Hitachi Integrated Report 2020
Year ended March 31, 2020

The challenges we face as a society are unprecedented,
but so are the opportunities.
Together, let’s start powering good.
Let’s call on our heritage, our spirit of collaborationand our technology to do better for generations to come.

Contents

Editorial Policy for
Hitachi Integrated Report 2020

Where We Are Going

3

Business of the Hitachi GroupThe Hitachi Group Identity and Social Innovation
Business
Hitachi’s Basic Policy for Responding to COVID-19
CEO Message

How We Will Grow

17

The Value Creation Process

Hitachi contributes to enhancing the social,environmental, and economic value of ourcustomers by providing novel solutions utilizing
digital technologies across the five sectors of IT,
Energy, Industry, Mobility, and Smart Life. The
cover image of this report depicts people whoare enhancing their lives through Hitachi'sbusiness.

Strategy and Resource Allocation
Strategy 1: Expand Revenues by Accelerating
the Social Innovation Business
Strategy 2: Reinforce Global Competitiveness
Strategy 3: Reinforce Management System to 		
Improve Profitability
CFO Message

Reporting Scope
Period:Value Creation Story in 5 Sectors

How We Will Achieve Sustainability

In this Hitachi Integrated Report 2020, we illustrate Hitachi's aspirations andthe competitive advantages, strategies and management system to achievethem, while reviewing the history and progress of the Hitachi Group up to
fiscal 2019 (year ended March 31, 2020), as well as the achievements andchallenges of our initiatives. The expanded impact of Covid-19 has
significantly changed the social and economic environment around theworld. Even in the midst of these changes, Hitachi is committed to contributeto realizing a sustainable society while co-creating with customers andsociety to enhance their social, environmental, and economic value. In thisreport, we focused on illustrating such an approach to Hitachi.
In editing this report, we referred to the International Integrated Reporting
Council’s (IIRC’s) International Integrated Reporting Framework and theMinistry of Economy, Trade and Industry of Japan’s Guidance for Collaborative
Value Creation.

About Cover Page

Looking Back on Past Mid-term Management Plans

		

Editorial Policy

59

Addressing Risks and Opportunities
Promotion of Information Security
Occupational Health and Safety, Employee Health
Value Chain Responsibilities
Quality Assurance

April 1, 2019, to March 31, 2020
(Certain subsequent activities and information presented
after April 2020 is also included.)
Hitachi, Ltd., and its consolidated subsidiaries

Companies:
Scope of Data:
Social data:
The scope of the data are individually described.
Environmental data: 815 companies (Hitachi, Ltd., and 814 consolidated
subsidiaries)
For environmental performance data associated withbusiness operations, Hitachi, Ltd., and consolidated
subsidiaries whose environmental load comprises
90% of the total (based on Hitachi calculations) are
included.
Accounting Standard: Unless otherwise noted, this report is prepared inaccordance with U.S. GAAP through fiscal 2013 andwith the International Financial Reporting Standards(IFRS) from fiscal 2014.

ComplianceContact

Corporate Governance

Hitachi, Ltd.
6-6, Marunouchi 1-chome, Chiyoda-ku, Tokyo 100-8280
TEL: +81-3-3258-1111 E-mail: ir.info.hq@hitachi.com

Message from Independent Directors
Leadership

Data Section
10-year Financial Data
5-year Non-financial Data
Segment Highlights
Hitachi Group Business Operation Framework
Corporate Data / Stock Information and a Message
from the Editor-in-chief

2

Hitachi Integrated Report 2020

89

Investor Relations
https://www.hitachi.com/IR-e/ (English)
https://www.hitachi.co.jp/IR/ (Japanese)
Sustainability
https://www.hitachi.com/sustainability/ (English)
https://www.hitachi.co.jp/sustainability/ (Japanese)
Disclaimer Regarding Forward-looking Statements
Certain statements regarding the future of the Company set forth in thisReport may constitute “forward-looking statements,” such as “plan,”“forecast,” “target,” and “strategy.” Although forward-looking statements
contained in this report are based upon what the Company has determined tobe reasonable assumptions at the time of disclosure, actual performance andother results may differ materially from those anticipated in such statements.
For the major factors regarding these differences, please see “Addressing
Risks and Opportunities” on page 60 of this Report.

Where We Are Going
Business of the Hitachi Group4

The Hitachi Group Identity and Social Innovation Business

6

Hitachi’s Basic Policy for Responding to COVID-19

8

Hitachi's Current Management Policy for Response to COVID-19

9

CEO Message

103

Where We Are Going

Business of the Hitachi GroupOur 2021 Mid-term Management Plan, launched in April 2019, focuses on simultaneously improving social, environmental
and economic value, and establishes five business sectors (IT, energy, industry, mobility and smart life) for the creation ofsocial innovation. These are areas in which Hitachi can make use of the technological know-how it has built up through its
many years of developing social infrastructure. Through each of these business sectors, we will utilize Lumada to improve
people’s quality of life (QoL), as well as corporate value at our client companies.

Revenues

Adjusted Operating Income

Composition ratio (%)

Composition ratio (%)
OthersOthersHitachi Chemical

Hitachi Chemical
Hitachi Metals
HitachiConstruction
Machinery

5%

7%
9%

10%

IT

22%

Revenues
by segment¥8,767.2 billion

4%(FY2019)

9%Energy2%

HitachiConstruction
Machinery11%

9%

Hitachi High-Tech

5%3%

Adjusted operating
incomeby segment(FY2019)

Smart Life

9%
8%

14%

Smart Life

Energy2%

Mobility

12%
15%

IT

37%

¥661.8 billion

Industry

7%

Hitachi High-Tech

Hitachi Metals

Mobility

Industry

Note: Figures for each subsegment include intersegment transactions.

Revenues by Region

Revenues/Adjusted Operating Income Ratio/
Net Income

Composition ratio (%)

Asia¥1,767.5 billion
10%

ASEAN, India
and others

Net income attributable to
Hitachi, Ltd. stockholders (¥ billion)¥1,102.9 billion
10%¥896.4 billion

20%

China

Revenues (¥ billion)¥924.4 billion

North America

13%

10,034.3
9,162.2

9,368.6

9,480.6

Japan¥4,529.0 billion

7.6

Outside Japan

10%

Adjusted operating income ratio (%)

Europe6.3¥4,238.1 billion

6.4

8.0

8,767.2
7.5

362.9

Total

¥871.1 billion
5%¥8,767.2 billion(FY2019)

52%

Japan
¥4,529.0 billion

172.1

231.2

222.5
87.5

Other Areas¥443.1 billion

FY2015

4

Hitachi Integrated Report 2020

FY2016FY2017FY2018FY2019Systems integration
Consulting
Control systems
Cloud services
SoftwareIT products (Storage, servers)
ATMs

IT

Energy solutions

Energy(Nuclear, Renewable energy,
Thermal, Power grid)

Revenues ofLumada Business¥1,037.0 billion

Elevators, escalators,
building services
Railway system(FY2019)

P.24

Mobility

Grow Highly Profitable Businesses
with Digital Technology

Industry

Smart Life
Industry & distribution system
Medical equipment

Water & environment system

Smart life & eco-friendly system(Refrigerator, washing machine,
air conditioner, commercial air
conditioning system)

Industrial products

Automotive systems(Powertrain, chassis parts,
advanced driving assistancesystem)Hitachi Construction Machinery
Ownership percentage ofvoting rights:

51.5%

Main products and services

Hitachi Metals
Ownership percentage ofvoting rights:

53.5%

Main products and services

Hitachi High-Tech

Hitachi Chemical

Became a wholly owned subsidiary in
May 2020

Deconsolidated in April 2020

Main products and services

Main products and services

Hydraulic excavators

Specialty steel products

Medical and life science products

Functional materials

Wheel loadersFunctional components and equipment

Analytical equipment(Electronics materials, printed wiring board

Mining machinery

Magnetic materials and applications

Semiconductor processing equipment

materials, electronic components)

Maintenance and services

Power electronics

Manufacturing and inspection equipment

Advanced components and systems

Construction solutions

Wires, cables, and related materials

Advanced industrial products(Mobility components, energy storage

Mine management systems

devices and systems, life science related
products)

5

Where We Are Going

The Hitachi Group Identity andSocial Innovation Business
Grounded in the Hitachi Group Identity, we will raise the social, environmental and economic
value we provide to customers and aim to achieve a sustainable society by focusing on ourSocial Innovation Business.
The present world is said to be an era of volatility, uncertainty, complexity and ambiguity (VUCA), in which the future is difficult
to predict. Looking around the world, we can see a wide variety of steadily approaching change that will have an impact
on people's lives, including climate change, resource shortages, demographic changes due to aging, problems related tourbanization, and responding to COVID-19.
Since its establishment, Hitachi has operated under the Mission expressed by its founder: “Contribute to society through thedevelopment of superior, original technology and products.” In accordance with this Mission, we have solved challenges facing
society during each era through the development of social infrastructure technologies while raising people's quality of life and,in recent years, contributing to the achievement of a sustainable society.
Originally set by Hitachi founder Namihei Odaira, the Mission has been carefully passed on to generations of employees andstakeholders throughout the Company's 100-year history. The Values reflect the Hitachi Founding Spirit, which was shaped by
the achievements of our company predecessors as they worked hard to fulfill Hitachi's Mission. The Vision has been createdbased on the Mission and Values. It is an expression of what the Hitachi Group aims to become in the future as it advances to
its next stage of growth. The Mission, Values and Vision are made to be shared in a simple concept: Hitachi Group Identity.

History of Hitachi—Addressing Social Issues and Helping to Improve Quality of Life
Social Situation
mainly in Japan

Transition to domestic
production of industrial
equipments

Five-horsepower
induction motor

6

Hitachi Integrated Report 2020

1940

1950
Postwar reconstruction

1960

1970

Increase in transportation demand associated witha rise in population, and fast economic growth

1940s–1970s
Energy and transportation network infrastructure established alongside growthin the Japanese economy

Urban infrastructuredevelopment

Production of trains for
the Tokaido Shinkansen

Launch of operations
at the Shimane Nuclear
Power Station

1980

1990

2000

Globalization

Spread of the Internet

Entered an era of high-capacity
and high-speed communicationIT
OT and Products

1980s–2010s
Responded to demand for the advancement ofInternet technologies

2010

IoT
Information
technology
Infrastructuredevelopment andmaintenance

2020
Advancement of theSocial Innovation
Business

We will improve our three values
to attain a sustainable society andresolve a variety of pertinent social
issues.
SocialValue

Development andsupply of large-scalecomputers

Development of
virtual storage
technology

Digital solutions
business

Environmental
Value

Economic
Value

7

Where We Are Going

Hitachi’s Basic Policy
for Responding to COVID-19
We’re placing top priority on the health and safety of our stakeholders, including customers,
partners and the employees working at Hitachi Group worldwide, as well as their families.
We’re helping prevent the spread of the infection, both inside and outside of Hitachi Group,and minimize the effects of the virus on both our and our customers’ businesses.
We’re fulfilling our responsibilities for accountability to stakeholders and will disclose
necessary information as needed.
Moving forward, we will continue to promote management that conforms to this basic policy.

Examples Hitachi Initiative
Supply of Free Face Shields and Establishment of aProtective Mask Production Line

Supply of Touchless Solutions

The Hitachi Group provided medical
practice in Japan by producing protective
face shields for use on medical sites andproviding them to medical institutions
free of charge. JR Automation, which
operates our robot system integration
business in North America, hasconstructed a medical-mask productionlines for customers and is supporting thesteady supply of face masks in North
America, where demand has grownurgent.

We are contributing to the achievementof no-contact device operation by
providing solutions that allow for
touchless entry and exit management
on elevators and in buildings using
image analysis technology. In addition,
we are providing automatic reception
and payment machines for use in
medical institutions that are equippedwith aerial input technology thatwill replace the button and touchpanel interfaces used in conventional
machines.

Loans for Businesses and Research Support

Standardization of Telecommuting Utilization

Hitachi has decided to provide US$ 1
million in loans to businesses affectedby the spread of COVID-19 throughKiva Microfunds, a U.S.-based NPO. In
addition, we have resolved to support
infectious disease research with a¥100 million donation made throughthe Hitachi Global Foundation and willcollect donations from executive officers
and corporate officers at Hitachi.

While prioritizing the health and wellbeing of our employees and theirfamilies, we are promoting utilizationof telecommuting as a standard way
of working for a wide range jobs. At
the same time, we are accelerating
our shift to job-based human resource
management to demonstrate our fullpotential and improve productivity.

“Make a Difference!” Internal Idea Contest
In April 2020, using the platform provided by the “Make a Difference!”
internal idea contest it has been conducting since 2015, the HitachiGroup, under the theme of “Challenge to COVID-19,” solicited ideas from
employees around the world regarding new work styles and how Hitachitechnologies can be utilized to provide social support and contributions.
From the 1,430 suggestions that we received, we are promoting the useof existing Hitachi technologies to support online education for children
and other social contribution measures and bolstering systems andproducts that facilitate lifestyles that are quickly relying more heavily on

8

Hitachi Integrated Report 2020

remote, contactless and automated technologies. Also, in accordancewith suggestions that we received, we are conducting initiatives aimed atproviding and maintaining remote work tools that will support new work
styles and eliminating procedures that require physical approval stamps or
paperwork. In fact, the aforementioned business loans made through Kiva
Microfunds were the first initiative that we implemented in response tosuggestions received through this contest.

Hitachi's Current Management Policy
Implemented in Response to COVID-19

We respond to social changes caused by COVID-19 andmake appropriate contributions throughthe Social Innovation Business.
Priorities in Management

Priority Actions

Prioritize the health of employees, theirfamilies and customers

Strengthen digital technologies tosupport working from home and remote
working

Maintain social infrastructure and secure
customer support

Customer support, maintaining social
infrastructure and supply chain (securebusiness continuity)

Sufficient liquidity and financial soundness
Respond based on the assumption that
COVID-19 impacts continue for a while
and affect moving forward

Maintain business activity while securingsafetySustaining financial soundness andenhancing cost management

Acceleration of the Social Innovation Business
Hitachi’s Social Innovation
Business

Co-creation and digitaltechnologies

OT×IT×ProductsSocietal changes caused by
COVID-19

RemoteContactless

Automation

Solving issues caused by
COVID-19 through the Social
Innovation Business“Human-centric”
Human needs accelerateinnovations

In Pursuit of Further Growth as the Societal Impact of COVID-19 Continues
Hitachi will further strengthen the management foundations andwill continue to maintain rock-solid financial and businessplatforms as COVID-19 spreads. We will accelerate operations in
our Social Innovation Business by completing post-merger

integration (PMI) of acquired businesses and maintaining ourbusiness portfolio reform efforts. Furthermore, we will continue to
conduct growth investment based on clear assessments ofpriority.

9

Where We Are Going

Dynamic Hitachi
Continues to Accelerate its
Social Innovation BusinessDespite COVID-19

First, I would like to express my deepest sympathies to those suffering from COVID-19,
as well as their families and other affected individuals. At the same time, please allow
me to express my condolences to those whose family members have passed away due
to this tragic disease. Furthermore, I would like to share my deep gratitude to everyone
working to prevent the spread of COVID-19 and maintain social function.
Toshiaki Higashihara
President & CEO

Progress During the First Year of the 2021 Mid-term Management Plan
In fiscal 2019, Hitachi achieved an adjusted operating

and proud that, through continuous adaptation, we haveincome ratio of 7.5% despite the impact of COVID-19. We

successfully achieved a V-shaped recovery since fiscal 2008

achieved this result thanks to the success of profitability

and constructed a solid and unwavering earnings base in the

improvement measures implemented under our 2018 Mid-face of COVID-19.

term Management Plan. Hitachi is immensely confident

Co-Creation with Customers and Partners Around the World Enhances
Digital Infrastructure

10

In last year’s Integrated Report, Hitachi shared its aim to“social innovation” was coined by Hitachi and refers to both

become a global leader in the Social Innovation Businessthe transformation of social and industrial infrastructure

through its 2021 Mid-term Management Plan. The term

– such as railway, energy and water facilities – into more

Hitachi Integrated Report 2020

CEO Message

sophisticated and intelligent social infrastructure through theecosystem with partners around the world and working touse of digital technology and providing it to the public. As aconstruct digital infrastructure at major global sites. In April

leading company advancing the digital transformation (DX) of

2019, we established “Kyōso-no-Mori,” a new researchsocial infrastructure, Hitachi aims to help raise the quality of

initiative for a generation of innovation within our Central

life (QoL) for people throughout the world and increase the

Research Laboratory. Furthermore, in January 2020, we

value of its globally expanding client companies.

launched Hitachi Vantara, which will lead the development of

Digital technology is at the core of our Social Innovation

digital solutions on a global scale.

Business; to enhance it, Hitachi is building an innovation

Construction of a Globally Competitive Business Portfolio
To simultaneously increase social, environmental andOverall, in fiscal 2019, we strengthened our North American

economic value, our 2021 Mid-term Management Planbusiness through measures such as our acquisition ofidentifies five business sectors that underpin our Social

JR Automation, a leading company in the U.S. robotic

Innovation Business (IT, Energy, Industry, Mobility and Smartsystems integration (SI) business. we made progress toward

Life). Under this plan, we are building a globally competitive

our goal of constructing a globally competitive businessbusiness portfolio. We assess our global competitivenessportfolio through tactics such as our decision to transfer

based on whether our businesses can secure a leading

our diagnostic imaging-related businesses to FUJIFILM

market position. One major move we have made to secure

Corporation. In December 2019, we reached a settlementa larger market share in the automotive systems industry

with Mitsubishi Heavy Industries, Ltd., regarding a South

specifically is the merger between Hitachi Automotive

African boiler construction project that was being handled

Systems, Ltd., and Keihin Corporation, Showa Corporation

by Mitsubishi Power, Ltd. (formerly Mitsubishi Hitachi Powerand Nissin Kogyo Co., Ltd., which are affiliates of Honda

Systems, Ltd.). By reaching this settlement, we resolved aMotor Co., Ltd. The “electrification” of vehicles will be key

long-standing management issue and took a significant stepas the automotive systems industry responds to tightening

forward to accelerate the proactive management strategies

global environmental regulations. This merger will enablepreviously mentioned.

us to secure a top share of the global market for core parts
used in electrification technology while also helping generateenvironmental value.

Realigning Group Companies
We revised the capital policies of our group companies based

subsidiary in May 2020, and I believe that Hitachi High-Tech’s

on considerations for how to reorganize listed subsidiaries

measurement and analysis technologies are the best in theto compete on a global scale. Our general philosophy wasworld. We anticipate that our acquisition of Hitachi High-Techthat the subsidiaries capable of competing on a global scale

will enable us to identify further synergies among our fiveshould be retained within the Group, whereas those that werebusiness sectors; for example, promoting highly competitive

not should pursue their own growth. After conducting reviews

clinical chemistry and automatic immunodiagnostic analyzers

of our subsidiary companies, we transferred Hitachi Chemical

through our partnership with Roche Diagnostics and retaining

Co., Ltd., to Showa Denko K.K. in April 2020. Meanwhile, wedata related to semiconductor manufacturing.

converted Hitachi High-Tech Corporation into a wholly owned

11

Where We Are Going

Thoughts on COVID-19, Employees and Future Management

Deep Gratitude Toward Employees
The first action Hitachi took when COVID-19 began in thesafety of employees for whom shifting to remote work is

world, was to establish an on-site emergency headquarters

difficult, including staff working on the front lines at medical

on January 27, 2020, to protect employees. We also

institutions, employees responsible for on-site system

donated computed tomography equipment to speed up

support and maintenance, and personnel who commute

medical examinations, with the aim of containing the virus’s

to workplaces to maintain administrative functions, suchspread in China. In February, we established a system

as expense processing and payment of salaries and otherin Japan that prioritizes the health of employees andobligations. I am deeply grateful for their ongoing daily

their families, our customers and our business partners,

commitment to safety measures as they bravely continue toprimarily by encouraging a work from home (remote work)

perform their work.

model whenever possible. I am concerned about the

Our Ability to Respond to Change Will Strengthen Our Company

Now is the Time to Implement Cash-Positive Management and Adjust Our
Policies to Prepare for a “New Normal”

12

COVID-19 has brought to light a number of large-scale social

involvement or intervention. These popular technologies

issues, including income inequality and hidden discrimination,

can help resolve issues brought about by COVID-19. Whileas well as the challenges facing our own Company. In

promoting its Social Innovation Business, Hitachi has

terms of corporate business administration, companies

clarified issues and established procedures for finding theirthat maintain a measurable cash surplus during times ofsolutions. I believe that applying these procedures will enablecrisis have fared better than those that, in accordance withpeople whose day-to-day routines have been impacted

previous philosophies, are content with a minimal cashby COVID-19 to resume active lifestyles through new andsupply. In the short term, it is essential that we establish a

unconventional methods. I am also convinced that COVID-19

solid cash management system that will not falter under any

will be a driving force for acceleration in the Social Innovation

circumstances. To this end, Hitachi has secured liquidity ofBusiness.

¥1.3 trillion. My commitment to cash-positive management

Hitachi has always been able to adapt to surrounding

is not simply a product of the COVID-19 pandemic; we will

circumstances, but we will embrace agility and change evencontinue to strengthen our cash management strategy tofurther in response to the global shifts caused by COVID-19.

enable swift responses to a wide variety of future changes.

We will implement a business structure that is based on the

COVID-19 has caused massive changes in people’s lifestyles.

“New Normal” conditions resulting from the pandemic. In

I do not believe that the world ever completely returns to

addition, we will restructure the way our employees work

“normal” following a global event of this magnitude; however,while simultaneously striving to improve their productivity. To

this notion is not entirely negative. Changes are sometimes

achieve this goal, we will implement a remote work modeldifficult but can also be viewed as opportunities, enabling us

as well as shift to job-based human resource management.

to accomplish things that were not previously possible.

Hitachi’s global employee base is growing, requiring theDue to the spread of COVID-19, public focus has shifted

Company to clarify individual job descriptions. We currently

to “remote,” “contactless” and “automation” – in otherplan to complete our shift to job-based human resourcewords, enabling processes to be conducted without humanmanagement by April 2021.

Hitachi Integrated Report 2020

CEO Message

COVID-19 Has Highlighted a High Level of Employee
Awareness Regarding Contributions to Society

Job Satisfaction Reforms Will Resultin Major Changes at Hitachi
Incidentally, I do not believe that these changes andopportunities will come from other people; rather, I believethat positive, large-scale results will only be achieved once wehave proactively seized upon relevant opportunities. In timesof crises, such as current COVID-19, I consider it importantto frequently converse with employees, and I have been
sending messages to employees nearly every week since
March. Employees have proactively shared their thoughts
with me in response. Many of these replies contained positive
messages, such as, “I feel like this is the time to make aarea. At the time, transportation management for many rail lines

positive contribution to the world” and, “I anticipate that thiswas still conducted by directors and station staff, who manually

pandemic will lead to a variety of new ideas.” Our “Challenge

operated signal lamps and communicated using telephones.

to COVID-19” competition, which leverages submissions from

The main goal behind the adoption of the ATOS was to improve

our “Make a Difference!” internal idea contest, has generated

passenger service by increasing the efficiency of transportationa variety of splendid ideas from around the world. We havemanagement operations and providing train operating conditions

implemented those ideas that were immediately applicablein real time. For several years, I was responsible for installation

and are sequentially reviewing other visionary proposals, withwork between the Kofu and Tokyo stations on the Chuo Line,the ultimate goal of adopting them for practical use. Against

and we encountered a series of problems at the beginning of thethe backdrop of COVID-19, many employees share mysystem’s launch. At the time, when train delays and other related

perspective that the time is ripe to solve social issues throughproblems on the Chuo Line were announced on television, myinnovation and, by doing so, contribute to society at large.

family would apparently conclude that I would not be returning

Moreover, ideas from employees who are conscious of theirhome that day. Now, the ATOS facilitates smooth travel by

connection to society and the importance of giving back aresupporting safe and stable train operation on a large-scale railfunctioning as a driving force for Hitachi as a whole. Seeing

network that transports about 14 million passengers per day.

this trend unfold has been emotionally moving for me.

When working on this project, I drew a tremendous amount of

For Hitachi to become a true global leader, each employee must

motivation and job satisfaction from the fact that both my family

be aware of his or her personal connection to society, as well as

and I understood how my efforts contributed to the betterment

the importance of social and environmental value. In addition,of society. Economic value is extremely important in terms of

our employees must all become capable of perceiving social

management. However, employees might feel an overwhelming

and environmental issues as personally relevant. More relevant

amount of pressure if management overemphasizes a top-

in this regard than “work-style reforms” are “job satisfaction

down approach when pursuing income targets. Our key toreforms.” To relay a personal story: in 1995, as a member ofresolving this issue is to expand businesses that promote

Hitachi (since 1977), I became involved with work connectedsocial and economic value on a global scale, while integrating

to the Autonomous decentralized Transport Operation control

and achieving balance between bottom-up approaches, such

System (ATOS), a transport management system adopted

as “Make a Difference!,” and top-down approaches. I believe

by East Japan Railway Company for the Tokyo metropolitan

that these efforts will make the Hitachi Group even stronger.

13

Where We Are Going

The COVID-19 Pandemic Will Not Alter Our Investment Plans

Accelerate the Social Innovation Business While Responding to Issues
Some aspects of management have remained unchanged

have become particularly apparent. We’ve modified oureven during COVID-19, including our basic capital allocation

supply chain in response to Great East Japan Earthquake

policy. In the 2021 Mid-term Management Plan, weand tragic flooding in Thailand in 2011 and have establishedprojected total funds of ¥4 trillion–¥4.5 trillion and have madea backup system for our production lines, as a significant

no changes to our plan to use ¥2 trillion–¥2.5 trillion of thisnumber of our production processes are conducted acrosstotal for growth investment and the remaining ¥2 trillion

international borders. There is still more to be done, however.

for shareholder return and capital expenditure. We have

We must focus on optimizing the Hitachi Group as a wholealready decided that ¥1.8 trillion of growth investment will

as we build a supply chain system capable of flexible

be allocated to the acquisition of ABB’s power grid business

response. It’s also important to stay abreast of evolving

and other projects. Meanwhile, we plan to use the remaining

geopolitical risks, such as the impact of Brexit and trade¥700 billion primarily to strengthen our front-line sales teamfriction between the United States and China.

in the IT sector, predominantly through M&A. In terms of

As living environments change rapidly due to COVID-19,

shareholder returns, we have consistently raised dividends

Hitachi is encountering an increasing number of opportunities

since I assumed my position as CEO in 2016. Moving

to support its goal of creating social, environmental andforward, we will look into conducting share buybacks while

economic value. Moving forward, COVID-19 will function

maintaining a stable dividend payout ratio.

as a major trigger, providing us with the impetus to further

The COVID-19 pandemic has brought many issues into theaccelerate our Social Innovation Business.

spotlight. Operational risks associated with Hitachi’s factories

Development of the Social Innovation Business

Package a Multitude of Solutions Generated Through Hitachi’s IT, OT and
Products and Roll Them Out Globally

14

Since 2016, Hitachi has utilized Lumada as a digital platform

accumulated expertise on how customers use products,

for providing value to its customers and has established

namely concerning operational technology (OT). Since

frameworks for packaging individual solutions. In total,

1960, we have supplemented this expertise with knowledge

the Lumada platform has accumulated more than 1,000

and skills related to IT used in banking, industry and othercustomer cases. Our collaborative creation efforts in thefields. Hitachi’s status as a singular group possessing IT,

U.S. to improve the operating efficiency of trucks are an

OT and products expertise has afforded it a strength that

illustrative example of our use of Lumada. These efforts

other companies do not have and has led to solutions forhave resulted in a mechanism that utilizes Lumada to collecta variety of issues. To share an example from our railways

data on automotive parts and other important factors

systems business: we delivered train cars and an unmanned

using sensors built into trucks, detect signs of failure andoperation control system to Denmark’s Copenhagen Metro,recommend maintenance before breakdowns occur. I believe

but also endeavored to make the system more convenientthat only Hitachi, with its practical knowledge of devices andby installing sensors on station platforms and field testing aequipment, can create and leverage solutions like these.

solution that automatically adjusts train schedules based on

Hitachi has been manufacturing for 110 years and has

the number of people waiting on platforms.

Hitachi Integrated Report 2020

CEO Message

Hitachi provides solutions in five sectors: IT, Energy,

maintenance in addition to supporting stable water supply

Industry, Mobility and Smart Life. I believe that we canand reuse. Furthermore, we would conduct video analyses

contribute to the construction of smart cities by combining

aimed at gauging the number of park visitors on line andthe solutions we provide within these sectors. Let us

ensuring social distancing. One of Hitachi’s major goals

examine an amusement park as a smaller-scale “smart

is to platformize solutions such as these so that it cancity,” for example. We would provide stable energy andprovide customer value globally in each of the five sectors

mobility services that are essential for the park’s operation.

mentioned earlier.

We would collect data using sensors built into the park’s
attractions, detect signs of failure and perform preventive

The Importance of Human-centric Innovation
Earlier, I mentioned that new needs around remote,our specific environments; AI should never be able tocontactless and automated solutions have arisen due toreplace our ability to make decisions about our lives. AI is

the COVID-19 pandemic. Moving forward, we will likely

programming at its core, so providing ethical training forsee growth in digital technology that provides solutions

engineers who create algorithms and other problem-solving

for the restraints and inconveniences placed on society

operations, as well as making adjustments from a legal

due to the pandemic. Important in this regard is theperspective, will be important tasks moving forward.

creation of “human-centric” societies. Smartphones, theWe must not forget the importance of a “human-centric”

Internet and other modern technologies have dramaticallyapproach when considering innovation generated throughchanged our lives, and the belief that AI will play a role in

AI. This approach supports the core policies of the Social

innovation moving forward has become common. However,

Innovation Business, through which Hitachi is promoting

COVID-19 has taught us that humans, not technology, areadaptation to the “New Normal” brought about byat the center of these changes. As humans, we determine

COVID-19.

and shape our lifestyles based on the circumstances of

Human Resource Development and Revolutionary Changes to Mindsets

The Hitachi Group is Driven by its Founding Venture Spirit and an Empathetic
MindsetThe ratio of Hitachi Group’s domestic and overseas employees

Once our employees, who come from diverse backgrounds,

has shifted due to strategic decisions made to establish ahave shared their opinions and held thorough discussions

more global business foundation, such as the acquisition

on a matter, they unite toward a common set of objectives.

of ABB’s power grid business. Traditionally, the value of a

Because we find ourselves in uncertain times, I think it iscompany has been determined primarily based on quantitative

important that we return to Hitachi’s mission and values infactors, such as ROE. However, as we endeavor to fully

pursuit of achieving a unified “One Hitachi.” To truly achieve

establish our Social Innovation Business, we have come tothe “One Hitachi” vision, we must sympathize with the venture-

believe in the relevance of qualitative value; in particular, we

company spirit through which founder Namihei Odaira andregard the value of human resource as extremely important.

several engineers created Hitachi in 1910 and strive to achieve15

Where We Are Going

CEO Message

unity based on the sharing and practical implementation of

To put it another way, empathy enables one to understandthis founding spirit.

the feelings of others; this fosters a win-win mindset. I believe

Hitachi currently has about 300,000 employees. I believethat this is precisely the frame of mind that the front-line sales

that the value of our human resource will greatly increaseteam promoting our Social Innovation Business should have.

if they are able to view social issues and the interests of

Sharing happiness does not cause it to dwindle, but rather

others, including our customers, as personal interests.

to grow. As we move forward, we will focus on developing

People often pursue endeavors that are in their own self-

human capital who are capable of perceiving social issues

interest; however, it is critical to consider the interests andas personally relevant, passionately involving others andneeds of others as well. When our employees balance theirdeveloping shared mindsets focused on achieving common

own interests with a desire to help others, we elevate totargets.

demonstrating empathy.

Opportunities for Hitachi to Continue to Grow

Social and Environmental Value Through the Social Innovation Business
As Hitachi strives to simultaneously increase social,

Japan is far behind the rest of the world in terms of digitizing

environmental and economic value, I feel as if these issues

its public infrastructure. Along with other entities active

have grown in importance to our investors. In recent years,

in industrial circles, we are addressing this problem byclimate change in particular has become an urgent issue fordiscussing data architecture with the government. I believe

humanity.

that Hitachi, which is promoting the digital transformation ofWith the aim of increasing environmental value, Hitachi hassocial infrastructure, is uniquely equipped to provide many

declared that it will achieve carbon-neutral production bysolutions to these issues.

fiscal 2030. In January 2020, our Omika Works becameSocial infrastructure, including power grids and railways,

the first factory operated by a Japanese company tois also aging in North America and requires thoroughbe listed in the World Economic Forum Lighthouse as ainspection. In Europe, infrastructure must be assessed in“most advanced factory.” We will make our CO2 reduction

accordance with environmental policies.

initiatives, particularly those applied during the manufacturing
stage, more visible to customers, which will lead to

All of Hitachi’s global employees have dedicated themselves

subsequent environmental solutions. As soon as possible, I

to the advancement of the Social Innovation Business bywould like to transform Hitachi into an environmental leader

considering social issues personally relevant. Moving forward,

in our industry.

Hitachi will continue to adapt to surrounding circumstances

Large-scale natural disasters are occurring more frequently

as it implements efforts around the world aimed at improvingaround the world due primarily to climate change. Japan

people’s QoL and raising value for client companies. I humbly

is no exception; this year, it is facing many cases of

ask for your continued support as we move forward.

unexpected and abnormal weather. Circumstances likethese underscore the urgent need for maintenance on aging
social infrastructure. In response to the increased frequency

Toshiaki Higashiharaof natural disasters, we will be required to update andPresident & CEO

tighten safety standards for infrastructure and equipment.
The COVID-19 pandemic has also revealed that, overall,

16

September 2020

Hitachi Integrated Report 2020

How We Will Grow
The Value Creation Process

18

Looking Back on
Past Mid-term Management Plans

20

Strategy and Resource Allocation

22

Strategy 1
Expand Revenues by Accelerating
the Social Innovation Business

24

Strategy 2
Reinforce Global Competitiveness

30

Strategy 3
Reinforce Management System to
Improve Profitability

38– CFO Message

42

Value Creation Story in 5 Sectors

44

17How We Will Grow

The Value Creation Process
Comprehension of Issues and Trends
Social issues
Climate change
Issues concerning energy, water andother natural resources
Population growth and urbanization
Aging infrastructure
Cybersecurity

Input

Global trends

Customer issues

Accelerating digitalization
Appearance of geopolitical risks due to the globalization ofpolitics and the economy
Paradigm shifts (shifting from possession to sharing, fromobjects to things and from closed to open strategies)

Safety and security
Reduction of energy consumption
Response to diversifying consumer
needs
Improvement of productivity

Comprehend social issues and global trends while identifying
customer issues through collaborative creation with customers(As of March 31, 2020)

Human capital• Number of employees: 301,056 people(consolidated)• Digital technology training participants:over 19,000 people (cumulative)• Global management program participants:

4,063 peopleIntellectual capital• R&D investment: ¥293.7 billion• R&D centers (including intellectual property):

5 regions (North America, Europe, China,

Diverse partners(open innovation)

Extract widely applicable industrial andAccumulation of Lumada

APAC and Japan)

Natural capital• Total energy input (crude oil equivalent):

OT

IT

Operational technology with a trackrecord of more than 100 years

Information technology withmore than 50 years of history

80 PJ (2.07 GL)

Source of value (competitive ad• Raw material input: 3,776 kt• Total water input: 36.41 million m3

Converting data into value (Lumada platform)

Financial capital• Stockholders' equity: ¥3,159.9 billion• Interest-bearing debt: ¥1,485.0 billion

Expand Revenues by Accelerating
the Social Innovation Business

Reinforce Global
Competitiveness
P.30

P.24

Sustainable growth strate

Manufactured capital• Manufacturing bases: 406• Capital expenditure: ¥399.6 billion
Addressing Risks andOpportunities
P.60

Promotion of Information
SecurityP.66

Occupational Health and Safety,
Employee HealthP.68

Social and relationship capital• Total CV investment (plan):$150 million

18

Hitachi Integrated Report 2020

Foundations supporting sustainableVision: Improving the Quality of People’s Lives,
Raising Customers’ Corporate Value and Achieving a Sustainable Society
Social value

Environmental value
Healthy lives and a safe,
secure, comfortable andefficient society

Economic value
Redistribution of added
economic value tostakeholders

High-quality andenvironmentallyconscious manufacturing
Reduction ofenvironmental burden
through the value chain

Simultaneously improve three types of customer value throughthe digital technologies and five solutions

Output/ Outcomes(As of March 31, 2020)

Financial results• ROIC: 9.4%
• Operating cash flows: ¥560.9 billion• Adjusted operating income ratio: 7.5%

Diversification and globalizationof human resources

Platform expansion
business expertise• Ratio of non-Japanese executives*: 8.6%

customer cases• Ratio of female executives*: 7.1%
• Digital talent: 30,000 people* Executive officers, Corporate officers, and fellows

Products

We have developed andmanufactured products with ourown technology since our founding

vantage)• Overseas employee ratio: 46%• Female manager ratio: 8.9%

Value Creation Story in 5 Sectors

Progress of strengthening
competitiveness• Revenues of Lumada business:

P.44¥1,037.0 billion• Lumada overseas revenue ratio:

Innovation ecosystems that constantly
create groundbreaking new value

approximately 40%• Lumada customer cases: over 1,000

Accumulation ofdiverse industrial andbusiness expertise• Lumada solution core: over 85• Overseas revenue ratio: 48%• Number of published of patent applications:approximately 12,000

Reinforce Management System
to Improve Profitability
P.38

Efficient use of energy andresources

gies
Goals to which we contribute through our business strategies

Long-term environmental targets(compared with fiscal 2010)• Reduction rate in CO2 emissions per unit

Value Chain
Responsibilities
P.70

Quality Assurance
P.72

ComplianceCorporate
Governance

P.74

P.76

(products and services): 19%• Reduction rate in total CO2 emissions atbusiness sites (factories and offices): 17%• Reduction rate in water use per unit: 26%

growth• Reduction rate in waste and valuables

Goals to which we contribute through all of our corporate activities

generation per unit: 14%

19

How We Will Grow

Looking Back on Past Mid-term Management Plans
Changes in Performance and Business Portfolio
FY1999 (Revenues)
OthersOthers

IT

21%

26%

14%

30%
9%

Home appliances

14%

High functional
materials and16%components

51%

High functional
materials andcomponents

Revenues

FY2019 (Revenues)

Home
appliances

Socialinfrastructure

IT

22%

65%

5%
43%

Socialinfrastructure

Net income
Revenues (¥ billion)

Net income (¥ billion)
2,000

qu
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pa
Ja
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at

G

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20
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11,226.7

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is

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12,000

1,500

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00

IT

bu
bb
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8,767.2

bu
bb
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ec
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20

11

10,000

8,000

1,000

2018 Mid-term Management Plan
2015 Mid-term Management Plan
2012 Mid-term Management Plan
6,000

500

4,000

0

-327.62,000-500-483.8-787.3-787.3-1,000

0

1990

20

Hitachi Integrated Report 2020

2000

2010

2019

（FY）

2015 Mid-term Management Plan
2013-20152012 Mid-term Management Plan
FY2010-20122015 Mid-term Management Plan
FY2013-2015

Rebuilding Management

Building a Foundation for Growth

Recovery

The Swapping Out of Businesses

Looking Back

Looking Back

After booking its largest losses ever in fiscal 2008, Hitachi during the period

Hitachi during the period covered by the 2015 Mid-term Management Plan substantiallycovered by the 2012 Mid-term Management Plan advanced the rebuilding of its

revised its business portfolio as if sought to build a foundation for growth. The Company

business. The rebuilding of the automotive systems business, the withdrawal fromacquired Pentaho, which develops and markets big data analytics software, as partthe internal manufacturing of flat-panel TV business, and the transfer of the HDDof its aim to strengthen and expand the global value chain in big data utilization, whilebusiness all served to improve profitability, allowing Hitachi to concentrate on thealso removing from consolidation its thermal power, air-conditioning, and batteries

Social Innovation Business that so effectively leverages the Company’s strengths.

businesses. In addition, Hitachi moved its rail business headquarters to the U.K. as partIn fiscal 2012, Hitachi consolidated operations into six strong groups and workedof its effort to promote the globalization of the Company, appointing Alistair Dormer,

to speed up management through an integration of operations.

currently serving as executive vice president, as the global CEO of the Company’s rail

Hitachi’s operating income ratio in fiscal 2012, the final year of the Mid-termbusiness. In personnel evaluation systems, Hitachi introduced “Global Performance

Management Plan, fell short of the 5% target due to a write-off associated with aManagement” as a mechanism under which compensation directly reflects personal

sharp drop in material prices, as well as the booking of structural reform costs andperformance assessments as well as the global common standards for job roles.

reduced capacity utilization amid the economic slowdown in China and Europe.

