Hitachi Integrated Report 2022
Year ended March 31, 2022

Hitachi Integrated Report 2022

Introduction

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

1

Contents
Introduction

Value Creation

02 Editorial Policy

10 CEO Message

03 Message to Stakeholders

15 The Story of Collaborative
Value Creation with
Stakeholders── On the Release of theIntegrated Report

What’s Hitachi
04 History of Hitachi
06 Looking Back on
Past Mid-termManagement Plans
07 Promoting Sustainable
Management
08 Business of the HitachiGroup
09 Global Business
Overview

18 Materiality
21 The Value Creation
Process
22 Mid-term Management
Plan 2024
24

Digital Strategy

29

Green Strategy

34

Innovation Strategy

39 Human Resources
Strategies
45 Financial Strategies
49

CFO Message

Business Strategies

Sustainability

51 Digital Systems &Services

75 Addressing Risks andOpportunities

58 Green Energy & Mobility

78

64 Connective Industries
70 Hitachi Astemo

Responding to
Climate-related Risks
and Opportunities

Corporate Governance
85 Corporate Governance
85

Message from the
Chairman of the Board

98

Independent Directors
Dialogue

80

Promoting Information
Security81

Occupational Healthand Safety82

Responsibility in the
Value Chain

104 5-year Non-financial Data

83

Quality Assurance

84

Business Ethics andCompliance

106 Corporate Data andStock Information

Data
103 10-year Financial Data
105 Segment Highlights

Hitachi Integrated Report 2022

Editorial Policy

Whatʼs Hitachi

Introduction

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

2

Message to Stakeholders

Hitachi Integrated Report 2022 Editorial Policy
Editorial Policy The Hitachi Integrated Report is compiled for the purposes of facilitating a deeper understanding among stakeholders of Hitachi’s business model, as well as a dialogue throughwhich we can further enhance corporate value and realize a virtuous cycle of value co-creation. In the 2022 edition, we clarify materiality within Hitachi’s sustainable management
and systematically explain strategies and measures. In addition to highlighting Hitachi’s history of value co-creation and the Mid-term Management Plan 2024, this report will
enhance the reader’s understanding of Hitachi’s sustainable growth potential.
In editing this report, we referred to the IFRS Foundation’s International Integrated Reporting Framework and the Japanese Ministry of Economy, Trade, and Industry’s Guidance
for Collaborative Value Creation.

Production Structure

Information Disclosure Structure

Board of Directors
President & CEO

Value Creation Story

Evaluation/
Feedback

Integrated Report
Information Disclosure Working Group

Integrated Report, Annual Securities Report, Sustainability Report
Investor Relations Division, Legal Division, Sustainability Promotion Division

Planning/
Content
Production

Research & Development Group
Board of Directors Office

Reporting Scope Period: Fiscal 2021 (April 1, 2021–March 31, 2022)

Note: Includes activities and other information occurring after April 1, 2022.

Companies: Hitachi, Ltd. and its consolidated subsidiaries
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.
Disclaimer Regarding Forward-looking Statements
Certain statements regarding the future of the company set forth in this Report may constitute“forward-looking statements,” such as “plan,” “forecast,” “target,” and “strategy.” Althoughforward-looking statements contained in this report are based upon what the company has
determined to be reasonable assumptions at the time of disclosure, actual performance andother results may differ materially from those anticipated in such statements.

•Sustainability Report•Sustainability Website

Executive Officers in Charge
Business Divisions•Digital Systems & Services•Green Energy & Mobility•Connective Industries•Hitachi Astemo

Shareholder/Investor Information•Corporate Governance Report*

Related Divisions

Group Corporate

Sustainability/ESG Information

Content
Production/
Support•Annual Securities Report*•Financial Statements*•Business Report*•Corporate Strategy(Mid-term Management Plan)•Investor Relations Website

Comprehensiveness*Statutory disclosure/timely disclosure

Website Information
About the Hitachi Group

Investor Relations

Japanesehttps://www.hitachi.co.jp/

Japanese

Englishhttps://www.hitachi.com/

Englishhttps://www.hitachi.co.jp/
IR/https://www.hitachi.com/
IR-e/Financial

Information Disclosure Report Planning Production TeamNon-financial

Supervisor: Yoshihiko Kawamura (Executive Vice President and Executive Officer, CFO)

Sustainability
Japanese

Englishhttps://www.hitachi.co.jp/
sustainability/
https://www.hitachi.com/
sustainability/

Hitachi Integrated Report 2022

Editorial Policy

Introduction

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

3

Message to Stakeholders

Message to Stakeholders── On the Release of the Integrated ReportCreating Value through Dialogue and
Co-Creation with Stakeholders,With Our Employees as the Driving Force
Since its founding in 1910, Hitachi has continued to grow anddevelop with society, the economy, and customers. For morethan 110 years, Hitachi has faced countless difficulties. However,
we have continued to transform ourselves to create value
through co-creation with a diverse range of stakeholders.
In this Hitachi Integrated Report, we will showcase our sustained
efforts, explain our vision and showcase the value Hitachi
provides to society. We hope this report gives our stakeholders
a better understanding of Hitachi’s vision and creates value by
encouraging further dialogue.
In the Mid-term Management Plan 2024, announced in April
2022, we declared a mode change for growth focused on
supporting people’s quality of life with data and technology thatsolves social challenges, fostering a fully sustainable society. We
are committed to further promoting Hitachi’s Social Innovation
Business. With planning, Hitachi can determine new business
opportunities that should be undertaken now and in the mid tolong term to create a better, sustainable future. On a global scale,the environment is reaching the limit of its ability to accommodate

safe living for humans (planetary boundaries). Recent changes toworkstyles and the diversification of personal values have madewellbeing (physical, mental, and social) a vital part of how wechoose to live and work. Helping to maintain a society that does
not exceed planetary boundaries while realizing wellbeing is
the path forward for Hitachi. Hitachi also practices sustainable
management which positions sustainability as the core of its
business strategy and implements measures to strengthen
the management foundation to facilitate global growth. Morethan 300,000 members of the Hitachi Group will combine theirstrengths to achieve a sustainable society and deliver value tocustomers and other respected stakeholders.
This report will describe Hitachi’s future vision, management, andbusiness strategies under the Mid-term Management Plan 2024.
In addition, the report highlights the measures Hitachi is following
to achieve a sustainable society. We have also clarified six criticalissues in sustainable management in light of global initiatives
and the expectations and needs of stakeholders. These issues
along with the business strategies described in the Mid-termManagement Plan, will be further discussed at meetings of the
Senior Executive Committee and Board of Directors.
We understand the external environment has become
increasingly complex and diverse. The pandemic has madethe future difficult to predict, while climate change continues
to cause a surge in natural disasters, and social divisions areleading to more political instability. However, we sincerely hope
this report will help you appreciate the progress Hitachi has
made and value the company’s strategic, long-term growth.
As CEO, I can attest to the accuracy of the information describedin this report and guarantee that it has been reviewed andapproved among the directors and executive officers. As you
read this report, please share your honest feedback with the
Hitachi management team. I hope that the Hitachi Integrated
Report 2022 will help promote a deeper understanding of
Hitachi’s value creation story and serve as an incentive for future
dialogue and creating value with all stakeholders.

President & CEO

Keiji Kojima

Hitachi Integrated Report 2022

Introduction

Whatʼs Hitachi

Looking Back on Past Mid-term Management Plans

History of Hitachi

Value Creation

Promoting Sustainable Management

Business Strategies
Business of the Hitachi Group

Sustainability

Corporate Governance

4

Data

Global Business Overview

Hitachi’s History as a Corporate Citizenship with Innovation
Since its establishment, Hitachi has operated under the Mission “Contribute to society
through the development of superior, original technology and products.” In accordance withthis Mission, we have resolved issues facing society through the development of technologies
and products that support social infrastructures. The Social Innovation Business creates newvalue for society by offering a combination of the OT (operational technology), IT (information
technology), and products cultivated over Hitachi’s 110-year history. Through this business,
we strive to improve people’s quality of life and contribute to achieving a sustainable society.
Originally set by Hitachi founder Namihei Odaira, the Mission has been carefully passed on
to generations of employees and stakeholders throughout the company’s 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 tobecome 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.

Hitachi Group Identity

Contribute to society through the development ofsuperior, original technology and products.

The mission that Hitachi
aspires to fulfill in society

The values crucial to
the Hitachi Group inaccomplishing its mission

Hitachi Founding Spirit:

Harmony, Sincerity, Pioneering Spirit

Hitachi delivers innovations that answer
society’s challenges. With our talented
team and proven experience in global
markets, we can inspire the world.

What the Hitachi Groupaims to becomein the future

History of Hitachi, Ltd.

1910

1920

Five-horsepower
induction motor

Episode

1930

1940

Urban infrastructuredevelopment

1

In 1910, Namihei Odaira founded
Hitachi, Ltd. with the aspiration ofcontributing to society through thedevelopment of machine industry
in Japan by manufacturing electric Hitachi Founder
Sogyo Koya
Namihei Odaira(Hitachiʼs first factory)
machines on his own.
Hitachi has developed and provided numerous products while enhancing its
technological capabilities by strengthening testing and research, and the founder’saspiration to contribute to society has been steadfastly inherited by Hitachi employees.

Episode1950

Production of trains for theTokaido Shinkansen

2

1960

1970

Launch of operations
at the Shimane Nuclear
Power Station

Contribution to reconstruction
after the Great Kanto Earthquake

In 1923, the Great Kanto Earthquake wrought unprecedented damage
across the Tokyo metropolitan area. Although Hitachi’s Kameido
Works was partially destroyed, Namihei Odaira indicated “our top
priority is reconstruction of the Keihin area, the head of Japan.” Everyeffort was made to rebuild infrastructure by increasing the production
and supply of products necessary for the restoration of power supply
infrastructure in the Tokyo metropolitan area. The name Hitachi
became widely known throughout Japan for its technological prowessin transformer equipment and transformers.

Episode1980

Development and supply oflarge-scale computers

3

Development and supply oflarge-scale computers

In the late 1950s, Hitachi participated in the development of the MARS-1
seat reservation system for Japan National Railways (now JR Group).
The objective was to systematize seat reservations, which at the time
were done manually, enhancing convenience for users. However,development involved a variety of hardships. In 1959, we completed thecomputer that would become the central processor for this system, andin 1960, we succeeded in developing terminals for installation in stations.
The seat reservation system for limited express trains was launchedthroughout Japan and has continued to evolve to the present day.

Hitachi Integrated Report 2022

Introduction

Whatʼs Hitachi

Looking Back on Past Mid-term Management Plans

History of Hitachi

1990

Value Creation

Promoting Sustainable Management

2000

Performance

Revenue

12,000

Corporate Governance

2020

4

Net income attributable to Hitachi, Ltd. stockholders
1997〜
Financial crisis

5

Data

Global Business Overview

Social Innovation Business

Provision of intercity express
trains to the United Kingdom,
birthplace of the railroad

Developing more advanced social
infrastructures by combining
expertise in OT, IT, and products

In 2009, Hitachi became the first Japanese manufacturer to provide
rolling stocks to the United Kingdom with the delivery of 174 train cars
(Class 395), which commenced commercial operations that same year.
In 2017, 866 train cars (Class 800) were delivered and commenced
commercial operations on intercity express trains connecting London
with destinations in northern and western UK. In 2021, Hitachi received
an order for the design, build and maintenance of next-generation
high-speed rail in the UK. This serves as a testament to the more than
20 years Hitachi has spent building its brand in the UK.

Delivered high-speed
train to theUnited Kingdom

1991〜
End of bubble economy in Japan(Billion yen)

Business of the Hitachi Group

Sustainability

2010
EpisodeDevelopment of virtualstorage technology

Business Strategies

2000〜
IT bubble implosion

Cash flows margin from operating activities
2008
Global financial

11,226.7 crisis

Adjusted operating income ratio

2011
Great East Japan Earthquake

（%）

10

10,264.6
7.2
7.1

9,000

8

6

583.4

600

4
300

2

0

0

1990

2000

2021 (FY)

2010

(2)

(300)

(327.6)
(600)

(900)

(483.8)(787.3)Mid-term
Management Plan2012
(FY2010–2012)

Mid-term
Management Plan2015
(FY2013–2015)

Mid-term
Management Plan2018
(FY2016–2018)

Mid-term
Management Plan
2021
(FY2019–2021)

Hitachi Integrated Report 2022

History of Hitachi

Whatʼs Hitachi

Introduction

Value Creation

Promoting Sustainable Management

Looking Back on Past Mid-term Management Plans

Business Strategies
Business of the Hitachi Group

Sustainability

Corporate Governance

Data

6

Global Business Overview

Looking Back on Past Mid-term Management Plans
Mid-term Management Plan 2012 (FY2010–2012)
Rebuilding Management

Mid-term Management Plan 2015 (FY2013–2015)
Building a Foundation for Growth

Recovery

The Swapping Out of Businesses

Achievements
1. Created a product-based company systemclarifying responsibilities and authority• Clarified responsibility and authority through		 introduction of an in-house company system• Consolidated business into six Groups, focusedon growth fields under an integrated system ofoperations, and accelerated management
2. Rebuilt/Withdrew from low-profit businesses• Automotive systems business:
		 Rebuilt through structural reform• Flat-panel TV business:
		 Withdrew from in-house production• HDD business: Divestiture
3. Strengthened cost competitiveness•	Started “Hitachi Smart Transformation Project”
for cost structure reform• Expanded centralized purchasing and global
		procurement• Optimized and consolidated manufacturing sites

Mid-term Management Plan 2018 (FY2016–2018)
Strengthened the Social Innovation Business Leveraging Digital Technologies

Challenges

Challenges• Realizing further improvements to business profitability• Enhancing business with social innovations as a core
• Developing business globally• Speeding up management to rapidly respond to changes in market environments• Launching a platform for digital growth• Addressing low-profit businesses to improve profitability

Achievements

Achievements

1. Promoted the Social Innovation Business on a global
basis by strengthening frontline functions• Expanded service businesses through use of digitalization• Strengthened digital capabilities through the acquisition		of Pentaho
2. Reviewed non-core businesses• Thermal power business: Established joint-venture
		 firm with Mitsubishi Heavy Industries• Air-conditioning business: Established joint-venture
		 firm with Johnson Controls• Batteries business: Relisted Hitachi Maxell, drew		 down its stake in the company
3. Promoted globalization• Relocated the railway systems business headquarters
		 to the United Kingdom• Introduced Global Performance Management aimed
		at enhancing the use of global human capital

1. Transitioned away from a product-based company
system to a three-level structure comprising 		
frontline, platform, and product tiers• Accelerated decision-making with the introduction		of a business unit system
2. Strengthened the global frontline• Bolstered global frontline operations through 				acquisitions (Ansaldo STS, Sullair)
3. Expanded the digital solutions business with Lumada• Launched Lumada• Established Hitachi Vantara to deliver digital solutions• Lumada business revenue grew to 1 trillion yen

4. Executed ongoing business reviews• Divestiture and deconsolidation of listed		subsidiaries
		 Divestiture of Hitachi Koki and Clarion
		 Sold a part of shares in Hitachi Transport
		 System, Hitachi Capital, and Hitachi Kokusai		Electric• Reduced/Withdrew from low-profit businesses		 such as the information and telecommunications
		 equipment business and the overseas EPC
		business

Mid-term Management Plan 2021 (FY2019–2021)(billion yen)

Realized Social Innovations with Digitalization, Built a Platform for Global Growth

Challenges•	Business growth through expansion ofco-creation with Lumada as a core
• Completing business portfolio revisions• Improving capital efficiency

Performance targets and results
Although targets at the start of fiscal
2019 were revised due to the COVID-19
pandemic in 2020, revenue expanded,
profitability was maintained and operating
cash flows were generated, and net income
attributable to Hitachi, Ltd. stockholders
reached an all-time high.

Mid-term Management
Plan 2021 targets(as announced in April 2021)

Fiscal 2021
results

9,500.0

10,264.6

Adjusted operating
income/ratio

740.0 / 7.8%

738.2 / 7.2%

Net income attributable to
Hitachi, Ltd. stockholders

550.0

583.4

Over 2,100

Approx. 2,100

8.3%

7.7%

Revenue

Operating cash flows(FY2019–2021 cumulative total)

ROIC

Achievements
1. Launched the digital business platform and achieved growth• Launched the Lumada Solution Hub and Lumada
Alliance Program• Expanded Lumada business revenue from 1.1 trillion
yen to 1.6 trillion yen
2. Enhanced efforts toward digital and environmental growth• 2019: Acquired JR Automation• 2020: Made Hitachi High-Tech a wholly owned
			subsidiary Established Hitachi ABB Power			
Grids (now Hitachi Energy)• 2021: Established Hitachi Astemo
			
Acquired GlobalLogic			Transferred the diagnostic imaging–related business			
Participated in COP26 as a principal partner

3. Reinforced and improved the business foundation
by resolving management issues• Made progress in reviewing the capital policies
		 of listed subsidiaries• Divestiture of Hitachi Chemical and Hitachi Metals*• Sale of a part of shares in Hitachi Construction
		 Machinery and Hitachi Transport System*• Responded to management issues• Settled with Mitsubishi Heavy Industries on
		 South Africa projects• Withdrew business operations on the UK nuclear
power stations construction project•	Promoted diversity, increased digital talent, andenhanced risk management*Scheduled for completion during fiscal 2022

Hitachi Integrated Report 2022

History of Hitachi

Introduction

Whatʼs Hitachi

Looking Back on Past Mid-term Management Plans

Value Creation

Promoting Sustainable Management

Promoting Sustainable Management

Business Strategies

Sustainability

Business of the Hitachi Group2019

Commenced operation of the
Hitachi Internal Carbon Pricing(HICP) system

Set the target of achievingcarbon neutrality at Hitachi business sites
by fiscal 2030
2021

Set the target of achievingcarbon neutrality throughout theentire value chain by fiscal 2050

2016

t

Formulated Hitachi Environmental
Innovation 2050

2022

Soci

al

Gov

7

2020

Announced endorsement of Task Force on Climate-related
Financial Disclosures (TCFD) recommendations

nmen

Data

Global Business Overview

2018

EnviroCorporate GovernanceSet the target of contributing to CO2 emission reductions
through business (100 million metric tons in fiscal 2024)

2013

ern

anc

Formulated Hitachi Group
Human Rights Policy, Launched
Human Rights Due Diligence (HRDD) initiative

e

2011

Introduced global
HR management

2019

Instituted the Hitachi Group
Global Procurement Code,Enhanced digital talent
2016

2003

Promoted workstylereforms

Shifted to a company withcommittees(currently a company with anominating committee, etc.)

Set diversity
targets

Set Diversity,
Equity and Inclusion(DEI) targets
Ratio of female and non-Japanese executive
and corporate officers

FY2024:2010

Enhancement of interactions with Capital Markets
Hitachi IR Day was launched

2000

2017

2021

2010

15% each FY2030: 30% each2012

Increased numberof independent
directors, including
non-Japanese
directors

2016

2021

Enhanced disseminationof information about
medium- to long-termsustainable growth

2020

Introduced evaluation systemthat considers environmental value

into short-term incentive compensation for executive officers

Hitachi Integrated Report 2022

History of Hitachi

Introduction

Whatʼs Hitachi

Looking Back on Past Mid-term Management Plans

Value Creation

Promoting Sustainable Management

Business Strategies

Sustainability

Business of the Hitachi Group

Corporate Governance

Data

8

Global Business Overview

Business of the Hitachi GroupIn April 2022, Hitachi formulated the Mid-term Management Plan 2024 targeting further global advances and growth in the Social Innovation Business based on three pillars of growth: digital, green and innovation.
To increase management efficiency and speed, we simplified our structure, grouping together businesses with similar characteristics organized into three sectors: Digital Systems & Services (DSS), Green Energy& Mobility (GEM) and Connective Industries (CI). Together with customers, we will resolve social issues leveraging a business structure that includes the Automotive Systems Business (Hitachi Astemo).

■ Digital Systems & Services
Main products and services◎ Front Business: IT and digital systems in mission-critical fields

such as financial institutions, public offices, municipalities andsocial infrastructure◎ IT Services: DX solutions and services◎ Services & Platforms: Designs, digital engineering, data
analytics, cloud services and IT products■ Connective Industries

Others4%

Digital Systems &Services

Hitachi Metals

9%
Hitachi Construction
Machinery

9%
Automotive
Systems Business

15%

20%

Revenue

10,264.6
billion yen(FY2021)

Green Energy &Mobility

Main products and services◎ Urban Group: Elevators, escalators and building services,

home appliances, air-conditioning systems◎ Advanced Technologies Group: Healthcare (clinical chemistry

and immunochemistry analyzers, automated cell culture
equipment, particle therapy system, etc.), measurement andanalysis (semiconductor metrology/inspection equipment,
electron microscopes, etc.)◎ Industry Group: Industry & distribution solutions, robotics
SI, water supply and sewage, utilities solutions, industrial
equipment

18%

Connective Industries

25%
Others■ Green Energy & Mobility
Main products and services◎ Energy solutions (power grids, nuclear, renewable anddistributed power sources)◎ Railway systems (rolling stock, signals, controls, services
and maintenance, smart mobility, turnkey)

3%

Hitachi Metals

4%

33%

Hitachi Construction
Machinery

12%

Automotive
Systems Business

7%
Source: Aibel

Digital Systems &Services

Connective
Industries

30%■ Automotive Systems Business

Adjusted EBITA

855.3

billion yen(FY2021)Main products and services◎ Powertrains, chassis, advanced driver assistance, motorcycle

Green Energy &Mobility

11%

Notes:
1 Figures based on new segment classifications applied from fiscal 2022 onward.
2 Hitachi Construction Machinery was deconsolidated on August 23, 2022. Hitachi Metals isscheduled to be removed from the scope of consolidation in March 2023.
3 Adjusted EBITA ＝ Adjusted operating income ー acquisition-related amortization ＋ equity inearnings (losses) of affiliates

systems

Hitachi Integrated Report 2022

History of Hitachi

Whatʼs Hitachi

Introduction

Looking Back on Past Mid-term Management Plans

Value Creation

Promoting Sustainable Management

Business Strategies
Business of the Hitachi Group

Sustainability

Corporate Governance

Data

9

Global Business Overview

Global Business Overview (As of March 31, 2022)
Overseas revenues account for 59% of total revenues for Hitachi.
By combining Lumada with global business portfolios built up in each region and business, Hitachi will further accelerate its global rollout
and expand the value created and realized through the Social Innovation Business on a global scale.

Japan
Number of
employees

Approx. 157,000■ Digital Systems & Services

China■ Green Energy & Mobility■ Connective Industries

Approx. 51,000■ Others (Including Hitachi Construction Machinery, Hitachi Metals)

158

Revenues

Number of
employees■ Automotive Systems Business

Number ofsubsidiaries

4,187.0

Number ofsubsidiaries

136

Power
Grids BU

Revenues

1,331.6

billion yen

Component ratio
Building
Systems BU

41%

Nuclear Energy& Energy BU

HitachiGlobal Life
Solutionsbillion yen

Industry Group

Component ratio

13%

North America
Number of
employees

Approx. 28,000

EuropeNumber ofsubsidiaries

Hitachi High-Tech

Number of
employees

97

Approx. 43,000

Number ofsubsidiaries

148

Power
Grids BU

Revenues

1,555.1

Revenues

Power
Grids BU

billion yen

15%

Approx. 70,000

billion yen

Component ratio

Industry Group

Hitachi High-Tech

13%

Number ofsubsidiaries

200

Power
Grids BU
Railway
Systems BU

Hitachi High-Tech

ASEAN, India, and other areas
Number of
employees

1,299.4

Railway
Systems BU

Component ratio

Building
Systems BU

Revenues

1,183.2

Railway
Systems BU

billion yen

Component ratio

11%

Other areas
Number of employees

Approx. 20,000

Number of subsidiaries

115

Revenues

708.1billion yen

Hitachi High-Tech▶

19 customer
co-creation centers

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

CEO Message

Hitachi is Constantly Growing Thanks to
Our Employees and Technology
Accelerating Transformation ThroughMode Change for Growth

Hitachi is finishing up a decade-long structural reform and has begun moving towards
sincere growth. I was determined when I became CEO in April 2022, during the launch of the
Mid-term Management Plan 2024, to take the baton and continue Hitachi’s transformation,emphasizing the history and values assembled by Hitachi since its founding.
We will continue to build a Hitachi that is always changing thanks to our employees andtechnology while also reconfirming our DNA of transformation that has led us to continue
restructuring in accordance with social changes.

President & CEO

Keiji Kojima

Data

10

Financial Strategies

CFO Message

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

11

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Reconfirmation of History and Values for the Next Decade
Since its establishment in 1910, Hitachi has grown together with the development of society and the economy, operating under a foundational
Mission set by founder Namihei Odaira: “Contribute to society through the development of superior, original technology and products.” With thisguiding principle, we have resolved issues facing society through the development of technologies and products that support social infrastructure.
As a student, I visited Hitachi’s Central Research Laboratory in Tokyo for the first time. I remember being impressed that Hitachi appreciatedtechnology above all else, which made me decide to begin my career with the company as a researcher. I was heavily involved in databaseresearch during that time and once again realized the company’s unique attitude towards valued technology. Hitachi’s culture of superior
performance and unparalleled functionality inspires me to never compromise. Hitachi has continued to grow while championing the ideas
passed down from those who came before us. We proudly continue developing new technologies and pioneering services that support social
infrastructure—that is, enhancing people’s lives.
Hitachi is also an organization that can cope with social changes and continuously transform without fear. Our vision of being a Social Innovation
Business as promoted by previous CEOs enabled us to come out of the red following the global financial crisis. To avoid future financial issues,
we shifted back to the true DNA of Hitachi and continue to seek transformation and strategize to solve future social issues. Lumada is a great
symbol of this as it was launched in 2016 to offer solutions that deal with the shift towards digitalization in society that we are experiencing today.
The Lumada concept started when I was CTO in 2014, when it was predicted that the Internet of Things would be the next big social trend.
We created a business model framework that offers value by collaborating with customers and leveraging Hitachi’s rich IT and OT (operational
technologies) expertise and technologies. We called this system, inspired by the wisdom of Silicon Valley’s cutting-edge people, “Lumada.” In
addition to data analytics and the knowledge of AI specialists, we also incorporated cultural anthropology, experience design and a variety ofother viewpoints to construct the concept of “people (customers).” Hitachi’s Lumada was finally launched in 2016, not only as a system to run
applications or software on platforms but also as a framework for co-creation too. In addition to expanding the Social Innovation Business, Hitachi
took on the challenge of making a major transformation over the past decade and growing the Lumada business since 2016.
I believe there is a great resemblance between Hitachi and a tree that is constantly evolving. Hitachi’s
biggest strength is its ability to grow and transform to continuously solve social issues. In order forthe tree to continue to grow without weakening, we must change our business, shedding light on
Hitachi’s branches and leaves, similar to the strategy we followed over the past decade. We have gone
through that pruning. What kind of fruit will this tree produce? What sort of buds will become part of the
new trunk? Instead of creating finite products that cannot be altered, Hitachi consistently co-creates
solutions alongside society to meet current needs and improve quality of life. Hitachi’s legacy is definedby the fruit—or results—of that tree. I believe it is vital for this tree to change forms along the way andfor Hitachi to continue taking on new challenges.

Hitachiʼs Central ResearchLaboratory
Established as a primaryresearch laboratory in 1942.
Through its establishment,
comprehensive basic researchon electron microscopes andmore was strengthened from thestudy of prior developments andimprovements directly linked to
products and further progress
was made in developing new
products.

LumadaP.24

Experience Design
Designing around the userʼs
experience value (experience).

Hitachiʼs Design Thinking

https://www.hitachi.
com/rd/research/design/
nexperience/design/Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

12

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

The Mid-term Management Plan 2021 Has Ended and the Groundwork for Growth over the Last Decade is Complete
The emergence of COVID-19 greatly affected social and economic activity worldwide during the three years between fiscal 2019 and 2021 in
the Mid-term Management Plan 2021. Since the second half of 2021, there have been shortages of semiconductors and the costs of materials
have skyrocketed. In 2022, the prices of resources, including crude oil and natural gas, have kept increasing due to the Russia-Ukraine situation,
which exposed us to new geopolitical risks.
The major social and economic changes caused by COVID-19 also affected Hitachi’s management. Nonetheless, we were able to achieve
an adjusted operating income ratio of 7.2% in fiscal 2021. Under these conditions, Hitachi has set the goal of achieving a sustainable society
through the Social Innovation Business in the Mid-term Plan Management 2021 and has established a comprehensive plan to build a businessfoundation for global growth. We built a solid management system through continued efforts and initiatives to improve profitability and believe thiswas a significant accomplishment for the Mid-term Management Plan 2021. We also continue to establish a strong business foundation, pushing
through with profitability improvements and structural improvements to achieve growth in the Social Innovation Business. To make Hitachi an evenstronger global competitor, we acquired GlobalLogic and ABB’s power grid business (now Hitachi Energy) while also deciding to sell publicly listed
subsidiaries including Hitachi Chemical, Hitachi Metals, and Hitachi Construction Machinery. I believe another accomplishment was establishinggoals during the groundwork for growth toward the Mid-term Management Plan 2024.

Mid-term Management Plan 2024̶Mode Change for Growth in the Next Decade
We positioned the three years of the Mid-term Management Plan 2024 as a mode change for growth to create paths allowing continuous growthover the next decade while also valuing prior transformations. Through the power of innovations for the future of society and the creation of value
by digital and green actions, we have changed our future course to focus mainly on growth.
“Creating a sustainable society through data and technology where each person
can actively participate while also protecting the earth.” People and the Earth are
key in our vision for the future. Based on our innovation strategy for 2050, we will
implement digital and green measures from the backcast approach to determine
the next steps.
Additionally, in the Mid-term Management Plan 2024, we took on the challengeof adequately explaining the Lumada framework once again. There are fourmonetization models in Lumada, and we recently strengthened our ability to workfrom any model with the acquisition of GlobalLogic. We believe that Lumada
can accelerate the process of problem solving and co-creation and we hope todemonstrate Hitachi’s potential for further growth through expanding the business.

GlobalLogic
A U.S.-based company
acquired by Hitachi in July
2021. GlobalLogic is aleading company in the digitalengineering service market.

https://www.globallogic.com/
Hitachi Energy
Hitachi acquired the power gridbusiness from ABB, a heavy
electric company in Switzerland,and began operations in July
2020. The company name waschanged to its current name in
October 2021. Hitachi Energy
offers systems, products, andservices of a leading global
standard for the transmissiontransformation of electric energy,
including a high-voltage direct
current (HVDC) system allowing
for long-distance transmissionof energy on a large scale anda microgrid allowing for highly
reliable energy supply.

https://www.hitachienergy.
com/us/en
Mid-term Management Plan
2024: Digital, Green, andInnovation

P.22

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

13

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Creating an Organization Where Our Employees and Technology Produce Innovations for Customersʼ Next Steps
Hitachi is committed to solving social issues of the future through both our employees and technology. We understand that the next step ourcustomers want to take is focused on digital and green. Hitachi will solidly support these steps; Our Mid-term Management Plan 2024 will address
all growth opportunities in these sectors and support in refining the customers’ future decisions. It is vital to drive our business with technologicaladvancement, insights and vision from a medium- to long-term perspective. We are already making strategic moves to refine our digital and green
transformations through the acquisition of GlobalLogic and ABB’s power grid business (now Hitachi Energy), and we are thinking beyond thesetransformations as we move forward.
While Hitachi has always valued research and development, it is essential to understand technological trends and how they differ from an
innovation that changes the world. To convert technology into innovation, Hitachi believes it is imperative to foster human capital with vision,ideas and concepts and I will lead this growth by drawing from my experience in R&D. I am also confident that the strength of more than 300,000
employees in Hitachi will assist in delivering value to our customers and society. In order to respond to the various expectations and needs ofsociety, we will create value and greater promotion of DEI (Diversity, Equity and Inclusion) and co-creation.
We have also been working to strengthen employee engagement to create a culture where each employee takes responsibility for solving social
issues. We aim to be a company where employees are satisfied with their jobs and are proud to be a part. We will continue to be committed
to including our employees in more significant discussions and consider what we can do together, as we are doing with PMI (Post-Merger
Integration) to fully utilize the knowledge of our new colleagues at GlobalLogic and Hitachi Energy.
When I was transferred to a startup in Silicon Valley, I had the chance to see Hitachi from the outside. At that time, I was interviewing about 10
people every day to recruit human capital and I experienced firsthand how key leaders can flourish into outstanding and unique human capitaland ultimately guide an organization in a unified direction.
It helped me understand the importance of harmony, where various human capital unites under one leader to work together, and the value ofsincerity when facing customers and solving problems with integrity. Finally, the crucial role of having a pioneering spirit is to develop dedicatednew customers.
It was a valuable opportunity for me to understand the true meaning of the Hitachi Founding Spirit ofHarmony, Sincerity, and Pioneering Spirit and the role a leader should play. It was great to see Hitachi
employees willing to work in different settings and fields because they have a willingness to grow. It is
becoming even more important to make Hitachi a company people want to work for again.

DX
Digital Transformation

GX
Green Transformation

DEI (Diversity, Equity andInclusion）

P.41

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

14

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Dealing with Complex Global Risks
We are in an age where it is challenging to predict how the social and economic environment will change. To accelerate and grow the Social
Innovation Business, Hitachi will not only collect information on potential upcoming risks, but also thoroughly prepare for and respond to themwhen they occur. It is often pointed out at meetings of the Board of Directors that it has become necessary not only to determine risks related tohuman rights, compliance, and other disasters, but also to prepare for comprehensive risk management due to the constant change in businessenvironment that includes financial risks as well.
Since April 2022, Hitachi has established a global risk governance structure with the CFO taking on the role of CRMO in order to identify therisks that might affect us in the near future. For example, with the situation in Ukraine this year, we responded based on BCP, with the safety ofour 7,000 GlobalLogic employees as our top priority. For Hitachi, having spread its business globally, it is essential to make risk management
preparations to increase our resilience to various risks.

Risk Management Structure

P.75

For a Stronger, Trusted Hitachi Through Dialogue with Stakeholders
As we promote our Social Innovation Business, Hitachi values the dialogue and co-creation with our diverse stakeholders, including customers,
governments, municipalities, academic organizations, and research organizations, to accurately understand the various social problems in eachcountry and region.
To accelerate and lead the initiatives towards decarbonization, a high-priority issue for society, Hitachi was inaugurated as a Principal Partner,
supporting the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP26) held in the U.K. in November
2021. Through discussions with our various stakeholders, including government officials and management from global companies, we haveshown our role as an innovator in the field of climate change and our strong commitment to realizing a decarbonized society.
We feel that the capital markets have been very supportive in providing us counsel on management through dialogue with institutional investors.
I realized that we could increase Hitachi’s corporate value through co-creation withinvestors, just as we can realize value for customers and society through co-creation.
And from a sustainability management perspective, I believe that dialogue and engagementwith a wide range of stakeholders is even more critical.
We have upheld a mode change for growth in the Mid-term Management Plan 2024 andwe will be focused on generating cash during these three years as a result of implementing
the plan. We will also expand our core free cash flows and enhance our shareholder
returns by improving our earning power and streamlining our balance sheet. We are
already planning a 200 billion yen buyback this fiscal year and we will continue to share theresults of our growth with our stakeholders and make further contributions to social andenvironmental values.

Generating Cash

P.45

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

15

Financial Strategies

CFO Message

The Story of Collaborative Value Creation with Stakeholders
The Hitachi Group is like a continually evolving tree that gathers diverse capabilities.
By nurturing this tree together with our stakeholders, we have brought about solutions that contribute to the resolution of social issues.
Moving forward, we will continue to engage in new collaborative value creation with our stakeholders by aiming for transformations with the times and continuing to take on new challenges.

Episode 1

Episode 2

The Optimise Prime Project, UK
─Towards a carbon-free society

Development of Microservices Solutions, ASEAN
─Supporting digital transformations of financial
industry and beyond

Episode 3

Hitachi Digital Solution for Retail/Logistics
─Transformations centered around the
distribution industry

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

The Value Creation Process

Episode 1

Value
Provided

Co-creation
Partners

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

16

Financial Strategies

CFO Message

Episode 2

The Optimise Prime Project, UK
─Toward a carbon-free society

SocialIssue

Business Strategies

The United Kingdom has set the target of reducing CO2 emissions to effectively
zero by 2050. To reach this target, the decarbonization of the electric power
sector has to be almost completed by 2030 and 60% of new automobiles
have to be EVs in the UK. If Optimise Prime is implemented across the UK, it
is estimated that a reduction of 2.7 Mt of CO2 is possible by 2030, which is aneffect corresponding to saving a total of 207 million pounds.

The Optimise Prime project, launched in January 2019, is an initiative torealize a carbon-free society by keeping down power prices while increasing
the spread of EVs and making efficient use of existing power distribution
networks. Hitachi is in charge of designing the solutions architecture andimplementing the IoT platform at the project’s core. We started gathering dataon EVs in 2019 and have already implemented demonstration experimentswith up to 3,000 vehicles over 12 months. We plan to submit the final reportin 2023, so that the data can be used by organizations, research institutions,and government agencies that want to shift to zero emissions through EVs.

UK Power Networks, Centrica, Royal Mail, Uber, Scottish & Southern
Electricity Networks, Novuna Vehicle Solutions

https://www.hitachi.com/rev/archive/2020/r2020_04/activities2/index.html

Development of Microservice Solutions, ASEAN
─Supporting digital transformations of financial industry and beyond

SocialIssue

Value
Provided

Co-creation
Partners

Application development that applies adaptable and flexible microservices, aswell as DevOps that links system development and operation, thus realizing
agile development that is flexible and speedy, is in great demand for theacceleration of DX. DX is proceeding rapidly in the financial industry, especiallyin the fast-growing ASEAN region. Hitachi will establish microservices
solutions and secure a core of digital talent for its development, to realize thetransformation of client systems to a more flexible architecture, for which an
open banking architecture and shorter time-to-market are increasingly needed.
In order to expand Lumada business globally, Hitachi will make fast-growing ASEAN its starting
point, and will develop common functions needed for the development of microservices byutilizing its know-how in application development for financial institutions. The developmentof this solution was enabled by knowing and incorporating functions required by financial
institutions, which were collected through the co-creation with a major bank in ASEAN.
Moreover, we engage in activities that aim to develop digital talent and guidelines that support
microservices development and are now aiming to establish a managed service that includes
a cloud environment and DevOps development infrastructure. Going forward, we will aim
to further enhance our delivery capabilities by establishing a dedicated development teamfor microservices (resource pooling), and scale out these solutions globally to clients in nonfinancial fields, whose needs for financial functions are increasingly growing.

A major bank in ASEAN

http://www.hitachi-ebworx.com/solutions-microservices.html

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Mid-term Management Plan 2024

SocialIssue

Episode 3

Hitachi Digital Solution for Retail/Logistics
─Transformations centered around the distribution industry

Sustainability

Value
Provided

Corporate Governance
Human Resources Strategies

Data

17

Financial Strategies

CFO Message

Against a background of diversifying consumer needs, manpower shortages froma shrinking working age population, food loss issues, and so forth in the logistics
industry, there is a growing need for high-efficiency store management that utilizes
advanced digital technologies and that can instantly respond to changes indemand. Moreover, we are seeing issues with driver shortages and long working
hours in the delivery operations due to the spread of e-commerce and diversifying
delivery needs.
Hitachi is using digital technologies to resolve these challenges in the distribution
industry. We are contributing to more efficient, safer, and more secure operations
by automating order placements based on demand prediction, automatic delivery
planning, and ensuring safe driving management of drivers. Moreover, we are
optimizing storage in the food industry to counter food loss as well.
Order placement, storage management, and delivery planning have normallyrequired some time to perform based on the experience and know-how ofexpert workers. The Hitachi Digital Solution for Retail/AI Demand Forecast
Auto Replenishment Service makes advanced demand predictions forindividual stores and products by using AI and original algorithms, thereby
making suggestions for recommended order volumes and facilitating
automation of order placements. Hitachi Digital Solution for Logistics/Delivery
Optimization Service realized automated suggestions for highly efficientdelivery plans by generating data on all key conditions for delivery planningtasks and performing analyses that also incorporate the experience of expert
workers. SSCV*1-Safety on Hitachi Digital Solution for Logistics*2 contributes
to operation management, better driver safety, and workstyle reform throughAI analysis of the biometric and driving data of logistics drivers.
Hitachi is combining these solutions to provide value to all stakeholders
throughout the supply chains, including suppliers, wholesalers, logistics
operators, stores, and consumers, in the distribution industry.
*1 SSCV: Smart & Safety Connected Vehicle*2 Business developed through collaborative efforts between Hitachi Transport System, Ltd.,and Mitsubishi HC Capital Inc.

Co-creation
Partners

Mitsui & Co., Seiyu, Workman, Asahi Shokuhin, etc.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

18

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Materiality
Towards a Sustainable Society: Hitachi’s Materiality
Hitachi practices sustainable management, which positions sustainability as the core of its
business strategy, and is working toward realizing a sustainable society through the Social
Innovation Business.
In the Mid-term Management Plan 2024, we declared our new aspiration of “supporting people’squality of life with data and technology that fosters a sustainable society.” While some of the nine
planetary boundaries have already been exceeded, Hitachi is aware of each one and works toprotect the planet and maintain society. Hitachi aims to solve social challenges to realize a futurethat balances protection of the planet and people’s individual wellbeing.

The materiality analysis process
With a comprehensive understanding of social issues, Hitachi has identified six material topics
and 15 sub-material topics based on an analysis of risks and opportunities from sustainability
perspectives as well as feedback from stakeholders.
Based on these material topics, Hitachi will monitor measures as well as discuss the progressof, and new initiatives for, each materiality at the Senior Executive Committee and the Board of
Directors.
Further, Hitachi’s materiality was developed based on backcasting from 2050 and input fromstakeholder dialogue in Japan and Europe, based on the Strategic Focus Area disclosed in the
Hitachi Integrated Report 2021 published last year.
Comprehensive understanding of social issues
STEP

STEP

1
2

• Identifying social issues from the SDGs, GRI standards, SASB standards, ESG external
evaluation items, etc.

