Climate Change Data

Environmental Metrics

ESG Focus Areas

• Energy conservation
• Environmental protection
• Corporate social responsibility (CSR)
• Global warming countermeasures
• Compliance

Environmental Achievements

• Used environmentally friendly paper and printing methods for this publication
• Plants in Japan reduced CO2 emissions below fiscal 2006 levels in fiscal 2010 despite a production volume recovery
• Plants outside Japan achieved a 13.9% reduction in CO2 emissions per production unit (vs. fiscal 2008), exceeding their 2% target
• Substantially exceeded the target for reducing energy consumed per transportation volume in distribution through modal shift and other initiatives
• Developed an original yardstick for quantitatively evaluating the environmental friendliness of products (NSK eco-efficiency indicators - Neco)

Social Achievements

• Supported educational initiatives for children worldwide, including study tours and science classes
• Assisted students through internships and work experience programs, technology seminars, and scholarships
• Donated refurbished personal computers to developing countries
• Included three non-Japanese members in senior management team

Governance Achievements

• Strengthened governance structure by adopting the “Company with Committees” system
• Established an Audit Committee, a Compensation Committee, and a Nomination Committee
• Reinforced internal control structure by establishing NSK Group Management Rules
• Established a “Hotline” whistle-blower system

Climate Goals & Targets

Environmental Challenges

• The Great East Japan Earthquake of March 11, 2011, caused some equipment damage and supply chain disruptions
• Concerns over European sovereign debt, exchange rate volatility, and the ending of economic stimulus measures
• Increased competition in growth sectors and regions
• Rising prices of raw materials
• Yen appreciation
• Intensifying cost competition in the automotive industry

Mitigation Strategies

• Resumed normal operations within approximately 10 days of the earthquake
• Used alternative suppliers to fulfill supply obligations
• Increased production capacity at overseas plants to manufacture 50% of products outside Japan
• Implemented profitability enhancement measures, including cost reduction initiatives
• Strengthened overseas manufacturing capability and localized operations
• Adjusted product mix to strengthen business structure
• Collaborated with Toshiba Corporation to establish ADTech Corporation for developing electronic control technology for steering

Supply Chain Management

Responsible Procurement

• Promoting local purchasing of raw materials, components, and equipment

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Dow Jones Sustainability Indexes, FTSE4Good Index Series, Ethibel Investment Register, Morningstar Socially Responsible Investment Index

Sustainable Products & Innovation

• Environmentally friendly products
• Cold-formed hub unit bearings
• One-way clutch and bearing for automotive idling stop systems

Awards & Recognition

• 2010 R&D 100 Awards (one-way clutch and bearing for automotive idling stop systems)

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Reduced electricity consumption per production unit by up to 7.4% year on year in Japan and up to 33% year on year at headquarters; average energy consumption per unit of production over a two-year period fell 9% from fiscal 2009. Developed energy-efficient bearings for motors that reduce friction loss by one-half.
• Developed High-Reliability, Low-Torque Ball Bearings for Continuously Variable Transmissions, improving bearing life approximately 2.5 times compared to current products and lowering torque as much as 30%.

Social Achievements

• Provided monetary assistance and support to areas affected by the Great East Japan Earthquake and the large-scale flooding in Thailand; implemented employee volunteer activities and donation of used stamps.
• Established the Compliance Committee (March 15, 2012) and the Compliance Enhancement Office (July 1, 2012) to strengthen compliance.

Governance Achievements

• Strengthened governance structure by adopting a “Company with Committees” system; established an Audit Committee, a Compensation Committee, and a Nomination Committee.
• Revised the NSK Code of Corporate Ethics, the NSK Corporate Governance Rules, and the Compliance Rules; established new “Rules for Compliance with the Competition Law”.

Climate Goals & Targets

Environmental Challenges

• Great East Japan Earthquake and flooding in Thailand significantly affected business activities; slowing economic growth in emerging countries and fiscal and financial crises in Europe created uncertainty.
• Strong yen and electricity shortages in Japan posed challenges.
• Intensifying global competition.
• Investigations by the Japan Fair Trade Commission and other authorities regarding sales of bearings.