In fiscal 2015, the last year in the mid-term plan, the target was not achieved due to a

However, it improved to 4.7% thanks to cost structure reforms, Hitachi Smartdelayed response to changing market conditions, including in the telecommunication

Transformation Project, in line with the Smart Transformation Project. In addition, afterand networks business, as well as losses due to insufficient management at a large

dropping to 11.2% in fiscal 2008, the stockholders’ equity ratio recovered to 21.2% in

overseas project. Another factor contributing to underperformance was the greater-

fiscal 2012, while the D/E ratio narrowed to 0.75x over the same period, indicating athan-expected increase in structural reform costs due to an acceleration in structuralclear improvement in Hitachi’s financial position as the Company worked toward thereforms following a deterioration in the market environment for the infrastructure

establishment of a stable earnings base.

systems, power distribution, and construction machinery businesses. However,operating income reached ¥600 billion, with the operating income ratio at 6%,
signaling stability in the profitability and an improved ability to generate cash.

Challenges Ahead• Further improvements in business profitability• Strengthening the service businesses

Challenges Ahead• Global business development and establishing a management base that makes• Accelerate management’s speed to more quickly respond to changes in thethat possible

market environment• Strengthen project management• Take action regarding unprofitable businesses

2018 Mid-term Management Plan
FY2016-2018

Achieving Growth in Social Innovation

Utilizing Digital Technologies
Looking Back
With the goal of strengthening front-line functions, including the number of sales, systemtechnologies for delivering advanced solutions, including AI, analytics, security,

engineers, and consultants, and creating a system of collaborative cooperation with ourrobotics and control technologies distributed across the Company and applies themcustomers, Hitachi from fiscal 2016 moved from a product-specific company system toto a common platform, creating a system that comprehensively and organicallya three-level system, composed of front-line, platform, and product tiers. With the three-leverages the resources of the entire Hitachi Group to quickly and flexibly createlevel system, Hitachi bolstered the management speed. Specifically, business units

new innovations. Thanks to a steady increase in customer collaborations, Lumada(BUs), which had been subdivided from the former in-house companies to develop

business revenues are trending as planned and have already exceeded ¥1 trillion.

and provide services closely to the customer, and group companies, including listed

Moreover, in addition to reorganizing our business portfolio, including selling off

subsidiaries, were positioned to each level. We also strengthened project management

listed subsidiaries with little connection to the core Social Innovation Business, weand worked to improve profitability at individual businesses. With the aim of enhancing

continued to reform our cost structure, which contributed to the adjusted operating

on a global basis the front-line functions central to the Social Innovation Business, we

income ratio meeting our Mid-term Management Plan target and reaching a record

acquired 100% stakes in Ansaldo STS, which supplies signal equipment and control

level.

systems to 30 or more countries and regions, and Sullair, which manufactures, sells,
and services air compressors to about 4,000 customers, mainly in North America.

Challenges Ahead

In December 2018, we signed an agreement for the acquisition of ABB’s power grid

• Aggressive investment in key areas of focus

business. The goal of each of these is the acquisition of a robust global sales network• Improved capital efficiency

and the expansion of the Social Innovation Business.

• Accelerated innovation and active use of digital technologies with a focus on

To add to this, we launched Lumada in May 2016. Lumada takes the essential

Lumada21

How We Will Grow

Strategy and Resource Allocation
2021 Mid-term Management Plan
(FY2019-2021)

Aiming to Become a Global Leader in the Social Innovation Business

Shifting to a “Growth Mode”

Under our 2021 Mid-term Management Plan, we will conduct management focused on raising social, environmental and economic value forour customers as we aim to become a global leader in the Social Innovation Business. The Strategies we are implementing to simultaneously
raise these three types of value are “Expand Revenues by Accelerating the Social Innovation Business,” “Reinforce Global Competitiveness,”and “Reinforce Management System to Improve Profitability.” Through this approach, we will endeavor to improve people's quality of life, raisevalue for both our customers and society at large, and achieve a sustainable society.

Social Value
Accelerate customers’ innovation withadvanced IT solutions
Provide stable, high-efficiency energy and its
management systems
Increase the efficiency of customers’
production and processing systems, andprovide the supply of safe, secure city water,and sewage water systems

Environmental Value

Economic Value

Reduce CO2 emissions through the value
chain

Reallocate economic value added to
stakeholders

Enhance efficiency in the use of water

Improve profits at customer companies

Enhance efficiency in the use ofresources

Enhance employee compensation
Share earnings with partners, others

Design smart cities to be more convenientand environmentally-friendly
Provide with safe, comfortable transportation
systems and services

Performance targets (consolidated)
Revenues

FY2019 results

FY2020 forecast*1¥8,767.2 billion¥7,880.0 billion

FY2021 targets*2
CAGR over 31%

Adjusted operating income / ratio¥661.8 billion / 7.5%

¥372.0 billion / 4.7%

EBIT / EBIT ratio¥183.6 billion / 2.1%

¥614.0 billion / 7.8%

Operating cash flows¥560.9 billion¥500.0 billion

ROIC

9.4 %

5.7 %

Over 101%

Overseas revenue ratio

48 %

53 %

Over 601%

FY2019 results

FY2020 forecast*1

FY2021 targets*3¥2,099.4 billion¥1,920.0 billion¥2,600.0 billion

Over 101%—
Over ¥2.51trillion(3-year cumulative)

Performance targets by sector
SectorItem
Revenues

IT

Adjusted operating income / ratio
ROIC

Energy18.4 %

12.5 %¥399.2 billion¥1,020.0 billion

Adjusted operating income / ratio¥13.5 billion / 3.4%

Over ¥170.0 billion / Over 10%
7.5 %Revenues¥840.7 billion¥770.0 billion¥1,000.0 billion

Adjusted operating income / ratio¥54.7 billion / 6.5%

¥32.0 billion / 4.2%
3.1 %

10.8 %¥1,144.4 billion¥1,090.0 billion¥1,270.0 billion

Adjusted operating income / ratio¥92.3 billion / 8.1%
11.3 %

5.2 %¥2,167.6 billion¥1,900.0 billion

Adjusted operating income / ratio
ROIC¥118.9 billion / 5.5%
8.0 %

¥68.0 billion / 6.2%

¥100.0 billion / 5.3%
6.1 %*1 Announced on July 30, 2020 (ROIC as announced on May 29, 2020). *2 Announced in May 2019. *3 Announced on the “Hitachi IR Day 2019” in June 2019

Hitachi Integrated Report 2020

¥91.0 billion / 9.1%

8.6 %

ROIC
Revenues

22

15.0 %
Over ¥1,700.0 billion

14.5 %

Revenues

Smart Life(¥8.0 billion) / (0.8%)¥338.0 billion / 13.0%

6.4 %

ROIC

Mobility¥192.0 billion / 10.0%

Revenues

ROIC

Industry¥249.4 billion / 11.9%¥124.8 billion / 9.8%
13.1 %
Over ¥2,100.0 billion
Over ¥210.0 billion / Over 10%
Over 15 %Inputs for Promoting Strategy

Strategy 1

Expand Revenues by Accelerating the Social Innovation Business

Grow Highly Profitable Businesses with
Digital Technology

KPI• Expansion of the Lumada business• Accumulation and utilization of customer cases,
creation of solution cores• Developing digital talents to lead digitaltransformation

Customer cases

Over 1,000

Expansion of Global Business

Solution coresOver 85• Strengthen front line, use footprint

Digital talent

Creation of Social and Environmental
Value

Lumada overseas revenue ratio• Initiatives to realize a sustainable society throughsocial innovation• Initiatives to realize a decarbonized society anda resource efficient society

Strategy 2

Lumada core business
Lumada related business

Progress

FY2019 results

Revenues of Lumada business¥1,037.0 billion¥593.0 billion¥444.0 billion

30,000• Revenues of Lumada business, which drives the Social
Innovation Business, were ¥1,037.0 billion in fiscal 2019,with the adjusted operating income ratio exceeding 10%.
We are steadily expanding the accumulation of customer
cases and solution cores, as well as expanding digitaltalents, to quickly deliver value that meets customer
needs. We intend to achieve revenues of ¥1,600.0 billion
and profit improvement in fiscal 2021. We aim to expand
at a 10-20% annual growth rate.

Approx. 40%

Reduction rate in CO2 emissions per unit
(products and services)

19 %Reduction rate in total CO2 emissions at businesssites (factories and offices) (compared with FY2010)17 %Reduction rate in water use per unit
(compared with FY2010)26 %Reduction rate in waste and valuables
generation per unit (compared with FY2010)14 %• Regarding the 20% reduction in CO2 emissions perunit from products and services, the 26% reduction
in water use per unit and the 12% reduction in waste
and valuables generation per unit targeted under theEnvironmental Action Plan for 2021, we are progressing
according to plans and already achieved some of thetargets in fiscal 2019. We will make improvements
ahead of schedule and work to achieve our long-term
environmental targets with an eye on 2050.

Reinforce Global Competitiveness

Creation of Value at the Front Lines in
Each Region• Promotion of co-creation• Sharing vision to resolve future societal challenges

KPI
R&D expenses to sales revenues ratio

3.4 %Number of female managers

700

Ratio of non-Japanese executives*

8.6 %Ratio of female executives

7.1 %Leveraging Strength in Technology toCreate Value• Co-creation with customers in OT × IT × Products

Become a Technology Leader• Global No. 1 in technological platforms• Strengthen Lumada core technologies• Initiatives to enhance product advantages• Creation of disruptive technologies for the future

Initiatives in Intellectual Properties (IPs)
Securing and Training Diverse Global
Human Resources• Diversity & Inclusion• Global human resource management

Global management program participants

Progress

FY2019 results

4,063• To realize sustainable value creation, Hitachi focuseson the construction of Lumada CPS, AI, biometrics
and security-related technologies such as trust, 5G,
robotics and electrification, and is investing in R&D (tosales revenue ratio: maintained around 3%). We are also
strengthening initiatives such as front-end collaborations
to create value with customers and the formulation of avision for future social issues.
• We are in the process of transforming human resourcesmanagement to innovate and create new value inthe global and digital age. As one indicator of humanresource diversity, Hitachi has set targets of 10% forfemale and non-Japanese executives and 800 female
managers by fiscal 2020, both of which are progressing
on track. We are also focusing efforts on humanresources education, such as global management
training, aimed at developing management personnel.
* Executive officers, Corporate officers, and fellows

Strategy 3

Reinforce Management System to Improve Profitability

Accelerate ROIC Management• Promoting ROIC management with a higher
awareness of capital costs

Financial and Capital Strategy• Basic approach to funding procurement, capitalcosts, and shareholder returns• Strengthening cash management

Capital Allocation for Improving
Profitability

KPI

FY2019 results

ROIC

9.4 %

Adjusted operating income ratio

7.5 %Operating cash flows¥560.9 billion• Investments in priority growth businesses• Restructuring of the business portfolio
Growth Investment (planned)

Approx. ¥1,800 billion

Progress• 2021 Mid-term Management Plan targets an adjusted
operating income ratio over 10%, ROIC over 10%
and operating cash flows above ¥2.5 trillion (threeyear cumulative), as well as ¥2.0-2.5 trillion in growthinvestments aimed at achieving these targets. Regarding
cash management, to respond to the social andeconomic changes due to COVID-19, we will ensureliquidity on hand while strengthening our cash generation
capabilities and strengthening management by carefully
selecting investments. With the introduction of ROIC, we
are not only improving profitability but also accelerating
efforts such as optimizing and streamlining funding andinvestments, and reducing assets throughout the HitachiGroup. By improving corporate value over the medium
to long term, we will also enhance shareholder returns,
including stable growth in dividends.

23

How We Will Grow

Expand Revenues by Accelerating
the Social Innovation Business

Strategy 1

Leveraging its accumulated strengths in OT × IT × Products, the Hitachi Group contributes to the resolution of societal issues
and improves customer value by globally deploying digital solutions through the Lumada business.

Grow Highly Profitable Businesses with Digital Technology
Expansion of the Lumada Businesscustomer needs. That is an advantage of the digital solutions in the

As society and business continue to generate more data, Hitachi’s

Lumada business.

Lumada acts as an engine that creates new value from these data

The Lumada business comprises the Lumada core business andand accelerates innovation. Revenues in the Lumada business,

the Lumada related business. The Lumada core business is a purewhich commenced in 2016, were ¥1,037.0 billion in fiscal 2019,

digital solutions business that solves management and businesswith an adjusted operating income margin above 10%. Under ourissues by converting customer data into value using AI and other2021 Mid-term Management Plan, we are advancing measures todigital technologies. In the Lumada core business, we intend to

expand the business with the aim to improve profitability further

expand Lumada solutions by utilizing accumulated customer cases

and achieve ¥1,600.0 billion in revenues.

and solution cores, based on the “Scale of Digital” concept.

In the Lumada business, Hitachi does not offer individual products

The Lumada related business are defined as advanced products

but digital solutions that increase social, environmental andand systems businesses, centered on OT and products, that haveeconomic value while solving issues at customers by leveraging theprospects for synergies with the Lumada core business. In the

know-how in OT (operational technology), IT (e.g., AI and analytics

railway systems business, for example, data are collected fromtechnology) and Products (e.g., industrial equipment, rolling stock,rolling stock (the product) on the OT side, and these data areelevators) it has accumulated across the Hitachi Group’s broad

analyzed and deployed on the IT side. This makes it possible tobusiness domains. The Company has provided numerous digital

reduce breakdowns and increase capacity utilization by efficiently

solutions while building up a library of customer cases throughmaintaining rolling stock with predictive analysis. In the Lumada

collaboration with customers in various fields. In identifying andrelated business, Hitachi is promoting co-creation with customers

analyzing business issues with customers, it is possible to reapply

while delving deeper on the combination of OT × IT × Products

previous digital solutions and customer cases from similar issues,
thereby minimizing the need for customization as much as possible
for the more rapid deployment of solutions to a broader range of

Lumada Business Promotion Scenario
Grow both Scale of Digital, which scales Lumada solutions, andRevenues

1,600.0
Target*1

1,400.0(¥ billion)

YoY

1,037.0

Lumada related
business*2
Lumada corebusiness*3

Scale by Digital, which scales OT/IT system products+6%

1,100.0 +27%

444.0

440.0

593.0

660.0

FY2019FY2020
Forecast

570.0

Lumada corebusiness

830.0

Lumada solutions

FY2021
Forecast

Lumada related
business

Data collection, analysis,

OT/IT systems & products

visualization and optimization

Vehicles, operations management, MES,
production management, ERP,
core systems, etc.

¥1,037.0 billion (FY2019)
Business
area

IT

IT

EnergyIndustry

Mobility

Smart Life

Lumada core business (¥593.0 billion)

Promote overall Hitachi businessat speed of digital business(Scale of Digital)
Build ecosystems using the Lumada
Solution Hub

OTLumada related business (¥444.0 billion)

Products*1 Does not include impact from the performance of Hitachi ABB Power Grids Ltd.
*2 	Lumada related business: Advanced products and systems businesses, mainly OT and products, that are
expected to generate synergies with the Lumada core business*3 	Lumada core business: Digital Solutions business (service business that converts customers data into valuable
insight through AI and analytics, and improves management indicators or offers problem solutions)24

Hitachi Integrated Report 2020

Utilize co-creation facilities toaccelerate customer co-creation
activities
Strengthen links between business
units, develop solutions and promote
the utilization of customer cases

Apply Lumada to OT business units(Scale by Digital)

Phase 1: High profitability via digitizationof manufacturing, maintenance,
supplies, etc.
Phase 2: Service creation for stabilization
Phase 3: Create ecosystems, expand
markets with partners

based on the “Scale by Digital” concept. The Company is pivoting

on a new collaborative effort with customers, Hitachi utilizes

toward high-value-added, high-profit operations in the OT and

Lumada customer cases and solution cores that fit the customer’s

Product businesses by leveraging digital solutions to develop new

management issue, and then provides digital solutions that create

solutions and strengthen existing solutions. In this way, the growthsolid value.

potential of the Lumada core business and the Lumada related

Hitachi has created the Lumada Solution Hub as a venue forbusiness are intertwined, and by feeding off each other, therapidly and easily distributing the know-how in OT × IT × Products

Lumada business will continue to grow. In the future, we will

it has accumulated through co-creation with its customers.

continue to contribute to solving a broader range of social issues

Reusable digital technologies and solutions are packaged together

and customer issues by co-creation with our partners andand catalogued, allowing customers to choose the packages they

expanding markets through the Lumada ecosystem.

want to deploy from the catalog. This facilitates a smooth transition
from the early evaluation to deployment of cloud computing

Accumulation and Utilization of Customer Cases, Creation ofenvironments that satisfy the needs of customers. It is also

Solution Cores

possible to efficiently deploy the solution to multiple sites, including

At Hitachi, we have accumulated Lumada customer cases with ourthose overseas. Lumada Solution Hub has a development

extensive know-how and insight in various sectors and businesses,

environment for combining digital technologies and solutions

which was gained through co-creation with our customers inregistered in the catalog, enabling the creation of new solutions.

diverse fields. Each of these customer cases has examples of the

New solutions can also be added to the catalog, leading to thevalue that can be created with data, as well as details about thecreation of more new solutions. Lumada Solution Hub is a platform

technologies deployed, such as AI and analytics. Based on thesefor driving innovation that supports the Lumada ecosystem.

customer cases, Hitachi has identified the core technologies thatcan be broadly deployed across a wide range of industries to solvecommon issues. These core technologies are categorized andaccumulated as solution cores.
As of March 31, 2020, the number of customer cases exceeded
1,000, and solution cores number more than 85. When embarking

Front leads to provide solution “As-a-service”* for improving customers' economic, social and environmental value
Expanding service provision for problem-solving by linking technologies and solutions for each industrial field
Customers & Markets

IT

EnergyIndustry

Mobility

Smart Life

Provide solution “As-a-service”

Front

Consulting, solutions proposals, OT/IT front-end engineering

DeliverySolutions application, cloud environment building and migration services, management services

Partners

Data collection, storage, analysis, visualization, AI application, cross-industry solutions
Lumada solution

Lumada Solution Hub
Middleware
StoragePower transmission
and distribution
equipment grids
operation

Air compressor
Robotic SI

Rolling stock
Signalling systems
Elevators & Escalators

Home appliances
Air conditionings
Auto parts
Medical equipment

ITsolutions

Energysolutions

Industrysolutions

Mobility
solutions

Smart Lifesolutions

Partners* Shift business models from provision of services to provision of systems and products25How We Will Grow

Strategy 1

Expand Revenues by Accelerating the Social Innovation BusinessAs we make Lumada Solution Hub available to various partners, theLumada has more than 300 digital solutions available to meet thesolutions developed by our partners will be added to the catalog, andneeds for “remote,” “contactless” and “automation” in this “Newthese partners will begin to deploy Hitachi’s own solutions inNormal” brought by COVID-19. By providing these solutions, Hitachisequence. Hitachi is keen to increase the utility value of its customers,

helps its customers accelerate their own digital transformations.

helping to solve societal issues and management issues in the processof creating, distributing and deploying digital solutions in society, while
also accelerating the evolution of the Lumada ecosystem.
Solutions Adapted to “New Normal”
Keywords

Products and services provided

Detection ofpeople with hightemperatures/
event venues

Body temperature detection solution for COVID-19: Hitachi Vantara

Touchless devices/
medical institutions,public institutions,manufacturers, etc.

Touchless solutions: Hitachi-Omron Terminal Solutions

Detection andnotification of
crowding/railway
operators, etc.

Solution for visualizing flow of people using camera imagery: Hitachi

Cashless payments/
financial institutions,etc.

Cashless payments with finger vein authentication: Hitachi

Working from homeand remote work/
all industries

Hitachi work-style reform solutions: Hitachi Group

Remote support fromoffices/manufacturers

Field work information-sharing system: Hitachi Solutions

Remote monitoringand maintenance/
manufacturers,
medical institutions,transporters, etc.

Solutions for strengthening industrial machinery after-market services: Hitachi, Hitachi Construction Machinery

Meter reading/manufacturing sites

Automated service for reading meters: Hitachi

Automated planning in
response to changes
in supply and demand/
manufacturers,
distributors, etc.

Supply chain optimization services: Hitachi

Automation,
unstaffed,labor-saving

Control system security monitoring and analysis support services: Hitachi

Security

Cyberattack security/electricity, water andother plant facilities,
railway operators

Contactless

Remote26

FieldsHitachi Integrated Report 2020

The system scans people who may be queuing to enter a venue or facility. Once its machine learning software
detects an individual with a temperature exceeding the threshold level, the system will issue an alert. With this system,
we support risk management in event venues and other places in which people gather in large groups. The system
can also be used to measure social distance and monitor proper hand washing behavior without collecting personal
information.

Touchless solutions have been developed to allow the clean contactless operation of devices without touching them.
We provide devices to be manipulated by using hand and finger gestures in the air, instead of buttons and touch
panels.

People shown on camera are turned into icons to protect their privacy, enabling the visualization and display of how
crowded an area is on smartphones and train station signage. By preliminarily understanding how crowded an area ofa train station is, passengers can change their routes and departure times to avoid crowds.

Hands-free cashless payments can be made with finger vein authentication that verifies the identity of a person who
has registered her/his biometric information in an encrypted database. This reduces the risk of infection by eliminating
the use of cash for payments between people.

This system facilitates secure access to in-company work environments from a variety of devices, such as tablets,
smartphones and laptops, from off-premise locations including homes and satellite offices. A variety of services
are offered for efficiently and seamlessly working remotely, including services for visualizing work hours to prevent
employees from long hours of overtime.

Combining smart eyeglasses and image-sharing technology, this system can minimize the number of on-site workers
by having employees in offices remotely assist with several on-site tasks.

Addresses needs for increasing efficiency and saving labor in maintenance through remote operation of industrial
machinery using a combination of remote monitoring and predictive diagnostics technologies.

Analog meters at plants are shot by cameras, the images of which are analyzed, read and sent automatically, enabling
maintenance inspections that are done by people on the ground to be implemented automatically and remotely. Data
analysis can lead to early detection of abnormalities in equipment.

High-speed simulations using diverse data from procurement and production, among other sources, are afundamental part of this cloud-based service for automatically creating optimal plans for inventories and deliveries in
response to changes in demand. It also supports planning based on changes in the spread of COVID-19.

This 24-hour, 365-day-a-year support service helps companies protect their control systems from cyberattacks, bymonitoring and analyzing their status and responding to security events as they occur.

Developing Digital Talents to Lead Digital Transformation
Hitachi has strongly advanced efforts to develop digital talents tolead digital transformation and apply digital solutions that combine
OT and IT, the core of its Social Innovation Business.
In April 2019, Hitachi Academy Co., Ltd. was established with a
mission to further enhance and develop digital talents, including

Enhance the number of digital talents / human resources that
support Lumada to approximately 37,000 by FY2021, throughdevelopment of specialists and enhancement of basic training
Design thinker

Data scientist

Leads the identification of essential challenges,
development of solution ideas, consensus building and theevaluation of measures, among other initiatives

Utilizes data by taking full advantage of AI andmathematical statistics

front-line personnel and data scientists. Hitachi Academy has
created a new educational system for digital transformation anddevelops digital talents with on-the-job training (OJT) to accelerate
global growth in the Social Innovation Business.
The entire Hitachi Group aims to increase the number of digital

Domain expert
Facilitates/supports the onsite application of solutions
by leveraging knowledge on
OT and operations

Acceleration ofco-creation withcustomers

talents to 37,000 people by fiscal 2021, including 3,000 data

Engineer, etc.

scientists. We are keen to expand our digital solutions globally by

Design/implement/operation of digitaltechnology-based systems

increasing support for customers with a larger regiment of digitaltalents.

Security specialist
Facilitates/supports everythingfrom planning to operation at
both the cyber and physicallevelsStrengthen human resources to drive digital business
Establish Lumada Data Science Lab amassing the top data scientists
Retain personnel through establishment of Digital Talent Employment Course
Develop personnel using Hitachi Academy training courses
Enhance internal qualification systems: Hitachi Certified IT Professional
Retain personnel with Hitachi Vantara to accelerate the global deployment ofdigital business

Expansion of Global Business
Strengthen Front Line, Use Footprint

it will provide total seamless solutions combining digital solutions

In the Lumada business, overseas revenues account for about

and products.

40% of the total. To accelerate business expansion worldwide,

In Asia, Hitachi turned FusioTech Holdings into a wholly owned

Hitachi is strengthening the structure for advancing overseas

subsidiary in April 2020, after it was created to take over

operations in mainly North America and Asia.

operations from Fusionex International Plc, a market leader in AI

As a part of these initiatives, in January 2020, U.S. subsidiaryand big data that provides SaaS platforms for AI and data analytics

Hitachi Vantara Corporation was integrated with Hitachi Consulting

mainly in Asia. As a result, the Hitachi Group has obtained accessCorporation to create Hitachi Vantara LLC, which will drive global

to its more than 11,000 customers primarily in Asia, and its assets

development of the Lumada business as a core company in front-that include around 260 digital talents, such as data scientists andline and delivery functions, while collaborating with other Hitachi

AI front-line personnel. The Lumada Solution Hub will bring in its

Group companies.

competitive AI and data analytics applications, SaaS platforms that

By region, looking at North America first, Hitachi acquired JR

support payments and user verification, and SaaS business know-

Automation, a leading firm in the robotic SI business, in December

how for acquiring and maintaining a customer base. Through2019, following its acquisition of Sullair LLC, in 2017. Leveraging

collaboration with Hitachi Vantara and other group companies, weon JR Automation’s technologies, know-how and resources in thewill reinforce front-line and delivery functions in a bid to rapidly

advanced robotic SI business accumulated over many years as

develop SaaS platforms globally.

well as its customer base that encompasses a broad range of

In July 2020, Hitachi completed the acquisition of ABB’s powerindustries, we will provide new value to customers by globally

grids business and established Hitachi ABB Power Grids Ltd. The

expanding Lumada solutions that utilize digital technologies. In

Hitachi Group welcomes its global footprint of about 90 countries

addition, Hitachi Industrial Holdings Americas, Inc. was founded in

and regions, a customer base of more than 15,000 companies,

April 2020 as our North America regional headquarters for theroughly 200 sales bases around the world and 36,000 employees.

industry business. While collaborating with Hitachi Vantara, it will

These abundant resources and customer base on a global scale

integrate operations with Sullair and JR Automation and develop

will be instrumental in our efforts to expand global sales channels

the digital solutions business for the industrial and distribution

and front-line operations for Lumada.

fields. Through mutual utilizations of broad customer bases andresources that Sullair and JR Automation possess in North America

27How We Will Grow

Expand Revenues by Accelerating the Social Innovation Business

Strategy 1

Leverage easy-to-introduce application services and digital-capable resources,
Realize customers’ DX quickly and cost effectively
Extend sales coverage to volume zone customers
Offer as a Service

Target customers(in Southeast Asia)

635,000 (in FY2023)*

Large Enterprises

Asia

Japan

North America

Group
companies

Offer Fusionex’s services to global
customers through Hitachi’s global
network

EuropeHitachi Vantara

Integrate Fusionex’s services with
Hitachi’s solutions

Fusionex’s Services × Hitachi’s Solutions

Offer and deliver as a Service solutions
to volume zone customers quickly

Lumada Solution Hub* Created by Hitachi based on Frost & Sullivan research

Accelerating the Global Deployment of Digital Solutions
Hitachi Vantara joined in a strategic alliance with Disney Parks,

attractions and shows. Hitachi aims to improve the guest

Experiences and Products to help Disney's theme park

experience through Disney's entertainment and Hitachi Vantara's

innovations. Through the provision of digital twins solution as welldata-driven solutions.

as a predictive capabilities solution that utilizes data acquired fromsensors and other sources, Hitachi Vantara will help to visualize
and optimize operations and improve the operational efficiency ofCreation of Social and Environmental Value
Initiatives to Realize a Sustainable Society Through Social
Innovation
In its 2021 Mid-term Management Plan, Hitachi has set targets forenvironmental value created by our solutions in five sectors.

improving three values (social value, environmental value, economicITvalue) for its customers through solutions in five sectors comprising

Mobility

IT, Energy, Industry, Mobility and Smart Life, with the ultimate aim ofrealizing a sustainable society through the Social Innovation
Business. Since fiscal 2019, we have worked on the visualization ofvalue by quantifying as much as feasible the social andenvironmental value generated in each of our businesses, drawing
connections between our businesses and the SDGs. By
understanding both the positive and negative impacts on society
and the environment from our operations, we will generate value onthese three fronts in line with the 2021 Mid-term Management Plan,and propose ideas to customers for achieving more sustainablebusiness operations.

28

Please refer to the following pages for examples of the social and

Hitachi Integrated Report 2020

P.44

EnergyP.53

P.47

Industry

Smart Life

P.56

P.50

Initiatives to Realize a Decarbonized Society and a Resource

To reduce CO2 emissions from the use of products and services we

Efficient Society

sold that account for a large percentage of CO2 emissions in its value

Hitachi will resolve environmental issues and achieve both higher

chain, Hitachi is expanding its decarbonization business, in otherquality of life and a sustainable society through its Social Innovation

words, products and services that excel at conserving energy,

Business. In 2016, we established long-term environmental targets

businesses that introduce renewable energy, and solutions thatcalled “Hitachi Environmental Innovation 2050”, and are promoting

increase efficiency and reduce CO2 emissions through digitalization,

environmental activities to achieve these long-term targets in line

such as the utilization of Lumada.

with our Environmental Action Plan, which is updated every three

To achieve a resource efficient society, Hitachi has set targets foryears. To achieve a decarbonized society, Hitachi has set reduction

improving by 50% by fiscal 2050 (compared with the fiscal 2010

targets for CO2 emissions per unit of 50% by fiscal 2030 and 80%

level) its water- and resource-use efficiency in the Hitachi Group, inby fiscal 2050 (both compared with the fiscal 2010 level) throughout

addition to striving for building a recycling-oriented society throughthe value chain.

seawater desalination projects and other water-related businesses.

For a decarbonized society

For a resource efficient society

Reducing the CO2 emissions per unit
throughout the value chain

Building a society that uses
water and other resources efficiently

FY2021(efficiency)
FY2021

FY2030FY205020% or higher

50%

80%

Reduction

Reduction

Reduction(compared with FY2010)

Water

26% or higher
improvement

Resources

12% or higher
improvement

FY205050%
improvement50%
improvement(compared with FY2010, in the Hitachi Group)

Furthermore, in May 2020, Hitachi newly announced its intention toequipment in our factories. We are also endeavoring to achieve theachieve carbon neutral in its own business sites (factories andtargets by enhancing energy-use efficiency through the deployment

offices) by fiscal 2030, in accordance with its aim of accelerating toof smart meters and other IoT technologies, while advancing theachieve the targets of reducing CO2 emissions. This is a target foruse of renewable energy. To start these initiatives, we aim to have atpractically achieving zero emissions of CO2 from the production

least three carbon neutral factories in fiscal 2020 and seven or morestage within its value chain, in other words, Hitachi’s factories andsites in fiscal 2021.

offices. More specifically, we are working to increase efficiency infacility operations by introducing and upgrading to high-efficiency

29

How We Will Grow

Reinforce Global Competitiveness

Strategy 2

Hitachi’s corporate mission for more than 100 years has been to

help expand the Lumada business. As new values emerge from the“contribute to society through the development of superior, original

impact of COVID-19, Hitachi will step up its global efforts thattechnology and products.” While developing cutting-edge

address common societal issues, such as environmental issues, totechnologies, Research & Development (R&D) at Hitachi has

realize a human-centric society.

implemented the corporate mission and spurred innovations thathave led us into the future. In fiscal 2020, we decided on an R&D
policy to “become a global innovation leader driving social,environmental and economic value creation.” Building on Lumada,R&D structure based on three innovation strategies

we are further accelerating open innovation to grow together with

Global Center for Social Innovation

our stakeholders by combining our strengths in OT × IT × Products,

Service development meeting the needs of customers in each region

with the technology platforms in the Research & Development
Group, and external knowledge. Through these initiatives, our goal isCenter for Technology Innovation

to enhance social, environmental and economic value for our

Establishing global No. 1 technology (platforms, products)

customers, and raise people’s QoL.

Center for Exploratory Research

To realize this R&D policy, we are focusing on building ecosystems

Resolving future societal issues

to generate innovation and strengthen core technologies that will

Policy Become a global innovation leader driving social, environmental and economic value creation
Research policy

Provide social, environmental and economic value

Create value at Front
CSI

Formulate visions and regional policy as part ofglobal operations
Design business models based on value
provided by Hitachi

Leverage technology strengths invalue creation
CSI-CTI collaboration

Contribute value proposition-oriented businesscreation through cooperation with global front

NA

EU

CN

APAC

JP

Global CSI
Understand values & generate visions in each region

Industry/
Gov./
Academia/collab.

Business model engineering

Kyōsō-no-Mori
Lumada Center
Share Vision • Create solutions

Expand global Lumada business by deeper
customer co-creation in each region

Become a technology leader
CTI, CV office

CER

Build up Lumada CPS incorporating OT × IT ×
Products

Global CTI
OT × IT × Products

Enhance “AI,” “Trust,” “5G,” “Robotics” and“Electrification”

Global No.1 technology platforms

Develop disruptive technology for a humancentric society

CER
Disruptive technology

CPS: Cyber Physical System, CSI: Global Center for Social Innovation, CTI: Center for Technology Innovation, CER: Center for Exploratory Research, CV: Corporate Venturing

30

Hitachi Integrated Report 2020

Startupcollab.

