Shift up
Elevating society

ANNUAL REPORT 2023
NEC Networks & System Integration Corporation

Our Vision
NEC Networks & System Integration
Corporation Group Statement
The NEC Networks & System Integration Corporation Group
enables communities throughout the world to enjoy a safe,
secure, and plentiful tomorrow by continually facilitating morewelcoming and convenient communications, and supportinga connected society, from the floor of the ocean to the far
reaches of outer space, with proven technologies and reliable
services cultivated over many years.

Corporate Message

The NEC Networks & System Integration Corporation GroupStatement and Corporate Message were crafted based on
the NEC Way with discussions involving all employees.

ANNUAL REPORT 2023

Sustainable
Symphonic Society
NEC Networks & System Integration Corporation (NESIC) is
engaged in its medium-term management plan Shift up
2024, concluding in the fiscal year ending March 2025.
We will form even stronger relationships with our customers
and evolve our business model by continuing to advance ourtransformation while working toward the realization ofdigital transformation (DX) x Beyond 5G.

In these ways,
we will continue to strive tocreate new value for society.

ANNUAL REPORT 2023

01

Contents

01

Introduction 
01 Our Vision
02 Contents
04 Our Connection to Daily Life

06

NESIC’s Growth Strategy 
06 Message from the President	We will transform signs of change into our true strength andcreate a solid spiral-shaped path to growth.

12 Outside Director Dialogue
16	Materiality
18	Materiality Matrix
20 2030 Initiatives for Providing Value to Society
22 Initiatives for Growth at NESIC
24 Our History
26 NESIC’s Strengths
28 Value Creation Model
30 NESIC’s Strategic Road Map

Medium- to Long-Term Growth Strategy, Earnings Trend 32	Looking Back on Our Previous Medium-Term Management Plan

32

33 Progress of Medium-Term Management Plan Shift up 2024
38 Financial and Capital Strategy
42 Financial & Non-Financial Highlights
44 NESIC Segments
45 Overview by Business Segment
DX Solutions BusinessNetwork Solutions Business
Environmental & Social Solutions BusinessSpecial Feature 
48 Aiming to Realize a Sustainable Society through Unique and Innovative Technology

48

50 Moving Forward Under Self-Implementation: New Headquarters Relocation Project

ESG Initiatives Environment

SocialGovernance

52 Environment

58 Social

66 Governance	Disclosures Based on TCFD
Recommendations
Governance
Strategy
Risk Management
Indicators and Targets

58	Human Capital Initiatives
64	Communication with Stakeholders

66	Corporate Governance74	Directors & Corporate Auditors

Corporate Data 76	Consolidated Ten-Year Summary
78	Stock Information / Corporate Overview

02

ANNUAL REPORT 2023

52

76

Supplemental Information for Annual Report 2023

The following supplemental information for Annual Report 2023 is available on NESIC’s corporate website.
Item

Web
The NESIC Group’s Sustainability
https://www.nesic.co.jp/english/sustainability/

Sustainability-Related Information(ESG Information)- Environment
https://www.nesic.co.jp/english/sustainability/environment/- Social
https://www.nesic.co.jp/english/sustainability/social/- Governancehttps://www.nesic.co.jp/english/sustainability/governance/

Investor Relations

About Us

Editorial Policy
Since 2016, NESIC has been publishing its Annual Report in the format of an integrated report to provide readers with a wide range of information on its businessactivities, including the medium-term management plan and other business strategies
aimed at creating social value and achieving medium- to long-term growth as well as
its measures for realizing these strategies.
In Annual Report 2023, we show how we are continuing to create new value by
working toward the realization of digital transformation (DX) × Beyond 5G. At the sametime, we are forming even stronger relationships with our customers and evolving ourbusiness model to realize our vision of a “Sustainable Symphonic Society,” as set out
in the medium-term management plan Shift up 2024.
To enable all of our readers to gain a better understanding of the Group’s activities,
we at NESIC strive to provide highly valuable information by engaging in dialogue withinvestors and other stakeholders and constantly improving the content based on the
feedback we receive as a result. We greatly appreciate your opinions and suggestions
after reading this report.
Period Covered
April 1, 2022 to March 31, 2023 (Certain information related to the period followingthat noted above is also included.)
Scope of Report
NEC Networks & System Integration Corporation and consolidated subsidiaries
GuidelinesIFRS Foundation (Integrated Reporting Framework)
Global Reporting Initiative (GRI Standard)
IFRS Foundation (Materiality Map)
ISO 26000 (Guidance on social responsibility)
Guidance for Collaborative Value Creation 2.0

https://www.nesic.co.jp/english/ir/index.html

https://www.nesic.co.jp/english/corporate/index.html

Disclaimer
This report contains forecasts, outlooks, targets, plans, and other forward-looking
statements concerning the business performance, financial condition, and otheraspects of the management of the NEC Networks & System Integration Corporation
Group. These forward-looking statements are based on information NEC Networks &System Integration Corporation had as of the time this report was prepared and on
certain premises judged to be reasonable. These judgments and premises, by theirnature, are subjective and characterized by uncertainty. Furthermore, forward-looking
statements are not guarantees of future results and actual performance could begreatly affected by various factors.
Note: C ompany names, product names, and logos contained this report are thetrademarks or registered trademarks of the respective companies.
Note: Department names and job titles are accurate as of September 30, 2023.
Regarding the Cover of Annual Report 2023
Based on the medium-term management plan Shift up 2024, NESIC aims to realize asustainable society with prosperity that resonates for all, in other words, a“Sustainable Symphonic Society,” together with customers.
The cover page design reflects the concept of establishing and deepening “creationin harmony” relationships with customers and society, shifting from individual cocreation to the generation of unique value through mutual resonance.

Shift upElevating society

Issue Date
November 2023
Contact
Investor Relations
Responsible department: IR Group of the Corporate Finance & Controller Division

ANNUAL REPORT 2023
NEC Networks & System Integration Corporation

 ustainability-Related Information
S
Responsible department: Corporate Strategy Planning Division

ANNUAL REPORT 2023

03

Our Connection to Daily LifeNESIC Contributes to a Safe, Secure, and Plentiful
Tomorrow in Various Contexts of Daily Life.
1 Broadcasting

2 Workstyle Innovation

3 Airports

4 Hotels

Construction, operation,and maintenance of TV
broadcasting facilities,
relay stations, and studio,
facilities, as well as
installation of fiber-optic
cable for cutting-edge 4K
and 8K broadcasting

Creation of an environment that allows people to workfrom any location, such as home or satellite offices,
through the combination of physical and digital spaces bybringing together various cloud-based tools and applying
cutting-edge technologies. Establishment of a venue thatenables people to co-create as a team by transcendingorganizational and corporate boundaries and a way ofworking that generates innovation by resolving issues ofcommunication, management, and administrative tasks

Visual Docking Guidance
Systems (VDGS), airtraffic control systems,
security systems, airport
information, and a broadarray of other services

Comprehensive hotel
solutions such as telephones and switchingequipment, room management systems, and systems for providing guests
with information

3

1
4

2

5
9

8

6

7
7

5 	Mobile Communications

Network
Overall network support
indispensable for daily
communication via smartphone and flip phone, frominstallation of mobile basestations to system integration of core networks

04

ANNUAL REPORT 2023

6 	Firefighting &Ambulance
Construction of command
systems and radio systems enabling rapid
responses to emergency
calls, and provision ofmultilingual call center
services

7 Railways & Roads

8 Disaster Prevention

Support for public transportation by constructing
and maintaining telecommunications networks
and other systems forrailway and highway
traffic control

Support for living in safety
and with peace of mind
through creation of disaster prevention communication systems that provide
information at times of
emergency and support for
decision-making by centralizing various infrastructure
information

9 	Shops &Public Facilities
Creation of convenient
user environments forcustomers including Wi-Fi
and local 5G, information
distribution systems, andvalue-added video
services

10 Oceans

11 Space12 	Local Governments & Education

13 Primary Industry

Installation of submarine cables
that support international communication and development
and construction of submarine
seismometers that quickly
acquire information on earthquakes. Also, installation of
power lines for offshore wind
power that utilize NESIC’s knowledge of laying submarine cables

Wide-ranging support ofspace development, fromground stations to communication with andoperational control ofartificial satellites andspacecraft, and theenvironmental observation it enables

Provision of networks to local governments that help realize safe and secure
lifestyles by providing residential protecting services and energy management systems. Provision of rewarding
workplace environments to government
employees and ICT and online classes
to schools

Support for the transformation of­business models in agriculture, forestry,
fisheries, and other primary industries
by means of digital technology, suchas by promoting the safe and secure
production of high-quality salmon
through digital transformation of theaquaculture industry using the latest ICT

11

10

12

13
14

17
16

18

15

14 Plants

Achievement of smart
factories by improving
processes that aim toenhance production
efficiency, such as optimization of products andemployees through utilization of DX at manufacturing sites, including plants

15 	Network Total

16 	Comprehensive

Operation Centers

Technical Centers24/7 customer network
support ranging fromsecurity monitoring to
network operation

Comprehensive technicalservices ranging from
evaluation to SI of newtechnology to maintenance and repair thatrun 24/7

17 	Data Centers

18 Contact Centers

Keeping of customers’
ICT assets in secure,robust environments, andprovision of wide-ranging
operation, outsourcing,and cloud services

ICT system failure
response, help desk, andother support services forcustomer system administrators and system users,
and interpretation services
in multiple languages

: NESIC’s service platform

ANNUAL REPORT 2023

05

Message from the President

Yushi Ushijima
President and Chief Executive Officer (CEO)06

ANNUAL REPORT 2023

We will transform
signs of change into
our true strengthand create a solid
spiral-shaped pathto growth.
 estruction, Reconstitution, andD
New Establishment
Thoughts on My Appointment
When I was appointed President in 2017, what
I wanted to change most was our conventionalawareness of growth—aiming higher, with pastand current NESIC as our standard. This awareness was born from the impact of NESIC’s history
as a company that is began as being responsible
for part of the NEC Group’s functions their systemconstruction business. However, to become astrong and attractive company, we must not besatisfied with merely going beyond the NESIC oftoday but fight for the position NESIC should takewithin the industry in the future. This is fully possible if we utilize our distinctive management
resources. With such conviction, I have chosen
reconstitution—the creation of a new NESIC—
as a major theme.
In the first stage of this target, under the previous medium-term management plan Beyond
Borders 2021, we began by destroying and going
beyond the barrier of preconceived notions aboutmarkets, technology, organization, performance,and other factors. To achieve this, we tried tochange everything except our value of “contributing to the betterment of society through communications technology,” which has been passed
down since NESIC’s foundation. In anticipationof the borderless digital and 5G era, which

ANNUAL REPORT 2023

07

Message from the President

eliminates such barriers as nationality and typeof industry, we have significantly transformed ourorganization, resource allocation, and businessmodel by establishing a platform for providing
new services. Although slow, awareness within
NESIC has begun to change over the three yearsof this plan, and has been reflected in our
performance.

Vision for Society—
Sustainable Symphonic Society
We have adopted “Sustainable SymphonicSociety,” the realization of a sustainable society
with prosperity that resonates for all, as our
vision for society in 2030. We will contribute tosociety through NESIC’s distinctive features, newdigital transformation (DX) technologies, and thecommunication technologies that have been our
mainstay since our foundation, to resolve various
social issues, including a declining and aging
population and its accompanying effect on workforces and rural areas, and environmental problems. During the three years of the previous
medium-term management plan, utilization ofdigital technologies advanced suddenly with theimpact of the COVID-19 pandemic, digital literacy
in society improved, next-generation networks
including 5G progressed significantly, and the08

ANNUAL REPORT 2023

potential to resolve social issues throughtechnology greatly expanded. NESIC’s vision is tobecome a communication services orchestrator.
As such, we hope to enhance the added value ofservices we provide, shift the relationship withour customers and society from individual
co-creation to mutual resonance through cocreation, and stemming from this resonancedeepen our “creation in harmony” relationshipsthat realizes the resolution of new and complex
issues and unique value creation.

Second Stage: Shift up 2024
To realize this vision, we must not simply continue on from previous initiatives, but switch to ahigher gear and strongly advance the applicationand expansion phases for the diverse digital and
5G knowledge and expertise that we have accumulated through trial and error to date. With thisin mind, we decided to name the current mediumterm management plan Shift up 2024.
The continuous advancement of our businessmodel is of paramount importance to this plan.
In the previous medium-term management plan,
we integrated the Symphonict brand under our DX
strategy. At the core of this strategy, we launched
our own multi-cloud platform and developed asystem for quickly introducing and creating new

digital and 5G-related technology and services,such as those from startup companies in the
United States. Furthermore, we formulated a
co-creation and self-implementation businessmodel that attempts to resolve issues throughapplication rooted in the front lines together withcustomers to ensure that these technologies areeasy to use.
During the current plan, we will evolve this intoa spiral-type business model that generates
growth through a cycle in which we incorporate
consultation into the business model, apply andoperate with customers, and suggest the next
issue we have recognized via this process before
it arises.
Our self-implementation and site-specificconsultations are carried out from the same
standpoint as the customer, significantly differingfrom other consulting companies. We aim toleverage this strength to establish recurring“creation in harmony” relationships as strategic
long-term partner for our customers.

Progress of Shift up 2024
Progress in the First YearThe first year of the medium-term management
plan, the fiscal year ended March 31, 2023, faced
major issues, where net sales and income were
below targets set at the beginning of the fiscal
year. This was mainly because of increases in thelead time to point of sale due to impact of continued semiconductor and component shortages,
and steep procurement costs for overseas products due to the sharp depreciation of the yen. On
reflection, our response was insufficient. We wereunable to increase the speed of growth, becauseof the time it took to deal with these issues,
resulting in an inability to absorb cost increases
in advance as the primary factor. In particular,
in terms of profitability, the gross profit margin
has remained almost flat since the fiscal year
ended March 31, 2022, which I believe is anurgent issue.
Meanwhile, we also saw results related to
top-line expansion, such as orders received
exceeding the previous record. This is partly
because we have steadily captured the continued
strong demand for DX, mainly general

corporations and public offices, but also due toan increase in customers with whom we cancreate relationships as a recurring strategic partner. In actuality, we were able to increase thenumber of major regular customers who conduct
large transactions annually by 5% compared withthe previous fiscal year. In other words, while I
understand that the spiral-type growth model thatis the aim of the current medium-term management plan has not yet led to the enhanced profitability that this model targets, as the first step,
the spiral has steadily begun to turn and this has
started to appear in the figures.

Initiatives for Establishment ofOffering-Type ModelIn the fiscal year ended March 31, 2023, we
focused on developing an offering-type model
within our spiral-type growth model. NESIC is not
a company that develops systems from scratch.
We are quick to identify outstanding new services, develop them into easy-to-use services
through knowledge gained during selfimplementation, and provide them to customers.
The sense of speed is an asset based on cocreation and self-implementation and is accelerated by the offering-type model. Taking theknowledge of customer issues and operational
processes gained from NESIC’s wide-ranging
customer base as a starting point, combining itwith unique expertise based on self-implementation such as in areas including workstyle innovation, and packaging it as an optimal DX service
that cover areas from proposing concepts to theirapplication and operation, we will be able toquickly provide high-value-added services to evenmore customers and further commit to the pathof our spiral-type growth model.
This offering-type model is designed with anawareness of themes that are based on contributing to solving social issues from a customer
issue-driven perspective. We have alreadydeveloped themes such as reforms to businessstructure through measures including workstyleinnovation and business process outsourcing(BPO), next-generation disaster countermeasures,the Digital Garden City Nation concept, and thecreation of an energy system aimed at carbon
neutrality. These are areas that leverage NESIC’s

ANNUAL REPORT 2023

09

Message from the President

accumulated knowledge and expertise and willcontribute to the achievement of three materiality
issues by 2030: create work environments inwhich everyone can take initiative, develop pleasant and plentiful communities with cutting-edge
technologies, and provide robust services that
underpin safety and security in evolving society.
We strive not only for business growth from an
economic standpoint but also with a sharp focus
on a Sustainable Symphonic Society, our vision
for society beyond that.

Toward the Achievement of theMedium-Term Management Plan
I have positioned the fiscal year ending March 31,
2024 as important to make up for delays in thefirst year regarding the achievement of targets
from our medium-term management plan. The
key to achieving this is increasing the implementation speed of our offering-type model, whichhas progressed in development, for customers.
In April 2023, the Business Design Operations
Unit, which was launched as a new servicecreation function under the previous mediumterm management plan, was integrated into eachbusiness unit, with a focus on the DX Solutions
Business Unit. By transferring awareness andresources away from service development andtoward further market expansion, we will accelerate the rotation of our spiral-shaped model, which
has just begun to turn, and increase the value
provided by the second or third rotation.
Regarding next-generation networks, the infrastructure side supporting growth strategies,
capital investment by telecommunications carriers has been more restrained than expected. The
realization of a local 5G market is said to belagging almost two years behind initial estimates
due to factors including delays in the popularization of 5G terminals. However, we are, without adoubt, currently realizing various utilization methods. We are unwavering in our approach to preparing for the largest market segments in the
future, such as reinforcing initiatives in infrastructure areas that require robustness, and are
expected to be at the forefront of these markets
through various demonstrations. Delays in thenext-generation network domain are expected tobe covered by active areas of social

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ANNUAL REPORT 2023

infrastructure, such as a submarine communications network for the increasing volume of international communications, and space and radio
wave projects in line with themes including civil
utilization and national security.
While the external environment, such as theinternational situation, is certainly not in a positive state, we have passed the peak of issues
such as shortages in semiconductors and components and sudden exchange rate fluctuations
that impacted performance in the fiscal year
ended March 31, 2023. New focus markets,
such as community development and offshore
wind power, are areas that will expand in the
future, and the number of backlogged orders has
significantly increased as a result of longer sales
lead times. We will utilize our results to date andenter the final year of Shift up 2024 in an accelerated state.

Human Resource Strategies
As stated in last year’s annual report, we have
deeply ingrained the stance of meeting customers’ needs and exceeding their expectations,which stems from our long history in infrastructure development. It is vital that we change ourattitude to one that anticipates and understandssocial and customer issues, proactively making
proposals for solutions, which is the key toensuring the spiral-type growth model is truly
functional. To date, employees have been very
responsive to changes as we tear down andovercome various barriers, and I hope they
will “shift up” their learning and experience
related to knowledge and technical skills toa higher level and further build the strength
to remain steadfast.
A shared awareness of our vision for the futureis crucial to this goal. To realize a Sustainable
Symphonic Society in 2030 and become acommunication services orchestrator, we areadvancing dialogues to ensure that each person
understands what must be done. Under the current medium-term management plan, we haveadopted human resource development targets
which are the key to rotating the spiral, but it isimportant that we do not impost these targets on
employees. Instead, we must integrate them withmotivation and a positive attitude with a smile

on their faces. As we entered fiscal year ending
March 31, 2024, I reinforced the creation ofopportunities to visit each site, hold direct talks
with each employee, and eliminate doubt withregard to aims and careers. As our business isbased in communication, so should all our measures, not just human resource strategies. By further utilizing DX, we can see the correlation
between factors such as engagement and productivity. We must review everyday operations
and advance labor-saving measures to ensure
employees do not endure an unnecessary burden
and that we become a lean and durable company.
We will move forward, transforming dialogues
and mutual understanding across organizations
and positions into the driving force for change.

expanding our awareness outward, enhancing
the individual skills of each employee to becapable of even higher-quality engagement
while thoroughly focusing on areas where wecan leverage our strengths and develop ourbusinesses. I hope that all our stakeholders willcontinue to aid us in creating an even stronger
foundation through multilateral dialogues that
go beyond the status of strategies and progress
to date, getting to the core of our culture andapproach. I would like to ask for our continued
support going forward.

President and Chief Executive Officer (CEO)In Closing
We are working to shape the various innovations
to date into a new NESIC. The in-house key
phrase I chose for this year is “Be Stronger.”Our business has been steadily changed throughdestruction and reconstitution. Now, with othersystem integrators in our sights, we recognize
ourselves in a position to face them head-on as
a competitor. We will continue moving forward,

ANNUAL REPORT 2023

11

Outside Director Dialogue

Outside directors Michiko Ashizawa and Mamoru Yoshida reflected on the first year of the medium-term
management plan Shift up 2024 and candidly shared opinions with a focus on issues faced by NESIC.