Mitigation Strategies

• Worked to maintain stable supply conditions, ensure quality, and increase sales and profits.
• Increased overseas production ratio, reduced direct costs through localization and local procurement, increased efficiency of existing facilities, and expanded supply chain base.
• Implemented measures to strengthen profitability, focusing resources on key areas and considering strategic alliances; further increased management transparency.
• Established the Compliance Committee and Compliance Enhancement Office; revised internal rules and implemented enhanced compliance education.

Supply Chain Management

Responsible Procurement

• NSK Supplier CSR Guidelines distributed to major suppliers in Japan and overseas.

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: Dow Jones Sustainability Indexes, FTSE4Good Index Series, Ethibel Investment Register, Morningstar Socially Responsible Investment Index

Sustainable Products & Innovation

• Energy-efficient bearings for motors
• High-Reliability, Low-Torque Ball Bearings for Continuously Variable Transmissions

Environmental Metrics

ESG Focus Areas

• Governance
• Quality Assurance
• Good Labor Practices
• Working with Local Communities
• Environment

Environmental Achievements

• Reduced CO2 emissions per value-added production unit by 10.2% in Japan and 28.3% outside Japan (base year: FY2011)
• Maintained zero emissions (landfill disposal rate was 0.001%) in Japan
• Achieved a waste recycling rate of 99.999% in Japan
• Reduced water withdrawal per production unit by 25.2% in Japan and 23.2% outside Japan (base year: FY2011)
• Created 12 environmentally friendly products

Social Achievements

• Held the 4th Global Management College
• Distributed NSK Group Social Action Program intranet booklet (Japanese/English) to all business sites
• Continued providing human rights training through e-learning
• Increased number of men taking childcare leave
• Increased employment rate for persons with disabilities

Governance Achievements

• Strengthened corporate governance in response to the Japan's Corporate Governance Code
• Enhanced and accelerated dissemination of NSK Group rules
• Conducted internal audits of finance, purchasing and compliance
• Held trainings on compliance
• Revised the NSK Code of Corporate Ethics

Climate Goals & Targets

Environmental Challenges

• One incident of drainage standards being exceeded at a site in Japan and two incidents of standards being exceeded under regulations related to volatile organic compounds (VOCs) at a site in Europe
• Two types of oil solution have not been phased out yet.
• Investigation by relevant antitrust authorities in various countries for sales of certain products
• Korea Fair Trade Commission ruled that NSK had violated competition law

Mitigation Strategies

• Improved management by installing a grease trap
• Plans underway to switch to a cleaning liquid that does not contain VOCs
• Strengthening compliance education for manufacturing divisions
• Ensuring all employees are aware of the whistleblowing system
• Implemented compliance strengthening measures (system strengthening, education and awareness raising activities, strengthened monitoring)

Supply Chain Management

Supplier Audits: 44 audits in Japan and 12 outside Japan in FY2014

Responsible Procurement

• NSK Supplier CSR Guidelines
• NSK Green Procurement Standards

Climate-Related Risks & Opportunities

Physical Risks

• Abnormal weather (typhoons, torrential rainfall, droughts, forest fires, heat waves)

Reporting Standards

Frameworks Used: GRI G4 Sustainability Reporting Guidelines, ISO 26000:2010 Guidance on Social Responsibility, Environmental Reporting Guidelines (2012 edition) by the Ministry of the Environment of Japan

Certifications: ISO 14001, ISO 9001, ISO/TS 16949

Sustainable Products & Innovation

• Environmentally friendly products (202 total since 2002, 12 in 2014)