Creation of Value at the Front Line in Each Region

To realize this, Hitachi is expanding open co-creation spaces in

Promotion of Co-creation

regions of focus to strengthen initiatives in areas of growth andAs issues faced by society and customers become more complex,

resolution of societal issues. Following the launch of “Kyōsō-no-

the Hitachi Group is working as one under the banner ofMori” from the Central Research Laboratory in Tokyo, Japan, in“co-creation” to create social, environmental and economic value

April 2019, we opened a center for the development of digital

through a shared understanding with our different partners of thesolutions through open co-creation in Santa Clara, California, U.S.,

challenges, and working together to resolve the issues.

in May. Further, the R&D resources on the West Coast of North

Hitachi has built up an original end-to-end co-creation process for

America were relocated to the same office as Hitachi Vantara tocustomers called NEXPERIENCE, starting with the creation offacilitate close collaboration across business divisions. We are also

visions and leading through to services. NEXPERIENCE Spaces,

exploring business models together with startups throughwhere customers can come to discover the issues and moveideathons and hackathons held at such centers. In October 2019,

forward to create value, have been opened in Tokyo, North

Hitachi and the state Government of New South Wales, Australia,

America, the United Kingdom and China. Going forward,

agreed to establish a Kyōsō Centre (co-creation center) in Western

NEXPERIENCE will evolve as a methodology that quantifies social,

Sydney by 2023 to accelerate the creation of social innovation.

environmental and economic value, with enhanced risk

Further, in May 2020, Hitachi signed a memorandum ofassessment, to enable collaboration with multiple companies orunderstanding with the Liverpool City Council and the Southregional communities to resolve societal challenges. By working

Western Sydney Local Health District, to collaborate in areas suchwith Hitachi teams on the global front, we will accelerate theas digital healthcare.

creation of value through the delivery of Lumada solutions, as well

In April 2020, the Lumada Data Science Lab. was established withinby reflecting the insights of the challenges faced by each region in

Kyōsō-no-Mori by bringing together top talents in the area of datadrafting visions and rulemaking.

science to further enhance the values delivered through digital solutions.

Strengthen the Front Collaboration Structure

Accelerate commercialization by coordinated operation between Lumada Centers and Kyōsō Centers: Lumada Center: Research & Development Group Kyōsō Center

Hitachi Vantara
Lumada Data Science Lab. (April 2020)
LondonLumada Center UK
NEXPERIENCE Space

Lumada Center US
NEXPERIENCE Space

Beijing
Tokyo (Kyōsō-no-Mori), Shinagawa
Guangzhou
Hong Kong
ThailandSingapore

Santa Clara

Expand Lumada Solution Hub* andcontribute to strengthening “Scale of
Digital” business* Lumada Solution Hub won the Nikkei Business Daily Award for the 2019 Nikkei Excellent
Product and Service Award (January 2020)

NEXPERIENCE Space

SydneyLumada Center Southeast Asia
West Sydney Kyōsō Centre (Planned for 2023)
Joint press announcement with New South Wales State Government (October 24, 2019)

Connect to Kyōsō Centerand share solutions

31

How We Will Grow

Strategy 2

Reinforce Global CompetitivenessSharing Vision to Resolve Future Societal Challenges

by applying technologies developed for railway systems such as

While studying challenges that society may face in the future, Hitachi

operation control and scheduling. Field trials have begun in several

is using the insights to draft visions of how those challenges might becities in Italy and elsewhere in fiscal 2020. In the area of smart

resolved while maintaining economic growth. We will also be

manufacturing and logistics field, by realizing automatic selection of

stepping-up our efforts to share those visions with the world. As part

optimal plan parameters and dynamic demand-responsive plans in inof this activity, joint laboratories were established with the University ofthe value chain of production, facilities and logistics, we will deliverTokyo, Kyoto University and Hokkaido University in 2016. Hitachi also

services that can adapt to changes in the business environment.

shares its vision through industry-academia-government forums toThrough such initiatives, we will use OT technology, one of Hitachi’s

discuss societal issues, policy proposals and publications. Hitachi The

strengths, to differentiate ourselves and further enhance value creation

University of Tokyo Laboratory has made statements and held forums

in each region.

on next-generation power grid systems, and in 2020, is focusing on
total energy management for zero carbon emissions. Through such

Collaboration with Startups

initiatives, Hitachi is working to contribute to the resolution of

In April 2019, the Corporate Venturing Office was established to plant

environmental and societal issues.

the new seeds for new growth through investment and collaboration

With regard to regional co-creation activities, in Southeast Asia,with startups, and promote open innovation. Further, the fundHitachi is working on a project “working with Chlalongkorn University”

management company, Hitachi Ventures GmbH was set up in Junein Thailand to create new services to realize digital cities of the future,

2019, followed by Hitachi Ventures North America in December, toand contribute to the development of human-centric communities inmake the first $150 million investment fund. New seeds of innovation

Thailand. In China, Hitachi signed a strategic agreement with Tsinghua

are being sought in Europe, North America and Israel, and we will

University in 2018, “Future Innovation Collaboration Plan,” and has

pursue investments that advance collaboration in line with scenarios

been engaged in projects such as healthy aging. In August 2019, adrawn to augment Hitachi’s business portfolio in the future. We aretechnology exchange event was held with the National Development

already communicating with over 1,000 startups, and have invested in

and Reform Commission on the theme of “digital economy andthree firms and working on several collaborative projects. Disruptive

healthy aging.” We will contribute to raising social, environmental andtechnologies and startup business models are being adopted, andeconomic value in China through such activities.

achievements are being reflected in corporate and R&D strategies andR&D strategy. Hitachi will continue to invest in the future to realize new

Leveraging Strengths in Technology to Create Valuesocial, environmental and economic value while closely monitoring the

Co-creation with Customers in OT × IT × Products

impact of COVID-19 on the investment environment, as well as

Working with Hitachi teams on the global front to create solutions thatchanges in macroeconomic conditions through such activities.

enhance our customers’ corporate value and peoples’ QoL, we are

In July 2020, Happiness Planet, Ltd., was established with theleveraging the technology platforms and knowledge held by R&D in

objective of creating new industries in happiness and well-being. An

OT×IT×Products, and applying it to “Scale of Digital” business centering

app business to support organization management is being developedon IT sector, as well as “Scale by Digital” business, centered on OT andusing wearable devices and smartphones to quantitively measureproducts to contribute to the expansion of Lumada business.

people’s sense of well-being and increase organizational activity. The
new company adopts the “Dejima*” approach advocated by Keidanren

For the “Scale of Digital” business, OT × IT specialists have been

(Japan Business Federation), which has both the agility of a ventureassigned to each region in North America, Europe, China, Asia Pacific,

company with the advanced technology, and trust and sales channels

and Japan to form teams to resolve challenges faced by ourof Hitachi.

customers in those regions, and achieve an horizontal expansion by

Hitachi is adopting outside-in and inside-out initiatives, to rapidly

developing digital solutions such as maintenance repair throughcreating new businesses while staying one step ahead of changing

co-creation with customers.

needs in society.

For the “Scale by Digital” business, Lumada solution cores that can be* The Dejima Strategy is a reform that was proposed by Keidanren (Japan Business Foundation) in 2018. Its
name derives from the tiny island of Dejima off the coast of Nagasaki that once acted as a bridge between
Japan and the rest of the world during the country's isolationist period.

applied across the five sectors for solutions development, such as
blockchain and data analysis technologies, are being used to connect

32

multiple services and stakeholders to generate greater value in areas

Becoming a Technology Leader

such as Mobility-as-a-Service (MaaS), Infrastructure-as-a-Service

Global No. 1 in Technological Platforms(IaaS), and smart manufacturing and logistics. For example, in MaaS

To become a global leader in the Social Innovation Business by

solutions, Hitachi provides value to businesses and passengers by

resolving challenges faced by society, it is critical that Hitachi has acoordinating regional transportation networks and peripheral services

portfolio of world-leading technology while driving innovation

Hitachi Integrated Report 2020

through co-creation.

financial institution.

The strength of Hitachi’s R&D is derived from the established cycle

In the area of Trust, Hitachi is proceeding with technology

of value creation with its accumulated know-how, from co-creation

development in public biometrics infrastructure (PBI) using

to technology development, with integrated technology platforms

proprietary hands-free authentication system and confidentialand expertise in OT × IT × Products of the Hitachi's five businessinformation-processing technologies that allow data to be

sectors and other group companies. R&D efficiency is increased byprocessed while encrypted. With regard to PBI, several researchoffering concrete solutions that enhance value for our customers,

papers have been cited in the ISO/IEC 30136 world standards

and by sharing these solutions across the Hitachi Group.

issued in March 2018. Field verifications are currently being

The technology platforms are changed to align with changes in

conducted with UC Card Co., Ltd., on cashless settlements thatbusiness portfolios, and new areas of growth. Hitachi is reinforcing

use PBI. Further, in the area of cybersecurity, Hitachi inthe technology platforms through acquisitions and businesscollaboration with Keio University and Chubu Electric Power Co.,

integration in areas such as energy, automotive systems andLtd., developed technology to analyze darknet communications

robotic SI. We are strengthening Lumada core technologies such(communications to IP addresses that have not been assigned to aas “AI,” “Trust” and “Beyond 5G/6G,” as well as “robotics” andparticular computer) that are hidden from the public, from among“electrification” that ensure No. 1 products, and disruptive

the dubious communications coming from multiple unknown

technologies for the future such as “quantum computing,”

organizations, in order to prevent increasingly deft cyberattacks,“regenerative medicine” and “environment.”and showed that it is possible to predict cyberattacks.
For Beyond 5G/6G, Hitachi has built 5G testbeds in Kyōsō-no-Mori

Strengthen Lumada Core Technologies

and in North America, to accelerate R&D to realize secure real-time

To create innovations drawing on advantages of OT × IT ×

control systems in 5G environments. Amid growing needs for

Products, Hitachi is focusing on the development of Lumada CPS

automation, reduced human presence and remote capabilities in(Cyber Physical System) which connects cyberspace and the realvarious fields due to the impact of COVID-19, Hitachi is acceleratingworld, and prioritizing the core technologies of “AI,” “Trust” andthe deployment of Lumada × 5G especially for remote operation of“Beyond 5G/6G.”.

equipment in factory settings, remote work and the monitoring of

For AI, we have developed “Explainable AI” technologies that canbuildings and infrastructure.

explain the rationale behind decisions reached by the AI. Hitachi has

In addition, the Hitachi Group’s secure measurement and control

developed a highly accurate loan screening application that refers totechnologies are contributing to global growth in the Lumada

both internal data from financial institutions (e.g., card loans,business by advancing Lumada CPS and enhancing real-time

mortgage, housing loans) and external data (e.g., economic

connections between cyberspace and the real world.

indicators, GIS* information). We are pursuing real-world operation of* GIS: Geographic Information System

explainable AI through a co-creation initiative with a Vietnamese

Initiatives in Five Sectors
Field

Initiatives

IT

For solutions leveraging data in financial, public and social systems, in the financial field, for example, Hitachi is developing next-generation digital
payment platforms with Hitachi Payment Services (Pvt. Ltd.) in India. At the same time, Hitachi is also conducting verification trials to optimize nonlife insurance portfolios with a new type of computer (CMOS annealing) in a co-creation initiative with non-life insurance companies in Japan.

EnergyHitachi is contributing to increasing the ratio of renewable energy in Japan by evaluating technologies to maximize the use of renewable energy
in existing power grids, in accordance with the New Energy and Industrial Technology Development Organization (NEDO) project to develop
technologies to stabilize next-generation electric power networks to enable the introduction of large-scale renewable energy, as well as bydeveloping solutions to stabilize power grids that have incorporated renewable energy with view to total energy management for a decarbonizedsociety.

Industry

To create smarter manufacturing, maintenance and logistics, Hitachi endeavors to maximize our customers’ KPIs by seamlessly connecting thefield to management. For example, Hitachi developed a delivery optimization services in the logistics field and has begun deployment in Thailand
and China. We are also pursuing deployment of proven technologies such as predictive diagnostics technology for equipment failures with multiple
partners, including amusement parks.

Mobility

To improve the total value chain for mobility between urban centers or within high-rise buildings, Hitachi has begun field tests such as smart building
solutions in Singapore and smart ticketing solutions in Italy.

Smart LifeWe are promoting data-driven urban planning to realize smart cities. Our efforts are focused on developing PBT* solutions to minimize the burden
on patients; optimizing measurement conditions based on Hitachi High-Tech's “instrumentation × AI,” and autonomous driving/connected vehicles
and electrification technologies supporting CASE (connected, automated, shared, electric).

* PBT: Proton Beam Therapy

33

How We Will Grow

Strategy 2

Reinforce Global CompetitivenessInitiatives to Enhance Product Advantages

has commercialized pick-and-place technologies, in addition to the

Hitachi products include rolling stocks for high-speed railways, elevators

automated guided delivery vehicle, Racrew. We are also developing& escalators, particle therapy system, biochemical immunoassay

robotics technologies for unmanned installation and maintenanceequipment, inverters and air compressors. Next-generation

operations.

technologies enhancing these key products are being developed. In

In vehicle electrification, Hitachi is contributing to the reduction of CO2

February 2020, Hitachi was presented with the 66th Okochi Memorial

emissions in electric vehicles and industrial equipment by increasing

Production Prize for technologies related to high-speed railway rollingthe efficiency of electric power systems, such as motors andstocks. We are also focusing on initiatives in robotics for automation,

inverters. An 800-V inverter for long-distance drives was developedlabor savings and remote operations, as well as electrification for a zero-for automobiles. In 2019, Hitachi was awarded a Best 10 New

carbon society.

Products Award from Nikkan Kogyo Shimbun. For industrial

In the area of robotics, in April 2020, Hitachi commercialized theapplications, we are developing an amorphous motor based on IE5

communication robot “EMIEW” which offers guidance, monitoringstandards for energy conservation. These efforts were recognized inand patrol services within buildings. In the manufacturing and2020 with the presentation of the Ichimura Prize in Global

logistics fields, Hitachi is developing technologies that enable multi-

Environment Industry - Achievement Award. Hitachi will continue torobot coordination, and autonomous technologies that facilitate high-pursue greater efficiency in electric power systems.

speed item recognition and sorting with picking machines. Hitachi

Okochi Memorial Production Prize

Nikkan Kogyo Shimbun
Best 10 New Products Award

The Ichimura Prize in Industry against
Global Warming

Class 800 series

Inverter for EV*

Amorphous motor

Development of high-speed rolling stock
able to travel between electrified andnon-electrified track

800-V inverter halves recharging times

Development and commercializationof energy-saving industrial motor withamorphous magnetic alloy foil

* Picture: Screen cooling power module embedded in the inverter

Creation of Disruptive Technologies for the Futuretechnology to culture iPS-derived differentiated myocardial cells,

Aiming for a human-centric society, we are focusing on the

Hitachi has developed new technology to automate 3D culturing

development of disruptive technologies in the fields of quantum

using Hitachi’s equipment for automated mass culturing of iPS cells.

computing, regenerative medicine and the environment—new

In addition, through a joint venture established with MetaTech (AP)technologies that will change society.

Inc. in Taiwan, Hitachi is facilitating the development of regenerative

In the area of quantum computing, following the commercialization

medicine in Taiwan.

of a CMOS annealing machine, we are also pursuing the development

To become a company that leads in creating environmental value,of a gate-type quantum computer. R&D at the Hitachi Cambridge

Hitachi is developing high-efficiency electrically powered equipment

Lab., which welcomed its 30th anniversary, as well as in Japan, iswhile working on the development of renewable energy andbeing strengthened. Recently, we successfully developed ahydrogen systems. On the renewable energy front, we areprototype for the basic structure of a 2D quantum bit array usingdeveloping systems to help stabilize the supply of electricity andsilicon semiconductors. In contrast to conventional

strike a balance in supply and demand when large volumes ofsuperconducting devices, Hitachi’s approach enables the large-

renewable energy are added to the power grids. In hydrogenscale integration needed to reach industrial scale. Hitachi is also a

production and usage systems, we are moving ahead withmember of the Quantum Innovation Initiative Consortium

experimental projects. Through our participation on the Tokyo Zero-established by the University of Tokyo as a part of efforts to build an

Emission Innovation Bay Council established by the Ministry of

ecosystem involving industry, academia and the government.

Economy, Trade and Industry of Japan, we are contributing to

In the field of regenerative medicine, the Hitachi Kobe Laboratory

industry-academia-collaborations for zero emission.

has been working on the application of iPS cells to the cornea of theeye. Through joint research with Myoridge Co., Ltd., known for its

34

Hitachi Integrated Report 2020

Initiatives in Intellectual Properties (IPs)technologies that support Lumada, in advance of other companies.

Amid an ongoing international pro-patent shift, Hitachi is

Through business integrations, we are promoting the mutual use ofstrengthening its intellectual property activities in products andpatents, including with companies newly joined to the Hitachi

solutions. To demonstrate our OT × IT × Products strengths, weGroup.

have formulated IP master plan that defines areas of focus andIn addition, based on the “IP for society” concept, an intellectual

bolsters our IP creation activities. This resulted in Hitachi being

property strategy for a new era, we are aggressively promoting theawarded the Intellectual Property Achievement Award by the

openness of intellectual property in specific fields with high public

Minister of Economy, Trade and Industry in Japan for the first time inutility. While advancing these activities, Hitachi contributes toJune 2020.

solutions for global social issues by participating as a partner in the

To further drive the global deployment of Lumada solutions under“ W I P O G R E E N ” p l a t f o r m f o r t r a n s f e r r i n g e n v i ro n m e n t a l

the 2021 Mid-term Management Plan, we intend to obtain

technologies, that is operated by WIPO (World Intellectual Property

intellectual property rights of solution inventions and core

Organization).

Securing and Developing Diverse Global Human Resources
Based on its 2021 Mid-term Management Plan, Hitachi has

we are to provide optimal solutions based on an accurate

formulated the 2021 Human Resources Strategy with the aim ofunderstanding of the complex issues confronting society and ourhaving each and every employee around the world contribute to thecustomers. With the goal of having members with different values

creation of safe and vibrant workplaces while respecting diverseon the same team sharing the same goals, we are working not only

value systems, and having its employees feel pride and happinessto secure and train a diverse workforce but also to create aworking for Hitachi with opportunities for growth through work.

workplace where each of these individuals can work to the best of

All employees around the world are educated on Hitachi’s value

their abilities.

systems, beginning with the Hitachi Group Identity and within it,

Hitachi, Ltd., and 15 major group companies jointly operate the

Hitachi’s founding sprit of “harmony, sincerity and a pioneering

Advisory Committee and the Hitachi Group Diversity Development

spirit.” Our employees around the world look beyond countries,

Council, which focus on accelerating the promotion of diversity

regions and business divisions to contribute to society as One

across the Hitachi Group as a whole, including in regard to

Hitachi.

supporting diverse human resources and providing work-life

Hitachi is stepping up efforts to secure and train global humanmanagement. The Advisory Committee implements to the fullest theresources by evolving its training, evaluation, compensation andCompany’s diversity management policies, while the Diversity

hiring systems based on a core strategy of effecting changes in

Development Council shares best practices and discusses specifichuman resource management in a bid to spur innovation and create

diversity-related activities. Each committee meets every six months

new value in the global and digital era.

alternatingly. Group companies and business groups/sites havealso set up their own diversity-promotion organizations andDiversity & Inclusion

projects, such as those to help develop women’s careers, toHitachi is keen to create companies where human resources withenhance initiatives geared to the challenges faced by individual

diverse cultural backgrounds, experiences and ways of thinking canworkplaces. Hitachi from fiscal 2018 has broadened the sharing ofwork together.

diversity promotion policies across the entire group, with group

Diversity is the wellspring of our innovation and our growth engine.

companies around the world working together to accelerate

Hitachi regards personal differences—such as gender, nationality,

implementation.

race, religion, background, age, and sexual orientation—as well asother differences, as facets of people’s individuality. By respecting
our employees’ individualities and positioning them as anadvantage, Hitachi frames its diversity and inclusion as conducive
to both the individual’s and the company’s sustainable growth. Witha diverse workforce, strong teamwork and broad experience in the
global market, we will meet our customers’ needs.
We are promoting diversity management as a key management
strategy under the initiative slogan “Diversity for the Next 100.” We
believe it important to recognize diverse values and share opinions if

35

How We Will Grow

Strategy 2

Reinforce Global Competitiveness

Diversity Activities and Developing Women’s Careers

Number and Ratio of Female Managers

With the goal of promoting participation in management decision-(persons)
1,000(persons)
5,000

making by people with diverse backgrounds and enabling as manyfemale employees as possible to take up leadership positions,
Hitachi, Ltd., has created two key performance indicators (KPIs) for

4,302
3,975

800
3,325

the appointment of women in executive and managerial positions. In
fiscal 2013, Hitachi set a goal of promoting women to executive

600
474

positions by fiscal 2015. In April 2015, the Company appointed its
first female corporate officer, a position equivalent to the executive

our commitment both internally and to the world to improve ourdiversity management.

4.2%

4.1%

4.0%

1,000
73

0

to 10%, respectively, by the end of fiscal 2020. We are also working

fiscal 2020 compared with fiscal 2012. These efforts demonstrate

2,000

5.5%

200

rate of non-Japanese and female executive and corporate officers

to double the number of female managers to 800 by the end of

3,000

7.3%

4.8%

2017, we publicly announced our commitment to increasing theto promote more female employees to managerial positions, aiming

8.3%

6.7%

6.5%

400

level. We will continue to promote this goal to ensure that diverse
views and values will be reflected in our management. In November

2,562

509

8.9%

635

577

2,688

4,000
700

2000

2015

2016

Female managers, Hitachi, Ltd.*1 (left scale)
Percentage of total, Hitachi, Ltd.*1

2017

2018

2019 (FY)0

Female managers, Hitachi Group*2*3*4 (right scale)

Percentage of total, Hitachi, Ltd.*2*3*4*1 Since fiscal 2017, “Female managers” has included managerial employees dispatched from Hitachi, Ltd. toother companies and those accepted from other companies by Hitachi, Ltd. Earlier figures include regularmanagerial employees dispatched to other companies but exclude those accepted from other companies.
*2 Hitachi Group figures exclude approximately 40,000 manufacturing workers.
*3 The scope of reporting shifted from full-time, regular female managers, excluding those dispatched to non-Group
companies, to all female managers including those dispatched from Hitachi, Ltd. to other companies and those
accepted from other companies; figures for previous years have been adjusted to match this new scope.
*4 Rising numbers of female managers in part reflect improved coverage of our human capital databases.

As part of our efforts in this area, we have been holding the Global
Women’s Summit as a venue for diverse Hitachi Group employees
from various countries and regions, companies and positions tomingle and discuss gender equality. This event is held in a different

Ratios for Female and Non-Japanese Executives and Corporate
Officers (Hitachi, Ltd.)*1(persons)

8.8%

8

country each year to get as many employees to participate as

7
7.1%

possible. In fiscal 2019, the Global Women’s Summit was held inJapan in October. On the day of the event, Toshiaki Higashihara,

6.4%

5

speeches, panel discussions were held by Hitachi’s leaders fromleadership. The participants had opportunities to pursue deep

3.7%

2.4%

exchanging information. Last year, programs were also open to
2

3

5.0%

5

4

4

conversations about their careers and issues they face, while
male employees, and panel discussions were steered by male

6

6

President & CEO, and female Independent Director gave keynoteeach region, and workshops were held about careers and

8.6%

2.6%

2

2

June 2017

June 2018

executives. Regardless of gender, all participants were given a
venue for discussing gender equality in the workplace.
0
June 2019

Number of female executives

Number of non-Japanese executives

Ratio of female executives

Ratio of non-Japanese executives

June 2020*1 Disclosed since 2017, the year we established as a goal for achieving diversity among executive officers,
corporate officers, and fellows.

Initiatives to Realize Personal and Corporate Growth Through Job-based Management
FY2012Global HR Database

FY2013

FY2014FY2015–18

Global Grade

Global Performance Management

Thorough human resource management via
appropriate people in the right place androle standards

Ranking of 50,000 global managerial or
above positions

112,000 employees introduced(steadily increase introduction)

Database of personal information on
250,000 Hitachi Group employees

Global Leadership Development
Pool and develop top 500 talented
employees

36

Hitachi Integrated Report 2020

Compensation of above managerial positions

New HR system (Workday)
Centralized management of HR information(evaluation, skills, job history, etc.) using ashared global information system

Global Human Resource Management

Ensuring Fair Evaluations and Compensation

The development of the Social Innovation Business requires us toAmid the ongoing globalization of business, there is an increased

actively investigate social and customer issues and then cooperateneed to establish a global human resources system that ensureswith customers to create all new solutions. With the goal offair evaluations and compensation. To attract a diverse and highly

creating innovation and new value in the global and digital era,engaged workforce, Hitachi is focused on building a consistent

Hitachi is focused on securing and fostering a diverse workforce

management system and accordingly follows a common “Global

and the organizations capable of driving sustainable growth.

Compensation Philosophy” based on “Maintaining Market

Starting with a common human resources system for the global/

Competitiveness,” “Pay for Performance” and “Ensuringgroup companies, Hitachi aims to assign the right personnel to theTransparency.”

right positions, allocating the best human resources to key

We are developing a compensation system that is fair andpositions on a global basis. To achieve this goal, Hitachi clarifies thecompetitive in the context of each country or region’s labor market,

roles and responsibilities of each position, as well as reporting lines,

with an individual’s compensation determined after an evaluation of

to find a common approach to human resource management

performance. Individual assessments are conducted annually to set

globally. With this shared understanding, we endeavor to nurtureeach employee’s compensation, and feedback on performancean organizational culture that respects diversity while centering on

results is provided to inspire each employee to develop and growindividual capabilities and build a global business structure basedeven further.

on this culture.

We ensure compliance with the laws and regulations of eachregion in which we operate when determining compensation.

Framework for Global Human Resource Management

Starting pay for new graduates in Japan—representing about half

Hitachi has introduced measures, including the Hitachi Globalof all new graduates recruited each year across the Group’s global

Grade and Global Performance Management systems, to create aoperations—was roughly 20% higher than the weighted average ofhuman resource management platform shared globally across theJapan’s regional minimum wages.

entire group.
In January 2018, Hitachi launched the full-scale operation of thehuman resource management integrated platform, centralizing
processes and measures enacted to date, with a broad range of
information about its human resources, including the skills andcareer ambitions of individual employees. This platform is utilized in
optimally allocating personnel around the world, discovering andgrooming candidates for future leadership and management
positions, and communications between managers andemployees.
Employees clarify their ideal careers, and companies identify thenecessary work skills and experiences. We are shifting toward jobbased human resource management, whereby the best people are
optimally assigned to positions in accordance with each
employee’s abilities and ambitions, without regard to factors suchas age. More specifically, we visualize job functions throughpreparing job descriptions that describe the job content as well as
desired skills and experiences. Several managers gather to discuss
the strengths and career goals of their subordinates and conducttalent review sessions to explore options for job training andassignments. By introducing this framework, Hitachi is accelerating
the switchover to the job-based management of human resourcesthat clarifies the work and roles of each employee as well as
performance expected and achieved.

37

How We Will Grow

Strategy 3

Reinforce Management System to
Improve Profitability

Accelerate ROIC Management
Promoting ROIC Management with a Higher Awareness ofinvested capital (ROIC)*1 as a management benchmark since fiscal

Capital Costs

2019. ROIC is an indicator of how much profit (after-tax business

Under the 2021 Mid-term Management Plan, Hitachi has set forth a

profit) can be generated on capital invested in a business (invested

policy of investing in growth to become a global leader. Beginning

capital). To improve ROIC, returns need to exceed the weighted

with its ¥1 trillion acquisition of ABB’s power grids business, Hitachi

average cost of capital (WACC), which is the cost of raising invested

has decided to allocate ¥1.8 trillion for growth investments, centeredcapital. By using ROIC as a key performance indicator (KPI), Hitachi ison the IT, Energy and Industry sectors. To efficiently execute theseencouraging management to be more aware of the cost of capital, inlarge investments for future growth, Hitachi has used return on

addition to the goal of improving profitability.

Improve profitability
ROIC increase drivers

Example of major action items (to be further broken down and assigned to each division)
Expand orders, determine appropriate orders received
Optimize customer portfolio

Expandprofitablerevenues

Expand overseas revenues
Expand Lumada revenues

Increaseadjusted operating
income ratio

Reduce materials cost, outsourcing expenses
Improve production efficiency
Improve business efficiency
Reduce costs

2021 Mid-termManagement Plan
Targets

Increase after-tax
business profit

Strengthen project management
Reduce loss costs

Adjusted operating
income ratio

Withdraw/replace unprofitable business

10%

Over

Increase
ROIC

Implement structural reforms

Reduce tax expenses

Implement appropriate tax management

Increase equity in earnings
of affiliated companies

Realize joint venture alliance synergies

Improve asset efficiency (Improved invested capital ≈ business asset efficiency)
ROIC increase drivers

Example of major action items (to be further broken down and assigned to each division)
Early collection of trade receivables

Increase working
capital turnoverCCC*2
improvement

Reduce inventories
Trade payables: Set appropriate payment dates
Acquire advance payments

Improvebusiness asset
efficiency(Increase asset
turnover ratio)

Implement pre-investment checks and post-investment monitoring
Increase fixed asset
turnover ratio

Review held real estate, sell idle real estate assets
Manage goodwill
Review cross-shareholdings and equity-method investments

Reduce cash on
hand and interestbearing debt
*1 ROIC = (NOPAT + Share of profits(losses) of investments accounted for using the equity method) / “Invested Capital” x 100
NOPAT (Net Operating Profit after Tax) = Adjusted Operating Income x (1 – Effective income tax rate), Invested Capital = Interest-bearing debt + Total equity*2 CCC (Cash Conversion Cycle)

38

Hitachi Integrated Report 2020

Improve accuracy of cash flow forecasts
Expand poolingFinancial and Capital Strategy
Financial Analysis of the Past Five Years
The following is a summarized financial analysis of the Hitachi Group over the past five years.
• In addition to using the CCC as a management benchmark, Hitachi has slimmed down total assets through the strategic restructuring of groupcompanies• Notably interest-bearing debt has been reduced by ¥2.1 trillion, and the D/E ratio has improved from 0.87 to 0.35
• Hitachi had adequate liquidity on hand
• The dividend payout ratio has stayed in the range of 20%–30%, and the total amount of dividends paid has increased

Cash Conversion Cycle (CCC)

Liquidity on Hand

D/E Ratio(¥ billion)(days)

74.2
71.6

400.0

400.0

400.0

(times)

0.87

72.2
69.7

2015

400.0

500.0

2016

2017

69.3

2018

0.35

2019
(FY-end)

699.3

765.2

697.9

2015

2016

2017

Commitment line (Hitachi, Ltd.)Cash on cash equivalents

807.5

2018

812.3

2019
(FY-end)

0.29

2015

0.23
2016

2017

0.23
2018

2019
(FY-end)

The following four priority issues are central to Hitachi’s financial and capital strategy: 1) further improve profitability through stringent ROIC
management, 2) increase capital efficiency by improving the business asset turnover ratio, 3) reduce WACC using moderate leverage within an
appropriate financial discipline and 4) increase total shareholders return through the execution of rational shareholder return measures withconsideration for share buybacks in addition to dividends.

Ensuring Financial Stability
Hitachi recognizes that ensuring the stability of our financial base is an

Rating Company

Long-term

Short-term

S&P Global Ratings Japan Inc.

A

A–1

Moody’s Japan K.K. (Moody’s)

A3

P–2

Rating and Investment
Information, Inc. (R&I)

AA-

a–1+

important management issue in terms of realizing growth investments(¥2.0 trillion–¥2.5 trillion over three years) and continuous return ofprofits targeted in the 2021 Mid-term Management Plan. To this end,
we must maintain an A-rating on our corporate bonds and a D/E ratio
of about 0.5 times.
The Hitachi Group’s ability to generate cash has increased steadily overthe past five years with improvements in our financial structure leading
to rating improvements as shown in the table on the right.

As of September 202039

How We Will Grow

Reinforce Management System to Improve Profitability

Strategy 3

Financial and Capital Strategies and Shareholder Returns Going

Basic Approach to Shareholder Returns

ForwardReturning profits to shareholders through the medium- to long-term

Basic Approach to Funding Procurement

enhancement of corporate value and ongoing dividends is an

Funding procurement is conducted by the most appropriate means

important management priority for Hitachi. Regarding dividends, ourconsidering a variety of conditions, including the timing and funding

policy is to attempt to provide stable dividend growth, while ensuring

required for business. When procuring funds through borrowing, ourthe funding necessary for investments. Under this policy, we makefinancial discipline policy is to maintain a D/E ratio of less than 0.5

decisions based on overall consideration for performance trends,

times and an interest-bearing debt/EBITDA ratio of less than 2.0 times.

financial conditions, dividend payout ratios and other factors. ShareOur 2021 Mid-term Management Plan includes a budget for growthbuybacks are conducted flexibly to supplement dividends ininvestments of ¥2.0 trillion–¥2.5 trillion over the three years from fiscal

accordance with funding demand and the business environment.

2019 to fiscal 2021, which will be procured through ¥4.0 trillion–¥4.5

Internal reserves are used for M&A, R&D, capital expenditures andtrillion in cash on hand, borrowings and gains from the sale of assets.

other activities to ensure Hitachi’s competitiveness and growth as a

Basic Approach to Capital Costs

global company based on medium- to long-term management

Regarding the cost of capital (hurdle rate) used for individual

strategies.

investment decisions, calculations are made on a case-by-case

In its 2021 Mid-term Management Plan, Hitachi plans for total

basis in light of interest rates, country risks and the expected stock

shareholders return over the three years from fiscal 2019 through fiscal

market returns in the country where the investment will be made.

2021 to exceed the total for the previous three years through fiscal 2018.

Total Shareholders Return (TSR) for Hitachi, Ltd., Over the Past 10 Years
300

Hitachi share price
TOPIX including dividends
TOPIX Electrical Equipment
including dividends

250
200
150
100
50

Past 1 Year
TSR

Hitachi share price

-9.7%

13.0%

TOPIX

-9.5%

TOPIX Electrical Equipment

-1.4%

/0

/0

20

19

20

20

Past 5 Years

Annual TSR

3

3

3
20

20

18

17

/0

/0

/0
16
20

Past 3 Years

TSR

3

3

3
/0
15
20

20

20

14

13

/0

/0

3

3

3
/0
12
20

/0
11
20

20

10

/0

3

3

0

Past 10 Years

TSR

Annual TSR

TSR

4.1%

-14.3%-3.0%

116.1%

Annual TSR
8.0%

-0.4%

-0.1%

1.8%

0.4%

78.4%

6.0%

9.4%

3.0%

8.9%

1.7%

72.9%

5.6%

Note: The graph and table above show return on investment for investments made from the fiscal year ended March 31, 2010, taking into account dividends and stock prices as of the fiscal year ended March 31, 2020. Hitachi, Ltd.,
investment performance, including stock prices and dividends, is indexed using 100 as investment amount as of March 31, 2010. The TSE Stock Price Index (TOPIX), which is a comparative indicator, is similarly indexed using data
including dividends for electrical equipment.

Total shareholders return (TSR), including dividends and stock price fluctuation, is shown above.
While continuing to improve profitability and distribute a stable dividend, Hitachi is making concerted efforts to increase shareholder value throughmanagement that is aware of its share price, based on business and financial strategies designed to improve TSR in excess of the cost ofshareholders’ equity.
Strengthening Cash Management
To keep pace with the rapid changes in society and the economy,
Hitachi places an emphasis on stable cash flow by 1) ensuring
adequate liquidity on hand; 2) enhancing the generation of cash
flows from operating activities by obtaining business
opportunities, reducing working capital, such as inventories, andCash Flows
Cash flows from operating activities
Cash flows from investing activities
Free cash flows
Cash flows margin from operating activities
843.1 8.6%

363.5 324.4

7.1%
638.7 485.5
213.8Core free cash flows*(¥ billion)

7.8%
727.1

6.4%
610.0 447.1

6.4%
560.9

283.5 252.8
136.0

135.4

structural reforms; and (3) reviewing priorities for capital
expenditure and other investments and loans, while selling off
assets.

(153.2)(518.7)FY2015(162.8)(474.3)

FY201635.0

FY2017(525.8)FY2018FY2019* “Core free cash flows” are operating cash flows plus collection of investments in leases less cash outflows for thepurchase of property, plant and equipment, intangible assets, software, and the assets to be leased.

40

Hitachi Integrated Report 2020

Capital Allocation for Improving Profitability
2018 Mid-termManagement Plan

Basic investment policy

2021 Mid-termManagement Plan

¥4.0–4.5 trillion

Investment for
further growth

Debt/
Asset sale, etc.

¥2–2.5 trillion
Investment for growth¥0.5 trillion

CAPEX/
Shareholders
return, etc.

CAPEX/
Shareholders
return, etc.

¥1.8 trillion¥1.6 trillion

OperatingCash FlowsMore Than¥2.5 trillion

scale

ExpandInvestment

Investment

Resources

M&A• Expand the digital solutions business while strengthening products
and services and securing human resource development, which
are efforts essential to providing solutions
R&D• Strengthen development focused on AI (e.g., image analysis, voicerecognition, machine learning), robotics, electrification and security
to establish a Cyber Physical System (CPS)
Human resources• Produce and strengthen human resources who can create new
innovation using digital technology and provide optimal digitalsolutions to customers through external recruitment and internal
human resource development

R&D ¥1.2 trillion scale

R&D ¥1.0 trillion

Investments in Priority Growth Businesses

continuing to ensure sufficient capital, Hitachi makes decisions on

In its 2021 Mid-term Management Plan, Hitachi aims to expand thepriorities regarding capital allocations and R&D spending and moves

digital solutions business centered on Lumada, with a focus on the IT

into action. Below is a list of major M&A deals we have made or

and Industry sectors as key investment fields for growth. Whiledecided to make to reinforce operations.

SectorIT

Companies

Acquisition date

Fusionex International

April 2020

ABB’s power grids business

July 2020

Acquisition purpose
Hitachi acquired its SaaS business in AI and data analytics for the Asian region
in a bid to accelerate the global development of the Lumada business.
In addition to its world-class power grids business, Hitachi acquired its global

Energycustomer base, human resources, back-office functions and other business
infrastructure to accelerate its transformation into a truly global company.

