Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduced CO2 emissions per sales by 10% (compared to FY2005)
• Achieved 88% Eco-Products vehicle sales ratio (target: at least 90%)
• Developed ZH200 hybrid hydraulic excavator with 20% improved fuel consumption
• Developed ZX35B battery-driven mini excavator with zero CO2 emissions during operation and 65% reduction compared to conventional model
• Introduced trolley dump trucks in Zambia, Africa, increasing production volumes and reducing operating costs and CO2 emissions

Social Achievements

• Provided support equivalent to 300 million yen for Great East Japan Earthquake relief and recovery
• Delivered 76 units of demining equipment to 9 countries, including Cambodia and Mozambique
• Supported activities in Cambodia to turn demined land into agricultural land
• Established a “Diversity Promotion Group” to promote diversity and inclusion
• Implemented “Kenkijin Spirit” training for employees

Governance Achievements

• Established a Compliance Division to ensure compliance with laws and regulations
• Established a compliance hotline
• Adopted a committee governance structure to separate management oversight from business execution
• Implemented internal audits to assess risk management, internal controls, and corporate governance

Climate Goals & Targets

Environmental Challenges

• Great East Japan Earthquake damaged production bases and other assets
• Intensifying competition from Chinese and South Korean manufacturers
• Increasingly severe environmental and energy restrictions
• Fluctuations in financial markets, commodity prices, and exchange rates
• Risks related to product liability, credit management, public laws, and natural disasters

Mitigation Strategies

• Restored production capacity to pre-disaster levels by mid-April
• Formulated the “2020 Vision” and “Go Together 2013” mid-term management plan to address market changes
• Implemented hedging activities, increased local production, and promoted parts import to alleviate the effect of foreign currency exchange rate fluctuations
• Implemented Business Continuity Management (BCM) system to continue business operations during disasters
• Strengthened risk management centered on the Compliance and Risk Management Division

Supply Chain Management

Supplier Audits: 208 major suppliers surveyed in FY2010

Responsible Procurement

• Requesting suppliers to handle environmental issues, such as constructing environmental management systems and managing harmful substances

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters (e.g., earthquakes, floods)

Transition Risks

• Increasingly severe environmental and energy restrictions

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: Global Reporting Initiative (GRI), Ministry of the Environment, Government of Japan Environmental Reporting Guidelines

Certifications: ISO 14001

Sustainable Products & Innovation

• ZH200 hybrid hydraulic excavator
• ZX35B battery-driven mini excavator
• Trolley dump trucks

Awards & Recognition

• China Construction Machinery Association’s “Golden Award of Technical Innovation in 2010 in Top 50 of China Construction Machinery Products”

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Improved fuel efficiency by around 20% in ZH200 hybrid hydraulic excavator compared to conventional models.
• Introduced new emissions-reducing engines and hydraulic systems to comply with EU Stage 3B and US Tier 4 Interim gas emission regulations.
• Achieved 100% Green Supplier Rate (diffusion of EMS implementation by suppliers).

Social Achievements

• Established a “Diversity Promotion Group” and “Diversity Committee” to promote diversity within the Group.
• Conducted diversity workshops for managers.
• Established the Mining Support Human Resources Bank in Australia and planned to train 35 machinery engineers in the Philippines.
• Launched “Global Occupational Safety and Health Activities” to promote safe workplace environments globally.
• Provided agricultural training in Cambodia, resulting in an 81% increase in rice production and a 23% increase in household income compared to 2009.

Governance Achievements

• Established a Compliance Division and Risk Management Division.
• Implemented a performance-linked compensation system for executive officers.
• Strengthened global quality assurance systems at all production bases.
• Introduced the “Hi-STEP” sales progress management system.

Climate Goals & Targets

Environmental Challenges

• Supply capacity not keeping up with demand in some regions.
• Greater-than-expected drop in demand in the Chinese market.
• Impact from the Great East Japan Earthquake and flooding in Thailand.
• Increased market competition from manufacturers in emerging nations.
• Communication difficulties due to increasing workforce diversity.

Mitigation Strategies

• Strengthening overseas operations systems and promoting localization.
• Establishing a new “Strategy Planning Division” to strengthen intra-organizational collaboration.
• Pursuing improved business efficiency globally and eliminating business losses.
• Investing in expanding production of key parts and components for mining machinery.
• Conducting training to instill a common “Kenkijin Spirit” among all employees.

