Value creation story and management materiality

Our Corporate Philosophy is to provide safety, comfort, and a sense of security in people’s daily lives as well as across all forms of transportation with our unique motion control technologies. The Nabtesco Way is the statement of the stance and mindset that achieves this Corporate Philosophy, as The Principles We Value. Under this philosophy and the principles, we are promoting a long-term value creation story. It consists of the Long-term Vision that illustrates our aim for 2030, management materiality that presents the key management challenges we need to address to achieve our long-term goals, and the Medium-term Management Plan, which describes measures to implement this value creation story.
Through these measures, we bring innovation while enhancing economic value, environmental value, and social value in the long term, thereby pursuing management that supports the sustainable growth of both society and our Group.

Our Group positions management materiality as a key management challenge for achieving our Long-term Vision and promotes measures to support the sustainable growth of both society and our Group. In light of changes in the business environment and societal requirements, we will swiftly and appropriately review our management materiality and further enhance our management foundation to create value for our stakeholders.

Our management materiality is comprised of three pillars: “Measures to improve our financial performance,” “Measures to enhance our management foundation,” and “Specific measures to achieve the long-term targets.” Through financial and non-financial measures, we will strive to achieve economic value, environmental value, and social value from a long-term perspective, thereby creating value for our stakeholders.

For “Measures to improve our financial performance,” we will work to consistently achieve our short-term revenue targets, ensure the efficient distribution of our managerial resources, and increase our capital efficiency for the promotion of ROIC-oriented management.
For “Measures to enhance our management foundation,” we have identified items that need reinforcement to more effectively contribute to society through our business activities. Consequently, we will implement intensive measures for activities related to ESG items, considering their connections to our profit and growth.

Moreover, by implementing “Specific measures to achieve the long-term targets,” we will strengthen our business activities, including social contributions, and thereby promote our long-term growth.

To enhance our sustainability governance, our Group dissolved our previous CSR Committee in 2023 to pave the way for its existence as the newly established CEO-directed Management Materiality Committee.
The committee collaborates with other CEO-directed committees, and the Management Materiality Committee Chair, who is an executive officer, supervises and oversees the setting of goals and KPIs for each management materiality item, along with their progress and management. The activities are deliberated and determined at the Management Materiality Committee and the Management Committee and reported to the Board of Directors’ meeting to enhance the effectiveness of Group-wide sustainability governance.

In identifying management materiality, we extract social issues from those addressed through our business strategy and from ESG items closely related to our business and analyze their significance from the perspective of impact on our Group and stakeholders. Furthermore, after assessing their consistency with company-wide material risks based on the results of risk assessments, we designate them as management materiality. In terms of their validity, we engage in deliberations with external experts, conduct reviews within the Management Materiality Committee and the Management Committee, and finalize decisions at the Board of Directors’ meeting.
For management materiality, reviews are conducted once a year, in principle, to respond swiftly and appropriately to changes in the business environment and societal requirements. Regardless of whether revisions are made, the final decision is made at the Board of Directors’ meeting.

In 2025, we re-evaluated the validity and significance of our recognition of issues, responding to changes in the internal and external environment related to “improving profitability and clarifying innovation areas as required by the Medium-term Management Plan.” and “double materiality, a key societal requirement.” As a result, we have decided to maintain the management materiality items established in FY2024.

[Measures to improve our financial performance]

Based on our aim to achieve both the optimization of portfolio balance and improvements in ROIC, we manage these measures under the following item:

• “Promote ROIC management”

[Measures to enhance our management foundation]

We manage these measures under the following items that have been reorganized from an ESG perspective:

• E: “Countermeasures for climate change”
• S: “Promote human capital management” and “Pursue safety, comfort, and a sense of security”
• G: “Enhance corporate governance” and “Build a resilient corporate foundation”

[Specific measures to achieve the long-term targets]

We manage these measures under the following items that more clearly indicate the directions and strategies set out in our Medium-term Management Plan:

• “Meet social challenges through smart motion control”
• “Transform to innovative manufacturing with digitization”
• “Enhance global management”

In addition, sub-materiality and KPIs for each management materiality item will be established to strengthen the progress management of various initiatives, thereby enhancing their effectiveness.

The activity targets related to our management materiality for FY2026 have been established as follows, after verification of their alignment with our Group-wide material risks.