JR Automation

December 2019

KEC Corporation

April 2019

Industry

Mobility

Smart Life

Yungtay Engineering (partial shareacquisition)

May 2019

Chassis Brakes International

October 2019

Business integration of Keihin, Showa andWithin fiscal
2020

Nissin Kogyo, affiliates of Honda Motor

Hitachi entered the North American robotic systems integration business andacquired its customer base.
This acquisition was made to enhance competitiveness in the robotics
solutions business.
This acquisition of shares was made to expand global operations and improve
profitability in the elevators & escalators business.
This move strengthens the chassis and safety systems business, core
operations in the automotive systems business.
This will strengthen the development and provision of globally competitive
solutions in the CASE field in the automotive systems business.

Restructuring of the Business Portfolio

Chemical Co., Ltd., to Showa Denko K.K. In May 2020, Hitachi

To become a global leader in the Social Innovation Business, Hitachi isacquired the remaining shares in Hitachi High-Tech Corporation,

accelerating M&A with the intention of realizing an optimal businessturning it into a wholly owned subsidiary. For the two listed

portfolio, and to promote efficient group management while

subsidiaries, Hitachi Construction Machinery Co., Ltd., and Hitachi

strengthening governance, the Company is conducting a review ofMetals, Ltd., Hitachi continues to review its capital policy. Furthermore,

capital policy at listed subsidiaries and reducing the number of group

we have decided to sell the diagnostic imaging operations of thecompanies.

healthcare business, and in the railway systems business, we sold

As of the end of June 2020, the number of consolidated subsidiaries

some additional shares in U.K.-based Agility Trains West (Holdings)

was 739 companies (153 in Japan and 586 overseas), a decrease of

Limited, a rolling stock leasing firm, in April 2019. Hitachi continues to

64 companies from the end of March 2019. Regarding its listed

sell off non-core businesses and withdraw from low-marginsubsidiaries, in April 2020, Hitachi sold shareholdings in Hitachi

businesses.

41

How We Will Grow

CFO Message

Supporting Hitachi Group’s
Social Innovation Business throughthe appropriate capital allocation
Yoshihiko Kawamura
Senior Vice President and Executive Officer, CFO

Mr. Kawamura joined Hitachi in 2015 after serving as an executive officer at Mitsubishi
Corporation. Leveraging the experience he gained at Harvard Business School and theWorld Bank, he has played a key role as Chief Strategy Officer (CSO) since 2018 andhas driven structural reforms and the design of the 2021 Mid-term Management Plan.
He was appointed Chief Financial Officer (CFO) in April 2020.

Q: Having been promoted from CSO to
CFO, how are you approaching your roleas CFO?
The primary duty of the CFO is to make management decisions,42

Q: Last year, Hitachi added return on invested
capital (ROIC) as a key performanceindicator. What are your thoughts on ROIC
management over the past year?

mainly about investments, in addition to budgeting and compiling

In the past, operating income and operating income ratio were ourresults, the actual work of legal financial accounting, and ensuring

key performance indicators. In addition to these KPIs, we introduced

accounting compliance. In my previous role as the CSO, I oversaw

ROIC as a new indicator last fiscal year, for the purpose of clarifying

growth and investment strategies, as well as the Mid-term

our intention of pursuing profits commensurate with the cost ofManagement Plan. As the CFO starting in April this year, I support

capital, while remaining aware of the balance sheet. Hitachi is in

top management in making business decisions by allocating capital

position to accelerate company-wide growth by improving capitaland funds across the entire company and comprehensively

efficiency and concentrating management resources in highly

monitoring returns as a result of it. Japanese companies divide up

profitable businesses. Foreign investors make up approximately

the roles and responsibilities of the CSO (a majority of which belong

50% of Hitachi’s shareholders. Part of the reason why we introduced

to the corporate planning department) and the CFO, but around the

ROIC as a KPI is because these foreign investors pay close attention

world, many companies combine the functions of the CSO andto the cost of capital. Over the past year, we have striven to instill

CFO. I believe the experiences I gained as the CSO will be useful in

ROIC management from business units (individual profit centers) tofulfilling my responsibilities as the CFO.

the front lines by using an ROIC tree, which breaks down the

In its 2021 Mid-term Management Plan, ending March 31, 2022,

individual elements of ROIC and suggests ways to improve each

Hitachi plans to execute ¥2.0 trillion–¥2.5 trillion in growthone. To increase earnings, ROIC must exceed the weighted average

investments. The funds needed for these investments are, ofcost of capital (WACC), a measure of procuring cost of capital (i.e.,course, based on our operating cash flows, but being procured

ROIC spread is a positive value). Since last year, we havefrom diverse sources, including debt financing (e.g., loans fromperiodically conducted reviews of ROIC in each business unit. I

financial institutions, issuance of corporate bonds). Looking ahead,

believe the rollout of ROIC has had an impact, as discussions have

we are keen to maximize returns on investments by appropriately

come to center more on ROIC and consensus has formed aroundallocating capital while aligning investments with our strategies,

ROIC, based on whether the cost of capital aligns with the businessprocuring capital through an optimal combination of means with anbeing advanced. In addition, ROIC management is increasingly

eye on a rise of debt costs. If necessary, Hitachi will reshuffle its

understood in light of the reorganization and use of idle assets suchbusiness portfolio. It is important to steer the portfolio toward

as land, and the concentration of capital that leads to greater

assets that generate higher returns, while optimizing operations on

investment efficiency.

the capital procurement side. Business restructuring is done while

Despite the impact from COVID-19, which was not envisioned whencomprehensively considering strategic value and synergies withthe 2021 Mid-term Management Plan was drafted in early fiscal

core businesses. On occasion, decisions are made to scale down

2019, our key management targets have not been changed as ofor withdraw from businesses even if they are profitable.

today for capital allocations, including ¥2.5 trillion for growth

Hitachi Integrated Report 2020

investments, a 10% adjusted operating income ratio and 10%
ROIC. Debt has increased considerably in accordance with themassive investment Hitachi made to acquire ABB’s power grids
business, resulting in a temporary elevation in the Debt/Equity (D/E)
ratio above our target of 0.5 times, which was set relatively
conservatively. Hitachi plans to continue investing in growth whileleveraging under the adequate financial discipline and controllingdebt so the D/E ratio falls back below 0.5 times going forward.
When executing investment, it is necessary to create earnings
opportunities while managing risks. By understanding and analyzing
the constant changes in the business environment and consideringsocietal issues, our competitive advantages and constraints on
management resources, we seek to properly identify and manage avariety of risks as a company. I believe one of my most importantduties is to judge and monitor these risks.

Q: What is Hitachi’s policy on allocating
financial and nonfinancial resources inline with its aim of becoming a global
leader in the Social Innovation Business?
Hitachi follows strategies that move it closer to its vision of
becoming a global leader in the Social Innovation Business. It is
important for us to support business units, the front lines foradvancing its strategies, on the financial side. I believe the core
mission of the finance department is to maximize efficiency in the
procurement of financial resources and effectively deploy them tofacilitate their sales activities without restriction.
Hitachi promotes the Social Innovation Business by amplifying its
presence in social infrastructure and digital transformation. As
exemplified in the acquisition of ABB’s power grids business, It isnecessary to mobilize a large sum of funds for the Social Innovation

Q: Can you explain Hitachi’s approach tocapital allocation?

Business, and we need to come up with an optimal solution to these

Hitachi is keenly aware of the importance of growing in tandem withcan be made in a timely manner. Hitachi has an adequate level ofcapital markets. We believe in the importance of having constructive

liquidity, as the pace of capital accumulation has accelerated

conversations with participants on capital markets that watch

alongside constant increase in profits. Readying a foundation forcompanies in various industries along different time lines. For thisprocuring funds is a crucial element of financial strategy, and thisreason, we make a concerted effort to prepare informationalfoundation entails building cordial and all-around relationships withenvironment for it. Accordingly, this fiscal year, we took a leap of

external financiers and investors, including financial institutions andraising our disclosure level of managerial information. I hope that

capital markets around the world, international institutions andthese enhanced disclosures will shed more light on Hitachi’s

government entities.

management conditions among capital market participants.

Furthermore, social expectations for corporations have changed

Hitachi mainly considers growth investments in the area where

dramatically. For a sustainable company, the nonfinancial side hassignificant synergies with Lumada, our strategic core, can be

become increasingly important, in terms of contribution to solutions

anticipated, namely digital and IT businesses. In an environment offor social and environmental problems, in addition to management

rapid advances in technology (big tech era), being too much

indicators that focus on profitability. Hitachi is proactively tackling

cautious on investment strategies could translate into various

social and environmental issues, such as by reducing its carbon

opportunity losses in the future. Hitachi aims to maximize corporate

footprint, a cause of global warming, and augmenting its corporate

value though the pursuit of relatively short-term profits and medium-

behavior as a good corporate citizen. Strategically investing in fields

to long-term growth investments, while considering the balance ofthat facilitate solutions for these social and environmental problems

overall resource allocations, including R&D spending.

should translate into medium- to long-term growth for Hitachi, in my

As for shareholder returns, I believe improving corporate value isopinion. If we lose sight of the nonfinancial aspects of social andfundamentally important, more than anything else. We aim toenvironmental values and mechanically make investment decisions

increase earnings per share as a result of improved profitability ofbased on the adequacy of short-term profitability, our future

overall businesses, which is achieved through investments based on

corporate values could be eroded. To pursue economic, social andappropriate strategies and the creation of an optimal businessenvironmental value in parallel (not sequentially), Hitachi will manage

portfolio by shuffling assets from weak-performing businesses into

operations with an eye on medium- to long-term returns, while

relatively profitable businesses. And we believe it is also important topaying due consideration to nonfinancial value and relationships,

steadily and continually increase dividends. When the timing andwhich do not always factor into short-term profitability. The financevarious conditions are right, Hitachi considers share buybacks.

department lends its support to the parallel pursuits of economic,

Hitachi intends to comprehensively improve shareholder returnssocial and environmental value.

funding needs. In addition, it is important to prepare a financial
foundation on a regular basis so that these essential investments

while striking a balance among increasing corporate value, dividends
and share buybacks (maximize total shareholders return).

43

How We Will Grow

Story of Value Creation in the IT Sector
Digital transformation (DX) is attracting considerable attention. DX refers to a trend in

Activities for Creating Social andEnvironmental Values

which digital technologies such as AI, IoT, robotics and 5G are being used to respondto the digitalization of market environments. As this trend unfolds, it is transforming the
economic activities of companies and the business models that form them, as well as theinternal organizations, cultures and systems that make up the companies themselves. In

Contributing to economic
development in India

2020, the COVID-19 pandemic resulted in a global turning point for values regarding how

Payment services

business should be ideally conducted in response to consumer activity and supply chainOver

400 mill. people

considerations, and for business philosophies in general. Individual lifestyles and work styles
have also changed significantly due to the pandemic. Amid this “New Normal,” demand forremote, contactless, and automation including unmanned and labor-saving technologies is
growing, and DX appears likely to pick up further speed moving forward.

Results and Targets

Principal Products and Services

ROIC
（％）

FY2019 Revenues

Adjusted operating income ratio (%)¥2,099.4

billion

EBIT ratio (%)

Services & Platforms

18.4

37%
12.5

11.9

15.0

IoT platform

13.0
12.5

AI

10.0

10.2

¥2,099.4 billion / 26%

Cloud service

Public systems
IT for public offices, municipalities andeducational institutions

Control systems

Defense systems
IT functions commonly used for allcompanies
Application development,
engineering, operation andmaintenance, project management
and quality assurance¥2,600.0 billion / 42%

FY2020(Forecast)*1

Financial systems
IT for banking, insurance and securities

Systems for social infrastructure
IT for power generation/energy,transport and communication carriers¥1,920.0 billion / 27%

FY2019(Results)

63%

IT products (storage, server)

Security

9.3
Revenues/
Overseas revenue ratio

Data analytics

Front Business

FY2021(Target)*2*1 Announced on July 30, 2020 (ROIC was announced on May 29, 2020)*2 Announced at the “Hitachi IR Day 2019”

Vision in the 2021 Mid-term Management Plan
In the IT sector, we are using the power of digital technologies to fulfill

DX is also generating more opportunities for investment. In response

the expectations of customers in Japan and overseas while aiming toto corresponding needs, we are aiming to improve the social value

realize a sustainable society and become a top-class solution

generated by our digital solution business in the highly developed

provider in the global market. The impact from the spread of COVID-

financial and social infrastructure fields. At the same time, we are

19 has given rise to concerns of further stagnation in IT demand.

striving to raise overall environmental efficiency throughout the

However, the pandemic has also resulted in the global acceleration of

lifecycle of our products and services while targeting the creation ofDX, a trend in which digital technology is being used to transform

environmental value.

corporate management and business models. This intensification of

44

Hitachi Integrated Report 2020

Progress on the 2021 Mid-term Management Plan
We have expanded revenues and improved profitability in the IT sector
by reinforcing front-line functions related to financial, public and social
infrastructure systems and expanding services and platforms that
support DX, including those associated with cloud services, data
analytics, and IoT and AI technology.
Meanwhile, the IT sector has been a major driving force behind theLumada business, which is an engine of overall growth for Hitachi,
while also acting as a cross functional organization in collaboration with
the Energy, Industry, Mobility and Smart Life sectors to promotebusiness expansion.
Moving forward, we will actively invest in growth with the goal ofsteadily promoting the “sales expansion in the growing global market”
detailed in our 2021 Mid-term Management Plan and accelerate theglobal rollout of Lumada while striving to achieve business expansion.

within Hitachi Payment Services Pvt. Ltd. that focuses on data analysis
with the goal of promoting further business collaboration with SBI. At
the same time, this department began to collaborate with Hitachi’s
R&D Division as the company aims to create new services thatleverage payment data.
In Vietnam, we began field testing an automatic loan contract service
through a partnership with VietCredit Finance Company, a local
financial institution, in February 2020. Once ready, this service will
digitize loan agreement processes ranging from initial applications tosubsequent screenings and conclusions. By establishing the first-everautomatic loan contract service in Vietnam, we will reduce the burdenof service counter operations that were previously conducted using
paper and aim to raise the efficiency of office services. At the sametime, we will enable detailed, data-based screening utilizing our original
AI technology, which has been successfully utilized in home loan
screenings in Japan.

In terms of specific measures, we strengthened systems supporting
the global expansion of the Lumada business with our January 2020
integration between Hitachi Vantara Corporation and Hitachi
Consulting Corporation. This new Hitachi Vantara LLC will play a keyrole in carrying out front-line and delivery functions while striving tomaintain close collaboration with the entire Hitachi Group and driving
global expansion of the Lumada business. In addition to thisintegration, in April 2020, we obtained digital service businessexpertise, excellent data scientists, as well as new customer bases,from Fusionex International Plc in Malaysia. Moving forward, we will
incorporate AI and data analytics technology and expertise regarding
subscription-model service businesses into the Lumada business as
we aim for business expansion in the global market. Meanwhile, we willcontinue to consider further acquisitions and alliances aimed at
procuring personnel, business sites and other business resources.
Furthermore, we are working to establish Lumada Solution Hub, aPayment conducted on-site in India

common platform that will allow customers to quickly implement
Lumada, while developing advanced digital technology. In the future,
we will utilize the technology and expertise in the IT sector to digitalize,
and increase the added value provided by, products and solutions
businesses associated with other sectors and promote businessexpansion.

Global Business Promotion
In January 2019, we established a joint venture with State Bank ofIndia (SBI), the largest state-owned commercial bank in India. Throughthis venture, we aim to build a digital payment service platform for the
next generation. By collaborating with SBI, which has about 400 million
customers (equivalent to roughly one-third of India’s population), weare analyzing and utilizing vast amounts of digital payment dataSigning ceremony with VietCredit Finance Company

obtained from point-of-sale (POS) systems, e-commerce andtransportation fare payment systems in an effort to provide high-valueadded services in India. In fiscal 2020, we established a department

45

How We Will Grow

Story of Value Creation in the IT Sector
Contributing to Prevent the Spread of COVID-19

system scans people who may be queuing to enter a venue or facility.

Hitachi is supporting customers in their pursuit of DX by using Hitachi’sOnce its machine learning software detects an individual with adigital technologies in response to the “New Normal” with COVID-19.

temperature exceeding the threshold level, the system will issue an

For example, we will provide a variety of solutions that support remotealert. With this system, we support risk management in event venues

working, including systems that allow customers to use devices suchand other places in which people gather in large groups. The system

as tablets, smartphones and laptops to safely access their normal

can also be used to detect and measure social distancing, and todigital work environments from any external environment, including

monitor proper handwashing, without gathering private information.

homes and satellite offices. Through these solutions, we furnish

Furthermore, Hitachi-Omron Terminal Solutions, Corp. has developed

business continuity support for both organizations and activities,“touchless solutions” that achieve clean, contactless device operation

including many companies and social infrastructure–related projects. In

without requiring users to manipulate any equipment or parts; its aerial

addition, Hitachi Vantara provides a body temperature detection

input device has already launched and allows users to operate devices

solution for the COVID-19 pandemic that unobtrusively scans people

by touching an image that is projected into the air, rather than a button

with a greater accuracy than manual temperature measurement. The

or touch panel.

Conceptual image of the body temperature detection solution for COVID-19

Maximizing the Added Value Provided by
Solutions with Lumada×5G

creation through the use of 5G technology, conduct relevant

In 2020, telecom carriers began providing commercial services

preparations and development on the Lumada Solution Hub, andbased on 5G, which is the next generation telecommunication

swiftly roll out these applications within the market.

system. This high-speed telecommunication network launch amid the

Featuring ultra-high speed, low latency and support for multiple

spread of IoT technology will dramatically increase Hitachi’s potential

connections at the same time, 5G has the potential to facilitate

for providing solutions as it supports DX.

further evolution in digital technologies such as AI, IoT and robotics. It

Hitachi has established experimental 5G stations within its factories,

also speeds up cyber-physical systems, which process and analyze aoffices and research laboratories and is using them to accumulate

variety of data on a large scale in cyberspace and apply the results inthe technical knowledge required to construct 5G environments. By

the physical world.

examining and developing use cases in 5G environments and

5G is an essential platform that provides the fundamental

services, the entire Hitachi Group is supporting the 5G solutions thattechnologies that will accelerate the development of the world

are expected to form a thriving new market. Based on the expertiseenvisioned through Hitachi’s Lumada, where OT and IT have fused

and technologies cultivated through these efforts, the Hitachi Group

together. By combining Lumada with 5G, we will further raise thewill provide total support for the construction and implementation ofadded value associated with the solutions it provides.

5G environments in a wide range of companies and local
governments. This comprehensive support will include network
design, construction, operation and maintenance, as well as theprovision of upper-layer applications.
Particularly in the Industry field, where needs are reportedly mostprevalent, we are preemptively developing and testing use cases andwill collaborate with a wide variety of customers and partners togenerate new work styles amid the “New Normal” through means
such as the implementation of wireless technology in factories tosupport the construction of flexible production lines and remote
operation. In addition, in the Mobility, Smart Life and Energy sectors,

46

we will develop a range of applications that support new value

Hitachi Integrated Report 2020

Story of Value Creation in the Energy Sector
Global demand for energy has continued to increase alongside social innovations, such asincreasing popularity of electric vehicles (EVs), further industrial electrification and scale-up

Activities for Creating Social andEnvironmental Valuesof data centers, in addition to population increase and economic growth. Around the world,the movement to reduce CO2 emissions and decarbonize has gained momentum to combat
climate change. In developing countries, meanwhile, more than a billion people struggle toSupplying stable energy

live without electricity due to severe power shortages*. To solve these problems, Hitachi isManaging power grids

1.8 bill. people

contributing to society by energy solution businesses including power grids, nuclear energy(cumulative total)and renewable energy leveraging its strengths in OT × IT × Products.
* Source: Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry (Japan’s Energy White Paper 2018)

Results and Targets

Principal Products and Services

ROIC（％）

14.5

FY2019 Revenues

Adjusted operating income ratio (%)¥399.2

Energy BU

EBIT ratio (%)

Over 10.0
Over 10.0
7.5

6.4

Nuclear
Energy BU

38%

Nuclear power plant (ABWR)
Remotely operated vehicle*3

3.4

Fuel transport and storage
casks

(0.8)
(2.9)

(94.1)

Others (13%)

Over¥1,700.0 billion / 80%

Revenues /Overseas revenue ratio
Hitachi ABB Power Grids
Nuclear Energy BU
Energy BU

billionOver 180.062%Power grids (9%)
Substation, breakers,transformer

Services (26%)
Control system maintenanceservices

Renewable Energy Solutions (14%)
Mega solar*1 Announced on July 30, 2020 (ROIC was announced on May 29, 2020 and does not include Hitachi ABBPower Grids)*2 Announced at the "Hitachi IR Day 2019" (Hitachi ABB Power Grids is included under Energy BU)*3 The development was executed as one of the assignments of the International Research Institute for Nuclear
Decommissioning (IRID) with subsidies for the expenses of decommissioning and contaminated water disposal
provided by the Agency for Natural Resources and Energy.

¥1,020.0 billion / 74%

693.0

Over
1,520.0¥399.2 billion / 12%
155.7

153.8

254.7

213.3

FY2019(Results)

FY2020(Forecast)*1

FY2021(Target)*2

Vision in the 2021 Mid-term Management Plan

Conceptual image of the HVDC converter station that Hitachi ABB Power Grids
received an order in a multi-terminal HVDC interconnection project

The energy business is one of the core businesses of our Social
Innovation Business and contributes to the achievement of SDGs.
Within the Energy Sector, we will collaborate with all users and partners
involved with energy in three business domains (power grid solutions,solutions & services, and nuclear energy) that are the subject of focus interms of energy value chains to co-create solutions aimed at energy
conservation and achieving carbon-free society. By providing energy
solutions that leverage the strengths of OT × IT × Products, we will help
customers ensure a stable supply of energy while contributing toefficient equipment management, the reduction of CO2 emissions andthe realization of a low-carbon and decarbonized society.

Pre-assembly work conducted at the Port of Taichung in the Changhua Offshore Wind
Farm Project47

How We Will Grow

Story of Value Creation in the Energy Sector
Progress on the 2021 Mid-term Management Plan

Power Grid Solutions Business
Building advanced energy management systems requires knowledge

Amid growing demand for energy globally, the world is movingof energy and cutting-edge digital technologies. The energy businesstoward renewable energy with the aim of decarbonization. The

experience and digital technology that Hitachi has developed overamount of electricity generated by renewable energy is expected tomany years, and global business of Hitachi ABB Power Grids can begrow at an annual average of about 4.5% based on current

fully leveraged in the power grid solutions business. Through thisdevelopment plans in each country*1. As renewable energy expands,

business, we are actively developing high-voltage direct current

it is necessary to upgrade power grids and achieve more

(HVDC) transmission and substation equipment business for cross-sophisticated management of power grids using digital technology,

region / country interconnection and offshore wind power market. At

to strengthen power interconnections and supply-demand

the same time, we are striving to develop and deploy new solutions

adjustment capabilities.

that combine DC transmission and digital technologies. In April 2019,

Due to the spread of COVID-19, we anticipate that “green” andwe announced that we received an order for HVDC transmission“digital” investment within the energy market will continue to expand

systems for the Chubu Electric Power Co., Inc., Higashi-Shimizu

even as people’s lifestyles and corporate activities undergo significant

substation. In addition, in August 2020, we announced that wechanges. This business environment acts as a boost for the Hitachi

received an order for HVDC systems that will be installed in Europe

Group, which provides digital energy solutions that take fullfor the first time as part of a multi-terminal HVDC connection project

advantage of Lumada.

that will link wind power stations in the Shetland islands to the grid of

In the Energy Sector, Hitachi is transforming its business portfolio in

U.K. In September, we announced an order to build 4 substations forresponse to changes in energy market conditions, while reinforcing

3 wind power stations in Poland and an agreement with MHI Vestas

the solutions business and launching high-value-added services. In

Offshore Wind A/S under the terms of which we will provide

December 2019, Hitachi reached a settlement with Mitsubishi Heavytransformers for offshore wind projects in Taiwan. Furthermore, we

Industries, Ltd., regarding thermal power generation projects in Southare striving to expand our solutions in industrial fields for increasing

Africa, which had been a longstanding concern for many years,

data centers, factory electrification, and EVs. In July, we launchedresulting in the transfer of all of Hitachi’s shares in Mitsubishi Hitachi

Grid-eMotion™ Fleet, EV charging system for electric buses orPower Systems, Ltd.*2, to Mitsubishi Heavy Industries, Ltd. In Julycommercial EVs.

2020, Hitachi acquired the power grids business of ABB Ltd, a world

Examining trends in major markets by region, in North America,

leader in this field, and established Hitachi ABB Power Grids Ltd.

digital initiatives are underway, such as using blockchain technology

Through this acquisition, we enhanced our global competitiveness byin the energy field. In Europe and China, there are major businessincorporating into Hitachi Group new business foundations such asopportunities for power grids. In the Middle East, there is a

ABB’s top-tier transmission & distribution products and services, anmovement away from oil & gas, with more emphasis being placed

expansive global footprint including about 90 countries and regions,on renewable energy and making urban infrastructure smarter. In

approximately 200 business locations, a customer base of more thanIndia, national power grids are being modernized with digital

15,000 client companies, and 36,000 employees.

technology. In Japan, the priority is to strengthen resilience by

To create synergies through this merger, over the short term, both

upgrading grids and deploying digital solutions. We are aiming to

Hitachi and Hitachi ABB Power Grids will make joint offerings in the

expand our businesses by accelerating growth in the Social

Japanese market, where the former has demonstrated strength, andInnovation Business within these regions.

in North American, European and Middle Eastern markets, where thelatter has exhibited advantages. Over the medium to long term, we
will combine our powerful resources and expertise with Lumada to
arrive at new digital energy solutions that extend beyond theboundaries of the Energy Sector and endeavor to achieve global
expansion that will serve as one of the core businesses of the Social
Innovation Business.
*1 Source: IEA World Energy Outlook 2019*2 On September 1, 2020, the company’s name changed to Mitsubishi Power, Ltd.

Ceremony for the establishment of Hitachi ABB Power Grids (July 1, 2020)

48

Hitachi Integrated Report 2020

Solution & Service Business

Nuclear Energy BusinessIn the solution & service business, we are applying our extensive OT

Through the nuclear energy business, we contribute to realize aand digital technologies to provide service solutions that improve thedecarbonized society and provide a stable supply of energy. Withinstability and efficiency of facility operations in pursuit of a decarbonized

this business, Hitachi is utilizing its high-level technologies andsociety. We are providing solutions that are tailored to meet the uniqueabundant expertise to facilitate the completion of safety improvement

needs of individual regions and customers and are designed to resolve

measures for nuclear power stations in Japan and the restart of thesea wide variety of issues. These solutions are based mainly on wind andstations. Meanwhile, we are actively conducting decommissioning

solar power generation systems, as well as distributed power

measures at the Fukushima Daiichi Nuclear Power Station throughgeneration systems combined with integrated energy / facility

investigations in the reactor buildings and the development ofmanagement services. Utilizing Lumada, we integrate ourtechnology designed to remove fuel debris. Regarding Small Modular

technological capabilities and know-how accumulated on-site with ourReactors, which are projected to generate high demand in the future,

digital technologies to provide a wide range of services and solutions,

we will focus on joint development involving both Japan and theincluding increasing the efficiency of inspection planning, predictive

United States as we consider customer viewpoints and nuclear power

diagnosis of breakdowns, remote monitoring, and more advanced andpolicies and provide innovative nuclear reactors that are safe,

speedy maintenance. We are striving to launch high-value-added

economically efficient and highly acceptable for society.

service businesses and strengthen solutions businesses; in 2019, we
received an order from TOA Oil Co., Ltd. of a cloud service based on
Gas Turbine High Temperature Parts Management Platform to improvethe efficiency of inspection and maintenance, and to increase themaintenance capabilities of operators. In August 2020, we also
launched comprehensive maintenance services for emergency power
generators to improve performance by analyzing remote monitoringdata of operation and inspection.
Meanwhile, in wind power generation, installed capacity is projected tomore than triple around the world over the 20 years from 2015 to2035, mainly in Asia* and we are currently manufacturing and installing
wind turbines for the Changhua Offshore Wind Farm Project in Taiwan.
In the Japanese market, we are providing one-stop solutions thatcombine our track record and knowledge related to engineering,
installation and maintenance services, with products from our partner,

The Chugoku Electric Power Co., Inc., Shimane Nuclear Power Station Unit 3 (underconstruction)

Enercon, a wind turbine manufacturer based in Germany. In responseto strong needs for expertise and digital technologies that can realize
and guarantee high operation rates from wind power generation
systems, we will expand solution & service business that are focusedon renewable energy and help raise the profitability of our customers
by providing maintenance and other services utilizing predictive
maintenance systems for wind power generation equipment suppliedby other companies. At the same time, we will focus on developing
and manufacturing high-performance power semiconductors used in avariety of products that promote industrial electrification and energy
conservation.
* Source: IEA World Energy Outlook 201949

How We Will Grow

Story of Value Creation in the Industry Sector
The industrial market has been undergoing rapid and complex changes, such as declining
working-age populations and intensifying global competition, as well as climate change andActivities for Creating Social andEnvironmental Values

resource shortages. In such an operating environment, COVID-19 has significantly changed
people's lifestyles and corporate activities, and in various parts of the industrial market,
there are greater expectations for new services and innovations that use cutting-edge digital

Providing safe and secure water
environments

technologies, such as AI and IoT.

Water and sewage systems

70 mil. people/day(cumulative total)

Principal Products and Services

Results and Targets*1
ROIC（％）
Adjusted operating income ratio (%)
EBIT ratio (%)

9.1
8.6

8.6
6.9
6.5

Industrial
Products Business49%

billionAir compressors
Drive systems
Marking systems
Power distribution equipment, etc.

3.2
3.1

Built-to-order business (17%)

売上収益／海外売上収益比率
日立ABBパワーグリ
Industry & Distribution
ッド BU
Water & Environment BU

Industrial Products Business¥840.7 billion / 21%¥840.7Mass-production business (32%)

4.2

Revenues /Overseas revenue ratio

FY2019 Revenues
10.8¥1,000.0 billion / 30%¥770.0 billion / 26%

Radial compressors
Drive systems
Pumps
Transport systems, etc.

Industry &Distribution BU

30%

Digital solution business

Water &
Environment BU

21%Water supply and sewage, utility
solution business*4

348.0

259.8
270.0
181.5

179.6
160.0

424.0

FY2019(Results)

369.0

FY2020(Forecast)*2

470.5*1 Figures for each subsegment include intersegment transactions.
*2 Announced on July 30, 2020 (ROIC was announced on May 29, 2020)*3 Announced at the “Hitachi IR Day 2019”. Fiscal 2021 (target) for the Industry & Distribution BU, the Water &Environment BU and the Industry Sector as a whole includes the control system business, which is included in
the IT Sector.
*4 Air conditioning and water treatment facilities for factories, social infrastructure, etc.

FY2021(Target)*3

Vision in the 2021 Mid-term Management Plan
In the Industry Sector, Hitachi aims to become the best solution

Progress on the 2021 Mid-term Management Plan
Providing Total Seamless Solution

partner for our industrial customers tapping into Hitachi’s unique

The needs of our industrial customers have been becoming diverse

strengths in “Products × OT × IT.” We will create social,and sophisticated in recent years. In addition, the spread of COVID-19

environmental and economic value by “increasing the efficiency ofhas given rise to new issues such as ensuring employee safety andcustomers’ production and processing systems” by delivering our

improving productivity through automated, contactless and remotesolutions that contribute to productivity and quality improvements inoperations as well as business continuity within supply chain

the manufacturing and distribution fields; “providing safe and secure

disruptions. In the Industry Sector, we use Lumada to identify gaps inwater environments” to 70 million people per day worldwide with our

the overall value chain, which we view as “boundary” issues between

water and sewage infrastructure and seawater desalination

management, workplaces and supply chains, and connect cybertechnology; and “reducing CO2 emissions” through energy-saving

spaces and real spaces using digital technologies to provide total

products.

seamless solution that resolves issues existing on these boundaries
and attempt to create new business value aimed at business

50

Hitachi Integrated Report 2020

optimization from the perspective of management. These solutions are

Here is an example of delivering our total seamless solution that connects

underpinned by fusing our “Products × OT × IT” capabilities. For many

the boundary between workplace and management. Hitachi worked withyears, Hitachi has been sharpening our product such as industrial

MonotaRO Co., Ltd., which is a major Japanese e-commerce company

equipment, OT that controls and operates the industrial systems, andthat handles industrial supplies and products. In this project, we received

IT that helps our customers manage their overall business operations.

an order for transportation equipment, including approximately 400 units

We are leveraging these 3 technological capabilities.

of compact and low-floor automated guided robot called "Racrew", aswell as warehouse control systems. These technologies will contribute to

Improving the Overall Value of Customer Businesses

improved operational efficiency that is three times faster than

Total seamless solution

Maximize environmental value Maximize social value

conventional picking. Hitachi and MonotaRO have begun looking at the

Cyber space

future introduction of warehouse management systems and robotics,
aiming for further enhancements to these systems.

Management

Manage data
mentManagement

Manage data
ment

Workplace

WorkplaceManagement
data

huMan
Method Material
MachineWorkplace 4M data

huMan
Method Material
MachineWorkplace 4M*6 data

Management

Manage data
ment

Total seamlesssolution

WorkplaceManagement
data
huMan
Method Material
MachineWorkplace 4M data

huMan
Method Material
MachineWorkplace 4M data

Management

huMan
Method Material
MachineManagement

Workplace

Workplace 4M data
Workplace

Global SCM*5
network

Real space

Vision of the Industry Sector*5 SCM: Supply Chain Management*6 4M: huMan, Machine, Material and Method

Racrew, a compact and low-floor automated guided robot in operation at the
MonotaRO Kasama Distribution CenterIn the manufacturing industry in particular, labor shortages, soaring
labor costs and growing needs for automation due to COVID-19 will

Another example of delivery of our solution that connects the boundary

advance the shift from “manufacturing through people and machine” tobetween the supply chains is our recent collaborative creation with“manufacturing in which people and robots collaborate” like never

Daikin Industries, Ltd. Prior to this project, we have worked together

before. Against this backdrop, with the aim of strengthening ourwith Daikin regarding advances in manufacturing sites involving the

response to boundary issues between the workplace anddigitization of brazing work and chemical reaction processes. Our

management, we acquired JR Automation, a U.S.-based robotic SI

recent collaborative creation aims to contribute to maximizing value

business, and Japan-based KEC in 2019. Centered on the robotic SI

from a management perspective. In this project, we applied Hitachi

business, which is expected to have a high growth potential globally

Group's SCM optimization solution technology to Daikin's chemicals

and involving the collection of massive amounts of data, we will use

business, in order to formulate and execute optimal production andLumada to create a seamless connection from the workplace (OT) tosales planning that quickly responds to demand fluctuations. The

management (IT) facilitating major changes in manufacturing industry

solution started to be used in live environment from June 2020. Thismodality.

solution allows Daikin to create approximately 60 times moremanufacturing and sales actions faster than conventional approaches,
and to build consensus quickly based on the results of quantitative
simulations of those actions. Consequently, we confirmed that thesolution can reduce the time it takes to make decisions by about 95%.

Estimation results

Spare capacity utilization,
increased production ofhighly profitable products

ProfitInventoryvalue

Inventory
quantity

Sufficiency
ratio

Operatingratio

Substitutable manufacturing,bottleneck elimination

JR Automation’s robotic SI business

Formulation and execution support solution of optimal production and sales planning
implemented through collaborative creation with Daikin Industries, Ltd.

51

How We Will Grow

Story of Value Creation in the Industry Sector
Another example of our solution that connects the boundary between

Acceleration of Global Expansion

different companies in the supply chain is a platform for integrated

In the Industry Sector, we are accelerating business development inmanagement of cell and tracing information throughout the entire value

the North American region, including the acquisition of air compressor

chain, from cell collection to production, transport and administration

manufacturer Sullair in 2017 and JR Automation in 2019. In April 2020,of regenerative medicine products*7. This platform was built throughHitachi Industrial Holdings Americas, Inc. was established with the aim

collaborative creations with ethical pharmaceuticals wholesaler Alfresaof further strengthening the industry business in North America. Hitachi

Corporation, pharmaceutical companies, medical institutions andIndustrial Holdings Americas is based in Chicago, the center of theothers, and will start practical operations in 2021 as first*8 common

American Midwest where manufacturing industries are concentrated inservice infrastructure in Japan that can be used by all stakeholders

the United States, and has Sullair and JR Automation under its

involved in the value chain of the products.

umbrella. We are accelerating provision of total seamless solution
combining digital solutions and products through the mutual utilization

Common Service Infrastructure for All Stakeholders Involved in
Regenerative Medicine Products
Operational
Functionof our abundant customer base and resources in North America.
Following the strengthening of our North American management base,we will continue to enhance our global competitiveness through further

Individual sample identification
Information tracing for cell collection/production/transportation/administration

Data form the entire process for regenerative medicine products

expansion into the Southeast Asian and Chinese markets.