Environmental Metrics

ESG Focus Areas

• Governance
• Social
• Environmental

Environmental Achievements

• Reduced CO2 emissions per production unit by 8.4% in Japan (base year: FY2011) and 27.0% outside Japan (base year: FY2011)
• Maintained zero emissions (landfill disposal rate no more than 0.01%) in Japan
• Achieved a waste recycling rate of 99.9999% in Japan
• Completely phased out use of machining fluids containing chlorine additives

Social Achievements

• Continued holding the NSK Global Management College
• Conducted awareness building activities through training and education in priority areas for social contribution
• Distributed a CSR Communication Report introducing case studies to employees

Governance Achievements

• Improved corporate governance structure to reflect Japan’s amended Companies Act and other social requirements such as the Corporate Governance Code
• Established group internal audit standards and rules
• Expanded scope of compliance training and enhanced training content

Climate Goals & Targets

Environmental Challenges

• Risks associated with procurement
• Risks associated with disasters at outside Japan sites
• Slowdown in production growth in some regions outside Japan

Mitigation Strategies

• Continued to develop replacements for parts
• Visualized global supply chain data
• Implemented measures to minimize damage from severe disaster risks
• Improved productivity and increased operations that emit comparatively lower amounts of CO2

Supply Chain Management

Supplier Audits: 38 key suppliers in Japan and 29 outside Japan audited in FY2015

Responsible Procurement

• NSK Supplier CSR Guidelines
• NSK Group Green Procurement Standards

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Not disclosed

Opportunities

• Development of energy-efficient products

Reporting Standards

Frameworks Used: GRI G4 Sustainability Reporting Guidelines, ISO 26000: 2010 Guidance on Social Responsibility

Certifications: ISO 14001

Third-party Assurance: Sustainability Accounting Co., Ltd. and Japan Quality Assurance Organization

UN Sustainable Development Goals

• Not disclosed

Not disclosed

Sustainable Products & Innovation

• Environmentally friendly products (211 developed since 2002)

Awards & Recognition

• Award for Excellence in Quality from Aichi Machine Industry Co., Ltd.
• Zero Award from Toyota Motor Corporation

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Reduced greenhouse gas emissions by 17.6% from FY2017 to FY2019 (Scope 1 and 2).
• Increased renewable energy use from 0.02% in FY2016 to 2.8% in FY2019.
• Achieved a 98.6% recycling rate for waste in FY2019.

Social Achievements

• Reduced lost time injury frequency rate from 0.68 in FY2017 to 0.35 in FY2019.
• Increased number of employees who took childcare leave from 75 in FY2016 to 162 in FY2019.
• Maintained 100% labor union participation rate for non-management employees in Japan.

Governance Achievements

• Increased percentage of independent outside directors from 33.3% in FY2016 to 55.6% in FY2019.
• Maintained a 100% attendance rate for the Audit Committee.
• No serious legal violations, incidents/accidents, penalties for corruption/bribery, or violations of competition law reported.

Climate Goals & Targets

Environmental Challenges

• Decrease in production volume leading to increased emissions per unit of sales.
• Challenges with recycling certain wastes in China and the UK, and securing recyclers in the Americas.
• Lower loading efficiency caused by a decrease in volume and an increase in truck shipments for individual transport loads.

Mitigation Strategies

• Implementing measures to improve production efficiency, convert to better fuels, and convert to renewable energy.
• Improving water management and the effective use of water through recycling and other measures.
• Taking steps to improve logistics efficiency such as revising transport routes.

Supply Chain Management

Supplier Audits: 124 companies audited in FY2019

Responsible Procurement

• Green Procurement Standards

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

• 232 environmentally friendly products developed by FY2019

Awards & Recognition

• Not disclosed

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• GHG emissions per production unit: 10.2％ decrease (Japan), 33.2％ decrease (excluding Japan) compared to the base date of the year ended March 31, 2012 (0%).
• Development of 219 environmentally friendly products (cumulative total)

Social Achievements

• Lost-worktime injury rate (global): 0.68 (0.70 in the previous fiscal year)
• Diversity (Global): Proportion of female employees 17.6％ (17.3% in the previous fiscal year)
• Introduced an in-house childcare service in Japan on days when employees work on national holidays and public childcare services are closed.
• Started a trial work-at-home program for employees raising children in Japan.