Supply Chain Management

Supplier Audits: 208 main suppliers surveyed in fiscal 2010.

Responsible Procurement

• Basic Policy on Materials Procurement
• Guidelines on Procurement
• Requiring new suppliers to obtain EMS certification.

Climate-Related Risks & Opportunities

Physical Risks

• Impact from natural disasters (earthquakes, flooding).

Transition Risks

• Stricter regulations on exhaust gas emissions.

Opportunities

• Development of energy-efficient products (hybrid excavators, electric-drive systems).

Reporting Standards

Frameworks Used: GRI G3.1, ISO 26000

Certifications: ISO 9001, OHSAS 18001 (Tsuchiura Works and TCM Shiga Plant)

Sustainable Products & Innovation

• ZH200 hybrid excavator
• Electrically driven ultra-large hydraulic excavators
• Trolley dump trucks

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Achieved new zero emissions (final disposal rate 0.5%) at 10 group company plants
• Commercialization of hybrid hydraulic excavators to conserve energy usage during product operation
• Implementation of counterweight recycling to promote the 3Rs and to prevent illegal disposal and dumping

Social Achievements

• Establishment of Hitachi Construction Machinery Japan, a one-stop solution business, to facilitate a quick response to market changes
• Launched a loyalty point program, the first in the domestic construction machinery industry
• Implemented a compliance training program, including export control training

Governance Achievements

• Established a global compliance hotline
• Hitachi Construction Machinery Tsuchiura Works received OHSAS18001 certification
• Developed a business continuity plan (BCP)

Climate Goals & Targets

Environmental Challenges

• Sharp fluctuations in the global construction machinery market
• Significant sales decrease in China
• Ongoing financial crisis in Europe and slower pace of growth in emerging economies

Mitigation Strategies

• Efforts to increase market share, lower costs, and improve business efficiency to secure profits
• Establishment of Hitachi Construction Machinery Japan to capture reconstruction demands
• Strengthening ties with dealers via the full-fledged utilization of the service and parts sales management system and the Global e-Service system

Supply Chain Management

Supplier Audits: Supplier CSR survey conducted at 191 suppliers in Japan

Responsible Procurement

• Green procurement
• CSR procurement

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G3.1, ISO 26000

Certifications: ISO 9001, OHSAS 18001

Sustainable Products & Innovation

• Eco-Products
• Hybrid hydraulic excavators
• ZX35B electric mini excavator

Awards & Recognition

• Environmental award at the first and second Hitachi China CSR awards ceremony
• Environmental award for the China region at Hitachi Group’s Inspiration of the Year Global 2012
• Ranked 19th among manufacturing companies in the Nikkei’s Environmental Management Survey

Environmental Metrics

ESG Focus Areas

• Climate Change
• Resource Recycling
• Social Infrastructure Challenges
• Global Governance
• Human Rights

Environmental Achievements

• Reduced CO2 emissions by -16.5% from products and -27.2% from production (compared to FY2010)
• Recycling rate (Japan): 83.3% (FY2020 results)
• Water Consumption Reduction (per unit of production) -36.8% (Compared to FY2010)

Social Achievements

• Established a system for distributing and promoting sales of guaranteed used equipment under the unified PREMIUM USED brand
• Increased the number of environmentally conscious products to 259 models
• Implemented various safety and health activities, resulting in a decrease of 13 occupational accidents from the previous fiscal year

Governance Achievements

• Established a system to conduct due diligence for potential human rights abuses
• Established the Compliance & Risk Management Committee to promote group-wide compliance
• Strengthened governance for quality assurance operations by placing the Quality Assurance Division under direct control of the President

Climate Goals & Targets

Environmental Challenges

• Climate change impacts (extreme weather, regulations)
• Supply chain disruptions
• Labor shortages
• Declining birthrate and aging population
• Resource depletion
• Human rights risks in the supply chain

Mitigation Strategies

• Developed alternative sourcing strategies
• Strengthened BCP for the entire supply chain
• Developed various solutions to improve construction efficiency and site safety
• Established a due diligence system to identify and respond appropriately to human rights risks
• Promoting 3R (Reduce, Reuse, Recycle) activities
• Investing in digital and cutting-edge technologies