COVID-19 Response Solutions
In the Industry Sector, we are proactively developing business aimed at
resolving social issues, including the provision of support for the

Medicalinstitution

Logistics
company

Pharmaceutical company/
consigned manufacturer

Logistics
company

Medicalinstitution

Pharmaceuticaland othercompanies

production of face masks, respirators and antigen test kits, thedemand for which is rising rapidly due to the spread of COVID-19. In
March 2020, JR Automation, collaborated with General Motors

Diagnosis/cellcollection

Transportation

Acceptance inspection,
manufacturing, shipment

Transportation

Administration

Post-marketingsurveillance

Overview of the regenerative medicine products value chain integrated management
platform

Company to build an assembly line in six days that produces 50,000
medical masks a day, which are in great demand in North America.
Additionally, in Japan, Hitachi is participating in the planning ofengineering services for incidental facilities at a new factory making

Going forward, Hitachi will make an effort to provide next-generation
solutions aimed at optimizing business from a management
perspective by seamlessly connecting the entire value chain including
the supply and engineering chain*9.
One example from the Water & Environment BU is a special purpose

ESPLINE SARS-CoV-2 novel coronavirus (SARS-CoV-2) antigen test
kits provided by Fujirebio Inc., a wholly-owned subsidiary of H.U.
Group Holdings, Inc. By supporting the rapid commencement ofoperations at this facility, Hitachi is contributing to the expansion of
COVID-19 testing, which is an urgent social issue in Japan.

company set up in 2019 with Hitachi as the representative company
that was entrusted with the renewal of water purification plant

In Pursuit of Further Growth in the Industry Sector

equipment, including a 20-year operation and maintenanceIn the Industry Sector, we will strengthen and expand total seamless

management contract, for a facility in Hakodate City, Hokkaido. We arepromoting our business by combining Products x OT x IT track record
and know-how cultivated over many years as a comprehensive waterprovider. Going forward, while collaborating with Hakodate City, we willpropose advanced technologies and services such as Hitachi's O&M*10
support digital solutions to improve the efficiency of operations andfacility management.
Through collaborative creations with customers and partners, Hitachi
will develop and provide solutions in industrial fields utilizing Lumada as
we continue to develop the Lumada ecosystem.
*7

Products that have been processed under the responsibility of a corporation among cell processed products
used for cell therapy/gene treatment/regenerative medicine*8 As of August 31, 2020, according to Hitachi research*9 Engineering chain: A series of business flows, from planning and development to design, trial evaluation,
production design and design maintenance within product development.
*10 O&M: Operation & Maintenance52

Hitachi Integrated Report 2020

solution that leverage the strengths of Products × OT × IT and
accelerate and enhance global expansion in pursuit of further growth.
Furthermore, we will aim to become a high value-added business
entity by expanding recurring business *11 and improving capitalefficiency.
*11 Cycling business that exists after sale service market and continual replace demand such as replacement
parts.

Story of Value Creation in the Mobility Sector
In the Mobility Sector, Hitachi offers products and services that are gentle on the

Activities for Creating Social andEnvironmental Values

environment while enhancing the safety, security and comfort of people all over the world,
through the provision of solutions as core elements of clean and highly efficient smart cities.
These include smart solutions that facilitate faster and more environmentally friendly travel

Providing safe, secure andcomfortable transportation services

between cities, reduce reliance on automobiles inside cities and enhance the flow of people

Railway services

inside high-rise buildings.

18.5 bill. riders/yr.
(cumulative total)

Results and Targets

Principal Products and Services
FY2019 Revenues

ROIC（％）

13.1

Adjusted operating income ratio (%)
EBIT ratio (%)

Building Services

46%

11.2
9.8

9.8

E&E Modernization
E&E maintenance services

Jap an 45 %billion
50%
ina
Ch

11.3

¥591.5APAC, Middle East and others 5%

Building Systems
Business Unit

Sales /
Manufacturing
of Elevators &Escalators

54%

Elevators
Escalators
Moving walkways

Building equipment management
services

8.1
6.2
6.0
5.2

Rolling Stock

Revenues /Overseas revenue ratio
Building Systems BU
Railway Systems BU*1

¥1,270.0 billion

Shinkansen
ericasAm %9¥1,090.0 billion
620.0
/ 55%

Signalling& Turnkey

Ja
pa

40%
ETCS*

Satellite Train Control

Driverless

CBTC*

Facility Control

55

FY2019(Results)

516.8
/ 80%

FY2020(Forecast)*2

650.0
/ 80%

Intercity
LRV
Metro
Monorail%

Components

580.3
/ 79%

CommuterComponents

EA

Interlocking

Railway Systems
Business Unit
EM

590.0
/ 60%

Very High Speedbillion
36

591.5
/ 55%

¥580.3ACAPn, %¥1,144.4 billion

45%

FY2019 Revenues

TMS** CBTC: Communications-Based Train Control
TMS: Traffic Management System
ETCS: European Train Control System

FY2021(Target)*3

Service &Maintenance

15%

RS Maintenance
RS Refurbishing
Signalling Operation &Maintenance
Asset Management*1 Figures for Railway Systems BU include the control systems business, which is posted in the IT segment.
*2 Announced on July 30, 2020 (ROIC was announced on May 29, 2020)*3 Announced at the “Hitachi IR Day 2019”

Vision in the 2021 Mid-term Management Plan
In the Mobility Sector, Hitachi contributes to the enhancement of

Progress on the 2021 Mid-term Management Plan
Building Systems Business Unitsocial value through the provision of safe, secure, and comfortable

The Building Systems Business Unit manufactures and sells elevatorstransportation services, and through the products and services thatand escalators (E&E), and provides building services that include

solve problems in urban spaces including buildings. We also aim to

maintenance and modernization of E&E, and other solutions forcreate environmental value, such as by reducing CO2 emissions, bybuildings. We aim to boost profitability and growth in operations,realizing transportation services with a smaller environmental

centered on markets in China, Japan, Asia and the Middle East.

footprint.

53

How We Will Grow

Story of Value Creation in the Mobility Sector
Overview of E&E Market: Expansion in Services andSolutions Business

Expansion of Building Solutions Business with Digital
Technology

China dominates the world market for E&E, accounting for moreIn the Building Systems Business Unit, we have offered remotethan 50% of demand for new installations. Although the Chinesemonitoring services for E&E and building equipment in Japan formarket should hold steady at its current scale, the pace of growth inapproximately 30 years, and we have been running our business fordemand for new installations has been tapering off, shifting theyears in a way that anticipates Lumada's philosophy of creating

growth driver to the maintenance and modernization services

value from data and accelerating innovation. Furthermore, in recent

business. Demand for new installations of E&E appears likely toyears we have stepped up service provision overseas through our

expand in most countries in the Asia and Middle East regions,

global control center, which focuses on providing remote monitoring

including India, which is second only to China in market scale. In

and maintenance services for E&E and building equipment. BasedJapan, meanwhile, demand for modernization services has heldon the information we gather and analyze about equipment status insteady, and expectations are mounting for new solutions that

real time, we strive to conduct preventive maintenance and areenhance the added value of buildings with digital technologies.

enhancing product competitiveness. In addition to this sophisticatedremote monitoring and maintenance service, we provide building

Business Resilient to COVID-19 and Response to“New Normal”

owners and managers with a dashboard for monitoring the

In China, the world’s largest market, Hitachi has improved

as Lumada solutions, thereby contributing to greater efficiency inprofitability by cost reductions and other cost-cutting measures,

building management work. We aim to expand business globally by

while also leveraging its advanced products and technologicalreinforcing the value chain through the deployment of digital

capabilities to acquire a leading share of the market* in terms of newtechnologies, an area of strength at Hitachi Group.

installation orders for the past two fiscal years from fiscal 2018. In* Source: Hitachi

the fourth quarter of fiscal 2019, COVID-19 pandemic paused workon new installations, but operations have resumed in fiscal 2020,
and we think more business opportunities will arise amid stronger
interest in remote monitoring and maintenance services, areas ofstrength at Hitachi.
In Japan, the overall business scale in fiscal 2019 was identical tothe previous fiscal year, thanks to brisk demand for building services
that offset a decline in production and sales of E&E, owing to adownturn in demand for new installations. With tough competitionon the market for new installations and growing demand formodernization of E&E, Hitachi aims to sharpen the competitivenessof its E&E product and service offerings, while providing integrated
services that combine E&E with building solutions. Furthermore,
Hitachi is accelerating efforts in the smart building business, where it
provides new value through solutions that utilize IoT, AI and otherdigital technologies. We are targeting further growth by rapidly
developing and providing new solutions tailored to demand in the“New Normal” since COVID-19 outbreak, beginning with touchlesssolutions that enable non-contact movement and lifestyles insidebuildings.
In Asia and the Middle East, business has expanded alongside
growth in demand for new installations. Looking ahead, Hitachi ismonitoring the impact that COVID-19 will have on new installation
demand. Although market conditions and business issues vary bycountry, Hitachi is eyeing growth in operations by taking a sharedstrategy of maximizing resources and employing the productcompetitiveness gained in China.

54

Hitachi Integrated Report 2020

operations and maintenance status, as well as controlling operations

Railway Systems Business Unitand climate change, the railway business will likely grow over the long

Contributions to Development of Railway Businessas a Total Solutions Provider with Stronger Presencein Digital Field

term. The Hitachi Group has built a robust business foundation in

Hitachi aims to contribute to the development of the railway

world markets, including Japan, Europe and North America, withbusiness by creating solutions that use digital technology, as arolling stocks, signalling systems and turnkey solutions as coreprovider of integrated solutions for railways that solve issues andbusinesses.

meet needs related to railway operations in various countries. In

Against the backdrop of an expanding world population, urbanization

Denmark, for example, as an IoT solution, Hitachi has launched a

Business Resilience Based on Global
Competitiveness, Further Improvement inProfitability

proof-of-concept experiment in Copenhagen for optimizing the

In Europe, which accounts for approximately 50% of sales in thetransportation capacity, easing congestion and reducing costs. In

Railway Systems Business Unit, demand should remain stable for

Italy, Hitachi commenced a proof-of-concept demonstration in fiscalrolling stocks upgrades and high-speed railway projects, especially in2019 for digital ticketing solutions that feature automatic payments

the U.K. and Italy. In fiscal 2019, Hitachi won several large orders thatwith smartphones based on location data. In addition, in August

mainly entails rolling stocks for high-speed railways. In early 2020,

2020, Hitachi decided to acquire U.K.-based Perpetuum, which has

supply chains were disrupted by COVID-19, including the shutdown ofadvanced digital sensor technologies in order to enhance the digitalsome plants in the U.K. and Italy, but operations resumed in April.

maintenance services that we have been developing and providing.

Hitachi anticipates brisk performance as it makes steady progress on

With the rolling stocks, signalling and turnkey business continuing as

already ordered projects. In Japan, which generates 20% of sales,a core business, Hitachi aims to strengthen the maintenancemodernization demand and projects to develop new types of rolling

services business and enhance solutions that use digital technology

stocks are expected. In fiscal 2019, Hitachi secured orders for large-

by incorporating more outside knowledge, with the ultimate aim ofscale projects, including Shinkansen rolling stocks, and Japanesefurther expanding business scale.

schedules of automated trains based on the number of people
waiting on train platforms, with the objectives of maximizing

market will play a major role as an incubator of new technologies. To
sharpen our competitiveness in the global market, we are investingheavily in the Americas, a market with potential for robust demand.
Although the Americas account for only about 10% of sales, we are
keen to tap into business opportunities, including major projects,
through our existing manufacturing bases and presence in the market
for services and maintenance. We will accelerate growth with theintention of turning the Americas into a home market.
Worldwide, Hitachi has an order backlog totaling about ¥3 trillion. Our
production activities were affected by the lockdowns as many regions
combated COVID-19 outbreaks. However, as most of our customers
are government-affiliated companies, the impact on our operations
has been limited, even though some deliveries could encounterdelays, and we expect a recovery to get under way soon. Around theworld, although railway passenger numbers and the number of trains
running have declined considerably, maintenance and service
operations have not been adversely affected by this reduction, as the
majority of agreements in this business are based on the availability ofthe trains Hitachi delivers. Under these circumstances, initiatives toimprove profitability in the Railway Systems Business Unit are being
given urgent priority, including efforts to increase operating rates atplants and return supply chains to normal. In April 2020, Hitachi
entered into a partnership with Cyient, a global engineering firm in
India, to establish a global design center for developing technologies
related to signalling and turnkey solutions, in a bid to reduce
operational costs and enhance earnings capabilities.

55

How We Will Grow

Story of Value Creation in the Smart Life Sector
The Smart Life Sector realizes a pleasant society under the keywords of safety, health andActivities for Creating Social andEnvironmental Values

comfort, creating social, environmental and economic value that contributes to improving
the quality of life (QoL) for people throughout the world. Hitachi aims to contribute to theeradication of fatal traffic accidents through advanced driver assistance technologies, support
healthy lives through the provision of blood testing equipment and particle therapy systems,

Contributing to improving the QoL

facilitate a richer life through the provision of connected home appliances and air-conditioning
systems and prevent global warming by reducing CO2 emissions from products throughIn-vitro diagnostics(e.g., blood testing)

20 billion tests/year

electrification and IoT.

Results and Targets

Over 15.0

ROIC（％）
Adjusted operating income ratio (%)

10.5

EBIT ratio (%)

8.0

FY2019 Revenues
Over 10.0
Over 10.0

Health Care BU and Others

billion9%

Therapy systems

Measurement andAnalysis%
Systems

5.3

32

Revenues /Overseas revenue ratio

Clinical analyzers
Semiconductor processing equipment

Smart Life & Eco-friendly Systems
Automotive Systems
Measurement and Analysis Systems (Hitachi High-Tech)
Health Care BU and Others

Advanced industrial products

Smart Life &Eco-friendly
Systems

21%

Home appliances
Air-conditioning systems

Automotive
Systems

37%

Powertrain systems
Chassis systems
Advanced Driving AssistancesystemsOver¥2,100.0 billion / 60%¥2,167.6 billion / 50%465.3¥2,167.6

Diagnostic systems

6.1

5.5
4.2

Principal Products and Services¥1,900.0 billion / 53%
447.0

811.6
700.0

694.6

596.5

196.1

178.4

FY2019(Results)*1

FY2020(Forecast)*2

FY2021(Target)*3

Particle Therapy System (Osaka Heavy Ion Therapy Center)*1 ROIC values do not reflect impact from the conversion of Hitachi High-Tech (measurement and analysis
systems business) into a wholly owned subsidiary*2 Announced on July 30, 2020 (ROIC was announced on May 29, 2020)*3 Announced at the "Hitachi IR Day 2019."

Vision in the 2021 Mid-term Management Plan

56

The Smart Life Sector is undergoing comprehensive business

Through the reorganization of our business portfolio and the use ofrestructuring. In May 2020, the Hitachi High-Tech Corporation was

digital technologies to reform operations, we will realize profitability

made a wholly owned subsidiary and commenced operation in the

improvement through expanding business scale and market share,

Smart Life Sector as its core business. In addition, in fiscal 2020, we

and improving cost efficiency. Mitigating the adverse impact ofplan to complete the transfer of the diagnostic imaging-related

COVID-19 on business performance that began at the beginning ofbusiness to FUJIFILM Corporation, as well as the management

2020 through improved management efficiency, we will ascertain the

integration of Hitachi Automotive Systems, Ltd., with Keihinmarket needs arising “New Normal” and continue to contribute to

Corporation, Showa Corporation and Nissin Kogyo CO., Ltd.

improving QoL and achieve business growth.

Hitachi Integrated Report 2020

Progress on the 2021 Mid-term Management Plan

making improved environmental performance via electrification an

Automotive Systems Businessneeds in the “New Normal” by providing innovative components

Amid growing social needs for the reduction of environmental
burdens through electrification, the eradication of traffic accidents

important issue. The new integrated company will meet socialand systems that are essential for electrification and advanced
driver assistance.

using AI technologies such as autonomous driving and the shift
from vehicle ownership to utilization, the automobile industry is

Smart Life & Eco-friendly Systems

entering a period of drastic changes said to occur once every 100

The Smart Life & Eco-friendly Systems business, which has a longyears. Hitachi Automotive Systems focuses on products including

history of developing products from the consumer’s perspective, is anelectric powertrains, suspension, steering, brakes and theimportant business in the Smart Life Sector, which aims to improveadvanced driver assistance systems that integrate them. Aiming topeople’s QoL. We create new growth businesses that utilize digitalincrease the global market share of focus products to within thetechnologies, such as robotic vacuum cleaners and laundry

third place, we are engaged in M&A and business alliances. In

machines linked to smartphones, Internet-connected refrigerators

October 2019, we acquired Chassis Brakes International, a provider

and other home appliances, and systems that perform remoteof automotive safety systems centered on electrically controlled

diagnostics and maintenance of air conditioners using IoT. In thebrakes. Also, in October 2019, Hitachi and Hitachi Automotive

Smart Life & Eco-friendly Systems business, our air-conditioning

Systems, a wholly owned subsidiary of Hitachi, entered into an

business was merged with that of U.S.-based Johnson Controls andagreement with Honda Motor and its three affiliates on

spun off, realizing high profitability by integrating the sales channels

management integration of their automotive/motorcycle businesses.

and technological and R&D capabilities of both companies. In April

After conducting the tender offer by Honda Motor which will make2019, we merged home appliance sales and design andKeihin, Showa and Nisshin Kogyo its wholly owned subsidiaries,

manufacturing, which had been handled by separate companies, toHitachi and Honda will integrate their subsidiaries in fiscal 2020. The

establish Hitachi Global Life Solutions, Inc. As a lifestyle solutions

integrated company’s shares will be owned 66.6% by Hitachi andcompany. Hitachi Global Life Solutions can respond quickly to

33.4% by Honda Motor. Keihin has strengths in powertrains, Showachanges in lifestyles and provide new products and services.

has strengths in suspension and steering, and Nissin Kogyo has

Working from home, which initially was intended to prevent COVID-

strengths in brakes. As these are a good fit with Hitachi Automotive

19, is becoming established in society as the “New Normal.” The

Systems’ focus product areas, the merger will maximize synergies

home will be the place we spend most of our days, thus needs forin terms of innovative technology R&D and cost capabilities

air-conditioning and home appliances will change. Hitachi Global Lifeenhancing global competitiveness.

Solutions utilizes technologies cultivated over the years, such as

Due to COVID-19, the trend toward electrification and autonomous“cleaning,” “purifying,” “cold storage” and “freshness” to provide

driving in the automobile industry are further accelerating.

timely solutions that realize a safe and comfortable “New Normal”.

Passenger cars will be required to advance safety performancethrough advanced driver assistance technologies as a personaland safe means of transportation with less risk of infection. At the

Measurement and Analysis Systems

same time, with respect to commercial vehicles, distribution

In May 2020, Hitachi, Ltd., made Hitachi High-Tech a wholly owned

volumes are rapidly increasing due to rising e-commerce demands,

subsidiary to add its Measurement and Analysis Systems businessas a pillar of the Lumada growth strategy. As a result, the risk of
conflicts of interest in parent company-subsidiary listings have been
reduced and EPS has been improved by eliminating the outflow ofminority interest profits. Hitachi High-Tech provides physics andchemistry equipment that diagnoses and inspects objects with ahigh degree of accuracy in various fields based on measurement
and analysis technologies represented by electron microscopes. For
example, clinical chemistry and immunodiagnostic analyzers that
perform blood tests in the life sciences field, as well as CD-SEM(Critical Dimension Scanning Electron Microscope) that test theprocessing quality of semiconductors in the semiconductor
manufacturing field, are both products with the top market share in
the world. Hitachi High-Tech measurement and analysis systems

Advanced Driver Assistance Systems

generate huge amounts of data on measurement targets.

57

How We Will Grow

Story of Value Creation in the Smart Life Sector
Mathematical analysis of this data using Lumada’s AI and analytics

Healthcare Businesscreates new value. Taking the life sciences field as an example, theIn the Healthcare business, we are reorganizing our businesscomprehensive analysis of blood protein data output from clinicalportfolio, placing the highest priority on market growth potential. In

chemistry and immunodiagnostic analyzers and gene data output

December 2019, we decided to transfer our diagnostic imaging-from DNA sequencers enable the realization of precision medicine.

related businesses, such as diagnostic ultrasound system, CT and

At Hitachi High-Tech, collaborative creation with customers is the

MRI, which are mature markets, to FUJIFILM Corporation. At thebasis of business development, and this business model issame time, regarding our particle therapy system, in June 2018 we

consistent with the Lumada business strategy. To connect

acquired Mitsubishi Electric Corporation's business in this field andmeasurement and analysis technologies to customer value, it isintegrated it into our own. This increased our market share in this area

necessary to work with customers to find out what to measure andto the second largest in the world. The particle therapy system isanalyze to solve their problems. For example, in the semiconductor

attracting attention as a state-of-the-art treatment method able tomanufacturing field, we are developing new solutions by expandingbalance treatment and a normal social life with almost no pain. We

engineering bases around the world to collaborate with major

will continue to invest in the research and development of innovative

customers. In global industrial markets, where data is an important

hardware and software, aiming to capture the world’s top market

asset, the need for measurement and analysis technologies toshare in this business. In May 2020, we made Hitachi High-Tech aobtain high-quality data is expected to continue to grow, thus wewholly owned subsidiary to strengthen the physics and chemistry

will focus investment in this area as one of the pillars of the Lumada

equipment business in the life sciences field, which is at the center ofbusiness.

high-precision medical care and regenerative medicine, markets thatare expected to expand.

Measurement and analysis technologies for creating customer value

Solutions Businesses Resolving Social Issues
and Realizing Improved QoL
In the “New Normal,” there will be a need for solutions that facilitate
economic activity and infection control. This is a massive business
opportunity for Hitachi, as we collaborate with various partners ineach sector to promptly provide the required solutions. Hitachi
High-Tech has trading business division which is directly
descended from the Nissei Sangyo Co., Ltd. trading company;
thus, we possess human resources with a track record of building
value chains that include partners. Utilizing this capability, we will58

Hitachi Integrated Report 2020

strengthen investments mainly in the APAC region to develop
solutions businesses that realize human safety, health andcomfortable lifestyles.

How We Will Achieve Sustainability
Addressing Risks and Opportunities

60

Compliance74

Promotion of Information Security

66

Corporate Governance76

Occupational Health and Safety,
Employee Health

68

Message from Independent Directors

84

Leadership

86

Value Chain Responsibilities

70

Quality Assurance

72

59

How We Will Achieve Sustainability

Addressing Risks and Opportunities
Risks and Opportunities
Under the 2021 Mid-term Management Plan, which began in fiscal 2019, we will expand business while leveraging the Company’scompetitive advantages. We plan to invest ¥2.0 trillion–¥2.5 trillion in focus areas over the three-year period ending in fiscal 2021. A solidrisk management system is indispensable for seizing growth opportunities and implementing aggressive management.
Hitachi established the Investment Strategy Division in 2017 and the post of Chief Risk Management Officer (CRMO) in April 2020 to better
understand risk and take appropriate action. The Company in the same year established the Executive Sustainability Committee to focus
on the Company’s policies regarding social and environmental issues. Our efforts in this area also included a move to identify issues that
could be seen as business opportunities, as well as the negative effects on society and the environment from our business activities andthe measures Hitachi is taking to address them.

Risk Management System
The business environment is changing day by day, impacted by the continued advance of information and communications technology, as
exemplified by IoT, and geopolitical risks arising from complex shifts in political and economic conditions around the world. Hitachi aims to create
new revenue opportunities while controlling risks. To do this, we maintain a clear understanding and analysis of the operating environment, taking
into account social issues, as well as our competitive advantages and management resources, conducting risk management with an eye towards
the many risks the company should be prepared for as well as opportunities for growth.
In April 2020, we newly established the post of CRMO to formulate and execute risk management policies and strategies for the entire HitachiGroup. We also established the “Hitachi Group Corporate Ethics and Compliance Code” to clearly share ideas regarding corporate ethics andcompliance that should be shared throughout Hitachi, as we work to further ensure that all Hitachi executives and employees act in thoroughcompliance with corporate ethics.

Management strategy
Reflected in

Executive level
Ascertain
risks and opportunities
Investment strategy

Sustainability• Enhance individual
investment and businessevaluation criteria• The Executive
Sustainability Committee,
the Sustainability
Promotion Meeting andthe Eco-Management
Meeting focus on
ascertaining andresponding to risks
affecting society and theenvironment, including
climate change andhuman rights.

• Strengthen themonitoring of large-scale
M&A and other projects• Enhance business risk
management

P.61

Information security• Promote information
security governance*• Promote collaborative
creation by fostering asecurity ecosystem

P.66

Occupational healthand safety• Rebuild a culture of safety
and establish a safe
workplace• Develop
countermeasures toprevent work-related
accidents

Compliance• Entrench awareness ofregulations related tobusiness practices
through Hitachi Global
Compliance Program

P.74

P.68

Quality Assurance• Implement quality
assurance activities fromthe perspectives of"organization andmanagement,""technology," and"human resources" inevery process—from
product planning anddevelopment to design,
manufacturing, delivery
and maintenance.

• Establish and maintain
BCP systems as adisaster/hazard
countermeasure• Procurement of BCPs

P.70
• Formulate BCPs
at major Hitachi facilities

See the Sustainability
Reporthttps://www.hitachi.com/
sustainability/download/
index.html

P.72

See the Sustainability
ReportBusiness Continuity
Plan (BCP)

Risk management for strengthening business and business continuity
Market Risks

Management Environment Risks

Management Policy and Strategy Risks• Economic trends• Procurement of raw materials and components• Exchange rate fluctuations• Fluctuations of quotations and costs in longterm contracts, as well as contract cancellations• Strategies relating to strengthening the Social
Innovation Business• Funding procurement environment• Falling stock or other prices• Credit risks of partners and suppliers• Demand and supply balance• Rapid technological innovations• Human resource retention• Intensifying competition• Merger & Acquisitions, joint ventures andstrategic alliances• Business restructuring• Adverse equity-method associate performance• Overseas business activities• Cost structure reform efforts* Information security governance supports corporate governance by building and implementing an organization’s internal control mechanisms related to information security.

60

Hitachi Integrated Report 2020

Other Risks Affecting Overall Company
Management• Intellectual property• Litigation and other legal proceedings• Product quality and responsibility• Large-scale disasters• Dependence on information systems• Management of confidential information• Debt related to retirement benefits• Dilution due to additional issuance of shares

Investment Risks and Opportunities

Quantitative Understanding of Risks

To accelerate the global Social Innovation Business amid structural

Hitachi calculates the maximum risk (Value at Risk) assumed bychanges and increasing uncertainty in the world economy, it isstatistical methods according to the type of assets held on the group’s

increasingly important to understand investment risks and opportunities

consolidated balance sheet.

(e.g., M&A and orders for projects) and to take appropriate measures.

Considering total consolidated net assets and other factors, weAs shown in the flowchart below, with regard to individual investment

visualize the surplus capacity of growth investments to monitor growthdecisions (e.g., execution, business plan changes and disposals), underopportunities and ensure that risks are not excessively unbalanced

the ultimate authority of the Board of Directors and depending on thecompared to Hitachi’s consolidated management strength.

scale and content of the projects, Hitachi delegates authority to the

In addition, by analyzing risk conditions in each country and sector andSenior Executive Committee (which, in principle, meets twice per month)

the outlook for future trends, Hitachi gains a quantitative understanding

and respective business units to facilitate flexible and appropriate

of risk concentrations in specific countries and sectors in comparison

decision-making. In addition, regarding important matters to bewith profitability.

deliberated by the Senior Executive Committee, prior to deliberations,discussions are held with the Investment Strategy Committee* advisory
body, whose findings, including pros and cons, are reported to Senior

Understanding and Responding to Risks andExecutive Committee members, including the President.

Opportunities Related to Sustainability* Investment Strategy Committee: Consists of 10 members from the finance department and other relevant
corporate divisions (as of March 31, 2020), including the Executive Officers in charge of Investment Strategy
and Management Strategy as chairman and vice chairman.

Social and environmental issues, including climate change, resource

Investment Execution Flowchartdisasters and social instability due to growing inequality, are having a

Business Unit (BU)
management meeting
Investment Strategy
Committee

ReportClarify project risk factors, identify
important issues, report findings,
including project pros and cons

BU CEO or Executive
Vice President approval

Senior Executive
Committee

President approval(important projects)

Board of Directors

Board of Directors
discussion(particularly important
projects)

After making an investment, Hitachi regularly monitors business objectives
and achievement status of the project, considering changes in theexternal environment. In principle, each business unit ensures flexibility,
but the Headquarters is also involved depending on the level ofimportance. Also, regarding changes in business plans and the disposal
or reorganization of important investment targets, discussions are held by
the Senior Executive Committee as in the execution stage. For investment
targets whose business is not progressing as planned, Hitachi establisheddepletion, the curtailment of business activity due to significant
substantial impact on corporate value creation and business models.
Amid such drastic changes in the business environment, companies
must have a clear understanding of opportunities and risks and takeappropriate measures if they are to achieve sustainable growth overthe long term.
Hitachi can gain a clear understanding of sustainability-related risks,
and accordingly take appropriate actions, thanks to the efforts of the
Executive Sustainability Committee and other related committees. We
remain actively engaged in promoting our own sustainable growth
while contributing to the realization of a sustainable society by seeking
out business opportunities contributing to the resolution of important
domestic and overseas issues, including those relevant to the UN
Sustainable Development Goals (SDGs) and Society 5.0.
https://www.hitachi.com/sustainability/

a framework to deliberate on the pros and cons of continuing business,
including withdrawal, so as to improve capital efficiency.
Post-Investment Flowchart

Risk Factors
We conduct business on a global scale across a broad range of

Monitoring by business unit

business areas and utilize sophisticated, specialized technologies tocarry out our operations. Thus, we are exposed to a wide range of

Monitoring by Headquarters
Contravention of specified conditions

Business withdrawal, sale or continuation
determined by business unit
Investment Strategy
Committee

ReportSenior Executive Committee

risks related to our operations. The following risks are based on theassumptions we consider reasonable as of the date this report wasissued.
For more information on business risks and other risks, please refer toour 151st Annual Securities Report.
https://www.hitachi.com/IR-e/library/stock/index.html

Business withdrawal, sale or continuation

Through the above process, Hitachi will further strengthen asset
profitability and risk tolerance while ascertaining risks before and afterinvestments are made.

61

How We Will Achieve Sustainability

Addressing Risks and Opportunities
Major Risks and Opportunities
Major risk factors

Details on risks and opportunities

Company actions

Fluctuations in productsupply and demand,exchange rates andresource prices;
insufficient raw
materials, components

Risks• Price fluctuations, including products, exchange rate impact and excess
inventory• Exchange rate impact and price fluctuations, including for raw materials
and components• Impact from significant disasters in the supply chain• Shrinking demand and impact in the supply chain caused by the spread of
COVID-19• Building close relationships with multiple suppliers• Ensure an appropriate response to changes in demand in each region bypromoting a local production and consumption model for products andservices• Strengthen resilience to business interruption risks by formulating BCPs atdomestic and major overseas facilities
P.70 Value Chain Responsibilities

Rapid technologicalinnovation

Risks• Decreased competitiveness if development of cutting-edge technology orapplication of a product/service does not progress as expected• Reduction or elimination of existing market due to technological innovation
Opportunities• Develop advanced technology to generate new business opportunities

Securing humanresources

Risks• Impact on new hires and worker retention due to increased competition tohire and retain highly skilled workers
Opportunities• Grow opportunities for the recruitment and retention of highly skilledworkers who share Hitachi’s vision

P.38 Sustaining Financial Soundness, Enhancing Cost Management• Promote open innovation through industry-academia-government cooperation• Secure and develop digital talent• Strengthen Lumada• Foster an innovation ecosystem through the above
P.24 Expand Revenues by Accelerating the Social Innovation Business
P.30 Reinforce Global Competitiveness• Expand the direct hiring of front-line and digital talent overseas• Create workplaces where diverse talent can work comfortably• Secure highly skilled global talent using a global common platform for HR
Management• Retain and develop talent through common Group & Global learning
management system and in-house education programs
P.24 Expand Revenues by Accelerating the Social Innovation Business
P.30 Reinforce Global CompetitivenessOccupational healthand safety

M&A, investment in
new projects, etc.

Risks
• Impact on business due to inability to create healthy, safe and secure work
environments• Impact on business activities from employees infected with COVID-19

Risks• Failure related to insufficient management of projects involving M&A aimed
at strengthening the Social Innovation Business, investment in new
projects, R&D investment/capex, and large-scale orders.
Opportunities• Build a foundation for growth through the acquisition of new management
resources

Geopolitical risks

Risks• Impact on Hitachi Group's overseas businesses due to political, economic
and social trends• Establish a global occupational health and safety system that includes lessons
learned from global operations, the entrenchment of global norms and thesharing of success stories
P.68 Occupational Health and Safety, Employee Health
P.8

Ensuring employee safety by working from home and promoting remote
operations• Strategy formulation in business units, phase-gate management in various
councils and approval meetings• Analysis and discussion of market trends, other company trends, technologicaltrends and potential risks at Investment Strategy Committee, Business
Strategy Meeting, Senior Executive Committee, Board of Director and Audit
Committee meetings
P.76 Corporate Governance• Regularly update our understanding of global political and economic trends,
analyze the impact on our business and swiftly implement countermeasures
on a group-wide basis
P.60 Addressing Risks and Opportunities
P.76 Corporate Governance

Tighter laws andregulations

Risks• Tighter laws and regulations regarding investment, exports and customs duties
Example: Impact on business activities from the introduction of new laws
and regulations related to the protection of personal data, such as theGeneral Data Protection Regulation (GDPR) in Europe

Compliance

Risks• Loss of trust and a decline in corporate value as a result of corporate
behavior that deviates from social norms and violates laws, including
relating to bribery and anti-competitive activities

Product quality andresponsibility

Climate change/
significant disasters

Risks• Loss of trust and claims for damages due to defects or a deterioration in
product and service quality because of the increased complexity/
sophistication of products or services, or the diversification of production
sites or suppliers

Risks• Impact on business activities due to measures in line with the tightening ofinternational regulations to curb greenhouse gas emissions and thedepletion of energy and resources• Impact on business activities, from production to sales, due to a significant
disaster affecting major facilities in Japan or overseas
Opportunities• Expand the decarbonization business by offering climate change–related
solutions

Information security

Risks• Computer viruses or other factors adversely affecting information systems
Opportunities• Expand revenue opportunities through increased demand for information
security measures• Respond to increased demand for IT solutions in line with the expansion of
remote work

62

Hitachi Integrated Report 2020

• Operate personal information protection systems in line with Hitachi’s personal
information protection policy• Identify businesses subject to the GDPR, assess risk, implement appropriate
safety management measures in line with those risks, and conduct worker
training
P.66 Promotion of Information Security• Implement group-wide compliance programs based on Hitachi Group Codesof Conduct as highest principles• Strengthen measures to prevent bribery and violation of competition laws
P.74 Compliance• Strengthen the quality assurance system• Engage in activities aimed at preventing accidents• Engage in activities aimed at ensuring compliance with laws and regulations
related to technology• Ensure intensive risk assessment• Implement measures for handling product accidents• Conduct quality and reliability-related training
P.72 Quality Assurance• Strengthen measures to achieve the CO2 reduction targets in the “Hitachi
Environmental Innovation 2050”• Implement measures in line with an analysis of Hitachi risks and opportunities
based on climate-related scenarios• Formulate BCPs to strengthen our ability to respond to business disruption risks
P.63 Response to Climate-related Risks and Opportunities
P.70 Value Chain Responsibilities
P.28 Creation of Social and Environmental Value• Promote cybersecurity strategies through risk management and value creation• Enhance technological and product development for digital environments
P.66 Promotion of Information Security
P.44 Story of Value Creation in the IT Sector
P.24 Expand Revenues by Accelerating the Social Innovation BusinessResponse to Climate-related Risks and Opportunities
Climate-related Financial Information Disclosure (Based on TCFD Recommendations)
In June 2018, Hitachi announced its endorsement of theStrategy

recommendations by the Financial Stability Board (FSB)’s Task Force

We are responding to climate change by fulfilling our responsibilities as

on Climate-related Financial Disclosures (TCFD). The TCFD calls fora global company in achieving a decarbonized society. Taking note ofdisclosures sought by investors, such as how businesses assess

the total CO2 reductions required globally, we have established long-climate-related issues, the short-, medium-, and long-term impact ofterm environmental targets called Hitachi Environmental Innovation

climate change on corporate value, the identification of climate-2050 based on our Environmental Vision calling for CO2 reductions

related risks and opportunities, the metrics and targets to assessthroughout our value chain of 50% by fiscal 2030 and 80% by fiscal

progress, and how the results of these assessments are reflected in

2050, compared with fiscal 2010.

corporate management.

In May 2020, we announced an even more ambitious CO2 reduction
target of achieving carbon neutrality, which will mean net zero
emissions, at our business sites (factories and offices) by fiscal 2030.

Governance
Hitachi sees climate change and other environmental issues asimportant management issues. A report to the Board of Directors in

Climate-related Risks

2016 was followed by the establishment and announcement of long-

As for climate-related business risks, we have followed the TCFD’s

term environmental targets called Hitachi Environmental Innovation

classification in considering (1) risks related to the transition to a low-

2050 containing CO2 reduction targets for fiscal 2030 and fiscal 2050.

carbon economy in the 2°C scenario* and (2) risks related to the

The Executive Sustainability Committee, chaired by the president andphysical impacts of climate change in the 4°C scenario,* which

CEO and staffed by heads of corporate divisions and business units,

assumes that efforts to reduce global CO2 emissions have failed. Our

meets twice a year to discuss and reach decisions on material

assessments are also categorized according to time span, namely,environment-related policies and measures, including those in

short term (three years from fiscal 2019 to 2021), medium term

response to climate change, and to set the stage for implementation.

(through fiscal 2030), and long term (through fiscal 2050).