Ranking issues by priority from Hitachi’s point of view
• Identifying innovation areas where Hitachi should contribute based on backcasting from 2050
• Analyzing risks and opportunities

Ranking issues by priority from stakeholders’ point of view
STEP

STEP

3
4

• Evaluating material topics based on assessments and comments from investors, NGOs,
and ESG evaluation organizations• Evaluation through dialogue with investors, NGOs, and sustainability experts

Identifying Materiality

Materiality

Environment
Contributing to decarbonization
and resource circulation

Resilience
Contributing to the maintenanceand rapid recovery of social
infrastructure

Safety & Security
Contributing to safe and securesociety-building

Quality of Life
Contributing to physicaland mental wellness and aprosperous life

Business with
Integrity
Adhering to ethical standards
as well as respect humanrightsDiversity, Equity andInclusion (DEI)
Contributing to a society where
everyone can shine

Our aspirations
As a climate change innovator, Hitachi will contribute to therealization of a carbon neutral society with Hitachi’s superior green
technologies, by providing value to customers in all businesssegments. We will also promote resource efficiency toward thetransition to a circular economy.
Hitachi helps people live safely by contributing to the rapid recovery
of supply chains and the maintenance of social infrastructure byproviding system solutions that can respond immediately to risks,such as natural disasters, pandemics, and cyberattacks.
Hitachi contributes to the realization of comfortable and active
lifestyles for people by providing solutions in the building, mobility,
and security fields that support urban development for safe andsecure living.
Hitachi is harnessing our healthcare and digital technologies to help
more people develop bonds and enjoy healthier, more prosperous
lives. We will also continue to pursue the happiness and wellbeing of
our employees, as we believe that their happiness and wellbeing is
the ground on which Hitachi’s future will flourish even more fully.
As a Group responsible for social infrastructure around the world,
Hitachi will manage its business with honesty and integrity, trusted
by society, respect human rights, and provide a safe workplace. We
will reflect a system of ethical and responsible business conduct,
including respect for human rights, in our business activities anddecision-making standards, working together with our employees,
collaborative partners and communities throughout the supply chain.
Hitachi has a place for everyone, welcoming differences incolleagues’ background, age, gender, sexuality, family status,
disability, race, nationality, ethnicity, and religion.
At Hitachi, we treat everyone fairly, recognizing differences toallow everyone to perform at their full potential.
We respect and value these and other differences because only
through them we can understand our markets, create better
ideas and drive innovation.

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

19

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

15 Sub-Material Topics and Targets
Material topics

Sub-material topics

TargetCarbon neutrality through the value chain• FY2030: Achieve carbon neutrality in business sites (factories and offices)• FY2050: Achieve carbon neutrality through the value chain

Environment

Contributing to CO2 reduction through business• FY2024: 100 million metric tons/year

Contributing todecarbonization and resource
circulation

Transition to a circular economy• FY2024: Full application Eco-Design for new product development• FY2030: Zero*2 waste to landfill1 from manufacturing sites

Effective use of water• Reduction rate in water use per unit (compared to FY2010)
FY2024: 24%, FY2050: 50%

Decarbonization

Resource circulation

Harmonize with nature

Minimize impact on natural capitalStrengthening supply
chainsBuild flexible supply chains capable of responding to disasters and risks

Maintaining social
infrastructure

Resilience and sophistication of maintenancethrough DX of social infrastructure• Contribute to stable energy supply through substation management
Approx. 1.9 billion people*3

Safety & Security

Safe and secure urban
environments

Safe and comfortable transportation• A total of 15 billion people use railway services annually*3

Contributing to safe andsecure society-building

Ensuring cyber security

Secure cybersecurity for social infrastructure and business systems

Connected andprosperous society

Increase healthy life expectancy and wellbeing• Blood tests and other physical exams: 20 billion tests/year*3

Build a trustful relationship with others• Users of happiness service (10 thousand in FY2022 → 90 thousand in FY2024)

Employee happiness

More flexible working styles to increase
engagement• Employee engagement score (FY2021: 65.0% → FY2024: 68.0%)

Business ethics andcompliance

Encourage employees to apply ethicalstandards in day-to-day work.

• Achieve a score of at least 60 (out of 100) in FY2022, the first year of resultsfrom Ethical Culture & Perceptions Assessment, improving it every year

Business with
Integrity

Respect for human rights

Promote human rights due diligence and strengthen monitoring of procurement partners for responsible procurement,
including human rights

Adhering to ethical standards
as well as respect humanrightsOccupational safety

Creating a safe working environment without
accidents

Safe and secure products
and services

Ensure products and services safety while putting customers first

Resilience
Contributing to themaintenance and rapid
recovery of social infrastructure

Quality of Life
Contributing to physicaland mental wellness and aprosperous life

Diversity, Equity andInclusion (DEI)
Contributing to a society
where everyone can shine

Diverse organization that
fosters innovation

Contribution to a diverse
and equitable society*1 Wherever this is compatible with local conditions and regulations• Zero fatal accidents

Strengthen diversity in management• Ratio of female and non-Japanese executive and corporate officers(30% in FY2030)

Acquiring and developing digital talent• FY2021: 67,000 persons → FY2024: 98,000 persons

Empower DEI of society through community
relationship programs• Support young generations in Asia through the Hitachi Young Leaders
Initiative
A total of 405 students participating (as of end of July 2022)*2 Less than 0.5%

*3 FY2021 results

Relevant SDGs

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

The Value Creation Process

Importance for stakeholders

HigherHitachi has mapped the 15 sub-material topics in terms of importance for Hitachi and its
stakeholders. The level of importance to Hitachi is defined as the gap between our goals andour current initiatives.

● Business ethics
and compliance（▲）●Respect for ●Decarbonization
human rights （■■■▲）（▲）●Diverse organization ●Employee● Connected andthat fosters innovation happiness●Harmonize
prosperous（■■■▲）（■■■▲）
with naturesociety（■■）●Resource（■）
circulation●Safe and secure（■■■）
urban environment（■■）● Occupational● Maintaining social
safety（▲）
infrastructure（■■）● Ensuring cybersecurity（■■▲）●Strengthening● Contributing to a diverse
supply chains（■■）
and equitable society（▲）● Safe and secure products
and services（■■■▲）
High
Growth driver

HigherImportance for Hitachi■Green ■Digital ■Innovation● Environment ● Resilience ● Safety & Security ● Quality of Life
● Diversity, Equity and Inclusion

Business Strategies

Foundation of societal trust ▲Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

20

Financial Strategies

CFO Message

Stakeholder dialogue about the materiality
We held a stakeholder dialogue with on the theme of materiality in Japan and Europe infiscal 2021. We received feedback on Hitachi’s proposed materiality and measures foreach materiality from disclosure experts, leading sustainability companies, the European
Commission, NGOs, international organizations, and institutional investors. In Europe, we
divided the dialogue into a planet session and a people session, with Hitachi explaining
its measures for the environment, human capital, and respecting human rights, while
participants gave suggestions for new perspectives and improvements.
Principal comments from stakeholders• Hitachi should indicate the direction society wants Hitachi to move along or the goals
that Hitachi itself has.
• When it comes to diversity and inclusion, it would be better to include “equity” andmake it “diversity, equity, and inclusion.”• For the circular economy, the approach shouldn’t just be to reduce materials and waste
but also to think about new business models.
• With human rights and decent work, Hitachi should go beyond conventional monitoring,audit, and other compliance approaches to engage with all aspects of supply chainsthrough partnerships with external stakeholders.

● Business with Integrity

Sustainability Strategy Promotion Structure
Under the leadership of Lorena Dellagiovanna, the Chief Sustainability Officer newly appointed
on April 1, 2022, Hitachi is promoting its sustainability strategy including green strategy. We
have created the Sustainability Promotion Meeting, which consists of the Chief Sustainability
Officer, the heads of business promotion departments at business units (BUs) and majorgroup companies, and sustainability officers at regional headquarters, to deliberate on key
sustainability measures and monitor progress towards targets. Deliberations and decisions

regarding important matters to achieve the Mid-term Management Plan are made by the Senior
Executive Committee, which is then discussed further by the Board of Directors.
With regard to important themes like carbon neutrality, the circular economy, human rights
due diligence (HRDD), and DEI, individual committees consisting of responsible staff at BUs
and major group companies work to promote sustainability throughout the Hitachi Group by
discussing measures and sharing information.

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

Mid-term Management Plan 2024

The Value Creation Process

Capital expenditure 388.7 billion yen
Manufacturing bases*
approx. 470

on for So
reati
cie
c
ty
Co

Human capital

Diverse and global talent thatcan resolve social issues

DigitalInnovation

Green
Energy &Mobility

Leverage competitive
advantages
DigitalSystems &Services

61 kt

Financial platforms andinvestments for creating value
Hitachi, Ltd.
stockholdersʼ equity

HitachiAstemoConnective
Industries

4,341.8 billion yen
Interest-bearing debt 3,126.7 billion yen
Growth investment 1,000 billion yen

Total: 67,000 persons

65%

Environment
Integrity in management

Reduction rate in total CO2 emissions
at business sites (factories and offices)

Materiality

Reduction rate in water use per unit
Reduction rate in waste andvaluables generation per unit
Reduction rate in chemical
atmospheric emissions per unit

Corporate governance

MissionPeople(vs. fiscal 2010)

Security & Safety
Diversity,
equity and inclusion

Risk management

Contribute to society through the development ofsuperior, original technology and products.

*Number of employees, R&D staff and customer co-creation centers are as of end of fiscal 2020; manufacturing bases are as of April 2021.

Wellbeing

Number of publishedapprox. 11,000
patent applications

IT, OTs, Product

Enhancing quality of life

Society

A society where
every individual is
comfortable and active

Reduction in CO2 emissions
from products and services

Resilience

Protect the earth
while maintaining
social infrastructure

Expand the use of Lumada in-house
Application cases forinternal IT services
305 cases

Reducing environmental burden(1.61 GL)

Raw material input
3,235 kt
Total water input 25.61 million m3
Total chemical substances handled

32,000 persons

Lumada business revenues 1.6 trillion yen
Lumada overseas revenue ratio
47%

62 PJ

Financial capital

Increase ofPlanetary
Boundaries

Increase competitive superiority
to expand business

R&D investments
317.3 billion yen
R&D staff*
2,550
Customer co-creation centers*
19

Total energy input (crude oil equivalent）(FY2021)Engagement indicatorin employee survey

Three Growth Drivers
Realizing Co-creation

Technologies/co-creation platforms
to ensure global competitiveness

Efficient use of resources

CFO Message

Diversity, equity and inclusion
Ratio of female managers
9.8%
Ratio of non-Japanese executive
and corporate officers
17.6%
Ratio of female executive
and corporate officers
12.2%
Digital talent

GreenIntellectual capital

Lumada Alliance
Program partners approx. 50 companies
Investments incumulative
startups
17 companies
Funding for social
contribution activities 1.9 billion yen
Natural capital

Financial Strategies

Diversification and globalizationof human capital

Production/Business processes
enhanced through IT

Partnerships for creating value
through Co-creation

Human Resources Strategies

OUTCOME

Manufactured capitalSocial and relationship capital

21

Support Peopleʼs Quality ofLife with Data and Technologythat Fosters a Sustainable Society(FY2021)

Number of employees*
368,247
Overseas employee ratio
57%
Investment in education
per employee
57,700 yen

Data

Corporate GovernanceMid-term Management Plan 2024 -Vision

The Value Creation Process

INPUT

Sustainability

28%
37%
36%
18%
35%

Accumulate resources for
growth and returns
Core free cash flows 290.0 billion yen
Total dividends
120.9 billion yen
Total shareholder return +120.9%(past five years)

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

22

Financial Strategies

CFO Message

Mode Change for GrowthWith a corporate philosophy focused on “contributing to society through the development of superior, original technology and products,” Hitachi aims to evolve even further through the provision ofcompetitive products and services that provide customers with even higher value. Our basic management policy is to enhance shareholder value through strengthened competitiveness, achieve growthin global markets and meet the expectations of our stakeholders, including customers, shareholders and employees, by maximizing the use of various management resources within the Hitachi Group,
as well as reviewing and reorganizing businesses.

Ideal Positioning in the Mid-term Management Plan 2024
With the three growth drivers of digital, green and innovation,
the Mid-term Management Plan 2024 Plan aims to realize
global growth. Under this plan, Hitachi will protect the global
environment so as not to exceed planetary boundaries
and contribute to the realization of a sustainable society
where wellbeing (human happiness) is maintained so that all
members of society can be comfortable and active.

Digital

Green

With an understanding of management issues faced bycustomers, Hitachi will contribute to the enhancement ofcustomer business value through a cycle of co-creation
with customers, which involves designing, implementing,managing and maintaining solutions, while working to resolve
subsequent issues.
We will expand earnings and achieve global growth byleveraging digital technologies to drive the value co-creation
cycle.

Hitachi will lead global GX (Green Transformation) by switching
to renewable energy, electrification, energy conservation
and automation, and contribute to the realization of asustainable society. We will proactively invest in the green
field to contribute to an annual reduction in CO2 emissionsof approximately 100 million metric tons by fiscal 2024.
Additionally, we will promote decarbonization in order torealize Hitachi Environmental Innovation 2050, which aims toachieve carbon neutrality throughout the value chain by fiscal
2050. Leveraging knowledge gained through this process
and providing environmental value tailored to each businessdomain and region, we aim to realize both a sustainable
society and growth of the Hitachi Group.

Supporting people’s quality of life with data and technology that foster a sustainable society

Protect the earth
while maintaining
social infrastructure

ation for Soc
iet
cre
o

InnovationyPlanetary
Boundaries

C

GrowthWellbeing

Green
DigitalInnovation

A society where
every individual is
comfortable and active

PeopleSociety

Customers (Power, Transport)

Customers (Financial, Public Services)

Customers (Industry, Urban)

Customers (Vehicle)

Green Energy & Mobility

Digital Systems & Services

Connective Industries

Hitachi Astemo

Focusing on its vision for the world in 2050, Hitachi will identify
areas where R&D is required while striving to create innovativetechnologies and products contributing to the resolution ofsocial issues. At the same time, we will increase the speedof innovation by further accelerating collaborations withpromising startups, government and academia.
In April 2022, Hitachi simplified its structure, grouping together
businesses with similar characteristics organized into threesectors: Digital Systems & Services (DSS), Green Energy &Mobility (GEM) and Connective Industries (CI) to streamline andspeed up its management function. With the addition of theAutomotive Systems Business (Hitachi Astemo), we will execute
these three growth strategies and provide value to customers.

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data

23

Financial Strategies

CFO Message

Corporate Governance

Performance Targets
Adjusted EBITA
Margin*1

Revenue growth

5%–7%

12%

FY2021–FY2024
CAGR

EPS*2 growthCore FCF*3(3-year cumulative)

ROIC

10%–14% 1.4 trillion yen
FY2021–FY2024
CAGR

10%

Of which about half isreturned to shareholders*1 Adjusted EBITA = Adjusted operating income − acquisition-related amortization + equity in earnings (losses) of affiliates*2 Includes share buybacks. *3 Core FCF: Cash flows from operating activities – CAPEX

Under the Mid-term Management Plan 2024, in addition to top-line and bottom-line growth,
we will focus on generating cash to be used for growth and shareholder returns. In terms ofmanagement indicators, we have introduced new indicators comprising adjusted EBITA, whichindicates primary business profitability; EPS, which indicates growth potential; and core FCF,
which indicates the ability to organically generate cash. We will increase shareholder valueby allocating approximately half of the core free cash flows generated to shareholder returns.

Business Portfolio Enhancements
Groupwide growth will be driven by increased revenue and profit from the Lumada business.
During the Mid-term Management Plan 2024, we will double Lumada business revenue and increaseadjusted EBITA to one-third of the whole. At the same time, with regard to business other than
Lumada, we will maintain stable growth in the IT, OT and product businesses while working to further
enhance profitability.
To achieve growth through Lumada business expansion, we will accelerate digital transformations,
expanding Lumada digital technologies to existing businesses. We will also utilize large-scale assets
acquired through M&A in an effort to increase the service recurring ratio.

Hitachi Growth driven by the Lumada Business
Revenues
HitachiGroup
Lumadabusiness
IT/OT/
Products
business(trillion yen)

Adjusted EBITA / Margin

10

1.2

CAGR 6%

8.3
1.4

CAGR
24%

2.7

trillion
yen
3.5

0.4

3.0

0.7

2.5

/ 9% ＋4%

2.0

0.2

6.9

CAGR
2%

7.3

/ 12%
+3%

/ 11%

/ 8%

FY2021

FY2024FY2021

Adjusted EBITA
Margin 15%

2.2
0.6

CAGR
７%

ROIC
10%

2.6
1.2

1.5

0.8

0.5

Mid-term Management Plan 2024 Performance Targets by Sector
Revenues
Lumada revenue
Digital Systems & Services
Green Energy & Mobility
Connective Industries

/ 12%

/ 16%

1.0

0.6

0.5

FY2024For example, Hitachi Energy can achieve maintenance advances and develop energy digital solutions
in various fields such as control by leveraging GlobalLogic and Lumada. Similarly, in the Railway
Systems Business Unit, we will further accelerate digital transformations through M&A and transform
our business model by incorporating Thales’ railway signal–related business, scheduled for acquisition
during fiscal 2022, and expanding the MaaS business.
In addition to the transition to a highly profitable business model, we will continue to implement
structural reforms aimed at achieving adjusted EBITA margins above 10% and ROIC of 10% or higher
across all businesses.
For details on the growth strategies of other business divisions, refer to the section starting on page 51.

0

FY2021

FY2024

Adjusted EBITA
trillion
Margin 10%
yen
3.5
3.0
2.5
2.0

CAGR
8%

2.1
0.2

ROIC
8%

2.6
0.34

trillion
yen
3.5
3.0
2.5

Adjusted EBITA
Margin 13%

2.8
0.5

CAGR
５%

ROIC
13%

3.2

Hitachi Astemo
Adjusted EBITA
trillion
Margin 9%
yen
3.5
3.0

1.1

2.5

2.0

2.0

1.5

1.5

1.5

1.0

1.0

1.0

0.5

0.5

0.5

0

FY2021

FY20240

FY2021ROIC
11%

FY2024

0

CAGR
8%

2.0

1.6

FY2021

FY2024

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

24

Financial Strategies

CFO Message

Digital Strategy

Digital transformation (DX), which uses digital technology to solve problems and transformsociety for the better, is drawing increased worldwide demand as various social challenges
come to light. Hitachi moved swiftly to focus on the Social Innovation Business, which aims to
improve quality of life (QoL) and contribute to sustainable social and economic development
by leveraging know-how and ideas with data and digital technology at its core. In April 2022,

it established Hitachi Digital in Silicon Valley to further accelerate Lumada’s expansion into
the global DX market. Serving as a command post, Hitachi Digital will formulate and execute
Hitachi’s global Groupwide digital strategy and target growth by creating synergies through thecross-fertilization of OT (control and operation technology), IT, and products.

Overview of Lumada
Concept
Launched in 2016, Lumada is a coined term that combines the words “illuminate” and “data.” It
expresses Hitachi’s desire to create value from data using digital technology to meet the needsof customers and society, as well as to help address issues and grow our businesses.

Customers and partners

OT assets

IT assets

Field Data

2 Domain expertise (solutions and customer cases)
Hitachi has knowledge and expertise in a wide range of industries and businesses, including
electric power, railways, manufacturing, and finance, as well as digital solutions that have proven
their value through co-creation with customers. To enable rapid deployment and utilization ofthese assets, we gather universal solutions and customer cases as models and accumulatethem into Lumada. The number and scope of applicable fields are growing every year, andHitachi is using Lumada’s accumulated customer cases and solutions to quickly propose andprovide solutions to resolve issues faced by customers and society.

Business Data

Co-creation with customers and partners(methodologies)

Domain expertise(solutions and customer cases)

Digital innovation platform

Lumada Overview

1 Digital innovation platform
Lumada’s digital innovation platform brings together advanced digital technologies, such as AI
and analytics. It uses AI tools and other technologies implemented on the cloud (cyberspace) tovisualize and analyze data gathered from the real world, then feed back solutions to the real worldin real time. The digital innovation platform creates and accelerates this cycle. It’s “openness” isstrong point of Lumada architecture. It connects not only Hitachi’s original technologies, but also
other companies’ products and platforms so that it can provide combination of multiple digitaltechnologies, products, and platforms.

3 Co-creation with customers and partners (methodologies)
Hitachi has created value in various forms by activating co-creation with customers and partners
through the following three initiatives. With GlobalLogic joining our ranks in July 2021, we
have gained two new capabilities—design and digital engineering—enabling us to understand
upstream issues and create solutions to them more quickly.

Ways to Accelerate Co-creation
LumadaAlliance
Program

Together with partners who agree with the purpose of our Social Innovation Business, weare building an ecosystem to accelerate open innovation. This ecosystem is expanding, withapproximately 50 participating partners and 50 other candidate companies in discussions tojoin as of March 31, 2022.

LumadaInnovation Hub

In April 2021, we opened Lumada Innovation Hub in Tokyo as a flagship base to accelerateinnovation by sharing wisdom and ideas with our customers and partners. It will accelerate
DX by serving as a hub to connect diverse domestic and international co-creation sites andhuman resources. As of March 31, 2022, over 5,100 people from more than 300 companies
have used the service, making it a place for active innovation.

LumadaSolution Hub

We provide Lumada solutions that combine technologies and know-how cultivated throughco-creation with our customers, as well as mechanisms to promote the reuse of applications.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Make the Social Innovation
Business more
profitable with Lumada

Mid-term
Management
Plan 2018• 2016
Lumada global launch• 2017
Acquisition of Sullair

25

Human Resources Strategies

Financial Strategies

CFO Message

Lumada Performance Highlights

Efforts to Strengthen Lumada

Provide an IoT
platform (Lumada)to take the Social Innovation
Business to the next stage

Data

Corporate Governance• 2019Acquisition of JR Automation
Launch of Lumada Solution Hub

Digital engineering

System integration

Connected productsManaged services

Adjusted EBITA ratio

Strengthen Lumada
to accelerate the Social
Innovation Business
Mid-term
Management
Plan 2021

Lumada Business revenues *Excludes listed subsidiaries

Mid-term
Management
Plan 2024

16%
13%

12%

2,700.0 billion yen

1,870.0 billion yen• 2022
Establishment of Hitachi Digital LLC
Establishment of GlobalLogic Japan

1,393.0 billion yen• 2020Acquisition of ABB’s power grid business (now Hitachi Energy)
Made Hitachi High-Tech a wholly owned subsidiary
Acquisition of FusioTech
Launch of Lumada Alliance Program• 2021
Acquisition of GlobalLogic
Opening of Lumada Innovation Hub in Tokyo

FY2021(result)

FY2022(forecast)

Hitachi Astemo

1%

Digital Systems &Services

45%

External evaluations
2021• Received DX Grand Prix award in “Digital Transformation Brand 2021”• Named a leader in the “2021 Gartner® Magic Quadrant™ for Industrial IoT Platforms” report (second consecutive year)2022• Received DX Grand Prix award in“Digital Transformation Brand 2022” (second consecutive year)*Gartner Disclaimer: Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only
those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organizationand should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any
warranties of merchantability or fitness for a particular purpose.
Gartner and Magic Quadrant are registered trademarks of Gartner, Inc. and/or its affiliates in the U.S. and internationally and are used herein withpermission. All rights reserved.

FY2024(target)FY2021
Lumada Business:
Revenue Breakdownby Segment
Connective
Industries

38%

Green Energy &Mobility

16%

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

26

Financial Strategies

CFO Message

Evolution of Lumada
Shift to Cyclical Business Model
As the term VUCA* implies, we are in an era of rapid change, symbolized by technologicaladvances, diversification of customers’ lifestyles and values, and market volatility, while
the focus of business is shifting from the sale of goods to subscription-type solutions, andservice-type businesses are emerging at an ever-increasing rate. To address such changes
in customer needs and business conditions, we will evolve Lumada into a cyclical businessmodel that continuously provides value by utilizing digital technologies, such as data analysis
and AI. Specifically, as shown on the right, Lumada will continuously implement a cycle ofunderstanding customer issues (PLAN: first quadrant), creating and implementing solutions(BUILD: second quadrant), operating (OPERATE: third quadrant), and maintaining (MAINTAIN:
fourth quadrant) to enhance value for our customers. In this way, we will continue increasing
value for customers.

Secure data management
and hybrid cloud support
Hitachi Vantara, Hitachi Systems, etc.
MAINTAINManaged services

Design thinking and digital engineering skills are extremely effective in capturing the needs andchallenges of customers and society, incorporating them into agile solutions, and increasing
value for customers. With this in mind, we acquired GlobalLogic, which has design thinking anddigital engineering capabilities. To date, we have strengthened and developed our business byleveraging our customer base and capabilities in each of the four quadrants. With the additionof GlobalLogic, we can now connect each quadrant more seamlessly and accelerate the cycle
continuously. We have also expanded our global footprint. We will leverage this cycle to capture
repeat orders and grow Lumada in response to the expanding market.
Leveraging the strengths of Hitachi Energy, Hitachi Vantara, and GlobalLogic, we are alreadyproducing outcomes from OT and IT synergy projects and have initiated a cycle of digitalbusiness development, co-provisioning, demonstration, and implementation.

Digital engineering

PLAN

Understand our customers’
management challenges
Design Thinking

Predictive MaintenanceOperate, maintain,
and assess for the next step

AI tools / Methodologies /Customer Cases / Solutions

Develop solutions with
IT/OT/Products
Digital Twin

Remote/Automation

Implement solutions*Acronym for “volatility,” “uncertainty,” “complexity,” and “ambiguity” (coined term)

Leveraging GlobalLogic’s Capabilities

Design thinking,digital engineering capabilities
GlobalLogic, etc.

OPERATE

Connected products

Product, OT knowledge, customer base
Hitachi Energy, Hitachi Rail, JR Automation, etc.

System integration

BUILD

Highly reliable system integration
Hitachi Vantara, Hitachi Solutions, etc.

Cycle Configuration
Digital engineering business: Driving problem resolution through design thinking
System integration business: Building IoT systems for data collection and analysis
Connected products business: Improving productivity and reducing operating costs by introducing
Internet-connected products and remote/automated solutions
Managed services business: Using operation monitoring and predictive failure diagnosis to achieveadvances in operation and maintenance while creating and embracing new business opportunities insuch areas as ticketing and digital payment utilizing secure data management
Hitachi’s Strengths

Hitachi’s major strength, which other companies cannot immediately emulate, is its ability toprovide continuous value to customers and society by linking the capabilities of each quadrant.
In addition to GlobalLogic’s design thinking and engineering capabilities, such capabilities
include the system integration capabilities that our Front Business Unit, Hitachi Solutions,and Hitachi Vantara have developed over many years in Japan and overseas, as well as thecustomer bases and expertise of Hitachi Energy, Hitachi Rail, and JR Automation and the
hybrid cloud support of Hitachi Vantara and Hitachi Systems.

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

27

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Hitachi Digital: Spearheading Development and Execution of Digital Strategies across the Hitachi GroupIn April 2022, we established Hitachi Digital as a command post to accelerate the deployment
of Lumada globally.
Hitachi Digital is based in North America, where the market is particularly large. Targeting
the rapidly growing global DX market, it will spearhead the formulation and execution of
Hitachi’s Groupwide digital strategy. In North America, the speed of progress and evolution oftechnologies and solutions is extremely high, so Hitachi Digital will play a role in incorporating
best local practices and promoting the expansion of Lumada globally. In addition to Hitachi
Vantara and GlobalLogic, we will accelerate the expansion of Lumada across the Hitachi Groupby driving synergy co-creation with group companies in the OT sector, including Hitachi Energy,
Hitachi Rail, and JR Automation.
To this end, the Digital Systems & Services (DSS) sector plans to invest 200 billion yen in growing
Lumada under Mid-term Management Plan 2024. For example, we will look to invest in creatingsynergies with Hitachi Energy and Hitachi Rail, as well as go-to-market initiatives, such as green
transformation (GX) of social infrastructure, while leveraging Hitachi’s own assets to develop
solutions and attract digital talent.

Hitachi Digital will lead the development and implementationof the digital strategies across the Hitachi Group

Provide customers of all the Hitachi Group with
innovative values based on OT × IT × ProductsInterview with CEO of Hitachi Digital
My mission is to expand the scale of Lumada’s business in the Hitachi Group from 1.4
trillion yen to 2.7 trillion yen. The challenging part of this mission is to grow Lumada’s
business in fields where its presence is not high, such as the Green Energy & Mobility
and Connective Industries sectors.
As a former member of Hitachi’s Control System Platform Division, I have gained personal
experience in OT, and I was also involved with Hitachi Global Life Solutions, which
focuses on consumer electronics (products). One of my important roles is to expand new
business opportunities fields that bring together OT/products and digital technologies.
Using differing business timelines, business models, and KPIs, I will continue striving toconnect OT/products and digital to achieve business successes.
I will chair a Board meeting attended by the CEOs of Hitachi Vantara, GlobalLogic, Hitachi
Energy, Hitachi Rail, and other companies. At the meeting,
we will share each company’s digital strategy, determine
areas of focus and investment, and make decisions on how
to approach customers and develop sales and marketing
activities.

Jun Taniguchi,
Vice President and Executive Officer,
CEO of Hitachi Digital LLC

Green Energy & Mobility
Connective Industries
Hitachi Astemo

Digital Systems & Services

Hitachi Digital
Develop and implement the digital strategies across the Hitachi Group
Organize Groupwide projects with locally-led decisions
to accelerate the speed of value creation and provision

Investments in growth for the global expansion of the Lumada businessContinuously invest in the resources and capabilities necessary forbusiness expansion at each quadrant of the customer’s problem-solving cycle
Co-creation, Digital engineering

Global delivery

Cloud, Managed services

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

28

Financial Strategies

CFO Message

Our Approach to Lumada’s Business Expansion
From the perspectives of customers’ digital utilization and Hitachi’s business opportunities, we will broadly divide our approach into the following two target areas.

Target Area 1

Target Area 2

In the technology, financial services, retail, telecommunications, and media industries, where
customers are increasingly using digital technology, the DSS sector will take the lead inapproaching GlobalLogic’s customer base. Meanwhile, Hitachi Vantara and GlobalLogic will
collaborate to jointly develop powerful IT solutions and expand their business through crossselling. In fiscal 2021, we combined GlobalLogic’s design thinking and digital engineering
services with Hitachi Vantara’s expertise in cloud services and system operation andmaintenance, enabling us to provide end-to-end solutions that meet customers’ DX needs.

In industries with large assets, such as energy, mobility, automobiles, manufacturing, andhealthcare, we expect digital technology to be the driver of future growth. Here, we will
combine OT, IT, and products to provide customers with end-to-end solutions and services,
including grid automation, MaaS, Industrial Internet of things (IIoT), and digital healthcare,demonstrating the true power of “One Hitachi.” For example, Hitachi Energy, Hitachi Vantara,
and GlobalLogic are working together to expand digital solutions in the energy sector by
upgrading asset management software and developing next-generation energy platforms.

Lumada Synergy Case Study
Comments from Project Leaders (Hitachi Energy and Hitachi Vantara)

Asset Management Innovation

PLAN

Remote/Automation

Implement solutions

Remote and automatic inspection offacilities using “AI image diagnostics”

Scaling

Power utilities

APM: Asset Performance Management

Railways

Digital Twin

Implementation of facilities
diagnosis and management
systems by “digital twin”

BUILD

OPERATE

MAINTAIN

Hitachi Energy, Hitachi Vantara, and GlobalLogic have launched a project to promote nextgeneration green digital services by leveraging their respective strengths. Targeting the facility
asset management segment of the social infrastructure, public utilities, and manufacturingindustries, the three companies aim to provide end-to-end services covering everything from
customer experience design to solution development, delivery, and maintenance. Among theirinitiatives, Hitachi Energy and Hitachi Vantara took the lead in collaborating on a projectcalled “Lumada Asset Management” in fiscal 2020. Here, Hitachi Energy has integrated DigitalEnterprise, a suite of asset and field operational management solutions provided mainly to electric
power companies, into Lumada, and both companies are now offering large-scale solutions
and engaging in marketing activities targeting the electric power sector in North America andother regions. GlobalLogic joined the project in July 2021, leveraging its design thinking anddigital engineering expertise to provide product development and service design capabilities.
This has strengthened Lumada Asset
Providing condition-based
Optimizing facilities cost byservices by using
Management, which is now expanding“APM modeling” Understand the customers’ “Design thinking”
management challenges
its business with the development
Predictive
Design Thinking
Maintenanceof facility inspection solutions using
Operate, maintain,
Develop solutions withdiagnostic imaging.
and assess for the next step
IT/OT/Products

Buildings, Data centers

The partnership with Hitachi Vantara is a collaboration in go-tomarket as well as product development support. Traditionally,
Hitachi Energy has focused on customers in the utility andtransportation sectors, but through our collaboration with Hitachi
Vantara, we have been able to strengthen our presence in sectors
such as mining, as well as expand into other manufacturingindustries where we had little or no presence.
Bryan Friehauf,
Just looking back over the past year, we have been able to reach Senior Vice President,a large number of customers. Hitachi Vantara has been a strong Enterprise Software
Solutions, Hitachi Energy
value-delivery partner for Hitachi Energy.
We are working together in three areas. First, on initiatives thatcomplement each other’s Lumada software capabilities. This
includes Hitachi Energy’s Asset & Works Management software, andHitachi Vantara’s IoT-related capabilities that connect devices anddata to gain actionable insights. These software capabilities are very
complementary, and are industry leading elements of Lumada.
The second is an effort to accelerate and extend the development of Phil Gruber,
both companies’ capabilities. GlobalLogic is also collaborating on this. Energy Industry Leader,
The third is the market deployment of these capabilities. The sales Hitachi Vantara
forces from Hitachi Energy and Hitachi Vantara are working together
on this.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

29

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Green Strategy

Becoming a Climate Change Innovator
In recent years, many countries have set goals for carbon
neutrality and made investments toward that end amida growing awareness of the importance of international
efforts to protect the global environment. Aiming to becomea Climate Change Innovator, Hitachi is working to resolve
environmental issues and achieve a higher QoL (Quality ofLife) through its Social Innovation Business in collaborative
creation with stakeholders.

We are working to realize a “decarbonized society,” a “resource efficient society,” and a “harmonized society with nature,” asdefined in our “Environmental Vision” and in our long-term environmental targets, “Hitachi Environmental Innovation 2050.” Inparticular, we are accelerating our efforts to decarbonize. In addition to the targets for carbon neutrality at our business sites(factories and offices) by fiscal 2030, we set a target of achieving carbon neutrality throughout the value chain by fiscal 2050. Thistarget covers CO2 emissions from our procurement partners and from the use of Hitachi products and services by our customers.
By collaborating with customers, partners, and governments, Hitachi will lead the way toward a better world, with the aim ofrealizing a decarbonized society.
To realize Hitachi Environmental Innovation 2050, Hitachi establishes three-year indicators and targets, and conducts environmental
activities. BUs and major group companies also set their own targets based on the Hitachi Group’s Environmental Action Plan andstrive to achieve their targets.

Environmental Vision
Hitachi will resolve environmental issues and achieve both a higher quality of life and a sustainable society
through its Social Innovation Business in collaborative creation with its stakeholders.

Long-term Environmental Targets: Hitachi Environmental Innovation 2050

Strengthen GX Promotion Organization
To uncover business opportunities centered on theenvironment and lead value creation throughout the HitachiGroup and across sectors, as well as realize sustainablegrowth through GX (Green Transformation),
the Global Environmental Division wasestablished in April 2022, with executive
officer Lorena Dellagiovanna as Headof Global Environment Division (former
Chief Environmental Officer). At thesame time, she was appointed to
the newly created position of Chief
Sustainability Officer.

Lorena Dellagiovanna
Vice President and Executive Officer,
Chief Sustainability Officer, Head of
Global Environment Division, and CDIO

For a Decarbonized Society

For a Resource-Efficient Society

Achieve carbon neutrality by FY2050
throughout the value chain,

Build a society that uses water andother resources efficiently
with customers and society

reduce CO2 emissions
by 50% by F Y2030(compared with FY2010)

Achieve carbon neutrality
by FY2030 at business sites(factories and offices)

For a Harmonized Society with Nature

Impacts on natural capital

Efficiency in use of water/resources
FY2050

Minimized

50% improvement(compared with FY2010 in the Hitachi Group)

Environmental Action Plan
To achieve its Long-term Environmental Targets, Hitachi sets indicators and targets every three years.
The “Environmental Action Plan for 2024,” covering the targets for FY2022 through FY2024, is in progress.
One of the decarbonization targets at Business Sites (Factories and Offices)
Reduction rate target in total CO2 emissions(compared with fiscal 2010)

Fiscal 2022

Fiscal 2023

Fiscal 2024

32%

35%

50%
Sustainability report

P.33

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Hitachi GX Strategy
GX for GROWTH
Enabling our customers to reduce CO2 emissions
through enhanced product offerings

GX for CORE
Decarbonizing Hitachi activities through Scope 1 & 2carbon neutrality commitments by FY2030 and Scope 3 by FY2050

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

30

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

To accelerate and promote Hitachi’s long-term environmental targets as measures, Hitachi developed two business strategies, GX
for GROWTH (customer and society decarbonization) and GX for CORE (Hitachi decarbonization). Under GX for GROWTH, we will
support customers in reducing CO2 emissions by expanding Hitachi’s greener and more efficient product portfolio and providing
customers with E2E (End-to-End) solutions across sectors. By fiscal 2024, we aim to contribute to reduce CO2 emissions byapproximately 100 million metric tons per year, equivalent to 1.1 trillion yen in monetary terms. We will accelerate the developmentof various solutions realizing energy transition, the electrification of mobility and the conservation of energy. GX for CORE aims todecarbonize our own operations. We aim to achieve reductions in Scope 1 and 2 by investing approximately 37 billion yen over the
next three years in efforts to conserve energy and generate renewable energy, and also combining measures such as the purchaseof renewable energy, the acquisition of green power certificates and the purchase of credits for neutralization.

Achievement of Hitachi GX Strategy can bring New Value
Hitachi believes a strong commitment to sustainability will be the driving force for realizing enhanced corporate value. Specifically, Hitachi believes GX forGROWTH will enable further enhancement of corporate value through the provision of increased value through the new E2E service solutions for mobility
and energy as a service. In EV Value Chain as a Service, we are developing turnkey solutions and promoting the shift to EVs for bus fleets, light commercial
vehicles and private vehicles. Hitachi aims to increase value by providing more environmentally friendly products and solutions as a leader in carbon-freesocieties. We will proactively engage with our own management resources in addition to capital alliances with outside companies. To this end, we areconsidering investments in startups with the aim of developing green technologies.
We also believe we can create the value through efficiency gain with less energy consumption and further utilization of renewable energy based on GX for
CORE. As one example, we are considering the use of wide-area energy centers and the optimization of energy at multiple sites within facilities management.
We are also avoiding costs to facilitate future high-quality credit purchases for neutralization and considering the use of green finance to reduce capital costs.

Road Map for Realizing Hitachi’s Vision
1 reduce their footprint• Increase sale of green products (with higher efficiency)• Propose E2E green solutions (BTaaS*3, EVaaS*4)• Launch carbon management platform

2 Invest in new• Premier Technologies development (hydrogen, CCS*5, DAC*6, energy storage)

3 Build Circular Society• Waste reduction• Usage 3R materials

4 Lead Carbon Neutrality
1• Carbon Neutrality of Hitachi operations

5 External interaction• Launch green bonds• Improve ESG rating

Enable customers to

GX forGROWTHgreen technologies

GX for
CORE(Scope 1 & 2 + 3)*

Enablers

2024•100 Mt-CO2e*2•Pilots completed

2027

HitachiEnterprise
Value 2021

Value-addedfrom GX
for CORE

Value-addedfrom GX
for GROWTH

2030

2050

Roll out to new customers/geographies•100 MW HV power-electrolyser/methanation•100 MW BESS*7•Artificial photosynthesis•Apply eco-design for new product development•Battery recycling•Renewable recycling•CN2030•CN2050(Scope 1 & 2 + Scope 3 50%)

•Green bond framework•ESG management system

HitachiEnterprise
Value 2030

(Continuous issue)•Highest rank in each assessment•(Expand eco-system)*1 SBTi certified on Scope 1 & 2 carbon neutrality by 2030, Scope 3 40% reduction by 2030 vs. 2010, aligned with 1.5°C commitment. Certification will be updated for new targets.
*2 CO2 equivalent*3 Battery as a Service*4 EV Value Chain as a Service*5 Carbon Capture and Storage*6 Direct Air Capture*7 Battery Energy Storage System(Scope 1 & 2 + 3)

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Business Strategies

Value Creation

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data

31

Financial Strategies

CFO Message

Corporate GovernanceSpecific GX for GROWTH, CORE Initiatives
GX for GROWTH
Through GX for GROWTH, Hitachi Energy will lead group contributions to reducing the carbon footprintof customers throughout the world. Our goal is to contribute to an annual reduction in CO2 emissions ofapproximately 100 million metric tons by fiscal 2024, equivalent to about 1.1 trillion yen in monetary terms.
Sustainable products and systems, power electronics and digital solutions are being deployed to build thefoundation for a system of systems and enabling the energy transition. Technologies such as HVDC (HighVoltage Direct Current), FACTS (Flexible Alternating Current Transmission Systems) for power quality anddigital solutions play an important role in the integration of renewables, long-distance power transmission,
grid interconnections and ensuring flexibility, resilience, and efficiency. Additionally, Hitachi Rail successfully
tested a storage battery–powered tram on a section of track in Florence, Italy. Hitachi will contribute to lower
energy consumption in global urban transportation (railways). In the Green Energy & Mobility sector, withplans to invest 200 billion yen in R&D under the Mid-term Management Plan 2024, we will contribute to
reducing CO2 emissions from customers globally through the creation of new technologies, products andsolutions that improve energy conversion efficiency. Hitachi Astemo is developing EV motors and inverters,
which are key components amid the shift toward electrification in the next-generation vehicles (xEV) field
and we plan to invest 300 billion yen in R&D under the Mid-term Management Plan 2024 for electrification.To
accelerate activities, we continue to invest in future technologies such as hydrogen, artificial photosynthesis
and carbon (or CO2) utilization. Further, in utilizing services that create an ecosystem through the collectionof vast amounts of data obtained in the real world (physical space) and analyzed in cyberspace, we willcontribute to energy conservation in the manufacturing and logistics fields, etc.