Governance Achievements

• Independent director took over the role of heading the Nominating Committee since the June 2017 Ordinary General Meeting of Shareholders.

Climate Goals & Targets

Environmental Challenges

• Profitability in the Industrial Machinery Business is still not at a satisfactory level.
• Room for improvement in safety and quality performance.
• Decline in demand in the Industrial Machinery Business.
• Intensifying rivalry in emerging markets with local manufacturers and those from developed countries.
• Temporary slowing of NSK’s EPS business growth in light of an expected rise in demand mainly for lower-assist rack-type EPS centered on large vehicles.
• Risk of incurring significant costs or a decline in the Company’s social responsibility in the event of defects that lead to product liability.

Mitigation Strategies

• Reorganization of production network (gradually transferring part of its production from the Fujisawa plant to new facilities at its Kirihara site).
• Transferring production of large and ultra-large bearings used in wind power generation to its Shenyang plant in China.
• Strengthening cost competitiveness by reorganizing production and upgrading manufacturing methods.
• Clarifying target markets and focusing on areas requiring advanced technologies in the Automotive Business.
• Conducting design reviews and working to accelerate global procurement in the Automotive Business.
• Developing new rack-type EPS systems.
• Establishing systems designed to ensure high quality and utilizing insurance that allows a certain level of risk cover.

Supply Chain Management

Supplier Audits: Approximately 500 suppliers in Japan conducted a self-assessment, and 87% responded.

Responsible Procurement

• NSK Supplier CSR Guidelines
• Basic business contracts contain clauses that pertain to ESG (Environment, Society, and Governance).

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: International Integrated Reporting Framework of the International Integrated Reporting Council (IIRC)

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 9 (Industry, innovation and infrastructure)
• Goal 12 (Responsible consumption and production)

Sustainable Products & Innovation

• Environmentally friendly products that help customers conserve energy and resources

Awards & Recognition

• Eruboshi
• Kurumin

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• 13.8% reduction in greenhouse gas emissions related to production in Japan
• 21.7% decline in greenhouse gas emissions outside of Japan
• Development of 226 environmentally friendly products (cumulative)

Social Achievements

• Strengthened workplace safety initiatives, resulting in a declining trend in the lost-time injury frequency rate globally
• Promoting diversity and inclusion, with a focus on empowering women and increasing the ratio of female managers and candidates
• Conducting employee awareness surveys to understand employee satisfaction and engagement

Governance Achievements

• Board of Directors evaluation conducted by a panel of external experts since 2015, maintaining a high level of effectiveness
• Proactive efforts to respond to Japan’s Corporate Governance Code
• Reduction of cross-shareholdings deemed to have little benefit in increasing mid- to long-term corporate value

Climate Goals & Targets

Environmental Challenges

• Country risk management in China
• Changes in the automotive industry due to EV and autonomous driving trends and the rise of carsharing
• Competition from Chinese manufacturers
• Shrinking workforce due to declining birthrate and aging population

Mitigation Strategies

• Internalization in China by localizing top management and incorporating external views
• Developing new products for improving EV functionality and engaging with new players in the automotive industry
• Leveraging NSK's accumulated analytical power and expertise to solve problems and provide technical proposals
• Introducing NSK’s Smart Factories and developing automated production facilities and processes

Supply Chain Management

Responsible Procurement

• NSK Supplier CSR Guidelines
• Conflict minerals surveys
• Green Procurement Standards
• Regular meetings on technology and quality
• Supplier Safety Confirmation System

Climate-Related Risks & Opportunities

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (IIRC), Guidance for Collaborative Value Creation (METI)

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 8 (Decent work and economic growth)
• Goal 13 (Climate action)
• Goal 9 (Industry, innovation and infrastructure)

NSK contributes to these goals through its products and services, as well as its internal initiatives.