12

Michiko Ashizawa

Mamoru Yoshida

Outside Director

Outside Director

October 1996:	Joined International Department, Century Audit Corporation(currently KPMG AZSA LLC)
		* Resigned in May 2001
September 2003:	Joined Industrial Revitalization Corporation of Japan		* Resigned in January 2006
February 2006:	Joined Advantage Partners LLP (currently Advantage Partners, Inc.)		* Resigned in January 2007
April 2013:		Associate professor in Faculty of Liberal Arts (currently the School of
Economics and Business Administration) at Yokohama City
University (retired in August 2023)
		Associate Professor in Graduate School of International
Management at Yokohama City University (retired in August 2023)
June 2018:		
Outside director of the Company (present position)
September 2023:	Associate professor in Graduate School of Business Administration,
Keio Business School, at Keio University (present position)

April 2009:	Officer, Panasonic Corporation vice president,
Panasonic AVC Networks Company, in charge of Consumer Business
April 2012:	Director, managing executive officer, Panasonic Corporation President,
Panasonic AVC Networks Company
April 2013:	Director, managing executive officer, chief technology officer (CTO),
Panasonic Corporation
April 2015:	Director, managing executive officer,
Panasonic Corporation senior vice president,
Appliances Company; president, Air-con Company, in charge of TV Business
June 2015:	Managing executive officer, Panasonic Corporation senior vice president,
Appliances Company; president, Air-con Company, in charge of TV Business
June 2016:	Senior audit & supervisory board member, Panasonic Corporation(resigned in June 2020)
June 2020: Outside director of the Company (present position)

ANNUAL REPORT 2023

Evaluation of the First Year of Shift up 2024
Ashizawa: Leadership was put to the test amid a harshexternal environment that has included global component
shortages, a depreciating yen, and various cost increases.
Within the Company as well, numerous issues have also
emerged on the theme of effectiveness, such as the permeation of a spiral-type growth model, development ofconsulting personnel, and balance of new and existing
businesses. To put it another way, I feel that it was a yearthat brought light to essential topics we need to focus on
to become even stronger for future growth.
Yoshida: I feel exactly the same way. We saw significant
results from initiatives under the previous medium-term
management plan accompanying the environmental
changes resulting from COVID-19. The current mediumterm management plan sets out ambitious targets in linewith this trend, and as society as a whole moves on to thenext phase, I believe that our internal issues are becoming apparent. This was a period where we could reconsider and clarify issues, such as whether we can balance
management of existing customers and new customers,
whether we are truly creating value provided to customers,
and what we are aiming for with consulting personnel.
Ashizawa: Currently, NESIC is challenging itself daily tobe able to propose a path to value creation for customers
based on data accumulated through DX. While the kind ofvalue we create is important, it is difficult to suddenly
change conventional methods. Therefore, self-implementation, which we have excelled at to date, has become
vital. NESIC also has an ingrained culture, has making
further digitalization and value creation no simple feat. By
trying it out ourselves, we can make good proposals thatbring us closer to customers. Both the front lines andmanagement are searching for solutions, but we have yet
to see a winning formula. It is necessary to coordinate
effectively within the organization. However, the speed atwhich we operate remains a major issue, since global
trends move quickly.
Yoshida: When considering our vision for 2030, I feel that
we have not done enough to formulate a road map andclarify issues to address to achieve it.
While NESIC has been able to improve operational efficiency through DX solutions, I think that our customers also
worry about what kind of vision they should aim for andwhat kind of outcomes they are aiming to achieve beyond
that point. I hope that we can work with our customers todevelop and propose a road map for the future, leading tosolutions through co-creation and implementation.
Ashizawa: Enhancing our ability to formulate a road map isdifficult. What kind of approaches have you considered?
Yoshida: First, it is important to set ambitious goals. To
realize this, it is vital that we move forward and significantly change our perspective. We must approach thisfrom two angles: the front lines improving their daily
activities and top management pushing for significant
reforms of Groupwide issues. For this reason, we need toseparate problems that are extensions of existing ones
and the essential road map from a medium- to long-term
perspective. The reason for this is that NESIC’s challenge
is developing a road map from a reformative viewpoint.
Ashizawa: I am making efforts to have discussions withthe younger generation of employees. They have only
been in the workforce for a short amount of time and see
various issues from an unconventional perspective. I also
understand their motivation to grow personally and contribute to society. Since they also have high digital literacy, I think there is room to devise ways to improve theorganizational structure, such as creating a forum fordiscussion with less hierarchy. The ideal form of management is absorbing the opinions of various generations
when making reforms to improve corporate value andmaking reforms.

I hope in freely sharing my experiences
to be part of NESIC’s transformationand of its greater strength.

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13

Outside Director Dialogue

I will strongly support management
through candid and open discussions
founded on a diversity of thought.

Yoshida: Young people are used to digital technology andgenerate ideas flexibly. Since the analog generation also
has value in experience, it is good to integrate the best
approaches and methods from each side and utilize themin the formulation of an essential road map. However, it isdifficult for the front lines to deny current circumstances,
implement, and communicate the development of a road
map in a reformative manner themselves, so that is therole of top management, led by President Ushijima. To
date, they have been communicating with an awarenessof this issue and have been striving to address it, butthere is an expectation for even stronger leadership.

results end in failure. By learning about the front lines
these personnel gain new wind, change perspective on
what should be done in-house and in collaboration, andcreate a different image of what they are working on.

Ashizawa: In terms of difficulty, there are differences inbusiness characteristics. The DX Solutions Business Unit
and the former Business Design Operations Unit are organizations that focus on rapidly evolving technology, so thetechnology handled and organization itself must be highly
flexible. Many of the customers for the Environmental &Social Solutions Business Unit and Network Solutions
Business Unit are national and local governments andsocial infrastructure providers, and are required to provide highly reliable and durable networks. The difficulty ofbalancing the business characteristics of each unit with
culture and management is significant. Since synergy
between businesses is NESIC’s biggest strength, it isnecessary to thoroughly discuss our core strength ofgenerating this synergy and what value it provides.

Yoshida: The method of connecting people and companies has become very American. Although it is a temporary negative that people sometimes leave their jobs
because they want to do something else, I believe that
increased liquidity of the labor force will become naturalin Japanese society going forward. You are active as anexpert as a result of a wide range of careers and experiences. In the same way, it is possible to collaborate withvarious people in who have left their companies and arein similar circumstances, which is a positive aspect.
NESIC has a highly effective system in which employees
who leave are welcome to return.

Yoshida: The next step is the need to develop personnel
and foster a corporate culture where they can play anactive role globally as a target to increase NESIC’s
strength. For example, NESIC dispatches personnel to
Silicon Valley, where there is a culture in which disruptive
innovation is generated by repeated efforts, even if

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ANNUAL REPORT 2023

Ashizawa: I was also in Silicon Valley for a while andhope that such sense of speed and culture of taking onchallenges is adopted. NESIC’s employee dispatch program in Silicon Valley is conducted over a stay of only
a few months so the timing of their return to Japan isunfortunate. We hold follow-up discussions to ensurethat the flame of motivation does not go out.

Sustainability Management Unique to NESIC
Ashizawa: There has been a sudden recent advancement
in disclosure requirements regarding the TCFD and nonfinancial information due to revisions to the Corporate
Governance Code. NESIC is also holding various discussions centered on its Sustainability Management
Committee and the executive officers in charge.

In the past year, the Nomination and Compensation
Committee has discussed introducing non-financial targets and achievement levels in the designs for director
remuneration. This has resulted in a model where nonfinancial targets adopted in the medium-term management plan are partially linked with compensation.
However, establishing evaluation methods and KPIs has
been extremely difficult. Human capital metrics such as
engagement scores and diversity are truly at the core ofcorporate strategies. For this to lead to value creation,a paradigm shift in management is vital. I believe that thefoundation of a strong company is to recognize gaps by
first setting target figures and by establishing discussions on what NESIC should fundamentally be, so thateach employee can continue to consider what We areaiming for and what kind of value to create, even without
the figures.
Yoshida: In addition to introducing a non-financial perspective to this remuneration system, there is also value
to discussions about setting KPIs. As an example of oneof these points, I feel it is important to establish target
figures for the promotion of female managers, but moreover, to discuss how to train the appropriate person andthe process. We should set targets after focusing effortson the form that personnel training takes, rather thanbased on figures.
Ashizawa: That’s a topic we always discuss passionately.
While I have no experience as a manager, from my perspective of business administration research, I believe it
is important to first set targets and choose a method for
invigorating discussions and making advancements.
Yoshida: As you have said, these discussions always run
parallel. Each company addresses sustainability-related
requirements from society but I worry that, if we do notthoroughly look into the aims of these non-financial indicators and sustainability, they will only be implemented
for the sake of implementation.
Ashizawa: It is whether taking a further step forward willlead to substantial value creation. Certainly, there is still
an issue with how to understand and evaluate essential
sustainability that increases NESIC’s value. President
Ushijima also commented that, while it may be possible
to increase numbers in the short term by compromisingand getting closer to the front-line staff, this cannot reallybe called a strength of NESIC from a medium- to longterm perspective. As outside directors, we hope to continue candidly sharing opinions at Board of Directors’

meetings, recognizing that this is an area where we mustpush forward without easing up or compromising.
Sustainability is the specialist area of newly appointed
outside director Mikiko Morimoto, so I expect it to takeshape within NESIC.

Advancement of Governance for “Shift up”
Yoshida: By evaluating the effectiveness of governance,
the system functions as a mechanism to visualize issues
and steadily implement measures, advancing improvements. I hope that this trend continues. Further governance reforms are vital for reinforcing corporate value
creation and the foundation of sustainable management.
As the chair of the new Special Committee established in
2021, I am in charge of understanding coordination withthe parent company and profitability of the business andensuring there is no harm to profits from a minority
shareholder perspective. Furthermore, while the committee has clarified the standards for submitting items about
projects to be discussed with the parent company and aflow that can be confirmed at committee meetings, wehave also raised issues, such as whether there are any
areas in which we can collaborate with the parent company. As both companies endeavor to evolve, I hope thatcooperation over the medium to long term will lead tosignificant mutual growth and profit and produce resultsthat lead to value for minority shareholders.
Ashizawa: That was quite a lively discussion. In terms ofgovernance, we have deliberated the necessity of monitoring the global governance of overseas subsidiaries. I havealways believed that governance should not be overly
defensive, but support a speedy offense while taking
necessary risks. As a result, it is vital to have a systemthat enables thorough management of these risks.
Yoshida: Such a system reinforces governance as necessary to “Shift up” NESIC. Based on such points, we will
give advice through continued discussions and investigations at board meetings.

ANNUAL REPORT 2023

15

Materiality
We have identified risks and opportunities based on megatrends and designated six materiality issues as key initiatives
for contributing to the sustainable development of society and realizing our sustainable growth. Based on the various
changes in our business environment, we formed more concrete images of materiality issues and are working to put it
into practice by share these images.

Initiatives to provide value to society

Megatrends eclining and aging population andDdecreasing working population
Concentration of population in
urban centers
Declining population in rural areas
and widening regional disparities
Growing impact of climate change
Increasing awareness of safety andsecurity
Acceleration of digitalization
Rapid advancement of networks

Initiatives for growth at NESIC

Increasing focus on sustainability
and ESG management
Market restructuring of the Tokyo
Stock Exchange(1st Section Prime Market)

Increasing emphasis on humancapitalGrowing attention on the importanceof ensuring people’s physical, mental,
and social well-being
Respect for diversity
Cultivation of a culture of co-creation

Materiality Identification
Process

16

ANNUAL REPORT 2023

Opportunities for NESIC

Risks for NESIC hanges in workstyles at enterprises andC
local governments
Widening promotion of DX in educationalsettings
Rising needs for the development of
attractive, highly resilient communities
Expanding needs for the use of digitaltechnologies to address the increasing
demand for measures against climatechangeGrowing needs for security-related anddata-driven businesses associated withincreasing sophistication of networks
Increasing number of business partners
seeking to collectively realize a sustainable society eclining productivity
D
Inability to secure human resources andtransfer skills
Loss of trust due to information leakage,
privacy violations, and other security
issuesImpact of natural disasters on the supply
chain
Obsolescence of services, technologies,
and quality due to lack of timely responseto change
Loss of relationships with co-creation
partners due to lack of importanceplaced on sustainability

Bolster international competitiveness by
ensuring diversity of directors
Expand opportunities for new businessdevelopment by speeding up innovation
Enhance credibility by strengthening
governance and promoting businessgrowth by ensuring rapid decision-making
Enhance social reputation by strengthening our response to diversifying social
needsSecure exceptionally talented personnel
and reduce employee turnover by actively
engaging in human capital managementand disclosing such activities
Expand growth opportunities andincrease engagement through proactive
investment in human resourcesTransfer knowledge and skills to younger
generations by creating opportunities
where senior employees can play anactive role ysfunctional governance and internalD
control systems
Closed decision-making and diminishinglong-term growth due to lack of Board
diversity
Loss of trust due to compliance violations and unfaithful management
Loss of social reputation due to lack of
information disclosureImpact on recruitment, increase inemployee turnover, and lack of motivation and engagement due to the lack ofimportance placed on human capitalmanagement

STEP 1

STEP 2

Confirmation of social issues(overseas / domestic)

Interviews and internal discussion
on important initiatives at NESIC

Global issues were verified based on
megatrends and discussions withinvestors and other external parties.

Interviews with top management andfree discussions among top management were held on the vision for society
and the vision for NESIC, within
the context of important initiatives
that it should undertake.

Vision for Society

Create work environments inwhich everyone can take initiative

An inclusive and sustainable society

We aim to provide environments
where everyone, regardless of age,gender, or nationality, can work
proactively and to the best of theirabilities without regard to location.

created through communications

Initiatives to Provide Value to Society through 2030
Create work environments in which everyone can take initiativeDevelop pleasant and plentiful communities with cutting-edge
technologies
Provide robust services that underpin safety and security inevolving society

Develop pleasant and plentiful
communities with cutting-edge
technologies
We aim to help develop communities,
such as smart cities, where people
can lead exciting and fulfilling lives
with safety and convenience, andwhere various information services
are provided on robust communication platforms using the latest
mobile technologies, etc.

Provide robust services that
underpin safety and security inevolving society
We will support the development
and advancement of ICT essential
for economic growth by creating
safe and secure services that offer
high quality and national reach.

Initiatives for Growth at NESICSound and highly
transparent management
 trengthen governance throughS
dialogue with all stakeholders romote compliance with an eyeP
to diversity

Strengthen innovation
capabilities to create
new value romote a culture that encourP
ages change and embrace of newchallenges
 ccelerate co-creation and theA
use of various services in our own
business practices to better
understand customers’ pointof view

Create a culture where
employees can takeinitiativeImprove the Well-being of
employees
 ncourage frank and open discusE
sions, and enhance the corporate
culture as a facilitator ofself-growth

STEP 3

STEP 4

STEP 5

Candidate materiality issues andinternal discussions

Interviews withoutside directors

Identification ofmateriality issues

A list of candidate materiality issues wascreated based on the vision for society
and initiatives to be undertaken to realize
the visions that were examined in
Steps 1 and 2, which was followed bydiscussions with top management.

Candidate materiality issues
proposed in Step 3 were explained
to the outside directors, who offered
their insight.

The Executive Committee determinedmateriality issues based on internal andexternal opinions. The issues werereported to the Board of Directors.

ANNUAL REPORT 2023

17

Materiality Matrix
The matrix chart below classifies and systemizes the relationship between our business, ESG, and the SDGs withrespect to the six materiality issues.
NESIC has been working to resolve a number of social issues through its core businesses, such as building safe andsecure social infrastructure, providing workstyle innovation solutions, promoting the global use of ICT, and creating
partnerships through communications.
In an effort to further our contributions to society through our core businesses, we have numbered the 169 targets of
the SDGs in relation to our materiality, visualizing their relationship with our core business strategies and initiatives andthe basic strategies of the medium-term management plan.
SDGs targets that are strongly interlinked with NESIC’s materiality issues

Medium-term management plan (ʼ22–ʼ24)
Basic Strategy 1

Materiality

Create work
environments inwhich everyone cantake initiative•P articipation of a wide range
of individuals from different
generations and backgrounds
in society and diverse
workstyles•A work environment in which
employees can demonstrate
their full potential
 work environment conducive•A
to the creation of even greater
value through innovation•W ell-being workstyles that
fulfill both work and life

Develop pleasantand plentiful
communities with
cutting-edge
technologies

 community in which a•Adiverse group of people cannaturally and enjoyably
communicate and co-create•A living environment where
regional disparities do not exist
and necessary information andservices are available regardless of location•A comfortable and convenient
community where people wantto continue to live•A
 community where visitors
can discover and fully enjoy
the attractions and that
residents can take pride in•S hare the enthusiasm,
excitement, and emotion ofsports, entertainment, andother activities in a variety ofvenuesProvide robust
services that
underpin safety andsecurity in evolving
society•H ighly secure communication
infrastructure that supports
economic activities• Energy and other social
infrastructures that are
optimized to facilitate therealization of a carbon-freesociety•A sustainable social infrastructure realized through efficientdevelopment, maintenance,and management•A society resilient against
increasing and intensifying
natural disasters•A society that protects its
abundance of land and sea
and that ensures consistent
supplies of food•A safe and secure society
conducive to the prevention
and early detection of
accidents and criminal acts

Sound and highly
transparent
management•S trengthen governancethrough dialogue with all
stakeholders•P romote compliance in
response to increasing
diversity

Initiatives toProvide Valueto Society

Initiatives for
Growth at
NESIC

Strengthen innovation capabilities tocreate new value

Create a culture
where employees
can take initiative

18

Concrete Image of Materiality
Issues Being Realized

ANNUAL REPORT 2023•E mbrace a culture thatencourages change and the
pursuit of challenges•S tep up the pace of co-creationand self-implementation
practices that underscore theview of customers•E nhance employee well-being•E ncourage frank and open
discussions, and enhance
corporate culture as a
facilitator of self-growth

ESG
Affordable
and cleanenergyE/
S

Decentwork andeconomic
growthIndustry, Sustainable
innovation, cities andinfrastruc- communitureties

ClimateactionPartnerships
for the goals

13.1

17.16
17.17

8.1
8.2
8.3
8.5
8.8
8.10

9.5

8.1
8.2
8.9
8.10

9.1

11.2
11.3
11.7

13.1

17.16
17.17

8.1
8.4

9.1
9.4

11.2
11.3
11.5
11.6
11.7
11.b

13.1
13.2

17.2
17.7
17.16
17.17

13.1
13.3

17.16
17.17

E
/
S

7.2
7.3
7.a
7.b

E
/
S

8.5
8.8

G

8.2

9.5

8.2
8.5
8.8

9.5

17.16
17.17

S

S

13.3

Accelerating
Original Value
Creation

Basic Strategy 2
Advancing
Solution
Capabilities

Transform All
Businesses to
Ensure They
Address
ClimateChangeBasic Strategy 3
Evolve into
DX-Native
CompanyNotes:• This table has been prepared under the guidance of Mr. Hidemitsu Sasaya, an ESG/SDGs consultant and a professor at the Chiba University of Commerce.
•P lease be aware that changes in a variety of factors may lead to differences in results from the content provided above. Furthermore, we have revised the definitions and numericaltargets from when we announced our medium-term management plan.
*1 W
 e are bringing forward and revising targets for reducing Scope 1 and 2 CO2 emissions to further accelerate our contribution to climate issues and fulfill our responsibility as acompany. The rate of reduction in the fiscal year ended March 31, 2023 is based on calculations from before implementing third-party verification. These are subject to change
following the results of verification.
*2 W
 e have revised definitions and targets set during the announcement of the medium-term management plan to include additional criteria, such as skill level acquired from qualifications and training.

Initiatives and Specific Targets•E xpand businesses under themes including workstyle DX, data analysis and utilization, anddigital twins*A

Target figures(Numerical targets for initiatives without a specified
fiscal year are based on FY2025/3)

Net sales ¥50 billion(total of A, B, and C)

Results and result indicators
Results from FY2023/3¥24.9 billion (total of A, B, and C)

Hold local 5G implementation training
through co-creation with Mobile
Computing Promotion Consortium•E xternal sales and monetization of DX human resource development function(College Concept)

P34•A ccelerate original value creation through Symphonict•E xpand businesses under the theme of local government DX*B

Net sales ¥50 billion(total of A, B, and C)¥24.9 billion (total of A, B, and C)•P romote community development businessNet sales ¥20 billion¥5.0 billion•A ccelerate original value creation through Symphonict

P34•E xpand businesses related to telecommunications carriers*D(provide local 5G and various other network services and develop secure infrastructure)

Net sales ¥62 billion(total of telecommunication carrier-related businesses,
including D and E)

Reference: ¥79.2 billion(total from telecommunications
carrier-related businesses and social
infrastructure businesses)• Increase sales from social infrastructure business*F(expand solutions businesses utilizing satellite images and AI)

Net sales ¥35 billion(total of social infrastructure businesses, including F and G)

Reference: ¥79.2 billion(total from telecommunications
carrier-related businesses and social
infrastructure businesses)•E xpand businesses under theme of next-generation network security*C

Net sales ¥50 billion (total of A, B, and C)¥24.9 billion (total of A, B, and C)•E xpand businesses related to telecommunications carriers*E(data operations business through automation and AI prediction using infrastructure operations data)

Net sales ¥62 billion(total of telecommunication carrier-related businesses,
including D and E)

Reference: ¥79.2 billion(total from telecommunications
carrier-related businesses and social
infrastructure businesses)• Increase sales from social infrastructure business*G(provide resilient social infrastructure services through the use of observation data obtained fromsatellites and ocean floors)

Net sales ¥35 billion(total of social infrastructure businesses, including F and G)

Reference: ¥79.2 billion(total from telecommunications
carrier-related businesses and social
infrastructure businesses)• Increase sales by strengthening measures toward the realization of a decarbonized society

Net sales ¥20 billion¥3.0 billion•L aunch and expand onshore fish farming businessNet sales ¥30 billion(FY2030/3: includes franchises)

Begin construction of Fuji-Katsuragawa
Factory in December 2022•R educe CO2 emissions from business activities (Scope 1, 2)

Reduce CO2 emissions by 40% in FY2023/3 over FY2020/3,
reduce by 89% in FY2025/3 over FY2020/3, andrealize net zero*1 emissions by FY2031/3

24% reduction (compared to FY2020/3)• Increase ratio of directors who are women

30% (FY2031/3)

22.2%

•E
 xpand shareholder returns based on stable dividends

Maintain dividend on equity (DOE) of 5.0%

5.0% (16th consecutive year ofincreasing dividends)

P35•E xpand energy businesses through co-creation•S et targets for supply chain CO2 emissions (Scope 3) up to fiscal year ending March 31, 2024•C
 onduct investor relations (IR) activities focusing on individual business field• Training of highly skilled professionals and human resource investment(¥5 billion; on a cost basis)

Implementation in May and June 2022
190 consulting personnel, 1,190 advanced DX professionals,
1,580 Beyond 5G professionals*2

39 consulting personnel, 444 advanced
DX professionals, 1,216 Beyond 5G
professionals•C onduct business investments (¥17 billion; on a cost basis) and M&As and other growth investments(¥38 billion; on a cash basis)

Implement capital and businessalliances in the local 5G and energy
domains• IT investment (¥8 billion; on a cost basis) (including cost of relocating headquarters)

Implement relocation of NESIC
headquarters•C ontinue to hold NESIC’s pitch competition for new businesses

Continue implementation
Number of ideas 183 (40% increase
from previous fiscal year)•E nhance employee engagement score(researched by Kincentric)

50% (Tier 1 level) (FY2025/3)(This score generally corresponds to the world’s top 25%, and 32%
accordingly the Tier 1 level.)• Increase ratio of women in management positions

10% (FY2027/3)

5.9%• Increase ratio of paid leave taken

100% (FY2027/3)

65%•P romote participation in the Japan Master of Health Literacy Test

Number of people with qualifications
approximately 1,800•H old psychological safety workshops throughout NESIC

Complete implementation fromexecutives to department managers

ANNUAL REPORT 2023

19

2030 Initiatives for Providing Value to Society

Vision for Society

An inclusive and sustainable society
created through communications
2030 Initiatives for
Providing Value to Society

To realize a sustainable society created through communications, which is our long-term vision for society,
we have adopted three initiatives for providing value to society through communications for 2030.

