Information Disclosure based on the TCFD Recommendations

The progress of IIJ Group's initiatives for the TCFD(*)'s disclosure recommendations of "Governance," "Strategy," "Risk Management" and "Metrics and Targets" is as follows.

• (*)TCFD：Task Force on Climate-related Financial Disclosures

Governance and Risk Management

IIJ believes that the fulfilment and implementation of corporate governance play an important role both in putting its management philosophy into practice and continuously enhancing its corporate value. IIJ has established and operated a corporate governance system to ensure these fulfilments. Under the corporate governance system, the Sustainability Committee, chaired by the president, has been established as an organization under the direct control of management to deal with the increasing importance of responding to sustainability-related risks and opportunities in recent years such as climate change, and to promote company-wide initiatives across the entire company. With regard to climate change related issues, IIJ continues to engage in the relevant initiatives in accordance with the "Policy for Environmental Initiatives," and also identifies, assesses and manages climate change related risks and opportunities from diverse perspectives by cross-sectional members from corporate planning, technology, finance, public relations, human resources and other departments. The initiatives of the Sustainability Committee are regularly reported to the Board of Directors, and risks identified by the Sustainability Committee that could have material impacts on the business are integrally managed together with other business risks, which are continuously identified, assessed and managed by the Board of Directors.

Activities of the Sustainability Committee

(As of the end of June 2023)

Committee meetings	Four times（2022.07-2023.06）
Report to the Board of Directors	Once

In addition to the above initiatives, IIJ has established and operated an environmental management system that covers the business activities of the data center department, and has obtained international environmental management system certification (ISO 14001:. 2015), which is designed to minimize the impact of corporate and other activities on the environment.

Strategy

The TCFD recommends that analyses include the 2℃ or lower scenario, which is based on the Paris Agreement's targets. IIJ selected the 2℃ or lower scenario for its "Scenario Analysis" in line with the recommendation. The "Scenario Analysis" was conducted by setting the year 2030 as a point in time in consideration of the rapid progress of information technology and others. In the first year of the "Scenario Analysis" (2022), the analysis was conducted only for IIJ, and in the current year (2023), the major subsidiaries IIJ Global Solutions (IIJGS) and IIJ Engineering (IIJEG) were included in the analysis in consideration of their business scale and the impact of climate change on their operations.

The table below shows the risks and opportunities related to climate change identified by IIJ, IIJGS and IIJEG that could have material impacts on their businesses, measures to address them, and impacts on their businesses, strategies and others. As for physical risks such as increased occurrence of typhoons and floods, prolonged high temperatures, and sea level rise, IIJ recognizes that the impact on its business and strategies is low due to the selection of data center sites in consideration of hazard maps, and redundant designs of network circuits and equipment. Meanwhile, the use of electricity is essential for the provision of network related services, and IIJ believes that implementing measures such as the use of renewable energy and improvement of energy efficiency at data centers, which consume a large amount of electricity, is an important initiative to address transition risks and opportunities, including stricter laws and regulations toward a decarbonized society, increasing demand for low-carbon emission services, and increasing social demand for environmental responsibility. IIJGS mainly provides network services such as WAN, and its risks and opportunities related to climate change are common to those related to IIJ's network services. IIJEG mainly provides data center services and others to IIJ, and the risks and opportunities related to climate change are common to those related to IIJ's data center services.

	Events	Risks and Opportunities	Measures	Time Horizon(*)	Business Impacts of the 2℃ or Lower Scenarios
P h y s i c a l r i s k s / o p p o r t u n i t i e s	Increase in extreme weather events such as typhoons and floods, and climate changes such as prolonged high temperatures	Applicable companies：IIJ,IIJEG		Long-term	Low
		Risk Risk of inability to provide services due to data center facility damage, Internet circuit disconnection or other events caused by natural disasters Risk of inability for engineers to work on-site at data centers or other sites due to natural disasters Opportunity Increasing demand for services that are highly resilient to natural disasters and climate changes	Measures Selection of data center sites in consideration of hazard maps, and redundant designs of circuits and equipment Formulation of business continuity plans and establishment of a system that enables remote monitoring between data centers
T r a n s i t i o n r i s k s / o p p o r t u n i t i e s	Stricter laws and regulations on decarbonization and energy conservation	Applicable companies：IIJ,IIJEG		Mid- to Long- term	High
		Risk Risk of an increase in service operating costs due to increased renewable energy prices Risk of an increase in service operating costs due to increased electricity prices as a result of the introduction of carbon taxes	Measures Formulation of a policy for greenhouse gas reduction initiatives at IIJ's own data centers, and efforts to achieve targets for renewable energy usage and energy conservation (Refer to "Metrics and Targets" for progress) Diversification of renewable energy procurement measures such as the installation of photovoltaic panels in own data centers, direct procurement of non-fossil fuel certificates Planning new services with non-fossil fuel certificates, demonstration experiments of micro data centers in Iceland using 100% renewable energy, and others
	Increasing demand for low-carbon emission services	Risk Risk of inability to provide services to meet the demand due to unavailability of renewable energy procurement or failure to achieve energy conservation Opportunity Increasing demand for data center services that use renewable energy and energy-saving technologies, as well as low-carbon emission services that use them		Mid- to Long- term	Medium
		Applicable companies：IIJ,IIJGS,IIJEG		Short- to Long- term	Medium
		Opportunity Increasing demand for IT resource sharing services such as cloud services Increasing demand for services that make business activities more efficient through IT utilization such as IoT	Measures Continued execution of current strategy (Continuous development and provision of new services, and others)
	Increasing social demand for environmental responsibility	Applicable companies：IIJ		Short- term	Low
		Risk Risk of a decline in reputation from customers and capital markets due to insufficient corporate initiatives and disclosure of such information Likewise, risk of not being able to secure human resources necessary for business operations due to a decline in reputation in the human resources market	Measures Continuous execution of environment related initiatives, enhancement of information disclosure, and communication with shareholders, investors, ESG rating agencies, customers, and students etc.