Enable customers to reduce their footprint
Contribution to CO2 reduction: Approx. 100 million metric tons/year

FY2024 Target
T&D

Customers(Equivalent monetary value: Approx. 1.1 trillion yen)*2
Non-fossil
fuel energy

Oil

Gas

Transport

Automobile(car/motorcycle)

BuildingIndustry

Logistics

GX for GROWTH 1
Life-cycle CO2
reduction in annual
products shipped*1

million metric tons
Approx.
(Approx. 980 billion yen)millionApprox.
metric tons
(Approx. 72 billion yen)

Approx.
million metric tons
(Approx. 80 billion yen)

Value Provided

Energy Transition

Electrification

Energy Savings(equivalent monetary
value breakdown)*2*1 Base year FY2013

6.5

89

7.2

*2 Estimated carbon price as 11,000 yen per metric ton-CO2 and converting CO2 reduction by decarbonization solutions into monetary value

Sector focus business

GX for GROWTH 2

Green Energy & Mobility

Hitachi Astemo

Connective Industries Digital Systems &Services(Source: Aibel)

Carbon-free solution

Carbon-free mobilityxEV components

Logistics (Ecosystem(HVDC systems)(Battery-powered tram)(EV motor) (EV inverter)

services connected by CPS)

Visualization of energy
management (EcoAssist)

Omika Green Network
In 2020, Hitachi’s Omika Works (Hitachi City, Ibaraki Prefecture) was selected as aLighthouse advanced factory by WEF (World Economic Forum), a first for the factory of aJapanese company. As a factory implementing Hitachi’s Lumada solutions combining OT,
IT and products, the Omika Works is engaged in resolving various issues and creating new
businesses by mobilizing technologies and know-how in a variety of fields.
With this factory as a hub, Hitachi created the Omika Green Network to promotedecarbonization alongside stakeholders, conduct various demonstrations in the Omika
Works field and accumulate technologies and know-how related to decarbonization. These
efforts aim to achieve carbon neutrality across the entire value chain and support customer
business activities and environmental efforts through the provision of decarbonization
measures to customers. We set the goal of realizing carbon neutrality at the Omika Works in
2024, returning the technology and knowledge gained to local communities and suppliers.

• Creating business opportunities• Accelerating commercialization
by experimental verification

Horizontal deployment to supply-chain
companies and local communities
Functions asa model factory
OT co-creation and experimental
verification environment
Showcase of solutions to issues

Origin Park

Sharing in the visionof the Hitachi GroupKyōsō-no-Mori,
Central ResearchLaboratory

LumadaInnovation HubTOKYO

Practice

Identifying issues,
OT co-creation,and experimental verification

Omika Works

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

The Value Creation Process

GX for CORE
As a decarbonization initiative, Hitachi has set a goal for
fiscal 2024 of reducing CO2 emissions by 50% comparedwith fiscal 2010. The specific aim is to reduce emissions
33% by conserving energy and generating renewable energy.
At Hitachi Rail’s Tito Scalo plant (Italy), 50%–60% of all theenergy used onsite is generated from sunlight, supplying morethan 700 MWh of electricity per year through solar power andreducing 325 metric tons of CO2 annually. We are aiming to
reduce CO2 emissions 33% by energy saving and renewableenergy generation, 31% by renewable energy purchases,
26% by green power certificate purchases and 10% by highquality credit purchases for neutralization. Combining various
initiatives, we will reduce CO2 emissions by 50% across theentire value chain by fiscal 2030 (compared with fiscal 2010),
achieving carbon neutrality by fiscal 2050. To accelerate these
efforts, Hitachi will invest 37 billion yen in energy conservation
and renewable energy power generation over the next three
years. To realize carbon neutrality by fiscal 2050, we areformulating plans to establish monitoring mechanisms andmeasurable KPIs for up and downstream CO2 emissions. In
terms of downstream CO2 emissions, we are working toward
two goals: CO 2 emissions source transparency and thedevelopment of energy-saving products.

Business Strategies

Value Creation

Sustainability

Mid-term Management Plan 2024

Data

32

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

On track to achieve carbon neutrality for Scope 1 & 2 by FY2030,
strengthen commitment for CN by FY2050 and Circular Economy
Lead on Carbon Neutrality (Scope 1 & 2 + 3)
Scope 1 & 2: 50%* reduction of CO2 emissions in FY2024 (37 billion yen investment for energy saving and an RE facility in three years)
Scope 3: 50%*1 reduction by FY2030, carbon neutrality throughout value chain by FY2050
1

Scope 1 & 2 decarbonization levers

Scope 3

Levers to abate CO2 emissions
Energy saving + RE generation

RE purchase

33%

31%

RE certificate

Neutralization

26%

10%

Upstream

Downstream

Establishing monitoring
scheme andsetting visible KPIs

Accelerating reductions
to promote CO2 visualizationand energy-saving products*1 50% reduction: base year FY2010

Completed/Ongoing projects
Mass-consumption type
• Energy saving/improve HVAC
• RE self-consumption

Area intensive type
3 areas in Ibaraki

Aiming for a 100% fossil-free factory(Hitachi Rail)• Use as energy center• Generating 50%–60% of energy
from solar panels• Asset share• Facility management BPO*2

HitachiYokohama OfficeHitachinaka

Rinkai Factory• Expecting to reachmore than 700 MWh• Reducing carbon emissions by 		
325t annually

Tsuchiura
Omika WorksOkayama Data Center*2 Business Process Outsourcing

Mito WorksNaka Site

Tito Scalo Site, ItalyHitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data

33

Financial Strategies

CFO Message

Corporate GovernanceInitiatives for Realizing a Circular Economy
Hitachi will promote the transition from a conventional
linear economy to a circular economy with the aim ofcreating a resource recycling–based society. Defining
KPIs that establish target values to be achieved bybusiness units and major group companies, we set
goals such as reducing the volume of manufacturingsite waste disposed in landfills. In the procurement,
development and design divisions, we promoteresource conservation through the introduction ofdesign methods that are easily dismantled and use
recyclable materials. We will also promote ecodesigns, including increased use of recycled andeco-friendly materials. Further, we will work on
long-term product usage, including the reuse, repair,
improvement and remaking of products that are nolonger needed. To support customer needs as theyshift from goods to experiences, and society as it
shifts from ownership to usage, Hitachi will provide
services utilizing leasing, pay-per-use systems
and subscriptions to promote the effective use ofresources and assets. In the field of technology
developments supporting resource recycling, we
will accelerate decarbonization efforts through thedevelopment of raw materials, products, tools,
applications and services.

Recycling 99% of Transformers
Hitachi Energy is promoting efforts in cooperation with Sweden’s Stena Recycling to reuse approximately
99% of materials generated from the disposal of old transformers. At the end of their life, old transformers
are dismantled and recycled to minimize their impact on the environment. About 64% of materials arerecycled; 35%, including oil, is either recycled or incinerated for conversion to energy; and the remaining
1% is used as scrap. The provision of services has already been launched in northern Europe, with plans
to expand in the future.

Transformer at the substation

Remanufacturing of Air Compressors (Hitachi Industrial Equipment Systems, Sullair)
Hitachi Industrial Equipment Systems and Sullair(US) promote rebuilding and remanufacturing of aircompressors that have been in operation at customer
sites for a long time. Air compressors received
from customers are disassembled and inspected,
and reusable parts are repaired and adjusted.
They are then reassembled and performance
inspected, and through other numerous steps,
the air compressors finally restore their original
performance and functionality. This allows fewer
parts to be manufactured, and significantly reduces
the energy required for processing raw materials
relative to manufacturing new products.

Work steps
Disassembly,
cleaning, andinspection

Casingregeneration

Disassembly work

Rotor coating

Block decomposition line

Measurement
anddistribution ofgap between
rotorsGap measurement
between rotors

Assemblyandadjustment

Block assembly

Note: Photos are from Hitachi Industrial Equipment Systems

Participation in Public Forums

CDP Evaluations

Hitachi proactively participates in numerous global public forums focused on global sustainability challenges.

Achieved CDP’s Highest Score of “Grade A”
in Climate Change and Water Security

COP26 (2021 Glasgow)

World Economic Forum (WEF, 2022 Davos)• Supported as Principle Partner• Held the Hitachi European Innovation Forum• Hosted Towards Net Zero—Greening
Cities Through Low Carbon Connected
Urban Transport• Participated in the mainstream climate leadership
panel with the Alliance of
CEO Climate Leaders

Comprehensive
testHitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data

34

Financial Strategies

CFO Message

Corporate Governance

Innovation Strategy

Innovation Strategy in the Mid-term Management Plan 2024

Under the Mid-term Management Plan 2024, we will expand investments in innovation acrossthe entire Hitachi Group for further growth. A cumulative total of 100.0 billion yen will be invested
in advanced research during the three-year plan, expanding Groupwide R&D investment to 1.1
trillion yen. We will also invest an additional 50.0 billion yen in corporate venturing (CV). Throughthese investments, Hitachi aims to create radical innovation to solve future societal issues.

Innovation Promotion Structure for DX/GX Global Growth
Fully leveraging the Hitachi Group’s technology platforms, human capital and the customer
network, we will create DX/GX innovations under a global structure. The Research & Development
Group with a highly diversified workforce of 2,300 people, will be leading the creation of
innovation through digitalization and other technologies. Together with Hitachi Ventures GmbH
(HVG), we will work to create innovation that will solve issues faced by customers and society
through collaborations with leading startups in a wide-range of fields. The Global Intellectual
Property Group is promoting the establishment of a new intellectual property platform to provide
value to global customers under experienced global leadership. We will accelerate global
business growth together with Hitachi Energy, GlobalLogic, and business units in each region.

Protect Earth

Resolving customer and societal issues
with data and co-creation

Sustain society

MMP 2018

Wellbeing

A society where every individual
is comfortable and active

MMP 2021

MMP 2024

April 2019
Opened Kyōsō-no-Mori

Established Innovation Growth Strategy Division

Launched NEXPERIENCE/Lumada

Reorganized technology platforms

Established global collaborative creation hubs
for co-creation with customers in Japan,
North America, Europe, China and Asia

Integrated the technology platforms of
Hitachi Energy, Hitachi Astemo, Hitachi Vantara
and GlobalLogic; created synergies

Create digital service businesses

Open Labs

June 2019 Launched new CV fund company

Create radical innovation

Acquired business models
through startup investment and collaborations

Backcast from 2050 to resolve
customersʼ future management issues

Pursued innovation through collaborative creation
Established a three-center structure for co-creation
with customers (CSI), technology innovation (CTI)
and exploratory research (CER)

Collaborated with the University of Tokyo, Kyoto University,
Hokkaido University, University of Cambridge,
Tsinghua University, and the KOBE Biomedical Innovation Cluster

Formulate innovation investment strategies
to inspire customersʼ next of growth
Provide value through OT × IT × Products
to support customer growth

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

Cumulative investment(over three years)

Advanced research investment:
100.0 billion yen

Enhance R&D investment in advanced research

1.1trillion yen

874.4

billion yen

812.1

200.0

About
billion yen

1,020.0

higher

62.3

100.0

MMP 2021

MMP 2024

Sectors,
Group
companies
Advancedresearch
investment(corporate)

Innovation Growth Strategy Division
Formulate and execute innovation investment strategies
that stimulate further customer growth
Keiji Kojima, President & CEO

Research & Development Group 2,300 people
Drive innovation with digitalization and technologies toprovide value through co-creation
Norihiro Suzuki, CTO and GM of the R&D Group

Global Intellectual Property Group 200 people
Establish intellectual property platform to provide value toglobal customers
Stephen Manetta, CIPO

Asia
India: Strengthen digital engineering
APAC: Focus on green buildings and smart cities

CV investment:
50.0 billion yen

Enhance investment in corporate venturing
Cumulative fund size
(billion yen)

Expanding Hitachi Group Investments in Innovation

Planetary Boundaries

R&D investment(billion yen)In the Mid-term Management Plan 2024, we will be focusing on generating innovation
through digitalization to achieve global business growth. During the Mid-term Management
Plan 2021, we opened Kyōsō-no-Mori and expanded co-creation with customers, whilereorganizing technology platforms and acquiring business models through startup investment
and collaborations. To further accelerate these initiatives under the Mid-term Management
Plan 2024, the newly established Innovation Growth Strategy Division will formulate innovation
investment strategies that will inspire the next of growth for customers, and under this strategy,
promote the creation of digital service businesses and radical innovation.

ExpandHV Fund

100
80
60
40
20
0

HV
Fund 1FY2019HV
Fund 2

FY2021

50.0

MMP 2024

EuropeChina

Create the environment
business in collaboration with
Hitachi Energy and Hitachi RailParticipate in the European
Environment ecosystem

Expand industrial GX/DX
business in collaboration
with local group companies

Hitachi Energy: Gerhard Salge, CTO

Hitachi China: Yasushi Harada, CTO

Strengthen decarbonization
efforts

North America

Japan

Enhance creation of digital
service businesses throughcooperation with GlobalLogic,
Hitachi Vantara and Hitachi
DigitalPromote customer co-creation
targeting DX/GX, establish
world-leading technology
platforms, create radical
innovation addressing planetary
boundaries and wellbeing

GlobalLogic: Sunil K. Singh, CTO

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data

35

Financial Strategies

CFO Message

Corporate Governance

Generating Digital Service Businesses with the Lumada Growth Model
Under the Mid-term Management Plan 2024, we will further develop the Lumada growth model to co-create innovation together with customers and promote digital services that address ourcustomers’ next management challenges. To ramp up the Lumada growth cycle, we will deepen our understanding of captured signs and changes in society and customers, draft together with ourcustomers visions for new growth, and provide innovations to realize that growth. In the Lumada growth model, we will promote the categorization of business segment characteristics and operations
as well as work with the global front teams to strengthen marketing activities, to materialize and scale up through co-creation.

Backcasting from 2050 to Generate Radical Innovation
In formulating the Mid-term Management Plan 2024, we explored future societal issues throughrepeated discussions with international organizations, universities, customers and startups.
Based on these discussions, we understood that the societal challenges that need to beaddressed as we approach 2050 are “an environmentally-neutral society,” “a society which
supports an active 100-year lifespan of its citizens,” and “the co-evolution of digital technologies,
people and society,” and set them as areas of focus. We are addressing these concerns throughsuch initiatives as “energy storage and supply” and “direct air capture” to realize a carbonnegative society; “minimally invasive cancer treatment” and “designed cells” to overcome cancer
and intractable and infectious diseases; and “Ultra Big Data Management” and “silicon quantum
computers” to facilitate a data economy and computing innovation. Hitachi will be taking on thechallenge of creating radical innovation to resolve future issues by backcasting from 2050.

Value

Environment

Present

2030

Arrival of a hydrogen-based society
realizing carbon neutrality• Carbon pricing• Hydrogen mobility
Development of a circular economy
facilitating zero waste and acomprehensive recycling-based society• Restrictions on plastics

2050• Carbon neutrality• Full-scale utilization ofhydrogen energy

Environmentally-neutral society• Energy storage and supply• Direct air capture• Transition to bio-based andresource recycling

Safety,Security &Healthcare

Eradication of cancers with biomedical
technologies• Overcome COVID-19 pandemic
Advances in AR/VR enabling flexible workstyles• Remote work

Resilience

Advances in AI leading to the automationof a wide range of operations• RPA acceleration due to labor shortage
Acceleration of technology development
cycles using quantum computers• Risk analysis, Traffic control• Expansion of regenerative
medicine, Cell therapy
market expansion• Remedy gaps using avatars
and online education

Society with active,
100-year lifespans• Minimally invasive cancer
treatments• Designer cells• AI governanceCo-evolution ofdigital technologies,
people and society• Material and new drug
developments• Ultra Big Data Management• Silicon quantum computerInd

Ecosystems

us

tri

Radicalinnovation
ecosystems
Academia

Cutting-edge facilities

es

Glo
ba
gov l instit
ern utiome
nts ns/D
R&

Customers and partnersses
sin tsBu uniups

Foster innovation
ecosystems

Innovation andresearch strategiesrtSta

Through investments and collaborations with startup companies, Hitachi will achieve radical
innovation and acquire groundbreaking business models contributing to the expansion of theLumada business. In 2019, we established Hitachi Ventures GmbH (HVG) and launched the first
fund. We have now launched a second fund and invested in 17 companies. In May 2022, HVG
CEO Stefan Gabriel was ranked 19th on the Top 50 Powerlist by Global Corporate Venturing.
Under the Mid-term Management Plan 2024, we will expand innovation ecosystems withcustomers, startup companies, academia and others. Specifically, we will focus on three areas
identified in backcasting from 2050: “achieving a decarbonized and carbon-negative society,”“overcoming cancer and intractable and infectious diseases,” and “promoting the co-evolutionof digital technologies, people and society.”

Policies andframeworks

Collaboration themes toaccelerate radical innovations

Accelerating Outside-in Innovation through Startup Investments
Decarbonized • New approaches in carbon removal technologies• Negative-emission business model
society• Improved efficiency of artificial photosynthesis
Carbon negative (photocatalysts and new devices)
Overcoming cancer • Fusion of biopharmaceutics and radiotherapies
and intractable and • Designed cell innovation technologies(genetic design, cell manufacturing andinfectious diseases evaluation of cell functions)• Metaverse/Web 3.0 applications andCo-evolution ofbusiness models (societal infrastructure
digital technologies, and industrial fields)•
Quantum
applications and use cases
people and society• Quantum service business models

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

36

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

R&D Strategy
Basic Policy of Hitachi’s R&D

Creating Growth Drivers

Hitachi’s R&D strength is that it has established a value creation cycle based on owning platform
technologies for OT × IT × Products, and know-how, and pursuing technology development
through co-creation with customers and partners, adding to greater know-how.
Under the Mid-term Management Plan 2024, Research & Development will work closely with
Hitachi Digital, the Global Environment Division and the Innovation Growth Strategy Division thatare leading the growth strategy across the Hitachi Group. We will accelerate our initiative for theco-creation of value to further advance the Social Innovation Business, focusing on “Digital,”“Green,” and “Innovation” as the growth drivers. By generating innovation which will drive theLumada growth model, we will contribute to the growth of our global business as well as create
the next pillars of growth through radical innovation backcasted from 2050.

Hitachi is developing data-driven solutions under the Lumada growth model. By implementing
the Lumada four-quadrant value co-creation cycle, our goal is to create growth drivers that
support customer businesses. In Research & Development, we are furthering our understandingof customers’ next business challenges while promoting the co-creation of innovations anddigital services to resolve these issues. The Lumada growth model will be deployed worldwide
together with GlobalLogic and others.

Accelerating Value Co-creation
We will develop Hitachi’s unique co-creation approach, NEXPERIENCE, into a methodology toresolve societal issues and deploy the Lumada growth model. Through activities such as thosein our university joint laboratories, we are capturing the kizashi (signs) of change in society andcustomers, to develop visions and business scenarios.
Initiatives in fiscal 2021 included participating in the Transition to Zero Pollution panel discussion
hosted by Imperial College London in the United Kingdom to promote consensus-building
on expectations and issues regarding a decarbonized, recycling-oriented society. Transition
to Zero Pollution aims to achieve net zero emissions by 2050 (the state where the amount of
CO2 produced is equivalent to that removed from the atmosphere). Additionally, forums androundtables were held at the H-UTokyo Lab. and Tsinghua University in China to discuss therealization of a carbon neutral society in each region. In fiscal 2022, we are proactively engaged
in the creation of new innovations, including the establishment of a joint research center with
Imperial College to accelerate the development of decarbonization and natural climate solutions.

MAINTAIN
MAINTAINManaged services

Managed services

PLAN

Digital engineering

Understandcustomer
Digitalengineering

PLAN

management challenges
Understand our customersʼ
management challenges
Operate, maintain,
Develop solutions withmove to next challenge
IT/OT/Products
Operate, maintain,
Develop solutions withand assess for the next step AI tools / Methodologies / Customer Cases / Solutions
IT/OT/Products
Implement solutions

OPERATEOPERATE

Implement
solutions
Connected
products

Connected products

System integration

System integration

BUILD

BUILD

Examples of Value Co-creation in Finance and Public Services
Current issue: Operational excellence

Next challenge: Create new demand

PLAN

Optimize work processes with design thinking

Design cross-industry financial and public service
products based on OT know-how

BUILD

Increase work process system efficiency using“AI (RPA, dialogues, automated responses),”awarded first place in an international competition(SemEval2020)

Launch of Sustainable Finance Platform as interindustry coordinated services using IoT andblockchain technology, implement an inter-industry
coordinated IoT information distribution system

OPERATE

Hitachiʼs “Explainable AI” analyzes and evaluates
operational data, and supports the implementation of
AI in work systems, continuous operations and improvements

Data analysis with assured security in DFFT and
Blockchain/NFT discussed at first GTGS hosted
by the World Economic Forum

MAINTAIN

Hitachiʼs sensitivity analysis service automatically analyzes
the voice of customers, and provides customer service
improvements through product planning, sales strategies,
risk countermeasures, and so on.

Offer value distribution services leveraging
metaverse and Web 3.0

AI: Artificial Intelligence, RPA: Robotics Process Automation, GTGS: Global Technology Governance Summit, DFFT: Data Free Flow with Trust,
NFT: Non-Fungible TokenHitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Examples of the Value Creation Cycle in the Fields of Energy, Railway and Transport
Current issues: Innovations in asset management

Next challenge: Promote user transition to CN

PLAN

Optimize facility costs with design thinking

Consider asset optimization, including gas and hydrogen,based on a CN scenario created through sharedunderstanding of issues with stakeholders in an industryacademia co-creation forum hosted by H-UTokyo Lab.

BUILD

Deploy Hitachiʼs digital maintenance platform and digitaltwin equipment diagnoses and management systems tomaintain and improve analysis accuracy in line withchanges in equipment status

Co-create and verify using the area energy management
verification environment created at Kyōsō-no-Mori bycombining Hitachi power generation, power
storage, and equipment maintenance technologies

OPERATE

Implement remote and automated equipment inspections
using “image diagnostics AI technology" that has achieved thehighest level in an international competition (TRECVID2020)

Introduce DERMS to implement grid-edge control
systems using technology such as Hitachiʼs gridedge solution for distributed energy sources

MAINTAIN

Provide condition-based services with Hitachiʼs APM
which was selected as a Leader in the IDC MarketScape
2020–2021 Vendor Assessment

Provide multi-energy optimization service with
EaaS and MaaSAPM: Asset Performance Management, CN: Carbon Neutrality, DERMS: Distributed Energy Resource Management System,
EaaS: Energy as a Service, MaaS: Mobility as a Service

Hitachi Product Strengths
Hitachi is promoting the provision of value to customers through OT × IT × Products. In terms of
products, during the Mid-term Management Plan 2021, we were able to establish the top global
technologies, winning prominent awards for high-speed railways, in-vehicle inverters, particle
beam cancer treatment systems, and biochemical immune-assay systems.
In the Automotive System business, we are working on gearless, high-efficiency drive systems
and multi-port EVs realizing the industry’s most substantial size and weight reductions.
Regarding the drive system (in-wheel motor), we aim to reduce energy loss by 30% compared
to previous motors, and have been selected for support by the Japanese government’s Green
Innovation (GI) Fund, aiming for even higher efficiency.
In the measurement and analysis systems business (Hitachi High-Technologies), we will
enhance the competitiveness of our semiconductor inspection and manufacturing equipment
while integrating and analyzing data generated from equipment in processing, inspection,measurement and analysis to provide feedback on manufacturing processes and products
to realize customer process innovations. Through co-creation with customers, we will use
the data generated from products for predictive diagnostics, analytics visualization andoptimizing operating conditions to contribute to reduced development time, improved yields inmanufacturing, and increased productivity for customers.

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

37

Financial Strategies

CFO Message

Further Evolution of Lumada
In conducting R&D to further evolve Lumada, Hitachi is engaged in the creation of Lumada
cyber-physical systems (CPS) that link the digital and physical spaces in real time. We are also
focusing on the key technologies of AI, 5G, beyond 5G, security, electrification, and metaverse/
Web 3.0. For the area of security, we are developing Public Biometric Infrastructure (PBI)
technologies realizing data free flow with trust (DFFT) and promoting enhanced security for
crypto assets. Regarding metaverse/Web 3.0, which will support future societal infrastructure,
we will accelerate co-creations with startup companies.

Creating the Next Pillars of Growth
By backcasting from 2050, Hitachi is taking on the challenge to generate radical innovation for
the next pillars of growth: “an environmentally-neutral society,” “a society which supports anactive 100-year lifespan of its citizens,” and “the co-evolution of digital technologies, people andsociety.”
To realize a decarbonized and carbon negative society, we are working to realize a large-scale,
low-cost hydrogen production system; high-efficiency artificial photosynthesis; and a fuelproduction cycle fed directly by CO2.
For “overcoming cancer and intractable and infectious diseases,” we are working to develop
even more advanced cancer therapy through technology such as automated positioning ofparticle beam radiotherapies. Furthermore, we are developing designed cells based on genetic
modification and cell measurement technologies.
For the “co-evolution of digital technologies, people and society,” we will further enhance ultrahigh-speed database engines to realize data extraction performance speeds more than 100
times faster than conventional systems.
We are also accelerating developments for bio transformation (BX) and quantum transformation(QX), which will follow DX and GX.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

38

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Intellectual Property (IP) Strategies
At the same time, “Collaboration” is an intellectual property strategy based on collaborative creation.
As co-creation activities with customers and partners increase, we have expanded the scope of our IP
activities to include copyrights, patents and trade secrets, as well as information assets such as data andinformation, to promote partnerships and build ecosystems.
“IP for society” involves activities utilizing intellectual property in specific fields of a highly public nature
to maintain and evolve social norms. We will promote the creation of ecosystems and partners andcontribute to the improvement of social value.

Becoming a Global Leader in IP Activities
Under the Mid-term Management Plan 2021, in line with the stated visionof becoming a global leader driving enhanced value through the use of
intellectual property and the goal of realizing IP-driven social innovations,
we engaged in value-based (Environment, Safety & Security, Resilience)
intellectual property activities. In the Mid-term Management Plan 2024,
we established a new vision to become a global leader that resolves
societal issues and grows our DX and GX businesses using intellectual
property. We will achieve further advances and growth in the our Social
Innovation Business through the protection and use of intellectual
property centered on Green, Digital and Innovative initiatives.
Stephen Manetta
Additionally, in fiscal 2022, the name of the Intellectual Property Division
CIPO and General Manager,
was changed to the Global Intellectual Property Group. The position of
Global Intellectual Property
Chief Intellectual Property Officer (CIPO) was newly established to leadGroup
Hitachi Group intellectual property activities, and Stephen Manetta, whobrings a wealth of experience in global intellectual property management
was appointed as CIPO. By sharing insights gained from regional intellectual property activities at a global
level, and identifying beneficial insights, we will promote the creation of new value leading to innovation.
Hitachi formulates and executes an intellectual property strategy based on three pillars: “Competition,”"Collaboration," and “IP for society.”“Competition” is the intellectual property strategy based on competition, centering on acquiring andusing intellectual property rights with a focus on patent rights. We are formulating and strengthening theintellectual property master plans tailored to each business.

Intensifying
competition

104
103
102
101
100

Open

10-1

Launch
100

101

102

Growth potential (recent invention CAGR)

100 Entry difficult

Figure 3： Hitachiʼs strategy matrix

Hitachi well-positioned

Degree of market maturity
Intensifying competition

80
60
40
20
0

Competing02

Promising
4

6

8

10

Hitachi technology share (%)

12

Hitachi superiority

105 Mature

We are also promoting activities that contribute to innovation by analyzing intellectual property
information. For example, we are promoting the following initiatives in the environment field:
Market analysis based on number of inventions by all applicants (Figure 1). Each dot represents atheme, with market growth potential estimates (horizontal axis) based on the compound annual
growth rate (CAGR) of the most recent inventions, while market scale estimates (vertical axis) are
derived from the cumulative number of inventions, which are then divided into four quadrants toanalyze the degree of market maturity. For each theme, Hitachi’s technology share (Figure 2) isestimated (horizontal axis) based on the ratio of Hitachi inventions among total inventions, while
the degree of oligopoly is estimated (vertical axis) based on the ratio of top 10 companies among
total inventions, from which we can analyze Hitachi’s positioning. By combining these metrics(Figure 3) and identifying themes in areas where markets demonstrate high growth potentialand Hitachi has a high technology share (orange area at upper left), we contribute to innovation
activities by identifying growth areas where we can utilize Hitachi’s powerful existing technologies
to make proposals and share with other business divisions.

Figure 2： Hitachi technologyʼs positioning
in the environmental field
Degree of oligopoly (technology
share of top 10 companies)

Scale (cumulative total inventions)Figure 1： Number of inventions andgrowth potential in the environmental field

New Initiatives Linked to Innovation

Open

MatureHitachiwellpositioned

Theme A(e.g., smart grids)

Theme B(e.g., railway power
regeneration)

Launch・・・・・・

Promising

Theme C(e.g., combined renewableenergy and storage)

Theme D(e.g., IT infrastructure
resilience)

・・・

・・・

Competing

・・・

・・・

・・・

・・・

Entry
difficult

・・・

・・・

・・・

・・・

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

39

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Human Resources Strategies
10 Years of Accelerating Global Growth Utilizing an Acquired HR Foundation
To develop the Social Innovation Business, Hitachi must
explore social and customer issues and collaborate withcustomers to create unique new solutions. Over the past 10
years, we have retained and developed a diverse range ofhuman capital, the driver of sustainable growth, and createdan organization facilitating innovations and the creation of newvalue for a global and digital age. We believe human capital(people) is a wellspring of value in terms of Social Innovation
Business global deployment. To realize a sustainable society,we will marshal the strengths of our more than 300,000
employees and continuously provide value to our customers
and society.

〜Mid-term Management Plan 2015

〜Mid-term Management Plan 2021

Transformation toSocial Innovation Business

Autonomous, decentralized
growth in each business field

Mid-term Management Plan 2024
and beyond

Next 10 years of growth─Sustainable growth with assets by acquisition─

Major initiatives and achievements up to now• DEI promotion
Regularly conducted Womenʼs Summits
Held DEI strategy and media briefing sessions
Increased ratio of female and non-Japanese
executive and corporate officers• Talent acquisition and development
Management leader selection and development
Digital specialist acquisition and development

Beyond2024• Development of global HR foundation
Hitachi Global Grade (HGG), Global Performance Management (GPM), Hitachi University, others

Global HR
management 3.0
Global HR
management 1.0
20112024 Human Resources Strategy

Global HR
management 2.0

Become the employer of choice withdiverse talents, equitable opportunity
and an inclusive organization to contributeto growth by Green, Digital and Innovation

Launch of global HR initiatives

Main KPIs
Digital talentJapan

Ratio of female and non-Japanese executive and corporate officers
Women

Overseas(persons)
100,000

98,00080,00067,00020,000059,00038,00015.0

1530,00011,00019,00029,000FY2019FY202139,0003
0

FY2024

11.6

10.1

9
6

7

6.4

(persons)
12
9

Overseas

Total

（%）

100

6

82.0

80.0

80
60

8

65.0

56.2

68.0

60.0

40

5

3

2.6
2

0
FY2018

Employee engagement (positive response rate)
Japan

（%）

12

60,00040,000Non-Japanese

FY2021

FY202420
0
FY2021

FY2024

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

40

Financial Strategies

CFO Message

HR Strategy within the Mid-term Management Plan 2024
In this global and digital era, we must explore the needs of societies and customers throughout
the world and provide services that resolve the issues they face. Human resources are themost critical driver in terms of facilitating the acceptance of diverse values, and of responding
to the changing value sought by customers and to the increasing complexity and severityof social issues. Hitachi formulated the 2024 HR Strategy with the mission of acquiring anddeveloping diverse human resources, providing equitable opportunity, and contributing tobusiness through an inclusive organization. To grow business through a data-driven cycleof value co-creation with customers and a growth model that realizes higher earnings

throughout the cycle, we aim to maximize talent (human capital and individual capabilities)
and its engagement to achieve growth in each business. We also to promote inter-divisioncollaborations and enhance global productivity and efficiency to cultivate an awareness andculture oriented toward sustainable growth. Specifically, we will acquire the global leaders anddigital talent required to achieve growth. We will retain, develop and place the right people in
the right places at right time within the Hitachi Group, and make an effort to enhance employee
wellbeing and engagement. Hitachi will become the “Employer of choice” in global markets.

HR Mission, Vision and Strategy

MissionContribute to business through diverse talents,
equitable opportunity, and inclusive organization.

VisionWe lead transformation into “Employer of choice” in global market
to become a vibrant “Talent Destination” that contributes to society
Pillars

Key Initiatives

People（Talent）

1. Acquire, retain, develop and allocate global leaders and digital talent to maximize their potential
Maximize talent
2. Place the right people in the right places (matching) at right time in the Hitachi Group(human capital and individual capabilities)
3. Enhance employee wellbeing and engagement
engagement for growth

HR Strategy

The 2024 HR Strategy comprises three main pillars forrealizing individual employee and organizational growth:
People (talent), which involves acquiring, retaining anddeveloping global and digital talent, positioning the rightpeople in the right places, and promoting employee
wellbeing and engagement; Mindset (culture), which involves
the cultivation of a corporate culture realizing innovation,
ongoing and autonomous skill development, including
upskilling and reskilling in consideration of individual careerdevelopment, and the promotion of innovations andchange; and Organization, which involves promotion of
the transformation to a high-quality human capital divisionthat enhances DEI, breaks down organizational silos andengages in co-creation in order to ensure diverse humanresources can work energetically with diverse values.
Hitachi will work to foster a corporate culture enabling thegroup’s more than 300,000 human resources to maximize
individual potential while coming together to create anorganization where everyone plays an active role.

Mindset（Culture）

Fostering a mindset andculture for growth

4. Embody Hitachiʼs founding spirit and cultivate global Hitachi culture to realize sustainable growth
5. Promote growth mindset (ongoing, autonomous skills development, including upskilling and reskilling)
6. Promote innovations and transformations: Ensure psychological safety and encourage
the taking on of challenges

Organization
7. Break down organizational silos and collaborate to enhance customer value
Promoting collaborations between divisions 8. Create new workstyles
for growth and the realization of
9. Utilize digital technologies to transform HR with the provision of higher-quality HR services and solutions
global productivity and efficiency
Foundation• Ensure physical and mental wellbeing and safety• Strengthen exhaustive risk management (compliance, prevent incidents and accidents,
respond to disasters, etc.)

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

41

Financial Strategies

CFO Message

Diversity, Equity and Inclusion (DEI)
Hitachi is committed to implementing DEI (Diversity, Equity and Inclusion) in the organization to
become a global leader and foster a sustainable growth of our business. Sustainability is thevery core of Hitachi’s business strategy, and to be a global leader in Social Innovation, Diversity,
Equity and Inclusion is a crucial component for successful growth. A diverse workforce that
represents society will allow the group to better understand customers and society’s needs. For
this reason, in Hitachi DEI strategy has been integrated into the core of the new MTMP as part of
the Sustainability structure, with the aim to strengthen the management structure and integrate
all the sustainability topics in one organization and to create a strong and coordinated approach
toward ESG.
From this fiscal year, we have added “equity” as a key element of the DEI plan, showing a clear
commitment to create “equitable opportunity for everyone.” At Hitachi, we recognize that we are
all different, and therefore each person may have different needs. By including Equity in our DEI
strategy, we consciously seek to address the needs of each person based on their own unique
circumstances. By recognizing differences, we are better able to provide everyone with accessto the same opportunity and to fulfil their potential based on their will and competences.
There’s growing evidence that Diversity drives innovation, as diverse teams, working in an
inclusive environment, can lead to better ideas. By providing and fostering an equitable andinclusive environment, Hitachi will be able to create effective and innovative technologies totackle climate crisis, respect planetary boundaries and increase people’s wellbeing.
Being a global player, Hitachi is committed towards all the diversity pillars, such as age, gender,
background, ethnicity, sexuality, religion, disability, marital
status, and thinking style. All of those are relevant. To track
our progress, Hitachi has identified and set KPIs for threemain global themes common and applicable to all businesses,
everywhere, which are gender balance, cultural diversity andmulti generation. In 2021 Hitachi announced publicly a global
commitment, to reach 30% female and 30% non-Japanesein executive and corporate officer positions by fiscal 2030
in Hitachi, Ltd. Each Business Unit and function part of thegroup at the global level also has set DEI targets for diversity indecision-making layers and female managers by fiscal 2024,
in accordance with their business strategy. In addition to these
KPIs, each business and region is setting specific targets Lorena Dellagiovanna
focused on other dimensions, prioritizing and adopting actions Vice President and Executive Officer,
Chief Sustainability Officer, Head ofaccording to their specific needs and business strategies.
Global Environment Division, and CDIO

Gender Balance
For our business to be successful, we want our workforce to have equal representation of thesociety we want to serve. About 50% of the world population is female. For this reason, we set
specific targets for gender balance, creating more opportunities for women across the business.
We provide access to roles through recruitment, offer opportunities for their progression into
leadership positions and support to ensure a workplace where women can thrive. As the group,
we are putting in place many activities on a global level. For example, in Japan, the company isproviding support for a childcare-work balance, pre-maternity leave and reinstatement support
seminars, and the development of childcare facilities, as well providing paternity-maternity leaveseminars. As of fiscal 2020, the double-income ratio had increased to 30%, and participation inchildcare leave and leave for the purpose of childcare among men had increased to 35%. We
believe these efforts can improve wellbeing and promote personal diversity through participationin childcare.

Cultural Diversity
Being culturally diverse is about creating a team that reflects the global nature of our company.
Hitachi has grown into a global innovation business from its Japanese roots, and our desire isthat the global and diverse nature of our business portfolio should be reflected in our people,
particularly at the decision-making levels. By providing the opportunity for more individuals fromdifferent nationalities to progress into leadership, we create opportunities for Hitachi to accessnew markets and sustain our global growth. For example, Hitachi’s R&D team, being consciousthat language can often present a barrier to integration, is working to place more English
communication in their promotional activities, replacing Japanese-only communication.

Multi Generation
Technology and society change fast, and the voice of our younger colleagues is essential in
Hitachi’s approach to innovation. We seek to attract new generations of colleagues into our
workplace and ensure they contribute to our thinking. We recognize the value that individuals
can bring regardless of age and therefore our aim is that colleagues are recognized based oncompetence rather than age. For example, to attract and retain future talent, Hitachi Energy has
set targets on early career hiring (under 28 years old), partnering with university relations andour Power+ trainee program. Its Diversity 360 scheme also focuses on lifelong learning. Hitachi
Energy has also ensured that its recruiting policy creates an inclusive workplace by examining
areas such as the office infrastructure and embedding flexible working practices.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

42

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Enhanced Acquisition of Digital Talent
To expand the Social Innovation Business, Hitachi must retainand develop digital talent to drive Lumada business growth.
In the Mid-term Management Plan 2024, we aim to become
a global top-class DX company with plans to increase theranks of digital talent from 67,000 at the end of fiscal 2021 to
98,000 by the end of fiscal 2024, mainly overseas, including
at GlobalLogic and Hitachi Vantara.
GlobalLogic has systems in place and track record of timely
human capital acquisitions required for business, leading
to the reinforcement of global human capital in the Digital
Systems and Services sector, the driver of the Lumada
business Groupwide.
At the same time, in Japan, we are strengthening humancapital by developing internal human capital and recruitingfrom outside the company.
In developing internal human capital, we will accelerate
the bolstering of digital capabilities necessary for businessgrowth through digital literacy e-learning to inculcate a basic
understanding of digital transformation (DX) and Hitachi’s
digital business, DX training to develop basic human capitalable to engage in digital businesses as project members,
and enhanced training programs for each skill and position,
including OJT programs aimed at developing professional
human capital able to plan and lead projects.

Further, when recruiting from outside the company, we seek
new graduates who are treated competitively in the digitaltalent recruitment course, and promote the retention oftalented human capital, including experienced mid-careerhires in Japan and recruited directly from India, Eastern
Europe and other overseas locations.

Digital talentJapan

Identify capabilities and scale of human capital required forthe digital business; strengthen human capital capabilities
through internal training, external recruitment and M&A

Overseas(persons)
100,000

98,000Digital capabilities
specialist

80,00067,00060,00040,000

Human capital equippedwith existing business skills
Accelerate and digital capabilities

customerco-creation

59,000

Advanced technologies
researchers developing
differentiating technologies

38,00020,00030,00011,00035,00012,0000

19,00023,00029,000FY2019-end

FY2020-end

FY2021-end FY2024-end target

39,000Develop internal
human capital

Recruit fromoutsideM&A

Promoting Job-based HR Management
Objective

Foster human capital and organizational and cultural independence,
become a global leader in the Social Innovation Business

Organizational and individual growth ・Maximize performance ・Increase engagement

Visualizing work duties
・Required work
・Necessary skills
・Training programs
Company-specified

Two-way communication
between the company and individuals,
daily execution of work duties,
skills development

Equal partners with work as the key

Individuals

Place the right people in the right place in accordance with individual motivation andcapabilities regardless of age and other attributes
Company

In order to achieve global business growth, each employee must grow. In response to changes in the businessenvironment, Hitachi’s business direction, social issues in Japan and changes among individual employees, Hitachi ispromoting job-based human capital management to support business growth. Specifically, we will promote awarenessand behavioral changes by visualizing work duties and human capital, strengthening upskilling and reskilling education,
recruiting and assigning work with clear job descriptions and maximizing individual performance, which will lead to growththroughout the entire organization.
Most recently, we are promoting measures that include revitalizing internal employment opportunities using the group’s
open recruiting system, strengthening support for managers through training that enhances manager capabilities,
providing support for upskilling and reskilling in line with career goals, and introducing a learning experience platform.
Through these efforts, we aim to become a global leader in the Social Innovation Business by targeting individual andorganizational growth, thereby fostering independence among Hitachi’s human capital, organization and corporate culture.

Visualizing human capital・Desirable work
・Skills possessed
・Career plans

Individual employee-specified

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

43

Financial Strategies

CFO Message

Enhancing Employee Engagement
Employee wellbeing is a necessary condition for increasing productivity, as well as a management
issue. Creating comfortable work environments and workplaces where all employees canproactively engage in work and achieve results is the source of Hitachi’s sustainable growth.
To this end, enhancing employee engagement is critical. Diverse human capital working withhigh engagement across countries, regions and companies is essential for maximizing humancapital and organizational performance. Each year, we conduct Hitachi Insights, a global
employee survey aimed at ascertaining employee understanding of Company strategies andmeasures, job satisfaction, and desire to autonomously engage in efforts to achieve results.
Through this process, in addition to employee engagement, we quantify understanding ofmanagement policies, operational reforms, DEI, career development opportunities, health andsafety, and growth motivation, and work to improve them.
Hitachi Insights results are shared by executives and managers at each workplace with othermembers of their organization, leading to specific improvement measures and the formulationof a PDCA cycle that creates rewarding workplaces. This facilitates the prioritization of humancapital–related measures throughout Hitachi, workstyle reviews in each workplace, andproductivity improvements.
Since this survey was introduced in 2013, scores have improved over the medium term. In
fiscal 2021, Hitachi Insights was conducted in 14 languages for approximately 240,000 people
worldwide, with a participation rate of 86%. The employee engagement index was 65% in fiscal
2021, and we aim to raise this to 68% in fiscal 2024.
By conducting this survey annually, we can evaluate and review initiatives, as well as measureeffects directly linked to work and workplace improvements. In promoting a growth-oriented
mindset among all employees (continuous and independent skills development, including
upskilling and reskilling), we will accelerate innovations and transformations embodying Hitachi’sfounding spirit to inculcate Hitachi’s corporate culture on a global scale.