Create work environments in which everyone can take initiative
Launch of Sansan, a Sales DX Service for Local Governments,
in Collaboration with Sansan, Inc.
NESIC has launched “Sansan Secure Access Service for
LGWAN,” an LGWAN-ASP service for local governments incollaboration with Sansan, Inc.
There is increasing demand for telework and DX promotion, not only among companies but local public bodies,capable of handling diverse workstyles and BCP countermeasures during emergencies. However, local governments operate through the Local Government Wide Area
Network (LGWAN), a closed network, making it difficult totelework or introduce tools that use public cloud services.
LGWAN-ASP contributes to resolving such issues byenabling the secure provision of cloud services in an
LGWAN environment.
This service enables users to create their own databases,
such as personal network information within local governments, by combining more than one million data points
from company information provided standard and information compiled from business cards and emails. Accordingly,
it supports the promotion of DX, enhancement of laborproductivity, and the realization of flexible workstyles.

20

ANNUAL REPORT 2023

We will use the provision of this service as a chance topromote the reform of local government operations andenhancement of productivity, by expanding cloud services
and other features to shift to a paperless system and leveraging the knowledge and expertise of workstyle innovation
accumulated to date.
Going forward, both companies will evolve the workstyles
of various customers and contribute to emerging innovation through the provision of DX services, including Sansan.


Excerpt from press release (issued on February 7, 2023)

Initiatives to Realize this Materiality(number of new releases)

8

for provision of
new services

2

for experiments

July 2022 to June 2023

Develop pleasant and plentiful communities with cutting-edge technologies
Implementation of DX Promotion throughJapan’s First Hybrid 5G Network that Utilizes Infra-Sharing
Tokushima Prefecture and six companies—CATVTOKUSHIMA, Inc., NEC Corporation, NEC Networks &System Integration Corporation (NESIC), NTT DOCOMO,
INC. Shikoku Branch, NTT Communications Corporation,
and JTOWER Inc.—are promoting DX in Tokushima
Prefecture by created the first domestic hybrid 5G network
environment through infra-sharing that combines local 5G
provided by CATV TOKUSHIMA and the NEC Group withDOCOMO’s carrier 5G by utilizing 5G sharing equipment
provided by JTOWER.
Through these new initiatives, a hybrid 5G network has
been created that achieves unprecedented and innovative
measures by combining the strengths of local 5G—its
stability and high level of security—with the broad coverageand versatility of carrier 5G. As a result, enhanced quality ofpharmaceuticals, such as in emergency medicine, andstabilized health care and disaster support measures inemergencies are made possible.

CATV TOKUSHIMA, NEC, and NESIC comprehensively
support local 5G promoted by the Tokushima Prefectural
Government from license renewal to system design andcreation. This project will provide local 5G services byutilizing infra-sharing to realize a hybrid 5G network.
Through this initiative, we aim to build a pioneeringmodel case for a hybrid 5G network environment that­utilizes both local and carrier 5G.


Excerpt from press release (issued on September 8, 2022)

Initiatives to Realize this Materiality(number of new releases)4

for provision of
new services

9

for experiments

July 2022 to June 2023

Provide robust services that underpin safety and security in evolving society

Launch of OWLai as an AI Imaging Service Brand
NESIC has launched OWLai as a new AI imaging service
brand in the image utilization business domain.

accrued over 60 years in the field of imaging with the latest
AI imaging technology.

Background of Launch
Due to the popularization and advancement of cameras,
we can collect a higher number of clearer, higher-quality
images than ever before. As a result, there is increasing
demand for advanced utilization of image data in crimeprevention measures, disaster countermeasures, marketing, and various other applications. Amid this increase indemand, a new system is required that does not solely rely
on checking and processing by humans but enables more
efficient utilization of imaging data by a limited number ofpeople.
NESIC launched the AI imaging service brand OWLai,
based on the concept of transcending simple video recording to create value for the future. We will develop services
for detection of anomalies and visualization of congestion,and provide customers with optimum value by combining
abundant experience and credible front-line capability

The launch of this brand provides opportunity to reinforce
initiatives for implementing co-creation with customers in
the AI imaging service business and expand our service
lineup. We will also continue addressing corporate management issues and contributing to the realization of a safe
and secure society.


Excerpt from press release (issued on July 14, 2022)

Initiatives to Realize this Materiality(number of new releases)

8

for provision of
new services

3

for experiments

July 2022 to June 2023

ANNUAL REPORT 2023

21

Initiatives for Growth at NESIC

Vision for Society

An inclusive and sustainable society
created through communications
Initiatives for Growth at NESIC

As we continue to grow as a company that provides value to society, we must further reinforce our management foundation.
To achieve this, we have selected three initiatives for growth at NESIC based on the approach that communication,such as co-creation and dialogue, is vital.

Sound and highly transparent management
Main Risks When Selecting
Materiality Issues• Dysfunctional governance and internal control systems• Loss of trust due to compliance violations and unfaithful management

Main Opportunities When
Selecting Materiality Issues•E nhance credibility by strengthening governance andpromoting business growth by ensuring rapid decision-making•E nhance social reputation by strengthening our response to diversifying social
needs

Strengthen governance through dialogue with all stakeholders• Enhancement of dialogue with shareholders and investors ( P64)
• Dialogue with suppliers for improved supply chains ( P64)•E xchange of opinions with outside directors, such as in pre-meeting
briefings for the Board of Directors

Promote compliance with an eye to diversity• Implementation of compliance awareness surveys and training• Implementation of human rights risk training following advancement ofAI biometric authentication technologies

22

P66

ANNUAL REPORT 2023

Strengthen innovation capabilities to create new value

P58

Main Risks When Selecting
Materiality Issues•L oss of relationships with co-creation partners due to lack ofimportance placed on sustainability

Main Opportunities When
Selecting Materiality Issues• Increasing number of business partners seeking to collectively realize
a sustainable society•E xpand opportunities for new business development by speeding up
innovation

Promote a culture that encourages change and embrace of
new challenges• Implementation of compliance awareness surveys and training• Implementation of NESIC AWS GameDay, a game-style practical training
program contest for NESIC employees

Accelerate co-creation and the use of various services in our own
business practices to better understand customers’ point of view•A
 ccelerated implementation of sustainability management following therelocation of NESIC headquarters ( P37)
• Implementation of “Fusion,” an open innovation program for recruiting
companies that work with our business research team to verify the feasibility of commercialization by utilizing NESIC’s assets

Create a culture where employees can take initiative

P58

Main Risks When Selecting
Materiality Issues• Impact on recruitment, increase in employee turnover, and lack of motivationand engagement due to the lack of importance placed on human capitalmanagement

Main Opportunities When
Selecting Materiality Issues•E xpand growth opportunities and increase engagement through proactive
investment in human resources

Improve the Well-being of employees• Implementation of engagement surveys• Implementation of one-on-one meetings•H osting of psychological safety seminars and workshops• Implementation of internal surveys and training related to well-being•P romotion of participation in Japan Master of Health Literacy Test

Encourage frank and open discussions, and enhance thecorporate culture as a facilitator of self-growth• Implementation of career assessments• Introduction of online video training service throughout NESIC•P romotion of communication between management and employees
through town hall meetings and caravans

ANNUAL REPORT 2023

23

Our History

History of Honing Core Competence

NESIC is committed to realizing an inclusive and sustainable society created through communication as a communication services orchestrator. We have continued to change and grow, adding new strengths in tune with the times to ourcore business of innovating and developing communications. Starting from a foundation in construction technology,
NESIC has obtained information and communications technology (ICT) and built a unique position as a system integrator
with construction capabilities. In recent years, NESIC has gained the ability to create new kinds of solutions that combine
its accumulated technological capabilities and know-how gained through self-implementation and co-creation withpartners.

Refinement of Construction Technologies
as a Telecom Infrastructure Constructor

Growth through Construction Capabilities
and Refinement of ICTNESIC was established in a spin-off of the telecommunications
engineering division from NEC Corporation in 1953. NESIC has
steadily built up its construction capabilities, centered on NEC
products, while tapping into growing demand for telecommunications infrastructure in Japan and overseas. We have also maintained and advanced high-quality technologies, which are symbolicof the NEC Group.

Alongside advances in technology, NESIC broadened its reach in
the telecommunications infrastructure field to such areas asmobile base stations. NESIC also expanded business to provide
ICT to corporations by creating voice networks, enabling it toprovide construction, system integration (SI), and maintenanceservices. Accordingly, we have set up sales bases across thecountry and broadened our nationwide responsiveness.

1953–

1960s–

Founding:
Telecommunications
Construction

Overseas Infrastructure
Construction

Technological
Capabilities &Credibility

Technological
Capabilities &Credibility

1990s–
System Integrator

Nationwide
Business
Capabilities

Main Initiatives 1950s–1990s
 ippon Electric Installation Company established in a spin-off from NEC Corporation
NConducted first overseas project (construction and installation of switchingequipment in the Philippines)
Constructed the first television broadcasting facility A
Constructed satellite telecom infrastructure for the 1968 Olympic Games,
in Mexico City B
Constructed microwave telecom infrastructure for five Central American countries(simultaneous construction in multiple countries)
Acquired special construction business and general construction businesslicenses for seven categories of construction businessEstablished the first overseas affiliate, in Brazil

A

B

Net Sales

Over ¥10 billion
1974

Over ¥100 billion
1989

1950s

1960s–1970s

1980s–1990s

Reconstruction after World War II

Increase in international communications
and satellite communications

Telecom liberalization

Era of construction in broadcasting andtelecommunications infrastructure24

 hanged the company name to NEC System
C
Integration & Construction, Ltd.
Listed on the Tokyo Stock Exchange
Strengthened sales structure for private sector
by creating a specialized division
Reinforced nationwide network by setting up
Ca business unit for regional sales
Business for New Common Carriers (NCCs) took
on significant scale and received major orders from new private communications
companies
Constructed communications equipment on Mt. Everest (enabling broadcast fromthe peak of Mt. Everest for the first time)Expanded the enterprise system integration business C
Established S-iDC (Strategic Internet Data Center), NESIC’s first data center

ANNUAL REPORT 2023

Expansion in demand for telecommunications
infrastructure construction worldwide

Birth of NCC

Over ¥200 billion
1997

Creation of New Businesses through Technological Capabilities
and Nationwide Responsiveness
NESIC has reinforced its strengths by building a full-service network of about 400 support and service bases across Japan through aggressive
M&As, including a merger in 2007 with NEC Telenetworks Co., Ltd., a company with strength in the service field, and turning Q&A Corporation, which
operates contact centers, into a subsidiary in 2013. Furthermore, NESIC has greatly expanded the products and services it offers, including throughturning the innovative technologies of startups into services while advancing co-creation with partners, as well as creating EmpoweredOffice workstyle innovation solutions and other new businesses that leverage its unique technological capabilities.

Technological
Capabilities &Credibility
2010s–

2020s–

Solution Provider

Toward Becoming
a Communication
Services Orchestrator

Nationwide
Business
Capabilities

Business
Creation
Capabilities

Main Initiatives 2000s–2020s hanged the company name to NEC Networks & System Integration CorporationCLaunched EmpoweredOffice workstyle innovation solutions business andimplemented it internally in certain sections DEstablished nTOC (Network Total Operation Center) E
Practiced EmpoweredOffice in all sections upon transfer of head office to
Iidabashi (Bunkyo, Tokyo)
Implemented initiatives in high-speed mobile networks and next-generation
broadcastingNESIC’s industry sector classification in the stock market changed from“construction” to “information & communication”
Established sDOC (Service Delivery Operations Center) FLaunched MVNO service for IoT
Introducted telework system throughout NESIC (spawned from a “Women’s Project
Experiment” idea created by female employees)

D

E

F

 stablished CVC Fund to create new businesses through open innovation withE
startup firms
Established K&N System Integrations Corporation as a joint venture with KDDI
Corporation in mobile network construction G
Launched joint business in low-power, wide-area (LPWA) communications protocol
for IoTEntered onshore fish farming business utilizing ICT
Realigned head office to challenge itself to new workstyles including distributed
work locations
Moved to the newly established prime market
on the Tokyo Stock Exchange
Relocation of headquarters to Shibaura(Minato, Tokyo) to accelerate sustainability
management through self-implementation H

G

HOver ¥300 billion
2020

2000s

2010s

2020s

Advance of internet protocol (IP) and broadband
networks

Expansion of the use of cloud

Acceleration of DX

IoT and Fourth Industrial Revolution

Advancement and spread of generative AI

Integration of communications and broadcasting

ANNUAL REPORT 2023

25

NESIC’s Strengths

Changes in our internal and external business environment have altered the strong points we must be aware of torealize further growth. Our three conventional strengths have also evolved, as a result of which, we reorganized
our strengths into five points.
At NESIC, our extensive line of business offers everything from construction to operation, and support services
for a variety of customers ranging from corporations to government agencies. The diverse human resources
underpinning these businesses have refined their advanced technical skills through co-creation and selfimplementation, a key element of our ability to develop businesses.
Moreover, because NESIC urges and values efforts that promote interaction with other companies and those inadvanced domains, each and every employee is becoming more and more aware of the importance of embracing
our spirit of challenge and speed.
Under our Shift up 2024 medium-term management plan, we will leverage these five strengths in order to differentiate ourselves from the competition.

Broad business areas
In addition to the construction services we have provided since our founding,we have expanded our business into the ICT domain. We offer a wide rangeof services from construction to maintenance, operation, and cloud services
at various customer sites, including corporations, telecommunications carriers, government agencies, and social infrastructure providers.
Breakdown of Net Sales by Market

3%
10%
17%

Breakdown of Net Sales by
Business Details

49%
Consolidated
net sales of¥320.8 billion(FY2023/3)

37%
Consolidated
net sales of¥320.8 billion

63%

Broad businessareas(FY2023/3)

21%Enterprises
Telecom carriers
Government agencies
NEC Group
Overseas

System integration and construction
Service

Speed and challenge spirits
The sense of speed fostered through our co-creation experiences with customers and partners and our mindset for embracing challenges throughinternal efforts, such as our pitch competition, will spur the creation of newvalue that is well-suited to the current era marked by drastic changes.
Continued implementation of new business idea contest for
NESIC Group employees
Number of ideas

183(Contest held in FY2023/3)

Game-style practical training program contest for NESIC employees,
implementation of NESIC AWS GameDay

101 competitors in 27 teams(Event held in FY2023/3)

26

ANNUAL REPORT 2023

Speed andchallenge
spirits

Technological capabilities
In addition to the technological capabilities we have cultivated over the years, the knowledge of their utilization from a customer perspective we have acquired through ourself-implementation and co-creation activities—in which we integrate and master the
cutting-edge technologies of various partners—will play a major role in resolving theincreasingly complex issues of society.
• To strengthen Beyond 5G professionals, we have developed a training environment at the Shin-Kawasaki TechnicalBase that utilizes local 5G to train engineers.
•W e regularly send personnel to our base in San Jose, California, in an effort to develop and enrich human resources
who will innovation through co-creation with startups and advanced technologies.

Co-creation and self-implementation
Our unique approach of co-creating and self-implementing withcustomers and various other stakeholders has become a strengthfor our creation of new businesses aimed at resolving social issues.

Technologicalcapabilities

NESIC’sStrengths

Co-creation andselfimplementationDX

Beyond 5G
next-generation networks

Sustainable

SaaS optimization
service
Cloudbrink (U.S.)

Automated network
operation utilizing AI
Tupl (U.S.)

Next-generation
storage batteries
CONNEXX SYSTEMSDX services tochange workstyles
SansanLocal 5G
The University of Tokyo /HFR (South Korea)

Liquid-immersion
data center
KDDI, Mitsubishi Heavy
Industries

Human resources
Our diverse human resources who underpin our extensive line ofbusiness, which has advanced in step with NESIC, create newvalue by drawing on their various experiences, knowledge, andskills, contributing to the development of society and the growthof our organization.


Humanresources

Number of people with key technical qualifications** As of end of FY2023/3

Managing engineers and technical supervisors
Advanced human resources for growth*
Consulting personnel
Advanced DX professionals
Beyond 5G professionals

1,388
39
444
1,216

ANNUAL REPORT 2023

27

Value Creation Model
With the formulation of our medium-term management plan Shift up 2024, we have set forth the achievement of a
“Sustainable Symphonic Society” as our vision for society.
In order to realize such a society, we will establish a value creation model that integrates DX × Beyond 5G nextgeneration network technologies through the inspiration of our five strengths, with creation in harmony as new factor
to success.
Based on this value creation model, we will develop a series of new businesses and services, and by 2030, we willrealize three particularly important values for society (materiality): “create work environments in which everyone cantake initiative,” “develop pleasant and plentiful communities with cutting-edge technologies,” and “provide robust services that underpin safety and security in evolving society.”

INPUT

MEANS OF VALUE CREATION(Strengths)

Social Capital
Broad customer base
Co-creation partners in business

Financial Capital
Strong financial base
P38 Financial and Capital Strategy

Broad business areas

GROWTH        We will shift up from our co-creation stage
in pursuit of a single specific goals. We willorchestrate creation in harmony through theestablishment of long-standing relationships by sharing the same long-term goals
with our partners.
In this way, we will continue to provide
value that exceeds expectations by opening
new paths against more complex issues.

Technologicalcapabilities

Human Capital
Consulting personnel /Advanced DX professionals /Beyond 5G professionals
P58 Human Capital Initiatives

Co-creation andself-implementation

Intellectual Capital
Nihonbashi Innovation-Base
Shin-Kawasaki Technical-Base

Manufactured Capital
Network for 24/7
nationwide service

Natural Capital
Declaration of Support for the
TCFD Recommendations
P52 Environment

28

ANNUAL REPORT 2023

Human resources

Speed andchallenge spirits

From
co-creation tocreation inharmonyFurthermore, in order to continue to create such value for society, we will implement three initiatives that are particularly important to the growth of our business (materiality): “sound and highly transparent management,” on the basis ofwhich we will “strengthen innovation capabilities to create new value” and “create a culture where employees can takeinitiative.”
By continuing to embrace this value creation model, we aim to help realize a more affluent society, contribute to theachievement of the Sustainable Development Goals (SDGs), and increase corporate value over the long term.

Growth areasDX

OUTPUTOUTCOME

Value Provision for 2030

Sustainable
Symphonic Society

Materiality Issues

Provide Value to Society
Create work environments in which
everyone can take initiative
Develop pleasant and plentiful
communities with cutting-edge
technologies
Provide robust services that
underpin safety and securityin evolving society

Beyond 5G

Growth at NESIC(next-generation
networks)

Sound and highly transparent
management
Strengthen innovation capabilities
to create new value

Realization of a sustainable
society with prosperity that
resonates for all        DRIVERS

Create a culture where employees
can take initiative

ANNUAL REPORT 2023

29

NESIC’s Strategic Road Map

DX

2019

2021
Beyond Borders 2021

Preparation period
for continuous growth2022
Medium-Term Management Plan Shift up 2024

Evolution

into a new business structure

Realizationof DX × Beyond 5G

Co-creation and self-implementation
business model

Self-implementation-based consulting

Medium-Term Management Plan

Shift up 2024
Elevating society

DX × Beyond 5G

From demonstration
to realization

Relationship withcustomers

From co-creation
to creation inharmony

Financial Targets(¥ billion)

Net sales
Operating income
Operating margin
ROE

Business model

Non-Financial Targets

From project-type
to spiral-type

Under our medium-term management plan Shift up 2024, we will give form to the Digital × 5G
demonstrations conducted under our previous medium-term management plan, developing
services that are geared to resolving social issues. We will also evolve our co-creation relationships with customers into strategic partnerships that collectively overcome the increasingly complex key issues of society. Furthermore, we will build recurring relationships inwhich we constantly work in harmony with customers and increase the value we provide,
evolving our business model into one that achieves spiral-type business growth. We aim tocreate new forms of social value, and realize a sustainable and prosperous society that welike to call a “Sustainable Symphonic Society.”

Human
resources*1(employees)

Note: Figures in the table below,

Consulting personnel
Advanced DX professionals
Beyond 5G professionals

Engagement score*2(Researched by Kincentric)

Ratio of female managers
GHG emissions (Scope 1, 2)*3

*1 W
 e have revised definitions and targets set during the announcement of the medium-term management plan to include additional criteria, such as skill level acquired from qualifications
and training.
*2 Score that quantifies employee loyalty and relationships of trust with the company. Average employee ratio of over 4.5 in six related questions (answers valued on a scale from one to six)

30

ANNUAL REPORT 2023

Sustainable
Symphonic Society

Beyond 5G(next-generation networks)

Realization of a sustainable society
with prosperity that resonates for all

2024

2027

2030

3rd Step

4th Step(FY)

DeeperHigherWider

Global expansion

FY2023/3

FY2025/3 target

320.8

370

22.8

34

7.1%

9.2%

10.0%

13%+

except for engagement score, are on a non-consolidated basis.

FY2023/3

FY2025/3 target

39

190

444

1,190

1,216

1,580

32%

* This score generally
corresponds to the world’s
top 25%, and accordingly
the Tier 1 level.

24% reduction

FY2031/3 target

50%

5.9%
(Compared with FY2020/3)

FY2027/3 target

10.0%
89%

(Achieve net zero in Scope 2)

100% reduction(Achieve net zero in Scope 1 and 2)*3 To further accelerate our contribution and fulfill our responsibility to address climate change as a company, we have brought forward and revised our targets for reducing CO2 emissions in
Scope 1 and 2. The reduction rate for FY2023/3 is based on figures calculated before implementing third-party verification and may change as a result of verification.
ANNUAL REPORT 2023

31

Looking Back on Our Previous Medium-Term Management Plan

FY2019/3
Objective

The year in which we solidified the foundation necessary to
becoming a strong and attractive company
Basic Policy

Transform into a strong and attractive company

FY2020/3 to FY2022/3

Overview of Beyond Borders 2021

Under our previous medium-term management plan Beyond Borders 2021, we implemented the measures necessary to
overcome all obstacles in our path to sustainable profit growth. These measures included reinforcing our business structure and foundation with an eye to future changes in the environment in a bid to enhance our growth potential andprofitability.
In order to enhance our growth potential, we established new business schemes and partnerships while launching the
DX business and introducing cutting-edge services by joining forces with leading companies.
In addition, to further sharpen our core competencies, we restructured our organization into three business units
based on expertise and competitiveness and established a specialized organization that centralizes the functions forcreating cutting-edge technology businesses.
Meanwhile, aiming to speed up our co-creation of business with partners, we teamed up with promising startup companies in order to discover state-of-the-art solutions and services, such as through investment in a venture capital fundin the United States.