In addition, the Audit Committee of independent directors conducts anaudit of sustainability-related operations once a year, and Hitachi
executive officers report on climate-related material issues to the* Our assessments are based on the scenarios contained in the Fifth Assessment Report, published in 2014 by
the Intergovernmental Panel on Climate Change (IPCC). The 2°C scenario assumes that the increase in global
temperatures from preindustrial levels is kept below 2°C at the end of the 21st century. The 4°C scenario sees
global temperatures rising by approximately 4°C compared to preindustrial levels.

committee during the audit.
(1) Risks related to the transition to a low-carbon economy (applying mostly to the 2°C scenario)
Category

Policy and legal

Major risksTime span

Main initiatives

Increased business costs from theintroduction of carbon taxes, fuel/energy consumption taxes, emissions
trading systems, and other measures

Short to long term

• Avoid or mitigate increases in business costs, such as from carbon taxes, byfurther enhancing production and transport efficiency and promoting the useof non- or low-carbon energy sources

Technology

Loss of sales opportunities due todelays in technology development
for products and services

Medium to long termMarket and reputation

Impact on sales due to changes inmarket values or assessment of ourapproach to climate issues

Medium to long term

• Contribute to reducing CO 2 emissions by developing and marketing
innovative products and services and expanding the decarbonization
business• Promote the development of low-carbon products by implementing
Environmentally Conscious Design Assessments when designing products
and services• In the light of rising investor and market interest and expectations regarding
climate change, clearly incorporate our CO2 emissions reduction targets in
our management and business strategy(2) Risks related to the physical impacts of climate change (4°C scenario)
Category

Major risksTime span

Main initiatives

Acute and chronic
physical risks

Climate-related risks to business
continuity, including increased
severity of typhoons, floods, anddroughts (acute risks) as well as
rising sea level and chronic heatwaves (chronic risks)

Short to long term

• Take into account the possibility of flood damage when deciding on thelocation or equipment layout of a new plant. Measures tailored to thewater risks of each manufacturing site will be strengthened in the future
based on the results of a water risk assessment now being conducted.

63

How We Will Achieve Sustainability

Response to Climate-related Risks and Opportunities
Climate-related Financial Information Disclosure (Based on TCFD Recommendations)
Climate-related Opportunities
CO2 emissions during the use of our products and services by our customers account for approximately 90% of total emissions in our value
chain. Developing and providing products and services that emit zero or very little CO2 during their use will thus not only help meet society’s
demands for reduced emissions but also represents a major business opportunity for us in the short, medium, and long term.
Climate-related opportunities
Category

Major opportunities

Main initiatives• Develop and market products and services that contribute to a decarbonized society, expand
Increased corporate value and revenue from expanded
the decarbonization business, and promote the development of innovative devices andProducts/ services sales of products and services with innovative
materials that contribute to reducing the environmental burden
and markets
technology that can contribute to the mitigation and• Create solutions that leverage Hitachi’s strengths in operational technology (OT), IT, andadaptation of climate change
products, as well as expertise in R&D
Resilience

Provision of solutions to address climate-related natural • Provide disaster-mitigation solutions, such as high-performance fire-fighting command systems• Provide construction machinery that enables speedy recovery efforts
disasters

Initiatives to Realize a Decarbonized Society and a Resource Efficient Society

P.29

Responding to Climate Scenario Risks and Opportunities for Each Business
Hitachi operates a broad array of businesses, with each business having its own set of risks and opportunities. We therefore selected six businesses(using such criteria as a relatively high likelihood of being affected by climate change and high sales volume) and examined the business impact ofand responses to the 2°C and 4°C scenarios.
Strategies for the 2°C and 4°C Scenarios (abridged)
Targetbusinesses

Power generation and power grids

IT systems

Global demand for transport systems that emit
less CO2 per distance covered will grow with
The businesstighter CO2 emission regulations in each country
environment under and region
the 2°C scenario

Global demand for electricity generated fromrenewable energy, nuclear power, and othernon-fossil sources will grow with tighter CO2
emission regulations in each country and region.
Power networks will increasingly accommodate
natural energy produced through distributed
generation.

Demand for energy-saving, high-efficiency IT
solutions will grow with tighter CO2 emission
regulations in each country and region. There
will be a jump in demand for data centers toaccommodate the expansion of financial services
like investments and loans for decarbonization
businesses and green bond issues.

Demand for electric-powered transport, which
has few energy regulations, will gradually
The businessincrease. Damage from typhoons, floods, andenvironment underother natural disasters caused by climate change
the 4°C scenario
will rise sharply.

The cost competitiveness of non-fossil energy
will increase, and demand for renewable, nuclear,and other non-fossil energy will increase as the
expansion of energy consumption pushes up theprice of fossil fuels. Natural disasters caused byclimate change will rise sharply.

Demand for new, high-efficiency technology will
expand as multiplex IT systems in response tonatural disaster BCPs will result in increased
energy consumption. Demand will also grow forsocial and public systems to reduce damage
from natural disasters.

Response to business risks under 2°C or 4°C
scenario• Continue to strengthen the railway business,
as global demand for railways will increase
under either scenario• Given the increasing frequency of natural
disasters, take risk aversion into account when
deciding the location and equipment layout ofa new plant

Response to business risks under 2°C or 4°C
scenario• Continue to enhance response to relevantmarkets in view of expected higher demand
for non-fossil energy under either scenario• Given the increasing frequency of natural
disasters, develop technologies for disasterresilient renewable energy systems anddisruption-resistant power transmission/
distribution systems

Response to business risks under 2°C or 4°C
scenario• Continue to develop innovative digitaltechnologies, nurture necessary humancapital, and enhance digital service solutions
that generate new value in view of expected
growth in society’s demand and markets for
digital services under either scenario• Given the increasing frequency of natural
disasters, strengthen our ability to respond tobusiness disruption risks in accordance with
our BCPs

Responses tofuture businessrisks (business
opportunities)

Railway systems* The above table has been abridged. For a full discussion of the risks and opportunities under each scenario and detailed financial information, refer to the Hitachi Sustainability Report 2020.
* The above scenario analyses are not future projections but attempts to examine our resilience to climate change. How the future unfolds may be quite different from any of these scenarios.

64

Hitachi Integrated Report 2020

Strategies for the 2°C and 4°C Scenarios (abridged)
Targetbusinesses

Automotive systems

Construction machinery

Global demand for energy-saving, high-efficiency
industrial equipment will grow with tighter CO2
emission regulations in each country and region.
The business
There are risks that competitiveness will decline
environment under
if there are delays in the development of highthe 2°C scenario
efficiency, low-loss products.

Electric vehicles will rapidly spread with tighter
laws and regulations on fuel efficiency andenvironmental standards, and increases infossil fuel prices. Markets for alternative, nonfossil technologies like hydrogen and biofuel
vehicles will expand. The number of countries
and regions with near zero sales of internal
combustion engine vehicles will increase.

Demand for electric and low/no carbon-fuelconstruction machinery will grow with tighter
laws and regulations on the use of fossil fuels.
Environmental regulations for items other thanCO2 emissions (air and noise pollution, etc.) willgrow tighter in urban areas.

Typhoons, floods, and other natural disasters
caused by climate change will rise sharply and
The businessexacerbate damage to production facilities.
environment under Demand for remote control equipment to be
the 4°C scenario
used during natural disasters represents anopportunity.

Fuel efficiency laws and regulations will remain lax
globally, and internal combustion engine vehicles
will remain a major mode of transport. The modal
shift will be slow, as conventional automobiles andmotorcycles will remain predominant. Typhoons,floods, and other natural disasters caused byclimate change will rise sharply.

Natural disasters caused by climate change willrise sharply, boosting demand for construction
machinery to support speedy and safe recovery
efforts

Response to business risks under 2°C or 4°C
scenario• Under either scenario, continue developing
energy-saving, high-efficiency products thatuse IoT technology. Focus particularly on
connected products with communication
features. Miniaturized, high-efficiency, low-loss
products can also help reduce CO2 emissions• Given the increasing frequency of natural
disasters, take risk aversion into account when
deciding the location and equipment layout ofa new plant

Response to business risks under 2°C scenario• Promote R&D of electrification technology
and other alternative technologies to enhance
response to new markets, such as for electricvehiclesResponse to business risks under 2°C scenario• Advance product development with an eye on
trends in electrification and low/no carbon fuelto minimize development and product costs

Responses tofuture businessrisks (business
opportunities)

Industrial equipment

Response to business risks under 4°C scenario• Promote R&D and product development
in existing technologies, including internal
combustion engines, to not only improveenergy efficiency but increase such nonenvironmental value as safety, security, andcomfortResponse to business risks under 4°C scenario• Promote the development and manufacture ofinnovative products and solutions that enablea speedy recovery from disasters• Given the increasing frequency of natural
disasters, take risk aversion into account when
deciding the location and equipment layout ofa new plant* The above table has been abridged. For a full discussion of the risks and opportunities under each scenario and detailed financial information, refer to the Hitachi Sustainability Report 2020.
* The above scenario analyses are not future projections but attempts to examine our resilience to climate change. How the future unfolds may be quite different from any of these scenarios.

We believe that by paying close attention to market trends and developing our business flexibly and strategically,
we have high climate resilience in the medium to long term under either the 2°C or 4°C scenario.

Risk Management

Group products and services in the value chain. Under the current

The Hitachi Group evaluates and monitors climate-related risks for2021 Environmental Action Plan (covering fiscal 2019–2021), we set

each business unit and Group company as part of a process ofand monitor progress for annual target reduction rates of CO2

assessing risks and opportunities in accordance with theemissions per unit compared to fiscal 2010 for each business unit andEnvironmental Action Plan, updated every three years. The results areGroup company.

tabulated by the Sustainability Promotion Division of Hitachi, Ltd., andTo advance CO2 reductions during the use of sold products andtheir importance is checked at Sustainability Promotion Meetings.

services, we set targets and monitor progress for the reduction rate ofThose risks and opportunities perceived as being particularly important

CO2 emissions per unit. In other words, for products and services

for the Group as a whole are deliberated by the Executive Sustainability

featuring equivalent value, we focus on metrics to provide customers

Committee, chaired by the president and CEO of Hitachi, Ltd.

and society with those that emit less CO2. At the same time, we will
make an exerted effort to not only reduce per unit but also total CO2

Metrics and Targets

emissions from our business sites (factories and offices).

Our environmental activities are managed through the Environmental
Action Plan, whose metrics and targets are updated every three years,
including those to measure and manage climate-related risks andopportunities.
We use the reduction rate of CO2 emissions per unit compared tofiscal 2010 to set targets and monitor progress across our many

This section on “Climate-Related Financial Information
Disclosure (Based on TCFD Recommendations)” has been
abridged due to space considerations. For a full discussion of
our initiatives, refer to the Hitachi Sustainability Report 2020.
https://www.hitachi.com/sustainability/download/index.html

65How We Will Achieve Sustainability

Promotion of Information Security
With the arrival of the digital age in recent years, risks associated with the leakage of confidential and personal information resulting
from increasingly international socioeconomic activities are expected to rise while accelerated global digital transformation spurred
on by the spread of COVID-19 is projected to give rise to more sophisticated and numerous cyberattacks.
As we aim to become a global leader in the Social Innovation Business, Hitachi is striving to minimize risks that directly hinderbusiness continuity, such as information leaks caused by cyberattacks and operational shutdowns, and maximize opportunities forcollaborative creation with customers and society at large. In pursuing these goals, we are viewing information security as one ofour most important management issues and focusing on enhancing our information security governance.

Information Security Policies and Framework
Information Security Policies
As a global company, Hitachi broadly recognizes the management
risks associated with information security, including cybersecurity risks.
Therefore, we have established an information security policy that is
consistent with our corporate management policy, ensuring that we
can declare both internally and externally that response policies are
implemented throughout our organization.

HitachiPresident

Chief Information Security Officer (CISO)

Information Security Promotion Council

Businesssite

Information Security Officer

1. Formulation and continuous improvement to information security
management regulations
2. Protection and continuous management of information assets
3. Strict observance of laws and standards

Information Security Directive Auditor

Persons responsible for information security
Information Security Promotion Department
Post of external liaison division
Information Systems Manager

Information Security Policies

Information Security Chief Auditor

Information Security Committee
Chairperson (also CISO)
Education Director
Committee members: Representatives from businesssites and heads of headquarter administrative divisions

Group Companies
President

Information Asset Manager
Cybersecurity Manager

Information Security Officer
Information Security Auditor

Information security promotion

Information Security Risk Management

4. Education and training

We have established Global Information Security Administration Rules

5. Incident prevention and management

compliant with ISO/IEC 27001, an international standard governing the6. Assurance of fair business practices within the corporate groupmanagement of information security. At the same time, we are promoting
an ongoing information security management system to enhance ourInformation Security Framework

overall information security management. We are also globally expanding

Our President & CEO appoints both a Chief Information Security

this management outside of our parent company in Japan to include

Officer (CISO) and an Information Security Chief Auditor.

group companies overseas. Meanwhile, we have stationed information

Charged with promoting information security, the CISO determines

security experts in the Americas, Europe, Southeast Asia, India andpolicies, education plans and measures related to information security

China as we strive to enhance our global security.

as Chairman of the Information Security Committee. His or her

As cyberattack methods diversify, incidents are being caused by a wider range

decisions are communicated to all Hitachi Group business sites andof sources and are having an increasingly broad impact. To respond to risks

companies, where each information security officers ensure theirunder these circumstances, Hitachi has expanded the scope of its risk

thorough implementation in the workplace.

management activities, which had previously focused on measures related to

The Information Security Chief Auditor performs annual audits

internal IT environments, and is now promoting new “cybersecurity and risk

concerning information security and personal information protection in

management activities.” Meanwhile, we are conducting business risk reduction

all of Hitachi’s departments. He or she conducts these audits

activities and have expanded the range of our management activities to cover

independently to ensure their fairness and impartiality anddevelopment, production and manufacturing environments established for the

independence. Hitachi conducts audits and inspections on a group-

creation of products and services, as well as our supply chain and processes

wide basis; group companies in Japan carry out audits that are

implemented for the development of products and services.

commensurate with those performed at Hitachi, Ltd., which later
confirms their results. Meanwhile, group companies overseas employ astandard global self-check system.

Information Security Enhancement Initiatives
Security Monitoring
To ensure early detection and a quick response to global cyberattacks,
Hitachi is conducting continuous security monitoring (24 hours perday, 365 days per year) through its Security Operation Center (SOC),
collecting and deploying cyber threat intelligence* through its Incident
Response Team (IRT) and performing incident response.
* Cyber threat intelligence: A general term for efforts aimed at acquiring knowledge of new threats from a variety
of cybersecurity-related information and applying this knowledge through security measures.

66

Hitachi Integrated Report 2020

Preventing Information Leaks

resources who systematically respond to cyberattacks from outside the

Hitachi is developing standardized IT measures, such as encryption,company. We provide the education and exercises necessary for eacha diverse range of access control systems, ID management andcategory through advanced security human resource study, e-learning

filtering, as it strives to prevent information leaks. To defend againstthat facilitates the acquisition of basic cyberattack response knowledge

cyberattacks, we are strengthening a variety of countermeasures,and communication training.

including defense-in-depth controls, early detection measures and· Advanced security human resources

initial response strategies.

Duties: Investigate and analyze unidentified attacks, countermeasure

In addition, we review and investigate the status of information security

formulation and guidance for all other human resources

measures taken at suppliers based on our request guidelines. At the same

· Middle-level human resources

time, we provide suppliers with educational materials regarding security andDuties: Develop action plans and other policies associated withtools for checking operational data stored within information-processing

defense measures for known attacks

equipment. We also require that operational data stored on personally· Base-level human resources

owned information processing equipment be inspected and erased.

Duties: Implement fully developed security countermeasures

Information Security Education

Thorough Protection of Personal Information and Compliance with

Hitachi provides annual e-learning-based education concerning

Global Legal Systems

information security and personal information protection for all

In accordance with the Hitachi, Ltd. Personal Information Protection

executive officers and employees. We also make a wide variety ofManagement System, which was established based on theinformation security education available for new employees, newCompany’s Personal Information Protection Policy, Hitachi properly

managers and information system administrators. Furthermore, wemanages and processes personal information while providing

conduct “targeted attack e-mail simulation training” aimed at

education for, and performing regular audits of, all its employees.

defending against cyberattacks. This training raises the security

In addition, 39 Hitachi Group companies in Japan have received

sensitivity of employees by sending them simulated e-mail attacks.

Privacy Mark accreditation and are working to safeguard personal
information (as of March 2020).

Developing Human Resources Well-Versed in Information Security

Furthermore, Hitachi is ensuring compliance with global legal systems

As cyberattacks on social infrastructure intensify, Hitachi is promoting

by adhering to applicable legal systems implemented abroad, including

activities aimed at developing human resources that are well-versed inEurope’s General Data Protection Regulation (GDPR). Meanwhile, we

security and capable of responding to these threats. Through these

are implementing appropriate measures while continuously monitoring

activities, we have identified the following categories of humanapplicable legal systems and societal trends.

Security Changes Associated with New Work Style

Employee Security Awareness Is the Bulwark That Protects Our Organization
The spread of COVID-19 has forced us to adopt new work styles. However, thiscan also be viewed as a positive opportunity to achieve more personallysuitable balances between work and private life. Hitachi is also responding tothis opportunity by rapidly accelerating its implementation of telework while
actively conducting measures focused on promoting future work styles basedon utilization of telecommuting.
Meanwhile, in recent years, cyberattack threats have continued to increase,creating a need for security measures that are adequate for the promotion of
telework. In terms of IT security, we are currently facing extremely high levels ofrisk related to data theft targeting telework environments and intrusion into
internal networks. Under these circumstances, Hitachi is reducing risk byrequiring employees to use Company PCs and protecting remote accessthrough various security measures.
Until recently, cyberattackers have primarily targeted the IT vulnerabilities oforganizations but, as work styles shift toward telework, these attacks areprojected to focus on weaknesses in the security awareness of individual
people. When working outside their offices, employees might feel more relaxedthan usual, resulting in the loss of documents, PCs, mobile phones or USB
drives containing sensitive data. People around them might also quickly peak attheir computer screens, resulting in information leaks. Furthermore, with
nobody around with whom they can talk, employees working outside the office

could be tempted to access suspicious e-mails or malicious websites. Under
these circumstances, all employees are exposed to potential risk.
Given these conditions, we believe that raising the security awareness of ouremployees will be the ultimate bulwark defending us against these risks. Accordingly,
we will adopt a new perspective as we launch employee-centered awareness-raising
activities regarding next-generation security to support the introduction of security
measures implemented through people, which will complement our security
measures that provide protection through IT. Specifically, we will provide avenues
through which employees can voluntarily learn about and practice security. Bysharing what they have learned through these avenues, our employees willsubsequently elevate each other’s awareness regarding security activities.
With the goal of creating a major bulwark for the defense of our organization,
we will aim to establish a collective awareness that will foster an appropriate
understanding regarding security among all employees and allow them to work
effectively toward achieving our ideals. By also conducting awareness-raising
activities outside the Company, we will strive to expand this bulwark so that it
can provide protection to society as a whole.
Moving forward, Hitachi will continue to explore and promote new security
initiatives that will enable us to avoid risks lurking within the “New Normal” weare now facing and to live more safely, securely and comfortably under these
new circumstances.

67

How We Will Achieve Sustainability

Occupational Health and Safety, Employee Health
Building Safe and Secure Work Environments, Efforts to Prevent the Spread of COVID-19
As a corporate group with a globally developing business, we must deal with the management issue of creating healthy, safe and hygienic
work environments at every work site. Hitachi believes that its organizational culture which prioritizes safety first is an essential foundation for
creating corporate value, and it is working to establish a global health and safety management system. In addition, in response to the spreadof COVID-19, to conduct management that puts the safety and health of our employees and stakeholders first while looking ahead into the
future of the “New Normal,” we are promoting the adoption of work styles and the establishment of environments with teleworking with a wide
range of duties as the standard.

Our Basic Policy and Promotion Framework

is appropriate for its own operations.

The Hitachi Group Health and Safety Policy is shared with all Hitachi

In particular, since the establishment in April 2019 of the Safety

Group companies around the world, based on the principle thatManagement Division, we are working to improve both tangible and“Health and Safety Comes First,” and we work together to build a safe,

intangible elements safety measures by checking and improving our

secure and healthy workplace that is free from accidents.

risk assessment system and utilizing IT and digital technologies to

In 2019, aiming to become an organization whose employees

prevent work-related accidents.

spontaneously promote safety activities with the direct commitment of

We had already introduced the Hitachi Group Key Safety Management

management, we established the Safety Management Division, which

Designation System, which promotes the improvement of safety

reports directly to the president on matters of safety management.

measures and reinforcement of safety activities at Hitachi Group

This division holds an annual Safety Strategy Congress, attended bycompanies and business sites that have experienced serious work-safety officers from each group company and representatives from

related accidents. Under the leadership of top executives, theseeach division. The congress sets budgets and objectives forcompanies and business sites take on both management-driven andcompany-wide safety strategy and reviews the progress in building thebottom-up initiatives to formulate specific plans, and the progress of

Hitachi Group’s safety management systems, making the congress anthese plans is monitored by safety officers, who also lead initiatives toopportunity for top management to share their commitment to safety

prevent recurrence.

as the highest priority.

In addition, because the risk of accidents is higher for workers not yet

Furthermore, we hold monthly meetings of the Safety Strategy

accustomed to their work or environment, employees and temporary

Promotion Council, attended by managers in charge of safety fromworkers receive individual health and safety training and on-the-job

each business unit and group company. This council provides antraining before work begins to help prevent accidents by ensuring that

opportunity for us to examine the promotional frameworks for safety

they understand work procedures and dangers. At the same time, on

activities and education in each division alongside standards to beoccasions of business restructuring, we share the details of the healthshared across the group. Utilizing the Hitachi Group Health and Safety

and safety management frameworks and initiatives of the organizations

Portal System and Incident Investigation Database, which comprise

to be merged in advance, and paying all due respect to the safety

the basic system for occupational health and safety management

cultures on both sides, ensure that safety is always preserved duringcommon to group companies in Japan, in response to the degree ofthe execution of a smooth business launch.

occupational accidents that have occurred in Japan, the results of

In Japan, a health and safety commission—composed of businessincident analyses and countermeasure examples are registered inowners, labor union officials and employees—is convened at eachthese systems, with the know-how acquired from this process sharedbusiness site every month to discuss and share information related to

globally as a knowledge base throughout the entire group. The

such issues as work-related accident cause analysis andanalysis of detailed accident information from various angles collected

countermeasures and health and safety activities in light of the situationin these systems help prevent the occurrence of similar accidents andregarding employees who have taken sick leave.

injuries.

However, in 2019, four fatal incidents caused by work-related
accidents occurred globally, thus accidents have yet to be eradicatedInitiatives for Preventing Work-Related Accidents

situation, and brings in an objective third-party perspective by working

Based on the policy above, to prevent work-related accidents among

with external consultants. Through various countermeasures such as

approximately 300,000 employees of the entire Hitachi Group, we

strengthening our ability to determine the causes of accidents, as wellhave established and applied our own standards for manufacturing

as reviewing our risk assessments, we are committed to continuously

sites at high risk of work-related accidents as a common global policy,

improving our safety management system.

and each company promotes health and safety activities in a way that68

entirely. Hitachi takes a sincere approach in recognizing its present

Hitachi Integrated Report 2020

Promoting Work-Style Reforms Focused on
Preventing the Spread of COVID-19
Hitachi is promoting work styles standardizing the use of
telecommuting in a wide range of jobs, while looking ahead to theMain Measures for Telecommuting and Other
New Work Styles in the “New Normal”
1.		Support for employees based on the immediate risk of“New Normal” caused by the spread of COVID-19.

infection

Since 2016, Hitachi has promoted diverse work styles, including(1) Provide subsidies for prevention against COVID-19 intelecommuting(2) Provide subsidies for equipment purchase costs fortelecommuting under the cafeteria plan system(3) Establish “bonus payment for responding to COVID-19”(4) Support foreign employees by introducing the Foreign
Language Medical Assistance Service for foreign
employees working in Japan

telecommuting, so that diverse human resources can achieve results.
Since the government announced a state of emergency in Japan,
Hitachi has, in principle, promoted telecommuting, except for duties
that require going into the workplace to maintain social functions.
Hitachi is moving forward with the creation of a business promotion
system for the “New Normal” so that ordinary corporate activities canbe maintained and continued in the event of a second or third wave of
COVID-19 or a natural disaster. With protection of the health andlivelihood of our employees and their families as our top priority, evenafter the state of emergency is completely rescinded, telecommuting
will be the standard for a wide range of jobs as we examine andimplement measures to increase productivity further than ever before.

2.		 Main measures to continue telecommuting over the
medium to long term
(1) Accelerate the conversion to job-based HR management(2) Improve the IT environment(3) Provide health support for employees telecommuting overthe long term
(4) Provide communication enhancement tools“New Work Style Standards for Telecommuting” Road Map

May–July 2020

• Review and summary of issues related to telecommuting identified thus far• Examine medium- to long-term work styles according to individual jobs

August–September 2020

• Determine the handling of various bonus payments for improving the proactive utilization of
telecommuting environments• Launch a trial of work styles based on the use of telecommuting

October 2020–March 2021

• Review business execution methods, the business environment, various bonus payments, welfare
and other efforts toward productivity improvements and cost optimization• Review various bonus payments, welfare and other efforts aimed at cost optimization• Consider revising rules and agreements between labor and management

From April 2021 (tentative)• Application of new regulations and agreements• Formal commencement of work styles based on telecommuting

69

How We Will Achieve Sustainability

Value Chain Responsibilities
Achieving a Sustainable Value Chain
We are deeply involved in social infrastructures in areas where risks can affect society as a whole. We acknowledge our responsibility tominimize the impact of such risks. Also, the global expansion of our value chain means that we come into direct contact with diverse work
environments, business customs and practices in a variety of countries and regions. Accordingly, we need to make a conscious effort toconduct business in a manner that respects the human rights of all people involved. Furthermore, we are reinforcing business continuity
plans (BCPs) and tightening our information security to ensure a stable supply of our products and services and to prevent threats to our
networks that could severely disrupt business operations.
Ensuring stable supply of our products and services is vital, and this is why Hitachi strives to enhance the BCP on an ongoing basis. In
addition, the Company recognizes human rights as a management priority, and implements various measures intended to respect thehuman rights of all our stakeholders, including employees and individuals throughout our supply chain in all countries and regions in which
we operate our businesses. Furthermore, as a group of companies that procure products and services from suppliers around the globe, wewere one of the early adopters of CSR procurement policies, various measures are being implemented at each group company.

Procurement BCP Policies and Framework
To minimize the impact from disasters, the procurement divisions inenvironmental impact. Through these guidelines, we are working
together with our suppliers to promote green procurement.

business units and key group companies have created procurement
BCPs that 1) standardize and use generic parts to minimize risks tostable procurement as flexible as possible; 2) cultivate multiple
suppliers; 3) distribute production across several locations; 4) secure
strategic inventory; and 5) consider substitute products.
To ensure the efficacy of these procurement BCPs, we implement
desktop exercises to simulate specific case of disaster, and discuss ingroups what actions need to be taken to further improve these plans.

CSR Procurement Policies and Framework

Hitachi Group CSR Procurement Guidelines
https://www.hitachi.co.jp/procurement/csr/__icsFiles/
afieldfile/2018/06/07/HSC_CSR_GB_E.pdf
Hitachi Group Green Procurement Guidelines
https://www.hitachi.com/environment/library/pdf/green_en.pdf

Framework
Hitachi’s Value Chain Integration Division, which reports directly to theCreating and Sharing Procurement Policies

President, discusses policies and measures related to CSR supply

In accordance with the principles of the UN Global Compact, Hitachi

chain management, responsible mineral procurement and green

established the Hitachi Group Global Procurement Code in 2019 as

procurement. Decisions reached through these discussions are shared

our highest code for procurement activities. This code specifies thatthroughout the group via the Hitachi Group CSR/BCP Procurement

based on Hitachi’s CSR Procurement and Green Procurement

Committee, which is composed of CSR/BCP Procurement Committee

Guidelines, due diligence should be performed to the supply chain on

members from business units and key group companies.

factors such as human rights, labor practices, safety, ethics, quality

Chemical substances within our products are recommended to be

and security. They also require our procurement team to request

managed by chemSHERPA*-CI/AI, which is a standardized system for

suppliers to perform same due diligence. All Group companies follow

communicating information regarding chemicals in products (CiP)

the code, and share global supply chain issues within the Group as wethroughout the supply chain.

engage in procurement activities.
In addition, we distribute the Hitachi Group CSR Procurement
Guidelines to the approximately 30,000 suppliers of our business units
and group companies to ensure their thorough dissemination andreceive written responses confirming that the content therein isunderstood. We also require first-tier primary suppliers to confirm that
second-tier suppliers are complying with these guidelines.
In terms of environmental response, we have compiled our basic
philosophies regarding procurement of eco-friendly parts / products aswell as our requirements of suppliers into our Green Procurement
Guidelines to expand the procurement of parts and materials with low

70

Procurement Policy
https://www.hitachi.com/procurement/index.html

Hitachi Integrated Report 2020* chemSHERPA: The Ministry of Economy, Trade and Industry of Japan is spearheading the standardizationof this common system for communicating information regarding chemicals in products. It facilitates thetransmission of information based on approaches that are common throughout supply chains to ensure theproper management of chemicals in products.

Strengthening Global Partnerships

the UN Guiding Principles on Business and Human Rights, providing

To promote procurement based on the premise of expanding local

appropriate education to employees, adhering to laws and regulations

production for local consumption in accordance with its operationalin all the regions and countries where we operate, and seeking ways topolicy of global business expansion, Hitachi has stationed Regional

honor the principles of international human rights when faced with

Procurement Officers who supervise local procurement activities inconflicts between internationally recognized human rights standards

each of its four regions of operation around the world (China, the restand national laws.

of Asia, Europe and the Americas). These Regional Procurement
Officers have strengthened our response to CSR-related risks byconducting CSR audits, CSR monitoring (self-checks) and CSR
procurement seminars for suppliers in their respective regions.

* Human rights due diligence: An ongoing process to identify and assess potential and actual human rights
negative impacts, take appropriate action to prevent or mitigate potential impacts, track the effectiveness ofactions to address impacts and communicate externally.

Starting in fiscal 2015, the Hitachi Group Procurement Division began
implementing human rights due diligence based on the Hitachi GroupCSR Monitoring (Self-Checks)

Human Rights Policy. In fiscal 2017, we incorporated the results of

To monitor how well its CSR supply chain management philosophy

human rights due diligence into our CSR procurement guidelines forhas been adopted by its suppliers, Hitachi requests that major

suppliers while also thoroughly revising the questions on the checksuppliers conduct self-checks using check sheets created in

sheet used in supplier CSR monitoring (self-checks) to better grasp theaccordance with the Hitachi Group CSR Procurement Guidelines. We

issues.

then encourage suppliers to make improvements in response topotential issues by analyzing collected results and providing relevant

Hitachi Group Codes of Conduct

feedback to our business units and group companies dealing withhttps://www.hitachi.com/about/corporate/conduct/index.html

those suppliers.
CSR Audits
Hitachi, Ltd. has been auditing the manufacturing bases of its andHitachi Group Human Rights Policy
https://www.hitachi.com/sustainability/renew/pdf/human_rights_
policy.pdf

group companies’ suppliers in China and the rest of Asia. For theseaudits, we engaged external evaluators such as the experienced CSR

Addressing the Risks of Child and Forced Labor

auditing company Intertek Certification.*1 Our audits are based on the

The Hitachi Group Codes of Conduct clearly express Hitachi’s firminternational SA8000 certification standard developed by Social

stance against the use of child labor either in Group companies or

Accountability International (SAI), an American CSR evaluation

forced labor along its supply chain. In addition, Hitachi’s CSR

institution. These audits investigate our workplace practices, and an

procurement guidelines for suppliers also clearly forbid the use of

RBA-recognized auditor checks suppliers’ CSR initiatives from thechild labor or forced or compulsory labor. As part of our efforts toperspectives of labor and human rights, health and safety, theraise awareness all along the supply chain, we conducted CSR

environment, and ethics. Suppliers needing improvement were

procurement seminars in China and Thailand.

requested to submit improvement action plans, and Hitachi, Ltd.,
together with group companies, will work with and advise the suppliers
until they complete the planned improvements.
*1. Intertek Certification: A company that provides a wide range of certification services extending across allindustrial fields in more than 100 countries around the world.
*2. RBA: Responsible Business Alliance (formerly “EICC”)

Response to the Conflict Minerals Issue
Hitachi has formulated the Hitachi Group Conflict Minerals
Procurement Policy. The policy explicitly lays out measures to be
implemented to ensure responsible procurement, including inquiries
based on international guidelines, so that procurement of

Human Rights Due Diligence in Procurement

components incorporating conflict minerals does not benefit armed
groups in the Democratic Republic of the Congo (DRC) or adjoining

Basic Policy

countries. Expanding the scope of corporate responsibilities for the

Hitachi believes that respecting human rights is our responsibility as aprocurement of minerals is a global trend, with companies

global company and indispensable in conducting business. To thisincreasingly expected to address the overall risks to human rights as

end, in May 2013 we formulated the Hitachi Group Human Rights

well as conflict risks, and recognize responsibilities that extend

Policy. In this policy, we clarify our understanding of human rights as

beyond the countries adjoining Congo to a wider area where risks arebeing, at a minimum, those outlined in the International Bill of Humanhigh. We are currently revising our Conflict Minerals Procurement

Rights and the International Labour Organization’s Declaration on

Policy in this respect.

Fundamental Principles and Rights at Work. This policy shapes
Hitachi’s approach to meeting the responsibility to respect humanrights, including implementing human rights due diligence* in line with71How We Will Achieve Sustainability

Each Hitachi business unit and group company responds toinvestigation requests and inquiries relating to conflict minerals, andDeclaration of Partnership Building (summary)reports the results to customers when requested.

1. Prosperous Coexistence throughout Supply Chains andHitachi Group Conflict Minerals Procurement Policy:
https://www.hitachi.com/procurement/csr/csr/index.html

New Forms of Collaboration That Transcend Company
Size and Business Groupings
We will aim to build a prosperous coexistence with our

Announcement of a Declaration Aimed at Building New
Partnerships (Declaration of Partnership Building)
Hitachi has approved of, adopted and announced the Declaration ofPartnership Building established by the Council on Promoting
Partnership Building for Cultivating the Future, the members of which
include the chairman of the Japan Business Federation, the chairmanof the Japan Chamber of Commerce and Industry, the president of
the Japanese Trade Union Confederation and representatives from
related ministries (the Cabinet Office; the Ministry of Economy, Tradeand Industry; the Ministry of Health, Labour and Welfare; the Ministrybusiness partners by engaging in collaborations thattranscend existing business relationships and company size
while striving to raise added value throughout the supply
chain. As we pursue these goals, we will support theimplementation of remote work at business partners andprovide advice for the formulation of BCPs in accordancewith appropriate perspectives regarding business continuity
during natural disasters and work-style reforms.
2. Compliance with “Promotion Standards”

of Agriculture, Forestry and Fisheries; and the Ministry of Land,

We will observe appropriate business practices between

Infrastructure, Transport and Tourism).

main subcontracting entrepreneurs and subcontractors

Specifically, this declaration identifies matters upon which Hitachi will

(Promotion Standards based on the Act on the Promotion of

focus as it strives to build new partnerships through the promotion of

Subcontracting Small and Medium-Sized Enterprises) andcollaborations and prosperous coexistence with business partners inproactively adjust trading and business practices that hinder

its supply chain and businesses endeavoring to create value.

the construction of partnerships with our businesscorrespondents.

Quality Assurance
Thorough Quality Assurance
Providing products and services that our customers can use with confidence, along with meeting the specifications and quality levels
demanded by customers are important values shared by all our employees and described in the Hitachi Group Codes of Conduct. To ensurethat quality and reliability are top priorities, we are strengthening our quality assurance activities from the perspectives of organization andmanagement, technology, and human resources in every process—from planning and development to design, manufacturing, delivery, andmaintenance.

Quality Assurance Initiatives

also thoroughly discussing the process, framework, and motivating

Maintaining the values of “Harmony”, “Sincerity”, and “Pioneeringfactors leading up to an occurrence, along with ways to prevent

Spirit” that comprise the Hitachi Founding Spirit, as well as adhering toreoccurrence, in order to improve our product reliability and to increase“Basics and Ethics” and “Right and Wrong are more important thancustomer satisfaction.

Profits and Losses”, we place great emphasis on “Sincerity” in quality

72

assurance activities for earning trust in our products.

Framework for Quality Assurance

One integral aspect of this is our unique and longstanding practice of

To ensure full control over quality governance, we have separated the“Ochibo Hiroi”, which means “gleaning” in English and involves learning

quality assurance division from the manufacturing division in every

from failure to further develop our technologies. Our executives andbusiness unit and group company, creating a framework for activity insenior management take the lead in examining things from thewhich our customers’ safety and trust are the top priorities. Since fiscal

customer’s perspective, not only investigating the technical causes but

2018, to strengthen this framework further, we have reinforced the

Hitachi Integrated Report 2020

reporting lines from business unit and group company quality

reduction measures based on the following priorities: design (intrinsic

assurance divisions to the quality assurance division at our head office,safety design), protective measures (safeguarding), and information on

independent from all business divisions, creating systems for closeuse (e.g., instruction manuals). We also collaborate with related

information sharing between the two. We are also strengthening

business units and laboratories to conduct risk assessment from agovernance by giving greater authority to the quality assurance division

broad perspective.

at our head office.
Hitachi has also established “Product Safety Assurance Guidelines”

Handling Product Incidents

and declares that we will always give top priority to ensuring the safety

When an incident occurs, the department in charge of the product willof our customers. We strive to achieve a higher degree of safety bytake the lead in dealing with the situation from the customers'

reciprocally examining product safety activities in each division.

perspective.