Cultivating the Next Generation of Management Leadership
The rapid selection and development of management leader candidates is one of Hitachi’s mostimportant management issues. Thus, Hitachi is focused on the development of young leader
candidates referred to as the Future 50.
Each year, 500 high-performing Hitachi employees around the world who have driven changes
and innovation leading to noteworthy results are nominated for intensive development, with only
50 selected as members of the Future 50. Members from all over the world gather to discuss
what is required for Hitachi Group growth. In making recommendations to management, theyacquire the capabilities of next-generation leaders who can practice “I will” mindset and takeresolute actions. Further, through participation in unconventional tough assignments* andinternal and external training sessions, Future 50 members broaden their horizons and expand
their perspectives beyond the responsibilities of the business areas in which they are engaged.
The Nominating Committee also holds discussions and individual interviews with incoming andsubsequent CEO candidates to proactively develop the next generation of managers. Hitachi’s
management, including the Board of Directors, has strengthened its ability to respond toincreasingly complex global social issues through diversity regardless of gender and nationality,
as well as through a strict approach to the governance of various issues. Inculcating this change
in management awareness among young leader candidates will lead to the global recruitmentof truly talented human capital without reliance on age, gender or nationality, deepening andbroadening the pool of next-generation leaders throughout Hitachi.
*Work duties with a relatively high degree of difficulty

Selection and Development of Management Leaders (pipeline construction)
Nominating Committee
Development
and evaluation

Discussions

Incoming and subsequent CEO candidates
Select candidates for incoming and subsequent CEO successors
from the talent pool of change leaders and reformers demonstrating
noteworthy achievements

Management leader candidates (talent pool)
Human capital driving change and innovations, achieving noteworthy
results (approximately 500 people)

Future 50 Outstanding young employees (approximately 50 people)
Conducts discussions and individual interviews with incoming and subsequent CEO

Nominating Committee candidates, participating in focused, medium-range development

Execution side

Selects and develops global management leader candidates(1) Discussions conducted at 30 Talent Committee meetings each year (compositionchanges annually)(2) Selection of approximately 500 employees developed mainly through stretch assignments(includes non-Japanese and female employees)

Selects talented young people as members of the Future 50 and provides intensive training
Execution side +Allocates tough assignments, facilitates one-on-one sessions with the CEO and organizes
Nominating Committee lectures by Nominating Committee members, among other efforts

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Cultivating Global Hitachi Culture
Of the approximately 370,000 Hitachi Group employees in Japan and overseas (as of the end of fiscal
2021), more than 100,000 (about 30%) have joined the group over the past three years. While diverse
human resources are the driving force behind corporate growth and innovation, there is also a needto repeatedly share the Hitachi Group Mission and Values to inculcate common understanding andbehaviors.
As this is the inaugural fiscal year of the Mid-term Changes in consolidated employee numbers
Management Plan 2024, we are also making efforts to
Reduced personnel
due to transfer of businessfacilitate understanding through online meetings for group FY2018295,941
end
peopleand global executives conducted by President and CEO
Kojima and videos distributed to all employees. Town
Increase by 100,000 people via M&A
hall meetings are held with all business unit and division368,247
managers to explain the Mid-term Management Plan 2024 FY2021peopleend
and divisional polices to all employees while reaffirming
Hitachi’s Mission and Values.
0
250,000 300,000 350,000 400,000
With the addition of new talent in the group, it is important
to develop a human capital management system and inculcate Hitachi’s corporate culture. To thisend, it is essential that we deploy and utilize the global HR foundation Hitachi has been working on
to strengthen internal communication among group companies, disseminating and sharing consistentmessaging throughout the Hitachi Group. It is also important to implement cultural inclusion measurestargeting employees who recently joined the group through M&A by respecting each company’s uniqueculture and sharing and incorporating the necessary cultural features and elements for future growth. In
the Mid-term Management Plan 2024, we will consolidate PMI knowledge accumulated through past
M&A and other efforts in the Center of Excellence (CoE) established at our Corporate Division, creatinga system that can be utilized for new projects.

Sustainability

Mid-term Management Plan 2024

Data

44

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Initiatives and Results Associated with GlobalLogic PMI
Steady efforts are already bearing fruit. For example, at the Make a Difference!
idea contest held to promote our corporate culture, the Success Paths concept
proposed by GlobalLogic, which joined the Hitachi Group in July 2021, waspresented with the Gold Ticket* award for fiscal 2021. Make a Difference! is anidea contest launched in fiscal 2015 as a means of reforming the “I will” mindset
aimed at new business and internal reforms. The Success Paths proposed
by GlobalLogic focus on Hitachi employee engagement, utilizing an app that
addresses individual careers as well as social activities (hobbies, volunteering,
personal development and other pursuits). These efforts were recognized as aunique method for guiding employees down the path to success.
*Conferred to outstanding projects demonstrating high feasibility

Lumada Business Award Jointly Awarded to Hitachi Energy, Hitachi Vantara and GlobalLogic
The One Hitachi Acceleration for Green Digital Program powered by Lumada
jointly proposed by GlobalLogic, Hitachi Vantara and the ABB power grids
business (now Hitachi Energy), which became part of the Hitachi Group in July
2020, won the fiscal 2021 Lumada Business Award (Grand Prize), demonstratingthat Hitachi’s PMI is functioning effectively. These three companies provide
services, including stabilized power distribution and the sale of surplus power tolocal users, to power transmission and distribution companies that utilize Battery
Energy Storage Systems (BESS). This award was conferred in recognitionof Hitachi’s contributions to resolving issues faced by social infrastructure
maintenance operators, including reliability modeling and equipment inspection
solutions based on diagnostic imaging. In terms of cultural inclusion, while
respecting the unique culture of each company that has become part of the
Hitachi Group through M&A and other efforts, it is critical to foster global Hitachi
culture by mutually sharing and incorporating cultural characteristics andelements necessary for future growth.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

45

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Financial Strategies
In the Mid-term Management Plan 2024, we will shift into growth mode, achieve further advances in revenues and profitability, and take additional steps to enhance our ability togenerate cash through organic business growth. To achieve Hitachi’s growth through a financial capital strategy, we will continue to work on four priority issues: (1) further improvements
to earnings capabilities through ROIC management, (2) improved capital efficiency through higher business asset turnover, (3) reduced WACC utilizing appropriate levels of leverage
within the bounds of appropriate financial discipline, and (4) improved total shareholder return (TSR) by implementing shareholder return measures that consider share buybacks inaddition to dividends.

Strengthening Cash Management
In the Mid-term Management Plan 2024, we will step up efforts to ensure that cash can be generated organically by our own business. To strengthen cash management, we will revise businessprocesses while improving accounts receivable collections, ascertaining the impact of strategic inventory, and enhancing monitoring.
The challenge of generating cash is about not only maximizing operating cash flow, but also optimizing capital investment. Hitachi makes capital investments totaling around 400 billion yen each year.
Going forward, certain criteria will be applied to select these investments with greater care. Capital expenditures in tangible fixed assets such as machinery and equipment will be carefully examined
one by one. In addition, we will promote the digitalization of cash management, including the visualization of the entire supply chain, by spreading IT to manufacturing sites as well.

Capital Allocation
Over the three years of the Mid-term Management Plan
2024, we will expand core FCF to 1.4 trillion yen throughthe operating cash flow earned from organic growth andthe careful selection of capital investments. Combinedwith the cash gained from the sale of assets, we will
allocate capital in a well-balanced fashion between growthinvestment in the areas of digital, green and innovation,and shareholder return.
Specifically, around half of core FCF will be allocatedto shareholder return comprising dividends and sharebuybacks. The remaining core FCF and cash earned fromthe sale of assets will be allocated to the growth areas ofdigital, green and innovation. While targeting a D/E ratioof 0.5x as a guideline for financial discipline, we will also
implement our strategy by utilizing debt as needed.

Cash generation
Shareholder returns:

0.3 trillion yen

Shareholder returns:

0.2 trillion yen

1.2 trillion yen

2.1trillion yen

0.7

2.3 trillion yen

Asset sales

0.9 trillion yen

Core FCF

1.4 trillion yen

1.2 trillion yen

Core FCF

Core FCF

0.9 trillion yen

MMP2018(3-year cumulative)

MMP2021(3-year cumulative)

0.5 trillion yen

Shareholder returns:
Approx.
trillion yen

Asset sales

Asset sales

0.7 trillion yen

Capital allocation

MMP2024(3-year cumulative)

While keeping D/E ratio of around 0.5x in mind,
use debt flexibly as required

Strengthen strategic growth areas byasset replacement• Focus on Digital, Green, and Innovation
Growthinvestments Investment criteria• Profitability: Adj. EBITA 10％+• Asset efficiency: ROIC 10％+Return approximately 50% ofcore FCF to shareholders
Return toshareholders • Dividends: Stable dividends based on

business growth• Share buyback: Implement based on funding
demands and business environment, etc.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

46

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Basic Policy on Shareholder Returns
Returning profits to shareholders based on medium- and long-term business plans and achieving growth in total shareholder return (TSR) through the formation of appropriate stock prices are
positioned as important management themes for Hitachi. Our policy is to provide stable dividends while securing the internal capital required to execute the R&D and capital investments that are
essential to maintaining market competitiveness and increasing profits. Under this policy, we make decisions based on overall consideration of performance trends, financial conditions, and dividend
payout ratios, among other factors.
In April 2022, we announced share buybacks of up to 200 billion yen. Going forward, we will issue stable dividends while also considering share buybacks, ensuring that the profits earned frombusiness growth are properly returned to shareholders.

Improve profitability

Progress on ROIC Management
In fiscal 2019, Hitachi introduced return on invested capital(ROIC) as a new corporate management index. ROIC indicates
how much profit (after-tax business profit) can be generated
on capital invested in a business. To improve ROIC andexpand corporate value, returns must at a minimum exceed
the weighted average cost of capital (WACC), which is thefinancing cost of the invested capital. Since introducing ROIC,
we have promoted management that considers the cost ofcapital in addition to profitability throughout the group as awhole, and the ROIC tree has been tied directly to concrete
actions at each workplace. Given a changing macroeconomic
environment and other factors, we were unable to meetthe 10% ROIC targeted in the Mid-term Management Plan
2021, but we have again declared this target in the Mid-termManagement Plan 2024, and will further advance activities
based on this target including action in each sector andbusiness unit, revisions to business strategy itself, and othermeasures.

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

Expand profitablerevenues

Expand overseas revenues
Expand Lumada revenues

Increase adjusted
operating income ratio

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

Increase after-tax
business profit

Implement structural reforms
Strengthen project management
Reduce loss costs
Withdraw/replace unprofitable business

Increase ROIC* 1

Reduce tax expenses

Implement appropriate tax management

Increase equity inearnings of affiliated companies

Realize joint venture alliance synergies

Improve asset efficiency (Improved invested capital
ROIC increase drivers
Increase working
capital turnover
Improve businessasset efficiency(Increase asset
turnover ratio)

business asset efficiency)
Example of major action items(to be further broken down and assigned to each division)
Early collection of trade receivables
CCC* 2
improvement

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

Increase fixed
asset turnover ratio

Implement pre-investment checks and post-investment monitoring
Review held real estate, sell idle real estate assets
Manage goodwill
Review cross-shareholdings and equity-method investments

Reduce cash on hand andinterest-bearing debt

Improve accuracy of cash flow forecasts
Expand pooling*1 ROIC = (NOPAT + Share of profits (losses) of investments accounted for using the equity method) / “Invested Capital” × 100
NOPAT (Net Operating Profit after Tax) = Adjusted operating income × (1 – Effective income tax rate), Invested Capital = Interest-bearing debt + Total equity*2 CCC: Cash Conversion Cycle

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Materiality

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Corporate Governance
Human Resources Strategies

Data

47

Financial Strategies

CFO Message

Growth through the Digital Management Platform

Financing and Capital Costs
Financing is carried out through the means deemedmost appropriate (e.g., cash on hand, borrowings, andgains from the sale of assets), based on a variety ofconditions, including the timing and amounts requiredby the business. When financing through borrowing andother forms of debt, our financial discipline is to maintaina D/E ratio of less than 0.5 times and an interest-bearing
debt/EBITDA ratio of less than 2.0 times. Regarding thecost of capital (hurdle rate) used for individual investment
decisions, calculations and judgments are made on acase-by-case basis considering interest rates, country
risks, and expected returns in the country where theinvestment will be made.

Ensuring Financial Stability
Ensuring the stability of the financial base is an importantmanagement issue for Hitachi. For this reason, we willcontinue our financial discipline policy of maintaining an A
rating on issued instruments and a D/E ratio of less than 0.5
times. At the same time, we will ensure a return of profits with
an awareness of shareholder returns, for example, throughgrowth investments and continued increases in dividends.
Our ability to generate cash is increasing steadily, and ourratings are as shown in the table below.
Rating company

Value Creation

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+

To achieve global growth in the Social Innovation Business, improving theefficiency of management platform through digital technology is essential.
As ABB’s power grids business (now Hitachi Energy) and GlobalLogic, bothacquired during the Mid-term Management Plan 2021, already possess global
management platforms, we intend to deploy and utilize Hitachi Energy’s
advanced global operations platform for product-related businesses andGlobalLogic’s advanced global operations platform for IT-related businesses
within the Hitachi Group. We will work to build a common ERP across theentire Hitachi Group, utilize DX and Global Business Services (GBS), andimplement a customer relationship management system (CRM). We will invest
80 billion yen to build out and introduce these systems by fiscal 2024.

(billions of yen)
160
120
80
40
0

FY2022

FY2023

FY2024

Priority Measures

ERP

Sharing Management Data in Real Time
Utilizing the ERP system deployed globally by Hitachi Energy throughout the Hitachi Group will accelerate management decisions andpromote reductions in costs associated with system usage, operations, maintenance and new developments. In fiscal 2021, we createda Groupwide common template based on Hitachi Energyʼs ERP system that commenced operations at Hitachi Channel Solutions basesin Thailand and Indonesia. In fiscal 2022, we will establish an office for the promotion of this common ERP system and accelerate theintroduction and development of ERP at group companies.

DX

Realizing Automated Operations and Predictive Management
Hitachi will realize predictive management and business process automation and sophistication based on ERP, CRM, data lakes and other information
to enhance performance and improve the efficiency of indirect operations. Further, we will improve digital literacy among all employees to accelerate DX
through the development of infrastructure and tools that expand the scope of in-house DX activities.
In addition to the promoted utilization of data and automation of operations across all business divisions by fiscal 2021, from fiscal 2022, we plan toestablish standard services and template platforms necessary for promoting DX in all operations and deploy them throughout the company with the ERP.

CRM

Global Utilization of Account Information
We will deepen insights into new markets and enhance the utilization of sales activity information through the group-wide collection of market andcustomer information. Additionally, we will strengthen our customer approach in all areas through the promotion of coordinated customer support
between business units and other measures. After the initial August 2022 launch of this platform in Japan, we plan to expand implementation to
three companies: Hitachi Vantara, GlobalLogic and Hitachi Energy. The platform will be rolled out company-wide starting in fiscal 2023.

GBS

SG&A Reduction by Operation Consolidation and Process Transformation
We will improve operational efficiency and productivity by building company-wide common management department operations (indirect
operations such as human resources, finance, procurement, IT, etc.) as centralized shared services that can be used globally. At overseas
bases and group companies, the shared service functions of Hitachi Energy and Hitachi Vantara will be applied. We have already introduced
this concept to our regional companies such as those in North America, India, Europe and Asia. In Japan as well, we will expand sharedservice functions to standardize and consolidate business processes and have started to engage in pilots for process transformation.

ERP: Enterprise Resources Planning
As of July 2022

Effects of Priority Measures

Hitachi Integrated Report 2022

CEO Message

Whatʼs Hitachi

Introduction

The Story of Collaborative Value Creation with Stakeholders

Business Strategies

Value Creation

Materiality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

48

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Financial Analysis of the Past Five Years
The following is a summarized financial analysis of the Hitachi Group for the past five years.
•The adjusted operating income ratio increased as a result of efforts to improve profitability. In fiscal 2020, despite the harsh business environment resulting from the COVID-19 pandemic, the profit ratio stayed above 5%.
•Despite fluctuations caused by business restructuring, efforts to improve profitability resulted in net income reaching a record high of approximately 600 billion yen in fiscal 2021.
•Efforts to strengthen cash management resulted in cash flows from operating activities rising to the level of approximately 800 billion yen.
•The payout ratio has remained between 20% and 30%, and the total of dividend payments has increased.

Adjusted operating income ratio

8.0

7.6

Trends in dividends

Cash flows
(%)

7.5

Cash flows from operating activities (billion yen)
Cash flows margin from operating activities（%）

7.8％

7.2
5.7

727.1

6.4％
610.0

6.4％

9.1％

793.1

560.9

7.1％

283.5

2017

2018

2019

2020

2021

2017

(FY)

2018

72.4

2020

120.9

39.1

290.0

20.0

135.4

2019

Total amount (billion yen)

91.7
104.8

86.9

729.9

419.8
136.0

Payout ratio (%)
Payout ratios excluding
unordinary items (%)

Core free cash flows (billion yen)

2017

2021 (FY-end)

17.0
2018

101.5

19.8

20.2

2019

2020

20.7
2021

(FY)

Total Shareholder Return (TSR)
The following illustrates Hitachi’s TSR, with fluctuations in dividends and stock price reflected.
While continuing to improve profitability and distribute a stable dividend, Hitachi is making concerted efforts to increase shareholder value through management that is aware of its share price, basedon business and financial strategies designed to improve TSR in excess of the cost of shareholders’ equity.
450
400
350
300

Past 1
Year

Hitachi share price
TOPIX including dividends
TOPIX Electrical Equipment
including dividends

Past 3 Years

TSR

TSR

AnnualTSR

Past 5 Years

Past 10 Years

TSR

AnnualTSR

TSR

Annual
TSR+25.7%+81.0%+21.9%+120.9%+17.2%+161.5%+10.1%

200

TOPIX

+2.0%

+31.2%+9.5%+44.3%+7.6%+183.3%+11.0%

150

TOPIX Electrical
Equipment+3.6%+72.4%+19.9%+91.2%+13.8%+261.5%+13.7%

250

Hitachi share price

100
50
3
20
22
/0

03
20
21
/

3
20
/0
20

03
20
19
/

3
20
18
/0

03
20
17
/

3
16
/0
20

20
15
/0
3

20
14
/0
3

3
20
13
/0

20
12
/

03

0

Note: The graph and table above show return on investment for investments made from the fiscal year ended March
31, 2012, taking into account dividends and stock prices as of the fiscal year ended March 31, 2022.
Hitachi, Ltd. investment performance, including stock prices and dividends, is indexed using 100 as theinvestment amount as of March 31, 2012. The TSE Stock Price Index (TOPIX), which is a comparative
indicator, is similarly indexed using data including dividends for electrical equipment.

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data

49

Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

CFO Message

Growth is one of the most important management objectives
in the Mid-term Management Plan 2024.
We will optimally allocate cash brought from organic businessgrowth, and generate further growth towards the future in
conjunction with strengthening shareholder returns.
I was appointed CFO in April 2020, in the second year of the Mid-term Management Plan 2021.
Through various measures implemented during the Mid-term Management Plan 2021, suchas reorganizing the business portfolio, revising low-profit businesses and establishing ROIC
management to raise capital efficiency, we have transformed our business structure into one thatis able to increase profit in a stable fashion.
Hitachi aims to constantly achieve business growth and generate profits and cash by using its
10 trillion yen in assets as a base, but the contents of the assets that contribute to earnings
change considerably over time. How we think assets structure to maximize profit and cash in a
rapidly changing management environment now truly requires “an awareness of the times andresource allocation” on the part of management. We will continue working to build a financialbase to support that.

Results of the Mid-term Management Plan 2021

Yoshihiko Kawamura
Executive Vice President and Executive Officer, CFO, CRMO
Joined Hitachi in 2015 after serving as an executive officer at Mitsubishi
Corporation and as an economist at the World Bank. Leveraging theexperience he gained at Harvard Business School, he has driven structuralreforms as CSO (Chief Strategy Officer) since 2018 and as CFO (Chief
Financial Officer) since April 2020. Current position from April 2022.

During the Mid-term Management Plan 2021, we were forced to revise our numerical targets
in a severe management environment that continues to this day, with the COVID-19 pandemic,
unstable international environment, semiconductor shortages, sharply rising material prices,
etc. Under these difficult conditions, we have recognized the need to go back to the basics ofmanagement and have given greater priority to increasing our resilience to exogenous impacts,
such as by thickening liquidity on hand.
Meanwhile, we have been steadily working on existing management issues for some time andhave proceeded with considerable boldness to deconsolidate listed subsidiaries, and shift
to a business portfolio centered on digital and environmental businesses. The acquisition of
GlobalLogic and the ABB power grids business (now Hitachi Energy) is indicative of this. In
parallel with these initiatives, in order to achieve an operating income ratio at the 10% levelacross the board, we checked all businesses with using operating income ratio of 5% as abasis (half of the target operating income ratio), and pursued integration and optimization as

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

part of a review of low-profit businesses. We also responded
by utilizing our relatively healthy balance sheet to undertake
large-scale growth investments.
As a result of these activities, in fiscal 2021 adjusted operating
income ratio stood at 7.2%, with net income attributable to
Hitachi, Ltd. stockholders reaching a record high of 583.4
billion yen. In addition, I believe that our efforts to continue
with our transformation even under this harsh environment
have led to results, such as the cumulating 2.1 trillion yen in
operating cash flow generated over three years.

The Challenge of the Mid-term Management
Plan 2024
To become a leading global company, we will strive to (1)further improve profitability; (2) enhance the ability to generate
cash; and (3) address the ongoing issue from the Mid-termManagement Plan 2021 of boosting capital efficiency.
Growth through Lumada is a pillar of improved profitability.
Working from a base of the assets shifted with a focus
on digital and environmental businesses, we will improve
profitability by raising the proportion of our businesses thatare service-oriented, such as maintenance, upkeep andrecurring services in each sector. I believe we can also improve
profitability by continuing to implement reviews of low-profit
businesses.
Enhancing the ability to generate cash is a major challenge
now that we have completed a round of major M&A activities
and asset sales. Moving forward, we need to focus on
measures to ensure that organic profits will lead to cash
generation. Corporate and Hitachi’s business divisions
are jointly operating a cash flow reform project. By further
improving efficiency when profit recognized in profit and loss
statements is converted into cash, we will achieve our Midterm Management Plan 2024 target of core FCF totaling 1.4
trillion yen (cumulative total over three years). Key measuresthat make up the project include management that isMateriality

Value Creation

Business Strategies

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

cognizant of the marginal efficiency of funds, the introductionof best practices beyond business, improved cash conversion
management, cash flow visualization, and a shift in the internal
mindset away from profits on P/L statements towards anemphasis on cash flow.
We will also continue to work on ROIC as a KPI to improve
capital efficiency. We are already using the ROIC tree to spread
understanding internally, and this is leading to grassroots
action at each workplace. This has also strengthened theunderstanding that businesses unable to cover their capitalcosts are damaging corporate value.

Strengthening Risk Management
Amid an increasingly uncertain global climate typified by thecrisis in Ukraine, starting this fiscal year Hitachi developed astructure to comprehensively monitor both financial and nonfinancial risks. This means that as CFO, I have taken on the
concurrent role of Chief Risk Management Officer (CRMO).
We have been working to quantify investment and the otherfinancial risks by using a statistical method known as avalue-at-risk model, and are currently revising consolidated
management risks from having more than 800 companies
under the group umbrella and geographic risks from overseas
expansion from the perspective of overall management. We
will also consider a well-balanced approach to non-financial
risks, from quality assurance and compliance to safety and
BCP measures in the event of natural disasters.

Enhancing Corporate Value through Dialogue
with the Capital Markets
I personally place an importance on dialogue with the capital
markets. We should be accountable to the shareholders
who have invested in Hitachi in terms of how we manage
the business, and we must also demonstrate appropriate

Corporate Governance
Human Resources Strategies

Data

50

Financial Strategies

CFO Message

shareholder returns. Through dialogue with the capital markets,
we often get comparisons with other companies, perspectives
and insight from the capital markets, and advice of all kinds,
making bilateral dialogue immensely productive. I believethat explaining the initiatives we will implement to achieve theperformance targets outlined in the Mid-term Management
Plan 2024 and steadily delivering on shareholder returns
including share buybacks are an important part of building a
relationship of trust with the capital markets.
Going forward, I think we will need to further consider how
intangible assets such as human capital and intellectual
property help improve corporate value, and link non-financial
KPIs to financial value. I hope to lead efforts to shape acommon language with the capital markets by exploring
what factors of production affect the value (added value) offinal goods and services, and considering the application of
the concept of “factor endowment” in economics (a model
to show the level of contribution that input resources such as
capital and labor make in the creation of added value).

Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Value Creation Initiatives

Whatʼs Hitachi
Connective Industries

Value Creation
Hitachi Astemo

Strategies by Sector

Digital Systems & Services
Promote digital transformation (DX) of customers’
business systems and social infrastructure
to help realize a sustainable society

Business Strategies

Sustainability

Corporate Governance

Data

51

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

30%

Experience design
Digital engineering
Applications
Data analytics, artificial intelligence
Cloud services
Security
IT products (storage/servers)

IT Services

37%

Main products and services

FY2021
Revenues

2,153.6
billion yen

33%

Main products and services

DX solutions and services
Hitachi Systems
System operation, monitoring, and maintenance andone-stop services covering the entire IT lifecycle
Hitachi Solutions
Solutions for productivity improvement and new businesscreation through combination of packages and services

Corporate Governance

52

Data

Results and Forecasts
Front Business

Main products and services

Lumada’s core DX methodology
and digital technology

Sustainability

Hitachi Astemo

Digital Systems & Services Business Structure
Services & Platforms

Business Strategies

IT/digital systems in
mission-critical fields
Financial Institutions BU
Development and operation of
mission-critical systems andfinancial solutions for banks,
insurance companies, andsecurities companies
Social Infrastructure
Systems BU
Construction and operation ofsocial infrastructural systems,
defense systems, and control
systems for public offices,municipalities, electric powercompanies, and transportationcompanies, and provision ofdigital solutions to those entities

Revenues (billion yen) /Overseas Ratio (%)

Lumada revenues(billion yen)
Adj. EBITA (billion yen)

Front Business
IT Services
Services & Platforms

Adj. EBITA ratio (%)
ROIC (%)

10.0

8.8

8.3*1

780

985

948

13.1

860

13.1

842.7
776.4

281.4

FY2021(result)

840

1,200

2,600/
38%

2,290/
33%

2,153.6/
29%

Digital engineering
System integration
Managed services

300

FY2022(forecast)*2

15.0

631

400
FY2024(target)FY2021(result)

FY2022(forecast)*2

FY2024(target)*1 Restated base of the impact of the GlobalLogic acquisition *2 Announced on July 29, 2022

Mid-term Management Plan 2024: Vision

Strengths
The Digital Systems & Services Sector (DSS Sector) has approximately 100,000 employees andis responsible for operations in 50 countries and regions. It consists of three segments: Front
Business (supporting social infrastructure with advanced IT solutions), IT Services (supporting
customers’ business DX with packaged solutions and services), and Services & Platforms (providing
methodologies and the latest technologies necessary for DX).
The DSS Sector’s strengths lie in its highly reliable system construction and operation capabilities
cultivated over many years in mission-critical fields, such as finance, public services, electric power,
and transportation; its know-how and solutions for realizing DX in collaboration with customers; andits numerous digital human resources that support these capabilities.
With GlobalLogic joining our ranks in July 2021, we have added two more powerful capabilities:
design thinking and digital engineering.
We will leverage these strengths to create value in all quadrants, from understanding customer andsocial issues to creating agile solutions, system implementation and collaboration with products in
the OT field, and secure service operation and maintenance in cloud environments. We will continue
maintaining this cycle to foster the creation of new value and deliver DX for customers and society.

Over the period covered by our last two mid-term management plans (2018 and2021), we implemented continuous reforms, including business restructuring,loss cost reductions through meticulous project management, and productivity
improvements. As a result, we transformed ourselves into a business entity that cangenerate stable earnings and established a foundation for future growth. Under the
Mid-term Management Plan 2024, we aim to achieve dramatic growth of Lumada
in the DX market and become a top-class global business entity. We will achievesustainable business
KPI
FY2021
FY2024growth for Lumada by both
1,280
million
2,830
millionGlobalLogic revenues*3
dollars
dollars
expanding revenues andimproving profitability and Lumada Service Business46%
Over 50%
continuously creating value ratio*4
as a partner in solving our Lumada Overseas revenues
35%
50%
5
customers’ issues. To this ratio*end, we will work on the Revenue of Whole Lumada 1.4 trillion yen 2.7 trillion yen
four KPIs listed on the right. Business*3 Includes synergies/M&As *4 Percentage of services business in DSS’s Lumada business *5 Percentage of overseas business in DSS’s Lumada revenues

Hitachi Integrated Report 2022

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Digital Systems & Services

Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

53

Hitachi Astemo

Market Environment
To address increasingly complex business challenges, customers are stepping up their use of digital solutions and services for business continuity and competitive advantage. At the same time,environmental issues and SDG-related investments are increasing against the backdrop of serious social issues. In this context, the global DX market, a target for social innovation projects that
address business and social issues, is expected to continue growing at double-digit rates in all regions, reaching an average annual growth rate of 17% by 2025.
In Japan, as well, we look forward to increased IT investments targeting customers’ business growth, as well as stepped-up DX initiatives and accelerated deployment and spread of cloudcomputing and digital technologies.

Digital Systems & Services Growth Strategy
Growth Driven by Lumada’s Evolution
The DSS Sector is the core entity driving the three segments of Lumada’s growth cycle—
Digital Engineering, Systems Integration, and Managed Services—as shown below. With theaddition of GlobalLogic to the DSS Sector in July 2021, we have gained design and digitalengineering capabilities, enabling us to understand the issues facing customers and society inthe global DX market while combining Hitachi’s strengths in OT, IT, and products to come up
with solutions more quickly. We are also confident that Hitachi Vantara will implement solutions
developed by GlobalLogic on the cloud and provide them as services to global customers
in the form of a recurring business. In the context of Lumada’s growth cycle, the twocompanies—GlobalLogic and Hitachi Vantara—will work together to provide ongoing value,with GlobalLogic responsible for the first quadrant (Digital Engineering) and Hitachi Vantara the
fourth quadrant (Managed Services).

Lumada’s growth cycle (4-quadrant model)

MAINTAINManaged Services

Secure Data Management,
Hybrid Cloud Compatibility

Digital Engineering

Understand the customers’
management challenges

Operate, maintain,
and assess for the next step
Digitized Products in
Other Sectors

OPERATE

PLAN

Consulting, Design and DigitalEngineering Capability

GlobalLogic
Develop solutions with
IT/OT/Products

Implement solution

Connected Products

System Integration

Highly Reliable
System Development

BUILD

Under the Mid-term Management Plan 2024, we will invest a total of 500 billion yen in businessexpansion and 200 billion yen in Lumada to complete the cycle of enhancing the strengths ofeach quadrant. Our aim is to accelerate growth by creating such cycles with more and morecustomers.
In addition, we launched Hitachi Digital in April 2022 to accelerate the global expansion of Lumada.
Hitachi Digital will take the management lead in Silicon Valley. Together with Hitachi Vantara andGlobalLogic, it will collaborate with OT-related group companies, such as Hitachi Energy, Hitachi
Rail, and JR Automation, to power the development and execution of our Lumada strategy.

GlobalLogic
GlobalLogic’s strength lies in design-driven digital engineering. It enjoys a high level of trustfrom customers, having posted year-on-year growth in revenues of 38% in fiscal 2021.
GlobalLogic has 38 engineering centers, nine design studios, and more than 25,000 designand software engineering professionals worldwide. For more than 20 years since its founding,it has deployed its capabilities in design, engineering, and data science to support the DX
initiatives of customers around the world. Specifically, it provides “experience design” to create
intuitive digital experiences that increase user engagement, “advanced engineering” to realize
powerful digital experiences through solution development, and “content/data engineering” toderive insights from data and convert them into customer value. By offering these services asa total package, it is able to deliver unique value. It also engages in cross-selling and solution
synergies with Hitachi Vantara, which is beginning to produce results.
For the Japanese market, we established GlobalLogic Japan in April 2022 to accelerate DX
promotion for customers by combining Hitachi’s business foundation in OT, IT, and productswith GlobalLogic’s strength in design-led digital engineering.

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Scale the Lumada BusinessDomain DX

The DSS Sector will address the needs of customers and the market through three
approaches. In addition to solving issues through collaborative creation with individual
customers, we will leverage the strengths of each business group—in such areas as
horizontal deployment of high-value-added solutions and creation of new markets in theecosystem—to scale the Lumada business.
Customers

Customers

Customers, collaborative partners

Here, our approach is to attract new customers by horizontally deploying original services
developed through co-creation with customers and solutions already proven in the market.
This is an area where we can utilize the strengths of Hitachi Systems and Hitachi Solutions,which have solid track records in the horizontal deployment of services and solutions.

Case study• Value provision through horizontal deployment of proven solutions
More than 700 local governments have adopted Hitachi Systems’ “ADWORLD”
municipal solution, and the total number of users of Hitachi Solutions’ “PointInfinity”
digital marketing solution in Japan and overseas has surpassed 300 million.

SolutionsContinuously provide value

Horizontally deploy solutions

Take the lead inbuilding ecosystems

Customer DX

Domain DX

Social Infrastructure DX/GX

FrontBusiness

Services &Platforms

Increase engagement withindividual customers to
obtain repeat orders

IT Services

Services &Platforms

Horizontally deploy packaged
solutions to attract customers
and build a new cycle

Front
Business

IT
Services

Services &Platforms

Create new markets throughsocial infrastructure DX/GX
with numerous stakeholders

Customer DX

This is a field in which we can deploy the strengths of the Financial Institutions BU, the Social
Infrastructure Systems BU, and other business units.
Case study

Social Infrastructure DX/GXThis approach involves building a new ecosystem with numerous stakeholders to addresscomplex issues that cannot be solved by customers and Hitachi alone. Such a business isonly possible because Hitachi engages in a wide range of domains, including OT, IT, andproducts, and will actively promote it as one of the core businesses of the DSS Sector.

Case study• Corporate ESG management and capital market transparency
We launched our “Sustainable Finance Platform,” which facilitates the collection anduse of ESG data using digital technologies, such as IoT, blockchain, and AI, to create
an ecosystem that connects financial institutions and operating companies throughtransparent monitoring and data analysis, and thus identify new market opportunities.

•Sustainable management support for Sompo Japan Insurance
To support the insurance underwriting operations of Sompo Japan Insurance, we
mobilized our “CMOS annealing” quasi-quantum computer to increase the number ofpolicies analyzed and evaluated for risk 10 times, thus reducing overall business risk.
We also expanded collaboration on multiple fronts to develop services that addresssocial issues, such as AI-based infectious disease forecasting and corporate SX*
support through HR tech.
*SX: Sustainability transformation

Strengthening and Expanding Digital Talent
We will continue to advance GlobalLogic’s exceptional HR recruiting and development
mechanism and expand it to Japan while upgrading overall development programs. By also
expanding the mutual exchange of human resources with GlobalLogic, we will accelerate
the development of IT engineers in Japan. Our DSS Sector will increase its digital talent byaround 30,000 people in Japan and abroad over the three years through fiscal 2024.

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Growth Strategies of Business Units and Group Companies
Front Business
Financial Institutions Business Unit

Social Infrastructure Systems Business Unit

The Financial Institutions BU builds and operates mission-critical systems with high levels ofrobustness and safety for the financial, insurance, and securities industries. It also develops andprovides innovative financial solutions that help resolve customers’ business challenges. Under
the Mid-term Management Plan 2024, we aim to increase revenues and operating income from“financial DX” services in Japan and overseas, where the market is continuously growing, whilestrengthening efforts in “GX,” earmarked as a new growth engine.
The Financial Institutions BU has expanded its Lumada business by developing solutions andproviding services through co-creation with customers in the financial services industry. Goingforward, we will leverage the strong relationships we have cultivated with financial institutions
and combine them with the Hitachi Group’s capabilities in the OT field to build an ecosystemthat involves stakeholders from different industries. Our aim is to utilize various data to create
and expand new service businesses and thus achieve further growth of the Lumada business.
In “financial DX,” we are working on digitalization services that utilize Hitachi’s DX and cloudtechnologies for the systems of financial institutions, as well as microservices that contributeto the DX of financial institutions. We are also striving to create a tourism MaaS that combines
data from different industries with Hitachi’s digital ticketing and settlement capabilities. We will
collaborate with GlobalLogic and Hitachi Vantara to globally expand the knowledge and results
we have obtained in Japan and overseas from creating these new financial services. In “GX,”
meanwhile, we are currently developing a solution to support the collection of ESG information oflisted companies, with a full-scale launch planned for the second half of fiscal 2022. In addition,
we will work with regional financial institutions, local companies, and local governments todevelop regional revitalization services and help realize a sustainable society.

The Social Infrastructure Systems BU is responsible for developing a wide range of missioncritical social infrastructure systems and IT services for public offices, municipalities, electric powercompanies, transportation companies, telecommunication providers, and defense contractors. It
aims to be a business entity that innovates social infrastructure with data and digital technology
by co-creating with customers and stakeholders to resolve various social issues. Leveraging
its strength in system integration–driven value provision, it engages in “Customer DX” aimed atproviding individual customers with new value digitally to monitor their business challenges, as wellas “Domain DX” to horizontally deploy the know-how obtained through individual customer DX efforts
across businesses in the same sector and other industries. The next strategy of this business unit
is to become a provider of “Social Infrastructure DX/GX” solutions that collaborates with various
stakeholders to deliver advanced services and solutions to issues facing society as a whole. Under
the Mid-term Management Plan 2024, we will create a new growth-oriented service model by
positioning “social Infrastructure DX/GX” as a pillar of business growth in markets where the HitachiGroup can demonstrate its strengths from the perspective of social value, market growth, and value
creation through co-creation. Using OT and domain knowledge in synergy with IT, we aim to generate
stable revenues and high profitability through a recurring business model that implements solutions
to customers’ issues and also converts value into assets.
To realize “Social Infrastructure DX/GX,” we will participate in national and local government initiatives
for the social implementation of Society 5.0 while collaborating extensively on a global basis inorder to expand our business. In light of new government policies, we will utilize our unique digitaltechnologies to support Digital Government, the safety and security of local communities and public
spaces, and reinforcement of social infrastructure. In addition, we contribute to a decarbonizedsociety by combining energy management (including the supply-demand balance and control) andenvironment-related solutions that have proven expertise. We will also use materials informatics
technology to support value creation in various industrial fields aimed at realizing a sustainable society.

Case study

Case study

As a cooperative member of Japan Exchange Group (JPX) that issued thefirst Green Digital Track Bond in Japan, Hitachi will utilize its sustainablefinance platform to smoothly collect and record operational data on
the power generation facilities in which JPX has invested. By providing
high levels of convenience to issuers and investors, we will encourage
corporate ESG initiatives and help society as a whole, achieve carbon neutrality.

To address the rapid aging of social infrastructure facilities and fallingnumbers of experienced maintenance personnel, we will provide moreadvanced maintenance solutions through remote inspections using drones
and diagnostic imaging. In addition to infrastructure providers, we will
incorporate superior technologies through open innovation from companies,
universities, and other organizations to strengthen AI platforms for facility inspections and achieve
more efficient and cost-optimized infrastructure management throughout local communities.

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IT Services
Hitachi Systems

Hitachi Solutions

We have business systems across a wide range of industries of varying sizes and a diverse
service infrastructure that includes data centers, network and security operation and monitoring
centers, contact centers, and around 300 service locations throughout Japan for system
operation, monitoring, and maintenance. Deploying these strengths, we provide one-stop
services covering the entire IT lifecycle.
In addition to services and security solutions to facilitate digitization of frontline processes, wewill focus on managed services that support system operation, maintenance, and monitoringin order to expand Lumada’s business. To broaden recurring businesses promoted by the DSS
Sector, we will also focus on “areas of continuous value delivery.” Specifically, we will leverageknowledge accumulated in each of our businesses to build a new growth model, and we will
use this model to provide cloud-managed services and software assets and thus expand ourbusiness.
In cloud computing, Hitachi will use the standardization of municipal systems as an opportunity
to step up deployment of its “ADWORLD” municipal solution, which incorporates know-how
gained through the fast-tracked standardization of Japan’s National Health Insurance system.
Through collaboration with local vendors, we will promote the horizontal deployment of thissolution. By also incorporating our business in managed services for the Government Cloud, we
will work to expand our share of the municipal government market.
In managed services, we will deploy Lumada’s solutions in a stable and efficient manner
to enhance our high-value standardization services, which include security monitoring, IT
operations, contact centers, and business process outsourcing (BPO). By also incorporating
industry-specific solutions, we will deliver our services to a wide range of customers, including
small and medium-sized companies. In security monitoring, which will become indispensablewith the spread of cloud computing, we will step up collaboration with domestic and overseas
group companies with specialized skills and actively engage in Groupwide initiatives.

As a member of society and the Hitachi Group, Hitachi Solutions provides digital solutions,particularly for the manufacturing, logistics, and communications industries, thus helping resolve
problems faced by customers and society. It also promotes sustainability transformation (SX) byservicing and providing high added value to existing commercial products.
We have been promoting data-driven management by stepping up internal DX to visualize
management data and improve productivity. Utilizing our expertise in this area, in Japan we haveprovided solutions to support productivity improvement and new business creation in the priority
areas of smart manufacturing, digital marketing, workstyle innovation, smart mobility, businesscooperation, security, spatial information, and data acceleration. As a result, we posted steadysales growth despite the COVID-19 pandemic.
Overseas, meanwhile, Microsoft’s Dynamics business performed well in Europe, the UnitedStates, and Southeast Asia, which are earmarked for advances in DX and high growth.
Hitachi Solutions America has received a global “Microsoft Partner of the Year Award” for four
consecutive years. In 2002, it was a “Winner” in Microsoft’s “Dynamics 365 Supply Chain
Management and Intelligent Order Management (IOM)” category.
Under the Mid-term Management Plan 2024, we will leverage “Hitachi Solutions DX Lab,” adigital co-creation space, to accelerate co-creation with customers and partners and deliver
solutions and services that help realize sustainable management and society. Internally, we
will refine data-driven management and promote human resource development that draws on
people’s individual strengths. Here, we will create opportunities for employees to take on global
challenges by holding SX-themed idea sessions and encouraging senior employees to excel. We
will also swiftly roll out commercial products that reflect market trends, such as IoT and smart
payment solutions, while collaborating globally with partners who excel in AI, blockchain, andother advanced technologies.