Completion of structural reforms for sustainable income growth in the Digital × 5G era

1Strengthening of competitiveness, andgrowth power for the Digital 5G era

DX business expanded with Symphonict

2

Strengthening of base, schemes,
and structure to create advanced
technologies and new businesses

 nvironment enhanced enabling new technology educationEand demonstrations (Shin-Kawasaki Technical-Base /5G Lab)Acceleration of innovation through
All-NESIC ew Normal workstyles implemented using theN
Nihonbashi Innovation-Base and at distributed offices3

 ew businesses created using the co-creation andN­self-implementation business modelIncubation accelerated using U.S. venture capital, etc.

DX proposal model encompassing NESIC as a whole

Shift up 2024
32

ANNUAL REPORT 2023

Progress of Medium-Term Management Plan Shift up 2024

Spiral-Type Growth Model: A Recurring Model Based on Consultation
We aim to reinforce the self-implementation/site-specific consultation services we provide based on expertise obtained throughour experience in co-creation and self-implementation. As a result, we make connections with our new proposals by deepening
the relationship of mutual trust with our customers for the purpose of enhancing the value we provide and further reinforcing
our consulting capabilities to evolve NESIC’s business model.
Realize customers’
success and sustainability
A factor added to
new strengths inthe medium-term
management plan

Consultation based on expertise obtained throughexperience in co-creation and self-implementation
Win customers

Strengths and assets developed
under the previous medium-term
management plan igital × 5GD
Symphonict
Co-creation andself-implementation
business model

Design / Suggest

Create value
Be smarter

Seek original value,
accelerate shift toservices

Existing strengths
and assets

High customer value,
Long-term relationshipof trust

SI capabilities
Technologicalcapabilities
Field capabilities
Nationwide coverage

Realize(Spiral of quality improvement)

OperateApply DX torealization andoperation
processes toimprove quality

Accumulate
know-how,data toenhanceinsight

Site-specificconsultation

Create new social value

Progress
Through the initiatives for self-implementation/site-specific consultation set out in our spiral-type growth model, we are deepening the relationships of mutual trust with our customers and increasing the number of regular, large-transaction customers whomake major purchases. While implementing the spiral, we will also increase the speed of improvements in profitability byenhancing value-added services, such as proposing opinions and solutions for latent customer issues.
Expanding Orders and Net Sales

Improving Profitability

Build long-term relationships of trust with customers(recurring relationships)

Provide high customer value

Indicator

Indicator

Expansion of large recurring accounts* /increase in transaction volume

Improvement of GP margin
20.5

Number oflarge recurring accounts+5 %S teadily deepen trust with customers that will lead to recurring businessDrive top-line expansion* Large recurring accounts: Customers continuously doing business with NESIC forover three years, with average sales above a certain monetary amount<c.f.> Coverage: Slightly more than 5% of NESIC customers (non-consolidated)

Expected line
based on themedium-term
management
plan

（%）

20.7
16.5

Beyond Borders 2021

2017/3

Shift up 2024

2022/3 2023/3（FY） elayed from the target lineD
An offering-type model designed to provide high added value andprofitability is being developed; there are signs that a positive cycle
will be achieved in the next fiscal year and beyond
17

18

19

20

21

22

23

ANNUAL REPORT 2023

33

Progress of Medium-Term Management Plan Shift up 2024

Basic Strategy 1: Accelerating Original Value Creation
We combine the knowledge of resolving issues under each theme supported by self-implementation with a cycle of collecting
data, implementing solutions, and carrying out verification that includes unique cloud-based services to successfully lead ourcustomers’ transformation.
Additionally, we are providing value in a timely manner to even more customers by modeling various services and knowledge
according to customer issues and developing them as an offering-type model.

Value Creation Through Symphonict
Symphonict is a DX brand that aims to realize the basic concept of providing new value to our customers’ businesses throughco-creation. It interlinks and automates various cloud-based services through comprehensive management and analysis ofcollected data. We realize customer innovation by quickly combining and providing the diverse functions, technologies, andservices on our unique platform that are essential after realizing a digital shift.
Example of Symphonict: Data Analysis Platform Service Model
We flexibly provide a data analysis platform with various cloud services to meet customer needs, such as wanting to make asmall start to data analysis and utilize it as a sub-platform.

Data extraction, conversion,and load
API platform

Data collection

Value offerings
Communication
innovation

Issue discovery

Workstyle innovationand process reforms
Carbon neutrality

We provide value that
ensures the success ofcustomer DX activities

Productivity
improvements
Personnel development

Data accumulation and shaping

Formulation ofsolutions

Visualization, analysis, andnotification

Implementation anddevelopment

Indication, prediction, and sug
gestionPractical implementationand verification(Service in preparation)

Development of Offering-Type Model
NESIC’s strength is our ability to deeply understand customer business processes and issues through the development of asite-specific business. Additionally, we are developing a model that packages this strength from the perspective of value creationby combining self-implementation and customer co-creation focused on workstyle innovation with our ability to provide integrated services from concept design to system building, implementation, and operation, leading to solutions for customer issues.

Knowledge of customers’ businessprocesses and issues

Examples of offering-type model themes

Workstyle DX
Co-creation and self-implementation

Providing integrated services fromconcept design through to DX services,
construction, and operation

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ANNUAL REPORT 2023

Nextgeneration
disastercountermeasures

Smart factoryetc.

Basic Strategy 2: Advancing Solution Capabilities
Incorporating co-creation with business partners and customers into NESIC’s strength of self-implementation accelerates andadvances issue resolution.

Implementation of Businesses that Address Climate Change
Self-Implementation
We are transforming all of our businesses to ensure they address climate change through collaboration with other related divisions to formulate a framework, such as drafts and targets for Groupwide carbon neutrality strategies, with a focus on the
Carbon Neutral Promotion Division established in April 2022.
First, we carry out self-implementation, one of our strengths, significantly bringing forward our targets for reducing greenhouse gas emissions. We will further advance these initiatives going forward to enable this. ( P57)

Co-Creation
NESIC signed a capital and business alliance agreement with CONNEXX SYSTEMS Corporation, a startup that develops storage
batteries. Going forward, we aim to fully expand projects into the community development field by reinforcing energy projects
through co-creation. ( P48)
Collaboration with partners

NESIC

CEMS*3

SIM*1 / EMS*2

Renewable energy Storage batteries
and solar power

EMS

Smart building

RA Cloud*4

Data Center
solutions

Smart stadium*1 SIM (Simulator): Solar power generation simulator*2 EMS (Energy Management System): System to optimize energy management by visualizing energy usage conditions*3 CEMS (Community Energy Management System): System to manage energy throughout a community*4 RA cloud (Resource Aggregation Cloud): Cloud service for integrated control of decentralized energy resources and creation of coordination capabilities

Community Development Strategies and Progress
NESIC provides a hybrid-style disaster countermeasures office that connects to a virtual office and enables the utilization ofvarious information in real time. As a result, we will contribute to corporate risk management and support for business continuity by enhancing the speed of each stage, from understanding circumstances to decision-making. We invite customers to experience this actual service at NESIC’s Nihonbashi Innovation-Base.
Real & virtual disaster risk management office / BCP model

Real disaster risk management office

Virtual disaster risk management office

ANNUAL REPORT 2023

35

Progress of Medium-Term Management Plan Shift up 2024

Basic Strategy 3: Evolve into DX-Native Company
To further accelerate our spiral-type growth model, we are working to develop human resources who possess advanced expertise and are the source of customer value. While advancing the innovation of DX platforms that support management, we will
also take the opportunity of our headquarters relocation to accelerate sustainability management.

Development of Advanced Human Resources
We position employees as consulting personnel who are unique to NESIC, advanced DX professionals who enact specificreforms, and next-generation network professionals who possess high-level techniques as a priority focus, and are strengthening the training and acquisition of human resources with advanced expertise.
Consulting personnel

Advanced DX professionals

Beyond 5G professionals

Performance in fiscal year ended
March 31, 2023

39

444

1,216

Targets for fiscal year ending
March 31, 2025

190

1,190

1,580

Note: W e have revised definitions and targets set during the announcement of the medium-term management plan to include additional criteria, such as skill level acquired from
qualifications and training.

Innovation of Management Platform to Realize DX
We are advancing the development and utilization of a management platform that supports NESIC becoming a “DX-Native”
company.
Regarding the digitalization of processes, we are extending Salesforce, which we began introducing in sales areas from thefiscal year ended March 31, 2020, to all customer-related processes. Furthermore, we have completed construction of aCompanywide data platform to support digital management in the fiscal year ended March 31, 2023. We integrate customer
information, financial information, and non-financial information and leverage the knowledge not only for in-house use but also
in consulting services for customers based on our self-implementation practices.
We plan to complete the shift to digitalization for all processes in the fiscal year ending March 31, 2025 by replacing the basic
operations system developed in-house with the global standard of cloud-based enterprise resource planning (ERP).
Through utilization of this management platform and development of DX human resources, we will realize our transformation
into a DX-Native company.

Business foundation that supports our spiral-type growth model

Aims

1. A
 cceleration of original value creation: social value creation
through Symphonict
2. A
 dvancement of problem-solving capabilities: businessfoundation that supports transforming businesses to address
climate change
3. Transformation into a DX-Native company: establishment ofdigital native personnel, organizations, and management

Data Platform
Data
platform

Data
Integration
and Analysis

DX
modernization
strategy

Business
Processes

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ANNUAL REPORT 2023

•U tilization and standardization of data
Companywide•C reation of balance between data governanceand data democratization policies•A ccumulation of knowledge through self-implementation and expansion of external sales

Process integration from
customer perspective

Process integration frommanagement perspective

Utilization of
non-financial data

• Integration of various customer
information(sales, construction, andmaintenance)•D eepening of business utilization•C loud-based ERP•G lobal standards•S trategic collaboration•H uman resources and skills• ESG• Workstyles

Acceleration of Sustainability Management at New Headquarters
In March 2023, NESIC leased an entire building in Shibaura (Minato, Tokyo) and relocated its headquarters.
To further accelerate initiatives for self-implementation, co-creation, and climate change response, we will promote sustainability management by advancing new initiatives as a forum for utilizing advanced networks, including local 5G, and demonstrating cutting-edge DX solutions.

Environment

SocialGovernance

Energy control
Visualization of electricity and fuel usage conditions
Co-creation with local communities
Improvement of well-being and promotion ofhealth management
Visualization of information by utilizing DX technology
and increase in management speed

Organizational Strategy
To accelerate the speed of business development, in April 2023 we integrated new business development and DX service development functions into each business unit, with a focus on the DX Solutions Business Unit. Through this integration, we will
enhance profitability by creating DX businesses, accelerating proposals through direct approaches to customers, and further
enhancing the value provided by our problem-solving services through their implementation for customers.
Further collaboration for service development and customer implementation functions aimed at improvement of profitability

Business Design Operations Unit

DX Solutions
Business Unit

New Business Development and DX Services

Network Solutions
Business Unit

Environmental & Social Solutions
Business Unit

New Business Development and DX Services

DX Solutions
Business Unit

Network Solutions
Business Unit

Environmental & Social Solutions
Business UnitDX Business Themes

Workstyle innovation
CX and BX
Digital twins

Beyond 5G
Next-generation network services

DX for local governments
Digital twins
Carbon neutrality

ANNUAL REPORT 2023

37

Financial and Capital Strategy

We aim to achieve our medium-term
management plan and maximize
corporate value through a corporate value
development cycle that rotates between
non-financial and financial approaches.
Hiroyuki Sekizawa
Senior Vice President, Chief Financial Officer (CFO) andMember of the Board

Approach to Sustainable Shareholder Value / Corporate Value Enhancement
Our approach to sustainable growth remains unchanged,
placing importance on the integration of “maximizing financial value” based on ROE and “strengthening non-financial
value / ESG” with a focus on materiality. Under our mediumterm management plan Shift up 2024, we will actively invest
toward future growth and proceed with sustainability

management to accelerate our cycle of corporate value
creation from non-financial to financial enhancement andback again. While doing so, we will ensure that progress isclearly visible to all stakeholders and engage in constructive
dialogue with the aim of increasing corporate and shareholder value by improving ROE and lowering capital costs.

Sustain Improvement in Corporate Value

Financial value

Non-financial value(Enhancement of ROE)

MarginROE

ANNUAL REPORT 2023

•R
 einforce existing businesses•C reate new businesses

Cost ofsales ratio• Improve cost structure(increase efficiency of material
and outsourcing costs,
advance in-house production)

SG&A
expenseefficiency• Increase operating expense
efficiency•R educe admin. staff expenses

Working
capitalefficiency• Improve cash-conversion cycle

Fixed
asset
efficiency•F urther strengthen governance ofinvestments•R educe assets

TurnoverLeverage

38

Growth in
net sales•U tilize debt while considering
financial soundness(Reduction of capital costs)

Through expansion of
non-financial capital

Reinforce
portfolio
management

Sharpen core competencies
such as personnel training,
improve ESG

Throughengagement

Improve information
disclosure through IR and
PR activities

Maximization of Financial Value Based on ROE
In terms of maximizing financial value, to increase ROE andcontinuously achieve and maximize returns that exceed
capital costs, we will roll out measures in business divisions
focused on profit margin on sales and the total asset turnover ratio, which are both components of ROE, and implement a PDCA cycle. While we utilize a Capital Asset Pricing
Model (CAPM) and other methods to understand assumed
capital costs, we are conservative in our judgements whenlooking at the business, keeping in mind investor expectations and the level of capital efficiency we are aiming for.
Although profit and profit margin have certainly risencompared with the past, levels are still low compared tocompetitors. We also have issues with stability in that it
fluctuates significantly depending on the existence of projects. Our shift to a spiral-type growth model ( P33), building recurring relationships with customers, aims to achievesustainable growth both in terms of society and customers
and of NESIC, thereby creating profit stability and high profitability. At the same time, for sustainable ROE improvement
and profit growth, we are constantly carrying out project
portfolio management (PPM) with an awareness of capitalefficiency as an important theme of management, and arestrengthening monitoring. After setting a hurdle rate basedon factors including capital costs, we analyze and assess
the approximately 20 divisions and consolidated subsidiaries that make up each segment from the perspective of
ROIC and growth. Where businesses face issues, business
units collaborate to create and execute improvement plans,a process in which I am involved.

Consideration ofRegrowth

Progressive
Expansion

Structural Reforms/ Withdrawals

Reinforcement ofProfitability

Establishment of hurdle rate thattakes capital costs into consideration

High

ROIC

Indicators That Take Capital Efficiency into AccountApplication of Indicators That Take Growth in Return on
Invested Capital into Account (ROIC × Sales Growth Rate)

Low
Low

Growth in Sales

High

Indicators That Take Growth into AccountWhen advancing these strategies, we intend to actively carryout business investment, human investment, and investment
in information technology. We will achieve a balance between
growth investment and profit growth by expanding sales andimproving profitability by reaping the profits from investments
and promoting PMM. As target indicators, we aim to achieve
an operating margin of 9.2% and ROE of over 13% by the fiscal
year ending March 31, 2025.
In the first year of the medium-term management plan, thefiscal year ended March 31, 2023, there was a decrease inprofits for the year. This was due to profit creation capabilities
failing to improve as hoped due to sales growth lagging behind

expectations with the lengthening of lead times to point of salebecause of the impact of semiconductor and component
shortages, and longer-than-expected delays in improvement ingross profit margin due to factors that include rising procurement costs caused by yen depreciation. As a result, we wereunable to cover expanded strategic costs based on policies in
the medium-term management plan. Meanwhile, in the fourth
quarter, we were able to cover increasing costs as external
factors that had been causing performance to decline began
to be eliminated. Going forward, I will be mindful of balancing
investment from a medium- to long-term perspective withshort-term performance. The establishment of our spiral-type
growth model has produced constant progress ( P33) in that
we surpassed our previous record, with order backlogs increasing 22% year on year.
The fiscal year ending March 31, 2024 holds a sense of
uncertainty for the macro environment and telecommunications carriers. However, while thoroughly ensuring a link
between such an abundance of order backlogs and sales,
we will steadfastly increase profit by actively engaging in
the area of DX/workstyle innovation and fields that are
seeing favorable movement in areas related social infrastructure, namely marine, space, and national security, as
strategic costs increase.
Furthermore, to raise asset efficiency and improve cash
flow creation capabilities, in a continuation from the previous medium-term management plan, we are making efforts
to improve the cash-conversion cycle (CCC), developing
systems and structures such as for the revision of rules
regarding accounts receivable management and their incorporation into internal performance reviews. We have also
promoted the changing of awareness through methods that
include the use of educational comics and holding training
for all sales employees. In the fiscal year ended March 31,
2023, the CCC slowed with a deterioration in both the turnaround time for accounts receivable and the time for inventory turnover. This was because of an overemphasis on
sales in the fourth quarter due to the impact of semiconductor and component shortages, and because we strategicallyincreased inventory to secure delivery dates.
However, the ability to implement activities has been
increasing, with front-line managers in charge of sales andother areas gathering to identify issues and consider measures in areas that need improvement through workshops
using best practices as a reference. I feel that we havemade steady progress, such as advancement of initiatives
for CCC activities and fostering of awareness.
Cash Conversion Cycle

CCC(Days)

Fiscal year
ended March
31, 2022

Fiscal year
ended March
31, 2023

Improvement

86

98

–12

Accounts receivable
turnover (days)

123

133

–10

Inventory turnover(days)

13

18–6

Trades payable
turnover (days)

49

52

3

ANNUAL REPORT 2023

39

Financial and Capital Strategy

Over the past few years, our overseas businesses havecontinued to record losses and we sincerely apologize forthe concern this has caused shareholders and investors. I
have already visited the front lines and we are taking measures with the aim of reinforcing collaboration and communication with overseas affiliates. We aim to strengtheninternal controls by not only reinforcing project management at these affiliates but also through the Japanese sideincreasing the number of audit personnel at overseas
subsidiaries.
In regard to capital allocation, our policy is to prioritize
M&As and investments based on our business strategy,

while giving consideration to stable shareholder return uponsecuring cash on hand that is equivalent to approximately
two months of net sales. This is in preparation for sudden
needs for funds going forward and our responsibility toconsistently provide highly reliable services, including thedevelopment of social and public infrastructure, and thisentails having a sound financial foundation in place.
Meanwhile, if the need for funds were to arise, we will prioritize the use of loans to the extent that it does not impair
NESIC’s financial position upon ensuring security, andthrough this means, take shareholder value into consideration.

Non-Financial Value / ESG Reinforcement Focused on Materiality Issues
In addition to improving sales and ROE, I believe nonfinancial value / ESG will mitigate future risks for both society and NESIC, and contribute to increases in corporate
value from the perspective of achieving business growth
and reducing the cost of capital. Accordingly, we have also
been actively focusing on this in addition to financial
aspects. We have set non-financial indices such as the
reduction of greenhouse gas emissions, the development ofhighly skilled professionals, and the achievement of a highemployee engagement score as management targets underthe medium-term management plan. We will also transformall of our businesses to ensure that they are able to address
climate change and work to strengthen our disclosure inthis area. ( P30)
Furthermore, we will not simply disclose non-financial
information in response to requirements from society but
will also advance our response in order to show the connection between financial and non-financial information,
explaining the path toward enhanced sustainable corporate
value. In particular, regarding human capital, we described
related indicators ( P58) after clarifying the relationshipbetween management strategy and finance. Going forward,
we hope to thoroughly explain these results to the entire
capital market.
Additionally, regarding the environment, we announced
our endorsement of the TCFD recommendations in
December 2021 and established the Carbon Neutral
Promotion Division in April 2022. While we have reinforced
our strategic climate change response measures in terms ofboth risk and opportunity, we will bring forward and revise
our targets for reducing CO2 emissions in Scope 1 andScope 2 to further accelerate our contribution toward climate issues and fulfill our responsibility as a company.
As CFO, I have been actively engaging in constructive
dialogue with people in the capital markets. I believe it isvital to implement a cycle of issue awareness through this
dialogue, reflecting notable points in management activities,
explaining results, and holding further dialogues. Based on
this approach, over the past few years, in addition regular IR
activities such as explanations of results and question-andanswer sessions, and I have promoted dialogue with coverage analysts and investors from the perspective ofimproving corporate and shareholder value. The recent
expansion of current disclosure and the aforementioned
increased efforts to connect financial and non-financial
aspects are also a result of these discussions. On a positivenote, other listed companies have taken an interest in thisinitiative as a practical example of corporate value enhancement through two-way communication between corporations and capital markets. This has led to NESIC’s Selection
for the “Most Liked!” IR Award at the Best IR Award 2022
hosted by the Japan Investor Relations Association. While
two-way communication with capital markets is a given, we
will continue to take the lead in steadily building on these
efforts, as this will lead to the creation of relationships of
mutual trust, which will in turn contribute to reduced capitalcosts.

Outside Evaluations / Selection of Indices

JPX-Nikkei 400

FTSE4Good Index Series

FTSE Blossom Japan Index

MSCI Japan Empowering
Women (WIN) Select Index*

SNAM Sustainability Index* 	THE INCLUSION OF NEC Networks & System Integration Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMESHEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF NEC Networks & System Integration Corporation BY MSCI OR ANY OF ITS AFFILIATES.
	THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITSAFFILIATES.

40

ANNUAL REPORT 2023

Shareholder Return
Under Shift up 2024, we are making efforts to enable
returns to all of our shareholders in terms of capital gains
by improving both financial and non-financial value throughactive investment, in addition income gains based on our
approach to dividends.

Based on a sound financial position and after securing
funds for investment in future growth, NESIC comprehensively takes into account consolidated business performance, free cash flows, the expectations of shareholders,and other factors, while emphasizing dividend on equity(DOE) as a dividend indicator rather than the dividend
payout ratio, which is influenced by short-term businessperformance. In the process, we pay stable dividends on acontinuous basis to shareholders who have continued tosupport us over the long term.
Under Shift up 2024, we set the DOE level as 5.0% withconsideration given to the projected levels of ROE and dividend payout ratio. Accordingly, following an increase in theannual dividend per share for the 17th consecutive year,
from ¥46 per share in the fiscal year ended March 31, 2023,
we plan to increase the dividend to ¥49 per share in thefiscal year ending March 31, 2024. Going forward, we will
work to provide even higher levels of return to shareholders
by continuing to strengthen our profitability. We consider
share buybacks based on a comprehensive review of investment in future growth and share price, cost of capital,
increases in shareholder value, and other factors.