To develop a basic philosophy pertaining to Hitachi quality assurance

In case of a particularly serious accident, we have a company-wide

efforts within global activities, we created Global Quality Assurance

framework in place to take prompt and appropriate action. Specifically,

Standards and are strengthening the global governance of the entire

in accordance with laws and regulations, we report to the competentgroup.

authorities and disclose information to customers via our website andother channels, as well as promptly reporting the situation to senior

Incident Prevention Activities

management.

We believe that prevention of incidents is the essential role of quality

Furthermore, when it is deemed necessary to take retroactive

assurance, and we are strengthening our initiatives not only to prevent

measures against a product, we issue a public notice in newspapers

the recurrence of incidents, but also to prevent them in the first place.

or on our website and implement measures such as repair andTo this end, we are promoting quality assurance activities while

replacement.

anticipating quality issues with an eye to the changes in our various
business activities.

Quality and Reliability Instruction

As a part of these activities, to prevent incidents in advance, we are

We offer field-specific technical courses and level-specific courses

applying our software development capabilities and reliability

such as "basic" and "advanced" mainly for engineers involved inenhancement know-how in solutions divisions to product-related

manufacturing. Each business unit also provides specialized technicaldivisions (embedded software development divisions), and we also

instruction in quality assurance training centers to improvebuilding and strengthening our quality assurance activities in service

manufacturing, quality assurance and maintenance techniques.

businesses, which are growing rapidly, as well as a framework forsharing information on current issues.
Furthermore, we are promoting the digitization of test and inspection
data and the establishment of processes that do not require manualintervention in the acquisition and assessment of inspection data andthe preparation of inspection reports.
Complying with Technical Laws and Regulations
In addition, we developed the "Guideline for the Assessment ofTechnical Laws and Regulations, and Quality Assurance Systems,"
which is shared throughout the Hitachi Group. The guideline includes
two key subjects: (1) clarification of laws and regulations related toeach product (product laws and regulations map); and (2), legal
compliance activities and continuous improvement of processes basedon a product compliance management system.
Thorough Risk Assessment
We give top priority to the safety of our customers' lives, physicalbodies, and property when designing new products, and confirm thesafety of our products at every stage in the process, from development
to production, sales, and maintenance. Specifically, we improve risk
communication with our customers based on the Guide for Preparing
User Instruction Manuals, and ensure product safety through risk

73How We Will Achieve Sustainability

Compliance
Thorough Compliance
As the economy becomes more global and corporate activities become more borderless, business activities spanning across countries andregions with different administrative and economic systems, trading practices and values are picking up. Globally shared initiatives and guidance
are increasingly important in terms of conducting proper international business and preparing for all types of risks that could potentially hinderbusiness activities.
Hitachi promotes business globalization in accordance with “Basics and Ethics” and has established its own set of rules concerning importantbusiness practices, such as preventing bribery, observing the Competition Law and establishing tax compliance, that are compliant with widely
recognized and approved international standards. We are also working to ensure thorough awareness and practice of these rules throughout theentire Hitachi Group. We will respond appropriately to the demands of society while reviewing and updating these rules as needed based on anawareness that required corporate behavior and interpretations of standards and regulations continue to evolve due to ongoing global discussion
concerning compliance.

Our Basic Policy and Promotion System

the internal audit section regularly conducts group-wide reviews to

We established the “Hitachi Group Codes of Conduct” as a standard

verify that each area of compliance is being appropriately operated. Inof behavior for the entire group and have translated them fromcases where these reviews identify necessary improvements,

Japanese into 13 different languages, including English and Chinese,

corrective measures are swiftly implemented. In addition, Hitachi

and have been circulating them through e-learning, sharing them with

conducts surveys every three years at group companies in regions

officers and employees throughout the world. We also established thewhere bribery risks are high based on possible bribery risk scenarios.

“Hitachi Group Code of Ethics and Compliance” to clearly share ideas

Hitachi also convenes an “Advisory Committee” of outside experts toregarding corporate ethics and compliance that should be sharedgain new insights into compliance and apply them proactively in its

throughout Hitachi, as we work to further ensure that all Hitachi officers

own efforts.

and employees act in thorough compliance with corporate ethics.

In fiscal 2019, compliance risk surveys were conducted at 821 group

Regarding awareness of corporate ethics and compliance, ancompanies to conduct management based on shared risk

employee survey is conducted by the Hitachi Group every year in an

management categories throughout the Hitachi Group globally. Basedeffort to foster a sound corporate culture.

on the results of these surveys, we will work to ensure the

In 2016, Hitachi reconstituted its rules and guidelines related toeffectiveness of compliance programs by allocating resources tomatters such as compliance with competition law and the prevention

businesses and regions where risks are high and thoroughlyof antisocial transactions, corruption and bribery, repackaging them

implementing and managing measures in accordance with risks.

into the “Hitachi Global Compliance Program (HGCP)”, a system ofregulations falling under the Hitachi Group Codes of Conduct. We areCompliance Reporting Systemseamlessly implementing these rules at all business sites globally.

Hitachi introduced a Compliance Reporting System to prevent illegal
and unethical behavior, promptly address infractions and enhance ourStrengthening Our Global Compliance Framework

the Hitachi Group, as well as temporary staff and business partners

To implement the HGCP, we have appointed a senior executive as the

such as suppliers and distributors. In fiscal 2019, we received 459

head of risk management for the entire Hitachi Group to supervise thereports from all group companies in Japan and throughout the world.

executives who are in charge of management-level risks in each

In addition, we have implemented the Channel to the “Board ofbusiness unit and key group companies. Under this system, policies

Directors system” to allow all Hitachi employees to directly reportand measures are shared through the “Compliance Management

problems anonymously or under their real names to Hitachi directors in

Conference”, composed of these risk management executives. Eachcases where they see any illegality or extreme inappropriateness inexecutive is assisted by a compliance manager who implements

business conduct by division heads, executive officers or otherpractical support measures.

management personnel.

We also support group companies outside Japan and have appointed
compliance heads in 11 regions, responsible for implementing
education and sharing information as well as arranging consultation
services with outside attorneys.
Issues in the promotion of compliance measures are clarified throughindividual dialogue with business units and key group companies, while74

ability to self-regulate. This system can be used by employees within

Hitachi Integrated Report 2020

Primary Initiatives

Export Controls

Policies for Preventing Bribery and Corrupt Practices

For basic export control policies, we have adopted the “Hitachi Group

Preventing bribery and corrupt practices is a major challenge for

Codes of Conduct”, which state: “We will help maintain international

corporations today. Hitachi established rules against bribery andpeace and security through compliance with all applicable laws andcorruption for the HGCP along with guidelines indicating specificregulations concerning import and export, and will operate

spending thresholds for entertainment, gifts and other arrangements

appropriately according to our internal rules and policies.” Hitachi has

provided to public officials, establishing a policy banning facilitation

established “Corporate Regulations concerning Security Export

payments and due diligence procedures for business partners. In

Control” based on this policy to carry out strict export control practices

addition, Hitachi thoroughly complies with the U.S. Foreign Corrupt

in line with relevant laws and regulations, screening all goods andPractices Act (FCPA) and bribery regulations in each country andtechnologies intended for export against such factors as destination

region, which have become stricter in recent years.

countries and regions, as well as intended end use and end users. We
provide guidance and educational support for the formulation of

Tax Compliance Initiatives

regulations and the establishment of frameworks to Hitachi GroupTo ensure risk management for taxation in response to globalization,companies to ensure that all group companies follow this policy and

Hitachi follows relevant tax-related regulations applicable to the overall

implement export control in accordance with the laws and regulationsgroup, as well as rules for transfer pricing management. We alsoof the regions and countries.

manage transfer pricing in accordance with the OECD Transfer Pricing
Guidelines and the laws and regulations on transfer pricing in eachcountry or region where group companies are located.
Preventing Violations of Competition Law
Hitachi makes thorough efforts to comply with the HGCP’s rules
concerning competition law and other related business standards andguidelines. We created a global version of our standards for contact
with competitors to enhance awareness of ethical principles andpractices. We also provide a collection of case studies for workplace
discussions to group companies, including case studies oncompetition law in Japanese, English and Chinese, to raise employee
awareness.
Hitachi holds a special manager training every other year and in fiscal
2019, approximately 1,100 general managers, mainly from sales
department personnel facing high compliance risks in daily work
activities, such as contact with competitor companies and involvementin public bidding, attended the training.
Violations of Laws and Regulations
In fiscal 2019, there were no incidents in which Hitachi violated or was
penalized under laws or regulations regarding bribery or corrupt
practices. Regarding tax compliance, Hitachi acts in accordance withall applicable laws and regulations and did not have any significant
fines or nonmonetary sanctions for noncompliance with tax laws andregulations. Moreover, regarding competition law, we take seriously thefact that a group company was confirmed to be in violation ofcompetition laws regarding the overseas transactions of some
automobile parts. We are working to prevent recurrence throughorganizational and regulatory improvements and enhanced education
and auditing.

75How We Will Achieve Sustainability

Corporate Governance
Hitachi views the expansion of long-term and overall shareholder returns as an important management objective. Hitachi and its group companies
maintain good relationships with a wide range of stakeholders, and we recognize that these relationships make up an important portion of ouroverall corporate value. Accordingly, we are striving to establish a system that will facilitate the maintenance of these relationships and improve ourcorporate value primarily through the implementation of measures focused on promoting constructive dialogue. To advance these efforts effectively,
we are working to improve our corporate governance by ensuring thorough separation between the oversight and execution of management,
establishing a swift business execution system and striving to achieve highly transparent management.

History of Hitachi’s Corporate Governance Reform
1999

Introduction of Objective Perspective

2012

Development of Guidelines for Strengthening
Governance

Demarcation of Management Oversight and 		
Execution

2014

Development of Stewardship Code2015

Start of Application of Corporate Governance Code

Shifted to a company with committees (currently acompany with nominating committee, etc.)
To increase management speed and improve
management transparency

2016

Enhancement of Dissemination of Information about
Medium- to Long-term Sustainable GrowthManagement Advisory Committees
Practical advice from experts in Japan and overseas
2003

2006

Enforcement of Revised Companies Act

2010

Enhancement of Interactions with Capital Markets

Development of Corporate Governance Guidelines

Publication of an integrated report
2019

Executive vice presidents were placed in 5 sectors

Hitachi IR Day (briefing on business strategy by 		
division) was launched

ESG briefing session held
An independent director (chair of the Audit Committee)
and the CEO shared their remarks

Clarification of commitment of top management of
the business units to the capital markets
2012

Acceleration of the Social Innovation Businessacross 5 Growth Fields

Acceleration of Global Management
Independent directors including foreign directors wereincreased
Independent directors comprised the majority of 		
directors

Implementing All of the Principles of the Corporate Governance CodeWe are implementing all of the principles of the Corporate Governance Code.

Director Composition
Independence(ratio of Independent directors)

Diversity(ratio of non-Japanese directors)

Directors with Abundant Experience
Hitachi has 13 directors, 6 of whom are nonJapanese and 2 of whom are female. This team of
directors applies their abundant experience andIndependent
directors

Non-Japanese
directors

76.9%

46.2%

knowledge related to the management of global
companies, legal affairs, accounting, capital markets,
government agencies and the field of digital
2 female directors technology to facilitate discussions informed by a
(15.4% of overall
director total)

76

Hitachi Integrated Report 2020

wide variety of perspectives.

Hitachi's Corporate Governance Framework and

The Senior Executive Committee is an advisory body to the President & CEO
that conducts multifaceted discussions and makes careful decisions regarding
important matters that impact Hitachi or its group companies. As of April
2020, it consisted of 11 members, including the President & CEO, executive
vice presidents (6 members), senior vice presidents (3 members) and a vicepresident.

Its Features

General Meeting of
Shareholders

Senior Executive
Committee

3Appointment

Appointment/
Oversight

ReportPresident & CEO

2 Board of Directors

2 executive members

1

11non-executive members(including 2 female members)

1

Executive Vice Presidents andExecutive Officers/Senior Vice
Presidents and Executive
Officers/Vice Presidents andExecutive Officers

1

Nominating
Committee

Compensation
Committee

Audit Committee

4 directors

4 directors

5 directors*

Audit

Internal
Auditing
OfficeReportExecutive
Officer

Department
in charge

Executive
Officer

Department
in charge

Department
in charge

Department
in charge* One standing Audit
Committee member

Audit

Audit

Audit
ReportNon-independent

Independent

Accounting Auditors

POINT 1

POINT 2

POINT 3

Transparency in Management

Independence of the Board of
Directors

Enhanced Collaboration throughTripartite Audits

We increased our number of independent
directors, including non-Japanese directors,
in 2012.

Hitachi’s Audit Committee and internal audit

We became a company with committees(currently a company with a nominating
committee, etc.) in 2003.

We have established a Nominating
Committee, a Compensation Committee

Our Board of Directors, which is chaired by

and an Audit Committee, which are mostly

an independent director, has 13 members,

made up of, and are chaired by,including 10 independent directors, 2

independent directors. The system we havedirectors who are also serving as executive

i n p l a c e t o e n s u re t r a n s p a re n c y i n

officers and 1 director who is not serving as

management separates the oversight andan executive officer. In addition, we haveexecution of management, facilitates the fullestablished a system that facilitates the full

exercise of supervisory functions andexercise of supervisory functions byenables discussions and reports to be

maintaining separation between the

conducted appropriately within these threeoversight and execution of management.

section collaborate with third-party
accounting auditors to strengthen its“tripartite auditing,” which aims to increase
the effectiveness of internal controls.

committees.

77How We Will Achieve Sustainability

Corporate Governance
Administrative Performance of the Board of Directors

Within the Board of Directors, there are 3 statutory committees—the

The Board of Directors approves basic management policy for Hitachi

Nominating Committee, the Audit Committee, and the Compensation

Group and supervises the execution of the duties of executive officers

Committee — with independent directors accounting for the majority ofand directors in order to sustainably enhance corporate value andmembers of each committee. The Board of Directors meetings wereshareholders’ common interests. The basic management policy

held on 9 days during fiscal 2019, and the attendance rate of directors

includes the Mid-term Management Plan and annual budget

at these meetings was 98%. The attendance rates for eachcompilation. The Board of Directors focuses on strategic issues related

independent director were as shown in the table below. To assist withto the basic management policy as well as other items to be resolved

the duties of the Board of Directors and each committee, staff who arethat are provided in laws, regulations, the Articles of Incorporation andnot subject to orders and instructions from executive officers are

Board of Directors Regulations.

assigned.

Status of Board of Director meetings held in fiscal 2019
Attendance / Number of days on which the meetings were held*
Name

Board of Directors

Nominating Committee

Audit Committee

Compensation Committee

Katsumi Ihara

100%

—

100%

100%

Cynthia Carroll

100%

100%

—

—

Joe Harlan

100%

—

—

—

George Buckley

100%

—

—

—

Louise Pentland

89%

—

—

—

Harufumi Mochizuki

100%

100%

100%

100%

Takatoshi Yamamoto

100%

—

100%

100%

Hiroaki Yoshihara

100%

100%

100%

—

* Number of days during term of office on which Board of Director meetings were held: 9
Number of days during term of office on which Nominating Committee meetings were held: 8
Number of days during term of office on which Audit Committee meetings were held: 15
Number of days during term of office on which Compensation Committee meetings were held: 4
Indicates role as board or committee chairperson

Board of Director Meetings in Overseas and Panel Discussions Involving Experts
In principle, Hitachi holds a meeting of its Boardof Directors annually in a foreign country that isdeeply connected with its businesses. In
December 2019, this meeting was held in theCity of Zurich in the Swiss Confederation. As aside event, we also held a panel discussion
involving representatives from the International
Energy Agency (IEA), European powertransmission and distribution companies, andJapanese scholars. This panel discussion
increased the depth of understanding ourdirectors and associates have concerning the“3Ds” (decarbonization, dispersion, anddigitalization) and new power system trends,
including the ongoing establishment of power
grids in a wide range of regions and nations.

78

Hitachi Integrated Report 2020

Analysis and Evaluation of the Effectiveness of the Board of Directors
The Company evaluates the effectiveness of its Board of Directors as a whole each year, in a continuous effort to maintain and improve its functions.
Fiscal 2019 Evaluation Process

1. Questionnaire-based selfassessment by each director(February–March 2020)

Points of evaluation· Composition of Board of Directors: Member diversity, numbers and ratios of independent directors and inside directors, etc.
· Clarification of the responsibilities and expected roles of the Board of Directors· Operation of Board of Directors: Meeting frequency, discussion time, proposal selection, discussion content, role of chairperson, etc.
· Contribution: Contribution to management strategy formulation and changes in corporate culture, member demonstration of experience andknowledge, etc.
· Understanding regarding the Company: Group identity, risk factors· Status of committee activities: Composition, responsibilities and roles, collaboration with Board of Directors, etc.
· Operation supporting system: delivery of information e.g., provision of documents for the Board

2. Discussions held by independent
directors (March 2020)· Independent directors held an exclusive meeting to discuss the effectiveness of the Board of Directors.

3. Discussion and review within the
Board of Directors (June 2020)· The Board of Directors held a discussion based on the results of the questionnaire-based self-assessment and discussions conducted in the
exclusive meeting attended by independent directors, comparing these results to those of the previous year and considering the statusesof related initiatives. Through this discussion the Board of Directors analyzed and evaluated its overall effectiveness and identified policies
through which it can increase this effectiveness.

Evaluation Results and Future Initiatives
Overall evaluation in fiscal 2019

Overall evaluation in fiscal 2019

Fiscal 2019 evaluations determined that membership in our Board of Directors was sufficiently diverse. They also indicated the Board of
Directors’ overall effectiveness was satisfactory due in part to its active discussions aimed at medium- to long-term
growth in corporate value. Each director was found to have contributed his or her own knowledge to these discussions, which were primarily
focused on points related to management strategy, including the Mid-term Management Plan.

Maintenance and improvement ofBoard of Director functions· The Board of Directors will continue to conduct discussions concerning business strategies for each sector. At the same time, it discusses the
progress of our Mid-term Management Plan as appropriate while accounting for circumstances surrounding COVID-19.
· We are strengthening collaboration between the Board of Directors and the Nominating Committee while further contributing to CEO
succession planning (for example, expanding reports made to the Board of Directors through the Nominating Committee, enhancing coachingfor successive and next-generation candidates).

Enhancement of operational supportof the Board of Directors andimprovement of its practical aspects· While accounting for circumstances surrounding COVID-19, we improve our operation supporting system through the continuous sharing of
information obtained through independent directors' visits to Hitachi Group business premises and event participation· We will achieve further improvements related to the composition and content of materials, as well as to their preliminary provision.

Future initiatives

Administrative Performance of the Three Committees
Nominating Committee

Audit Committee

Compensation Committee

The Nominating Committee has the authority to determine
proposals submitted to the general meeting of shareholders
for the election and dismissal of directors. The Nominating
Committee consists of 4 directors, 3 of whom are
independent directors.
It also determines director candidates and holds preliminary
hearings concerning the appointment and dismissal of
executive officers, including the CEO. In fiscal 2019, theNominating Committee held meetings on 8 days.

The Audit Committee has the authority to audit theexecution of duties of directors and executive officers and to
decide on proposals submitted to the general meeting ofshareholders for the election and dismissal of accounting
auditors. The Audit Committee consists of 5 directors,
including 4 independent directors and 1 standing Audit
Committee member.
Hiroaki Yoshihara, the chairman of the Audit Committee, hasbeen involved in accounting and other business practices at
the KPMG Group for many years and possesses a
considerable breadth of knowledge concerning finance andaccounting.
In fiscal 2019, the Audit Committee held meetings on 15
days.

The Compensation Committee has the authority todetermine remuneration policies for directors and executive
officers and remuneration for individuals (including amountsof remuneration) based on them. Composed of 4 directors,
including 3 independent directors, the committee strives toensure objectivity, transparency, and fairness in the
remuneration determination process.
In addition, the Compensation Committee verifies andreviews details of the process used for determining
remuneration for individuals, including assessments
concerning basic remuneration amounts, evaluations ofprogress made toward individual targets, and performanceappraisals that are tied to short-term incentive
compensation.
In fiscal 2019, the Compensation Committee held meetingson 4 days.

Primary Activities
In addition to deciding upon the contents of the proposal
made concerning director appointments at the Annual
General Meeting of Shareholders, the Nominating
Committee reviewed and confirmed the executive officer
system implemented in fiscal 2020. In addition, it promoted
committee-related activities including discussions andindividual interviews aimed at developing candidates for
future management and leadership positions.

Primary Activities
The Audit Committee conducted activities that were focusedon its priority matters for consideration, which included theenhancement of collaboration and the promotion of
information through tripartite audits (involving the Audit
Committee, internal audit sections, and accounting
auditors), as well as the construction and operational
evaluation of internal control systems based on perspectives
concerning the adequacy of risk management and businessexecution. In addition, standing Audit Committee members
established an understanding regarding timely andappropriate information through collaboration with internal
audit sections and attendance at meetings of the Senior
Executive Committee and other important internal
conferences. Furthermore, they subsequently shared thisinformation with other committee members.

Primary Activities
The committee determined remuneration amounts forindividual directors and executive officers in accordance withestablished policies while verifying and reviewing details of theprocesses applied when conducting performance appraisals
tied to short-term incentive compensation for executive
officers and evaluating progress made toward individual
targets. In addition, the committee reviewed the executive
compensation system while giving due consideration tocompensation granted to managers at global companies andthe goal of sharing value with shareholders. Furthermore, thecommittee decided upon policies covering remuneration for
directors and executive officers in fiscal 2020, including theimplementation of a restricted stock unit (RSU) compensation
system for non-Japanese officers.

79How We Will Achieve Sustainability

Corporate Governance
CEO Appointment, Dismissal, and Succession Plan

globally) necessary management personnel who will provide leadership

Hitachi’s Board of Directors decides upon the appointment andthat will allow us to realize our growth strategies. Accordingly, we aredismissal of executive officers, including the CEO, with the goal of

also concentrating on providing training for selected employees whileconstructing an optimal business execution system for management.

targeting the early development of candidates for future management

Decisions regarding the appointment or dismissal of executive officers

positions. Accordingly, we are developing next-generation leaders

are based upon proposals made to the Nominating Committee, whilecapable of acting authoritatively and resolutely by establishing forums

decisions related to the position of CEO are made based on preliminary

where participants can discuss what is necessary for Hitachi’s future

deliberations and proposals from the Nominating Committee. As

growth and make recommendations to management.

stipulated in our Corporate Governance Guidelines, our basic policy

In addition, we have identified a group of about 50 employees from aroundconcerning CEO appointments and dismissals requires that individuals

the Hitachi Group with next-generation development potential. People inserving in the position of CEO have extensive experience andthis “Future 50” group are selected on merit, regardless of age, gender, or

achievements in the field of company management. They must also benationality. They are given challenges to help expand their horizons andconsidered optimally suited for conducting management aimed atbuild their perspectives, through tough assignments including different

achieving Hitachi’s goals of continuously raising its corporate value andtypes of work, and internal and external training opportunities. The Future

further serving the common interests of its shareholders.

50 group members receive one-on-one mentoring opportunities with

Regarding our CEO Succession Plan, as the speed of change

independent directors to benefit directly from their extensive businessaccelerates, we are striving to build a system that enables us toexperience and global perspectives. Our aim is to change mindsets so thatappropriately and promptly secure and develop (both internally andwe can develop people for important positions in the future.

STEP 1

STEP 2

STEP 3

STEP 4

STEP 5

Designate important
positionsDefine the roles and personnel
requirements associated with
important positions

Select candidates forimportant positions

Evaluate candidates

Develop candidates

Director and Executive Officer Compensation
Compensation Structure

Basic Policy(1) Directors
Compensation for Directors is basic remuneration as fixed pay. The

Compensation shall be such that it enables theCompany to attract necessary personnel to achieve an
improvement in corporate value through global businessgrowth.
Compensation shall be commensurate with roles andresponsibilities of each Directors and Executive Officers.

reflect full-time or part-time status, committee membership and position,and travel from place of residence, etc. A Director concurrently serving as
an Executive Officer is not paid compensation as a Director.
(2) Executive Officers
Compensation for Executive Officers consists of basic remuneration as

Compensation for Directors shall be such that it enables
them to exercise functions of supervision of management
effectively.

fixed pay, and short-term incentive compensation and medium- and long-Compensation for Executive Officers shall be such that it
enables them to contribute to sustained improvement incorporate value through the execution of business andemploys an appropriate balance between short-term
performance and medium- and long-term performance.

of 1:1:1 as the standard form of compensation, taking into account the

The level of compensation shall be determined taking into
account compensation levels at other companies as wellas economic and market trends.

If it is found that an executive officer has been engaged in misconduct

The Compensation Committee utilizes external experts
to gain expert advice and an objective viewpoint, if
necessary, for considering the details and amounts ofcompensation.

80

amount of basic remuneration is decided by adjusting a basic amount to

Hitachi Integrated Report 2020

term incentive compensation as variable pay.
The basic amount of each type of compensations is set based on the ratio
composition of executive compensation for major global companies, inorder to improve corporate value through the growth of global businesses.
The higher position of Executive Officers held, the higher proportion ofvariable pay is set to the total annual compensation.
during his/her term of office, compensation for Executive Officers that has
been already paid shall be returned to the Company (clawback provision).

Please refer to Compensation to Directors and Executive Officers on
P.93-98 of Annual Securities Report (The 151st Business Term).
https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2019_4_en.pdf

Compensation to Executive Officers (FY2020)
Basic remuneration : short-term incentive compensation : medium- and long-term incentive compensation = 1:1:1 ratio
Total remuneration
Fixed pay
Basic remuneration

Variable pay
1

Short-term incentive compensation2

Medium- and Long-term incentive
compensation

Set according to the relevant position by

The amount of short-term incentive

adjusting that amount to reflect financial

compensation is decided within the range

The shares of restricted stock are granted

results and individual performance.

of 0 to 200% of a basic amount set

in order to propel management from aaccording to the relevant position by

medium- and long-term perspective andadjusting that amount to reflect financial

to provide incentives to bring about aresults and individual performance.

sustainable increase in enterprise value by
further promoting senior management’s
shared values with shareholders throughthe holding of shares during their term ofoffice.

1

Short-term incentive compensation(Executive officers forming the Senior Executive Committee*)

Linked to evaluations of Company-wide performance (80%)(Other executive officers)

Linked to evaluations
regarding the achievementof individual targets (20%)

Linked to evaluations ofdivisional performance (50%)

Linked to evaluations ofCompanywide performance (30%)

Evaluated referring to adjusted operating income andEvaluated referring to consolidated

Varies according to the evaluation

operating cash flows for each division, among otherrevenues, adjusted operating income,of the level of achievement of

indicators, to measure the level of achievement of targets

EBIT, and net income attributable toindividual target for each Executive

under the Mid-term Management Plan and the annual

Hitachi, Ltd. stockholders in order to

Officer determined based on his/budgets for divisions.

measure the level of achievement of

her responsibility.

consolidated financial forecasts
disclosed to stakeholders, including
shareholders and investors.
* The rates used for “other executive officers” apply when “executive officers forming the Senior Executive Committee” are in charge of business units or businesses.

2

Medium- and Long-term incentive compensation

The shares of restricted stock• The restriction on transfer shall be lifted if executive officers resign from120% or more. Lifting of transfer restrictions shall apply to part of

all of the positions of the Company's executive officer, director, andgranted shares if the TSR/TOPIX Growth Rate Ratio is 80% or more but

corporate officer.

less than 120%*. Transfer restrictions shall not be lifted for any shares if• With regard to one-half of granted shares of restricted stock, thethe TSR/TOPIX Growth Rate Ratio is less than 80%. Shares whose

number of shares whose transfer restriction is lifted shall betransfer restrictions are not lifted shall be acquired by the Company

determined after ex-post evaluation in which the total shareholder

without consideration.

return of Hitachi stock is compared to growth rate of TOPIX (bothmeasured over the three years dating back to the beginning of the* Number of shares whose transfer restrictions are lifted= Number of granted shares × {(TSR/TOPIX Growth Rate Ratio × 1.25) - 0.5}

fiscal year during which corresponding medium- and long-term
incentive compensation was issued). Lifting of transfer restrictions
shall apply to all granted shares if the TSR/TOPIX Growth Rate Ratio is

81

How We Will Achieve Sustainability

Corporate GovernanceInternal Control over Financial Reporting
To ensure the reliability of its consolidated financial reporting, the Hitachi Group is establishing and implementing relevant internal controls. We
evaluate their effectiveness by adhering to standards for the evaluation of internal controls related to financial reporting that are generally accepted
as fair and reasonable.
Furthermore, we have established the J-SOX Committee with the goal of raising the effectiveness of these internal controls. This committee
evaluates internal control effectiveness and establishes frameworks designed to improve and strengthen them.

Management of risk associatedwith global business expansion

Creation of a system focused on
maintaining transparency anda sense of urgency

Internal Control Assessment Framework
Financial Services
AgencyHitachi, Ltd. President & CEO
Chief Financial Officer

Internal
ControlReportAudit
Committee
ReportJ-SOX Committee
ReportReportReportTripartite audit
approach

Cooperation

Accounting auditors(accounting audits)Business Units and Major Group Companies
Internal Auditing
Office(Internal Audit Office)ReportSubsidiary Companies

External Audits

Execution

Regulation

Enhanced Collaboration through Tripartite Audits
In pursuit of sustainable growth in corporate value, Hitachi’s Audit
Committee and internal audit section collaborate with third-party
accounting auditors to strengthen its “tripartite auditing,” which aims
to increase the effectiveness of internal controls. Our Audit

Audit
Committee

Committee takes the lead in this regard, as the three parties
communicate closely to share risk information and assessments· Sharing of risk information· Audit plans and results· Internal audit results· Reciprocal reporting and evaluation concerninggroup audits· Reporting on the quality control system

concerning risk response while securing transparency and ensuring
appropriate checks and balances.

Sharing of risk information andassessments of risk response· Audit plans· Audit Policy and auditing methods· Assessment and reporting of audit
results· Methods and results of internal
audits· Evaluation of group audit system

Ensuring transparency and a senseof urgency and improving theeffectiveness of internal controls
Internal audit
section(Internal Audit Office)82

Hitachi Integrated Report 2020

Tripartite audit
approachAccounting auditors(accounting audits)· Exchange of information regarding audit plans,
auditing methods, and audit results· Sharing of risk information· Division of internal auditing duties and mutual
utilization of audit information

Building a More Effective and Efficient Auditing System

sector. They also function as a reporting line for statutory auditors at

Our Audit Committee formulates audit plans in accordance with its risk-

Hitachi subsidiaries who are legal agents under the Companies Act andbased approaches and conducts audits for each consolidated business unit.

are working to improve the efficiency of our internal control systems.

Audit Committee members meet directly with business unit heads before theWhen conducting business audits, we use IT systems to expeditiously searchinternal audit section’s audits are carried out. Then, these members inform

for reference information contained within materials submitted prior to audit in

the internal audit section about concerns and issues related to thean attempt to improve efficiency. We are currently building a system that will

implementation of business strategies aimed at achieving sustainable growthallow our internal audit section to share information with professionalthat require attention. At this time, Hitachi also verifies matters that carry highaccounting auditors using the Lumada platform’s data lake and expect it to belevels of risk in terms of quality, measuring these risks through employee

complete in fiscal 2020. When reading audit reports submitted by the internal

awareness surveys and thorough implementation of business strategies.

audit section, our CEO must be able to quickly understand the issues

Hitachi’s internal audit section performs regular internal audits at eachidentified by these reports and make prompt judgments concerning whether

business site and location. This section reports directly to the CEO and isimmediate action is required. In the future, our internal audit section will

independent from organizations that are subject to its audits. The internal

continue to maintain its transparency and independence while working toaudit section also formulates audit plans based on past audit records andimprove audit efficiency as one member of our tripartite audit system.

the most recent business circumstances. Additionally, this section performs

Our accounting auditors perform audits that focus on the accuracy andaudits upon receiving direction from the Audit Committee, ensuring theirreliability of our financial statements. First, they adopt a risk-based approach ineffectiveness. The internal audit section at Hitachi is responsible forresponse to the group’s overall financial status. Applying this approach, they

confirming the legality and appropriateness of all business operations,then determine the scope and methods of the audit, formulate an audit plan

including those related to accounting, production management, sales,and share opinions with the Audit Committee. Next, based on the audit plan,purchasing, IT systems, compliance and human resources. Furthermore,they perform audits on each of the 5 sectors and the business units that

acting on behalf of our management team, the internal audit section

comprise them, enabling effective and efficient understanding of data related toconfirms whether the employees are well versed in the ideas and policies ofHitachi’s finance department and each of its business segments. If, during theour management, and their operations are being carried out based on theseauditing process, our accounting auditors discover a degree of risk that could

ideas and policies and if business strategies are being implemented in a way

impact future financial statements significantly or issues that, even if monetarily

that will efficiently lead to sustainable growth.

small, could have a large qualitative effect, they share related information

To further raise audit effectiveness, we implemented a “chief auditor system”

regarding these risks and issues and progress on response from related

in each five sectors (IT, Energy, Industry, Mobility, Smart Life) in April 2019.

divisions with the Audit Committee and internal audit section. They also work to

Through this action, we built an internal control system spearheaded by chief

improve and raise the effectiveness of audits by submitting “management

auditors and enhanced collaboration with the executive vice presidents who

letters” containing points of concern and improvement suggestions through the

manage each sector and with the Audit Committee.

finance department. Recently, they have also been working to raise the

Although these chief auditors do not act as legal agents under theefficiency of checks on the accuracy of numerical figures by using IT systems

Companies Act, they still assume responsibility for governance in eachto investigate all cases, rather than performing test-checking through sampling.

Comprehending Management Issues through Conversations with Stakeholders
Hitachi promotes its Social Innovation Business with efforts to perceive the social issues in each country or region, followed by collaborative creation with customers,
national and local governments, academic and research institutes, and other stakeholders to resolve them. We strive to enhance the value of human capital—which are
indispensable management resources for conducting business—and place importance on direct dialogue between employees and senior management. Furthermore,
we are also actively communicating with shareholders and investors to improve our corporate value, and held approximately 790 meetings in fiscal 2019.
Stakeholders

Main Roles

Means of Communication

Customers

Creation of better products and services, Response to complaints
Appropriate disclosure of information on products and services• Customer satisfaction activities • Marketing • Website • Advertising activities• “Global Brand Campaign” (14 locations) • Holding Hitachi Social Innovation Forum (4 locations)Shareholders andinvestors

Timely and proper information disclosure, obtaining of fair recognition and support from
capital markets, reflection of shareholder and investor viewpoints in corporate management• Financial results briefings (quarterly) • General shareholders’ meeting (annual)• Hitachi IR Day event (annual), one-on-one meetings with institutional investors and analysts (about 790 meetings/year)• IR tools: Integrated Report, business reports, etc. • Information disclosure on website for stakeholders and investors

Suppliers

Building of fair and sound business relations, smooth information sharing toward better
partnerships• Procurement activities • CSR procurement seminars (59 companies/year) • CSR monitoring (201 companies/year)• CSR audits (19 companies/year)

Employees

Proper treatment, promotion of occupational health and safety of human capital• Intranet, in-house newsletters • Training• Town hall meetings between senior management and employees (president & CEO: 18 meetings/year, executive vice presidents: 28 meetings/year)• Employee survey (annual) • “Make a Difference!” idea contest (annual)

National and local
governments,
industrial associations

Compliance with domestic and foreign laws and regulations, policy recommendations,participation in industry-government-academia collaborative projects• Academic research for policy recommendations to international organizations and national governments, lobbying activities• Policy council participation (Japan) • Participation in business and industry associations (Japan)

Local communities

Fulfillment of responsibilities as corporate citizen, involvement in local communities• Contribution to local communities through business • Participation in volunteer activities

Academic
associations andresearch institutions

Promotion of technological innovations, participation in industry-government- academia
collaborative projects• Open innovation (joint research)

NGOs and NPOs

Incorporation of diverse public opinions, promotion of stakeholder-focused management,social contribution through nonprofit activities• Stakeholder dialogue (3 times/year)• Dialogue through collaboration

Global environment

Realization of a decarbonized society, a resource efficient society, a harmonized society with nature• Stakeholder dialogue (annual)83How We Will Achieve Sustainability

Message from Independent Directors
I hope to leverage my nearly 15
years in leadership roles building
successful global companies tomove us more swiftly down thepath of digital transformation andcontribute to good governance.
Ravi Venkatesan
Independent Director

84

First, I am honored to join the Board of Directors of Hitachi, which is one

independent directors who understand their fiduciary duty and haveof the world’s great technology companies.

lived through such experiences.