Case study

Case study“ADWORLD” has been adopted by more than 700 municipalities
nationwide, contributing to municipal DX by improving services forresidents and overall administrative efficiency. Using this solution,
Shibuya Ward undertook a complete renewal of its ICT infrastructure forworkstyle reform and reduced paper use by 40%. Going forward, we will
expand activities for system standardization in compliance with the Ministry of Internal Affairs andCommunications’ Municipal DX Promotion Plan and provide support for the Government Cloud.

Our “PointInfinity” digital marketing solution has been adopted by awide range of customers engaged in building loyalty point management
systems, including such convenience stores as FamilyMart. The total
number of “PointInfinity” members in Japan and overseas now exceeds
300 million. Here, we provide comprehensive marketing support, frombuilding membership and loyalty point programs to providing recommendations and effectivenessmeasurements using information collected by AI.

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Services & Platforms
Services & Platforms Business Unit
The mission of the Services & Platforms BU is to utilize co-creation and data to provide sharedinfrastructure and services that strengthen Lumada and enable continuous value creation.
Through IT platforms and services that support society’s digital infrastructure in the era of “ultrabig data,” we have helped resolve issues for customers in Japan and overseas.
In overseas markets, Hitachi Vantara is driving Lumada’s global expansion by providing
data management solutions, while GlobalLogic is using its strengths in design-driven digitalengineering to provide DX services. In the domestic market, we also provide IT platforms
that leverage our expertise in cutting-edge digital technologies and mission-critical systemconstruction.
With the progression of DX in recent years, customers have become increasingly active inutilizing cloud services to revamp their core systems for business expansion and improved
operational efficiency. Based on their DX strategies, they are increasingly demanding hybrid
clouds that combine the advantages of both public clouds (which enable rapid startup andflexible expansion) and private clouds (which allow safe and secure use of important data on
corporate systems, management, and the like). With this in mind, we will focus on providing
digital engineering and hybrid cloud managed services to avoid operational complexity andachieve both agility and reliability in environments where multiple clouds and services are used
together. Specifically, we will strengthen our data management infrastructure by linking storage
virtualization, operational automation, data governance, and other technologies. We will also
provide a one-stop service that covers everything from understanding customers’ businesschallenges to formulating optimal cloud migration strategies, migration itself, and systemconstruction and operation.
Through these efforts, we will support the digital infrastructure that is the key to our customers’
DX. At the same time, we will strongly encourage innovation by addressing the problem ofdata silos, eliminating operational complexity, and ensuring protection and traceability of criticalcustomer data.

Case study 1. Hitachi Vantara and GlobalLogic

Data-driven solutions for BMW Group innovation
Hitachi Vantara has been selected as a strategic partner for cloud storage and data management.
It provides a storage-as-a-service solution called “EverFlex” to manage the BMW Group’s
worldwide IT infrastructure and deliver thehigh reliability required for mission-criticalmanufacturing and operations.
GlobalLogic provides design and digitalengineering services for the development,enhancement, and maintenance of middlewarefor connected cars. In these ways, we support
the BMW Group’s data-driven innovation
efforts, from the first quadrant (design anddigital engineering) to the fourth quadrant (hybrid
cloud support).

Case study 2. Hitachi Energy and Hitachi Vantara

Development of “Lumada Inspection Insights” to optimize inspection andmonitoring of facilities“Lumada Inspection Insights,” jointly developed by Hitachi Energy and Hitachi Vantara, uses
artificial intelligence (AI) to analyze satellite images, as well as LiDAR (a remote sensing technology)
and temperature distribution and other images and videos, to help customers automate facility
inspections, improve safety, reduce weatherrelated risks and environmental impacts fromwildfires, and achieve sustainability targets.
This solution leverages AI and machinelearning to analyze equipment conditions andrisks and identify various causes of failuresand equipment stoppages. Through predictive
analysis, it also assesses operational andenvironmental risks, enabling repairs to bemade efficiently before a failure occurs.

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Green Energy & Mobility

Connective Industries

Value Creation Initiatives

Hitachi Astemo

Strategies by Sector

Green Energy & Mobility
Ensure happiness of people around the globe
through delivering green energy & mobility

Value Creation

Business Strategies

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Green Energy & Mobility

Connective Industries

Value Creation

Energy BU

7%

Railway Systems BU

30%

Main products and services

High-speed and intercity trains
Commuter trains
Tram, monorail, driverless metro
Signaling systems
Traffic management system
Turnkey solutions
Operation and maintenance
MaaS (Mobility as a Service)
Asset management

9%

Renewable energy solutions
Distributed energy resources solutions
Service solutions
Power semiconductors

Nuclear power plant ABWR
Fuel debris removal technologies
Nuclear fuel cycle

FY2021
Revenues

2,051.0
billion yen

Corporate Governance

59

Data

Results and Forecasts

Main products and services

Main products and services

Sustainability

Hitachi Astemo

Green Energy & Mobility Business Structure
Nuclear Energy BU

Business Strategies

Power Grids BU

Revenues (billion yen) /Overseas Ratio (%)
Nuclear Energy
EnergyPower Grids
Railway Systems

Adj. EBITA (billion yen)
Adj. EBITA ratio (%)
ROIC (%)

Automation systems
SCADA (Supervisory control anddata acquisition) systems
HVDC (High-voltage direct current)
STATCOM (Static synchronouscompensators)
Smart charging systems
GIS (Gas insulated switchgears)
AIS (Air insulated switchgears)
GCB (Generator circuit breakers)
Transformers

2.0
2,051/
80%

The emergence of climate change threats and increased geopolitical risks in recent years
has led to huge investment in energy transition and electrification. The strength of this
sector lies in its diverse products and solutions that contribute to those opportunities,
which serves as a tailwind for our business. We will also leverage our strength tocreate new markets. For example, we expect high growth in development of mobility
electrification for private car, public transportation (trains and buses) and mining
industries, as well as managed services in microgrids expanding for diversification anddecentralization of power supply systems.
Another strength of the sector is its robust business operations underpinned by aworldwide customer network and installed base. We will expand and strengthen this highprofitable business by leveraging the installed base providing services with Lumada’s
digital technology for IT, OT, and products.

344

2,600/
83%

2,300/
82%

280
222

1,310.5

1,112.6

6.9

4.5
628.3

Strengths

4.2

160.4
177.3

150.7
183.7

92.3

System integration
Connected productsManaged services

854%

Main products and services

Lumada revenues(billion yen)

687.9

FY2021(result)

159

FY2022(forecast)*

10260
FY2024(target)FY2021 FY2022 FY2024(result) (forecast)* (target)*Announced on July 29, 2022

Mid-term Management Plan 2024: VisionThis sector has been established with the mission of “Create a sustainable society in which
each individual can play an active role while protecting the global environment by using data
and technology.” Under the themes of energy transition, electrification and energy savings, we,as the Hitachi’s core business sector for green value creation which is a pillar of our Mid-termManagement Plan, will contribute to the realization of a carbon neutral society.
Through the acquisition of ABB’s power grids business (now Hitachi Energy) and the Thales
Ground Transportation System business, we will leverage our global installed base to accelerate
our business transformation into a higher profitability model. We will also expand and implement
Hitachi Energy’s global operation system supported by digital technology across the entire
Hitachi Group to support global growth.

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Green Energy & Mobility: Growth Strategy
Business Environment
Under such challenges as climate change and the Ukraine crisis, energy transition andelectrification have been precipitously advanced in global market. The rapid increase inglobal investment in decarbonization is a tailwind for this sector, which has a diverse range of
products and solutions that can help deliver decarbonization to multiple market segments. In
addition to conventional infrastructure projects, we expect new business opportunities such as
electrification of buses, trains, and other forms of mobility, as well as microgrids. Also, businessto-service conversion and GX (green transformation) aimed at creating a carbon neutral society
will emerge and grow around the world.
By leveraging Lumada to enhance this sector’s large installed base around theworld, we aim to evolve it into a recurring business to increase the ratio of highprofitable services. We will also use Lumada to address the challenge of business
transformation, for example, dedicated core businesses such as maintenance, tofoster the transformation of our overall business portfolio. In high growth segments, such as
mobility electrification and microgrids, we will provide offerings combining IT, OT, and products
as “One Hitachi.” For example, we will further expand collaboration with Hitachi Vantara andGlobalLogic in the asset management business, including asset performance management(APM) and the use of digital technologies in eMobility and other fields.

Digitalstrategy

Hitachi aims to contribute to CO2 reduction by 100 million metric tons annuallyGreen
by fiscal 2024 (monetary equivalent of approximately 1.1 trillion yen* 1), andstrategy Green Energy & Mobility Sector’s contribution will be more than 80% mainly
by Hitachi Energy. For example, Hitachi Energy’s high-voltage direct current(HVDC) transmission system and digitalization will contribute to the power grids’ resiliency andrenewables integration. In the nuclear power segment, we will accelerate development of newtechnologies, such as small modular reactors (SMRs). Meanwhile, EFaaS (Energy & Facility
Management as a Service), attractive solution for energy sector, improves operational efficiency
through the integrated management of energy and facilities, and contributes to CO2 reduction
by accelerating the introduction of distributed energy resources solutions.
We will focus on R&D investments in areas such as energy transition, electrification, and energy
savings and develop new products and services that match the market’s decarbonization needsin order to further increase our market share. The sector plans to invest in power electronics and*1 Carbon price: CO2 reduction contribution from decarbonization solutions converted to monetary value, assuming a carbon
price of ¥11,000/t-CO2

digital technologies, which are key to energy transition and electrification, during the period of
the Mid-term Management Plan 2024. Using such technologies, we will also develop sustainableproducts and solutions and expand our service business in our installed base. Through these
efforts, we will contribute to the achievement of a carbon neutral society.

Green Energy & Mobility Sector: Market Trends and Challenges
Major Market Trends
Net zero(in 20-30 years)

Geopolitics andenergy independence

Accelerate shift
from fossil fuels toclean electricity

Expand electrification(mobility, industry, buildings)

Advances in remote andautomation technologies

Challenges
Local regulations,
supply chain

Energy security

Power system resilience Mobility inagainst climate change a decarbonized,
impacts
post-COVID world

Business processtransformation

Leverage Lumada to Make the Social Innovation Business Highly Profitable
Lumada revenues

344 billion yen

Managed service offerings• Blade Total Service • Remotely monitoring and supporting services• Integrated substation maintenance management services solutions

System integration offerings• Digital railway controls • Lumada APM*2, EAM*3, FSM*4 • CNaaS*5
Connected product offerings• IoT-enabled vehicles • Energy management systems for microgrid• Restart of nuclear power plants• Grid-eMotion™
• CNaaS

FY2024 (target)*2 APM: Asset Performance Management *3 EAM: Enterprise Asset Management*4 FSM: Field Service Management *5 CNaaS: Carbon Neutral as a Service

Wide Range of Green Product Examples from the Green Energy & Mobility Sector
SECTOR’S PORTION OF
HITACHI’S CONTRIBUTIONFOR CO2 REDUCTION*6IN FY2024>80%

Power grids

EFaaS*6 Lifecycle CO2 avoided emission in annual products shipped (base year FY2013)

Nuclear powereMobility

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Energy Business

Market Environment
Energy transitions targeting a decarbonized society are accelerating on a global basis. We also
see progress in grid restructuring, including the shift to distributed energy resources, virtual
power plants (VPPs), and next-generation transmission networks, in line with the increasing
introduction of offshore wind power and other forms of renewable energy. In particular, demand
related to digitalization, such as predictive maintenance, distributed energy resources, and gridand operational optimization, continues to grow at a high rate. There is also growing momentum
to reevaluate nuclear power in order to achieve zero emissions by 2050.
Japan is also accelerating its energy transition, and the government has set a policy to increase
the ratio of renewable energy to 36%–38% by 2030. Its plan also calls for the development oflong-distance direct current transmission lines to transmit electricity from offshore wind andother renewable energy sources to urban areas, as well as to consider the use of hydrogen. The
domestic market is expected to continue growing against the backdrop of large-scale integrationof renewable energy, energy management such as grids, increasing data centers and the shift toelectric vehicles (EVs), natural disaster countermeasures, and the restart of nuclear power plants.

Business Strategy (Power Grids BU)
The power grids market and related areas are expected to grow against the backdrop of increased
electricity demand from industries, buildings and IT sectors, electric vehicles (EVs) and electrificationof railroads and the need to modernize the power grid to address supply and demand complexities
like the integration of renewable energy and rising adoption of EVs to help realize a net zero society.
Through collaborative creation with customers and partners led by Hitachi Energy, the Power Grids
BU has established itself as a global market and technology leader to support an accelerated energy
transition and pursue a carbon neutral future.
Hitachi Energy, which accounts for the majority of the Power Grids BU, operates four businesses:
Grid Automation, Grid Integration, High Voltage Products, and Transformers. It has a broad portfolio
of products, systems, software, and services, which together with Hitachi and its Lumada value cocreation cycle offer a unique combination of an energy and digital platform for utilities, as well as forcustomers in a variety of sectors, including industries, transportation, buildings, data centers, andcities. Sustainable products and systems, power electronics and digital solutions are being deployed
to build the foundation for a system of systems and enabling the energy transition. Solutions suchas high-voltage direct current (HVDC) technology play an important role in integration of renewables,
long-distance power transmission, and interconnection of power grids across countries andcontinents.

As an increasing trend towards cross-sector integration, Hitachi Energy has developed innovativetechnologies like Grid-eMotionTM—a flash-charging system for electric buses and commercial fleets
supporting the electrification of the transportation sector. Another example is the EconiQTM portfolioof environmentally efficient solutions that reduce environmental impact. In Japan, we will continue tointroduce appropriate Hitachi Energy solutions to serve customer requirements.
In addition to continuously strengthening its power grids core business, the Power Grids BU aims toadvance a sustainable energy future for all and achieve profitable and sustainable growth by doublingits digital and services businesses, and expanding its business at the grid edge of the energy system.
The company is committed to innovation through synergies, partnerships, and pursuing organic andinorganic growth; the Power Grids BU will continue to strengthen its contribution as a partner, acrossthe customer’s lifecycle—supporting planning, building, operations and maintenance. Especially,in the Mid-term Management Plan 2024, Hitachi Energy aims at a 4%–6% CAGR annual revenue
growth ahead of market, and to increase adjusted EBITA to 8%–12%.
By combining Hitachi’s digital technology with Hitachi Energy’s global top-level power grids business,
the Power Grids BU will take advantage of its unique strengths with both energy and digital platforms
to provide solutions for energy transition. We will also realize profitable and sustainable growth byplacing Lumada’s new value co-creation cycle at the core.

FY2021 Performance
NordLink—the interconnection linking Germany and Norway’s power markets andenabling access to renewable energy
Hitachi Energy has delivered one of the world’s longest and most powerful HVDC interconnectors(NordLink) to a consortium owned by Statnett (Norway’s national power transmission anddistribution company), TenneT (Germany’s national power transmission and distribution company),
and the state-owned German development bank, KfW.
The NordLink enables exchange of renewable energy byconnecting wind and solar power from Germany and hydropower from Norway, so that both countries can use theirrenewable resources more efficiently. Through the 623 km
long, 1,400 MW HVDC interconnection, it is possible toprovide enough electricity to meet the needs of 3.6 million
German householdsX, which is equivalent to the total
population of Berlin, Germany.
Hitachi Energy was responsible for the design, engineeringand supply of two HVDC converter systems in southern
Norway and northern Germany.

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Business Strategy (Energy BU)

Business Strategy (Nuclear Energy BU)

The Energy BU will focus investments and resources on green and service businesses, aiming tobecome a business entity that contributes to decarbonization and carbon neutrality.
We will develop and promote core solutions and technologies to realize “Hitachi Carbon
Neutrality 2030.” We will also integrate technologies mainly in the three key fields of “renewableenergy,” “energy management,” and “asset management” to deliver high-value-added solutions
and wide-ranging services.
In the green business, we will leverage our expertise in wind power and other forms ofrenewable energy, as well as in distributed energy resources, hydrogen utilization, andpower semiconductors, to generate growth. We will also promote next-generation microgrid
demonstration models and create carbon neutral solutions that incorporate virtual powerpurchase agreements (PPAs).
In the power semiconductors business, we will develop core competencies such as low-loss
and high-voltage technologies that contribute to decarbonization.
In the services business, we will enhance our digital service platforms and applications anddevelop data-driven services and other businesses using Lumada. We are shifting our emphasis
from maintenance services to management services for energy, assets, and the like to address
issues related to social infrastructure and production facilities in various industries.

Leveraging its advanced technological capabilities and abundant knowledge, the Nuclear
Energy BU is working to further improve the safety of nuclear power, which contributes todecarbonization and plays a role in energy supply stability as a base-load power source.
Specifically, we support the restart of nuclear power plants in Japan by ensuring that safetymeasures are taken in accordance with new regulatory standards set by the government. With aview to increasing plant value after restart, we are introducing a management system that utilizes
digital technology while working to improve capacity utilization.
To foster the steady decommissioning of the Fukushima Daiichi Nuclear Power Station, we aredeveloping technologies for fuel debris removal and using underwater remote-controlled robots
with cameras to investigate the inside of reactor containment vessels. We will continue supporting
the decommissioning of this power plant through the development of such technologies.
In the area of small modular reactors (SMRs), which hold promise as innovative nuclear reactors,
we are developing the BWRX-300 together with our partner, GE Hitachi Nuclear Energy(GEH). This reactor uses boiling water reactor (BWR) technology, for which we have extensive
experience in construction and operation. Our aim is to reduce construction costs throughdownsizing while ensuring world-class safety standards.
Hitachi will contribute to stable energy supplies and help realize a decarbonized global society
through the restart of nuclear power plants and the revitalization of Fukushima in Japan, as well
as deployment of the BWRX-300 in collaboration with GEH overseas.

FY2021 PerformanceOne-stop service for wind power facilities that uses drones and AI for inspection,
maintenance planning, and blade repairs
In 2022, Hitachi Power Solutions began offering a one-stop
service for wind power facilities that uses drones and AI for
inspection, maintenance planning, and blade repairs.
This advanced maintenance solution, which uses drones
and AI, will lead the way in decarbonization because it
facilitates stable operation of wind power facilities, withinspections taking one-third the downtime of conventional
services. We aim to contribute widely to wind power
generation projects in Japan, including offshore wind
power generation facilities expected to be fully introducedin the late 2020s.

FY2021 Performance
BWRX-300
Under joint development in the United States andJapan, the BWRX-300 is a compact, next-generation
reactor with an innovative safety system that combineshigh levels of safety and economic efficiency.
A Canadian power company has already selected
BWRX-300 as its reactor model and is preparing toapply for permits and approvals for its construction
in Canada. Other countries, including the United States, Poland, and Sweden, are also conducting
evaluations and studies based on the assumption that the BWRX-300 will be introduced.

Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

63

Hitachi Astemo

Mobility Business

628.3

EMEA 55%

15%( e x c l. J a p

Business Strategy (Railway Systems Business Unit)
Despite challenging market conditions caused by COVID-19, revenue expanded on steadyorders in the Railway Systems BU in fiscal 2021.
In the rolling stock business, orders for projects with attractive long-term service agreements
are on the rise. Specific achievements include an order to build and maintain next-generation
high-speed trains for the “High Speed Two” high-speed railway project in the UK, and thecommencement of a 30-year long-term high-speed railway rolling stock maintenance agreementwith ILSA in Spain. In the United States, the strategic decision was made to construct a newassembly plant for rolling stock the Washington, D.C., metropolitan area. This plant will enable
Hitachi to meet a wide range of demands in the North American rail market.
Hitachi also announced that it will acquire the Ground Transportation Systems business fromThales. Hitachi’s rolling stock and other signaling and services-related businesses currently
have a sales ratio of 6:4. With the acquisition from Thales, the strategy is to increase the ratioof the signaling and service businesses, which are considered to be more profitable. It is also
geographically advantageous, enabling the development of new important markets such as
Germany, Canada and Singapore. By combining the cutting-edge technologies possessed byThales’ signaling and services-related businesses with the digital engineering capabilities ofHitachi’s Lumada and GlobalLogic, we will establish a foothold as a major player in the Smart
Mobility and MaaS business models.
We are also accelerating technological developments to reduce CO2 emissions. We aim to
reduce fuel consumption by 20% or more with storage battery hybrid railcars introduced onintercity railways in the UK. In Florence, Italy, we successfully conducted the first test operation ofa storage battery–powered tram, and are making steady progress toward the global expansionof rolling stock equipped with storage batteries. We are also working with JR East and Toyota
Motor Corporation to develop
Rolling Stock 58%
Rail Control 42%
environmentally friendly hybrid
Manufacturing
Signaling andvehicles using hydrogen as ancontrol products0%Service &2energy source.
Service &maintenanceanmaintenanceIn transforming our business
Turnkey
FY2021solutions
Revenues
from hardware to “services” andincreasing investments in products
billion yen
facilitating a sustainable future, we
aim to achieve revenue of one trillionAm
1 0 ericas
yen and an adjusted operating%
income ratio in the double digits byfiscal 2026.
fi c
A sia Pa cian)Despite the ongoing impact of COVID-19 in fiscal 2021, lockdown restrictions were eased
compared to fiscal 2020 and demand gradually recovered, mainly in Asia and Europe. Although
the long-term impacts of the pandemic on the rail market are still not fully understood, railway
demand is recovering and national governments around the world remain committed to investingin public transportation, where the “Living with COVID-19” lifestyle has taken root.
Railways, which are able to move numerous passengers at the same time consuming lessenergy, are attracting attention for their connection to reduced CO2 emissions, and going
forward, we believe investment in railways will continue over the long term as a solution
supporting society, the environment and the economy in countries throughout the world that arepromoting decarbonization. In the rail market, where automation, predictive maintenance andother digitalization initiatives are under way, we expect to see an increase in Smart Mobility andMobility as a Service (MaaS) solutions that provide travelers with more seamless journeys whenutilizing multiple transportation systems, including railways and buses.

JapMarket Environment

Smart Mobility Example Using Lumada

New Lumada Smart Mobility services launched in Genoa, Italy
In July 2022, Hitachi Rail announced the launch of Lumada Intelligent Mobility Management, a newsuite of smart mobility solutions for cities, transport operators and passengers. The suite includes
powerful tech for passengers and transport operators alike—connecting smart ticketing, traffic flow
management and e-charging through a common analytics platform.
In the launch program, in Genoa, Italy, the new mobile app allows passengers to seamlessly
access every mode of public transport in a city “hands-free” by registering the passenger’s phone
as it connects to the network of more than 7,000 Bluetooth sensors on buses, trains, private hiree-vehicles and even a cable car. The cheapest possible fare is automatically calculated at the endof each day based on the passenger’s actual usage—and without needing to purchase a ticket.
For transport authorities, the new suite ofsmart mobility software empowers operatorswith a “digital twin” of the entire transportation
network, giving real-time visibility of passenger
and multi-modal transport flows around any city.
By offering “as a service” business models tocustomers for these services, Hitachi Rail aims
to make it easier than ever for cities, operatorsand passengers to accelerate the transformation
to more sustainable transportation.

Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation Initiatives

Hitachi Astemo

Strategies by Sector

Connective Industries“Connecting data, value, industry, and society.”
This sector brings together Hitachi’s unrivaled
products, connects them to use digital, andoffers them as solutions. We aim to be“sustainable value creators.”

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

64

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Urban Group

Revenues (billion yen) /Overseas Ratio (%)

44%

Main products and services

Industrial Digital BU

Industry and distribution 343.1 billion yen
solutions, robotic SI
FY2021
Water &
Water supply andEnvironment BU
Revenues
sewage, utility solutions
182.3 billion yen
Custom-made industrial
Industrial
equipment
Productsbillion yen(process compressors,
Business
automated guided robots, 409.4 billion yen
drive systems, etc.)
Mass-produced industrial
Hitachi High-Techequipment
576.8 billion yen(air compressors, marking
systems, power distribution
equipment, etc.)
Advanced Technology Group

Lumada revenues(billion yen)

Urban Group
Advanced Technology Group
Industry GroupElevators, escalatorsand building services
Home appliances andair-conditioning systems

2,752.8

Building Systems BU
822.7 billion yen

9.4

Hitachi Global Life Solutions
396.6 billion yen

Adj. EBITA (billion yen)
Adj. EBITA ratio (%)
ROIC (%)

13.4

2,752.8/47%2,770/
48%

1,219.3

1,212

10.3

23%

632.7 9.4
900.7

Healthcare (clinical chemistry and immunochemistry analyzers, automated cell
culture equipment, particle therapy system, etc.)
Measurement and analysis (semiconductor metrology/inspection equipment,
electron microscopes, etc.)

System integration
Connected productsManaged services

3,200/
51%
1,115
808.6

13.0
10.7

Main products and services

525.6

681

257.8

296

921

FY2021(result)

FY2022(forecast)*

417
FY2024(target)FY2021 FY2022 FY2024(result) (forecast)* (target)*Announced on July 29, 2022

Mid-term Management Plan 2024: Vision

Strengths

Increased
geopoliticalrisks

Skills transfer

Heightened demand for automation

Changesin officedemands

Actual infection risks

Accelerate
new drugdevelopment

More flexible workstyles

Stricter CO2 regulations
Enhanced circular economy structure
Factory and logistics functions
stoppedSudden import/export restrictions
and exchange rate fluctuations
Skyrocketing material
and energy costs

Planetary
Boundaries
Protect the planet
Maintain social
infrastructure

Make pharmaceuticals
into strategic
products

Technology trends AI, robotics, 5G/6G, quantum computers, metaverse, regenerative medicine

C

Adoption andspread ofregenerative
medicine

Hitachiʼs goal

Develop cancer
therapies
Expand preventive
medicine

issues across fields
is important

Increasing
naturaldisasters

Mass customization

Healthcare field

Resolution of

Impact of
COVID-19

Comfortableoffice and home

Severed supply chains

Sudden changes in thesocial environment

Trendsby field

Industry field“boundary”

Urban fieldnfeatio or soc
Cr
iet
o-

y

Social issues, including the impact of COVID-19, natural
disasters and increased geopolitical risks, impact all
business areas and are becoming increasingly sophisticatedand complex. Given these conditions, in addition toresolving issues that exist between organizations andcompanies, it is also important to comprehensively resolveinterdisciplinary “boundary” issues.
Hitachi will focus efforts on planetary boundaries andwellbeing as its most critical themes. At the same time,in the Connective Industries sector, we will connect
interdisciplinary domain knowledge across fields, connect
products digitally by pooling products from different fields
across fields, and resolve “boundary” issues using total
seamless solutions connecting products, OT and IT.

65

Data

Results and Forecasts

33%

Main products and services

Corporate Governance

Hitachi Astemo

Connective Industries Business Structure
Industry Group

Sustainability

Business Strategies

GrowthWellbeing
Society where
all individuals
are comfortable
and active

Connective Industries Policy
Connect
data, value, industry,and society
1. Connect interdisciplinary
domain knowledge.
2. Connect products digitallyby pooling products fromdifferent fields across fields
into digital.
3. Resolve “boundary” issues
using total seamlesssolutions connecting
products, OT and IT.

In the Connective Industries sector, comprising
the Urban Group, the Advanced Technology
Group, and the Industry Group, Hitachi aims todigitally connect highly competitive products,
including elevators/escalators, home appliances,measurement and analysis equipment, medical
equipment and industrial equipment with theaim of achieving growth through total seamlesssolutions and recurring business. Revenue will
expand, from 2.7 trillion yen in fiscal 2021, to 3.2
trillion yen in fiscal 2024, of which Lumada revenue
will increase from 0.5 trillion yen in fiscal 2021, to
1.1 trillion yen in fiscal 2024. We will also expand
business in North America as a focus area for
global growth in an effort to increase green value.

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

66

Data

Hitachi Astemo

Connective Industries Growth Strategy
In the Connective Industries sector, Hitachi will implement three priority measures to expand
business based on the Lumada growth model, in which the cycle of co-creation of value withcustomers is driven by data. In digital engineering, we aim to strengthen front engineering
capacity, and in system integration, we aim to evolve and expand total seamless solutions. In
connected products and managed services, we will strengthen recurring business by expanding
and enhancing the functions of connected products.

Strengthening Front Engineering Capacity
Hitachi creates specific objects and policies by utilizing various methods of business concepts
and issues analysis and provides integrated solutions and services. To accelerate the creationof digital synergies in this sector, in April 2022, Hitachi doubled its number of digital consulting
staff in response to DX needs, to about 120 people. Strengthening front engineering capacity willfurther increase mobility, which drives the Lumada business cycle.

Developing and Expanding Total Seamless Solutions

CPS

Modeling Service
layer
layer

“Boundaries” issues exist in all areas, including vertical boundaries between management andworkplaces, horizontal boundaries between supply chains, and boundaries between different
industries. It has become particularly important to provide places in industry, urban, healthcare
and other fields facilitating connections in response to increasingly sophisticated and complex
challenges in recent years. Given these conditions, Hitachi will model operations using cyberphysical systems (CPS) based on domain knowledge obtained from products to develop
and advance total seamless solutions resolving “boundary” issues in the industry, urban andhealthcare fields.

Physicallayer

Advance of total seamless solutions resolving “boundary” issues

Industry solutions

Urban solutions

Healthcare solutions

Process modeling
Domain knowledge

Industry

Urban

Healthcare

Strengthening Recurring Business by Expanding and Enhancing
the Functions of Connected Products
In addition to providing products and services, we will expand recurring businesses such as
maintenance and services, repairs and modifications, and replacements and recycling. The
aim is to achieve a recurring business revenue CAGR of 6% from fiscal 2021 to fiscal 2024,
exceeding overall sector revenue CAGR and driving growth.
One measure for strengthening recurring business involves the development of new services
combining connected products and digital technologies. First, by substantially expanding thenumber of connected products, from about 0.8 million units in fiscal 2021, to approximately
two million units in fiscal 2024, we will be able to gain a deeper understanding of the realitiesof customer issues. And in the second phase, we will also merge and strengthen advanced
recurring service applications utilizing product data collected through IoT platforms. Throughthese efforts, Hitachi will develop and provide new services based on product businessknowledge and digital capabilities to expand recurring business.
Recurring
serviceapplications

Strengthening and streamlining field engineering
Predictive
maintenance

Developing service models

Automated failure Connected data analysis
and recommendation
cause analysis
services

As a Service

App-linked, data-driven...

IoT platforms

Security, load distribution...

Global communication network infrastructure

Connected
products

Merge and strengthen
advanced applications
Develop new services
using product knowledge
and digital technologies
Substantiallyexpand connectivity

0.8 million
units(FY2021)

2 million
units(FY2024)

Global Business Strategy
Hitachi plans to increase its overseas revenue ratio from 47% in fiscal 2021, to 51% in fiscal 2024.
In particular, we will proactively invest in North America, our key region in the global market, andaim for high growth of 22% CAGR between fiscal 2021 and 2024. In addition to strengthening the
integration of robotic SI and digital technologies through the acquisition of JR Automation, we will
launch a total seamless solution in North America to further expand our business by connected
products such as air compressors, for which the business has been acquired from Sullair;
semiconductor manufacturing and measurement equipment; and particle therapy systems.

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

67

Hitachi Astemo

Urban Group
Comprising the Building Systems BU and Hitachi Global Life Solutions, this group aims to utilize
digital technologies to provide connected products and strengthen solution capabilities.

Revenue

Hitachi Global Life

Building Systems
BU
67%

33% Solutions

FY2021

1,219.3
billion yen

Sales andmanufacturing ofelevators andescalators
63%
Building services 37%

Hitachi Global Life Solutions
In addition to home appliances, air-conditioning systems and other product businesses, aswell as the provision of maintenance services, we offer solutions utilizing digital technologies.
With a long history of developing products from the consumer’s perspective, this businessis engaged in four areas: enriching life (connected home appliances), advancing andenriching medical care (cleanroom solutions), circular economy (recycling technologies,
environmentally friendly products) and low environmental impact (air-conditioning solutions
with low environmental impact). Specifically, this business focuses efforts on connected home
appliances, including refrigerators and washing machines that can be controlled and managedwith smartphones, air-conditioning remote diagnostics and maintenance systems using IoT,
and the creation of solutions utilizing digital technologies. Further, through a joint venturewith Arçelik in the overseas home appliance business, we will expand sales of Hitachi-brandproducts and accelerate the overseas expansion of the solutions business.

Building Systems BU

Total Seamless Solutions Business Example (Urban Field)

This business unit manufactures and sells elevators and escalators, and develops building services(comprehensive elevator and escalator maintenance services and modernization, as well as building solutions).
As building-related needs become increasingly sophisticated due to changing market environments, Hitachi
aims to become a smart building solutions provider resolving social issues such as prompting green buildings
and the new normal.
In Japan, we will attempt to expand business by capturing the recovery in demand for elevator andescalator modernizations that had slumped due to the pandemic. Further, in May 2022, we comprehensively
renovated our control centers, comprising the core systems and facilities that enable the remote monitoringand maintenance services for elevators, escalators and other building equipment, including the dashboard
facilitating the digital transformation of building management, significantly enhancing quality and expanding
menu options related to remote monitoring and maintenance services.
Outside Japan, we will accelerate the creation of synergies with Yungtay Engineering Co., Ltd., which became
a wholly owned subsidiary in April 2022 (renamed Hitachi Yungtay Elevator Co., Ltd., in May). In addition to
firmly maintaining a top share in terms of orders received in China, the largest market in the world, accounting
for more than 60% of demand for new elevators and escalators, we will work to expand the maintenanceservice and modernization business, areas in which market growth is expected.
Additionally, by leveraging strengths in these core business areas, as well as combining building IoT platforms
with strong products and services of the sector and Hitachi Group companies, we will provide smart building
solutions supporting green buildings and the new normal to contribute to improving people’s quality of life.

We connect building IoT platforms (including building IoT solutions and worker solutions) withproducts and systems in the Connective Industries sector, such as elevators, security, airconditioning equipment, lighting, pumps and power supplies, to visualize and analyze all building
data. This increases building management efficiency, improves operational quality and provides
building users with safety, security and comfort.
Providing smart building solutions for overall optimization by seamlessly connecting “boundaries”
between owners (managers) and users, common and private spaces, and facilities and systems.
Providing value

Management
Efficient building
management

Operation

Maintaining and improving
the quality of building operations

Life

Providing a safe andcomfortable building
environment

Pumps

IoT sensors
Processing

Power supply

Analysis

BCP
Accumulation
Building IoT platform

Elevators
Lighting

Security

Air conditioners
Informationon people flow

Improvingbuilding
management
efficiency andoperating quality
Providingbuilding users
with safety,
security, andcomfortHitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

68

Hitachi Astemo

Advanced Technology Group
Comprised mainly of Hitachi High-Tech, this group aims to expand business by enhancing
proprietary technologies for the healthcare and semiconductor fields and strengthening businesscreation capabilities.

Revenue

9% Others

Hitachi High-Tech 91%
FY2021

Industrial
30% Solutions

632.7

Analytical &Medical Solutions

28%

Nano-technology
Solutions42%billion yen

Total Seamless Solutions Business Example (Semiconductor Field)
We are engaged in utilizing product data and improving development and manufacturing
efficiency through co-creation with customers to handle increasingly complicated challenges insemiconductor device structuring and manufacturing processes. As a result, the development
period for new products and processes can be shortened in the development phase, yields canbe improved in the prototype phase, and line productivity can be improved in the mass production
phase. At present, we are already accelerating the creation of solutions at co-creation sites locatednear customers, and in 2022, a new engineering co-creation site was established in the UnitedStates located in Hillsboro, Oregon.
Consolidate and analyze data generated by Hitachi High-Tech semiconductor
manufacturing products for processing, testing, measurement, and analysis,
and feed that back into manufacturing processes and product groups
Customerco-creation sites

Service application platform
Use product data forpredictive maintenance/
analysis visualization/
condition optimization

Feedback into
manufacturing
processes/products

Healthcare, Measurement & Analysis Systems BusinessIn fields such as healthcare, nanotechnology (semiconductor), and social and industrial
infrastructure, Hitachi provides solutions that resolve customer issues utilizing technologicalcapabilities based on measurement, diagnostics, analysis and global sales capabilities.
In the healthcare field, Hitachi High-Tech boasts the world’s largest market share in clinicalchemistry and immunoassay analyzers, with more than 20 billion tests conducted each year
throughout the world. In May 2022, Hitachi High-Tech entered into a strategic partnership with
Invivoscribe, Inc. (United States), a global provider of blood cancer testing kits and services, withthe aim of accelerating the molecular diagnostics business. Hitachi also enjoys a strong market
share in particle therapy systems, which are able to treat cancer while maintaining quality of life
with less physical burdens caused by treatment. In the semiconductor field, Hitachi High-Tech
has strengths in plasma etching systems that enable ultrafine processing of semiconductors,
as well as high-resolution, high-speed inspection equipment, built on a foundation comprising
electron microscopes and other high-precision measurement and analysis technologies. In
advanced CD measurement SEM, in particular, Hitachi High-Tech holds a global top share.

IoT platform

Development phase

Shorten thedevelopment of
new products andprocesses
Prototype phase

Improve the yieldrate of new
products andprocesses
Semiconductor
manufacturing
products

Mass production phaseMicroprocessing

Semiconductor
manufacturing
processes

Contamination/
fault testing

Development
phase

Size
measurement

Prototype
phase

Failure analysis

Mass production
phase

Improve theproductivity ofmass production
lines

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Sustainability

Business Strategies

Corporate Governance

Data

69

Hitachi Astemo

Industry GroupThe Industrial Digital BU, the Water & Environment BU and the Industrial Products business(Hitachi Industrial Products and Hitachi Industrial Equipment Systems) strengthen the global ×
digital business.

Revenue

Industrial Products

Industrial
Digital BU

44% Business

Mass-produced
67% industrial equipment
Custom-made

33% industrial equipment37%

FY2021

900.7

billion yen

Water &
Environment BU 19%
Industrial Digital BU
This business unit provides digital solutions and robotic SI integrating IT and OT in the industry
and distribution fields. In Japan, we aim to establish a recurring growth model with Lumada,which will lead to sustainable innovation, by strengthening upstream consulting functions,
expanding the SI business constituting the core business, and strengthening service businesses.
Globally, we will focus on the North American market and accelerate business development
combining the robotic SI of JR Automation, acquired in 2019, with digital technologies. Further,by integrating KEC, which handles robotic SI business centered on automobiles, with Hitachi
Industrial Equipment Systems’ robotic SI business engaged in assembly and conveyor lines
for various manufacturers, Hitachi Automation was established in April 2022 to strengthen the
robotic SI business in Japan and the ASEAN region.

Water & Environment BUThis business unit provides a wide range of utility solutions, from social infrastructure facilities
for water supply, sewerage, etc., to air-conditioning and industrial plant facilities. We will further
strengthen environmental and clean technologies with the aim of creating and expanding nextgeneration utilities business in electronics, semiconductors, pharmaceuticals, biotechnology andother key markets. Through the development of total seamless solutions originating in OT, wewill maximize value across customer value chains and respond to increasingly complex social
issues.
Regarding overseas markets, we are targeting global expansion rooted in local communities
centered in the ASEAN region, which is our focus market.

Industrial Products BusinessThis business provides a broad lineup of custom-made and mass-produced industrial equipmentthat supports industrial and social infrastructure globally.
In the custom-made industrial equipment business, we aim to become a highly profitablebusiness entity contributing to green initiatives. We will work to expand products, services andrecurring business that reduces environmental burdens through electrified products, centrifugal
compressors and logistics.
In the mass-produced industrial equipment business, we aim to establish a strong productbusiness that contributes to the Social Innovation Business. While positioning air compressors
and marking systems as global priority businesses, we are focusing efforts on expanding
connected solutions (businesses including IoT controllers and location communication functions)and green products. Moreover, with regard to air compressors, we will pursue synergies with
Sullair, acquired in 2017, and in marking systems, we are accelerating global developments with
the April 2022 acquisition of Photon Energy (Germany), which has strengths in innovative laser
marking systems, and Telesis Technologies (United States), which handles industry-leading laser
markers, acquired in July 2022.