Cash Dividends per Share*(¥)

43

Increasing dividends for17th consecutive year

46

49

35

4.7

2007/3 2008/3 2009/3 2010/3 2011/3 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 2021/3 2022/3 2023/3 2024/3(Forecast)

(FY)

*F
 igures prior to the fiscal year ended March 31, 2020 have been adjusted to reflect
the three-to-one stock split on June 1, 2020.
* Forecast as of April 28, 2023

Total Shareholder Return(Times)
8.0

NESIC
TOPIX
*P
 rice including dividends relative to TOPIX, withthe closing price on March 31, 2012, set at 1.

7.0

6.0

5.0

4.0

3.0

2.0

1.0
0.5

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/32023/3(FY)* Total shareholder return: Total shareholder return, including capital gains and dividends* Method for calculating total shareholder return: NESIC: Cumulative dividends paid and changes in share price; TOPIX: Calculation by share price index with dividends (prepared by NESIC)ANNUAL REPORT 2023

41

Financial & Non-Financial Highlights

Financial Data

Orders Received / Net Sales

Operating Income / Operating Margin

Orders received exceeded our previous record.
Despite the impact of lengthening lead times
due to semiconductor and component shortages, net sales have showed signs of improvement going forward since the end of the fiscal
year ended March 31, 2023.

Operating income fell slightly as a result of
being unable to absorb higher strategic costs,
such as from the relocation of NESIC headquarters, and an increase in resources related
to the creation of new businesses, due todelays in the recording of sales and the impactof the depreciating yen.

(¥ billion)(¥ billion / %)

400

12

15.7

16

6

15.0

13.8

25.6
23.2
20

200

12.8

22.8

7.5

7.5
16.2

12

7.1

8

5.4

4.6

10

4.8

4.6

8
8.9

9.4

3.2

3.1

4.3

4

2

4

100

0

Net income attributable to owners of theparent decreased slightly due to factors
including a minor fall in operating income andthe recording of an extraordinary loss related
to the relocation of NESIC headquarters.

(¥ billion / %)

30

356.0
320.8

336.9
339.1 336.8
310.3
305.0
303.6
284.7
300
277.9

Net Income Attributable to Owners of
the Parent

4

2019/3 2020/3 2021/3 2022/3 2023/3

Orders received

0(FY)

Net sales

2019/3 2020/3 2021/3 2022/3 2023/3

Operating income (left)

0

0

(FY)

Operating margin (right)

2019/3 2020/3 2021/3 2022/3 2023/3

0(FY)

Net income attributable to owners of the parent (left)
Net income ratio attributable to owners of theparent (right)

Owner’s Equity / Owner’s Equity Ratio

ROE / ROACash Flows

Owner’s equity remained at 52.9%, the samelevel as the previous fiscal year. As a company
that facilitates the development of social
infrastructure, we maintain a solid financialbase.

We maintained a two-digit ROE of 10.0%,
despite a decrease compared with the previous fiscal year due to the impact of lower
incomes. As a medium-term target, we aim to
exceed 13% by promoting the improvement of
profitability and working capital efficiency.

While free cash flows were in the negative, thiswas due to the impact of a lag in the timing ofmoney received following delays in the recording of sales.

(¥ billion / %)(%)(¥ billion)

150

120

134.7

141.2 100

15

80

12

123.7
104.9

110.4

90
48.5

47.9

49.4

52.9

60

52.9

9

60

40

6

30

20

3

25

13.5

20

11.6
10.6
8.7

8.8

9.3

22.7

10.0

15

8.8

10
5

7.1
6.1

17.4
12.9
8.4

15.5

13.1

6.2

2.8

2.8

0

0

0
2019/3 2020/3 2021/3 2022/3 2023/3 (FYE)

Owner’s equity (left)

42

ANNUAL REPORT 2023

Owner’s equity ratio (right)

0

ROE
ROA

–5

2019/3 2020/3 2021/3 2022/3 2023/3

–10
(FY)

–5.6

–6.7

–4.3
–7.2

–2.1
–4.9

2019/3 2020/3 2021/3 2022/3 2023/3(FY)

Net cash provided by (used in) operating activities
Net cash provided by (used in) investing activities
Free cash flows

Non-Financial Data Non-consolidated

Greenhouse Gas Emissions

Total Waste Emissions

We are working to reduce greenhouse gas
emissions with the aim of helping realize a
low-carbon society.

Despite an increase in total waste emissions
from projects that involve dismantling anddemolition construction in the fiscal year
ended March 31, 2023, we are striving to
reduce the amount of waste emissions fromour business activities.

(t-CO2)(t)

120,000

1,146,038

1,200,000

1,063,199 6,022
919,400

90,00030,0009,525 8,456
0

8,062

8,000

900,000

6,000

600,000

4,000

300,000

2,000

0

0

4,500

3,642

3,273

3,787

(FY)

To accelerate the creation of new value, we
secure individuals of various backgrounds
through new graduate and mid-career hires.

(Employees)

159

160

1,500

2019/3 2020/3 2021/3 2022/3 2023/3

4.2

4.6

5.2

5.9

6

0
(FY)

Number of Internal Reports (Sexual
Harassment and Human Relations /Corporate Ethics)

We strive to achieve efficient and effective
workstyles for the purpose of maintaining andenhancing employee well-being.

We have established individual hotlines formatters related to sexual harassment/humanrelations and corporate ethics and are working
to ensure management transparency andsoundness.

(Hours / %)(Cases)
24.5

20

19.7

109
96

96

24.5

100

100

22.3

90

15

80

0
2019/3 2020/3 2021/3 2022/3 2023/3 (FYE)

Average Monthly Overtime (Per Employee) /Ratio of Paid Leave Per Person / Ratio ofMale Employees Taking Childcare Leave

69

80

19.0

90

72
60

60

94

87

80
69

65
51.8

30.3

10

60

60

40

40

20

20

68

61

74

56
41

51

41
11.5

5
3.9

0

3.7

* From the fiscal year ended March, 2023, the aggregation method for calculating the ratio of women in
management positions has changed (now includes
employees seconded to other companies but not
those seconded to NESIC from other companies).

25

131

40

12

Number of employees (left)
Ratio of women (right)
Ratio of women in management positions (right)

143

80

18

3,000

Scope 3* (right)

Number of New Graduate Hires /Number of Mid-Career Hires

97

5,176
4,996 5,090
4,841 4,871
17.6
16.8 17.2
15.7 16.2

2,944* In terms of Scope 3, we revised calculations for
figures from FY2020/3 onward based on the
results of third-party verification for FY2022/3 data.

120

24

6,000
6,867

8,321

2019/3 2020/3 2021/3 2022/3 2023/3

Scope 1 and 2 (left)

The number of female employees and the ratioof women in management positions continue
to rise as they are playing an active role in a
wider range of fields.
(Employees / %)978,02060,000

Number of Employees / Ratio of Women /Ratio of Women in Management
Positions

2019/3 2020/3 2021/3 2022/3 2023/3

Number of new graduate hires
Number of mid-career hires

0
(FY)

9.3

2019/3 2020/3 2021/3 2022/3 2023/3

22
0
(FY)

Average monthly overtime (per employee) (left)
Ratio of paid leave per person (right)
Ratio of male employees taking paternity leave (right)

0

26

18

33

38

2019/3 2020/3 2021/3 2022/3 2023/3(FY)

Sexual harassment and human relations
Corporate ethics

ANNUAL REPORT 2023

43

NESIC Segments
At NESIC, we aim to establish a spiral-type growth model in which we build recurring relationships as a strategic partner
to our customers, centered on our site-specific and self-implementation-based consulting services. At the same time, wewill continue to enhance our ability to create social and customer value through the data we accumulate via these recurring business processes. NESIC is currently operating segments based on three organizations, with a market-specificapproach added to our existing technology-specific structure, to proceed with our medium-term management plan.
Breakdown of Net Sales

Operating Income
Consolidated operating income¥22.8 billion

3%37%

FY2023/3

36%

13.2 billion

Consolidated
net sales

9.8 billion¥320.8 billion

10.7 billion

FY2023/3

25%–10.9 billion

DX Solutions BusinessNetwork Solutions Business
Environmental & Social Solutions Business
Other

DX Solutions BusinessNetwork Solutions Business
Environmental & Social Solutions Business
Other / Elimination

Business Segments
DX Solutions Business
Net Sales ¥

114.2 billion

Operating Income ¥44

13.2 billion

Network Solutions Business
Net Sales ¥

79.2 billion

Operating Income ¥

9.8 billion

Environmental &Social Solutions Business
Net Sales ¥

119.2 billion

Operating Income ¥

10.7 billion

FY2023/3

FY2023/3

FY2023/3

The DX Solutions Business provides acomprehensive service for consultation
on systems and their development,
maintenance and operation to introduce
network environments and ICT tools forworkplaces, primarily for companies andlocal governments, related to ICT that are
essential to our customers’ businessactivities and their efforts to improvebusiness processes.
In particular, we propose workstyle
approaches that are not bound by time or
location, improve productivity, and spurbusiness innovation through the use of AI,
the IoT, digital twins, and other cuttingedge digital technologies. We also help
diversify and enhance the quality of newworkstyle approaches by improving
corporate value for customers andaddressing social issues such as balancing work with childcare and nursing care,and increasing job satisfaction.

The Network Solutions Business provides
system development, maintenance, andoperation services for network infrastructures that require advanced and specialized technical capabilities and ensure
reliability, including such as networks fortelecommunications carriers and theirapplicable areas in next-generation
network services including local 5G,
transmission and studio facilities forbroadcasters, space-related businesses
such as satellite and space exploration
operations and ground observation, andmarine businesses such as submarine
communications networks and seismometer systems.
As a manufacturing group system
integrator, NESIC has developed advanced
technological capabilities by developing
products, assessing and examining
systems, and analyzing defects together
with NEC; a wide range of wireless technologies from Wi-Fi to satellite communications; and a high level of awareness ofcustomers’ businesses through its years
of providing system maintenance andoperation services. We also boast acompetitive edge in the form of multivendor SI capabilities that enable us to use
our aforementioned abilities to address
customer needs at a high level, including
for products of various manufacturers.

The Environmental & Social Solutions
Business provides SI and construction
services for a wide range of social andpublic infrastructures throughout Japan,
including communications infrastructures
and an array of services for local governments, firefighting and disaster prevention
networks, CATV, and networks for railways
and roads, as well as overseas infrastructure development businesses, centered on
five local subsidiaries.
We also offer a number of support
services, such as maintenance, operationand monitoring, and outsourcing for thevarious ICT systems and services weprovide.
NESIC helps ensure the safety andsecurity of systems and services with a
24/7 full-service structure that can dispatch personnel and deliver products
within two hours anywhere in Japan,
which can only be provided by a company
that protects social and public infrastructure, such as contact centers regarding
networks of the customers and comprehensive technical centers that provide
logistics and technical services.

ANNUAL REPORT 2023

Overview by Business Segment

DX Solutions Business
V I S I O N
We aim to become a strategic partner to ourcustomers that supports their management
strategies through ICT by working with them tomake proposals for improvement and to solve
their issues from various angles, such as workstyle DX.

Osamu Kikuchi
Senior Vice President,
Chief Digital Officer (CDO),
Executive General Manager,
DX Solutions Business Unit

Opportunities / Threats

Strengths / Features

Purpose of DX expanding beyond workstyle innovation to the strength-

Extensive customer relationships and a proven track record cultivatedening of management and the business itself as well as extending tothrough the development of various ICT infrastructures

the public sector

Capabilities to apply the high level of technology and service platforms,

Change in needs from a business model centered on product SI to asuch as operation and maintenance, required to the NEC Group on asolution service delivery model that utilizes cloud services

multi-vendor basis
Know-how related to DX and workstyle innovation cultivated throughco-creation activities with customers and Companywide selfimplementation activities and its provision capability as a real solution

Medium-Term Strategy and Progress

2022
As the impacts from the COVID-19 pandemic fade,the need年
to 3 月期
network security, data analysis and utilization, digital twins, andinnovate workstyles and workplaces is accelerating, such as
local government DX and ensuring that business results are
実績 1080 億円
hybrid workstyles that combine the merits of home and officelinked to our efforts to date. We aim to achieve our medium-term
environments through the utilization of DX technology. NESIC is
management plan by accelerating growth measures, including
2023 年 3 月期
reinforcing consultations from a customer standpoint by utilizing
practices at our new headquarters and Nihonbashi office andthe knowledge we have built up through self-implementationtodevelopment of an offering-type business model, and enhancing
予想 XXX 億円
date. At the same time, we are reinforcing the provision of serprofitability by adding more value to the services we provide.
2025
年 3 月期
vices that support the enhancement of customers’
management
capabilities and corporate value. This is achieved by implementNet Sales
Operating Income
目標値
1300(¥ billion) 億円(¥ billion)
ing a cycle of improvement proposals to stay ahead of the customer based on data analysis of cloud service and network
usage through the operation of systems we provide. We are
150
20
19.0
steadily advancing preparations, including the creation of new
130
121
120
16
114.2
solutions and reinforcement of resources, in the fiscal year
108.0
14.0
13.0 13.2
ended March 31, 2023, the first year of the medium-term man90
12
agement plan. This was despite downward pressure due tofactors including the impact of sudden exchange rate fluctua60
8
tions, semiconductor and component shortages, and a deteriorated sales mix resulting from the conventional private branch
30
4exchange (PBX) service business contracting faster than00expected during this period. These negative factors from the2022/3 2023/3 2024/3 2025/3(FY)
2022/3 2023/3 2024/3 2025/3(FY)
previous fiscal year are beginning to dissipate. At the same time,(Forecast) (Plan)(Forecast) (Plan)
we are reinforcing our approach to customers divided into differ*F
 Y2022/3 figures shown above have been reclassified to reflect the restructuring ofbusiness segments in April 2022.
ent growth themes, such as workstyle DX, next-generation* Forecasts for FY2024/3 are as of April 28, 2023.

ANNUAL REPORT 2023

45

NESIC Segments

Network Solutions Business
V I S I O N
We offer advanced technologies with highspecialty to connect society from the floor of theocean to the far reaches of outer space in optimal
forms to help realize a digital society with greater
security and convenience.

Yukinobu Noguchi
Senior Vice President,
Executive General Manager,
Network Solutions Business Unit

Opportunities / Threats

Strengths / Features

5G technology popularization and telecommunications carrier

Unrivaled strengths in communications technology as a member of theinvestment trends

NEC Group and multi-vendor SI capabilities that leverage our years ofChange in needs for development of social infrastructure toward real-experience

izing a sustainable society (including expansion of use into outer spaceWide range of wireless technologies from Wi-Fi to satellite

and strengthening of disaster response and national security)communications

Break free from vendor lock-in through the trend toward openness andExtensive customer base in social infrastructure and deep understand-virtualization

ing of our customers’ business activities acquired through our years ofproviding maintenance and operation services

Medium-Term Strategy and Progress
In the fiscal year ended March 31, 2023, there was an impact
promote differentiation by utilizing our strengths from ground
年 3 月期from a reduction in infrastructure investments by 2022
telecommuniequipment to satellites and system design to development, andcations carriers. While we do not expect a fast recovery from thisits operation through utilization of DX technology, such as AI
実績 1,080 億円
hesitance to invest, we are focusing on areas in which investimage analysis.
ments continue, such as strengthening of networks,
andexpand2023 年 3 月期 Despite challenging conditions for telecommunications carriing services to meet customer needs for reducing theirers, we aim to achieve business growth for the entire Network
予想 ofXXX 億円
operational costs, including visualization and automation
Solutions Business as planned by accelerating initiatives in theoperations. The launch of the entire local 5G market was delayedsocial infrastructure domain.
2025 is年 3 月期
compared to initial expectations, however implementation
starting to move ahead of schedule in markets that require a
Net Sales
Operating Income
目標値
1,300
億円
high level of reliability, such as power plants and transportation(¥ billion)(¥ billion)
infrastructure. We will build up results here in preparation for a97
full-scale market launch.
100
15
14.0
Meanwhile, in the area of social infrastructure, the market ismore active than predicted so we aim to accelerate businessexpansion. The reinforcement of submarine communications
networks is advancing in response to increased traffic in themarine domain and we anticipate business expansion in the
future as a result of demands related to the diversion of submarine communications technology into power line construction foroffshore wind power, and monitoring and observation demandfor disaster prevention and resource development. In the spaceand radio wave domains, in addition to higher demand fornational security, there are expectations for new areas, such as
space-related application in the private sector. We will further
46

ANNUAL REPORT 2023

80

81.9 79.2

85
12

60

9

40

6

20

3

0

2022/3 2023/3 2024/3 2025/3(Forecast) (Plan)

0
(FY)

10.8

11.0
9.8

2022/3 2023/3 2024/3 2025/3(Forecast) (Plan)

(FY)

*F
 Y2022/3 figures shown above have been reclassified to reflect the restructuring ofbusiness segments in April 2022.
* Forecasts for FY2024/3 are as of April 28, 2023.

Environmental &Social Solutions Business
V I S I O N
On the strength of our engineering capabilities
and our network of service centers, we aim tobecome a business operator that helps createand develop communities where people canKazuhiko Takeuchi

continue to live safely and with peace of mind

Senior Vice President,
Chief Engineering Officer (CENO),
Executive General Manager,
Environmental & Social Solutions
Business Unit

while helping revitalize regions by achieving a
recycling-oriented society.

Opportunities / Threats

Strengths / Features

Increase in ICT investment triggered by the shift toward a decarbonizedConstruction and support service assets that can be handled nation-society and digitalization, and disaster prevention and mitigation bywide, even in mission-critical public and social infrastructure

local governments

Ability to provide solutions by linking industry knowledge with

Decrease in existing businesses due to increasing migration to cloudGroupwide DX and network technology

services

Medium-Term Strategy and Progress
Our strengths include the construction and engineering capabilicooling technology that significantly reduces electric consump2022
年 3 月期
ties and a nationwide support service network. Basedon these,tion for air conditioning in data centers.
we are directing our attention to creating high-value-added serFurthermore, we are striving to resolve food issues by com実績 1,080 億円
vices aimed at development of safe and secure communities
mencing operation of an onshore salmon aquaculture farm thatand the realization of a decarbonized society by producing autilizes DX technology. While we faced a slow start in the fiscal
2023 年 3 月期
solutions service that connects Groupwide DX and nextyear ended March 31, 2023 due to the impact of exchange rate
generation network technology. Accordingly, we aim
toreinforcefluctuations and semiconductor and component shortages, we
予想 XXX 億円
profitability through provision of such high-value-added services
aim to achieve our medium-term management targets by taking
2025
年 3 月期
and advancement of our construction and maintenanceinfrathe opportunity to expand the market in these areas going forward.
structure that utilizes DX technology.
Net Sales
Operating Income
1,300
億円
In community development, we will support the目標値
quick recovery(¥ billion)(¥ billion)of infrastructure and the maintained safety and security of residents following natural disasters. This includes provision of
150
20
140
common platform services that connect map information across
126
16.0
119.2
industries such as telecommunications, gas, water, and trans120 115.0
16
portation and a virtual disaster countermeasures office that
12.0
90
12
10.7
enables rapid information-sharing and decision-making whengathering in person is difficult during a disaster. To realize a
8.2
60
8decarbonized society, we will develop comprehensive solutions,from visualization to downsizing and substitution, based on
30
4knowledge gained through self-implementation to reduce greenhouse gas emissions by 89% in fiscal 2024 and to net zero in002022/3 2023/3 2024/3 2025/3(FY)
2022/3 2023/3 2024/3 2025/3(FY)
fiscal 2030. In addition, we are carrying out initiatives that
(Forecast) (Plan)(Forecast) (Plan)
include co-creation with startups that utilize unique electricity*F Y2022/3 figures shown above have been reclassified to reflect the restructuring ofstorage technology and development of liquid immersion
business segments in April 2022.
* Forecasts for FY2024/3 are as of April 28, 2023.

ANNUAL REPORT 2023

47

Special Feature 1: Co-Creation Dialogue

Aiming to Realize a Sustainable Society through Unique and 		Hisashi Tsukamoto
Founder, CEO
CONNEXX SYSTEMS

Takahiro Uchino

General Manager
Energy Solutions Division
Environmental & Social Solutions
Business Unit

Nobuko EndoManager
Energy Solutions Division
Environmental & Social Solutions
Business Unit

NESIC is advancing the reinforcement of the energy business to achieve carbon neutrality. As part of this, weare engaging in co-creation with CONNEXX SYSTEMS Corporation, a startup that develops storage batteries.
The dialogue below focuses on the aims of both companies through co-creation and their future goals.

Co-Creation to Deliver New
Technology to SocietyUchino Measures to achieve carbon

neutrality are progressing aroundthe world. Under our medium-term
management plan Shift up 2024,
NESIC has adopted policies thatshift all businesses to ensure they
address climate change, and weare expanding our renewableenergy business, including solar
power. In achieving such carbon
neutrality, one issue that must be
addressed is the popularization ofenergy storage systems.
Endo To continually reinforce ourenergy business, NESIC needs a

48

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strong partner with an energy storage system that has the technicalcapabilities necessary for a stablesupply of renewable energy. Basedon these circumstances, weapproached CONNEXX SYSTEMS
Corporation, which develops andprovides unique and innovative
energy storage systems, and commenced co-creation through acapital and business allianceagreement in November 2022.

Tsukamoto CONNEXX SYSTEMS
is a storage battery development
startup. While we currently create
industrial-use energy storage systems that utilize existing lithium-ion
batteries as a key business, we
also engage in the development ofinnovative energy storage technology and batteries. The reason forour business alliance is the belief
that by integrating these technologies and products with NESIC’s ICT
and cloud-based technology, construction, operation, and maintenance resources, we could create
new services and contribute tosociety in a truly valuable way. I
founded CONNEXX SYSTEMS on
the concept of delivering our		Innovative Technology 
unique currently-in-development
high capacity rechargeable iron-air
battery called the SHUTTLE
Battery™. The SHUTTLE Battery™ is
an innovative battery that storesenergy generated by utilizing theoxidation reaction of iron. Theenergy density is five times that of
the currently popular lithium-ion
batteries but is a tenth the cost.
Additional advantages include thefact that the battery is environmentally friendly because the active
materials are iron and air and thatanyone, anywhere in the world canenjoy the benefits of this technology fairly and cheaply. Furthermore,at the same time as developing thisSHUTTLE Battery™, another key
project we are engaging in is thereuse of EV batteries in industrialuse energy storage systems.

renewable energy. I hope we can
expand EnePOND® nationwide bycombining this with NESIC’s ICT
strengths of operational management and remote monitoring and anational service network. With
EnePOND® and SHUTTLE Battery™,
I believe we can immediately
expand large-scale energy storage
systems, for which price has beena barrier to popularization, which
will be a game-changer. There are
numerous regions and islands
around the world that still acquireenergy through generators, andelectricity is become difficult to use
due to steep rises in fuel costs. If
we can implement these batteries,
it will enable us to supply cheapand stable green electricity even tothese areas, and contribute toresolving global energy issues.