Sustainable Products & Innovation

• Environmentally friendly products

Environmental Metrics

ESG Focus Areas

• Environment
• Social
• Governance

Environmental Achievements

• Decreased total volume of CO2 emissions in fiscal 2019 (although this was due to a drop in production, and CO2 emissions per production unit were worse)
• 99% recycling ratio at production bases worldwide
• Contribution to reducing CO2 emissions was 1.57 million tons in fiscal 2019

Social Achievements

• Increased the number of women in management positions
• Established the NSK Americas Women’s Development Program
• Held seminars on balancing work and caregiving

Governance Achievements

• Changed the composition of NSK’s Board of Directors to a majority of 5 outside directors and 4 internal directors
• Increased the number of ESG metrics in the director/executive officers’ compensation system
• Renewed takeover defense measures

Climate Goals & Targets

Environmental Challenges

• Economic slowdown and sluggish demand due to prolonged trade friction between the U.S. and China and the spread of COVID-19
• Difficulty in recruiting engineers
• Increasingly intense weather conditions due to global warming

Mitigation Strategies

• Reducing outflow costs, limiting capital investment, optimizing production system, and reducing fixed costs
• Holding science classes for elementary school students and publishing a comic book on bearings
• Strengthening response to severe weather scenarios, preventing oil and waste material leaks from plants

Supply Chain Management

Supplier Audits: 40 companies audited in fiscal 2019

Responsible Procurement

• NSK Supplier CSR Guidelines
• CSR self-assessments by suppliers
• Follow-up action based on audit results

Climate-Related Risks & Opportunities

Physical Risks

• Frequent heavy rainfall in various areas

Transition Risks

• Changes in environmental regulations

Opportunities

• Development of energy-efficient products
• Contribution to wind and solar power generation

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (IIRC), Environmental Reporting Guidelines (2018) issued by Japan’s Ministry of the Environment, Guidance for Collaborative Value Creation formulated by Japan’s Ministry of Economy, Trade and Industry

Certifications: ISO 45001

Third-party Assurance: Third-party assurance provider (name not specified in report)

UN Sustainable Development Goals

• Goal 7 (Affordable and clean energy)
• Goal 9 (Industry, innovation and infrastructure)
• Goal 12 (Responsible consumption and production)
• Goal 13 (Climate action)
• Goal 17 (Partnerships for the goals)

NSK aims to contribute to the achievement of the SDGs by continuing to create collaborative value with stakeholders.

Sustainable Products & Innovation

• Environmentally friendly products with Neco scores of at least 1.2

Awards & Recognition

• Winner Company in the 2019 Corporate Governance of the Year Awards
• WICI Japan Award for the Best Integrated Reporting Grand Prize
• Excellence award for environmental communication

Environmental Metrics

ESG Focus Areas

• Climate Change
• Diversity & Inclusion
• Governance
• Environmental Protection
• Human Rights
• Supply Chain Sustainability

Environmental Achievements

• Substantially offset CO2 emissions (Scope 1, 2, and 3) from its business activities by helping to reduce customers’ CO2 emissions through the Company’s products by 2026.
• Reduced CO2 emissions in business activities by 31% compared with fiscal 2017 by 2020.
• Developed the world’s first biomass plastic heat-resistant resin cage for rolling bearings made mainly from plant-based biomass materials.
• Increased renewable energy share to 9.6% of total energy use in 2020.

Social Achievements

• Selected as a Nadeshiko Brand for the second consecutive year.
• Retained Kurumin certification (certification recognizing companies with parent-friendly HR policies and programs).
• Improved paternal leave acquisition rate by 23.5 points against the previous fiscal year.
• Retained certification as an Outstanding Health and Productivity Management Organization (White 500) for the fourth consecutive year.

Governance Achievements

• Strengthened the monitoring functions of the Board by having outside directors form the majority.
• Incorporated ESG evaluation metrics into performance-based compensation for executive officers.