Total Seamless Solutions Business Example (Industry Field)
In collaborative creation with Suntory Beverage & Food, we have achieved enhanced product safety andsecurity with the traceability of single bottle at a next-generation factory that continues to evolve. Massive
volumes of data are collected from each line, which are then integrated and aggregated in various data
formats used to trace and visualize factory data. Based on this effort, we have realized an IoT platform
for overall optimization leading to the pursuit of safety, security and workstyle reforms. Further, we arecontributing to system enhancement with products that include marking systems enabling high-speed
special printing even on physical layers, as well as compact and low-floor automated guided robots.
IoT infrastructure that collects and consolidates data from production equipment
and IT systems to be utilized for overall optimization
Suntory Kita-Alps Shinano-no-Mori
Water Plant

3. Utilization
Utilize integrated andcollected data fortraceability, visualizingof factory data, etc.

Single bottle Visualization of
Other
tracingfactory dataapplications

Applications
IoT platform

2. Connection
Integrate andcollect various
formats of data
1. Collection
Data collection

4. Action
Pursue safety and security,
workstyle reforms, promoteadvances in factory
management
Automated
High-speed
in-factory
special printing transportation

Variousinformation
Quality
Equipment Procurement Production management
Shipment

Marking Automatedsystem guided robot

Better productsafety andsecurity withsingle bottle
traceability
Realize evolving
next-generation
factory model

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation Initiatives

Hitachi Astemo
We will contribute to a sustainable society
and improved quality of life by providing
world-leading advanced mobility solutions
that satisfy our customers

Value Creation
Hitachi Astemo

Strategies by Sector

Business Strategies

Sustainability

Corporate Governance

Data

70

Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation

Business Strategies

Sustainability

71

Data

Hitachi Astemo

Hitachi Astemo Business Structure
OthersCorporate Governance

Results and Forecasts

2% ・・Software
Aftermarket

・ICE*1

Powertrain & Safety
Systems Business

39%

Revenues (billion yen) /Overseas Ratio (%)

Adj. EBITA (billion yen)
Adj. EBITA ratio (%)
ROIC (%)

Engine Control Unit for Direct Injection

Motorcycle Business

19%

・Brake・Suspension

Disc Brake
Caliper

11.0

Front Forks

FY2021
Revenues

・xEV*2

1,597.7

3.5
Inverter

Motor

AD*3 ECU*4

StereoCamerabillion yen

2,000

1,800

・AD/ADAS・Powertrain

Disc
Brake
Caliper

9.0*1 ICE: Internal Combustion Engine *2 xEV: Electric Vehicles*3 AD: Autonomous Driving *4 ECU: Electronic Control Unit

40%

Chassis Business・Brake1,597.7/
72%

5.2

3.9
・Drivetrain

Propeller
Shaft

・SteeringElectric Power
Steering
System・Suspension

Frequency
Reactive Damper
Hydraulic

62.3

Strengths
Regarding powertrain and safety systems, we leverage advanced inverter and motor technologies honed
through years of market experience to develop highly efficient electric axles with integrated gearboxes.
Further, to realize autonomous driving, we provide core advanced technologies such as sensing technologies
centered on stereo cameras, electronic control units and control software. In the chassis field, we willrealize integrated vehicle control solutions for next-generation mobility by leveraging Hitachi’s strengths inelectronic and electrified brake suspension and steering products to link and control them as a system. In the
motorcycle field, where we boast the world’s top market share, we will lead advances by providing systemproducts for powertrains, suspensions and brakes, leveraging our advanced technological capabilities andexperience, including integrated vehicle control, driver assistance and control technologies for EVs. We will
establish Hitachi as a global mega-supplier for automobiles and motorcycles by combining the wisdom of ourdiverse 90,000 employees at 359 bases spread across 26 countries and regions. (As of July 2022)

5.1

FY2021(result)

92
FY2022(forecast)180
FY2024(target)Mid-term Management Plan 2024: Vision
Hitachi Astemo aims to realize a sustainable society by providing cutting-edge mobility solutions.
Specifically, we will provide environmental value by helping to realize a better global environment
through highly efficient, internal-combustion engine and electric powertrain technologies that
improve fuel efficiency and lower electricity costs. To create social value, we will improve safety
and comfort through integrated vehicle control technologies, using autonomous driving (AD)and advanced driver-assistance systems (ADAS) and advanced chassis systems. In addition,
we will utilize Lumada to advance mobility by realizing software-defined vehicles with in-vehicle
software enabling advanced control, and over-the-air (OTA) update technologies for various
control software. Through these efforts, we will create economic value totaling two trillion yen inrevenues with an adjusted EBITA margin of 9% and ROIC of 11% by fiscal 2024.

Hitachi Integrated Report 2022

Digital Systems & Services

Whatʼs Hitachi

Introduction
Green Energy & Mobility

Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

72

Data

Hitachi Astemo

Hitachi Astemo Sector Growth Strategy
Business Environment
As carbon neutrality efforts accelerate around the world, the automotive and motorcycle
industries are undergoing a once-in-a-century transformation, with competition intensifying in
the Connected, Autonomous, Shared, Electric (CASE) fields.
In response to these market changes, the ratio of internal combustion engines (ICEs), whichhave been the mainstream up to now, is expected to decline in the next few years amid asignificant shift towards xEV-related products (motors, inverters and electric axles).
With demand for safe and autonomous driving technologies on the rise, vehicles are increasingly
equipped with sensors that recognize the physical world to facilitate AD and ADAS. At the sametime, advanced technologies that recognize the physical world are advancing through the use of
infrastructure coordination systems that leverage communication technologies.
In the chassis area, EV and autonomous driving solutions are in demand for advanced vehicle
behavior control systems, facilitating the electric control of brakes, suspension, steering andother components.
In the motorcycle sector, demand is expected to continue growing in Asia—including India,
the largest motorcycle market in the world—while electrification demand is increasing due toheightened environmental awareness.
At the same time, there is an urgent need to stabilize production by overcoming increasingly
complex risks such as semiconductor supply shortages and the impact of COVID-19 on the
supply chain.

Growth Strategy
To support CASE and increase market share, we will focus on developing AD and ADAS,
advanced chassis and xEV-related products such as motors and inverters. For xEV-related
products, we will invest 300 billion yen, including R&D expenses, by fiscal 2025 to ensurecompetitiveness. We will also leverage Hitachi Group R&D resources and engineering
technologies possessed by Lumada and GlobalLogic to strengthen software development
capabilities and create new advanced solutions for realizing software-defined vehicles.
We will contribute to improving QoL, realize a sustainable society, and strive to attain aleadership position as a global mega supplier. This will be achieved through digital solutions,improving safety and comfort mainly in the areas of autonomous driving and connected cars;
green solutions that contribute to the global environment through electrification products andtechnologies that reduce emissions; and innovative solutions that anticipate the changes that will
occur in the mobility field by 2050.

Regarding the creation of synergies from business integration*, we will maximize corporate value
through the integration and optimization of our product portfolio and footprint as well as throughoperational improvements. Although semiconductor shortages are expected to persist, we willtake focused measures to ensure stable procurement and delivery, including the securing of
long-term contracts with customers.
*Hitachi Automotive Systems, Keihin Corporation, Showa Corporation, and Nisshin Kogyo Co. were integrated as
Hitachi Astemo in January 2021.

Provide advanced mobility solutions that contribute to building a sustainable society
Social value

Environmental value

Improve safety, comfort and QoL
with AD/ADAS systems
and advanced chassis

Contribute to a greener world
through efficient electrification
technologies and products that
improve emission reductions

AD/ADAS

Advanced environment recognition
Integrated electronic control

Connected car technologies
Onboarding devices and software

A technology company
making the world
a better place

xEV

Advanced electric powertrain package

Advanced Chassis

Integrated vehicle movement control

Economic value
Stereo Camera

A commitment to achieve 2.0 trillion yen in revenues;
9% adjusted EBITA margin; 11% ROIC in FY2024

Motor

Hitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

73

Hitachi Astemo

Business Strategy
The development of next-generation vehicle components (xEV, AD and ADAS, advanced
chassis, next-generation motorcycles) is the mainstay of Hitachi Astemo’s growth, thus we willprioritize investment in this area.

Powertrains
With powertrains, the key will be to expand mass production of xEV motors and inverters anddevelop new technologies for more efficient and compact e-axles. In fiscal 2021, Mazda’s firstmass-produced electric vehicle adopted our motors and inverters. We also provide powertrain
products to many customers, including China’s Geely Automobile Group, which uses Hitachi
inverters in its hybrid powertrains.
Hitachi Astemo has developed compact, high-output inverters that are easy to install, reduce
power loss to enhance energy-saving performance, and achieve a 50% size reduction comparedto our previous products. In fiscal 2019, we commenced mass production of the world’s firsthigh-voltage (800 V) high-power inverter for EVs utilizing Hitachi’s proprietary direct water-cooled,double-sided cooling technology. Moreover, our motors—which take advantage of the advanced
analysis technologies, structural designs, material developments, production technologies andmotor control technologies cultivated within the Hitachi Group—achieve more than 1.2 times theoutput torque per magnet volume compared to the competition. Hitachi Astemo’s strengths also
lie in its ability to make e-axles smaller and lighter by utilizing model-based technologies in the
optimized design of compact and lightweight e-axles integrating motors, inverters and gears.
In addition, we established Hitachi Astemo Electric Motor Systems to strengthen the mass
production of motors, with mass production systems now operational in Japan, China and theUnited States. Hitachi Astemo will expand its product lineup, and together with the developmentof advanced technologies that include new materials and software and the strengthening of costcompetitiveness, aims to capture the top market share in both motors and inverters.

Safety Systems
Hitachi Astemo also leverages its strengths in the development of sensing and information processing
systems required for realizing autonomous and connected vehicles. In fiscal 2021, Suzuki’s new
Wagon R Smile used our stereo camera with nighttime pedestrian detection capabilities. Honda’s
new Legend, a vehicle equipped with Level 3 autonomous driving launched in 2021, was equippedwith an OTA-compatible electronic control unit for autonomous driving, developed by Hitachi
Astemo. Leveraging Hitachi Group technologies, this autonomous driving system offers a one-stop
solution, from data centers where software updates are distributed, to vehicle-side equipment.

Hitachi’s OTA solution enables highly efficient and secure software updates leveraging its proprietarydifferential data update technologies and expertise in information security through wireless data
communications. In linking this OTA solution with Lumada’s digital solutions, it is possible toautomatically update software based on optimal solutions derived from AI analysis of big data.
For example, by collecting and analyzing real world information obtained from vehicle onboard
control units and sensors from each system in multiple autonomous vehicles, it is possible toupdate the control software for safer autonomous driving. To promote advances towards softwaredefined vehicles, we are also promoting the transition from domain-type electrical and electronic(E/E) architecture, in which mechatronic control systems are separated for each of several major
functions, to zone-type architecture, in which the vehicle is a single system.
In the future, Lumada will be linked to driving and vehicle behavior data acquired from on-board
control systems that can be used for predictive maintenance, advanced safety and comfortable
driving, and personalized services that anticipate user needs.

Cloud

OTA

Data
collection

Security・Firmware
・Maps

Vehicle security
operationcenterServicesfor EV

Communications
Integrated ECUs
AD/
ADAS

Parking

Front-endzone ECU

MPU

C2X

Body

Left-sidezone ECU

Electric
power steering

Integrated
vehiclecontrol

IVI

Right-side
zone ECU

Rear-endzone ECU

Electric
brakesCamera
Radar
LiDAR
Sonar
Sensors

Electric
suspension

Electric powertrain(motor, inverter, and battery)

Diagnosis

Servicesfor ADHitachi Integrated Report 2022

Digital Systems & Services

Introduction
Green Energy & Mobility

Whatʼs Hitachi
Connective Industries

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

74

Hitachi Astemo

ChassisTo improve vehicle safety, it is important to advance chassis components that perform basic
vehicle functions such as driving, turning and stopping. Leveraging strengths in the in-housedevelopment of brakes, suspension and steering systems, Hitachi Astemo contributes torealizing autonomous driving by converting these systems into electronic and electric devices,then linking and controlling them to integrally work in conjunction with AD and ADAS systems.
Utilizing suspension system technologies that facilitate a comfortable ride and stability, we jointly
developed a shock absorber with AISIN, which was adopted by Toyota’s new Land Cruiser,
unveiled in June 2021. For brake systems that improve vehicle safety and fuel efficiency, weoffer a wide range of products, including a regenerative braking system compatible with electricvehicles. In the area of steering systems, our products provide a high level of responsivenessand operability to meet the electrification needs of automobiles as well as a wide variety of otherapplications.

Motorcycles
One of Hitachi Astemo’s pillars is products for small motorcycles, which are a mainstay of daily
life in the Indian and Asian markets. We will respond to future increases in demand for advanced
technologies, including the expansion of midsize motorcycles and electrification offerings. We
will increase our share of the global market by leveraging Hitachi Astemo technologies andquality, providing products with specifications and cost competitiveness suited to market needs.
Starting with integrated vehicle control technologies, we will leverage advanced technologies
and a wealth of experience in driver-assistance and EV control technologies to contribute toadvances in next-generation motorcycles that realize environmentally friendly vehicle safety,
handling stability and ride comfort.
Specifically, we apply Hitachi Astemo technological expertise and promote technologicalinnovations, including the electronic control of brakes and suspensions, and electronic fuelinjection systems that comply with emission regulations around the world targeting a wide rangeof displacements, from small to large, and powertrain systems facilitating electrification. We will
also develop suspension systems that provide high handling stability and riding comfort, braking
systems that provide stable, reliable braking with a high level of safety and comfort, and driving
support systems that contribute to the safety of motorcycles.

Synergies from Business Integration
We are also accelerating the creation of synergies through the business integration of Hitachi
Automotive Systems, Keihin, Showa and Nisshin Kogyo, which was completed in January 2021.
With this integration, we will establish a solid management foundation through structural reforms

that include optimizing business locations and reducing procurement costs through centralizedpurchasing, efficiently allocating combined resources, integrating talent and fostering a newcorporate culture while investing in higher-growth, higher-profit areas.

Strengthening Software Development
Hitachi Astemo meets the needs of automakers around the world by incorporating optimal
software in its globally deployed products and systems. As the car itself now functions as a highperformance computer, the performance of in-vehicle software is directly related to creating newvalue and safe autonomous driving technologies. In April 2019, Hitachi Astemo enhanced its
software development capabilities with the establishment of the Software Division to make useof its software developers. Additionally, through the acquisition of in-vehicle equipment softwaredeveloper seneos (Germany) in April 2020, we have strengthened our front-end engineering
capabilities to facilitate efficient software development. Further, approximately 170 digital talent
within the Hitachi Group have transferred to Hitachi Astemo to promote digitalization business.
With Lumada at the core, we expect to realize synergies from GlobalLogic’s engineering andsoftware development capabilities.

Investment Plan
We will invest approximately 300 billion yen, including R&D expenses, in xEV-related productsby fiscal 2025, collaborating globally with Hitachi, Ltd.’s R&D divisions including use of theirresources. As an example, in areas such as connected solutions, Hitachi Astemo will conduct
R&D on the in-vehicle device side, while Hitachi, Ltd. will conduct R&D on the cloud side—
effectively separating the areas of R&D and resource allocation.

Risk Management
While EVs are expanding as part of efforts to realize carbon neutrality, ICEs are expected toshift from an upward to downward trend in the next few years. In response, we will optimize ourportfolio with changes in the business environment while shifting resources, redeveloping andretraining the professional skills of our human capital over the long term as needed.
Regarding concerns about semiconductor supply shortages, we will secure long-term contracts
with vehicle manufacturers for parts delivery and share Hitachi’s long-term planning with them tomitigate risk of shortages.
For parts procurement risks due to pandemic-related regulations in the COVID-19 era, we will
work with our global networks and supply chains to mitigate risks and overcome challenging
conditions while minimizing adverse impacts.

Hitachi Integrated Report 2022

Introduction

Addressing Risks and Opportunities

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

75

Business Ethics and Compliance

Addressing Risks and Opportunities
With the rapid advance of digitalization and complex developments in the political and economic landscape globally, the business environment is changing day by day. Hitachi monitors and analyzes
this business environment, conducts risk management in terms of both responding to risks that should be anticipated and opportunities for further growth in light of social issues, Hitachi’s competitive
advantage and management resources, and strives to create revenue opportunities while controlling risks.

Strengthening of the Risk Management Structure and Its Aims
In April 2022, a Risk Management Meeting that deliberates important matters related to Hitachi
management was established within the Senior Executive Committee. Chaired by the CEO with
the Chief Risk Management Officer (CRMO) as vice chair, the meeting discusses and makes
decisions on important matters relating to company-wide risks. By centrally managing the various
risks faced by Hitachi, which has operations around the world, we are working to achieve a solidmanagement foundation that is linked to our growth strategy.
Six risk-specific working groups have been set up under the Risk Management Meeting,investment risks, business risks, crisis management, compliance, group governance and regionalrisks. Each working group coordinates Group corporate functions across the organization while
conducting activities to mitigate the respective risks.

Risk Management Structure
Senior Executive Committee
Risk Management Meeting
CRMO• Formation of working groups for each risk category• Cross-utilize corporate functions

Business
Risks

CrisisManagement

ComplianceGroup
GovernanceRegional
Risks

Promotion Organization
Investment Strategy
Committee OfficeCompliance
Division

Corporate Quality
Assurance Group

Legal
Division

Safety and Health Corporate Sales & Investment Management
DivisionManagement Division Marketing Group
Risk Management Sustainability Promotion
Division
Division

Yoshihiko Kawamura
Executive Vice President and Executive Officer, CFO,
CRMO

Selecting Top Risks based on Global Risk Trends

Risk Categories / Working Groups
Investment
Risks

For example, the Business Risks Working
Group discusses risks and responses in
the global supply chain. Since control ofconsolidated management is important for
Hitachi as a group made up of more than800 companies, we must also develop
plans to disseminate and manage guidelines
and policies. This is an area the Group
Governance Working Group will discuss
going forward. Addressing regional risks
in an effort to review the roles of local
subsidiaries and achieve overall optimization
at global sites, we will ensure that Hitachi’s
assets are utilized effectively.
Initiatives about investment risks, crisis
management and compliance are introducedon the following pages.

FinanceGroup

In the Mid-term Management Plan 2024, we are utilizing knowledge from inside and outside thegroup to collect and analyze information on the external environment surrounding Hitachi andselect top risks through the Risk Management Meeting.
Specifically, we have organized major risks under classifications such as disasters, accidents
and epidemic; geopolitics and geoeconomics; economics, finance and markets; sustainability;
investment and orders for projects; and operations. We then assess and narrow down the risks
from the perspectives of the nature of risk events, expected time period, likelihood of occurrence
and seriousness when occurring, and select the top risks, such as the risk of a major natural
disaster in Japan that may significantly impact Hitachi’s business. The six working groups
consider and implement policies to respond to each of the top risks.

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

76

Business Ethics and Compliance

Addressing Investment Risks and Opportunities

Quantitative Understanding of Risks

To ascertain and appropriately respond to risks and opportunities related to investments (e.g., M&A, sale of assets, orders for projects), Hitachi has establisheda decision-making framework based on the following flowchart. Decision-making regarding individual investments (e.g., execution, business plan changes) isdelegated from the Board of Directors as the highest level body to the head office Senior Executive Committee (which generally meets twice a month) or the
relevant sector or business unit, based on the size and specifics of the matter. This facilitates flexible and appropriate decision-making. For important mattersthat fall under deliberation by the head office Senior Executive Committee, the Investment Strategy Committee working as its advisory body checks the risks,
response measures for the matter from economic value perspectives such as profitability and cash flow as well as in terms of the impact on social value andenvironmental value. Following deliberation, the Investment Strategy Committee delivers a report that includes approval or rejection recommendations to the
Senior Executive Committee, of which the CEO is also a member.
After executing an investment, Hitachi regularly monitors the achievement of business objectives and the plan while taking into account changes to the riskclimate including the external environment. By generally having monitoring performed by the relevant business units, which are accountable for profits andclosely associated with field operations, flexibility can be maintained, while the head office can still become involved depending on the importance of the matter.
For changes to business plans, business withdrawals, asset sales and other matters related to important investment targets, the head office Senior Executive
Committee engages in similar deliberations to the initial investment stage. For investment targets for which business is not proceeding as planned, a frameworkhas been established to deliberate the merits of continuing a business, including the prospects of withdrawal, in an effort to enhance capital efficiency.

Hitachi calculates expected maximum risks (Value at Risk)
assumed by statistical methods according to the type of
assets held on the group’s consolidated balance sheet.
We avoid missing out on growth opportunities by visualizing thecapacity for growth investment, etc., considering consolidated
net assets and other factors. We also engage in monitoringand hold discussions through the Risk Management Meeting
to ensure that risks are not excessively unbalanced compared
to Hitachi’s consolidated financial strength.
We also quantitatively analyze and understand the state ofrisks and profitability on a regional and per-sector basis.

Conceptual Diagram of the Decision-Making Flow
When an investment is executed
Resolution by the
Board of Directors(particularly important matters)

After an investment is executed

Chairperson: CRMO

Approval by the CEO(important matters)

Head OfficeSenior Executive Committee

ReportA committee whose members
are from related corporate
divisions such as the
Finance Group
Clarifies the risk factors
for a proposed matter,
identifies important discussion
points, and issues a report that
includes approval or rejection

Approval by the BU
CEO or executive officer
in charge of the sector

Business Unit (BU)
Senior Executive Committee

Business withdrawal,
sale or continuation

Investment Strategy
Committee

Board of Directors

ReportHead OfficeSenior Executive Committee

Decision by the BU
to withdraw from, divestiture orcontinue with the business
Conflicts withspecified conditions

Monitoring by thehead office

Monitoring by the BU

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Sustainability

Occupational Health and Safety

Responsibility in the Value Chain

Based on the selected top risks, the Crisis Management Working
Group promotes the development of response measures,
including crisis management structures, for each risk. By making
preparations under normal conditions, we have put systems inplace to respond swiftly in the event a risk does materialize.

The Compliance Working Group is made up of members fromthe Compliance Division, Sustainability Promotion Division,
Corporate Quality Assurance Group and Safety and HealthManagement Division.
For major compliance-related risks falling under business ethics
and compliance, environmental compliance, quality compliance,and health and safety (fatal and serious incidents, etc.),
information on the measures implemented by each department
under regular conditions (development of regulations, training,monitoring, audits, etc.) and the response methods implemented
in the event of an emergency (communication with internal andexternal stakeholders including top management when a majorrisk has materialized, etc.) are linked and shared amongst
member of the Working Group as management methods forthe different risk areas. By pursuing a greater level of global
collaboration, we will strive to raise the level of risk managementin each field and mitigate various risks.

SeverityCompliance Initiatives

Potential risks

Management of top risks
Crisis Management
Working Group
Response when acrisis occurs• Establishment of a task force• Consolidation and centralizationof information• Initial response, implementationof abatement measures

Various risks

Responding to risks
other than top risks• Ongoing monitoring• Consideration of including arisk in top risks

Preparations under normal conditions• Preparing response and operational steps based on crisis
scenarios• Conducting drills, revising procedures, responding to issues• Reconfirming business continuity plans

Quality Assurance

Data

77

Business Ethics and Compliance

Safety-First Risk Management

Crisis Management Initiatives

Occurrenceof crisis

Corporate GovernanceCompliance
Division

Sustainability Promotion
Division

Business Ethics
and Compliance

Environmental Compliance
Information Sharing

Consideration of Preventive Measuresand Early Response
Enhancement of Collaboration

Safety and Health Management
Division

Corporate Quality AssuranceGroup

Health and Safety

Quality ComplianceThree Hitachi Group companies, namely GlobalLogic,
Hitachi Energy and Hitachi Vantara have sites in
Ukraine. The safety and health of our employees andtheir families is the highest priority for the Hitachi Group.
GlobalLogic, which has an engineering site in Ukraine,
has approximately 7,500 employees. Based on thebusiness continuity plan, top priority has been given
to the safety of the site’s employees and their families,
and measures were taken to evacuate them to safe
locations in Ukraine or out of the country. The company
is now returning to normal operations with an operating
rate of 96% and is working to maintain business
continuity while ensuring safety (as of May 31, 2022).
For additional details regarding business and other risks,
please see page 27 of the 153rd Securities Report.
https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2021_4_en.pdf

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Sustainability

Occupational Health and Safety

Responding to Climate Change Risks and Opportunities

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

78

Business Ethics and Compliance

See page 49 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Climate-related Financial Information Disclosure (Based on TCFD-based Recommendations)

In June 2018, Hitachi announced its endorsement of the recommendations by the Financial Stability Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD). The following contains
key climate-related financial information in line with the TCFD’s recommendations.

Governance
Hitachi sees climate change and other environmental issues as important management issues.
Important matters concerning the group’s sustainability strategy, including climate change
measures, are discussed and decided on by the Senior Executive Committee and are presented
to the Board of Directors according to necessity.
Hitachi’s long-term environmental targets called Environmental Innovation 2050, which include
reducing CO2 emissions, were reviewed and approved by the Board of Directors when they were
established and revised in fiscal 2021, and then shared with the public. In addition, the Audit

Committee of independent directors conducts an audit of sustainability-related operations oncea year, and Hitachi executive officers report on climate-related issues to the committee during
the audit.
Additionally, as an external initiative, we have participated in the TCFD Consortium, which holds
discussions on efforts to link companies’ effective information disclosure and the information
they disclose with appropriate investment decisions by financial institutions and others, as a
Steering Committee member and contributed to their guidance formulation.

Strategy
We are responding to climate change by fulfilling our responsibilities as a global company byhelping to achieve a decarbonized society and established long-term environmental targets
called Hitachi Environmental Innovation 2050―as a transition plan to a decarbonized society―in fiscal 2016 under our Environmental Vision.
Moreover, in order to help limit the global temperature rise to 1.5°C as recommended in theIntergovernmental Panel on Climate Change (IPCC) Global Warming of 1.5°C report, in fiscal
2020 we announced a new and more aggressive target to achieve carbon neutrality at Hitachi
factories and offices by fiscal 2030. Then in fiscal 2021 we also announced that we would seek
to achieve carbon neutrality in our value chain by fiscal 2050.

Climate-related Risks
Climate-related business risks are considered based on TCFD classifications for a number ofscenarios, such as (1) risks related to the transition to a decarbonized economy mainly occurringon the way to the 1.5°C scenario*, and (2) risks related to the physical impact of climate changethat would materialize if the 4°C scenario* was reached due to global CO2 emission reduction
targets not being met. In considering climate change risks and opportunities, our assessments
are categorized according to time span, namely short term (three years from fiscal 2022 to fiscal
2024), medium term (up to fiscal 2030), and long term (up to fiscal 2050).
* The scenarios for rising temperature referenced include the Fifth Assessment Report (released in 2014) and theSpecial Report on Global Warming of 1.5°C (released in 2018), both from the Intergovernmental Panel on Climate
Change (IPCC). The 1.5°C scenario is a scenario under which, at the end of the 21st century, the increase in global
temperatures from preindustrial levels is kept below 1.5°C. The 4°C scenario is a scenario under which global
temperatures rise approximately 4°C compared to preindustrial levels.

Climate-related Opportunities
To achieve the CO2 reduction targets set forth in our long-term environmental targets and Midterm Management Plan 2024, it is important not only to decarbonize our business sites (factories
and offices) but also to reduce CO2 emissions from the use of products and services sold, which
account for a large portion of emissions in the entire value chain. Developing and providing
products and services that emit zero or very little CO2 during their use will help meet society’s
demands for reduced emissions. This represents a business opportunity for us in the short,medium, and long term and constitutes a major pillar of the Social Innovation Business that weare promoting as a management strategy.

Risks and Opportunities for Individual Businesses based on Climate Change–
related Scenarios, and Hitachi’s Response
Hitachi operates a broad array of businesses with each business having its own set of risks andopportunities. We therefore selected businesses that have a relatively high likelihood of being
affected by climate change and conducted scenario analyses on them and considered thebusiness environment and our response under the 1.5°C and 4°C scenarios. Based on a review,Hitachi did not find any significant climate change–related risks that were difficult to respond to.
Hitachi believes that we can adapt to a decarbonized society by switching the electricity usedin many businesses to non-fossil-fuel–derived energy. We will closely monitor market trends andwill develop businesses flexibly and strategically.

Hitachi Integrated Report 2022

Introduction

Addressing Risks and Opportunities

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Data

Quality Assurance

79

Business Ethics and Compliance

The Business Environment and Responses under the 1.5°C and 4°C Scenarios (excerpts)
Target businesses

The businessenvironment
under the 1.5°C
scenario

The businessenvironment
under the 4°C
scenario

Responses tofuture businessrisks(Business
opportunities)

Railway systems

Power generation and power grids

IT systems

Industrial equipment

Automotive systems

Business environment
Global demand for transport systems that
emit less CO2 per distance covered will growwith tighter CO2 emission regulations in eachcountry and region.

Business environment
Global demand for electricity generated fromrenewable energy, nuclear power, and othernon-fossil sources will grow with tighter CO2
emission regulations in each country andregion. Power networks will increasingly
accommodate natural energy produced
through distributed generation.

Business environment
Demand for energy-saving, high-efficiency IT
solutions will grow with tighter CO2 emission
regulations in each country and region. There
will also be increased demand for data centersand data analysis systems to accommodate
the expansion of financial services such as
investments and loans for decarbonization
businesses, green bond issues, and datautilization businesses.

Business environment
Global demand for energy-saving industrial
equipment will grow with tighter CO2 emission
regulations in each country and region.

Business environment
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.

Business environment
Demand for electric-powered transport will
gradually increase even without tighter energy
regulations. Damage from typhoons, floods,
and other natural disasters caused by climatechange will rise sharply.

Business environment
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 the price of fossil
fuels. Natural disasters caused by climatechange will rise sharply.

Business environment
Demand for new, high-efficiency technology
will expand as multiplex IT systems in
response to natural disaster BCPs will resultin increased energy consumption. Demand
will also grow for social and public systems to
reduce damage from natural disasters.

Business environment
Typhoons, floods, and other natural disasters
caused by climate change will rise sharply.

Business environment
Fuel efficiency laws and regulations will remainlax globally, and internal combustion engine
vehicles will remain a major mode of transport.
The modal shift will be slow, as conventional
automobiles and motorcycles will remain
predominant. Typhoons, floods, and othernatural disasters caused by climate change
will rise sharply.

Responses to business risks under the
1.5°C and 4°C scenarios
Continue to strengthen the railway businessas global demand for railways will increase
under either scenario.

Responses to business risks under the
1.5°C and 4°C scenarios
Continue to enhance the response to relevantmarkets in view of expected higher demand
for non-fossil energy under either scenario.

Responses to business risks under the
1.5°C and 4°C scenarios
Continue to develop innovative digitaltechnologies, nurture necessary humancapital, and enhance digital service solutions
that generate new value in view of the
expected growth in demand for digital services
and the subsequent market expansion undereither scenario.

Responses to business risks under the
1.5°C and 4°C scenarios
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.

Responses to business risks under the
1.5°C scenario
Promote R&D of electrification technology
and other alternative technologies to enhance
the response to new markets such as electricvehicles.

Notes:
1 This table is a partial extract. Please check the Hitachi Sustainability Report 2022 for more details including risks and opportunities under each scenario and financial information.
2 These scenario analyses are not future projections, but an approach used to consider Hitachiʼs climate change resilience. Future outcomes may differ from each scenario.

Risk Management

Metrics and Targets

Hitachi evaluates and manages climate-related risks for each business
unit and group company as part of a process of assessing risks andopportunities. The results of these evaluations are summarized by the
Hitachi Sustainability Promotion Division, after which the Senior Executive
Committee, and if necessary, the Board of Directors, deliberates the risks
and opportunities perceived as being particularly important for the groupas a whole to make decisions.

Hitachi defines its medium- and long-term metrics and targets in Hitachi Environmental Innovation 2050 and implements
detailed management of short-term metrics and targets in its Environmental Action Plan, which is updated every three years.
Metrics for climate change mitigation and adaptation use total CO2 emissions and the reduction rate in CO2 emissions perunit. Hitachi also sets and manages a metric of its contributions to CO2 reductions, which help achieve a comprehensively
decarbonized society. Hitachi promotes efforts to reduce CO2 emissions at its own business sites (factories and offices)using such as the Hitachi Internal Carbon Pricing (HICP) system, which that incentivizes capital expenditures that contributeto the reduction of CO2 emissions.
Additionally, to accelerate the creation of environmental value to achieve long-term environmental targets, in fiscal 2021
Hitachi introduced the executive officer compensation scheme incorporating assessments that take environmental value
into account. Hitachi also plans to spend approximately 500 billion yen as an R&D investment to create green value throughthe switching of energy sources, vehicle electrification, and so on over the next three years from now to fiscal 2024.

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Promoting Information Security
Hitachi places “Ensuring cyber security” as one of the sub material topics under our material
topic of “Safety and Security.” To minimize information leaks due to incidents such as cyberattacks and risks that would interfere with business continuity such as operational shutdowns,
Hitachi addresses information security from the perspectives of both value creation and risk
management. Hitachi has established an Information Security Policy based on cyber security risk
management, which is promoted under a structure where the Information Security Committee,
chaired by the Chief Information Security Officer (CISO), determines action policies and various
measures regarding information security and the protection of personal information.

Information Security Management
Hitachi has established the rules for information security in compliance with the ISO/IEC 27001
international standard and furthermore enhanced our rules with US government standard SP800171. In light of the recent severe cyber attacks, the rules have been rolled out globally by Hitachi,Ltd., and the headquarters of each group company. Support through regional headquarters and theuse of shared security services are also actively promoted. Policies and various measures determinedby the Information Security Committee are thoroughly enforced at each workplace through theInformation Security Promotion Council and other bodies. While Hitachi promotes new working styles
through telework, due to the threat posed by the risk of vulnerabilities in the security awareness of
employees, Hitachi has been conducting employee-focused awareness raising activities in addition
to IT measures since fiscal 2020.
In addition, to detect global cyber attacks early on and respond to them swiftly, we conduct 24/7
security monitoring through a Security Operation Center (SOC), and employ an Incident Response
Team (IRT) that collects and spreads threat information, and responds to incidents. To deal with cyberattacks that are becoming more sophisticated year after year, we have stepped up cyber monitoring
efforts, such as the installation of Endpoint Detection and Response (EDR) systems to monitor theoperation of equipment, and the implementation of monitoring to protect authentication systems.

Preventing Information Leaks
Hitachi employs device encryption, thin clients, electronic document access control and revocation
software, ID management and access control through the development of authentication
infrastructure, email and website filtering systems and other measures. We have also strengthened
various IT measures including multi-layered defense against cyber attacks such as targeted emails.
Additionally, to prevent information leaks from procurement partners, Hitachi checks and audits thestatus of information security measures at its procurement sources based on its own standards
for information security requirements. Hitachi also provides procurement partners with businessinformation inspection tools installed in information equipment and security training materials, andasks that business information stored on personally owned information equipment be checked forand deleted.

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

80

Business Ethics and Compliance

See page 184 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Education on Information Security
Hitachi conducts e-learning on information security and personal information protection for
all officers and employees each year. In fiscal 2021, roughly 35,000 employees underwent
the training (at Hitachi, Ltd.), achieving a 100% participation rate (excluding those who could
not take the training due to leaves of absence, etc.). Hitachi prepares and promotes a wide
range of educational programs for different subjects and purposes. Training on targeted email
attacks and similar incidents includes actually sending simulated attack emails to employees
as “simulated target attack email drills” designed to raise sensitivity to security through theexperience of receiving such messages.

Thorough Information Security Audits and Inspections
Hitachi’s information security is implemented in accordance with the information security
management system PDCA cycle. Audits of personal information protection and information
security are conducted for all group companies and divisions yearly. A chief auditor appointed
by Hitachi’s CEO conducts audits from an independent standpoint to ensure the impartiality andindependence of auditors. Domestic group companies (169 companies*) conduct equivalent
audits to Hitachi, Ltd., while self-checks consistent with global standards are promoted atoverseas group companies. In addition, as workplace self-inspections, all divisions of Hitachi
conduct checks of personal information protection and information security operation each year.
In conjunction with these activities, each month checks are performed to confirm the operationof personal information protection measures with respect to 740 tasks that involve handling
important personal information (as of March 2022) as a way to regularly monitor the status ofthese activities. In addition, a dedicated team performs on-site assessments periodically andchecks vulnerabilities quarterly on the servers or other equipment that are exposed to the public.
The team works to mitigate security risks by checking for deviations from self-checks.
*Including voluntary submission from partners.

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Occupational Health and Safety

Establishing the Occupational Health and Safety Management System
The Hitachi Group Health and Safety Leaders Meeting is held and attended by health and safety
officers from each group company and representatives from each division. The members set
plans and objectives for Groupwide health and safety strategies, review ongoing measures toimprove occupational health and safety management system, and share the commitment fromtop management to make protecting the health and safety of employees their top priority. The
Audit Committee also audits the results of group health and safety activities, plans, and policies
every year. For critical health and safety issues, the status of occupational health and safety
management is reported at least once a year to the Senior Executive Committee and at meetingsof group company presidents.
In fiscal 2021, the Hitachi Group established Safety and Health Management Division that is
responsible for promotion of occupational health and safety within the group and is overseeing a
global management system. Under the division, the Hitachi Group has been continually working
to improve our health and safety management system in collaboration with health and safety
officers from each group company and representatives from each division.

Initiatives for Preventing Work-related Accidents
We have set goals of “zero fatal accidents and having lost-time accidents across group sites
worldwide compared to 2018” by fiscal 2021 but were unable to meet the goals. In the lightof this, we have set a new goal of “zero fatal accidents and halving the global accident ratecompared to 2021” by fiscal 2024. In fiscal 2021, we promoted the effective utilization of risk
assessments, the building and operation of a global health and safety management system,
training to promote autonomous health and safety practices, and improvement measuresutilizing IT and digital technologies. In addition, in the event of a fatal accident occurs at an
overseas group company, a safety assessment is conducted by a third-party organization, andimprovements are made such as strengthening the system, reviewing action plans, and raisingsafety awareness.
Although the total number of occupational accidents is declining, there are issues to work onsuch as improvement of the risky work environment and enforcement of the safety management

Corporate Governance

Responsibility in the Value Chain

81

Data

Quality Assurance

Business Ethics and Compliance

See page 111 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Occupational Health and Safety
Hitachi places “Occupational safety” as one of the sub material topics under our material topic of“Business with Integrity.” “Health and Safety Always Comes First” is the basic principle underlining
the Hitachi Group Health and Safety Policy which is shared by all Hitachi Group companies, andreflects our commitment to develop a safe, secure, comfortable and healthy workplace free from
accidents. We share the belief that all work-related injuries and ill health can be prevented, andthat we are responsible for our own safety and health. We engage in practices to protect ourhealth and safety and endeavor to build a culture that promotes mutual awareness.

Sustainability

system including contractors and subcontractors. To address this, we are working to formulate
guidelines for safety management system common to the Hitachi Group and comprehensive
safety management evaluation methods that include contractors.

Initiatives to Improve Employee Health
Since the wellbeing of employees is essential to the sustainable growth of the Hitachi Group,
we are making every effort to develop workplace environments in which employees can worksafely without worrying about their physical and mental health. In fiscal 2020, new questions
about wellbeing were added to the Global Employee Survey that is conducted annually, and thequestions were expanded in fiscal 2021.
Additionally, in Japan we have steadily implemented hygiene and health measures, strengthened
mental health support in line with changes in working styles, and made thorough efforts toprevent lifestyle-related disease. In the medium to long term, we will carry out initiatives based on
a common hygiene policy after grasping the actual situations of occupational health measuresand identifying issues globally.

Measures to Prevent Infectious Disease
We have been vaccinating employees against hepatitis A, tetanus, cholera, etc., to support
infectious disease prevention during business travel outside Japan. In fiscal 2021, we asked that
employees always stay home if they have a fever or feel unwell relative to COVID-19. We also
urged the enforcement of preventive measures advocated by the government. The Hitachi Group
recommends that employees be vaccinated against COVID-19 from the perspective of preventing
infections and aggregation of the virus. In the workplace vaccinations implemented in Japan,
approximately 75,000 people were vaccinated, including employees and their families at some sites.

Hitachi Group Global Safety Statistics (rate of occurrence)*
100

Region
North America

80

Latin America
Europe

60

India

40

Asia

China
Oceania20

AfricaOverseas total

0

Japan

2017

2018

2019

2020

2021（Year）

Global total

(%)

2017

2018

2019

2020

2021

24.33
1.62
10.82
1.44
1.53
4.41
24.41
9.93
7.42
1.85
4.22

27.96
0.44
6.08
1.44
1.46
3.34
21.94
11.76
7.43
1.64
4.20

20.76
0.57
4.78
1.63
1.17
2.63
29.07
9.72
5.78
1.53
3.45

18.98
2.12
3.09
1.07
1.12
1.55
12.95
25.37
4.90
1.34
2.89

18.46
1.69
3.71
0.53
1.06
1.30
5.32
1.43
3.80
1.20
2.69

*Occurrence rate is the rate of workplace accidents per 1,000 directly contracted employees (including cases without lost workdays)

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Corporate Governance

Sustainability

Occupational Health and Safety

Responsibility in the Value Chain

82

Data

Quality Assurance

Business Ethics and Compliance

See page 123 and 132 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Responsibility in the Value Chain
Hitachi places “Respect for human rights” as one of the sub material topics under our material
topic of “Business with Integrity.” Together with our procurement partners*1, we also promoteresponsible procurement including human rights considerations in the value chain. Additionally,
to ensure the stable supply of products and services, whenever possible we endeavor toascertain and mitigate risks in advance.

Status of Sustainable Procurement Measures*1 Hitachi normally refers to its suppliers (including vendors or providers) as “procurement partners” who build business
together on an equal footing.

*3 Sustainability monitoring in fiscal 2021 was conducted focusing on the assessment of risks related to human rights
and the environment.

Procurement
Procurement BCP and Framework

Respect for Human Rights
Human Rights Due Diligence Initiatives

We are working to enhance procurement BCPs across the group companies worldwide so thatthe occurrence of incidents*2 does not disrupt business and have a significant impact on society.

In the Hitachi Group Human Rights Policy, Hitachi commits to engaging in Human Rights Due
Diligence (HRDD), appropriately educating employees, and other activities.
Hitachi has placed the Chief Sustainability Officer in charge of groupwide human rights promotion,
while a project team established within the Hitachi, Ltd. headquarters for HRDD promotion plays acentral role in promotional activities based on interdepartmental cooperation, such as considering
HRDD promotion measures for the Hitachi Group and its procurement partners.
In addition, in fiscal 2020 we established the Hitachi Global Compliance Hotline, which consolidated
the general consultation and reporting systems for harassment and human rights issues at thebusiness sites of each business unit and group company. Going forward, Hitachi will work to makethe hotline widely known to employees.

*2 Incidents: Events that cause a disruption to business, including natural disasters such as major earthquakes

Sustainable Procurement and Framework
Hitachi instituted the Hitachi Group Global Procurement Code. It calls on group companies
and procurement partners to give due consideration to human rights, labor practices, safety,
ethics, quality, and security in the supply chain. Hitachi also established the Hitachi Group
Sustainable Procurement Guidelines and the Green Procurement Guidelines, which are a codeof conduct for procurement partners. We distribute them to approximately 30,000 procurement
partners. We also ask for compliance and continually explain the contents through sustainableprocurement seminars. Hitachi also conducts sustainability monitoring, where it evaluates andanalyzes the state of sustainability initiatives by procurement partners through surveys. In fiscal
2021, we focused on human rights and environmental risk assessment, and provided feedback
to the relevant procurement partners. Regarding the procurement of minerals, we establishedthe Hitachi Group’s Policy for a Responsible Supply Chain of Minerals, and pursue activities
consistent with international guidelines.
We established the Sustainable Procurement Conference and Sustainable Procurement Office infiscal 2021 to strengthen our sustainability activities.

Tackling Sustainable Procurement by Strengthening Global Partnerships
Hitachi has appointed procurement officers to oversee procurement activities locally in China,
the rest of Asia, Europe, and the Americas. The officers carry out activities such as sustainability
audits, sustainability monitoring, and sustainable procurement seminars for procurement
partners in their respective regions to strengthen sustainable procurement.