Game-Changing Technology

Endo As other companies start tofocus on reusing batteries fromEVs, I once again get a sense ofyour foresight, Mr. Tsukamoto.
While clearly envisioning futurescenarios from a long-term viewpoint, we are very eager to create
this new business together with
CONNEXX SYSTEMS, which develops wonderful products. Throughthis co-creation effort, we havereaffirmed the importance of
reducing CO2 emissions from theproduct manufacturing process toachieve carbon neutrality. I hopethat such a viewpoint will spreadthroughout the entire NESIC Group.

Tsukamoto The energy storage

system CONNEXX SYSTEMS
possesses, EnePOND®, is advantageous in terms of price because,through its patented technology,
we can reuse the batteries takenfrom electric vehicles without
modifying them. Additionally, thesystem is impressive for achieving
extremely low CO2 emissions
during manufacturing, so weare trying to speed up its
implementation.

Toward Achieving a Carbon
Neutral SocietyTsukamoto I hope that we canestablish and popularize
EnePOND® technology in the next
few years in cooperation withNESIC. Furthermore, I believe that
we can contribute to a carbon neutral society by advancing the development of technology that will
enable us to implement the
SHUTTLE Battery™ in the near
future. To achieve this, we willclosely collaborate with NESIC
going forward.
Endo We appreciate your kindwords. To achieve a carbon neutral
society, first we will put our effort
into expanding EnePOND® technology throughout society by utilizing
NESIC’s ICT, operation, and maintenance. In the future we aim to be
an integrated service provider inthe energy business area, and will
engage in endeavors that include
development of integrated monitoring services for energy storage
systems through co-creation with
CONNEXX SYSTEMS.
Uchino NESIC has set a target of
realizing net zero CO2 emissions in2030, ahead of achieving carbon
neutrality in 2050. One of the keys
to achieving this is the establishment of an energy business that
focuses on renewable energy andenergy storage systems that are
the foundation of its stable supply.
Going forward, we hope to continue
collaborating, and to promote
carbon neutrality together.

Uchino I think that this CONNEXX
SYSTEMS technology is amazing—reusing EV batteries so they can bereborn as a storage system for

ANNUAL REPORT 2023

49

Special Feature 2: In-House Roundtable

Moving Forward Under Self-Implementation: New Headquar		

Kuri Okamoto

Business Creation Division
DX Solutions Business Unit

Tomomi Abe

Promotion Division
Empowered Business
DX Solutions Business Unit

Reika Takahashi Hiroyuki Sumitomo Tomoki Mikata
Administration Division

Promotion Division
Empowered Business
DX Solutions Business Unit

Administration Division

In March 2023, NESIC relocated its headquarters. Members of the new headquarters relocation project established at that time are gathered here to exchange opinions on the theme of self-implementation measures
aimed at deepening sustainability management.

Background to Launch of
New Headquarters
Relocation Project

Takahashi In April 2022, NESIC
decided to relocate its headquarters. The new location was aformer university, and we signed alease on an entire building, with its
layout remaining mostly unchanged.
We needed a lot of ideas to be able
to transform this campus used by
students into a headquarters thatis a foundation for achieving our
vision for 2030. Accordingly, we
decided to involve members ofmultiple departments, not just theperspective of the Administration
Division, which supports the management of the office. This was the
background for launching the newheadquarters relocation project.
Okamoto Ms. Takahashi and
Mr. Mikata, who are from theAdministration Division, were
responsible for the management of50

ANNUAL REPORT 2023

the entire project and its costs. Ms.
Abe and Mr. Sumitomo, who arefrom the DX Solutions Business
Unit, promoted measures that utilize our track record for proposing
workstyle innovation solutions tocustomers we work with on a daily
basis. With the aim of creating a
comfortable office that employees
want to work at, I was involved in
the overall direction of the project,
first analyzing the workstyles ofpeople within the office, and thenincorporating the role of the office
into the plan and spatial design.

Self-Implementation
Measures Aimed at
Deepening Sustainability
Management

Abe At the launch of the project, we

held numerous discussions with
President Ushijima about theembodiment of sustainability management, which was designed as

an overall concept for the newheadquarters. We decided on what
the office should look like following
the move with an awareness ofwhat kind of company NESIC
should be in 10 years after listening
to the President’s opinions on sustainability management andworkstyles.

Okamoto I also aimed for an officethat aligns with sustainability management, deciding on how to utilize
the existing fittings, such as partition walls and furniture. While
keeping much of the furniture fromthe old office, we have employedvarious concepts to make the location feel like a new space. We also		ters Relocation Project 
designed power to be environmentally friendly, such as using green
energy generated on site andswitching to eco-friendly electricity.
Takahashi The new headquarters
aims to become a place to actively
collaborate and co-create with thelocal community. We have enabled
the use of open space on the firstfloor for various seminars andevents that involve people fromthe local community, students,and others from outside NESIC.
Additionally, the large screen on
the first floor functions as a way
to display the latest information
during a disaster.

Sumitomo We have started selfimplementation of “digital twin,”technology which aggregates andvisualizes various information suchas customer and management
data and on-site environmental
conditions on one platform. This
technology will enable us to sustain a comfortable office environment that improves the productivityof employees, and to reduce CO2
emissions by predicting demand
for air-conditioning and lightwithin the building, controllingthem accordingly.
Mikata When teleworking, I wasaware of many issues related tocommunication with my managers
and co-workers. As a result, we
endeavored to create areas thatenable flexible communication by
designing many free spaces in the
new headquarters. We also utilized
characteristics typical of a university
where entire floors are open-plan tomake it easier to communicate

across departments. As a result,the number of people visiting thefloor via the stairs increased, which
I believe plays a part in promoting
health management. Stimulating
communication also leads toan improvement in employee
engagement.

headquarters who will take over theconcept of our projects. While therelocation is complete, this does
not mean everything is finished. We
will realize a headquarters officethat is constantly evolving throughcontinuous improvement.

Enthusiasm for Creating
New Social Value

Mikata We are continuing topursue new workstyles that further
invigorate in-house communication. By utilizing the knowledge wehave gained through this project
not just at headquarters but at allof our offices, we hope to develop
an office environment across theentire Group that is easy to workin, and for it to become the key
to communication between
employees.

Takahashi After moving, we havebeen hearing feedback from various employees. We will continue topursue a work environment that iseasy to work in and clarify the rolesof each office, while making it intoa place that enhances quality ofoperations for each employee utilizing the space for its intended
purpose and ensures the creationof new value.
Okamoto Through this project,
I believe that we have created afoundation for the new headquarters that is based on the theme ofsustainability management. As thenext step, we have launched a newteam to carry out self-implementation of DX technology at the new

Sumitomo My participation in thisproject and the iterative trial anderror of creating an office thatsatisfies all parties was a tremendous learning experience. I will
utilize the expertise related to ICTthat I have accumulated to dateand management knowledge
gained through this project in myoperations going forward.

Abe Through my involvement in
the new headquarters relocation
project, I was able to deepen myunderstanding of sustainability
management and reconfirm thepossibilities of NESIC’s businesses
and technologies. Workstyle innovation with an awareness of sustainability is rapidly gaining interest
among customers, and we will
provide them with our knowledge
gained through self-implementation as we contribute to the realization of a society where work is
comfortable and rewarding.

ANNUAL REPORT 2023

51

Environment

Disclosures Based on TCFD Recommendations
As part of the NEC Group, we committed to formulating Science
Based Targets (SBT) in December 2017, obtained SBT certification the following year, and are promoting initiatives aimed atcarbon neutrality with 1.5°C certification from the SBT initiative
for its current targets.
As greenhouse gas (GHG) emissions from the supply chain(Scope 3) are overwhelmingly greater than GHG emissions fromNESIC (Scope 1, 2), we are pursuing reductions throughout the
supply chain.
We completed approximate calculations for the applicable
Scope 3 categories for the fiscal year ended March 31, 2023 andreceived third-party verification in February 2023. We will continue to lower Scope 1 and 2 emissions, promoting thoroughvisualization and refinement of Scope 3 and promote emissions
reductions throughout the supply chain.

In addition to endorsing the Task Force on Climate-related
Financial Disclosures (TCFD), we have also joined the TCFD
Consortium to exchange information with other companies
and financial institutions that endorse its recommendations.
Additionally, we will contribute to carbon neutrality with theaim of realizing a sustainable society by participating in the GX
League Basic Concept organized by the Ministry of Economy,
Trade and Industry of Japan, which aims to promote the commercialization and popularization of decarbonization technology
and other measures, as well as participating in the Carbon to X
(C2X) open innovation business platform and promoting thecreation of climate change-responsive businesses.
From the fiscal year ending March 31, 2024, we are accelerating Groupwide business development by launching our Carbon
Neutral Business Promotion Project.

Outline of TCFD at NESIC
Supervise

Risk Management

Report(Understand risks and minimize damage)
Risk management focused on the Management Quality
Improvement Committee(Approval, supervision, accountability, reporting, and review)

PDCA
Cycle

ReportSupervise

ReportNote: Sustainability Management Committee and Board of Directors

Confirm

Governance

Strategies, Indicators, and Targets
Action plans to decrease risks, expand opportunities, and achieve lower emissions for 1.5°C–2°C and 4°C scenario analysis

Strategy• Scenario analysis

Indicators and Targets

Strategies in action• Indicators and action plan for reducing
emissions

Note: FY2024/3: 1.5°C–2°C and 4°C scenario analysis• Selection of risks and opportunities• Financial impact of risks and opportunities
Note: FY2024/3: Calculation of flood damage risks• Transition plan

Improvement of strategies
based on the most recent
status of targets

Note: FY2024/3: Formulation of action plan andfinancial plan

Note: FY2024/3: Bring forward reduction targets for Scope
1 and 2Net zero emissions in Scope 2 by end of FY2025/3(89% decrease)
Achievement of net zero emissions in Scope 1 and 2
by end of FY2031/3

Note: FY2024/3: Information disclosure and additional measures

Governance
NESIC views climate change and other environmental issues ascritical for promoting sustainability management and realizing
our vision of an inclusive and sustainable society createdthrough communications.
Regarding issues critical to management strategy, theSustainability Management Committee, which is a subcommittee under the Management Quality Improvement Committee andis chaired by the President and Chief Executive Officer, examines
strategies and measures and exchanges information pertaining
to sustainability and ESG strategies, including climate change
countermeasures, as well as risks and opportunities with thepotential of significantly impacting our business. Outside director and others with a deep connection with sustainability attend
Sustainability Management Committee meetings as observers.
They report the results of deliberations to the Board of Directors.

52

ANNUAL REPORT 2023

In this way, a system is in place for the Board of Directors tooversee NESIC’s climate change measures to ensure that they
are properly promoted.
Since adapting to sustainability management and climatechange are key issues for management decision-making inbusiness activities, we are formulating environmental policies
based on the responsibilities of the President and Chief
Executive Officer. Based on these policies, we are engaged in
reducing our impact on the environment and risks and expanding contributions through business activities. The Central
Environmental Management Committee, which handles themes
within the Sustainability Management Committee, is chaired by
the Executive Officer in Charge of the Environment and conducts discussions related to key items, such as medium- tolong-term target formulation and investment related to energy

conservation, for promotion under environmental management.
The Sustainability Management Committee discusses proposals that are judged to have a significant impact on business(including vision, medium-term management strategies, andmajor investments) and reports to the Board of Directors.
Furthermore, we are formulating targets for reducing CO2
emissions and promoting action through our business activities to achieve NEC Environmental Targets 2030 (NEC Grouptargets for environmental management), based on our Courseof Action for Climate Change Toward 2050 as a member of the
NEC Group.
In April 2022, NESIC established the Carbon Neutral Promotion
Division, directly controlled by the President, to further
strengthen and promote carbon neutral strategies andmanagement.

Companywide Promotion and Governance Structure
for Climate ChangeManagement
and Supervision
Business
Execution

Board of Directors
Executive Committee

Business Execution Committee

Management Quality Improvement Committee
Chair: President
Members: S enior Vice Presidents
Observers: O utside director,
directors, outside
experts

Sustainability
Management
Committee

ESG
ESG
Execution
Structure

E

S

G

Central Environmental Management Committee
Executive Officer in Chargeof the Environment
Carbon Neutral
Promotion Division

Operations and Business Units(Business strategies,
risk countermeasures)

Cooperate

Staffing Divisions(Companywide strategies,
disclosure support)

Strategy
Scenario Analysis 
To understand the impact of climate change on our businessand identify climate-related opportunities and risks, we implemented the following analysis for various scenarios, referred to
Scenarios Referenced

NEC Group assumptions regarding decarbonization scenarios inJapan, compared them with business environment assumptionsin NESIC’s long-term strategies, and analyzed the differences.

1.5°C–2°C Scenario

4°C Scenario

Transition Scenarios

Transition scenarios according to the International Energy
Agency (IEA)
Announced Pledges Scenario (APS)Net Zero Emissions by 2050 Scenario (NZE)

Transition scenarios according to the International Energy
Agency (IEA)
Stated Policies Scenario (STEPS)

Physical Scenarios

Scenarios that predict climate change according to theIntergovernmental Panel on Climate Change (IPCC)
RCP1.9 and RCP2.6
SSP1-1.9 and SSP1-2.6

Scenarios that predict climate change according to theIntergovernmental Panel on Climate Change (IPCC)
RCP8.5
SSP5-8.5

Source: IPCC AR5 / 6, IEA World Energy Outlook 2021 / 2022

We conduct scenario analyses through Companywide discussions in collaboration with the environmental, planning, andpublic relations departments, and business divisions.
In particular, discussions resulted in the prediction that boldmeasures and technology innovations will be promoted underthe 1.5°C–2°C scenario in the transition to a decarbonized society. Regarding transition risks, we analyzed that issues including
the rising cost of energy, increasing raw material prices, anddifficulties in procuring materials would become apparent.
Under the 4°C scenario, basic risks and opportunities would
be the same but physical risks, such as the occurrence andincreased severity of heavy rains and flooding, recovery measures for customer facilities, and increasing frequency ofdamage, will be relatively higher.
Meanwhile, we recognize increasing needs across society for
GHG emission reductions and renewable energy in its movetoward decarbonization as an opportunity for NESIC to provide
various ICT services that contribute to carbon neutrality.
We are reporting the results of carrying out analysis and evaluation regarding the details and amount of impact for each risk,
our response to risks, and subsequent opportunities for growth
as follows.

ANNUAL REPORT 2023

53

Environment

Main Climate Change-Related Risks Definition of Financial Impact and Timeline
Financial impact: No impact expected
Negative impact predicted
Scope for calculations: Non-consolidated
Category

Timeline: Short term (2024)

Main risks

Main initiatives

Government
policies andlaws•C ost increases due to higher prices
and lower•R educing power consumption
through office and workstyle innovation, procuring energy through inhouse PPA* (transition plan andaction plan 1–4)

Markets andratings•L oss of business opportunities due
to inability to meet customer andsupply chain demands•S upplies of materials such as semiconductors, resins and steel, leading
to difficulties in obtaining components and materials•E ncouraging suppliers• Implementing sustainability activities
throughout the supply chain tosecure components and materials

Physical risks•R isk of credibility loss and litigation
due to delays or inadequate
responses to the restoration ofcustomer facilities in the event of alarge-scale emergency or natural
disaster• Increased man-hours and costs inline with the frequent occurrence ofdisasters and system failures•P redicting disasters using big data,visualizing disasters through image
analysis•E nhancing disaster response capabilities through use of renewableenergy (e.g., ensuring the safety ofevacuation centers)•H eat stroke during outdoor work,
increased health risks for employees
due to high temperatures, anddecreased outdoor work productivity•U tilizing robots for remote operations•M anaging workers’ physical condition using wearable devices[Summary of Main Risks]•R egarding government policies and laws, we expect a negative
financial impact under the 4°C scenario due to the increase inenergy costs following rising energy resource prices, such as
those for natural gas and crude oil.
•R egarding markets and ratings, we expect a negative financial
impact under the 1.5°C–2°C scenario and 4°C scenario due tothe anticipated loss of business opportunities, as a result of
being unable to meet customer and supply chain demands ineach business division and difficulties in procuring materials
when providing products and services.
•R egarding physical risks, we expect a negative financial impact
of decreased sales due to suspension of business based on
the occurrence of large-scale disasters and natural disasters
resulting from climate change. Additionally, we expect a negative financial impact due to a decrease in outdoor work productivity amid rising temperatures and an increase in outsourcing
expenses as a result of fewer daytime working hours.
[Summary of Financial Impact Calculations]
Government policies and laws
Financial impact is qualitatively disclosed as the difference incost for natural gas and crude oil in 2021 and 2030 under theWorld Energy Outlook 2022 Stated Policies Scenario (STEPS)
with the assumption that there is no change between energy
usage in 2021 and 2030.

54

Medium term (2030)

ANNUAL REPORT 2023

Long term (2050)

1.5°C–2°C Scenario
4°C Scenario
Timeline /ImpactShort term Medium term Short term Medium term
(FY2025/3) (FY2031/3) (FY2025/3) (FY2031/3)

Mediumterm /
MediumMediumterm /
MediumLong
term /
Medium

Less
than
¥230
million

Less
than
¥700
million¥700
million¥2,120
millionLongterm /
Medium* PPA: Power Purchase Agreement

Markets and ratings
We expect increases in procurement costs in 2030 under boththe 1.5°C–2°C scenario and 4°C scenario due to increase indemand for semiconductors and rising overseas procurement
costs following competition to secure suppliers. Accordingly, theresults of anticipated negative financial impact are qualitatively
disclosed.
Physical risks
The amount of damage due to business suspension, such asthat caused by flooding, is calculated based on methods from
the Manual for Economic Evaluation of Flood Control Investment
provided by the Ministry of Land, Infrastructure, Transport andTourism of Japan. The total amount multiplied by the amount ofvalue added per person is quantitatively disclosed as a negative
financial impact after calculating the number of days of business suspension due to water damage, the flooding frequency
rate, and the correction factor for each office under the 1.5°C
scenario and 4°C scenario.
The amount of financial impact is calculated for the parent
company on a non-consolidated basis and is based on data fromthe fiscal year ended March 31, 2023. Furthermore, the results ofheatstroke during outdoor work, increased health risks for
employees due to high temperatures, and decreased outdoor
work productivity are qualitatively disclosed as anticipated negative financial impacts under the 4°C scenario. This is because
we expect an increase in outsourcing expenses for outdoor
operations due to a rise in days with temperatures above 30°C.

Main Climate Change-Related Opportunities Definition of Financial Impact and Timeline
Financial impact: Positive impact predicted
Scope for calculations: Non-consolidated
Category

DX Solutions
Business

Network
Solutions
Business

Environmental& Social
Solutions
Business

Markets /Resilience

No impact expected

Timeline: Short term (2024)

Medium term (2030)

Long term (2050)

Main risks

Main initiatives• In line with the rapidly growing
need for decarbonization measures
as a management issue, demandand opportunities are expanding forsolution services that include
workstyle and business process
innovations and ICT management
based on DX, local 5G, IoT, andother ICT, and there is an increasingneed for AI, IoT, and digitaltechnology•P romoting businesses and managed services that utilize theSymphonict platform aimed at
improving efficiency, visibility, andproductivity through the shift to DX( P56 transition plans / action
plan 2)•E
 nhancing recurring consulting
services for potential customer
issues through operational services•S trengthening and promoting the
EmpoweredOffice business withthe addition of carbon neutral
measures to office, workstyleinnovation and business process
reforms ( P56 transition plans /action plan 2)•D emand and opportunities are
expanding for energy saving andenhanced resilience in carrier andpublic network infrastructure•B urgeoning demand related to thestrengthening, operation andmanagement of critical social
infrastructure•E xpanding business domain andmarket access through collaboration and co-creation with othercompanies•M arine business: Business opportunities expanding in line withincreased demand for offshore
wind power generation•A erospace business: Business
opportunities are expanding withregard to environmental observation and disaster prediction using
satellite imagery and other analysis
methods•E nhancing technical capabilities in
DX, AI imagery, and next-generation
networks such as 5G, and strengthening business through alliancesand co-creation ( P56 transition
plans / action plan 8)•E nhancing market and businessdevelopments through co-creation
with advanced partners in theoffshore wind power and aerospace businesses ( P56 transition
plans / action plan 4)•E xpansion of space and marine
development businesses aimed atenvironmental monitoring of andpredictive detection for worsening
natural disasters ( P56 transition
plans / action plan 5)•E xpanding opportunities for business associated with the promotion of sustainable and resilient
community development, including
regional development and theDigital Garden City Nation concept• Increasing demand related to
citizen safety and security, including disaster prevention and mitigation, expanding business
opportunities on demand forrenewable energy and diversified
energy and new industries, including regional new electric power
providers•D emand and opportunities are
expanding for stable supplies offishery resources unaffected byrising sea temperatures and reductions in GHG emissions duringtransportation through local production for local consumption•P articipating in demonstration
projects, strengthening market andbusiness developments throughco-creation with partners in theenergy and community development fields ( P56 transition plans /action plan 6 and 9)•P roviding clean energy in responseto renewable energy demands(solar power and storage batteries),
promoting regional new electric
providers, EV infrastructure, andmanaged electricity businesses( P56 transition plans / action
plan 1 and 7)•S trengthening R&D on advanced
technologies that contribute tocarbon neutrality, including data
centers utilizing liquid immersion
cooling technologies and market
development through customer
partnering ( P56 transition plans /action plan 3)•P romoting in-house commercialization of onshore fish farming andenhancing business development
through co-creation with leading
local companies

1.5°C–2°C
4°C Scenario
Scenario
Timeline/ Impact Short term Medium term Short term Medium term
(FY2025/3) (FY2031/3) (FY2025/3) (FY2031/3)

Mediumterm /
High

Mediumterm /
High

Mediumterm /High

ANNUAL REPORT 2023

55

Environment

Summary of Main Opportunities•U nder the 1.5°C–2°C scenario, main opportunities related toclimate change are expected to have a positive financial impact
on each business.
•U nder the 4°C scenario, a main opportunity related to climatechange is that, in terms of the increase in burden, providing thesame services will result in no financial impact.