Supply Chain Management

Responsible Procurement

• Hitachi Group Sustainable Procurement Guidelines

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events
• Flooding
• Sea level rise

Transition Risks

• Increased CO2 emission prices
• Stringent regulations on greenhouse gas emissions
• Market shifts towards decarbonization technologies

Opportunities

• Development of decarbonization technologies
• Increased demand for disaster preparedness products and solutions

Reporting Standards

Frameworks Used: GRI Standards (Core option), International Integrated Reporting Framework (IIRC), Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for Collaborative Value Creation (METI)

Certifications: Science Based Targets initiative (SBTi)

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 9 (Industry, innovation, and infrastructure)
• Goal 11 (Sustainable cities and communities)
• Goal 12 (Responsible consumption and production)
• Goal 13 (Climate action)

The Group's initiatives contribute to these goals through decarbonization efforts, development of sustainable products and solutions, and promotion of resource recycling.

Sustainable Products & Innovation

• Electric excavators
• Hydrogen engines
• Fuel cells

Awards & Recognition

• Empathy IR Award at the IR Special Award 2020
• Gomez / IR Site Overall Ranking Bronze Award (2020)
• A Grade overall ranking by the All Japanese Listed Companies’ Website Rankings

Environmental Metrics

ESG Focus Areas

• Climate Change
• Resource Recycling
• Safety and Productivity
• Global Governance

Environmental Achievements

• Reduced CO2 emissions by 21.9% from the FY2010 level in products (Scope 3) and 33% in production (Scope 1+2)
• Achieved a 93.7% recycling rate in Japan
• Increased sales revenue from parts remanufacturing business by 488% compared to FY2010
• Increased sales revenue from used equipment business by 138% compared to FY2010

Social Achievements

• Launched the Self-Improvement Program for employee development, with approximately 4,000 employees participating
• Increased training hours per employee to 52 hours in FY2022
• Improved the ratio of women in managerial positions to 11.2%
• Increased the ratio of local managers in general managerial positions at overseas group companies to 72%

Governance Achievements

• Established the ERM (Enterprise Risk Management) Committee in April 2022
• Conducted a third-party evaluation of the Board of Directors' effectiveness
• Achieved 0 incidents of violations of corruption and bribery laws
• Maintained a consolidated dividend payout ratio of 33.3%

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to lockdowns in Shanghai and semiconductor shortages
• Soaring material costs and rising transportation expenses
• Need to improve cash flow and net D/E ratio
• Addressing the aging workforce and labor shortages in the construction industry

Mitigation Strategies

• Coordinating with suppliers and making internal adjustments to maintain production
• Implementing value-added pricing strategies
• Prioritizing efforts to improve cash flow
• Investing in digital technologies and automation to improve productivity and reduce reliance on manual labor
• Strengthening global human resource development and training programs

Supply Chain Management

Supplier Audits: 84% collection rate in FY2022 Supply Chain Sustainable Survey

Responsible Procurement

• Conducting annual Supply Chain Sustainable Survey
• Requesting improvements from suppliers with high potential sustainability risks

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters (typhoons, floods)

Transition Risks

• Transition to a decarbonized society
• Changes in investment and lending behavior
• Decline in coal demand
• Growing pressure to promote decarbonization

Opportunities

• Increased demand for environmentally conscious products and services
• Attracting ESG investment
• Establishment of a competitive advantage by developing decarbonization technologies
• Carbon tax savings
• Increased demand for products, services, and solutions that contribute to disaster prevention and mitigation

Reporting Standards

Frameworks Used: GRI Standards, International Integrated Reporting Framework (IIRF)

Certifications: SBT (Science Based Targets)

Sustainable Products & Innovation

• Electric excavators
• Fully electric dump trucks
• Hydrogen engine & fuel cell drive technologies

Awards & Recognition

• Internet IR Awards (Award of Excellence)
• All Japanese Listed Companies’ Website Ranking (AAA ranking)
• Gomez ESG Site Ranking (selected as an excellent company)

