Climate Change Data

Environmental Metrics

ESG Focus Areas

• Offering Products and Services with High Value
• Securing Transparency of Management
• Consideration for Employees
• Environmental Protection
• Management Systems

Environmental Achievements

• Reduced CO2 emissions per unit of sales by 16.3% compared with the previous year, and by 23% from the FY2004 level.
• Reduced landfill waste by 33% compared to the previous fiscal year, achieving the FY2014 target of 1% or less of total waste.

Social Achievements

• Significant decrease in the number of accidents, driving down the accident frequency rate to 0.13.
• Introduced an upgraded childcare/nursing care leave scheme.

Governance Achievements

• Established a “hotline” system for reporting or consulting from employees.
• Improved corporate governance system to speed up and maintain flexibility in business execution.

Climate Goals & Targets

Environmental Challenges

• Global warming, environmental contamination, depletion of natural resources, and other cases of natural environmental degradation.
• Increasing number of accidents caused by misuse of welfare equipment.
• Mental health problems among employees.

Mitigation Strategies

• Formulated Environmental Philosophy and Environmental Action Plan.
• Promoted close call reporting, hazard prediction training, and risk assessments.
• Organized various seminars and lectures on mental health.
• Introduced a group-wide health management system.

Supply Chain Management

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G3 Guidelines

Certifications: ISO 14001

Sustainable Products & Innovation

• Highly efficient wind turbine drive units
• Solar tracking systems

Awards & Recognition

• Recognition of TQM Achievement under the Japan Quality Recognition Award 2008
• Internet IR awards from Daiwa Investor Relations Co., Ltd. for five consecutive years since 2006
• Internet IR Excellent Company Award in 2010
• Named by Nikko Investor Relations Co., Ltd. as one of the best companies in the Listed Company Website Quality Ranking for five consecutive years since 2006

Environmental Metrics

ESG Focus Areas

• Offering Products and Services with High Value
• Securing Transparency of Management
• Consideration for Employees
• Environmental Protection
• Management Systems
• Fair and Proper Corporate Activities

Environmental Achievements

• Reduced CO2 emissions per unit of sales by 5.4% compared with the previous year, and by 26.8% from the FY2004 level
• Reduced landfill waste by 33% compared to the previous fiscal year, achieving the FY2014 target of 1% or less for two consecutive years
• Installed 400 kW solar panels on the roof of the Tarui Plant, reducing CO2 emissions by 241 tons a year

Social Achievements

• Increased employment rate of people with disabilities for four consecutive years
• Number of new female employees recruited exceeded the initial goal in FY2011
• Introduced an Employee Assistance Program (EAP) in FY2011

Governance Achievements

• Established a “hotline” system for reporting or consulting from employees
• Designated October every year as “Corporate Ethics Month” to raise awareness of compliance
• Started an e-learning program for compliance education

Climate Goals & Targets

Environmental Challenges

• Increased number of industrial accidents in FY2011, mainly due to the rapid increase in new recruits
• Increased total volume of water used in FY2011 due to increased production at the Tarui Plant
• Increased total volume of PRTR substances used in FY2011

Mitigation Strategies

• Implementing preventive safety management through risk assessments and improving the quality of the newcomer training program
• Working to improve logistics efficiency to reduce energy consumption in transportation
• Working in close cooperation with paint manufacturers and customers to promote a switch to alternative eco-friendly paints and water-based cleaning solvents

Supply Chain Management

Responsible Procurement

• CSR provisions included in the Basic Purchase Agreement

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: GRI G3 Guidelines

Certifications: ISO 14001

Third-party Assurance: PricewaterhouseCoopers Aarata Sustainability Certification Co., Ltd.

Sustainable Products & Innovation

• Intelligent Eco Door System
• Solar tracking drive equipment
• High-efficiency drive unit for wind turbine generators

Awards & Recognition

• Internet IR awards from Daiwa Investor Relations Co., Ltd. for six consecutive years
• Internet IR Excellent Company Award in 2011
• Named by Nikko Investor Relations Co., Ltd. as one of the best companies in the Listed Company Website Quality Ranking for six consecutive years

Environmental Metrics

ESG Focus Areas

• Value Creation through Products and Technology Enhancement
• Stakeholder Relationship Building
• Quality and PL Management
• Human Rights and Labor Practices
• Safety and Health Management
• Diversity
• Human Resource Development
• Environmental Management
• Climate Change Mitigation
• Waste Management
• Fair and Equitable Business Activities
• Supply Chain CSR
• Community Engagement
• Corporate Governance
• Risk Management and Compliance

Environmental Achievements

• Reduced CO2 emissions per unit of sales by 5.1% year-on-year and 37.7% compared to 2004.
• Achieved a zero-emission rate of 0.29%, exceeding the target of 1% or less.
• Reduced landfill waste by 33% year-on-year.
• Installed a 400kW solar power generation panel at the Tarui factory, reducing CO2 emissions by 261 tons.