[Summary of Financial Impact Calculations]•U nder the 1.5°C–2°C scenario, main opportunities related toclimate change are the prediction of financial impact based on
the past compound annual growth rate (CAGR) of each businessand the net sales of business applicable to climate change.
•U nder this scenario, due to business environment fluctuations
and other factors, changes in CAGR may result in changes tothe financial impact of opportunities.

Transition Plans Approach to Transition Plans
NESIC’s approach to transition plans encompasses TCFD-related
scenario analysis, risks and opportunities, financial impact, anddisclosure of indicators and targets and interrelated items.
This will result in changes to risks, opportunities, and financial
analysis through continuous improvement of scenario analysis,changes to established targets of transition plans, and changes
to indicators and targets.
Transition plans will be used as a milestone for implementing
TCFD strategy targets and will be utilized in our overall businessstrategies to continue enhancing corporate value going forward.

FY2023/3

FY2024/3

FY2025/3

Formulation of main
opportunities related
to climate change

Formulation oftransition plan
(action plan andfinancial plan)

Setting of quantitative KPI indicators(sales targets andgrowth investment)

Connectivity Between Transition Plans and Other TCFD Items
Scenario Analysis

Transition Plan

Risks and Opportunities
Transition Plan Financial Impact

Indicators and Targets[Transition Plans]•N ESIC is formulating transition plans to achieve targets for reducing greenhouse gas emissions by 2030 based on financial impact and scenario
analysis of TCFD risks and opportunities.
•W e will implement measures for achieving net zero in 2050 based on action plans and financial plans in 2030, while and reducing risks and increasing opportunities.
Category

Action Plan

Markets

1. Expand businesses such as clean energy services for renewable energy market through on-site and off-site PPA
2. E
 xpand DX decarbonization projects through local 5G, IoT services, and business process transformation that utilize
high-functioning, low-energy consumption semiconductors to visualize greenhouse gas emissions
3. E
 xpand environmental management-style services by integrating facilities with energy, such as next-generation data centers that utilize liquid immersion cooling technologies
4. E
 xpand business opportunities in line with increased demand for offshore wind power generation in response to needs forrenewable energy

Resilience

5. Expand disaster countermeasures business in response to increasing severity of natural disasters
6. E
 xpand business opportunities to promote sustainable and resilient recycling-based community development through IT
and DX solutions
7. P
 romote smart disaster prevention and mitigation businesses, from design and construction, to maintenance and operational support
8. Expand demand and opportunities for energy saving and enhanced resilience infrastructure facilities
9. E
 xpand opportunities for business associated with promotion of sustainable and resilient community development inresponse to smart cities concept

Category

Financial Plan

Growth Investment

1. Self-implementation and growth investments in in-house permeation by the Carbon Neutral Promotion Division
2. Growth investments in business opportunities due to climate change for each business division

Capital Investment

3. C apital investment, such as in green energy generation and off-site PPA that utilize solar power generation, to achievetargets for reducing greenhouse gas emissions
4. C apital investment to promote the introduction of the shift to EVs for NESIC-owned vehicles (including charging equipment
and other ancillary facilities)

Risk Management
Critical risks, including those posed by climate change, are identified and managed through a risk management system led by
the Management Quality Improvement Committee. Additionally,
the Sustainability Management Committee, which discusses
management strategies and policies for measures based on
56

ANNUAL REPORT 2023

those strategies, implements measures through deliberations,and in accordance with the Corporate Governance Code, reports
to the Board of Directors while providing ongoing disclosure to
stakeholders outside NESIC.

Indicators and Targets
As a member of the NEC Group, we have set major KPI targets
for reducing greenhouse gas emissions in the fiscal year ended
March 31, 2023, in line with NEC Environmental Targets 2030
(NEC Group targets for environmental management). However,
we are bringing forward our targets for reducing Scope 1 and 2

CO2 emissions to fulfill our responsibility and further accelerate
our contribution to responding to climate change.
For Scope 3, we will continue refining data on CO2 emissions
by engaging with the supply chain and set targets for reducing
emissions in the fiscal year ending March 31, 2024.

Major KPI Targets and Status of Achievement
Reduction Targets (Compared with FY2020/3) and Results

Notes–40% (FY2023/3)–24% (Reduction results)–55% (FY2031/3)–89% (FY2025/3)–100% (FY2051/3)

		–100% (FY2031/3)

Scope 1 and 2

As of FY2025/3
Achieve net zero in Scope 2
As of FY2031/3
Achieve net zero in Scope 1 and 2[Growth Strategy Targets]Management strategies that incorporate the medium-term management plan Shift up 2024
* Sustainable Symphonic Society

Time
HorizonGreenhouse Gas (GHG) Emissions and Our Actions for and Purpose of Their Reduction
FY2031/3

Shift up 2024

PurposeIn-house energy consumption and
PPA through next-generationenergy-storage batteries

Change to renewable energy plans for all buildings

Action Plan

FY2051/3

Enhancement ofenvironmental
value

Carbon offset
Green Power
Certification

Switch to EVs for
NESIC-owned vehicles
Reduction of Scope 3 emissions throughsupplier collaboration

Scope 1 and 2
Initiatives for GHG reduction

Scope 1 and 2

Net zero in Scope 2(t-CO2)

10,000

7,527

7,014

7,232

5,000
GHG Emissions

0

929

1,048

1,089

2020/32021/32022/3• Change to renewableenergy plans for allbuildings• Switch to leased EVs• Carbon offset

Net zero in
Scope 1

4,969
1,053

2023/3

2,710
929

929

Targets

500

2028/32024/32025/3
Target values Target values Target values

2031/32051/3(FY)(t-CO2)

Scope 3

1,200,000
900,000
Scope 3*

FY2030Net Zero Emissions

1,146,038
1,063,199
919,400 978,020• Reduction throughcooperation within supply
chains, such as semiconductors suppliers

Scope 3: Reduction through supply chains,such as purchasing semiconductors
Set targets for initiatives related to reducing GHG
emissions (FY2023/3) / Planned future announcement on reduction rate

600,000
300,000
0

Initiatives related to reducing
GHG emissions

Targets
2020/32021/32022/32023/32024/32025/32028/32031/32051/3(FY)

Planned future
announcement* In terms of Scope 3, we revised calculations for figures from FY2020/3 onward based on the results of third-party verification for FY2022/3 data.

ANNUAL REPORT 2023

57

SocialHuman Capital Initiatives

Basic Approach to Human Resource Strategies
NESIC has adopted the target of realizing a sustainable and inclusive society created through communications and aims to sustainably
grow and develop together with society and our customers. The source of this value creation is our human resources.
Our social mission is to continue creating and providing higher value-added solutions and services for society and customers in abusiness environment with sudden changes and advancements in technology and needs. Accordingly, we are advancing humanresource strategy initiatives based on the approach that individual employees taking on challenges, growing, and demonstrating theirfull potential regarding these changes is vital for the sustainable growth of NESIC.

Link Between Human Capital Initiatives and Management Strategies

INPUT(Human Capital Initiatives)

Effects of human capital initiatives

Inclusion and diversity

Human resource
development
Self-implementation andco-creation

Organization(the ever-changing NESIC)
Acceleration of innovation,
advancement of technology,
maximization of individual capabilities

Creation of high-value-added
services that provide value tocustomers and contribute toresolving diverse and complex
issues for customers and society

Reinforcement andtransformation of existing
businesses

Diverse workstyles

Opportunities for challenges and growth
Motivation, health, andwell-being

Self-improvement,
strength of adaptability

Employees (individuals who take on

Enhancement of productivity,
improvement of quality

challenges and grow)Dialogue withmanagement

Reinvestment

Related Indicators

58

Ratio of women in management
positions / Employment ofpeople with disabilities /Number of mid-career hires andpeople with foreign nationalities

Number of attendees to
psychological safetyseminars /In-house survey on
psychological safety

Advanced human resources

Ratio of paid leave taken

Number of proposals for
pitch competition

Number of town hall meetingsand nationwide caravans to
explanation of business
policies

Number of employees holding
Japan Master of Health
Literacy Test qualification

Engagement score

ANNUAL REPORT 2023

In addition to the acquisition and development of diverse human resources with advanced expertise, we are creating an environment
and fostering a corporate culture that accelerates co-creation and innovation and generates new value. At the same time, we are engaging in creating a system that enables each employee to continue working in a healthy manner and with peace of mind and provide
opportunities and support to autonomously learn and take on challenges while feeling work satisfaction.
Combining these organizational and individual measures will accelerate human resource strategy initiatives that support both theresolution of social issues and business growth.

OUTPUTOUTCOME

Materiality
Initiatives to Provide Value toSociety through 2030

Initiatives for Growth at NESIC

Create work environments inwhich everyone can take initiative

Sound and highly transparent
management

Develop pleasant and plentiful
communities with cutting-edge
technologies

Strengthen innovation capabilities
to create new value

Provide robust services that
underpin safety and security inevolving society

Create a culture where employees
can take initiative

Realization of a sustainable
society with prosperity that
resonates for all

Sustainable
Symphonic Society

Evaluations from Outside NESIC

Psychological Safety Award
2023

5th Platinum Career Award

1st WELLBEING AWARDS

Certified Health andProductivity
Management Outstanding
Organization 2023

ANNUAL REPORT 2023

59

SocialHuman Capital Initiatives

Accelerating Innovation, Advancing Technology, and Maximizing Individual Capabilities
Inclusion and Diversity 
Maintaining and Promoting Diversity
To continue growing sustainably even in a rapidly changing
business environment, we are promoting inclusion and diversity
initiatives based on the idea that it is important for employeeswith diverse personalities exchange opinions in an open andlively manner and fully demonstrate their capabilities.
Under the Inclusion & Diversity Promotion Committee, which isestablished Companywide, we promote the exchange of opinions and examination of systems to advance various employees,
such as those with foreign nationalities, older employees,
employees with disabilities, and female employees; careerbuilding opportunities; and a culture ofmutual respect.
In promoting the active participation of
women, we are announcing our action
plan, based on the Act on Promotion of
Women’s Participation and Advancementin the Workplace, and promoting systemHighest-grade“Eruboshi” certification
atic development and training for assistant manager and manager positions, aswell as cross-organizational support and care that includes theintroduction of a mentor system to encourage the next generation of women. Through these initiatives, we have acquired thehighest grade of “Eruboshi” certification.
Additionally, in maintaining diversity, such as in terms ofexpertise, experience, knowledge, and values, we have added the
securing of immediate assets through mid-career hires to ourrecruitment policy, with a yearly hiring quota. We are implementing measures that leverage diverse viewpoints through proactive
recruitment at the management level, such as functional managers, as well as continuing to secure expert human resources.

Example Initiative: Promotion of Psychological Safety
In addition to having diverse human resources, we are working
with management to promote workshops and training related to
psychological safety for employees, regardless of position or
experience, to exchange opinions frankly and comfortably andunderstand the importance of constructive conflict of opinions
to achieve goals and change their behavior. Through such activities, we are creating an organization that can respond quickly
and flexibly to changes in the business environment by enhancing employee engagement and autonomy, while accelerating
innovation. This initiative has been well received outside NESIC
and was awarded the Psychological Safety Awards 2023
“SILVER RING.”

Psychological safety workshops

Status of related indicators

Ratio of women in management positions
FY2023/3

Results

5.9%

6.6% as of April 30, 2022

FY2027/3

Target10%

Agreement with Challenge 2030**A challenge set up by Keidanren for companies to have at least 30% women inboard member positions by 2030

Balancing Work and Childcare
As an initiative for enabling each employee to fully demonstrate
their abilities, we are promoting measures and enhancing our
support system for employees of any gender with children to
maintain a balance between work and childcare. We acquired
the “Platinum Kurumin” certification mark as a special accredited company under the Act on Advancement of Measures to
Support Raising Next-Generation Children as recognition of thehigh standards of our efforts, including the creation of work
systems enabling employees toapproach work in a variety of ways, andcreation of an environment in which
employees can easily utilize childcare
leave and return to work.
“Platinum Kurumin”
certification mark60

ANNUAL REPORT 2023

Psychological Safety Award 2023
“SILVER RING”
Status of related indicators

Number of attendees to psychological safety seminars /Engagement Survey·F iscal year ended March 31, 2021: Implemented
Companywide seminars·F iscal year ended March 31, 2022: Implemented workshops
for executive officers and general managers·F iscal year ended March 31, 2023: Implemented workshops
for assistant general managers and senior managers·F iscal year ending March 31, 2024: Implementing online
training for all other levels of management
Results of Engagement Survey
Topic: “I can state my opinion frankly, even if it
differs from my boss”
FY2023/3+11 points(Compared with the launch of these activities in thefiscal year ended March 31, 2021)

Human Resource Development The Ever-Changing NESIC × Individuals who Take on
Challenges and Grow
NESIC has continued to grow by transforming its business in linewith changing customer needs and technology. Throughout thishistory, we have continued to cultivate and refine our DNA ofchallenge-driven spirit, co-creation abilities, expertise, andautonomy.
NESIC will continue to change with the times, adopting a
policy of developing individuals who take on challenges andgrow as an essential part of that change, and supporting theirautonomous career development.
Key Initiative: Development of Advanced Human Resources
Under the medium-term management plan Shift up 2024, NESIC
will realize DX × Beyond 5G, which is nearing the social implementation stage, and provide higher social value. To achieve this,we will continue to acquire and develop diverse human resources
with advanced expertise and accelerate initiatives in line withhuman resource strategies that support both the resolution ofsocial issues and the growth of our business. We have positioned and prioritized the fostering of consulting personnel, DX
professionals, and Beyond 5G network professionals as highly
skilled personnel, reinforcing the development and acquisition ofhuman resources. For consulting personnel, NESIC has been
consolidating upstream consulting personnel in the Business
Process Innovation Strategy Division established in April 2022,
inviting external experts as coaches to develop human resources
through actual proposal activities.
In the area of advanced DX technology, we regularly send
personnel to our base in San Jose, California in an effort todevelop and enrich human resources who will lead innovation
through co-creation with startups and promote innovation
through acquisition of advanced technologies. Furthermore, weare expanding level-based education systems and programs topromote an increase in sophistication and efficiency in all processes, including among corporate staff members, in an effort
to ensure all employees are DX natives. Education on areas ofadvanced technology, such as DX and next-generation networks,
and core technology, is conducted by the Shin-Kawasaki
Technical-Base. Through training in various technologies, we arereinforcing our capabilities in those areas.
Status of related indicators
Advanced human resources

FY2023/3
Results

FY2025/3
TargetConsulting personnel

39

190

Advanced DX professionals

444

1,190

Beyond 5G professionals

1,216

1,580

Please refer to NESIC’s SNS note for information about the activities of employees
in San Jose.
Introduction of employees based in Silicon Valley
https://note.nesic.co.jp/n/n7fbfac0058a6 (Japanese only)

Training at the Plug and Play Tech Center (PnP)

Self-Implementation and Co-Creation 
NESIC launched workstyle innovation efforts ahead of othercompanies in 2007, creating various services throughCompanywide self-implementation and verifications. Based onthese results, we have repeatedly improved systems, mechanisms and office environments. NESIC was among the first to
introduce telework and distributed work practices companywide,with the results and knowledge gained from these demonstrations during the pandemic significantly contributing to the continuation of customer business activities and the resolution ofcustomer issues.
We are actively engaging in the development of an environment that promotes co-creation of new values with customers.
The new head office, relocation to which took place in March
2023, will be positioned as a venue for demonstrating the useof advanced networks, such as local 5G, and cutting-edge DX
solutions. We will also create a new workstyle concept with aneye to 2030.
Furthermore, NESIC engages in open innovation through frank
discussions and co-creation with customers, partner companies,
and venture companies centered on the Nihonbashi Innovation-

Base, opened in 2020 as a hub for advanced technology demonstrations and innovation creation. We set up a showcase forresolving issues that consists of solutions to promote DX inlocal governments and for which we have been accepting customer tours.
We will accelerate innovation through self-implementation andco-creation to continue creating high-value-added services that
contribute to resolving issues that are increasing in diversity andcomplexity.

Nihonbashi Innovation-Base

ANNUAL REPORT 2023

61

SocialHuman Capital Initiatives

Improving Autonomy and Strengthening Adaptability
Systems and Frameworks That Realize Diverse Workstyles 
We are investing efforts in the creation of an environment thatrealizes diverse workstyles.
In July 2017, we introduced telework throughout NESIC. From
October 2019, we implemented a decentralized workstyle thatcombines working from home and commuting up to 30 minutes
to satellite offices (activity bases) established at seven locationsin the Tokyo metropolitan area. When the COVID-19 pandemic
began, we implemented a hybrid workstyle that optimally combined remote and real locations that utilized our experience todate to balance business continuity and performance.
From March 2022, we also introduced a flex-time system
without core working hours (super flex) and a system for taking
paid leave in hourly increments.

By utilizing such diverse systems and frameworks, we aresupporting the improvement of autonomy for each employee
and creating an environment that enables each individual andteam to further demonstrate their productivity.
Status of related indicators

Ratio of paid leave taken
FY2023/3

FY2027/3

65%

100%

Results

TargetInitiatives to Promote Challenges and Growth 
Career Autonomy
In line with the concept of individuals who take on challenges
and grow, adopted under our human resource development
policy, each employee considers their own career and we provide
opportunities and various systems that enable employees topersonally take on challenges to this end.
•E ducation system that enables employees to acquire theskills and mindset necessary for each level of employment, from new employees to management•P ersonnel recruitment system and “job challenge” systemthat enables employees to transfer to their preferred
department• In-house dual employment system that aims to encourage
voluntary participation in Companywide projects•E fficient reskilling support through implementation ofcareer assessment for all employees that visualizes
behavioral characteristics, strengths, and points toreinforce• Introduction of training service that enables personalization, making it possible to freely select and participate inover 16,600 courses

Example Initiative: Pitch Competition for All Employees,
Regardless of Experience and Position
We are implementing a pitch competition for new businesses as
an opportunity to take on challenges and grow, both organizationa
lly and individually, through business creation. We strive to prom
ote a corporate culture that encourages each and every employee
to change and to embrace new challenges, which is one of ourmateriality issues, by developing outgoing employees who are will
ing take on new challenges, regardless of age, experience, or posit
ion and whether they are in fields unrelated to existing businesses. In the fiscal year ended March 31, 2023, the number of propo
sals increased compared to the previous fiscal year, showing thateach initiative related to career autonomy was successful.

Status of related indicators

Number of proposals
for pitch competition(FY2023/3)

Increased
5th Platinum Career Award

We were evaluated for various initiatives that promote taking
on such challenges and growth and won the at the 5th Platinum
Career Award “Excellence Award” held by Mitsubishi ResearchInstitute, Inc. Additionally, we were selected for the iSTOXXMUTB Japan Platinum Career 150 Index, comprising 150
Japanese companies that actively and continuously carriedout platinum career initiatives, that was jointly developed by
Mitsubishi UFJ Trust and Banking Corporation and STOXX Ltd.
Through such initiatives, we aim to improve the autonomy andspirit of challenge for each employee and contribute to the resolution of social issues by connecting the education and skills
acquired through methods including reskilling to the creation ofeven higher value-added services and solutions and reinforcement of existing businesses.

62

ANNUAL REPORT 2023

40%

(Compared with FY2022/3)

iSTOXX MUTB Japan
Platinum Career 150 Index

Promotion of Health Management and Well-Being 
It is essential that employees remain healthy so that they can
maximize their personal capabilities to achieve management
strategies. We believe that employees and their families who
acquire healthy habits and maintain and improve their healthengender a state of physical, mental, and social fulfillment (wellbeing) that enriches their lives.
Having announced our Health Management Declaration under
the health management promotion system for which the
President himself is responsible, we are working on various
measures to promulgate our health management philosophy andpromote employee health.
These efforts have been recognized by external organizations,
including selection as a Certified Health and Productivity
Management Outstanding Organization in 2023 (White 500, large
enterprises category).
Status of related indicators

Japan Health MasterExamination
Number of employees
holding qualification

Key Initiatives•S upport for quitting smoking•F ree cancer screening for applicable employees• Initiatives to visualize health condition and change
behavior•D istribution of wearable terminal for interested employees (approximately 2,800 as of April 2023)•P romotion of regular exercise and autonomous
health management awareness through healthmanagement app•M easures to improve health literacy•P romotion of participation in the Japan Health MasterExamination conducted by the Japan Master of Health
Literacy Test Association•H ealth-related seminars and training held by external
experts and lecturers(Seminars about periods and male menopause held in
FY2023/3)

Approximately

Certified Health andProductivity Management
Outstanding Organization 2023

1,800

(Cumulative total as ofMarch 31, 2023)

CO
LU

Initiatives Aimed at Well-BeingMN

We carry out various activities to promote the improvement of employee well-being, as stated in ourmateriality issues. To ensure that employees have a shared awareness and understanding of wellbeing, we have formulated the WellBGs, 11 themes to work on as a company, organization, andindividuals, and are developing creative activities for their promotion.
These initiatives have been highly praised, and received the Gold Idea Award in the Organization/
Department category at the 1st WELLBEING AWARDS held by The Asahi Shimbun Company.
1st WELLBEING AWARDS

Toward a Better, Stronger Organization 
We believe that it is vital to further reinforce the connection
between NESIC and its employees by aligning Companywide
vectors to create a better, stronger organization and sustainably
grow and develop.
We are investing efforts in the creation of a forum for discussions to achieve this alignment, striving for diverse communications such as town hall meetings for open and natural

discussions between management and employees, and nationwide caravans to explain business policies. These forums also
generate empathy for our vision and mission and foster a solid
connection between NESIC and its employees, leading to theenhancement of our engagement score.
Going forward, we will accelerate all of our human capitalrelated initiatives to achieve our management strategies.
Status of related indicators

Status of related indicators• Number of town hall meetings

Engagement score status(Scores obtained from a survey conducted by global human resource
consultancy Kincentric)10(FY2023/3)
FY2021/3

FY2023/3

FY2025/3

23%

32%

50%

Results

Results

Target( This score generally
corresponds to theworld’s top 25%, andaccordingly the Tier 1
level.)•N umber of nationwide caravans to explain business policies

10(5 at local bases, 5 in Shibaura Headquarters area)(Implementation period: May 2023 to June 2023)

ANNUAL REPORT 2023

63

SocialCommunication with Stakeholders

Communication with Suppliers
The NESIC Group conducts business with full consideration
given to the effect on the environment and society as a wholethrough collaboration and co-creation with the suppliers thatcomprise NESIC’s unique supply chain, and in so doing, is able togain the trust of society and contribute to the creation of sustainable value. Based on this approach, we are learning together with
suppliers about issues faced by society and the effect businesscan have on society while continuing to engage in creating an
improved supply chain.