FY2017(Number of companies)
FY2018FY2019FY2020

FY2021271［Human rights］2,524＊3［Environment］708＊3

Sustainability Monitoring

131

345

291

Sustainability Audits

18

24

19

27

25

Sustainability Procurement Seminar for Suppliers

65

126

59

450

359

Initiatives to Deal with Child Labor and Forced LaborIn the Hitachi Group Codes of Conduct, Hitachi has made clear its stance of never tolerating child laborand forced labor internally or in its supply chain, and we work to thoroughly disseminate this stance amongprocurement partners. In March 2020, a report from the Australian Strategic Policy Institute indicated that
one of Hitachi’s procurement partners may be involved with forced labor of Uyghur people. In response,a third-party audit based on international standards was conducted to review the procurement partner’s
management systems and employee management in particular, but no issues regarding forced labor were
found. In fiscal 2021, we made groupwide efforts to address “forced labor and violations of the rights of
migrant workers,” which is designated as a priority risk across the Hitachi Group.

Response to Technical Intern Trainee Issues
In 2018, the Organization for Technical Intern Training Groupwide issued recommendations for
improvement regarding legal violations regarding training, and in 2019 Hitachi received an order for
improvement from the Immigration Services Agency of Japan and the Ministry of Health, Labour andWelfare regarding systems for carrying out proper training. We submitted reports stating the completionof improvements to the Organization for Technical Intern Training by October 2019, and the reports
were accepted. Hitachi has developed Groupwide policies, guidelines and check systems, conducts
internal audits, and engages in other efforts to thoroughly prevent repeat occurrences of this nature.

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Quality Assurance
Hitachi places “Safe and secure products and services” as one of the sub material topics
under our material topic “Business with Integrity,” and we are committed to ensuring productand service safety while putting the customer first. As stipulated in the Hitachi Group Codesof Conduct, we aim to meet customer needs and specifications when providing products andservices. We strive to ensure quality and safety by setting independent standards as necessary,in addition to complying with all relevant laws and standards.

Hitachi’s Basic Philosophy on Quality Assurance
Embracing the Hitachi Founding Spirit of “Harmony, Sincerity, and Pioneering Spirit,” we thoroughly
adhere to the basics and the right way and espouse the values of prioritizing morality over profits,
placing great emphasis on sincerity in our quality assurance activities. Hitachi’s unique practiceof OCHIBO-HIROI (investigating the fundamental cause of incidents and completely preventing
similar incidents) is a method that advances technology by analyzing and thoroughly learningfrom failures. When an incident occurs, we not only investigate the technical causes in a product,
but also thoroughly discuss the processes, frameworks and motivating factors leading up to theincident, along with ways to prevent recurrences, in order to improve our product reliability andcustomer satisfaction.

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

83

Business Ethics and Compliance

See page 137 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Technical Law Compliance Activities
Hitachi promotes internal awareness of product regulations, amendment trends, andenforcement dates in each country and region. We also work to clarify product-specific laws (withour product-specific laws map) as well as promoting regulatory compliance and implementing
continuous process improvements with our product compliance management system.

Thorough Safety Design and Safety Monitoring for Products and Services
When developing products, Hitachi makes the safety of our customers’ lives, health and property
its top priority. We verify safety across every process, from development and production tosales and maintenance, and strive to ensure safety based on the prioritization of risk mitigation
informed by usage information. We also conduct risk assessments from a wide perspective incoordination with related BUs and research laboratories.

Quality and Reliability Education
Hitachi regularly provides various forms of education and training related to quality and reliability
with curricula tailored to attendees. All employees undergo e-learning courses on Hitachi’s
philosophy regarding quality, with quality assurance themes also dealt with in tiered training.
Engineers are given field-specific technical lectures at various levels.

Framework for Quality Assurance

Product Safety Response When Incidents Occur

Hitachi has separated the Quality Assurance Division from the Manufacturing Division in
every business division. We have also made them independent of their business divisions
and reinforced their reporting lines to the Quality Assurance Division at our head office,establishing systems for close information sharing between the two sides. In addition, we
have strengthened governance by giving greater authority to the Quality Assurance Division at
our head office and implemented thorough quality governance through regular internal audits.
When a serious incident occurs, once identified it is promptly reported to the top management,
including the chairperson and president, by the Quality Assurance Division of the BUs or groupcompanies concerned.

When an incident occurs, the division responsible for the product takes a central role and acts
swiftly to ensure product safety. In the case of a severe incident, a status report is issued to
top management, the relevant authorities are informed in line with legal requirements, and theincident is disclosed to customers through the website and other communication channels.
We also have a structure in place to ensure that fast and appropriate action is taken. In thecase we determine that retroactive action is necessary, we notify customers via newspaper
advertising and websites to carry out the necessary repair or replacement program.

Quality Assurance Activities

In December 2021, Hitachi Astemo announced that it had uncovered improper conduct basedon information provided by an employee regarding periodic testing on brake and suspension
components and other activities. To ensure such incidents do not occur again, Hitachi
Astemo established a new governance office to function as a headquarters and strengthenrisk management, in addition to a dedicated auditing organization in the Quality Management
Division. In December 2021, we established a special investigation committee through external
legal counsel and we are working to enact sweeping measures to prevent reoccurrences.

We promote activities to enhance quality assurance in terms of organization and management,
technology and human capital across every process—from product planning and development
to design, manufacturing, testing, delivery and maintenance services. Under our approach of
making prevention the duty of quality assurance, we are strengthening our incident prevention
activities, which go beyond recurrence prevention.

Reoccurrence Prevention Measures in Response to Inappropriate Conduct
Discovered by Hitachi Astemo

Hitachi Integrated Report 2022

Addressing Risks and Opportunities

Introduction

Whatʼs Hitachi

Responding to Climate Change Risks and Opportunities

Value Creation

Business Strategies

Promoting of Information Security

Business Ethics and Compliance
Hitachi places “Business ethics and compliance” as one of the sub material topics under ourmaterial topic of “Business with Integrity.” We expect our business practices to meet internationalrules and legal requirements and adhere to high standards of ethics and integrity.

Governance
The One Hitachi Compliance Program, led by the Hitachi Group Head of Ethics and Compliance,with oversight by the Audit Committee of the Hitachi, Ltd., Board of Directors, contributes to
Hitachi’s success by providing advice to managers, leaders and employees.
The Compliance Division works closely with Hitachi companies to streamline business ethics
standards to drive the program’s efficiency and effectiveness. Focusing on business ethics helps
Hitachi attract, retain and engage the best employees and select the right business partners. It
protects our reputation and relationships with stakeholders. It helps us deliver on our Mission,
Values and Vision and provides a competitive advantage for Hitachi.
Outside Hitachi, the Compliance Division regularly exchanges ideas and best practices forcompliance processes. Hitachi became a member of Ethisphere’s Business Ethics Leadership
Alliance (BELA) in October 2021. BELA is a globally recognized organization of leading
companies collaborating to share best practices in governance, risk management and ethics.

Sustainability

Occupational Health and Safety

Corporate Governance

Responsibility in the Value Chain

Quality Assurance

Data

84

Business Ethics and Compliance

See page 170 of our Sustainability Report for detailed information.
https://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf- Competition Law Compliance Policy
The Hitachi Group’s Fair Competition Policy addresses interaction with competitors and ensuresawareness of points of caution related to business practices. In fiscal 2021, we revised the guidelines forpreventing cartel activity and improved the relevant forms based on the revised guidelines.

- Hitachi’s Tax Compliance Approach
The Hitachi Group ensures appropriate tax governance, established regulations governing tax-related
matters, and informed employees involved in tax management of the regulations.

Business Ethics and Compliance Training
Our annual business ethics training on the Codes and anti-bribery and anti-corruption reinforces
Hitachi’s commitment to business ethics and integrity. It keeps employees informed and updated
on our high ethical standards and obligations.
Our fiscal 2021 training course covered business ethics, bribery and corruption, gifts, travel
and entertainment, anti-money laundering laws, fraud, antisocial forces, fair competition, export
control, company assets, information owned by others, data protection, conflicts of interest,
reporting and non-retaliation and the Hitachi Global Compliance Hotline (Whistleblower system).
After completing the training, employees must certify that they will abide by the Codes andethics-related policies and protocols.

Enforcing Policies and Guidelines
The Hitachi Group Codes of Conduct and Code of Ethics and Compliance (the Codes), areavailable in 15 languages or more, and define how we conduct our business. The Codes set
standards for dealings with each other, customers, partners, and competitors. We also expect
our business partners to commit to meeting our high standards of integrity.
The One Hitachi Group Compliance Program consists of regulations and guidelines such ascompliance with the Competition law, preventing transactions with antisocial forces and money
laundering, and preventing bribery and corruption. In fiscal 2021, the Compliance Division
worked to address business ethics and compliance issues and improve policies, protocols,
systems and measures related to their implementation.

- Policies for Preventing Bribery and Corrupt Practices
The Hitachi Group’s Anti-Bribery and Anti-Corruption policy ensures that the Hitachi Group remains incompliance with all anti-bribery and anti-corruption laws. The policy details the provision or acceptanceof entertainment or gifts, donations, or provision of political contributions by officers and employees. In
addition to outlining spending limits on the value and frequency of entertainment or gifts to be provided to
public officials, these policies prohibit facilitation payments. In fiscal 2021, we set limits on the amount ofmoney spent on gifts or entertainment as part of sales activities to commercial parties and the number oftimes entertainment or gifts are provided.

Strengthening Our Speak-up Culture
Hitachi believes that a speak up/listen up culture—where employees are encouraged to raise
concerns and feel confident that they can do so without fear of retaliation—is a key to early
detection and prevention of ethical and regulatory problems. Employees may raise concerns andask questions through their managers or any other manager, Human Resources, Complianceor Legal team member or the Hitachi Global Compliance Hotline. Hitachi Group employees andother interested parties can use the Hotline to report suspected violations of law and Hitachi
policies and protocols relating to illegal or unethical conduct.
The Hitachi Group does not tolerate retaliation against an employee who cooperates with aninvestigation, raises a concern or reports suspected misconduct in good faith. Hitachi takes
claims of retaliation seriously—anyone found to have committed a retaliatory act is subject todisciplinary action.
In fiscal 2021, we received more than 1,000 reports from all group companies worldwide.

Violation of Laws and Regulations
In fiscal 2021, there were no bribery/corruption or competition law–related incidents in which
Hitachi was prosecuted or penalized by the authorities. Furthermore, Hitachi had no significant
fines or nonmonetary sanctions for non-compliance with tax laws and regulations.

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction

Whatʼs Hitachi

Corporate GovernanceValue Creation

Business Strategies

Sustainability

Corporate Governance

Data

85

Independent Directors Dialogue

Corporate Governance
Hitachi views the expansion of long-term and overall shareholder returns as an important management objective. Hitachi, Ltd. and Hitachi Group companies maintain good relationships with a wide
range of stakeholders, and we recognize that these relationships make up an important portion of our overall corporate value. Accordingly, we are striving to establish a system that will 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 governanceby ensuring thorough separation between the oversight and execution of management, establishing a swift business execution system, and striving to achieve highly transparent management.

Message from the Chairman of the Board
On Being Appointed Chairman of the Board

Katsumi Ihara
Independent Director

Four years have passed since I was appointed as a Hitachi
director. This period marks the final phase of Hitachi’s major
structural reforms, implemented for more than 10 years
after the 2008 global financial crisis. During this time, Hitachi
has been laying the foundation for growth by transforming
individual businesses to be competitive in the global market
and supplementing the necessary pieces with substantial
M&A activities. We have finally entered a phase of full-fledgedtransition from structural reforms to global growth. The Midterm Management Plan 2024, announced in April 2022, isbased on this recognition.
Hitachi has invested a substantial amount of capital in M&A inrecent years. It is an important responsibility of the Board of
Directors to follow up on these acquisitions to ensure that the
newly acquired assets generate synergies within the groupand contribute to the enhancement of corporate value. At
the same time, looking at the current business environment,
we are in the midst of volatility, uncertainty, complexity
and ambiguity (VUCA), such as rising geopolitical risks,
inflation and supply chain disruptions. The Board of Directors
continues to address the strengthening risk management
system as one of its important themes.

Many of Hitachi’s independent directors have management
experience at global companies and possess a wide rangeof experience and knowledge. Above all, they have a strong
desire to contribute to the enhancement of Hitachi’s corporate
value. Despite the challenging business environment, we will
fulfill our responsibility in terms of management oversightto ensure rigorous and effective discussions leading tosustainable growth.

Board of Directors Composition andEffectivenessAt present, Hitachi’s Board of Directors consists of 12
members, of which nine are independent directors, five are
non-Japanese and two are women. They have a wide rangeof specialties, including top management experience at global
companies and public administration backgrounds. At theBoard of Directors meetings, these members pose sharpquestions and opinions during lively discussion with executive
officers. I feel that the current composition of the Board of
Directors goes beyond formal aspects and substantiallycontributes to the enhancement of Hitachi’s corporate value.
In recent years, Hitachi has been focusing more on the digitalHitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

86

Independent Directors Dialogue

field, so we have brought independent directors on board
who are well versed in digital technologies. To maintain andimprove the effectiveness of the Board of Directors, it isnecessary to continuously secure directors with experienceand knowledge that match the direction the company isheading. However, it is not an overnight task to invite people
with management experience in global companies to serve
as independent directors. I believe that the activities ofNominating Committee, which deliberates Board compositionin light of Hitachi’s future vision, including advances in ESG
management contributing to the realization of a sustainable
society, are extremely important in terms of ensuring theeffectiveness of the Board of Directors.

Lively and Earnest Discussions at
Board Meetings
Not all directors agree with agendas submitted to the Board of
Directors. In the past, there have been cases where opinions
on major M&A projects were divided. As large M&A projects
entail significant risks, analysis from a variety of perspectives
is essential, and it is natural that there will be differences injudgment. What is important here is not only that the agenda
is passed, but also that the executive side understands
the rationale behind points discussed and applies them tosubsequent PMI and risk management.
In formulating Mid-term Management Plan 2024, the Boardof Directors held five sessions to discuss the plan before it
was announced. Independent directors provided a variety ofopinions that were reflected, for example, in the new businesspromotion organization and the deepening of Lumada
strategy. The technology strategy was also discussed in theform of backcasting from 2050, rather than focusing only on
the three-year period ending in 2024.

Strengths of Hitachi’s Board of Directors:
Awareness of and Confidence in Mutual Respect
Since being appointed director, I felt that Hitachi’s corporate
culture is based on respect for the opinions of others.
Executives sincerely listen to director opinions and are willingto incorporate them into their work. Further, directors have apassionate desire to contribute to the sound development of
Hitachi’s business based on their own experiences. Hence, alldirectors attend the Board meetings after careful preparation,
including reading through the materials distributed in advanceand sorting out points to be confirmed. I think that effectivenessof Hitachi’s Board of Directors is largely supported by thissense of mutual respect and trust.
Additionally, Board meetings are not the only opportunity forinteractions between independent directors and executive
officers. Opinions and questions from independent directors
to executive officers are also exchanged on a daily basis
via email, while executive officers seek the opinions of
independent directors on specific area of expertise. Further,
Hitachi has non-executive directors within the company who
are familiar with Hitachi’s business and worksites, effectivelyfunctioning as a bridge between independent directors andthe company.
Before the COVID-19 pandemic, all directors attended
meetings together, which gave them the opportunity toreceive explanations from relevant parties and communicate
with each other before meetings. Since fiscal 2020, Board
members living overseas have had difficulties traveling toJapan and remote meetings have become the norm, limiting
face-to-face communication. Going forward, while keeping aneye on the situation, we will use face-to-face opportunities asmuch as possible to further invigorate communication among
directors and with executive officers to improve the quality of
discussions and enhance the effectiveness of the Board of
Directors.

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction

Whatʼs Hitachi

Corporate Governance1999

Business Strategies

Introduction of Objective Perspective

General Meeting of Shareholders

 ractical advice from experts in Japan andPoverseas

Senior Executive Committee

Appointment

Demarcation of Management Oversight andExecution

	Transitioned to a company with committees(currently a company with nominating committee, etc.)

Appointment/
oversight

Report2 Board of Directors

2 executive
members

President & CEO

members
10 non-executive(including two women)

Executive Vice Presidents
and Executive Officers/
Senior Vice Presidents andExecutive Officers/
Vice Presidents andExecutive Officers

Increased management speed and improved
management transparency

2010

2006

Enforcement of Companies Act

1

1

1

2010	
Enhancement of Interactions with CapitalMarkets

Nominating
Committee

Compensation
Committee

Audit
Committee

4 directors

4 directors

5 directors*

3 Audit*One standing Audit
Committee member

3 Report	Launched Hitachi IR Day(briefing on business strategy by division)Clarifiedcommitment of business unit top
management to capital markets

2012

87

Data

Corporate Governance

Hitachi’s Corporate Governance Framework and Features (as of July 2022)

Management Advisory Committees

2003

Sustainability

Independent Directors Dialogue

History of Hitachi’s Corporate Governance Reform
1999

Value Creation

Acceleration of Global Management

Executive
Officer
Department
in charge

3 Audit	Increased number of independent directors, including
non-Japanese directors, to comprise a majority

	Development of Guidelines forStrengthening GovernanceInternal
Auditing
OfficeDepartment
in charge

Department
in charge

Department
in charge

3 Audit
3 Report

Non-independent

Executive
Officer

3 AuditAccounting Auditors

Independent2015

	Development of Corporate Governance Guidelines

2014Development of Stewardship Code2015

Began Application of Corporate
Governance Code2016	
Enhanced Dissemination of Information
about Medium- to Long-term Sustainability	Published the Integrated Report2019	
Accelerated the Social Innovation Businessacross Five Growth Fields
	Executive vice presidents were placed in five sectors
	Held ESG briefing sessions
An independent director (chair of the Audit
Committee) and the CEO shared their remarks

POINT 1

POINT 2

POINT 3

Transparency in Management

Independence of the Board of Directors

Transitioned to a company withcommittees (currently a company with anominating committee, etc.) in 2003.

Increased the number of independent
directors, including non-Japanese
directors, in 2012.

Enhanced Collaboration
through Tripartite Auditing

Hitachi established the Nominating Committee, theCompensation Committee and the Audit Committee,
with independent directors comprising the majority ofmembers and serving as chairpersons. This system
ensures transparency in management, separates
the oversight and execution of management,
facilitates the full exercise of oversight functions, andenables discussions and reports to be conducted
appropriately within these three committees.

The Board of Directors, which is chaired by anindependent director, has 12 members, including nine
independent directors, two directors who are also
serving as executive officers, and one director who is
not serving as an executive officer. The chairman of theBoard is an independent director. In addition, we haveestablished a system that facilitates the full exerciseof oversight functions by maintaining a separation
between management oversight and execution.

Hitachi’s Audit Committee and internal
audit sections collaborate with thirdparty accounting auditors to strengthen
Tripartite Auditing aimed at increasing
the effectiveness of internal controls.

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Whatʼs Hitachi

Introduction
Corporate GovernanceValue Creation

Business Strategies

Sustainability

Corporate Governance

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Data

Independent Directors Dialogue

Experience, Knowledge and Capabilities Required for Directors
Hitachi Directors need to have a wide range of experience and knowledge in the global and diverse fields that are worthy of leading Hitachi’s management to expand the Social Innovation Businessglobally, and have the qualities of a broad experience and expertise in management.
The experience, knowledge, capabilities and other qualities required for Hitachi directors are as follows.

Core Skills

Number ofapplicabledirectors

Core qualities that ensure management oversight efficiency anddecision-making functions

Professional Skills
Expertise and experience that enhances discussions pertaining to the promotion of theSocial Innovation Business

Number ofapplicabledirectors

Corporate
management

Corporate management experience and knowledge

12peopleGovernments
and internationalorganizations

Leadership experience in government, governmental agencies, international organizations
or economic associations that facilitate an understanding of and response to regulations
and social issues, as well as practical experience at educational institutions

4
peopleGlobalbusiness

Business experience outside Japan or management
experience at a company that develops business globally

12peopleLegal affairs

Expertise and practical experience in legal affairs
indispensable for global business and the development of
new business1
personRiskmanagement

Knowledge of risk assessment and management
necessary to maintain operations

12
peopleR&D andintellectual
property

Expertise and practical experience in R&D or intellectual
property facilitating the utilization of technology and theincorporation of new technologies

2
peopleFinance andaccounting

Knowledge and management experience pertaining tofinancial accounting necessary for medium- to long-term
corporate value creation from a financial perspective

12
peopleDigitalPractical experience in industrial fields vital for promoting digitaltransformation (DX) in the Social Innovation Business4
peopleBoard of Directors Composition (As of July 2022)
Independence(ratio of independent directors)

Diversity(ratio of non-Japanese and female directors)

Diversity(by country of origin)
Germany:
1personIndependent
directors
Nine people

75%

United Kingdom:
1personNon-Japanese
directors
Five people

41.7%

United States:
2people2 female directors(16.7% of overall
director total)

India: 1person

Industrial field
Japan:

Finance7peopleEnergy and resources

RetailMaterials andchemicals

Transportationand logistics

Automobiles
andtransportation

Electricity
and gasIT and services

Machinery
Electric andprecision instruments

Hitachi Integrated Report 2022

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Message from the Chairman of the Board

Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

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Independent Directors Dialogue

Highly Experienced Directors
At Board of Directors, discussions are conducted from a variety of perspectives by directors possessing a wealth of experience and knowledge pertaining to management, legal affairs, accounting,capital markets, government agencies and digital initiatives at global corporations.
Name

Notes

Main industrial fields

Positions at Hitachi and responsibilities

Katsumi Ihara

Engaged in Sony Group management, possessing a wealth of experience and insight in the field of international corporate
management.

Electric and precision
instruments, financeIndependent director
Nominating Committee chairman
Audit Committee member
Compensation Committee member

Ravi Venkatesan

Possesses a wealth of experience and insight in international corporate management at Microsoft India and other companies,
and in particular, the digital field and business in emerging markets.

IT and services

Independent director

Cynthia Carroll

Possesses a wealth of experience and insight as a manager of large international corporations including Anglo American.

Materials and chemicals, energy
and resources

Independent director
Nominating Committee member

Ikuro Sugawara

Held a leading position in the Ministry of Economy, Trade and Industry, and possesses a wealth of experience and insight in
the administrative field.

General industry

Independent director
Audit Committee member

Joe Harlan

Possesses a wealth of experience and insight in international corporate management, including at the Dow Chemical
Company.

Electricity and gas, energy
and resources, materials andchemicals

Independent director
Compensation Committee member

Louise Pentland

Attorney licensed in New York and the UK possessing a wealth of insight into corporate legal affairs and corporate
governance cultivated through experience as a Legal Officer at PayPal Holdings and other large global corporations.

IT and services, finance and retailIndependent director

Takatoshi Yamamoto

Possesses extensive insight into business and management in the fields of corporate analysis and international corporate
management.

Finance

Independent director
Compensation Committee chairman

Hiroaki Yoshihara

Possesses a high degree of professional knowledge and a wealth of experience in the fields of international corporate
management, finance and accounting.

Finance, general industry

Independent director
Nominating Committee member
Audit Committee chairman

Helmuth Ludwig

Mainly engaged in Siemens Group management, possessing a wealth of experience and insight in international corporate
management and the digital field in particular.

Machinery, manufacturing

Independent director
Audit Committee member

Keiji Kojima

Engaged in R&D at Hitachi and its group companies, most recently in the Smart Life sector, possessing a wealth ofexperience and achievements, particularly in digital businesses related to Lumada global deployment.

IT and services

Director, Representative Executive Officer,
President & CEO
Compensation Committee member

Hideaki SekiEngaged in managing Hitachi and group company elevator/escalator and automotive systems businesses, possessing a
wealth of experience and achievements, including promoting the global expansion of these businesses.

Automobiles and transportation,
machinery

Director
Audit Committee member

Toshiaki Higashihara

Engaged in managing a wide range of fields at Hitachi and its group companies, including the social infrastructure and electric
power system businesses, possessing a wealth of experience and achievements that include promoting the global expansionof Hitachi Group business.

Transportation and logistics,
IT and services, energy andresources

Director, Executive Chairman, Representative
Executive Officer
Nominating Committee member

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Data

Corporate Governance90

Independent Directors Dialogue

Administrative Performance of the Board of Directors
The Board of Directors approves basic management policy for the Hitachi Group and oversees
the execution of the duties of executive officers and directors in order to sustainably enhance
corporate value and the shareholders’ common interests. The basic management policy
includes the Mid-term Management Plan and annual budget compilation. The Board of Directors
focuses on strategic issues related to the basic management policy, as well as other items to beresolved that are provided in laws, regulations, the Articles of Incorporation, and the Board of
Directors Regulations.
Fiscal 2021 was a year in which we formulated the next Mid-term Management Plan, with theBoard of Directors holding numerous discussions between executive officers and directors on
the plan’s direction and priority issues. At a Board meeting held in October 2021, then CEO
Toshiaki Higashihara (currently Executive Chairman of the Board) provided a progress report on
the 2021 Mid-term Management Plan, facilitating a common understanding among directors
regarding issues that need to be strengthened in the next Mid-term Management Plan. This
process was aimed at sharing Hitachi’s aspirations as a Company and examining specific plandetails. In promoting the execution of management strategies, more time is spent discussing
and deliberating than is used to explain quarterly financial reports and business strategies. As
for GlobalLogic, which plays a major role in promoting Hitachi’s digital strategy, the Board of
Directors is informed of the post-acquisition PMI plan and progress, and the status of promotion
is shared on a regular basis. In terms of environmental initiatives, a report on Hitachi’s participationin COP26 and the revision of long-term environmental targets was provided, affirming Hitachi’sefforts toward the environment including carbon neutrality.

Board of Directors Meetings in Fiscal 2021
Fiscal 2021 Board of Directors Meeting Results
Nine days

Meetings held

7.5 per meeting

Average number of agenda items

3.5 hours (longest meeting 5.7 hours)

Average meeting length

Discussion of Major Themes
Discussions/deliberations

Explanations

FinancialreportingBusinessstrategy
Mid-term
Management Plan
0

25

50

Providing Information to Independent Directors
The Board of Directors holds individual meetings and site
visits to improve the effectiveness of the Board of Directors
and increase opportunities for information sharing. Sitevisits were conducted on a limited basis in fiscal 2021 dueto the impact of the COVID-19 pandemic, but throughonline participation in the Hitachi Social Innovation Forum,
attendance at Internal Business Conference and ResearchPresentation Meeting held at research institutes, we provided
opportunities to deepen understanding of the business andengage in dialogue with senior management and front-line
employees.

Digital Research Presentation Meeting held on November 12, 2021

Visit to Hitachi Research Laboratory on May 12, 2022

75
100
Average time/meeting (minutes)

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

91

Independent Directors Dialogue

Activities of the Three Committees
Nominating Committee

Audit Committee

Compensation Committee

The Nominating Committee has the authority todetermine proposals submitted to the general meeting ofshareholders for the election and dismissal of directors.
The Nominating Committee consists of four directors,
three of whom are independent directors.
This committee determines director candidates, holds
preliminary discussions concerning the appointment
and dismissal of the CEO and receives advance reportson the selection and dismissal of executive officers.
In fiscal 2021, the Nominating Committee held meetingson 10 days.

The Audit Committee has the authority to audit the execution ofduties of directors and executive officers and to decide on proposals
submitted to the general meeting of shareholders for the election
and dismissal of accounting auditors. The Audit Committee currently
consists of five directors, including four independent directors andone standing Audit Committee member.
Hiroaki Yoshihara, the chairman of the Audit Committee, has been
involved in accounting and other business practices at the KPMG
Group for many years and possesses a considerable wealth ofknowledge concerning finance and accounting.
In fiscal 2021, the Audit Committee held meetings on 15 days.

The Compensation Committee has the authority to determine remuneration
policies for directors and executive officers and remuneration for individuals(including amounts of remuneration) based on them. Currently composed of four
directors, including three independent directors, the committee strives to ensure
objectivity, transparency, and fairness in the remuneration determination process.
In addition, the Compensation Committee verifies and reviews details of
the process used for determining remuneration for individuals, including
assessments concerning basic remuneration amounts, evaluations ofprogress made toward individual targets, and performance appraisals thatare tied to short-term incentive compensation.
In fiscal 2021, the Compensation Committee held meetings on five days.

Primary Activities
In addition to deciding upon the contents of proposals
made concerning director appointments at the Annual
General Meeting of Shareholders, the Nominating
Committee confirmed and deliberated proposals
for CEO appointments and confirmed receipt of apreliminary report on the executive officer system
implemented in fiscal 2022. In addition, it promoted
committee-related activities, including discussions andindividual interviews aimed at developing candidates
for future management and leadership positions.

Primary Activities

Primary Activities

The Audit Committee conducted activities that were focused on its priority
matters for consideration, which included the strengthening of collaborationand the facilitation of information sharing under a “Tripartite Audit” (audit by
the Audit Committee, internal audit and audit by accounting auditors), andauditing of the establishment and operation of internal control systems fromthe perspective of risk management and validity of execution of duties. In
addition, a standing committee member worked to obtain information asneeded in a timely and accurate manner, mainly by collaborating with theInternal Auditing Office, among other departments, and attending importantinternal meetings such as the Senior Executive Committee, and facilitated
information sharing with other committee members.

The Compensation Committee determined remuneration amounts
for individual directors and executive officers in accordance withestablished policies while verifying and reviewing the processes
and results of appraisals for performance and individual targets
tied to short-term incentive compensation for executive officers.
In addition, the committee reviewed the executive compensation
system while giving due consideration to compensation granted to
managers at global companies and the goal of sharing value withshareholders, and decided upon policies covering remuneration
for directors and executive officers in fiscal 2022.

CEO Appointment, Dismissal, and Succession Plan
After a preliminary report to the Nominating Committee, Hitachi’s Board of Directors decides upon
the appointment and dismissal of executive officers with the goal of constructing an optimal businessexecution system for management. As stipulated in our Corporate Governance Guidelines, our basic policy
concerning the CEO requires that individuals serving in the position of CEO have extensive experience andachievements in the field of company management. They must also be considered optimally suited for
conducting management aimed at achieving Hitachi’s goals of continuously raising its corporate value andfurther serving the common interests of its shareholders. Decisions regarding the appointment or dismissalof the CEO shall be made based on prior deliberations and proposals by the Nominating Committee.

Regarding our CEO Succession Plan, as the speed of change in the management environment
accelerates, we are striving to build a system that enables us to appropriately and promptly secureand develop (both internally and globally) necessary management personnel who will provide
leadership that will allow us to realize our growth strategies. Accordingly, we are also concentratingon providing training for selected employees while targeting the early development of candidates
for future management positions. Moreover, we are developing next-generation leaders capable ofacting authoritatively and resolutely by establishing forums where participants can discuss what isnecessary for Hitachi’s future growth and make recommendations to management.

Hitachi Integrated Report 2022

Whatʼs Hitachi

Introduction

Message from the Chairman of the Board

Corporate GovernanceValue Creation

Business Strategies

Sustainability

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Data

Corporate GovernanceIndependent Directors Dialogue

Analysis and Evaluation of the Effectiveness of the Board of Directors
Hitachi evaluates the effectiveness of its Board of Directors each year in a continuous effort to maintain and improve its functions.

Fiscal 2021 Evaluation Process

1. Questionnaire-based
self-assessment by eachdirector(February–March 2022)

Evaluation Results and Future Initiatives
Points of evaluation

Evaluation results• Composition: Diversity on the Board, the number and proportion of Inside andOutside directors, etc.
• Visibility of responsibilities and roles of the Board• Meeting operation: Meeting frequency, deliberation time, agenda setting, quality ofdeliberation, Chairman’s role, etc.
• Contribution: Contribution to strategy building and change of company culture,contribution to constructive discussions, utilization of Director’s knowledge andexperience, discussions contribution to CEO succession plan, etc.
• Understanding of the company: Hitachi Group Identity, risk factors, potential
challenges and opportunities.
• Three committees: Composition, responsibilities and roles, coordination with the Board, etc.
• Supporting system for the Board: Provision of necessary information such as theBoard materials, etc.

• The Board assessed that Board members are diverse and make use of theirknowledge and expertise to speak out, having vigorous discussions especiallyon matters related to business strategies such as the Mid-term Management
Overall evaluation in fiscal 2021
Plan targeting the medium- to long-term growth of corporate value. The Board
concluded that the effectiveness of the Board as a whole is maintained.

2. Discussions among
independent directors(March 2022)• Independent directors had a meeting and discussed the Board effectiveness there
referring to the Board’s activities in each evaluation items set out in the above 1.

3. Discussions at the Board
meeting(May 2022)• The Board analyzed and evaluated its effectiveness as a whole and confirmed the policy
on approaches to further enhance the Board’s effectiveness based on the results of thepreceding process, considering comparison to the evaluation results of the previous
year and measures taken for improving its effectiveness in fiscal 2022.

Policy regarding Strategic Shareholdings
Policy on listed company strategic shareholdings
Hitachi’s basic policy is not to acquire or hold other companies’ shares except in cases whereacquiring or holding such shares is necessary in terms of transactions or business relationships.
We will promote reducing shares already held unless significance of holding shares or economic
rationales of holding are confirmed.
The Board of Directors verifies the appropriateness of all stock holdings every year. To this end,
each individual stock was reexamined as to the purpose of holding the shares and whether
benefits from holding shares are in line with target level of capital efficiency. As the resultof verification, we promote the sales of shares for which significance of holding shares andeconomic rationale are not confirmed. In the fiscal year ended March 31, 2022, we reduced thenumber of shares held in 10 listed stocks (total amount sold: 47,750 million yen).

Future initiatives

Further enhancement ofcorporate governance• Provide opportunities to freely discuss corporate culture and the overall future of
the business portfolio to deepen discussions.
• Discuss specific strategies including important themes (such as GX and DX)
in each sector and BU to confirm consistency with the Mid-term Management
Plan.

Enhancement of theBoard support system andimprovement of practicalissues in operations• Post COVID-19, increase opportunities for meetings with BU CEOs and others
and restart Independent Director visits to group sites.
• Further improve structure and content of materials for Board meetings andensure provision of materials well in advance of meetings.

Strategic shareholding status
Number of stocks held*
500
400

396

401

375

300

332

309

288

272

200

233

217

198

100
0
2012
2013
2014
2015
2016
Total amount recorded on balance sheet* (millions of yen)
244,181353,957

334,617*Total of listed and unlisted shares

239,993324,323

2017

2018

2019

2020

2021

270,336

179,668

141,859

201,055

274,470(FY)Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

93

Independent Directors Dialogue

Director and Executive Officer Compensation
Basic Policy• Compensation shall be such that it enables the company to attract necessary personnel
to achieve an improvement in corporate value through global business growth.
• Compensation shall be commensurate with the roles and responsibilities of each
Director and Executive Officer.
• Compensation for Directors shall be such that it enables them to exercise themanagement oversight functions effectively.
• Compensation for Executive Officers shall be such that it enables them to contributeto sustained improvement in corporate value through the execution of business andemploys an appropriate balance between short-term performance and medium- andlong-term performance.
• The level of compensation shall be determined considering compensation levels atother companies as well as economic and market trends.
• The Compensation Committee utilizes external experts to gain expert advice andan objective viewpoint, if necessary, for considering the details and amounts ofcompensation.

Compensation Structure(1) Directors
Compensation for Directors is basic remuneration as fixed pay. The amount of basic
remuneration is decided by adjusting a basic amount to 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 fixed pay and short-term
incentive compensation and medium- and long-term incentive compensation as variable pay.
The basic amount of basic remuneration, short-term incentive compensation and medium- andlong-term incentive compensation is set based on the ratio of 1:1:1 as the standard, taking
into account the composition of executive compensation for major global companies, in orderto improve corporate value through the growth of global businesses. The higher the position
an Executive Officer holds, the greater the proportion of variable pay is set to the total annualcompensation.
If it is found that an executive officer has engaged in misconduct during their term of office, any
compensation already paid shall be returned to the company (clawback provision).
Please refer to Compensation to Directors and Executive Officers on page 94 of the Annual Securities Report(The 153rd Business Term)
https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2021_4_en.pdf

Reflecting Sustainability Targets in Executive Compensation Evaluation
In fiscal 2021, Hitachi introduced evaluations that take environmental value into consideration in
the executive compensation system for the first time with the aim of accelerating the creation ofenvironmental value. All executive officers, including the CEO, set targets for environmental value
and were evaluated for their achievement of individual targets.
From fiscal 2022, in addition to environmental targets such as decarbonization and resource
efficiency, we introduced quantitative and qualitative target setting for occupational health andsafety and product quality in the compensation evaluation of all executive officers to further
advance sustainable management.

Examples of Sustainability Targets Reflected in Fiscal 2022 Compensation Evaluations
Sustainability targets
Decarbonization• Efforts to realize carbon neutrality* in business sites (factories and offices) by fiscal 2030
• Efforts to achieve carbon neutrality* by fiscal 2050 throughout the value chain

Resource efficiency• Efforts related to resource efficiency

Occupational healthand safety• Zero fatal accidents• Wellbeing initiatives

Product quality• Efforts to enhance product quality*Regarding fiscal 2030 and fiscal 2050 decarbonization targets, single-year targets are set Groupwide and for each BU.

Hitachi Integrated Report 2022

Whatʼs Hitachi

Introduction

Message from the Chairman of the Board

Corporate GovernanceValue Creation

Business Strategies

Sustainability

Corporate Governance

Data

94

Independent Directors Dialogue

Compensation to Executive Officers (Fiscal 2022)
Basic remuneration: short-term incentive compensation: medium- and long-term incentive compensation = 1:1:1 ratio
Total remuneration
Fixed pay
1 Basic remuneration

Variable pay
2 Short-term incentive compensation

1 Basic remuneration
Set according to the relevant position by adjusting that amount to reflect financial results andindividual performance.
2 Short-term incentive compensation
The amount of short-term incentive compensation is decided within a range of 0 to 200% of abasic amount set according to the relevant position by adjusting that amount to reflect financial
results and individual performance.
From fiscal 2022, we are also working to further strengthen accountability by linking theachievement of KPIs, including sustainability indicators specified in the Mid-term Management
Plan, to the performance evaluation of executive officers.
(Executive officers forming the Senior Executive Committee)*

Linked to evaluations ofCompany-wide performance (80%)(Other executive officers)

Linked to evaluations ofdivisional performance (50%)
Evaluated referring to adjusted operating
income and operating cash flows for eachdivision, among other indicators, to measure
the level of achievement of targets under the
Mid-term Management Plan and the annual
budgets for divisions.

Linked to evaluationsof Company-wide
performance (30%)
Evaluated referring to consolidated
revenues, adjusted operating income,
EBIT, and net income attributable to
Hitachi, Ltd. stockholders in order
to measure the level of achievementof consolidated financial forecasts
disclosed to stakeholders, including
shareholders and investors.

Linked to evaluations
regarding theachievement of
individual targets (20%)
Varies according to theevaluation of the level ofachievement of individual
targets for each Executive
Officer determined based on
his/her responsibility.

*The rates used for “other executive officers” apply when “executive officers forming the Senior Executive Committee” are in
charge of sector or business unit.

3 Medium- and long-term incentive compensation

3 Medium- and long-term incentive compensation
Shares of restricted stock were introduced in fiscal 2019 as compensation for Japanese
executive officers and corporate officers (the executive positions next to Executive Officers) topromote management from a medium- to long-term perspective and to provide incentives tobring about a sustainable increase in enterprise value by further promoting senior management’s
shared values with shareholders through the holding of shares during their term of office. In fiscal
2020, a restricted stock compensation unit system*1 was introduced as compensation for nonJapanese executive officers and corporate officers. In fiscal 2021, the scope of the restricted
stock compensation unit system was expanded to executives at some group companies.

Shares of restricted stock• The restriction on transfers shall be lifted if executive officers resign from all of the positions of
the company’s executive officer, director, and corporate officer.
• With regard to one-half of the granted shares of restricted stock, the number of shares forwhich the transfer restriction is lifted shall be determined after ex-post evaluation. In the expost evaluation, the total shareholder return (TSR) of Hitachi stock over the three years fromthe beginning of the fiscal year when the medium- to long-term incentive compensation is
granted is compared to growth rate of TOPIX over the same period.
TSR/TOPIX growth rate

Shares for which the transfer restrictions are lifted

120% or more

Transfer restrictions are lifted for all granted shares.

Between 80% or more but less than 120%

Transfer restrictions are lifted for part of granted shares*2.

Less than 80%

No granted shares have transfer restrictions lifted.

*1	A system in which restricted stock compensation units are granted to the eligible persons, and over three years from the startof the business year in which the restricted stock compensation units were granted, one-third of the number of restricted
stock compensation units granted is paid in each fiscal year that passes, as Hitachi stock or cash.
*2 Number of shares for which the transfer restrictions are lifted = Number of granted shares × {(TSR/TOPIX Growth Rate Ratio × 1.25) – 0.5}
Shares for which the transfer restrictions are not lifted shall be acquired by Hitachi without consideration.

Hitachi Integrated Report 2022

Whatʼs Hitachi

Introduction

Message from the Chairman of the Board

Value Creation

Business Strategies

Sustainability

Data

Corporate Governance95

Independent Directors Dialogue

Corporate GovernanceInternal Control over Financial Reporting

Enhanced Collaboration through Tripartite Audits

To ensure the reliability of its consolidated financial reporting, the Hitachi Group is establishingand implementing relevant internal controls. We evaluate their effectiveness by adhering tostandards 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 effectivenessof these internal controls. This committee evaluates internal control effectiveness and establishes
frameworks designed to improve and strengthen them.

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. The three parties communicate
closely to share risk information and assessments concerning risk response while securingtransparency and ensuring appropriate checks and balances.

Enhanced management of risk
associatedwith global business expansion

Creation of a system focused on
maintaining transparency and asense of urgency

Ensuring transparency and a senseof urgency and improving theeffectiveness of internal controls

Sharing of risk information
and assessments of risk response

Financial
Services
AgencyInternal Control Report

Internal Control Assessment Framework

Hitachi, Ltd. President
Chief Financial Officer

Audit
Committee

ReportAudit
Committee

ReportReportJ-SOX Committee
Cooperation
ReportAccounting
auditors

Tripartite
audit
approach(accounting audits)Business Units andMajor Group Companies
ReportInternal
Auditing Office(Internal Audit Office)External Audit•Audit plans•Audit Policy and auditing
methods•Assessment and reportingof audit results•Methods and results ofinternal audits•Evaluation of group audit
system

Tripartite
audit
approachInternal
Auditing Office(Internal Audit Office)Subsidiary Companies
Execution•Sharing of risk information•Audit plans and results•Internal audit results•Reciprocal reporting and evaluation
concerning Group audits•Reporting on the quality control system

Regulation

Accounting
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

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

96

Independent Directors Dialogue

Building a More Effective and Efficient Auditing System
Audit Committee
The Audit Committee formulates audit plans in accordance with risk-based approaches andconducts audits for each consolidated business unit. Cooperating with the internal audit section
audits, Audit Committee members meet directly with business unit heads. These members
share concerns and issues related to the implementation of business strategies aimed atachieving sustainable growth that require attention with the internal audit section. At that time,
the committee also verifies matters that carry high levels of risk in terms of quality, measuring
these risks through employee awareness surveys and thorough implementation of businessstrategies.

of audits by submitting “management letters” containing points of concern and improvement
suggestions through the finance department. Recently, they have also been working to raise theefficiency of checks on the accuracy of numerical figures by using some IT systems to investigate
all cases rather than performing test-checking through sampling.