Environmental Metrics

ESG Focus Areas

• Not disclosed

Environmental Achievements

• Not disclosed

Social Achievements

• Not disclosed

Governance Achievements

• Not disclosed

Climate Goals & Targets

Environmental Challenges

• Shortage of semiconductor devices causing supply chain upheavals (FY2022)
• Worsening work site issues, labor shortage and aging workers (Japan)
• Prolonged real estate recession (China)
• Intensifying geopolitical risks (Europe)
• Inflation and restraint of infrastructure investment (Europe)
• Progressive yen depreciation, rising costs of raw materials and energy (Japan)
• Curbing infrastructure investment (Japan)
• Lack of charging facilities near construction sites for electric machinery (Europe)
• Africa: Sovereign risk
• Africa: Accelerating shift to electrification at mines
• CIS: Penetration of neighboring Chinese brands
• CIS: Growing demand for mining equipment
• Middle East: Electrification of used machinery
• Middle East: Situations in the Middle East, high distribution cost
• Expansion of Chinese construction machinery manufacturers (Asia and Pacific)

Mitigation Strategies

• Increased number of dealers in Americas to 24, covering 80% of North American market
• Reformed rental business in Japan into a “Kenki-solution” rental business
• Reduced fixed costs in Japan by conducting rental business mainly through medium-sized bases
• Expanding value chain business, including used equipment and rental business
• Expanding service infrastructure for dealers in South America (establishing service support bases and remanufacturing plants)
• Introducing well-maintained used machinery from Japan to South America
• Expanding dealer network in Central and South America
• Establishing a local production and service framework for AC-driven dump trucks for mining in the Americas market (FY2026)
• Local sourcing of mainframes, welding structures and components for dump trucks in Canada
• Strengthening proposal-making capability and support system for customers and dealers in Americas
• Promoting team-building and cross-cultural communication training in Americas
• Appointing regional staff on a remote basis in Americas to collect customer and dealer information
• Improving and reinforcing operational quality in Americas
• Cultivating remaining market and developing new dealers in Americas
• Strengthening partnerships with dealers in Americas
• Collaborating with group companies in South American mining market (Bradken, H-E Parts and Wenco)
• Collaborating with Alfen B.V. to sell and rent energy storage systems for electric construction machinery in Europe
• ITOCHU Corporation providing financing to support expansion of rental business in Europe
• Acquiring Cobemat SAS in France and rebranding as Hitachi Construction Machinery France S.A.S.
• Strengthening competitiveness through direct sales and service system in France
• Accelerating value chain businesses (parts and servicing, rentals, and used machinery) in France
• Expanding rental fleet in France, focusing on medium- and large-sized hydraulic excavators and wheel loaders
• Collaboration with ITOCHU Corporation in Africa to respond to accelerating trend toward electrification in mining industry
• Expanding product lineup in Africa for increasing earnings of independent dealers
• Building efficient logistics in CIS market
• Maintaining and strengthening competitiveness over Chinese brands in CIS
• Value Based Selling (VBS) training for dealers in Middle East
• Expanding parts warehouse and introducing a warehouse management system (WMS) in Middle East
• Developing and producing products that meet the needs of customers in Southeast Asia and surrounding areas (Indonesia)
• Expanding into Middle East, Africa, Europe and other regions (Indonesia)
• Building a new parts remanufacturing plant in Indonesia
• Widespread use of ConSite in Southeast Asia
• Developing innovative solutions such as Modularisation in Oceania
• Partnering with key customers in Oceania
• Evolving and refining reuse procedures in remanufacturing facilities in Oceania
• Organizational restructuring and strengthening business in China
• Developing sales strategies in China with a focus on large-size hydraulic excavators for mining
• Reforming business structure of sales companies and dealers in China
• Establishing a new company to oversee sales and service operations in China
• Promoting reforms at each dealer in China
• Improving productivity at construction sites in Japan with “P-Line” and “Solution Linkage MG”
• Focusing on use of battery-powered electric excavators and remanufactured parts in Japan
• Establishing a business model as a manufacturer’s rental service in Japan
• Strengthening collaboration with business partners in Japan
• Expanding the ICT solutions business in Japan
• Opening “ZERO EMISSION EV-LAB” research facility in Japan to promote collaborative creation with customers and partners

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Not disclosed

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Not disclosed

Awards & Recognition

• Not disclosed