As an independent director, I hope to contribute to Hitachi in several

Hitachi’s board needs to have diversity that mirrors its complexity. I thinkways. For instance, Hitachi is making a big bet on the digital

the Company has been proactive and thoughtful in assembling a diverse,

transformation of its businesses and building out Lumada as a platform

accomplished and independent group of global leaders with varied

for this. The Company has been proactive and is well positioned forexpertise. Second, board members must be engaged effectively so weleadership, but other large technology companies and competitors arehave a sound understanding of our businesses, leaders, opportunities

building similar platforms. Many crucial decisions will determine ourand risks. My experience so far with the thoroughness of my orientation

success, including investments, partnerships, M&A and strategic

process and the information provided has been very positive. Third, thegovernance. I hope to draw on my nearly 15 years in leadership roles

board culture should be transparent, disclose and confront problems

with Microsoft and Infosys to bring useful perspectives to accelerate ourearly, and encourage frank discussions. Equally, board members needdigital transformation journey.

both the wisdom and independence of mind to ask the right questions

One opportunity is in India, which has a large market and a critical pool ofand challenge management constructively. If these conditions are met,

engineering talent. It also presents an extremely difficult businessand a high degree of mutual trust and respect exists between board

environment. Having helped build several successful companies in India,

members and management, things usually work out.

including Cummins, Microsoft, JCB and Volvo, I aim to advise and assist

It is already clear to me that the Company has enormous opportunities

our Business Units to successfully build market leadership there.

and fantastic technological depth, talent and resources. Any company

In my role as UNICEF’s Special Representative for Young People andthat has survived and flourished for more than 100 years must also

Innovation, I find Hitachi’s commitment to the Social Innovation Businesshave a very strong mission and values. But we are now experiencing

fascinating. This aspect of the Company is distinctive and extremely

the Fourth Industrial Revolution, which will be extremely disruptive. We

important; society is increasingly holding companies to account forface huge challenges like climate change, a changing world order andbehaving responsibly, operating in an environmentally sustainable way,its impact on global supply chains, as well as “Black Swan” events likeand reducing inequality. Hitachi can show the world that doing well and

COVID-19.

doing good are entirely compatible, and we can communicate this at a

The future is uncertain and volatile, and to maintain leadership,scale that the world will notice and hopefully emulate.

companies must be adept at managing risks and agile in adapting toFinally—and most importantly—I will contribute to good governance.

change. Most large, successful companies are built to last rather thanOver the last 20 years, I’ve led and served on the boards of global

built for change; this often becomes their central challenge. But I see thatcompanies in the U.S., Europe and India. I have helped guide firms

Hitachi has a clear and coherent vision and has made an enormous

through transformation, crises and stakeholder activism. A large,

number of difficult changes since the crisis of 2008. I am optimistic thatcomplex and global company like Hitachi benefits from having

we will be able to consolidate leadership in the industries of the future.

Hitachi Integrated Report 2020

Hitachi and its customers areon a journey to bring together
technologies, platforms and people.
I will draw on all my experience indigital transformation to support
this journey.
Helmuth Ludwig
Independent Director

The digital and physical worlds are growing together. To create andbusinesses. Forwardlooking portfolio changes over the past years are a

capture value, we need to understand both. In my former roles atclear proof point. This vision is most relevant for our stakeholders. In

Siemens, I had to do exactly that: bring together technologies,

today’s highly interconnected world, no one can go alone, andplatforms, and most importantly, people. A transformational journey.

Hitachi’s values are a strong foundation for building an ecosystem with

Hitachi can be a leader in this journey for its clients: with the Lumada

partners and customers. Hitachi Ventures headquartered in Munich is aplatform at its center and a strong focus on combining Information

good example for the open mindset of the Hitachi culture.

Technology with Operational Technology, and the crucial domain

The COVID-19 pandemic has taught us powerful lessons: humility,

knowledge (ITxOTxProducts). The magic ingredient? Our people.

inventiveness, and resilience. It also showed that technology can help

Empowered employees who learn, grow and co-create. I expect to be

us cope even with existential threats. I am inspired by the way we alla partner and sounding board for Hitachi’s business leaders along thismanaged to move to remote work, building on existing technologies

journey.

and inventing new ones. In the end, however, it is all about people, ourI am deeply impressed by the discussions with Hitachi’s top

resilience and our willingness to collaborate.

management; I am also humbled to support such a strong team, andNew technologies and new ways of working are exciting – but they

to serve as guide where it matters most to them. Their balanced focus

come with risks. One area where I would like to contribute is in theon social, environmental and economic value is an industry“Democratization of Artificial Intelligence (AI)”, one of my academic

benchmark.

research areas. We need to experiment with AI. But we need to do it

Hitachi is a global company with a strong base and longstanding

safely, so people will trust AI and understand its limits. I am convinced

heritage. I have enormous respect for its strong track record in markets

that we will see AI and other platform technologies becomeabroad. This international success story will be even more important

mainstream in Hitachi. We can be a trailblazer, if we find the rightgoing forward, since the Internet of Things and platform businessbalance between opportunity and risk here.

models are global in nature: more users and more data drive greater

But technological advancement is no value in itself. It needs to becustomer benefit – and thus our own success. I am excited to apply

human; it needs to serve us, humanity. My first board meeting in July

my own experience of having worked and lived in different countries inleft me convinced that I am supporting a team that embodies thisthe Americas, Europe and Asia.

mindset. The meeting began with a review of the health status of the

The vision of “Improving the Quality of People’s Lives, Raising

employees. People matter at Hitachi. I am honored to be one of them.

Customers’ Corporate Value and Achieving a Sustainable Society”
resonates well with top talents in and outside of Hitachi. The vision also
shows clearly where the company is going: Hitachi has a strong
innovation culture dating back to its founding by Mr. Odaira in 1910,
and the Company has a clear view on the next generation of85

How We Will Achieve Sustainability

Leadership
Independent Directors* (As of July 30, 2020)

Katsumi Ihara

Ravi Venkatesan

Cynthia Carroll

Joe Harlan

Share ownership: 600 shares

Share ownership: 0 share

Share ownership: 1,200 shares

Share ownership: 600 shares

Term of office as Independent Director: 2 years

Newly appointed

Term of office as Independent Director: 7 years

Term of office as Independent Director: 2 years

2005 Executive Deputy President, Representative
Corporate Executive Officer, Member of theBoard, Sony Corporation2009 Executive Deputy President, Corporate
Executive, Sony Corporation
Executive Vice President, Representative
Director, Sony Financial Holdings Inc.
2010 President, Representative Director, SonyFinancial Holdings Inc.
2011 President, Representative Director, Sony Life
Insurance Co., Ltd.
2015 Chairman, Director, Sony Life Insurance Co.,
Ltd. (Retired in June 2017)2016 Chairman, Director, Sony Financial Holdings Inc.
(Retired in June 2017)2018 Director, Hitachi, Ltd.

1999 Chairman of the Board of Directors, Cummins
India Ltd. (Retired in March 2004)
2004 Chairman, Microsoft India Pvt. Ltd.
(Retired in September 2011)
2011 Independent Director, Infosys Ltd.
(Retired in May 2018, served as Co-Chairman
from April 2017 to August 2017)2013 Venture Partner, Unitus Ventures LLC.
(Currently in office)2015 Chairman (Non-Executive), Bank of Baroda(Retired in August 2018)2018 Special Representative for Young People &Innovation, UNICEF (Currently in office)2020 Director, Hitachi, Ltd.

1991 General Manager, Foil Products, Alcan Inc.
1996 Managing Director, Aughinish Alumina Ltd.,
Alcan Inc.
1998 President, Bauxite, Alumina and Specialty
Chemicals, Alcan Inc.
2002 President & CEO, Primary Metal Group, Alcan
Inc.
2007 CEO, Anglo American plc. (Retired in April 2013)2013 Director, Hitachi, Ltd.

1999 Vice President and Chief Financial Officer,
Lighting Business, General Electric Company
2001 Vice President, Corporate Financial Planningand Analysis, 3M Company
2002 President and Chief Executive Officer,
Sumitomo 3M Ltd.
2004 Executive Vice President, Electro andCommunications Business, 3M Company
2009 Executive Vice President, Consumer and OfficeBusiness, 3M Company
2011 Executive Vice President, Performance
Materials, The Dow Chemical Company
2012 Executive Vice President, Chemicals, Energy
and Performance Materials, The Dow Chemical
Company
2014 Chief Commercial Officer and Vice Chairman,
Market Business, The Dow Chemical Company
2015 Vice Chairman and Chief Commercial Officer,
The Dow Chemical Company (Retired in August
2017)2018 Director, Hitachi, Ltd.

George BuckleyLouise Pentland

Harufumi Mochizuki

Takatoshi Yamamoto

Share ownership: 6,200 shares

Share ownership: 900 shares

Share ownership: 3,800 shares

Share ownership: 9,700 shares

Term of office as Independent Director: 8 years

Term of office as Independent Director: 5 years

Term of office as Independent Director: 8 years

Term of office as Independent Director: 4 years

1993 Chief Technology Officer, Motors, Drives andAppliances, Emerson Electric Company
1994 President, US Electrical Motors, Emerson
Electric Company
1997 President, Mercury Marine Division andCorporate Vice President, Brunswick
Corporation
2000 President and Chief Operating Officer,
Brunswick Corporation
Chairman and Chief Executive Officer,
Brunswick Corporation2005 Chairman of the Board, President andChief Executive Officer, 3M Company
2012 Executive Chairman of the Board,
3M Company (Retired in May 2012)
Chairman, Arle Capital Partners Limited(Retired in December 2015)
Director, Hitachi, Ltd.

1997 Admitted as a Solicitor (UK)2001 Senior Legal Counsel, Nokia Networks,
Nokia Corporation2007 Vice President, Acting Chief Legal Officer andHead of IP Legal, Nokia Corporation
2008 Senior Vice President and Chief Legal Officer,
Nokia Corporation2009 Admitted to New York State Bar Association2011 Executive Vice President and Chief Legal
Officer, Nokia Corporation (Retired in May 2014)2015 General Counsel, PayPal, eBay Inc.
Director, Hitachi, Ltd.
Senior Vice President and Chief Legal Officer,
PayPal Holdings, Inc.
2016 Executive Vice President andChief Business Affairs & Legal Officer,
PayPal Holdings, Inc. (Currently in office)

Chairman of the Board
Chair of the Nominating Committee
Chair of the Compensation Committee
2002 Director-General for Commerce and Distribution
Policy, Minister’s Secretariat, Ministry of
Economy, Trade and Industry of Japan (“METI”)
2003 Director-General, Small and Medium Enterprise
Agency, METI
2006 Director-General, Agency for Natural Resources
and Energy, METI
2008 Vice-Minister of Economy, Trade and Industry ofJapan2010 Special Advisor to the Cabinet of Japan(Retired in September 2011)
Senior Advisor to the Board, Nippon Life
Insurance Company(Retired in April 2013)2012 Director, Hitachi, Ltd.
2013 President and Representative Director,
Tokyo Small and Medium Business Investment& Consultation Co., Ltd. (Currently in office)1995 Managing Director, Morgan Stanley Japan
Limited1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan Limited
2005 Managing Director and Vice Chairman,
UBS Securities Japan Co., Ltd.
2009 Managing Director, CASIO COMPUTER CO.,LTD.
2011 Advisor, CASIO COMPUTER CO., LTD. (Retired
in June 2012)2016 Director, Hitachi, Ltd.

* The "independent directors" are the directors who fulfill the qualification requirements to be outside directors as provided for the Companies Act of Japan and also meet the independence criteria defined by the Company and those
provided by Japanese stock exchanges where the Company is listed.

86

Hitachi Integrated Report 2020

Nominating Committee
Audit Committee
Compensation Committee

Each Committee is composed of the following members(chair names underlined)
Nominating Committee:
Harufumi Mochizuki, Cynthia Carroll, Hiroaki Yoshihara,
Hiroaki Nakanishi

Hiroaki Yoshihara

Helmuth Ludwig

Share ownership: 2,200 shares

Share ownership: 1,500 shares

Term of office as Independent Director: 6 years

Newly appointed

Chair of the Audit Committee
1978 Joined Peat Marwick Mitchell & Co.
1996 National Managing Partner, the Pacific Rim
Practice, KPMG LLP
1997 The Board Member, KPMG LLP
2003 Vice Chairman and Global Managing Partner,
KPMG International (Retired in April 2007)2014 Director, Hitachi, Ltd.

2001 President, Software and System House Division,
Siemens AG
2002 President, Systems Engineering Division,
Automation and Drives Group, Siemens AG
2007 President, Siemens PLM Software, Inc.
2010 Global Head of Communications, Industry
Automation, Siemens Corp.
2011 President and CEO, Industry Sector, North
America, Siemens Industry, Inc.
2014 Executive Vice President and Chief Digital
Officer, Digital Factory Division, Product
Lifecycle Management, Siemens Corp.
2016 Chief Information Officer, Siemens AG(Retired in December 2019)2020 Professor of Practice in Strategy and
Entrepreneurship, Cox School of Business,
Southern Methodist University (Currently in
office)Director, Hitachi, Ltd.

Audit Committee:
Hiroaki Yoshihara, Katsumi Ihara, Harufumi Mochizuki,
Takatoshi Yamamoto, Hideaki Seki
Compensation Committee:
Harufumi Mochizuki, Katsumi Ihara, Takatoshi Yamamoto,Toshiaki Higashihara

Directors (As of July 30, 2020)

Hideaki Seki

Hiroaki Nakanishi

Toshiaki Higashihara

Share ownership: 11,200 shares

Share ownership: 117,900 shares

Share ownership: 135,400 shares

Newly appointed

1970 Joined Hitachi, Ltd.
2003 Vice President and Executive Officer
2004 Senior Vice President and Executive Officer
2005 Chairman and Chief Executive Officer,
Hitachi Global Storage Technologies, Inc.
(Retired as CEO in March 2009)2006 Executive Vice President and Executive Officer,
Hitachi, Ltd. (Retired in December 2006)
2009 Executive Vice President and Executive Officer,
Hitachi, Ltd.
Chairman of the Board, Hitachi Global Storage
Technologies, Inc. (Retired in March 2010)2010 President, Hitachi, Ltd.,
President and Director, Hitachi, Ltd.
2014 Chairman & CEO and Director, Hitachi, Ltd.
2016 Executive Chairman and Representative
Executive Officer, Hitachi, Ltd.
2018 Executive Chairman and Executive Officer,
Hitachi, Ltd.

1977 Joined Hitachi, Ltd.
2007 Vice President and Executive Officer (Retired in
March 2008)
2008 President, Hitachi Power Europe GmbH2010 President and Chief Executive Officer,
Hitachi Plant Technologies, Ltd.
President and Representative Director,
Hitachi Plant Technologies, Ltd.
2011 Vice President and Executive Officer, Hitachi,Ltd.
2013 Senior Vice President and Executive Officer,
Hitachi, Ltd.
2014 President & COO, Hitachi, Ltd.
President & COO and Director, Hitachi, Ltd.
2016 President & CEO and Director, Hitachi, Ltd.

1979 Joined Hitachi, Ltd.
2011 Board Director, Hitachi Automotive Systems,Ltd.
2013 Vice President, Board Director, Hitachi
Automotive Systems, Ltd.
2014 Executive Vice President, Board Director,
Hitachi Automotive Systems, Ltd.
2015 President & COO, Representative Director,
Hitachi Automotive Systems, Ltd.
2016 President & CEO, Representative Director,
Hitachi Automotive Systems, Ltd. (Retired in
March 2018)2018 Senior Vice President and Executive Officer,
Hitachi, Ltd.
President, Representative Director, Hitachi
Building Systems Co., Ltd. (Retired in March
2020)
2020 Director, Hitachi, Ltd.

87

How We Will Achieve Sustainability

Executive Officers (As of April 2020)

President & CEO

Executive Vice Presidents and Executive Officers

Toshiaki Higashihara*

Masakazu Aoki*

Ryuichi Kitayama*

Keiji Kojima*

Overall management

Assistant to the President (business for industry &distribution sectors, water & environment business,and industrial products business)

Assistant to the President (marketing & sales andregional strategies),
Marketing & sales and regional strategies

Assistant to the President (smart life & ecofriendly
systems business, automotive systems business andhealthcare business) and smart life & ecofriendly
systems business

Senior Vice Presidents andExecutive Officers

Keiichi Shiotsuka*

Alistair Dormer*

Toshikazu Nishino*Atsushi Oda

Assistant to the President (systems & services
business and defense systems business), systems &services business, defense systems business andsocial innovation business promotion

Assistant to the President (building systems businessand railway systems business)

Assistant to the President (nuclear energy businessand energy business)

Nuclear energy business and energy businessYoshihiko Kawamura*Toshiaki Tokunaga

Hidenobu Nakahata*

Mamoru Morita

Finance, corporate pension system andinvestment strategies

Services & platforms businessCorporate communications, corporate auditing,corporate export regulation and human capitalManagement strategies and strategies for next
generation business

Vice Presidents and Executive Officers
Keiichi Akino

Jun AbeHitoshi Ito

Kenji Urase

Marketing & sales (business for financial institutions,
government, public corporation and social
infrastructure systems and defense systems
business)

Business for industry & distribution sectors

Government & external relations and CSR &environmental strategies

Energy business

Ryuichi Otsuki

Tadashi Kume

Kohei Kodama

Norihiro Suzuki

Investment strategies

Nuclear energy business

Legal matters, risk management and corporate
auditing

Research & development

Yoji Takeuchi

Kojin Nakakita

Katsuya Nagano

Seiichiro Nukui

Marketing & sales (business for industry & distributionsectors, water & environment business, building
systems business, railway systems business andhealthcare business)

Regional strategies (APAC)

Business for government, public corporation andsocial infrastructure systems and defense systems
business

One Hitachi actions promotion

Yasushi Nomura

Andrew Barr

Masahiko Hasegawa

Kentaro Masai

Information technology strategies

Railway systems business

Marketing & sales and regional strategies (Japan)

Supply chain management(MONOZUKURI and quality assurance)

Shinya Mitsudomi

Masashi Murayama

Tsugio Yamamoto

Takashi Yoda

Building systems business

Cost structure reform and Information security
management

Business for financial institutions

Regional strategies (China)

Executive Officer
Hiroaki Nakanishi
General88

Hitachi Integrated Report 2020

Note: Executive officers are listed by position and in Japanese alphabetical order within each grouping.
		The asterisk(*) denotes executive officers who are representative executive officers.

Data Section
10-year Financial Data90

5-year Non-financial Data

92

Segment Highlights

93

Hitachi Group Business Operation Framework

93

Corporate Data / Stock Information anda Message from the Editor-in-chief

94

89Data Section

10-year Financial Data
U.S. GAAP

Millions of yen

For the year:

FY2010FY2011FY2012FY2013

FY2014

Revenues¥9,315,807¥9,665,883¥9,041,071¥9,563,791¥9,761,970

Operating income

444,508

412,280

422,028

538,288

600,479

EBIT (Earnings before interest and taxes)

443,812573,218

358,015585,662551,018

Net income attributable to Hitachi, Ltd. stockholders

238,869

347,179

175,326

264,975

241,301

Cash flows from operating activities

841,554447,155

583,508

439,406

447,348

Cash flows from investing activities(260,346)(195,584)(553,457)(491,363)(610,255)

Free cash flows

581,208

251,571

30,051(51,957)(162,907)

Cash flows from financing activities(584,176)(167,838)(180,445)

32,968250,335

Cash dividends declared

36,13336,727

47,69050,711

57,944

Capital expenditures (Property, plant and equipment)

556,873649,234

742,537

849,877

848,716

Depreciation (Property, plant and equipment)

382,732

360,358

300,664

329,833

349,614

R&D expenditures

395,180

412,514341,310351,426

335,515

Total assets

9,185,629

9,418,526

9,809,230

11,016,899

12,395,379

Property, plant and equipment

2,111,270

2,025,538

2,279,964

2,342,091

2,564,105

Total Hitachi, Ltd. stockholders’ equity

1,439,865

1,771,782

2,082,560

2,651,241

2,930,309

Interest-bearing debt

2,521,551

2,396,454

2,370,079

2,823,049

3,354,616

At year-end:

Yen

Per share data:
Net income attributable to Hitachi, Ltd. stockholders:		Basic¥52.89¥76.81¥37.28¥54.86¥49.97

		Diluted

49.38

71.86

36.29

54.85

49.93

8.0

8.0

10.0

10.5

12.0

318.73382.26431.13549.02606.87

Cash dividends declared
Total Hitachi, Ltd. stockholders’ equity%

Financial ratios:
Operating income ratio

4.8

4.3

4.7

5.6

6.2

EBIT ratio

4.8

5.9

4.0

6.1

5.6

Return on revenues

2.6

3.6

1.9

2.8

2.5

Return on equity (ROE)

17.5

21.6

9.1

11.2

8.6

Return on assets (ROA)

3.3

4.4

2.5

3.5

3.1

D/E ratio (Including non-controlling interests) (times)

1.03

0.86

0.75

0.73

0.78

Total Hitachi, Ltd. stockholders’ equity ratio

15.7

18.8

21.2

24.1

23.6

Notes:

90

1 In order to be consistent with financial reporting principles and practices generally accepted in Japan, operating income is presented as total revenues less cost of sales and selling, general and administrative expenses. The Company believes
that this is useful to investors in comparing the Company’s financial results with those of other Japanese companies. Under accounting principles generally accepted in the United States of America, restructuring charges, net gain or loss on
sales and disposal of rental assets and other property and impairment losses for long-lived assets are included as part of operating income.
2 The restructuring charges mainly represent special termination benefits incurred with the reorganization of our business structures and as the result of the Company and its subsidiaries reviewing and reshaping the business portfolio.
3 EBIT is presented as income before income taxes less interest income plus interest charges.
4 Effective from fiscal 2014, a part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provision of ASC 205-20, “Presentation of Financial Statements—Discontinued Operations,”
which was not transferred to MITSUBISHI HITACHI POWER SYSTEMS, LTD. for the business integration in the thermal power generation systems with Mitsubishi Heavy Industries, Ltd. The results of the discontinued operation are reported
separately from continuing operations. In line with this classification, “Revenues” and “Operating income” for fiscal 2013 are reclassified.
5 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) x 100

Hitachi Integrated Report 2020

IFRS

Millions of yen

For the year:

FY2013

Revenues¥9,666,446

FY2014FY2015FY2016FY2017FY2018FY2019¥9,774,930 ¥10,034,305¥9,162,264¥9,368,614¥9,480,619¥8,767,263

Adjusted operating income

604,798

641,325

634,869

587,309714,630

754,976

661,883EBIT

691,230

534,059

531,003475,182644,257

513,906

183,614

Net income attributable to Hitachi, Ltd. stockholders

413,877

217,482

172,155

231,261

362,988

222,546

87,596

Net cash provided by operating activities

306,777

451,825

812,226

629,582

727,168

610,025

560,920

Net cash used in investing activities(550,179)(612,545)(730,799)(337,955)(474,328)(162,872)(525,826)

Free cash flows(243,402)(160,720)

81,427

291,627

252,840

447,153

35,094

Net cash provided by (used in) financing activities

228,840

233,206(26,467)(209,536)(321,454)(320,426)

2,837

Cash dividends declared

50,711

57,94457,93962,76472,41786,90591,792

Capital expenditures (Property, plant and equipment)

491,170

431,201

528,551

377,545374,901

414,798

399,643

Depreciation (Property, plant and equipment)

331,228

350,783

366,547

302,757

265,413271,682

342,450

R&D expenditures

354,487

334,814

333,730

323,963

332,920

323,145

293,799

Total assets

11,098,191

12,433,727

12,551,005

9,663,917

10,106,603

9,626,592

9,930,081

Property, plant and equipment

2,258,933

2,472,497

2,500,226

1,998,411

2,124,827

1,956,685

2,165,311

Total Hitachi, Ltd. stockholders’ equity

2,668,657

2,942,281

2,735,078

2,967,085

3,278,024

3,262,603

3,159,986

Interest-bearing debt

3,033,985

3,557,356

3,604,455

1,176,603

1,050,294

1,004,771

1,485,042

At year-end:

Yen

Per share data
Earnings per share attributable to Hitachi, Ltd. stockholders:		Basic¥85.69¥45.04¥35.65¥47.90¥75.19¥375.93¥230.47¥90.71

		Diluted

85.66

45.00

35.62

47.88

75.12
375.60230.25

90.60

10.5

12.0

12.0

13.0

15.0
75.0

90.0

95.0

552.62609.35566.48614.56679.003,395.00

3,378.81

3,270.43

Cash dividends declared
Total Hitachi, Ltd. stockholders’ equity%

Financial ratios:
Adjusted operating income ratio

6.3

6.6

6.3

6.4

7.6

8.0

7.5

EBIT ratio

7.2

5.5

5.3

5.2

6.9

5.4

2.1

Return on revenues

4.3

2.2

1.7

2.5

3.9

2.3

1.0

Return on equity (ROE)

17.5

7.8

6.1

8.1

11.6

6.8

2.7

Return on assets (ROA)

5.0

2.9

2.4

3.0

5.0

3.3

1.3

D/E ratio (Including non-controlling interests) (times)

0.78

0.83

0.87

0.29

0.23

0.23

0.35

Total Hitachi, Ltd. stockholders’ equity ratio

24.0

23.7

21.8

30.7

32.4

33.9

31.8

Notes:

1 In order to be consistent with financial reporting principles and practices generally accepted in Japan, adjusted operating income is presented as total revenues less cost of sales and selling, general and administrative expenses.
The Company believes that this is useful to investors in comparing the Company’s financial results with those of other Japanese companies.
2 A part of the thermal power generation systems business is classified as a discontinued operation in accordance with the provision of IFRS 5, “Non-current Assets Held for Sale and Discontinued Operations,” which was nottransferred to MITSUBISHI HITACHI POWER SYSTEMS, LTD. for the business integration in the thermal power generation systems with Mitsubishi Heavy Industries, Ltd. The results of the discontinued operation are reported
separately from continuing operations.
3 From fiscal 2013, capital investment is stated exclusive of investment in lease assets classified as finance leases.
4 On October 1, 2018, the Company completed the share consolidation of every five shares into one share for its common stock. The figures for basic and diluted earnings per share attributable to Hitachi, Ltd. stockholders arecalculated on the assumption that the Company conducted this consolidation at the beginning of the previous fiscal year.
5 ROA (Return on Assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) x 100

91

Data Section

5-year Non-financial Data
FY2015FY2016FY2017FY2018FY2019Consolidated

335,244

303,887

307,275

295,941

301,056

Non-consolidated

37,35335,631

34,92533,49031,442Average service (years)*1

14.4

15.0

14.9

15.1

15.0

Turnover ratio (%)*1*2

4.2

5.3

5.5

6.3

5.2

Diversity & Inclusion
Ratio of female employees (%)*1

18.5

18.3

18.2

18.8

19.4

6.5
(2,688)6.7(2,562)

7.3(3,325)

8.3(3,975)8.9(4,302)

4.0
(474)

4.1
(509)

4.2
(577)

4.8
(635)

5.5
(700)

North America

—

27.65

24.33

27.96

20.76

Latin America

—

2.33

1.62

0.44

0.57

Europe

—

10.70

10.82

6.08

4.78

India

—

2.07

1.44

1.44

1.63

China

—

1.59

1.53

1.46

1.17

Asia (excluding India and China)

—

5.43

4.41

3.34

2.63

Oceania

—

39.07

24.41

21.94

29.07

Africa

—

17.26

9.93

11.76

9.72

Outside Japan total

—

7.76

7.42

7.43

5.78

Japan

—

1.57

1.85

1.64

1.53

Global total

—

3.95

4.22

4.20

3.45

4

3

5

0

4

Human Capital Development
Number of employees

Global ratio (number) of female managers*1*3*5
Ratio (number) of female managers*1 *4

Hitachi Group’s Global Safety Figures (Occurrence rate*6)

Occupational Health and Safety
Number of fatal accidents*7
Scope of Data
*1 Hitachi Group figures exclude approximately 40,000 manufacturing workers. *2 Includes only voluntary resignations. *3 The scope of reporting shifted from full-time, regular female managers, excluding those dispatched to nonGroup companies, to all female managers including those dispatched from Hitachi, Ltd. to other companies and those accepted from other companies; figures for previous years have been adjusted to match this new scope.
*4 Since fiscal 2017, “Female managers” has included managerial employees dispatched from Hitachi, Ltd. to other companies and those accepted from other companies by Hitachi, Ltd. Earlier figures include regular managerial
employees dispatched to other companies but exclude those accepted from other companies. *5 Rising numbers of female managers in part reflect improved coverage of our human capital databases.
*6 Occurrence rate is the rate of workplace accidents per 1,000 directly contracted employees resulting in fatality or work-time loss of one day or more. *7 January to December each year.

June 2017

June 2018

June 2019

Number of female executives

2

2

4

5

Ratio of female executives (%)

2.4

2.6

5.0

7.1

Ratios of Female and Non-Japanese Executive (Hitachi, Ltd.)

July 2020

Number of non-Japanese executives

3

5

7

6

Ratio of non-Japanese executives (%)

3.7

6.4

8.8

8.6

FY2015FY2016FY2017FY2018FY2019

3.3

3.5

3.6

3.4

3.4

FY2015FY2016FY2017FY2018

CSR monitoring (self-check) (companies)

218

316

131

345

291

1,801 *1

CSR audits

20

20

18

24

19

149*2

Supplier briefings

12

29

65

126

59

291*3

FY2019* Executive officer, corporate officer and fellow.

Research & Development
Ratio of R&D expenditure to revenue (%)

Responsible Procurement, Status of CSR Procurement Policies

FY2019 Cumulative total*1 Total number of companies during FY2011-2019 *2 Total number of companies during FY2012-2019 *3 Total number of companies during FY2015-2019

FY2016FY2017FY2018

—

—

—

—

19

CO2 emissions at business sites (factories and offices) (kt-CO2)

4,346

5,322*2

5,433*2

4,973*2

4,374*2

Water use (million m3)

43.91

41.34*2

38.54*2

37.02*2

36.41*2

618

1,336

1,356

1,384

1,302*2

3,615

4,380

Environment
Reduction rate in CO2 emissions per unit from products and services (base: FY2010)*1 (%)

Waste and valuables generation (kt)Atmospheric emissions of chemical substances (t)FY2015

*2
*2*3

4,391

Scope of Data
Hitachi, Ltd. and consolidated subsidiaries.
Number of companies: FY2015: 1,057; FY2016: 865; FY2017: 880; FY2018: 804; FY2019: 815.
Environmental performance data associated with Hitachi’s business operations: Hitachi Group companies for which the environmental load accounts for 90% of the total(based on Hitachi calculations); data for each fiscal year indicates performance within the given scope for the fiscal year.
*1 New indicator established in fiscal 2019.
*2 Figures include a materials company that has become a reporting company since fiscal 2016.
*3 The management scope of chemical substances has been expanded from 41 to 50 substances since fiscal 2016.
Independent Assurance of Environmental and Social Data
To enhance the reliability of the data disclosed in the Hitachi Sustainability Report 2020, we have received independent assurance of key
environmental and social performance indicators by KPMG AZSA Sustainability Co., Ltd.

92

Hitachi Integrated Report 2020

*2
*2*3

*2

4,392

*2*3

3,886*2*3

Segment Highlights
Revenues, Adjusted Operating Income and EBIT by Business Segment
Billions of yen

Revenues

Business Segment

Adjusted operating income

EBIT

FY2018FY2019FY2018FY2019FY2018FY20192,121.6

2,099.4

230.1

249.4

212.6

214.4

Energy

453.9

399.2

34.0

13.5

(298.0)(375.7)

Industry

895.4

840.7

20.6

54.7

19.1

57.8

Mobility

1,214.1

1,144.4

92.6

92.3

127.4

112.3

Smart Life

1,649.3

1,472.9

64.9

58.6

116.9

29.5

IT

Hitachi High-Tech

731.1

694.6

66.7

60.3

64.2

60.4

Hitachi Construction Machinery

1,033.7

931.3

115.7

75.5

104.5

70.5

Hitachi Metals

1,023.4

881.4

51.4

14.3

45.3

(57.2)

Hitachi Chemical

681.0

631.4

48.5

35.2

41.1

24.8

Others

561.3

484.8

31.3

22.3

30.2

31.2

10,365.1

9,580.5

756.2

676.4

463.5

168.2

Corporate items & Eliminations(884.5)(813.2)(1.2)(14.6)

50.3

15.3

Total

9,480.6

8,767.2

754.9

661.8

513.9

183.6

Subtotal

Hitachi Group Business Operation Framework (As of September 2020)
Financial Institutions Business Unit

IT

Social Infrastructure Systems Business Unit
Services & Platforms Business Unit
Nuclear Energy Business Unit

EnergyEnergy Business Unit
Hitachi ABB Power Grids Ltd.
Industry & Distribution Business Unit
Water & Environment Business Unit

Industry

Hitachi Industrial Products, Ltd.
Hitachi Industrial Equipment Systems Co., Ltd.
Building Systems Business Unit

Mobility

Railway Systems Business Unit
Hitachi Global Life Solutions, Inc.
Hitachi Automotive Systems, Ltd.

Smart Life

Hitachi High-Tech Corporation
Healthcare Business Unit
Hitachi Construction Machinery Co., Ltd.
Hitachi Metals, Ltd.
Regional Headquarters
Shared Service Companies, etc.

Five Sectors

Business Units

Listed Companies

93Data Section

Corporate Data / Stock Information(As of March 2020)

Corporate Name

Number of Employees

Stock Exchange Listings

Hitachi, Ltd. (Kabushiki Kaisha(consolidated)Tokyo, Nagoya

Hitachi Seisakusho)

301,056

Accounting Auditor
URL
https://www.hitachi.com/

Head Office
6-6, Marunouchi 1-chome,
Chiyoda-ku, Tokyo 100-8280, Japan

Number of Shares Issued 		
Common Stock(including treasury stock)

Ernst & Young ShinNihon LLC

Contact

967,280,477 shares

Hitachi, Ltd.
6-6, Marunouchi 1-chome,

Number of Shareholders

Chiyoda-ku, Tokyo 100-8280

308,638

Founded1910 (Incorporated in 1920)

Capital Stock459,862 million yen

TEL: +81-3-3258-1111

Administrator of
Shareholders’ Register
Tokyo Securities Transfer Agent Co., Ltd.
3-11, Kanda Nishiki-cho,
Chiyoda-ku, Tokyo 101-0054, Japan

10 Largest Shareholders
Number of Shares(shares)

Share-holding Ratio(%)

The Master Trust Bank of Japan, Ltd. (Trust Account)

81,189,800

8.40Japan Trustee Services Bank, Ltd. (Trust Account)

55,286,400

5.72

STATE STREET BANK AND TRUST COMPANY 505001

21,463,830

2.22

JP MORGAN CHASE BANK 385151

20,609,612

2.13

Hitachi Employees' Shareholding Association

20,319,676

2.10

NATS CUMCO

20,185,002

2.09

Nippon Life Insurance Company

20,000,099

2.07Japan Trustee Services Bank, Ltd. (Trust Account 5)

19,572,500

2.03

STATE STREET BANK AND TRUST COMPANY 505223

19,012,329

1.97

STATE STREET BANK WEST CLIENT-TREATY 505234

15,270,687

1.58

Name

Note: Treasury stock (1,050,741 shares) is not included in the calculation of "Shareholding Ratio."

Ratings
Rating Company

94

Long-term

Short-term

S&P Global Ratings Japan Inc.

A

A–1

Moody's Japan K.K. (Moody's)

A3

P–2

Rating and Investment Information, Inc. (R&I)

AA-

a-1+

Hitachi Integrated Report 2020

Shareholder Composition
Class of Shareholders

Government and Municipality
Number of
Shareholders

Share Ownership(shares)

317

328,199,579

304,125

178,131,101

Foreign Investor

1,410

445,992,700

Other Institutions

2,782

14,947,785

4

9,312

308,638

967,280,477

Financial Institution and Securities Firm
Individual

Government and Municipality
Total* Treasury stock is included in “Other Institutions.”

0.00%

Other Institutions

1.54%

Financial Institution
and Securities Firm

33.93%

Shareholder
Composition

967,280,477
ForeignInvestor

46.11%

Individual

18.42%

Message from the Editor-in-chief
I would like to thank you for reading all the way to the final page of

constructive discussions concerning the future with investors.

the Hitachi Integrated Report 2020.

When creating this current edition as well, we endeavored toSince fiscal 2016, Hitachi has been publishing an integrated report

include careful and thorough explanations regarding both financial

for its investors and all other stakeholders with the goal of creating

and non-financial matters, including our response to COVID-19.

a deeper understanding of how the Hitachi Group will create value

CEO has included a signed message at the top of the report on

over the medium to long term.

behalf of our management team, and this year’s report also

In 2019, major changes to our report production policies and efforts

includes messages from CFO and two newly appointed

to make our integrated report more rewarding to read proved

Independent directors.

successful; we received the Integrated Reporting Award through the

I hope that this integrated report will facilitate better understanding

7th WICI Japan Award for Excellence in Integrated Reporting event,of the Hitachi Group and provide an opportunity for constructive

as well as the Grand Prize in the 22nd Nikkei Annual Report Awards

discussion. Furthermore, we plan to enhance our disclosure and2019. When publishing the 2020 edition of our integrated report, weraise transparency moving forward, so we welcome you to shareexperimented with new ideas to enable the accomplishment of someany opinions you might have without reserve.

feats that were not possible during the previous year.

In closing, as the publication supervisor of the Hitachi Integrated

In May 2020, we disclosed our financial forecast for the fiscal year

Report 2020, I would like to take this opportunity to wish you, theending March 31, 2021, along with the projected impacts of thereader, well and express my gratitude for your kind attention.

COVID-19 pandemic on each individual business, which constituteone of the premises on which the forecast was based. We made

September 2020

these disclosures despite the uncertain circumstances we are now

Hidenobu Nakahatafacing because we wish to present as much information as

Representative Executive Officer

possible. This desire stems from our belief that disclosing as much

Senior Vice President and Executive Officer

information as we possibly can will enable us to have more

Head of Corporate Communications and Corporate Auditing

Website Information
Detailed information is available on the Company’s website.

About Hitachi Group

Investor Relations

Sustainability

https://www.hitachi.com/corporate/about/(English)https://www.hitachi.com/IR-e/(English)https://www.hitachi.com/sustainability/(English)https://www.hitachi.co.jp/about/corporate/(Japanese)

https://www.hitachi.co.jp/IR/(Japanese)

https://www.hitachi.co.jp/sustainability/(Japanese)95