In FY2025, we started close communication with our suppliers with the aim of reducing emissions throughout our supply chain, thereby achieving our SBTi-validated Scope 3 emissions reduction target. Additionally, The CITIZEN Group's Scope 1, 2, and 3 emissions for FY2024 across all of its businesses were verified by a third party in August and September 2025.

• Environmental Information Independent Verification Report（PDF）

Initiatives for Greater Use of Renewable Energy