Climate Goals & Targets

Environmental Challenges

• Supply chain disruptions due to the COVID-19 pandemic and global economic slowdown.
• Soaring material costs.
• Decreased demand for products geared toward internal combustion engines and transmissions due to the transition to decarbonization/electrification.
• Increasingly sophisticated decarbonization requests from customers.
• Securing globally competent human resources.

Mitigation Strategies

• Securing an appropriate level of liquidity on hand as a COVID-19 measure.
• Promoting decarbonization in NSK business activities.
• Employing self-help efforts to cut costs and appropriately reflect in pricing.
• Strengthening development, sales, and production of products for ZEV.
• Strengthening human resource management policies such as leveraging a diverse workforce, building more engaging workplaces, providing opportunities for growth.

Supply Chain Management

Supplier Audits: BCP audits of 30 major companies (Cumulative total of 100 companies since FY2018)

Responsible Procurement

• NSK Supplier CSR Guidelines
• Implementation of self-assessments based on the NSK Supplier CSR Guidelines

Climate-Related Risks & Opportunities

Physical Risks

• Increasingly severe natural disasters
• Production suspension due to in-house flood damage
• Supply suspension due to flood damage at suppliers

Transition Risks

• Transition to decarbonization/electrification
• More stringent regulations pertaining to greenhouse gas emissions
• Rising carbon prices

Opportunities

• Rising decarbonization needs throughout the life cycle
• Increasing needs to cut CO2 emitted when users operate automobiles, machinery, etc.
• Electrification progress
• Rising demand for storage/charging technology
• Growing renewable energy demand

Reporting Standards

Frameworks Used: International Integrated Reporting Framework (IIRC), Guidance for Collaborative Value Creation (METI, Japan), TCFD Recommendations

Certifications: ISO 27001

Third-party Assurance: Third-party assurance provider (name not specified in report)

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)

NSK's initiatives contribute to these goals through environmentally friendly technologies, products that reduce CO2 emissions, and participation in open innovation projects.

Sustainable Products & Innovation

• Biomass plastic heat-resistant resin cage for rolling bearings

Awards & Recognition

• Nadeshiko Brand
• White 500

Environmental Metrics

ESG Focus Areas

• Carbon Neutrality
• Diversity and Inclusion
• Corporate Governance
• Supply Chain Sustainability
• Safety

Environmental Achievements

• Reduced CO2 emissions by approximately 25% compared with FY2017 levels
• Reduced emission intensity (emissions per unit production) by approximately 12%
• Switched major European plants to green power, enabling significant reductions in CO2 emissions
• Rainwater recycling at Newark Plant in the UK reduced annual tap water usage by 200,000 liters

Social Achievements

• Selected as a Nadeshiko Brand for three successive years
• Certified as an Outstanding Health and Productivity Management Organization (White 500) for five consecutive years
• Increased number of female managers and female candidates for managerial positions
• Awarded Gold status in the PRIDE Index 2021 for efforts in addressing LGBTQ+ issues

Governance Achievements

• Made the majority of Board members outside directors
• Welcomed female outside directors
• Appointed first female executive officer in 2018
• Adopted non-financial indicators in executive compensation

Climate Goals & Targets

Environmental Challenges

• Slowdown in growth due to U.S.-China trade friction, COVID-19 pandemic, and supply chain disruptions
• Shrinkage in the automotive market due to changes in steering technology trends and semiconductor shortages
• Difficulty in predicting future business conditions due to global economic fragmentation and inflation
• Supply chain risks due to climate events and geopolitical instability

Mitigation Strategies

• Portfolio reform through the “Bearings & Beyond” concept
• Structural reforms in the steering business
• Expansion of sales of eAxle bearings and wheel bearing units
• Development of collaboration strategy for steering business
• Strengthening supply capabilities and enhancing technical services
• Promoting alliances and M&As
• Implementing flood countermeasures
• Developing alternative sourcing strategies
• Strengthening BCP in production and supply chain