• (*)short-term : 2 years or less, medium-term : 3-5 years, long-term : 6-10 years

Metrics and Targets

Policy for Greenhouse Gas Reduction Initiatives at IIJ's Own Data Centers

IIJ Group contributes to the reduction of greenhouse gas emissions in society as a whole by improving the efficiency of social activities through the provision of network related services and by sharing computer resources through the provision of cloud services. However, the use of electricity is essential for delivering these services.
IIJ recognizes the importance of reducing greenhouse gas emissions at its own data centers, which consume about 80% of all electricity consumption, by "usage of renewable energy(*1)" and "improvement of energy conservation". The targets for each of initiatives, and FY2022 results, are as follows.

Measures	Targets	FY2022 results
Usage of renewable energy	The target is to increase the renewable energy usage rate of data centers (Scope 1 and 2(*2)) to 85% in FY2030.	46.1% (as of March 2023) (Matsue data center has achieved 100% renewable energy utilization)
Improvement of energy conservation	The target is to keep the PUE(*3) of the data center at or below the industry's highest level(*4) until FY2030 through continuous technological innovation.	Matsue data center: 1.33 Shiroi data center: 1.31 (Achieved industry's highest level PUE of 1.4 or lower).

• (*)Renewable energy usage rate as of March 2022：14.3％　
• (*)PUE performance in FY2021：1.22 for Matsue DC and 1.42 for Shiroi DC

• (*1)Renewable energy: Including substantial renewable energy through the use of non-fossil fuel certificates
• (*2)Scope 1 and 2 (Greenhouse gas emissions by a company): Direct emissions from the use of fuels and industrial processes at the company and indirect emissions from the use of electricity and heat purchased by the company (as defined by the GHG Protocol)
• (*3)PUE (Power Usage Effectiveness) : Total data center facility energy usage divided by IT equipment energy usage
• (*4)Industry's Highest Level PUE : PUE 1.4 or lower (As of April 2023, the Agency for Natural Resources and Energy has set a benchmark index and target level of PUE as 1.4 or lower in the data center sector, and operators that achieve this are considered excellent energy conservation operators.)

Results of initiatives

Track record of initiatives in IIJ's own data centers.

IIJ's electricity consumption at its own data centers in FY2022 increased by 31% year-on-year due to the expansion of its business scale and increased utilization of its own data centers associated with the consolidation of data centers leased from other companies, though, Scope 1 and 2 greenhouse gas emissions (own emissions) decreased by 25% year-on-year due to initiatives such as achieving 100% renewable energy utilization at the Matsue Data Center.

Electricity consumption of own DCs and Scope 1 & 2 GHG emission

Actual Greenhouse Gas Emissions

As of the end of June 2023, IIJ calculated greenhouse gas emissions and the scope of data collection is IIJ (non-consolidated base). In Scope 1 and 2, which calculate IIJ's own emissions, the Scope 2 emissions, which recognize the electricity consumption of its own data centers, account for 96% of the total emissions. In Scope 3, which calculates indirect emissions within the upstream and downstream of supply chain, a large proportion of indirect emissions are accounted for by Category 1 "Purchased goods and services" and Category 11 "Use of sold products," which are recognized through the purchase and sale of equipment and others when providing system integration, and Category 2 "Capital goods", which is recognized through the purchase of equipment and others used in service facilities. These account for 98% of indirect emissions. In comparison with the emissions of other companies in the same industry, the emissions are generally correlated with the size of the business, and the composition of the emissions is similar for each company.

IIJ (Non-consolidated basis) FY2022 Results (Unit: t-CO2)

• (*)Calculation is based on the Basic Guidelines on Accounting for Greenhouse Gas Emissions Throughout the Supply Chain (The Ministry of the Environment and Ministry of the Economy, Trade and Industry）