Social Achievements

• Improved employee safety incident rate from 0.61% to 0.40%.
• Increased the number of foreign employees to 10, exceeding the target of 30%.
• Maintained a female employment rate of 20% in new graduate recruitment.
• Implemented various work-life balance initiatives, including a no-overtime day and increased childcare leave.

Governance Achievements

• Established a remuneration committee to ensure fair compensation for directors and executives.
• Implemented a robust internal control system.
• Strengthened corporate governance through the establishment of a management committee and a group audit system.
• Actively engaged in stakeholder engagement through participation in SRI/ESG subcommittees.

Climate Goals & Targets

Environmental Challenges

• Slowdown in the Chinese construction machinery market leading to decreased performance in the hydraulic equipment business.
• Increased costs due to yen depreciation.
• Supply chain disruptions.
• Climate-related risks such as extreme weather events.

Mitigation Strategies

• Consolidated hydraulic equipment manufacturing facilities in China to reduce fixed costs.
• Acquired Haiesuto Corporation to expand the hydraulic equipment product lineup.
• Developed alternative sourcing strategies.
• Implemented measures to mitigate climate-related risks, such as updating air conditioners, heat-resistant painting, and snow countermeasures.

Supply Chain Management

Supplier Audits: 1,105 companies surveyed using SAQs (Self Assessment Questionnaires)

Responsible Procurement

• Nabtesco Group CSR Procurement Policy, including compliance, human rights, labor standards, environmental protection, and community engagement.

Climate-Related Risks & Opportunities

Physical Risks

• Extreme weather events

Transition Risks

• Regulatory changes, market shifts

Opportunities

• Development of energy-efficient products and services

Reporting Standards

Frameworks Used: GRI (Global Reporting Initiative), ISO 26000, UNGC (United Nations Global Compact)

Certifications: ISO 14001 (Environmental Management System), OHSAS 18001 (Occupational Health and Safety Management System)

Third-party Assurance: Bureau Veritas Japan

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Energy-efficient products across various business segments.

Awards & Recognition

• Energy Management Excellent Business Operator Award (Chubu Bureau of Economy, Trade and Industry)
• Boeing Supplier of the Year (2014)

Environmental Metrics

ESG Focus Areas

• Socially Beneficial Products and Services
• Focusing on Employees’ Growth and Development
• Striving for Harmony with Global Environment
• Implementation of Fair and Proper Business
• Consideration of Community and Society
• Ensuring Management Transparency

Environmental Achievements

• Achieved a 16% reduction in CO2 emissions per unit of sales globally, exceeding the FY2015 target.
• Reduced CO2 emissions in Japan (excluding Hyest Corporation) by 1,030 tons compared to the previous year.
• New plants are expected to be 40% more energy-efficient than conventional facilities.

Social Achievements

• Maintained employee turnover rate around 1% for the past five years.
• Donated 270 Assist Wheel® electric wheelchairs.
• Achieved a 2% employment rate of persons with disabilities.

Governance Achievements

• Established the Nabtesco Corporate Governance Basic Policy.
• Appointed a third outside director, resulting in three outside directors on the 10-member Board of Directors.
• Established a Nomination Committee.

Climate Goals & Targets

Environmental Challenges

• Sluggish Chinese market, particularly decreased demand in the Hydraulic Equipment Business and postponement of the Chinese high-speed railway project.
• Delayed launch of the solar thermal power generation market.
• Stagnant demand from ASEAN countries in the Commercial Vehicle Equipment Business.

Mitigation Strategies

• Consolidated two plants in China into one, reducing production capacity and recognizing an impairment loss in the Hydraulic Equipment Business.
• Promoting the maintenance, repair, and overhaul (MRO) business.
• Expanding the MRO business more aggressively, particularly for the transport equipment segment.
• Actively pursuing M&A to accelerate growth and expand technologies and product lines.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Established Nabtesco Group CSR-Oriented Procurement Policy.
• Basic Purchase Agreement with new suppliers includes compliance, environmental considerations, occupational health and safety, and elimination of anti-social forces.