Supply Chain Management

Supplier Audits: 416 suppliers in Japan underwent CSR self-assessment in FY2020

Responsible Procurement

• NSK Supplier CSR Guidelines
• Fair, impartial, transparent, and socially and environmentally friendly transactions

Climate-Related Risks & Opportunities

Physical Risks

• Flooding
• Natural disasters

Transition Risks

• Regulatory changes (fuel efficiency, ZEV regulations)
• Rising carbon prices
• Decreased demand for ICE-related products

Opportunities

• Expanding demand for EV-related products
• Growing need for electrification of industrial machinery
• Rising demand for renewable energy and storage/charging technology
• Expanding demand for condition monitoring systems

Reporting Standards

Frameworks Used: TCFD

Certifications: ISO 27001, TISAX

Third-party Assurance: Third-party assurance provider (name not specified)

UN Sustainable Development Goals

• Goal 7 (Affordable and Clean Energy)
• Goal 9 (Industry, Innovation and Infrastructure)
• Goal 12 (Responsible Consumption and Production)
• Goal 13 (Climate Action)

NSK's initiatives contribute to these goals through its products and services, as well as its internal operations.

Sustainable Products & Innovation

• Environmentally friendly products contributing to CO2 emission reduction

Awards & Recognition

• Nadeshiko Brand
• White 500
• PRIDE Index Gold status
• Quality commendations from seven customers

Environmental Metrics

ESG Focus Areas

• Climate Change
• Resource Conservation and Recycling
• Reducing Use of Environmentally Harmful Substances
• Biodiversity Conservation
• Safety
• Quality
• Supply Chain Management
• Human Resource Management
• Corporate Governance

Environmental Achievements

• Reduced CO2 emissions by 43.6% from FY2017 levels in manufacturing, technology, and offices by FY2022.
• Avoided 2.29 million tons of CO2 emissions in FY2022 through product use.
• Reduced industrial waste per unit of sales by 13.2% from FY2017 in FY2022.
• Achieved a 99% recycling rate in FY2022.

Social Achievements

• Launched an initiative to increase the number of women in managerial positions to 100 by FY2024.
• Received the PRIDE Index Gold Award for three consecutive years for LGBTQ+ inclusiveness.
• Improved employee engagement survey scores in Japan and China in FY2022.
• Implemented various work-style reforms, including remote work and flextime.

Governance Achievements

• Endorsed the TCFD recommendations in January 2020.
• Established a Core Values Committee to address company-wide issues related to safety, quality, environment, and compliance.
• Implemented a robust risk management system.
• Maintained ISO 9001 and IATF 16949 certifications.

Climate Goals & Targets

Environmental Challenges

• Climate change impacts on the value chain (transition and physical risks).
• Supply chain disruptions.
• Managing environmentally harmful substances throughout the supply chain.
• Maintaining high safety standards across global operations.

Mitigation Strategies

• Developed a long-term environmental action plan with targets for CO2 emission reductions and carbon neutrality.
• Implemented green procurement standards and supplier CSR guidelines.
• Strengthened risk management systems and business continuity plans.
• Implemented various safety initiatives, including STOP6+2 activities and ISO 45001 certification.

Supply Chain Management

Responsible Procurement

• NSK Supplier CSR Guidelines
• NSK Group Green Procurement Standards
• ESG performance clauses in transaction agreements

Climate-Related Risks & Opportunities

Physical Risks

• Natural disasters

Transition Risks

• CO2 emission regulations

Opportunities

• Development of energy-efficient products
• Growth in markets related to mobility, renewable energy, and industrial machinery

Reporting Standards

Frameworks Used: GRI Standards, TCFD Recommendations

Certifications: ISO 14001, ISO 45001, ISO 9001, IATF 16949, TISAX

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)
• Goal 8 (Decent Work and Economic Growth)
• Goal 17 (Partnerships for the Goals)

The report details how NSK's initiatives contribute to these SDGs through various activities, including product development, supply chain management, and community engagement.

