Value creation story and management materiality

Our group positions management materiality as the most important management issue and pursues management that can sustainably develop both society and our group by improving economic value, environmental value and social value in the long term.

To promote value creation in the long term, we deem it important to “dynamically” change its management materiality according to changes in the business and management environments. We will regularly review our management materiality so as to respond to such changes in a nimble manner. We will steadily take action concerning each management materiality item to further enhance our management foundation.

Our management materiality is comprised of three pillars. By fostering financial and non-financial measures, we will keep providing value to our stakeholders, maintaining profitable growth.

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 designated items that will greatly affect us financially as “ESG items having a major impact on financial issues.” We will implement measures intensively for these ESG items, considering how they are connected with our financial outcomes. We have also identified “ESG items that drive sustainability power” as elements that will provide the foundation for us to continue creating value. We will implement measures for these items to reduce risks posed to our business continuity.

Moreover, by implementing “Specific measures to achieve the long-term vision,” we will enhance our competitiveness and thereby promote our long-term growth. We will also reduce our capital costs by implementing “Measures to improve our financial performance” and “Measures to enhance our management foundation.”

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. Its chairperson and members are chosen from directors including executive officers and heads of relevant divisions, meeting at least twice a year.

The Committee oversees the progress and management of management materiality, collaborating with other CEO-directed committees “Quality and PL Committee,” “ESH Committee,” “Risk Management Committee” and “Information Security Committee,” setting targets and KPIs for management materiality items, and regularly reviewing them. The activities are deliberated and determined at the Management Committee and reported to the Board of Directors’ meeting.

The Committee also regularly reviews materiality itself and reports to the Board of Directors’ meeting. The reviewed results are deliberated at the Board of Directors’ meeting and decided upon, in order to raise the effectiveness of group-wide sustainability governance.

Our group intensively discussed how to identify its material management issues within the Group and also had dialogues about its management materiality with multiple long-term investors and ESG-oriented investors. Based on the results, we worked to identify our material management issues by attributing importance to the following three points :

In 2021, in order to identify our material management issues, we worked to uncover and list the short-, medium- and long-term issues faced by our administrative departments, which are tasked with promoting company-wide strategies, by using a specific analysis framework and in consideration of the future outlook of the external environment and the managerial resources that support our value creation, both of which we examined in the process of formulating the long-term vision. We have also selected as ESG items those that are closely related to our business in reference to the evaluation items adopted by the ESG rating organizations and based on the framework and standards set for the disclosure of non-financial information. We then categorized the listed items according to their importance, time axis and financial impact. Furthermore, we conducted analyses regarding the important items related to the long-term opportunities and risks posed to each of our businesses from the aspects of the sustainability of the business model and ESG. Finally, we reorganized all the key items into our management materiality.

We regularly review on an annual basis the identified management materiality in order to flexibly respond to change of business and management environments.

In 2022, in order to redefine human capital as a primary source of value creation and implement integrated measures based on the new definition, we revised the human capital-related item to “Enhance human capital management” and also reviewed the actions to be taken for each related item. The results have already been approved by the Management Committee after deliberation by the CSR Committee and have also been reported to the Board of Directors. In 2023, the Management Materiality Committee reviewed progress and set action plans. The review deemed it unnecessary to change the management materiality in 2023, which was approved by the Board of Directors after deliberation at the Management Committee and Board of Directors’ meeting.

The targets, indicators, key activity results and plans for respective issues concerning “Enhancing our management foundation” with relation to the management materiality are shown below.

Targets, indicators, key activity results and plans concerning sustainability