Climate-Related Risks & Opportunities

Physical Risks

• Flooding

Transition Risks

• Changes in demand for construction machinery in China
• Delayed launch of solar thermal power generation market

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: GRI G4 Sustainability Reporting Guidelines, SASB

Certifications: ISO 14001, OHSAS 18001 (three major plants)

Third-party Assurance: Lloyd’s Register Quality Assurance Limited

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Compact Actuator AF Series (energy-efficient)

Awards & Recognition

• 2013 and 2014 Boeing Supplier of the Year Awards
• Institutional Investor Best IR Professional (machinery sector, buy side) award for Toshihiro Matsumoto

Environmental Metrics

ESG Focus Areas

• Governance
• Social
• Environmental

Environmental Achievements

• Reduced CO2 emissions per unit of sales globally; set medium-term target to achieve at least 9% reduction from the base year and long-term targets to reduce CO2 emissions by 30% in FY2030 and by 80% in FY2050.
• Achieved a 44% reduction in landfill waste from the previous fiscal year; Zero Emission rate was 0.06%, exceeding the FY2017 target rate of 0.1% or below.
• Increased investment in environment-friendly equipment to 2.3 times the previous fiscal year's budget; installed geothermal air-conditioning and zero liquid discharge systems.

Social Achievements

• Employee turnover rate remained around 1%; promoting work style reforms and workplace diversity.
• Implemented measures to respect human rights based on the Nabtesco Group Code of Ethics and the Nabtesco Group Human Rights Policy.
• Donated 38 units of welfare devices in 2017, bringing the accumulated total to 308.

Governance Achievements

• Established the Nomination Committee, Remuneration Committee, and Compliance Committee; annually evaluates the effectiveness of the Board of Directors.
• Affirmative vote rate of selected directors was over 97% for the past five years, exceeding the average for listed companies in Japan.
• Implemented a global compliance system and internal reporting system; established the Nabtesco Group Anti-Bribery Policy.

Climate Goals & Targets

Environmental Challenges

• Shortage of labor in Japan; increasing need for work style reform.
• Competition in the market with leading European companies.
• Risks related to the economy and market trends, overseas business expansion, competition, intellectual property, large-scale disasters, and the environment.

Mitigation Strategies

• Implementing measures for work style reform, including personnel system reform, operational reform, production reform, and cultural reform.
• Expanding product lineups and fostering a shift from selling components to cross-selling of hydraulic equipment and further proposals of optimal hydraulic systems.
• Implementing a global compliance system and internal reporting system; established the Nabtesco Group Anti-Bribery Policy.

Supply Chain Management

Supplier Audits: SAQ survey implemented to 1,047 suppliers (919 in Japan, 128 in China)

Responsible Procurement

• Nabtesco Group CSR-Oriented Procurement Policy; based on ISO 26000, UN Guiding Principles on Business and Human Rights, and EICC Code of Conduct.

Climate-Related Risks & Opportunities

Physical Risks

• Heavy rain falls and risk of rainwater flooding plants.

Transition Risks

• Strengthening of climate change-related laws and regulations.

Opportunities

• Development of energy-efficient products; promoting the use of renewable energy and introducing private hybrid power generation equipment using hydrogen.

Reporting Standards

Frameworks Used: Integrated Reporting Framework, Intangibles Reporting Framework, GRI, SASB, SDGs

Certifications: ISO 14001, IRIS, Science Based Targets (SBT)

UN Sustainable Development Goals

• Goal 4
• Goal 7
• Goal 9
• Goal 11
• Goal 12
• Goal 13
• Goal 17

Material CSR issues are aligned with relevant SDGs; initiatives contribute to achieving these goals.

Sustainable Products & Innovation

• Energy-saving and environment-related products

Awards & Recognition

• Prime Business Award from JIRA (2012)
• Best IR Award from JIRA (2017)
• Boeing Supplier of the Year Awards (2014, 2015, 2016)
• Boeing Performance Excellence Award (2015, 2016, 2017)
• Commendation from the Minister of Economy, Trade and Industry at the FY2018 Intellectual Property Achievement Awards

Environmental Metrics

ESG Focus Areas

• CO2 emissions reduction
• Human rights
• Management materiality

Environmental Achievements

• CO2 emissions reduced by 25% (Baseline year: fiscal 2015/aligned with the SBT 1.5-degree Celsius target)
• Progress with production reforms at plants
• Increased operational efficiency through an ICT-based production management system
• Promoted plant automation

Social Achievements

• Reduced average overtime work hours
• Increased the rate of outside directors
• Enhance Human Capital Management

Governance Achievements

• Increased the rate of outside directors
• Identified management materiality
• Regularly reviewing management materiality

Climate Goals & Targets

Environmental Challenges

• Declining operating profit margin since FY2015/3
• Significant decrease in profitability of CMP
• Loss of “earning power.”
• Maintaining high market share in each business
• ROIC management target of 10% or higher not met (forecast for the final year is 3.2%)
• Conglomerate discount

Mitigation Strategies

• Launched Project 10 to regain earning power
• Business portfolio management
• Aiming for a conglomerate premium transformation and a market capitalization of ¥500.0 billion
• Upgrading management practices
• Regularly reviewing management materiality

Supply Chain Management

Climate-Related Risks & Opportunities