Sustainable Products & Innovation

• Environmentally friendly products with a Neco score of 1.2 or higher

Awards & Recognition

• PRIDE Index Gold Award (LGBTQ+)
• Mukaidono Safety Award (Encouragement Award)

Environmental Metrics

ESG Focus Areas

• Safety
• Quality
• Environment
• Compliance
• Human Rights
• Supply Chain Management
• Carbon Neutrality

Environmental Achievements

• Reduced CO2 emissions by 52% compared with FY2017 in FY2023, achieving its FY2026 target of 50% in advance.
• Increased the ratio of renewable energy being used to the Group’s total energy consumption from 21.5% in FY2022 to 34.5% in FY2023.
• Developed and launched bearings for gas turbine generator use in March 2024 with a new lubrication mechanism that significantly reduces the amount of lubricating oil the bearing requires.

Social Achievements

• Received the Gold award for the third consecutive year under the PRIDE Index in recognition of our various activities to empower the LGBTQ+ community.
• Implemented a new personnel system for managerial positions in FY2024, clearly defining the skills required for each position and documenting the expected roles and responsibilities.
• Increased the number of women in managerial positions and in the managerial candidate class to 100, our target for FY2024.

Governance Achievements

• Abolishment of takeover defense measures (May 2023)
• Issued sustainability-linked bonds (September 2023)
• Introduced a new Enterprise Risk Management (ERM) framework in FY2024, clearly setting out the “Three Lines of Defense” approach.

Climate Goals & Targets

Environmental Challenges

• Decline in global automotive production volume compared with Automotive Business assumptions made at the time of Mid-Term Management Plan formulation
• Continued sluggish demand against the backdrop of rising interest rates in many countries and a slowdown in the Chinese economy
• Global inflation including energy and labor costs
• Deterioration of the business environment
• Decline in real volume
• Decrease in profitability impacted by the drop in sales
• Risk of being unable to secure the globally competent human resources needed to expand business and implement strategies
• Risk of being too slow to embrace diverse work styles and review personnel systems and measures accordingly

Mitigation Strategies

• Resetting FY2026 financial targets based on changes in the business environment assumptions
• Portfolio reform through efforts to deepen and expand the application of core technologies
• Structural reforms and production reorganization
• Reduce the Group’s manufacturing-based business activity CO2 emissions
• Execute structural reform/production reorganization
• Reduce the Group’s manufacturing-based business activity CO2 emissions
• DX driving efficiency
• Unit cost reductions, transfer labor cost increases to sales prices
• Invest for sustainable growth
• Strengthen managerial resources
• ESG management

Supply Chain Management

Supplier Audits: Annual audits for both new and existing suppliers

Responsible Procurement

• NSK Supplier CSR Guidelines
• NSK Group Green Procurement Standards
• ESG clauses in basic business agreements
• Prohibition of conflict minerals

Climate-Related Risks & Opportunities

Physical Risks

• Not disclosed

Transition Risks

• Stricter regulations aimed at building a carbon-neutral society

Opportunities

• Strengthening development, production, and sales of products and services that contribute to energy conservation

Reporting Standards

Frameworks Used: GRI Standards, SASB Standards, TCFD, UNGC

Certifications: ISO 14001, ISO 45001, IATF 16949, ISO 9001

Third-party Assurance: Mizuho Trust & Banking Co., Ltd.

UN Sustainable Development Goals

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

NSK's initiatives contribute to these goals through energy conservation, development of environmentally friendly products, resource conservation, and carbon neutrality efforts.

Sustainable Products & Innovation

• Low-friction 3rd generation tapered hub unit bearings
• Next-generation high load capacity tapered roller bearings for wind turbines
• 7th generation low-friction tapered roller bearings for automotive transmissions
• Edible oil deterioration control filter
• Bearings for gas turbine generators for eVTOL

Awards & Recognition

• Gold award for the third consecutive year under the PRIDE Index