Material Issues for Sustainability

In 2019, the Nitto Group identified its material issues for sustainability (materiality) in a bid to simultaneously solving social issues and creating economic value. Amid the changing external environment with sustainability and ESG (Environment, Society, and Governance) assuming growing importance worldwide, the Nitto Group announced that it would place ESG at the core of its management. Accordingly, the Group revisited its material issues for sustainability in order to become an “essential” entity for the global environment, humankind, and society, as well as the general public, further driving sustainable growth.

Identification Process

These material issues have been selected and identified as such from issues deemed important as they might affect the company and its stakeholders (the environment and society) over the long term. In implementing them, we identify risks and opportunities associated with each issue and reflect them in our business plans.

Criteria of sustainability

Risks and Opportunities, KPIs / Targets for FY2030

Ideal State: Protecting the future Earth

Material Issues for Sustainability	Risks	Opportunities	Implementation Details	KPIs / Targets for FY2030
Realizing a decarbonized society	Difficulty in continuing business activities due to delay in responding to the decarbonized society Increase in difficulty in sales of existing products as environmental regulations are tightened	Increase in productivity due to a shift to eco-friendly production lines that meet the demand for GHG reduction Increase in business opportunities by providing products with a low carbon footprint	Reduction in GHG emissions	CO₂ emissions: 400 kton/year
Realizing a circular society	Shut-downs due to increased cost and difficulty in procurement Decrease in competitive edge due to delay in innovating waste disposal and developing new technologies	Increase in demand for technologies/products for cyclic use of various resources/materials Cost reduction and efficient use of resources by waste reduction and recycling	Promotion of cyclic use of raw materials, energy, and waste	Waste plastics recycling ratio: 60% Sustainable materials procurement ratio: 30%
Conserving biodiversity	Health hazards to stakeholders due to air, water, or soil pollution Increase in the cost for compliance and difficulty in obtaining operational licenses	Acquisition of trust from local communities and customers by properly managing pollutants and hazardous substances Increase in demand for technologies/products that contribute to separation, removal, purification or otherwise, of hazardous substances	Prevention of air, water, and soil pollution	* Managing by internal KPIs
Creating PlanetFlags	Decrease in order volume in case of falling behind in addressing environmental need Inadequate response to social demand for environmental conservation	Increase in business opportunities by providing low-carbon-footprint or carbon-negative products Creation of new markets and business models by accumulating biodiversity-friendly technologies and knowhow	Providing solutions for decarbonization and material-circulation solutions Providing nature-positive products	PlanetFlags and HumanFlags category sales ratio: over 50%

Ideal State: Enriching people and society

Material Issues for Sustainability	Risks	Opportunities	Implementation Details	KPIs / Targets for FY2030
Safe manufacturing	Personal damage and shut-downs due to work-related accidents Occurrence of recalls, lawsuits, etc. due to quality problems	Increase in productivity and acquisition of trust from customers by providing a safe and secure workplace environment Acquisition of customer trust and support by providing them with safe and quality products	Improvement of workplace environment Enhancement of safety and quality of products	* Managing by internal KPIs
Empowering diverse employees	Increase in difficulty in maintaining stable business operations due to shortages of human resources Stagnation of novel ideas and innovations due to lack of diversity in human resources	Increase in productivity by way of workstyle reform and human resource development Enhancement of employee motivation by providing opportunities that empower diverse human resources	Hiring and development of personnel daring to take on challenges Promotion of DE&I	Female leaders ratio: 30% Engagement scores: 85 Challenge ratio: 85%
Upholding and respecting human rights	Shut-downs and damage to corporate value due to violation of laws concerning respect for human rights Employee health hazards due to human rights violations and outflow of human resources due to poor working conditions	Improvement of corporate image and brand value through socially responsible and fair practices Improvement of public credibility by complying with and proactively advancing beyond laws/regulations concerning human rights	Promotion of human rights due diligence	* Managing by internal KPIs
Building resilient supply chains	Disruption in production and distribution due to damage to factories and infrastructures in the supply chain Damage to the image of the Nitto brand as affiliates and business partners engage in misconduct or unlawful practices	Increase in product supply efficiency and reduction in costs by optimizing supply chains Acquisition of trust from business partners and society through management of supply chains	Sustainable procurement practices	* Managing by internal KPIs
Creating HumanFlags	Lowering of the company’s competitive edge and growth potential due to inadequate response to social needs Lowering of products’ competitive edge as alternative technologies emerge and the company’s technologies become commoditized	Increase in business opportunities by providing products/services that improve QOL and prevent disease progression Enhancement of competitive edge and growth potential by complying with and proactively advancing beyond next-generation technologies	Providing products that promote digital society Providing products that ensure comfort and security of life Providing products that support sound and healthy life	PlanetFlags and HumanFlags category sales ratio: over 50%

Ideal State: Fulfilling stakeholders’ expectations and trust

Material Issues for Sustainability	Risks	Opportunities	Implementation Details	KPIs / Targets for FY2030
Enhancing management security	Lowering of operational efficiency and quality due to inadequate internal control and workflow System shut-downs due to cyberattacks or leakage of confidential information	Reduction in cost and increase in profit due to improvement of management efficiency Creation of new markets and business models by comprehending the value and utilization of information assets	Ensuring compliance Creation of a safety/quality-oriented culture Promotion of information security management	* Managing by internal KPIs

The (medium- and long-term) risks identified in the material issues analysis are integrated into Business and Operational risks (short-term).
The management identifies and manages significant risks that may materially affect investors making decisions. (Business Risks)
The KPIs aimed at resolving material issues are managed as short-term risks, and progress is monitored and reported at the Corporate Strategy Meeting monthly.

Material Issues for Sustainability

Identification Process

Criteria of sustainability

Risks and Opportunities, KPIs / Targets for FY2030

Ideal State: Protecting the future Earth

Ideal State: Enriching people and society

Ideal State: Fulfilling stakeholders’ expectations and trust

Related Information

Nitto Group Integrated Report

Nitto Innovation Lab

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