TopicsInternal Audit Section

Sector Corporate Auditor System

Hitachi’s internal audit section performs regular internal audits of each business unit, businessdivision and subsidiary. This section reports directly to the President and is independent fromorganizations that are subject to its audits. The internal audit section also formulates audit
plans based on past audit records and the most recent business circumstances. In addition,
this section performs audits while sharing information with the Audit Committee, ensuring theireffectiveness. The internal audit section at Hitachi is responsible for confirming the legality andappropriateness of all business operations, including those related to accounting, production
management, sales, purchasing, IT systems, compliance, and human resources. Furthermore,acting on behalf of our management team, the internal audit section confirms whether employees
are well versed in the ideas and policies of management, whether operations are being carriedout based on these ideas and Policies, and whether business strategies are being implemented
in a way that will efficiently lead to sustainable growth.

To further raise audit effectiveness, sector corporate auditors were assigned in eachcore business field (sector) in April 2019. Through this action, we expanded theinternal control system spearheaded by chief auditors and enhanced collaboration
with executive vice presidents managing each sector, as well as with the Audit
Committee.
Although sector corporate auditors do not act as organs under the Companies Act,
they still assume responsibility for governance in each sector. Statutory auditors,
which function as organs at Hitachi subsidiaries under the Companies Act, also
report to sector corporate auditors and work to improve the effectiveness of
Hitachi’s internal control systems.

Accounting Auditors

When conducting business audits, we use IT systems to expeditiously search
for reference information contained within materials submitted prior to audit in
an attempt to improve efficiency. We are currently enhancing a system that willallow our internal audit section to share information with professional accounting
auditors using a data lake. When reading audit reports submitted to the President
by the internal audit section, the President must be able to quickly understand theissues identified by these reports and make prompt judgments concerning whether
immediate action is required. In the future, our internal audit section will continue
to maintain its transparency and independence while working to improve audit
efficiency as one member of our Tripartite Audit system.

Accounting auditors perform audits that focus on the accuracy and reliability of our financial
statements. First, they adopt a risk-based approach in response to the group’s overall financial
status. Applying this approach, they then determine the scope and methods of the audit,
formulate an audit plan, and share opinions with the Audit Committee. Next, based on the audit
plan, they perform audits on each of the five sectors and the business units that comprise them,enabling effective and efficient understanding of data related to Hitachi’s finance department andeach of its business segments. If, during the auditing process, our accounting auditors discovera degree of risk that could impact future financial statements significantly or issues that, even ifmonetarily small, could have a large qualitative effect, they share related information regardingthese risks and issues and the progress on a response from the related divisions with the Audit
Committee and internal audit section. They also work to improve and raise the effectiveness

IT Utilization

Hitachi Integrated Report 2022

Introduction

Message from the Chairman of the Board

Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

97

Independent Directors Dialogue

Comprehending Management Issues through Dialogues with Stakeholders
In promoting the Social Innovation Business, Hitachi accurately detects a variety of social issues
in each country and region, addressing these issues through co-creation with customers,
governments, academic organizations, research institutions and a wide range of otherstakeholders.
In response to the recent rise of ESG investing, Hitachi is proactively engaged in dialogue withshareholders and investors on both financial and non-financial information, while also focusing
efforts on co-creation to improve disclosure of non-financial information. Going forward, Hitachi
will continue to proactively promote dialogues with stakeholders, incorporating the takeaways
into operations to realize sustainable management.

ESG Disclosure Study GroupHow to address the rapidly changing global trend in ESG disclosure is a major challenge formany corporations and institutional investors in Japan. Hitachi, Ltd. is responding to this issue
through co-creation with stakeholders. In June 2020, Hitachi took the lead in establishing theESG Disclosure Study Group to explore ways of disclosing ESG information that contribute tolong-term corporate value enhancement while also keeping an eye on global trends. The study
group initially started with 19 companies, and as of June 30, 2022, more than 100 companies,
institutional investors, auditing firms and public organizations are participating.
Study group activities are divided into phases according to themes, and in June 2022, the “ESG
Disclosure Study Group Report 2022” was published including the results of these activities.
This report contains ESG disclosure recommendations for corporations, institutional investors
and standard-setting bodies and is disseminated to relevant organizations within and outside
Japan. Hitachi, Ltd. serves as the co-chairman and secretariat of this study group, and leads
these activities.
General Incorporation Association of ESG
Disclosure Study Group / EDSG
https://edsg.org/en/

Kyoto University and Hitachi Joint Project
One of the key initiatives for the evolution of sustainable management is to quantitatively clarify
the financial impact of non-financial values such as environmental and social values created bybusiness activities, as well as intangible asset measures such as human resource policies. Thisis expected to further advance management and improve engagement with stakeholders.
Since 2021, Hitachi, Ltd. has engaged with these challenges through experimental research
conducted in collaboration with Graduate School of Management, Kyoto University. Throughacademic and other approaches, it was quantitatively confirmed that Hitachi’s initiatives toward
the environment and human resources could have a positive impact on financial indicators (ROICand WACC). In the future, we will clarify the causal relationship between non-financial andintangible asset measures and financial indicators, as well as employee survey results, to identify
measures with a high degree of causal influence and lead them to measures to improve financial
performance through non-financial and intangible asset measures.

Enhancing Hitachi Sustainable Management
Visualization of correlation and causality between non-financial and intangible asset measuresand financial indicators, and quantification of financial impact is important.
Background

Global trends
Demand for disclosure linking financial and non-financial information• IFRS Foundation announced an exposure draft of ISSB (non-financial information disclosure standards)
in March 2022, indicating importance of “non-financial and financial connectivity”• Revised Japan’s Corporate Governance Code in June 2021 to reference the relationship between
human capital and investment• Securities Report revised in March 2020 upon request for disclosure of non-financial information
having a medium- to long-term financial impact

Hitachi’s activities
Le ft: 	 Tetsuo Kitagawa, Representative
Director, ESG Disclosure Study Group(Emeritus Professor of Aoyama Gakuin
University; Professor at Tokyo Metropolitan University)
Right : Norio Masuda, Co-Representative
Director, ESG Disclosure Study Group(Senior Manager, Sustainability
Promotion Division, Hitachi, Ltd.)

Mid-term Management Plan announcements• Announced that Mid-term Management Plan 2021 will
promote management focused on social, environmental and economic value
Engaged in non-financial value visualization in collaboration with related departments• Announced that Mid-term Management Plan 2024 will
strengthen efforts targeting human capital management and the environment
Correlation, causality, and quantification of financial impact are importantHitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction

Whatʼs Hitachi

Corporate GovernanceValue Creation

Business Strategies

Sustainability

Data

Corporate Governance98

Independent Directors Dialogue

Independent Directors Dialogue

Independent Directors Dialogue with Stakeholders
At Hitachi Investor Day 2022, held on June 13, 2022, a first-ever dialogue session
was conducted by Hitachi independent directors. With Executive Vice President, CFO
Yoshihiko Kawamura as moderator, independent directors Harufumi Mochizuki and
Helmuth Ludwig exchanged opinions on the formulation of the Mid-term Management
Plan, Lumada and Hitachi’s vision, among other questions submitted in advance byinstitutional investors and analysts.

Discussions at the Board of Directors Meetingon the Mid-term Management Plan
Mr. Kawamura: My understanding is that the Board
conducted in-depth discussions from early on in formulating
the Mid-term Management Plan 2024 announced in April
2022. Please share that process.
Mr. Mochizuki: In formulating a Mid-term Management Plan,
specific plans for the next three years are considered, but asa first step, it is extremely important that the directors andthe executive officers share the same vision of what Hitachi
wants to be. At Hitachi, the Board members and the executive
officers have had a series of discussions, so we have acommon understanding of what we want to be. On this basis,
we discussed priority issues for the next three years and how
to implement them. From the initial stages of plan formulation,
the Board of Directors has held a total of five meetings to
discuss. At these meetings, everyone provides opinions,thus a single agenda item can take up an hour or more.
In this process, various opinions were provided by Board
members from diverse backgrounds, but because we sharethe same underlying vision, discussions remained focused.
The important thing is to make sure that everyone outside thecompany understands it correctly, and independent
directors have pointed out that it should be written in more
specific terms. Through this process, I believe we were able
to formulate an easily understandable Mid-term Management
Plan focused on the essentials. For the past 10 years, I
have served as a Hitachi independent director, following thecompany’s transformation from the difficult period after the2008 global financial crisis to the present. I have watched theprocess of Hitachi’s incremental transformation into a global
company. I am impressed that Hitachi has changed direction
from a Japan-centric conglomerate to a Social Innovation
Business with a clearly defined stance as a global leader in the
Mid-term Management Plan 2024.

Lumada and the Mid-term Management Plan
Mr. Kawamura: Lumada is the lynchpin of the Mid-termManagement Plan 2024. Dr. Ludwig, you have in-depth
knowledge of the digital field, what is your assessment of
this plan?
Dr. Ludwig: I studied engineering in Germany and joined
Siemens in 1990. After that, for about the past 30 years, I havebeen engaged in business development in the automation andHarufumi
Mochizuki

Yoshihiko
Kawamura

Independent Director(in June 2022)

Executive Vice
President, CFO

Helmuth
LudwigIndependent
Directordigital fields—namely,
the integration of virtualwith physical. Just as GlobalLogic
has joined the Hitachi Group, I also
experienced a similar post-merger integration(PMI) at Siemens. It is my fervent belief thatcompanies must have deep knowledge in their businessdomain and integrate operational technologies (OT) with IT
capabilities to enhance competitiveness. With Lumada at thecore of Hitachi’s Social Innovation Business, there are two
critical points. First, is to focus on competition and provide
value to customers. To this end, Hitachi must understand how
to improve processes, then link them to revenues. Second,
solutions must be repeatable, which requires containerization.
Hitachi’s thorough knowledge of mobility, energy, industry
and other business domains offers the potential for businessscalability through the utilization of solutions in other fields.

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

99

Independent Directors Dialogue

Achieving this will enable Hitachi to increase margins in linewith expectations. Although the path forward is not easy, I think
Hitachi is off to a good start and on the right track.

while also experiencing some failures. I believe Hitachi
has attained a global standard with regard to acquisition
capabilities.

Large-scale M&A Discussions

Dr. Ludwig: GlobalLogic is a company that has achieved
amazing growth. The critical point was why it would be better
off with Hitachi. The Board of Directors thoroughly discussed
this point, confirming that the addition of GlobalLogic to the
Hitachi Group will provide even greater value to customers.
In M&A, it is of course important to select an appropriate
target and realize the deal, but the PMI process afterwards
is also extremely important. The question is how to integrate
human resources with different backgrounds with a senseof speed. GlobalLogic is full of dynamism, strengthening
Hitachi’s business and attracting talented human resources.
Employees have also been provided with a wider range ofopportunities.

Mr. Kawamura: Over the past two to three years, Hitachi
has made a series of large-scale M&A transactions, making
Hitachi High-Tech a wholly owned subsidiary and acquiring
both the ABB power grids business and GlobalLogic.
Given the risks associated with these deals, how were they
discussed at the Board meetings?
Mr. Mochizuki: Repositioning our business portfolio is an
important theme for Hitachi, and determining what to include
and what to divest was one of the means of structural reform.
Hitachi has made acquisitions in areas where synergies canbe expected, while disposing of non-synergistic businesses,
which has had a comparatively limited impact on finances
and the balance sheet. The acquisition of ABB’s power
grid business and GlobalLogic is a 1 trillion yen deal, so theBoard of Directors had a very in-depth discussion about it.
Since the Board members shared the strategy underlying
the discussion, the issues were very clear, and we confirmedthat we could expect synergies as a growth engine for
Hitachi in the true sense of the word. It was a very strategic
discussion and a major decision. Further, I also believe that
Hitachi’s repeated experience with acquisitions has made itvery sensitive to the discipline that must be observed when
conducting M&A activities. While preacquisition due diligence is taken asa matter of course, the degree towhich PMI is achieved is also a criticalfactor. Hitachi’s skills have improved
significantly over the past 10 years,
including risk mitigation, efforts torealize synergies, and post-acquisition
follow-up, including human resources,

Hitachi’s Business Portfolio and Vision for
Further Growth
Mr. Kawamura: As Hitachi is involved in a variety ofbusinesses, what are your thoughts on conglomerates(discounts)? Furthermore, what is required for a Company
with over 100 years of history toachieve growth going forward?
Dr. Ludwig: Capital markets may notconsider traditional conglomerates tobe the best structure. However, I believethat in the future, conglomerates will
have a different meaning. First of all,it is critical to have a clear vision andstrategy. Hitachi, which is focusing
efforts on sustainability and digital transformation, has a robust
innovation strategy. In this sense, I think Hitachi’s current
business portfolio is more streamlined and closer to theconglomerate of the future. In a world where unexpected events
often occur, corporations must be resilient. However, simply
engaging in a wide range of businesses is not the answer.
Hitachi must demonstrate synergies among businesses basedon a clear vision, and to this end, I think the speed of decisionmaking will become increasingly important.
Mr. Mochizuki: Hitachi used to be a Japanese conglomeratewith domestic sales accounting for 70% of its revenue. To
become a global leader, Hitachi must generate greater profits,
improve profit margins and continuously generate cash tocompete on the world stage. It is also important to havestrong leadership focused on the company’s ideal positioning
without losing the can-do spirit. Having watched Hitachi’s
trajectory over the past 10 years, my sense is that Hitachi
possesses both of these attributes.

Hitachi Integrated Report 2022

Whatʼs Hitachi

Introduction

Message from the Chairman of the Board

Corporate GovernanceValue Creation

Business Strategies

Sustainability

Corporate Governance

Data

100

Independent Directors Dialogue

Leadership (As of June 22, 2022)
Independent Directors*

Katsumi Ihara (71)

Ravi Venkatesan (59)

Cynthia Carroll (65)

Ikuro Sugawara (65)

Joe Harlan (63)Louise Pentland (50)

Share ownership: 1,100 shares
Term of office as Independent Director: 4 years

Share ownership: 400 shares
Term of office as Independent Director: 1 year, 11 months

Share ownership: 1,500 shares
Term of office as Independent Director: 9 years

Share ownership: 0 shares
Term of office as Independent Director: 0 years

Share ownership: 1,100 shares
Term of office as Independent Director: 4 years

Share ownership: 1,100 shares
Term of office as Independent Director: 7 years

2005	Executive Deputy President, Representative
Corporate Executive Officer, Member of theBoard, Sony Corporation

1999	Chairman of the Board of Directors, Cummins
India Ltd. (Retired in March 2004)

1991	General Manager, Foil Products, Alcan Inc.

1981	Joined Ministry of International Trade andIndustry of Japan

1999	Vice President and Chief Financial Officer,
Lighting Business, General Electric Company

1997	Admitted as a Solicitor (UK)2010	Director-General of the Industrial Science andTechnology Policy and Environment Bureau,
Ministry of Economy, Trade and Industry ofJapan (“METI”)

2001	Vice President, Corporate Financial Planningand Analysis, 3M Company

2012	Director-General of the Manufacturing
Industries Bureau, METI

2004	Executive Vice President, Electro andCommunications Business, 3M Company

2013	Director-General of the Economic andIndustrial Policy Bureau, METI2009	Executive Vice President, Consumer andOffice Business, 3M Company

2015	Vice-Minister of Economy, Trade and Industryof Japan2011	Executive Vice President, Performance
Materials, The Dow Chemical Company

2017	Special Advisor to the Cabinet of Japan(Retired in June 2018)2012	Executive Vice President, Chemicals, Energy
and Performance Materials, The Dow
Chemical Company

2009	Executive Deputy President, Corporate
Executive, Sony Corporation
Executive Vice President, Representative
Director, Sony Financial Holdings Inc.

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)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.

2010	President, Representative Director, SonyFinancial Holdings Inc.

2013	Venture Partner, Unitus Ventures LLC.
(Currently in office)2011	President, Representative Director, Sony Life
Insurance Co., Ltd.

2007	CEO, Anglo American plc.
(Retired in April 2013)2015	Chairman (Non-Executive),
Bank of Baroda (Retired in August 2018)2013	Director, Hitachi, Ltd.

2015	Chairman, Director, Sony Life Insurance Co.,
Ltd. (Retired in June 2017)2018	Special Representative for Young People &Innovation, UNICEF (Currently in office)2016	Chairman, Director, Sony Financial Holdings
Inc. (Retired in June 2017)2020	Director, Hitachi, Ltd.

2022	Director, Hitachi, Ltd.

2018	Director, Hitachi, Ltd.

2002	President and Chief Executive Officer,
Sumitomo 3M Ltd.

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 inAugust 2017)

Nominating Committee

Audit Committee

Compensation Committee

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, Chief Business
Affairs & Legal Officer, PayPal Holdings, Inc.
2022	Executive Vice President and Senior Advisor,
PayPal Holdings, Inc. (currently in office)2018	Director, Hitachi, Ltd.

Each Committee is composed of the following members (chair names underlined)
Nominating Committee : Katsumi Ihara, Cynthia Carroll, Hiroaki Yoshihara, Toshiaki Higashihara
Audit Committee: Hiroaki Yoshihara, Katsumi Ihara, Ikuro Sugawara, Helmuth Ludwig, Hideaki Seki

Compensation Committee : Takatoshi Yamamoto, Katsumi Ihara, Joe Harlan, Keiji Kojima* Independent directors are directors who fulfill the qualification requirements to be outside directors as stipulated in the Companies
Act and also meet independence criteria defined by Hitachi and stipulated by Japanese stock exchanges where Hitachi is listed.

Hitachi Integrated Report 2022

Message from the Chairman of the Board

Introduction
Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

101

Independent Directors Dialogue

Directors

Takatoshi Yamamoto (69)

Hiroaki Yoshihara (65)

Helmuth Ludwig (59)

Keiji Kojima (65)

Hideaki Seki (65)Toshiaki Higashihara (67)

Share ownership: 12,800 shares
Term of office as Independent Director: 6 years

Share ownership: 3,000 shares
Term of office as Independent Director: 8 years

Share ownership: 2,800 shares
Term of office as Independent Director: 1 year, 11 months

Share ownership: 100,800 shares

Share ownership: 12,000 shares

Share ownership: 198,800 shares

1995	Managing Director, Morgan Stanley Japan
Limited1978	Joined Peat Marwick Mitchell & Co.

2001	President, Software and System House
Division, Siemens AG

1982	Joined Hitachi, Ltd.

1979	Joined Hitachi, Ltd.

1977	Joined Hitachi, Ltd.

2011	General Manager, Hitachi ResearchLaboratory2011	Board Director, Hitachi Automotive Systems,Ltd.

2007	Vice President and Executive Officer(Retired in March 2008)2012	Vice President and Executive Officer

2008	President, Hitachi Power Europe GmbH

1999	Managing Director and Vice Chairman, Tokyo
Branch, Morgan Stanley Japan Limited

1996	National Managing Partner, the Pacific Rim
Practice, KPMG LLP
1997	The Board Member, KPMG LLP

2005	Managing Director and Vice Chairman, UBS
Securities Japan Co., Ltd.

2003	Vice Chairman and Global Managing Partner,
KPMG International (Retired in April 2007)2009	Managing Director, CASIO COMPUTER CO.,LTD.

2014	Director, Hitachi, Ltd.

2011	Advisor, CASIO COMPUTER CO., LTD. (Retired
in June 2012)2016	Director, Hitachi, Ltd.

2002	President, Systems Engineering Division,
Automation and Drives Group, Siemens AG
2007	President, Siemens PLM Software, Inc.

2016	Senior Vice President and Executive Officer

2013	Vice President, Board Director, Hitachi
Automotive Systems, Ltd.

2010	Global Head of Communications, Industry
Automation, Siemens Corp.

2018	Representative Executive Officer,
Executive Vice President

2014	Executive Vice President, Board Director,
Hitachi Automotive Systems, Ltd.

2011	President and CEO, Industry Sector, North
America, Siemens Industry, Inc.

2021	Representative Executive Officer,
President & COO and Director, Hitachi, Ltd.

2015	President & COO, Representative Director,
Hitachi Automotive Systems, Ltd.

2014	Executive Vice President and Chief Digital
Officer, Digital Factory Division, Product
Lifecycle Management, Siemens Corp.

2022	Representative Executive Officer,
President & CEO and Director, Hitachi, Ltd.

2016	President & CEO, Representative Director,
Hitachi Automotive Systems, Ltd.
(Retired in March 2018)2016	Chief Information Officer, Siemens AG (Retiredin December 2019)2020	Professor of Practice in Strategy and
Entrepreneurship, Cox School of Business,
Southern Methodist University (currently in
office)Director, Hitachi, Ltd.

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.

2010	Representative Executive Officer,
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	Representative Executive Officer andPresident & COO, Hitachi, Ltd.
Representative Executive Officer,
President & COO and Director, Hitachi, Ltd.
2016	Representative Executive Officer,
President & CEO and Director, Hitachi, Ltd.
2021	Representative Executive Officer, Executive
Chairman, President & CEO and Director,
Hitachi, Ltd.
Representative Executive Officer, Executive
Chairman & CEO and Director, Hitachi, Ltd.
2022	Executive Chairman, Representative Executive
Officer and Director, Hitachi, Ltd.

Hitachi Integrated Report 2022

Introduction

Message from the Chairman of the Board

Corporate Governance

Whatʼs Hitachi

Value Creation

Business Strategies

Sustainability

Corporate Governance

Data

102

Independent Directors Dialogue

Executive Officers
President & CEO

Executive Vice Presidents and Executive Officers

Vice Presidents and Executive Officers

Keiji Kojima*

Masakazu Aoki*

Yoshihiko Kawamura*Toshiaki Tokunaga*

Overall management, railway systems
business, nuclear energy business, energy
business, power grids business andinnovation strategies

Assistant to the President (industrial digitalbusiness, water & environment business,
industrial products business, industrial
equipment systems business, building
systems business, smart life & ecofriendly
systems business, measurement and analysis
systems business, and healthcare business)

Assistant to the President (financestrategies, corporate pension system,
investment strategies, investor relations
strategies, cost structure reforms, risk
management, corporate auditing andcorporate export regulation)

Assistant to the President (business forfinancial institutions, business forgovernment, public corporation and social
infrastructure systems, defense systems
business, services & platforms business,social innovation business promotion anddigital strategies)

Senior Vice Presidents and Executive Officers

Jun AbeKatsuya Nagano

Hidenobu Nakahata*

Masahiko Hasegawa*Services & platforms businessBusiness for government, public
corporation and social infrastructure
systems, and defense systems business

Human capital strategies, diversity &inclusion strategies, corporate
communications strategies, and safety andhealth management

Marketing & sales strategies, regional
strategies

Executive Officer

Noriharu Amiya

Takashi Iizumi

Railway systems business

Healthcare business, measurement andanalysis systems business

Hitoshi Ito

Tatsuro Ueda

Government & external relations

Business for financial institutions

Kenji Urase

Tomomi Kato

Energy business

Finance strategies and corporate
pension system

Tadashi Kume

Kohei Kodama

Nuclear energy business

Legal affairs, risk management andcorporate auditing

Takashi Saito

Norihiro Suzuki

Marketing & sales strategies(connective industries)

Research & development

Kenichi Tanaka

Jun Taniguchi

Human capital strategies

Digital strategies, services & platforms
business

Lorena Dellagiovanna

Kojin Nakakita

Sustainability strategies, environmental
strategies, diversity & inclusion
strategies

Regional strategies (APAC)

Hideshi Nakatsu

Seiichiro Nukui

Water & environment businessIT strategies

Andrew Barr

Tatsuro Hoshino

Railway systems business

Marketing & sales strategies(digital systems & services)

Kentaro Masai

Shinya Mitsudomi

Supply chain management(manufacturing strategies and quality
assurance), safety and healthmanagement

Urban business strategies, building
systems business

Masashi Murayama

Kazunobu Morita

Cost structure reforms and information
security management

Business for industrial digital

Takashi Yoda
Regional strategies (China)

Claudio Facchin

Mamoru Morita

Toshiaki Higashihara*

Power grids business

Management strategies

GeneralNote: Executive officers are listed by position and in Japanese alphabetical order within each grouping.
The asterisk (*) denotes executive officers who are representative executive officers.

Hitachi Integrated Report 202210-year Financial Data

Whatʼs Hitachi

Introduction

5-year Non-financial Data

Segment Highlights

Value Creation

Business Strategies

Adjusted EBITA
EBIT

103

Millions of yen
FY2013

FY2014

U.S. GAAP (through FY2013)

Adjusted operating income

Data

https://www.hitachi.com/IR-e/library/stock/hit_sr_fy2021_4_en.pdf

Annual Securities Report
FY2012

Revenues

Corporate GovernanceCorporate Data and Stock Information

10-year Financial Data
For the year:

Sustainability

FY2015FY2016FY2017FY2018FY2019FY2020

FY2021IFRS (from FY2014)

9,041,071

9,563,791

9,774,930

10,034,305

9,162,264

9,368,614

9,480,619

8,767,263

8,729,196

10,264,602

422,028

538,288641,325

634,869

587,309714,630

754,976

661,883

495,180738,236

ー

ー

ー

ー

ー

ー

ー

ー

609,107855,380

358,015585,662534,059

531,003475,182644,257

513,906

183,614850,287

850,951

ー

ー

ー

ー

ー

ー

885,318

619,001

1,343,067

1,392,840

175,326

264,975

217,482

172,155

231,261

362,988

222,546

87,596501,613583,470

Earnings per share attributable to Hitachi, Ltd.
stockholders, basic (yen)

37.28

54.86

45.04

35.65

47.90

375.93230.4790.71

519.29603.75

Earnings per share attributable to Hitachi, Ltd.
stockholders, diluted (yen)

36.29

54.85

45.00

35.62

47.88

375.60230.2590.60

518.51602.96

EBITDANet income attributable to Hitachi, Ltd. stockholders

Net cash provided by operating activities

583,508

439,406

451,825

812,226

629,582

727,168

610,025

560,920

793,128

729,943

Net cash used in investing activities(553,457)(491,363)(612,545)(730,799)(337,955)(474,328)(162,872)(525,826)(458,840)(1,048,866)(318,923)

Free cash flows

30,051(51,957)(160,720)

81,427

291,627

252,840

447,153

35,094334,288

Core free cash flows

45,702(186,042)(176,448)

113,371

100,215

283,593

136,079

135,441

419,848

290,082

Net cash provided by (used in) financing activities(180,445)

32,968233,206(26,467)(209,536)(321,454)(320,426)

2,837(184,838)

202,739

Capital expenditures (Property, plant and equipment)

742,537

849,877

431,201

528,551

377,545374,901

414,798

399,643

359,897388,747

Depreciation (Property, plant and equipment)

300,664

329,833

350,783

366,547

302,757

265,413271,682

342,450

345,201

382,922

R&D expenditures

341,310351,426

334,814

333,730

323,963

332,920

323,145

293,799

293,571

317,383

Total assets

9,809,230

11,016,899

12,433,727

12,551,005

9,663,917

10,106,603

9,626,592

9,930,081

11,852,853

13,887,502

Property, plant and equipment

2,279,964

2,342,091

2,472,497

2,500,226

1,998,411

2,124,827

1,956,685

2,165,311

2,408,887

2,478,901

Total Hitachi, Ltd. stockholders’ equity

2,082,560

2,651,241

2,942,281

2,735,078

2,967,085

3,278,024

3,262,603

3,159,986

3,525,502

4,341,836

Interest-bearing debt

2,370,079

2,823,049

3,557,356

3,604,455

1,176,603

1,050,294

1,004,771

1,485,042

2,397,356

3,126,712

4.7

5.6

6.6

6.3

6.4

7.6

8.0

7.5

5.7

7.2

%
Adjusted operating income ratio
ROIC

ー

ー

ー

ー

ー

―

8.5

9.4

6.4

7.7

Return on equity (ROE)

9.1

11.2

7.8

6.1

8.1

11.6

6.8

2.7

15.0

14.8

Return on assets (ROA)

2.5

3.5

2.9

2.4

3.0

5.0

3.3

1.3

4.8

5.2

D/E ratio (Including non-controlling interests) (times)

0.75

0.73

0.83

0.87

0.29

0.23

0.23

0.35

0.54

0.58

Total Hitachi, Ltd. stockholders’ equity ratio

21.2

24.1

23.7

21.8

30.7

32.4

33.9

31.8

29.7

31.3

10.0

10.5

12.0

12.0

13.0

15.0
75.0

90.0

95.0

105.0

125.0

26.8

19.1

26.6

33.7

27.1

20.0

39.1

104.8

20.2

20.7

Dividend per share (yen)Dividend payout ratio

Before share consolidation
After share consolidation

Note 1: Terminology differs under U.S. GAAP and IFRS for the following line items (U.S. GAAP/IFRS)• Sales/Revenues• Operating income/Adjusted operating income• Net income attributable to shareholders/Net income attributable to Hitachi, Ltd. stockholders• Net income per share attributable to Hitachi, Ltd. stockholders, basic/Earnings per share attributable to
Hitachi, Ltd. stockholders, basic• Net income per share attributable to Hitachi, Ltd. stockholders, diluted/Earnings per share attributable to
Hitachi, Ltd. stockholders, diluted• Stockholdersʼ equity/ Total Hitachi, Ltd. stockholdersʼ equity

Note 2: To represent actual management conditions more appropriately, adjusted operating income is presented as revenues less selling, general and administrative
expenses, as well as cost of sales.
3: Adjusted EBITA = Adjusted operating income + Acquisition–related amortization + Share of profits (losses) of investments accounted for using the equity method.
4: “Core free cash flows” are cash flows presented as free cash flows excluding cash flows from M&A and asset sales, etc.
5: 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 anddiluted earnings per share attributable to Hitachi, Ltd. stockholders are calculated on the assumption that the company conducted this consolidation at the
beginning of the previous fiscal year.
6: ROA (Return on assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) × 100

Hitachi Integrated Report 202210-year Financial Data

Whatʼs Hitachi

Introduction

Segment Highlights

5-year Non-financial Data

Value Creation

Number of employees

Sustainability

Corporate Governance

104

Data

Corporate Data and Stock Information

5-year Non-financial Data
Human CapitalBusiness Strategies

Hitachi Sustainability Reporthttps://www.hitachi.com/sustainability/download/pdf/en_sustainability2022.pdf

Safety Figures (Occurrence rate)*7*8 (Hitachi Group)

FY2017FY2018FY2019FY2020

FY2021

Hitachi Group

307,275

295,941

301,056

350,864

368,247

North America

2017

2018

2019

2020

2021

24.33

27.96

20.76

18.98

18.46

Hitachi, Ltd.

34,92533,49031,442

29,85029,485Latin America

1.62

0.44

0.57

2.12

1.69

Average service (years)*1

Hitachi Group

14.9

15.1

15.0

13.6

13.5

Europe

10.82

6.08

4.78

3.09

3.71

Turnover ratio (%)*1*2*3

Hitachi Group

5.5

6.3

5.2

4.3

7.5

India

1.44

1.44

1.63

1.07

0.53

China

1.53

1.46

1.17

1.12

1.06

Asia (excluding India, China and Japan)

4.41

3.34

2.63

1.55

1.30

Percentage of Positive Responses to
Employee Engagement Questions*4 (Hitachi Group)
58

Global average (%)
By region (%)

60

60

62

65

Oceania

24.41

21.94

29.07

12.95

5.32

Japan

̶

̶

̶

̶

56

Africa

9.93

11.76

9.72

25.37

1.43

Overseas

̶

̶

̶

̶

80

Outside Japan total

7.42

7.43

5.78

4.90

3.80

Japan

1.85

1.64

1.53

1.34

1.20

Global total

4.22

4.20

3.45

2.89

2.69

4

0

5

3

2

Digital Talent*5 (Hitachi Group)̶approx.
30,000approx.
19,000approx.
11,000approx.
35,000approx.
23,000approx.
12,000approx.
67,000approx.
29,000approx.
38,000

18.2

18.8

19.4

19.1

20.2

Hitachi Group

7.3(3,325)

8.3(3,975)8.9(4,302)

9.5(4,641)

9.8(4,762)

Hitachi, Ltd.

4.2
(577)

4.8
(635)

5.5
(700)

6.5
(768)

6.8
(785)

̶

̶

Japan

̶

̶

Overseas̶Global (persons)
By region

Diversity, Equity and Inclusion*2
Ratio of female employees (%)*1 Hitachi Group
Ratio of female managers(%/persons)*1*6
Ratio of female managers(%/persons)*6

Ratios of Female and Non-Japanese
Executives (Hitachi, Ltd.)

June 2018

June 2019

July 2020

June 2021

June 2022

Number of female executives

2

4

5

7

9

Ratio of female executives (%)

2.6

5.0

7.1

10.1

12.2

Number of non-Japanese executives

5

7

6

8

13

Ratio of non-Japanese executives (%)

6.4

8.8

8.6

11.6

17.6

Note: Executive Officers and Corporate Officers[Scope of Data]*1 Approximately 50,000 manufacturing workers not registered in the employee database and approximately 35,000 employees of somenewly consolidated companies are not included.
*2 The figures are based on enrolled employees with employment contract including those seconded from Hitachi Group to othercompanies and those taking leave, and excluding those seconded from other companies to Hitachi Group (as of March 31).
*3 Figures include only voluntary resignations.
*4 In fiscal 2021, the structure of questions measuring employee engagement was revised. In fiscal 2021, employee engagement will bebased on four points: sense of pride in working at Hitachi; whether employees can recommend Hitachi as a wonderful place to work;
job satisfaction and sense of accomplishment; and motivation to continue working at Hitachi for the foreseeable future, calculated fromthe average positive response rate.
*5 Disclosed starting in fiscal 2019. Human capital with any of the 12 capabilities necessary for digital business, such as data science andsecurity, are defined as digital talent. The digital talent figure is the human capital total within each capability (total number of persons).
*6 Rising numbers of female managers in part reflect improved coverage of our human capital databases.

Occupational Health and Safety(Hitachi Group*9, includes contractors)
Number of fatal accidents*8[Scope of Data]*7 Occurrence rate is the rate of workplace accidents per 1,000 directly contracted employees resulting in fatality or worktime loss of one day or more
*8 January to December each year
*9 Includes contractors

Sustainable Procurement Activities (Hitachi Group)

FY2017FY2018FY2019FY2020

FY2021［Human rights］2,524*10

Sustainability monitoring (companies)

131

345

291

271

Sustainability audits (companies)

18

24

19

27

25

Sustainability procurement seminars (companies)

65

126

59

450

359

［Environment］708*10*10 Sustainability monitoring in fiscal 2021 was focused on human rights and environmental risk assessment.

Environment
Reduction rate in CO2 emissions per unit fromproducts and services (base: FY2010)*11 (%)

̶

̶

19

20

28

CO2 emissions at business sites(factories and offices) (kt-CO2)

5,433

4,973

4,374

3,296

3,384

Total water use (million m3)

38.54

37.02

36.41

26.35

25.61

Waste and valuables generation (kt)

1,356

1,384

1,302

1,061

1,111

Atmospheric emissions of chemical substances (t)

4,472

4,389

3,882

2,373

2,499

*11 New indicator established in fiscal 2019
[Scope of Data]
Hitachi, Ltd. and consolidated subsidiaries.
Number of companies: FY2017: 880; FY2018: 804; FY2019: 815; FY2020: 872; FY2021: 854
Data on the environmental load from operations applies to business sites with a large environmental load that are classified as category A.**All Group business sites are classified into one of three categories: A, B, or C, based on the Criteria for Classification of Environmental
Management established by Hitachi, and the most suitable management is then conducted for each in accordance with the respective levelof environmental risk. (see page 2 of Hitachi Sustainability Report 2022)

Hitachi Integrated Report 202210-year Financial Data

Whatʼs Hitachi

Introduction

5-year Non-financial Data

Value Creation

Business Strategies

Sustainability

Corporate Governance

105

Data

Corporate Data and Stock Information

Segment Highlights

Segment Highlights
Hitachi Group Business Operation Framework (As of April 2022)
To further advance the Social Innovation Business and achieve growth centered on thethemes of digital, green and innovation, on April 1, 2022, Hitachi revised its business operation
framework into three segments comprising Digital Systems & Services, Green Energy & Mobility
and Connective Industries, as well as Hitachi Astemo.

Financial Institutions Business Unit
Social Infrastructure Systems Business Unit

Digital Systems & Services

Revenues, Adjusted EBITA and EBITDA by Business Segment
Billions of yen

Revenues

Adjusted EBITAEBITDA

Business Segment

FY2021

FY2022

FY2021

FY2022

FY2021

FY2022

Digital Systems& Services

2,153.6

2,290.0

281.4

300.0

358.6

354.0

Green Energy& Mobility

2,051.0

2,300.0

92.3

159.0

183.2

193.0

Connective Industries

2,752.8

2,770.0

257.8

296.0

358.9

350.0

Automotive Systems
Business

1,597.7

1,800.0

62.3

92.0

154.8

172.0

Hitachi Construction
Machinery Co., Ltd.

1,024.9

430.0

100.1

36.0

168.7

67.0

Hitachi Metals

942.7

570.0

30.7

27.0

80.7

46.0

Others

456.3

460.0

23.6

17.0

65.4

47.0

Corporate items& Eliminations(714.6)(770.0)

7.0(82.0)

22.1

215.0

1,0264.6

9,850.0

855.3

845.0

1,392.8

1,444.0

Services & Platforms Business Unit
Hitachi Systems
Hitachi Solutions

Nuclear Energy Business Unit
Energy Business Unit

Green Energy & Mobility

Power Grids Business Unit
Railway Systems Business Unit

Industrial Digital Business Unit
Water & Environment Business Unit
Building Systems Business Unit

Connective Industries

Hitachi Industrial Products, Ltd.

Total

Hitachi Industrial Equipment Systems Co., Ltd.
Hitachi Global Life Solutions, Inc.
Hitachi High-Tech Corporation

Automotive Systems Business

Hitachi Astemo

Hitachi Construction Machinery Co., Ltd.
Hitachi Metals, Ltd.
Segment

Business Unit

Main Group Companies

Listed Company*Fiscal 2022 outlook is as of July 29, 2022.
Please refer to the following URLs for details on performance by division and performance by former division.
https://www.hitachi.com/New/cnews/month/2022/04/220428/2021_Ansup.pdf
https://www.hitachi.com/New/cnews/month/2022/07/220729/2022_1Qsup.pdf

Hitachi Integrated Report 202210-year Financial Data

Whatʼs Hitachi

Introduction

5-year Non-financial Data

Segment Highlights

Value Creation

Business Strategies

Sustainability

Corporate Governance

106

Data

Corporate Data and Stock Information

Corporate Data and Stock Information (As of March 31, 2022)
Corporate Name

URL
https://www.hitachi.com/

Head Office
6-6, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8280, JapanFounded1910 (Incorporated in 1920)

Capital Stock461,731 million yen

Number of Employees(consolidated)368,247

Number of Shares Issued(common stock, including treasury stock)968,234,877

Number of Shareholders
238,967

Administrator of
Shareholdersʼ Register

Tokyo Securities Transfer Agent Co., Ltd.
3-11, Kanda Nishiki-cho, Chiyoda-ku,
Tokyo 101-0054, Japan

Stock Exchange Listings
Tokyo, Nagoya

Accounting Auditor
Ernst & Young ShinNihon LLC

Contact
Hitachi, Ltd.
TEL: +81-3-3258-1111

Shareholder Composition

10 Largest Shareholders

Hitachi, Ltd.
(Kabushiki Kaisha Hitachi Seisakusho)

Name

Share ownership Shareholding ratio(shares)(%)*2

Class of shareholders

Number ofshareholders

Share ownership(units)The Master Trust Bank of Japan, Ltd. (Trust Account)

181,747,800

18.79

Governments andmunicipalities

2

92

Custody Bank of Japan, Ltd. (Trust Account)

63,047,700

6.52

Financial institutions

205

3,407,137

State Street Bank and Trust Company 505223

22,788,025

2.36

Financial instruments
business operators

76

246,473

Nippon Life Insurance Company

20,000,099

2.07

2,426

129,714

Hitachi Employees’ Shareholding Association

19,551,338

2.02

SSBTC CLIENT OMNIBUS ACCOUNT

18,282,639

1.89

Nonindividuals

1,112

4,291,973

JP Morgan Chase Bank 385632

17,799,073

1.84

Individuals

157

1,413

State Street Bank West Client - Treaty 505234

16,509,187

1.71

234,989

1,582,410

NATS CUMCO*1

15,671,900

1.62

Total

238,967

9,659,212

State Street Bank and Trust Company 505001

14,656,120

1.52

Number of shares less than one
unit (shares)―

2,313,677*1 NATS CUMCO is the nominee name of the depositary bank, Citibank, N.A., for the aggregate of thecompanyʼs American Depositary Receipts (ADRs) holders.
*2 Treasury stock (998,721 shares) is not included in the shareholding ratio calculation.

Other institutions
Foreigncorporations,etc.

Individuals and others*Of 998,721 shares of treasury stock, 9,987 units are included in the“ Individuals and others ” column, while 21 shares are included in the“Number of shares less than one unit” column.
Individuals and others

Ratings
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+

Independent Assurance of Environmental, Social and Governance Data
To ensure the reliability of the data disclosed we have received independent assuranceof key environmental, social and governance performance indicators by KPMG AZSA
Sustainability Co., Ltd. in the Hitachi Sustainability Report 2022.

16.38%

Governments and municipalities

0.00%

Foreign corporations,etc. (individuals)

Financial
institutions

0.01%

35.27%

Share ownership

9,659,212 units
Foreigncorporations, etc.
(non-individuals)

Financial
instruments
business operators

2.55%

44.43%

Other institutions

1.34%

Indicators Subject to Independent Assurance

Hitachi Group Ratio and number of female managers, number of sustainability audits,
and CO2 emissions at business sites.
Hitachi, Ltd. Ratio of non-Japanese executives, female executives, and ratio andnumber of female managers.

Integrated Reports Inquiries
Investor Relations Division+81-3-3258-1111