Main Initiatives for Suppliers•B usiness trend briefing (held once a year)•L etter of appreciation ceremony (held once a year)•S hare business information at New Year meeting(held once a year)•K ey Partner Council meeting (held four times a year)•C ompanywide safety conference (held once a year)•C o-creation pitch events (held throughout the year)•R aising awareness toward SDGs among key partners andsupporting SDG education

Supply Chain Management 
The NESIC Group requires all of its supply chain partners, including upstream suppliers, to act in a responsible manner. In specific terms, we address six key risks in cooperation with
suppliers through each stage of contracting, awareness, self
assessment questionnaires (SAQs), and on-site inspection.
Contacts and Dissemination of Information
We obtain a Declaration Concerning Responsible BusinessConduct in Supply Chains from suppliers, through which weensure their performance and compliance. As of March 31, 2023,

the NESIC Group obtained declarations from suppliers accounting
for 91% of procurement domestically and internationally.
Self Assessment Questionnaires (SAQs)
Inspections are implemented according to sustainable procurement self-check sheets on the themes of human rights, healthand safety, the environment, fair trade, and others.
We share feedback on the results and implement guidance onnecessary improvements and revisions for suppliers whose
initiatives are insufficient or are evaluated to have latent risks.

Communication with Shareholders and Investors
For further understanding of our focused businesses, we haveheld briefings led by executive general managers in charge ofbusiness units since the fiscal year ended March 31, 2020. In
June 2023, we newly established IR Day as an event for discussions with management of key segments.
We have created opportunities for discussion with investors
and analysts about improvement in terms of both financial andnon-financial business circumstances and information disclosure to enhance corporate value in addition to regular meetings
to explain businesses and their results. Such PDCA activities led
to NESIC’s selection for the “Most Liked!” IR Award at the Best IRAward 2022 hosted by the Japan Investor Relations Association.
The opinions and requests received from regular meetingsand other communications are reported to all executives, including independent directors and auditors, from the investor relations section, and we will continue to reflect these in efforts tostrengthen management and improve corporate value.

64

ANNUAL REPORT 2023

Number of IR Meetings (excluding large-scale meetings)(Meetings / people)
400

333

300
200
100
0

230
132

241

341

206

165

380

198

101

25

32

36

38

44

2019/32020/32021/32022/32023/3(FY)

Number of IR meetings
Number of meetings attended by executive management
Total number of investors and analysts

Opinions Received at Meetings with Investors and NESIC’s Responses

OpinionResponse•W e would like to see progress reports each fiscal year
for the targets adopted under the medium-term management plan.
• I am unable to visualize new focus projects adopted
under the plan, such as community development, andwould like a concrete idea of what they are.

• The progress of Groupwide financial and non-financial targets ispublished in our financial results and each report. Some targets havebeen updated based on progress and redefined to be more connected
to strategy.
• IR Day has been launched to enable executive general managers to
explain the progress of each segment in the medium-term management plan. We give explanations, including examples of initiatives, toensure the understanding of what the business aims to be. However,
we have received comments about a lack of quantitative explanations
for each segment, which we will improve in the future.

OpinionResponse• It is important to reflect ESG factors in remuneration
to ensure that business is conducted with a full commitment to ESG.

•N ESIC has decided to use non-financial indicators in addition to financial ones in director remuneration from the fiscal year ending March 31,
2024 for the purpose of further clarifying the connection between
director remuneration and corporate value and incentivizing theachievement of targets for non-financial indicators under the mediumterm management plan. ( P68)

OpinionResponse•W e would like to see quantitative disclosure of the
impact on performance brought on by risks and opportunities related to climate change to avoid misleading
TCFD disclosures with only qualitative indicators.

•A nalysis of various scenarios has been implemented to understand theimpact of climate change on business and substantiate the opportunities and risks related to climate. The impact amount of some risks isdisclosed by reporting on the results of analysis and evaluation of our
response to each risk and the accompanying opportunities for growth.
( P53–56)

OpinionResponse• I would like to see disclosure that quantitatively connects human capital, corporate value, and earnings
growth.
• Investors ultimately require corporate value, and how
human resource strategies are reflected in corporate
value should be disclosed.

• The Human Capital Initiatives section illustrates the connection
between our human capital-related initiatives and management strategies. We explain the details of goals for each initiative connected tohuman resource strategies, namely human resource development andinclusion and diversity. ( P58–63)

OpinionResponse•W e want an explanation of full-year financial results on
the same day.
• There is too wide a gap over the Japanese Golden
Week holiday between the announcement of financial
results and briefings.

•F rom the fiscal year ended March 31, 2023, we have brought forward
full-year financial results briefings to the same day as their announcement. There are still issues with disclosing Japanese and English
results on the same day, however we will work to improve this in the
future.

OpinionResponse• If management is aware of capital costs, they shouldbe thoroughly disclosed.
• I would like to hear about NESIC’s awareness of capital costs and its approach to enhancing corporate
value based on this awareness.

•E xplanation on management’s approach to capital costs is provided by
the Chief Financial Officer (CFO) in the Financial and Capital Strategy
section. ( P38–41)

ANNUAL REPORT 2023

65

GovernanceCorporate Governance
Basic Approach to Corporate GovernanceWe believe that enhancing corporate governance is critical for
NESIC to realize an affluent society with vibrant communicationand for sustaining increases in corporate value. Accordingly, in
April 2022, we established NESIC’s Basic Policy on Corporate
Governance to outline its basic approach to corporate
governance.
NESIC is able to benefit dually from being a member of the
NEC Group and being a listed company on the stock exchange( P68). We are therefore well aware of the importance of protecting the rights of general shareholders. Starting with theappointment of independent auditors in 2006, we have been
increasing the number of independent directors and auditors.
The ratio of independent outside directors is currently onethird of the total number of directors. Candidates for the positionof director are nominated with due consideration paid to diversity, such as their experience, knowledge, specialization, andgender. This structure facilitates active deliberations at meetingsof the Board of Directors, and also decision-making based on its
own business interests as an independent company.

We have adopted the company with the Board of Corporate
Auditors system. We consider that the advice of outside directors in the decision-making of important business execution
and objective audits by corporate auditors from an independent
standpoint are effective for sound management. In addition, theNomination and Compensation Committee, chaired by an independent outside director and comprising a majority of independent outside directors, has been established to deliberate andexamine the nomination and remuneration of directors from theviewpoint of ensuring transparency, validity, and objectivity.
Moreover, NESIC has established the Special Committee, comprising solely independent outside directors, to deliberate andreview material transactions or actions that conflict with theinterests of the controlling shareholder and minority shareholders in order to ensure independence from controlling shareholders and to protect the common interests of shareholders.
Starting with business execution that prioritizes compliancefirst and foremost, NESIC will examine and build an optimal corporate governance structure while listening to market demands.

History of Reinforcing Corporate Governance
2000
Clarified andstrengthened
Board of Directors’
functions

2005(year)

2010

2015

2020

2021

2023

2000 Introduced executive officer system
2005 Reduced maximum number of directors from 20 to 10. Shortened terms of directors to one year
2016 Started to evaluate the Board of Directors’ effectiveness.
Systemized training of directors and auditors

2006 First independent auditor
2008

First independent
director

Improved
managementtransparency

2015 Two independent auditors

2012

2017

Two independent directors

Three independent directors

2021

2016

Reorganized into Nomination andCompensation Committee

Set up advisory panel

2021

Established Special Committee

2008College (internal controls)

Improved
diversity on Boardof Directors*

2016

2020

Corporate management

2012

Corporate management

2018

Attorney

College (business administration)

2017

Strengthened
remuneration
system linked tocorporate value

2023

2019

Corporate
management

2017

Introduced stocklinked remuneration
systemCSR / Corporate management

Sustainability /Corporate management

2019

2023

Introduced transfer-restricted stock
remuneration system

Introduced non-financial indicators
to director remuneration* Only for independent outside directors

MaleChanges in Structure of Board of Directors (ratio of independent outside directors)
End of June 2020to present

67%
70%

End of June 201778%

End of June 201288%

End of June 2008
066

ANNUAL REPORT 2023

Inside Directors

20%

40%

60%

80%

Outside Directors

33%

Three out of nine directors (30%

Three out of ten directors (22%

Two out of nine directors (12%

One out of eight directors (100%

Female))))NESIC’s Business Execution, Management Oversight, and Internal Control Framework

Note: As of June 23, 2023

General Meeting of Shareholders
Elect / Dismiss

Elect / Dismiss

Elect / Dismiss

Management andSupervision
Audit

Board of Directors (Directors)

3 Outside Directors

2 Outside Auditors

Nomination and Compensation Committee

Supervise

Cooperate

Board of Corporate Auditors(Corporate Auditors)

Special Committee

Audit

Cooperate
Audit

Accounting Auditors

Business Execution
Executive Committee

Business Execution Committee(Executive Officers)

Management Quality Improvement Committee

Corporate Auditing DivisionCorporate Staff, and Marketing & Sales and Business
Operations Units and Divisions
Cooperate

Cooperate

Audit

Manage / Monitor
Affiliates

Hotline for Internal Reporting and Consultation (Corporate Ethics Hotline, Sexual Harassment / Human Relations Hotline)

1 Directors and Board of Directors
As the principal decision-making authority within
NESIC, the Board of Directors makes decisions onimportant matters based on the procedural rulesof the Board of Directors, and it is also positioned
as a venue for deepening discussions about thebroader direction of corporate strategy, including
the medium-term business plan. The term of
directors is set at one year to clarify the management responsibilities of directors and strengthen
the management structure.

2 Corporate Auditors and Board of Corporate
Auditors

3 Executive Officers, Executive Committee,
and Business Execution Committee

The Board of Corporate Auditors decides auditing
policies and reports on the audits performed byindividual auditors. Corporate auditors participate
in meetings of the Board of Directors and otherimportant meetings, review important documents
related to final decisions, and listen to reports on
business execution by directors, executive officers,
and employees. In this way, corporate auditors
adequately audit the directors as they performtheir duties.

We have introduced an executive officer system to
expedite business execution based on prompt
decision-making and separate management supervision from business execution. NESIC has also
formed the Executive Committee to discuss important matters related to corporate management andbusiness execution, and this committee enhances
the deliberations and ensures appropriate decisionmaking. The Business Execution Committee was
set up to report on the status our business execution, such as monitoring progress with respect tomeeting budgets adopted by the Board of Directors,
with the aim of sharing management informationand promoting execution efficiency.

4 Nomination and Compensation Committee
Objective:	The Nomination and Compensation Committee has been
established to deliberate and examine the nomination andremuneration of directors from the viewpoint of ensuringtransparency, validity, and objectivity.
Members:	Representative director and independent outside directors
Chair:	Michiko Ashizawa (independent outside director)
Matters for discussion:	The committee shall discuss the following matters andreport the contents and results of these discussions to theBoard of Directors as appropriate. However, personnel
matters related to corporate auditors shall be subject tothe consent of the Board of Corporate Auditors.
1. M
 atters concerning the personnel of the Board of
Directors and the representative director
2. M
 atters concerning the compensation and bonuses of
directors and the representative director
3. M
 atters concerning the personnel of the Board of
Corporate Auditors
4. M atters concerning the succession plan of directors, etc.
5. Important matters concerning other personnel andcompensation
No. of meetings held:	Four times a year (additional meetings are held asnecessary)

Nomination and Compensation Committee Agenda
PeriodAgendaFY2022First Meeting

1. C hair of the Nomination and Compensation Committee from
June 2022
2. Items related to director remuneration
3. Succession plan for the President(May 31, 2022)

FY2022
Second Meeting(November 30, 2022)

FY2022
Third Meeting(January 30, 2023)

FY2022
Fourth Meeting(March 29, 2023)

FY2023First Meeting(May 31, 2023)

1. R
 evision of independence standards of outside directors andoutside auditors
2. Proposal for director and auditor system from June 2023
3. Succession plan for the President
1. Director and auditor system from June 2023
2. Committee operations in the next fiscal year
3. D
 irector remuneration that utilizes non-financial indicators(brief introduction plan)
1. C onfirmation of draft proposals for appointment of directors andauditors to be submitted at the General Meeting of Shareholders
2. D irector remuneration that utilizes non-financial indicators(design for system)
1. Items regarding director remuneration
2. D irector remuneration that utilizes non-financial indicators• KPIs for each indicator and method for reflection in bonuses

ANNUAL REPORT 2023

67

GovernanceCorporate Governance

4 Nomination and Compensation Committee

5 Special Committee

New Initiatives

Objective:	The Special Committee has been established to deliberate and review material transactions or actions thatconflict with the interests of the controlling shareholder
and minority shareholders.
Members:	Independent outside directors
Chair:	Mamoru Yoshida (independent outside director)
Matters for discussion:	The committee shall discuss the following matters andreport the contents and results of these discussions to
the Board of Directors as appropriate.
1. Status of major transactions with NEC
2. C
 onclusion of contracts in regard to M&As (including
business transfers and acquisitions, divestitures, andmergers) with NEC and its subsidiaries
3. O ther important matters that may conflict with theinterests of NEC and NESIC’s minority shareholders
No. of meetings held:	As appropriate (to report on the status of transactions
with NEC once a year and when M&As and other majortransactions take place)• Introduction of non-financial indicators to director remuneration
NESIC has decided to use non-financial indicators in addition to financial ones
in director remuneration from the fiscal year ending March 31, 2024 for the
purpose of further clarifying the connection between director remuneration andcorporate value and incentivizing the achievement of targets for non-financial
indicators under the medium-term management plan. We have integrated
targets adopted under the plan relating to greenhouse gas emissions, engagement score, and the ratio of women in management positions into performance-linked compensation (bonuses).

Relationship with the Parent Company
As a member of the NEC Group, NESIC benefits greatly from being
in charge of system integration and maintenance services among
the services provided by NEC Group companies, and from being
able to tap into recognition of the NEC brand and having access tobusiness resources, such as technological capabilities and humanresources. In particular, in DX × Beyond 5G, which NESIC is focusing on, NECʼs technological capabilities are outstanding, not onlyin network technologies such as 5G, but also in facial recognition
technology in the digital realm. We intend to deploy these technologies more than ever to increase corporate value. With that
said, however, NESIC is an independent listed company thatengages in business while making business decisions on its own
accord. This translates into credibility as a listed company fromour customers and business partners, while improving the moraleof our employees and making it easier to hire talented humanresources.
With a wide range of products and services that go beyond NEC
products, NESIC is able to create added value by providing solutions in tune with the needs of its customers and society.
Independent businesses generate approximately 75% of net sales.
In particular, one of NESIC's unique strengths is its provision of the
NEC Group's relentless focus on quality to the development ofmulti-vendor services.

In order to benefit from advantages as a member of the NEC
Group and as a listed company, NESIC must have systems in place
for appropriately protecting the rights of minority shareholders. In
transactions with the parent company, the Special Committee wasestablished in the fiscal year ended March 31, 2022 comprisingexclusively independent outside directors to deliberate and review
material transactions or actions that conflict with the interests ofminority shareholders. The committee confirms the status ofmajor transactions with the NEC Group and holds pre-meeting
discussions regarding important individual proposals, reporting
the results to the Board of Directors.
The Special Committee decides whether business transactions
with the NEC Group are verified to avoid conflicts of interest. Thisis accomplished by determining that business transactions withthe parent company are based on proper negotiations while referencing prevailing market prices and that terms and conditions areon equal ground with other business partners.
As a listed company, NESIC engages in dialogue with shareholders and investors to keep their opinions and expectations in mind
when managing business. We believe this effort makes NESIC
stronger and leads to higher corporate value.

Independent Outside Directors and Auditors
To further strengthen its corporate governance, since 2006,
NESIC has sequentially nominated qualified independent directors and auditors who do not have any conflicts of interest withgeneral shareholders. NESIC has a total of five independent
directors and auditors, comprising three directors (out of nine
directors) and two auditors (out of four auditors), who satisfy therequirements for independent directors and auditors, as definedby the Tokyo Stock Exchange. One third of its directors are independent outside directors and over 20% are women.
The independent outside directors and auditors have diverse
knowledge and experience in corporate management,

68

ANNUAL REPORT 2023

accounting, business management, sustainability management,
and corporate governance.
Independent outside directors provide advice and make decisions from the perspective of an outsider, while independent
outside auditors conduct audits of business execution by directors from a fair and objective standpoint as an outsider. Both
independent outside directors and auditors function adequately
in providing highly effective supervision of the business execution side.

Name

Reason for Nomination

Main Concurrent
Positions*2

Attendance during FY2023/3
Board ofDirectors

Board ofCorporate Auditors

MichikoAshizawa

Ms. Michiko Ashizawa has an abundance of experience, including business experience as a certified public accountant at anaudit firm and engaging in revitalization projects of major
companies at Industrial Revitalization Corporation of Japan.
She also possesses expertise in business administration as awhole, mainly researching M&A for corporate restructuring andserving as an instructor at a graduate school. The Company
believes she will continue to be capable of playing an appropriate role in matters such as giving advice and providing supervision relating to management of the Company from an objective
standpoint by making use of her extensive experience in financeand management, and has been appointed for these reasons.

·A ssociate Professor,
School of Economics
and Business
Administration,
Yokohama City
University(scheduled to retire inAugust 2023)·A ssociate Professor,
Graduate School ofInternational
Management,
Yokohama City
University (scheduled
to retire in August
2023)

13/13

—

MamoruYoshidaAfter joining a major electrical appliance manufacturer,
Mr. Mamoru Yoshida demonstrated excellent management
skills and strategy building ability through his career as manager of various areas, including overseas business. He also
served as a person in charge of technology and gained extensive knowledge and experience in technology management,
manufacturing, marketing, etc. Since 2016, he had promoted
corporate management governance reform as Senior Audit &Supervisory Board Member. The Company believes he willcontinue to be capable of playing an appropriate role in matterssuch as giving advice and providing supervision relating tomanagement of the Company from an objective standpoint bymaking use of his manufacturing knowledge and extensive
experience in corporate management, and has been appointed
for these reasons.

—

12/13

—

MikikoMorimoto*1

Ms. Mikiko Morimoto, after gaining experience in macroeconomic research and analysis and fund management at privatecompanies such as private think tanks, and consulting in areas
such as corporate and organizational sustainability, the promotion of SDGs, and ESG response, established a consulting
company that provides comprehensive support for sustainability management, at which she serves as CEO. The Company
believes she will be capable of playing an appropriate role inmatters such as giving advice and providing supervision relating
to management of the Company from an objective standpointby making use of her experience in the economics and financefields as well as her high level of knowledge in sustainability,and has been appointed for these reasons.

·C EO, karna ltd.
·O utside Director,
ITOHAM YONEKYUHOLDINGS INC.
(scheduled to beappointed inJune 2023)

—

—

Akiko
Isohata

Ms. Akiko Isohata has specialized knowledge of the Companies
Act and corporate governance, and the like, and has a wealth ofexperience as a lawyer in the field of general corporate legal
affairs. The Company believes she will audit the legitimacy ofits business operations from a fair and objective standpoint bymaking use of her knowledge and experience, and has been
appointed for these reasons.

· Partner, Tokyo
Hatchobori Law Office

11/11

10/10

Koji
Inagaki*1

Mr. Koji Inagaki has been engaged in audit work for many years
at an audit firm as a certified public accountant, has deep
knowledge of finance and accounting, and in addition, hasgained a wealth of experience in management, including overseas operations and promotion of innovation by using digitaltechnology, as Deputy CEO of an audit firm. The Company
believes he will be capable of auditing the legitimacy of its
business operations from a fair and objective standpoint bymaking use of his knowledge and experience, and has been
appointed for these reasons.

·C ertified public
accountant——*1 Ms. Mikiko Morimoto was newly appointed as a director and Mr. Koji Inagaki as a corporate auditor at the 91st General Meeting of Shareholders held on June 23, 2023.
*2 Main concurrent positions are as of June 23, 2023.

ANNUAL REPORT 2023

69

GovernanceCorporate GovernanceInvigorating Discussions by Board of Directors / Support System for Independent Directors and Auditors
We recognize that all members of the Board of Directors, including outside directors, must make decisions based on NESIC’s
own management from the standpoint of protecting minority
shareholders in a venue conducive to raising questions andhaving constructive dialogues. We are therefore taking the following steps to strengthen systems that support active deliberation at the Board of Directors’ meetings.
Before meetings of the Board of Directors are convened,
NESIC distributes briefing materials to participants beforehandand holds pre-meeting briefings each month (lasting about threehours) for independent directors and auditors with the aim ofenhancing deliberations by the Board of Directors. At thesebriefings, participants receive explanations of the agenda items
before the Board of Directors and are updated on NESIC’s­current business execution. In addition to these venues forindependent directors and auditors to engage with NESIC, opportunities are provided for information to be exchanged among
only the independent directors and auditors. Advice for theCompany’s management that was discussed at these exchanges
is then passed onto the Representative Director and reflected in
NESIC’s management.
Moreover, to further improve their skills, all directors andauditors are given opportunities to obtain the necessary information and knowledge to management and to supervise management. Training sessions on the theme of management strategies
and site visits were held in the fiscal year ended March 31, 2023.
Independent directors and auditors have adequate access to
information on NESIC’s history, business outline, financial information, business strategy, business environment, competitive
situation, and internal organizations.

Policies and Procedures for Nominating Directors
Nomination Policies and Procedures

When nominating candidates for director, the Board of Directors
makes decisions after a comprehensive evaluation based on
finding the right person for the job, taking into account thedesired qualifications, while seeking individuals who have skills
and experience to lead management and can contribute to thedevelopment of our business.
Headed by an independent outside director, the Nomination andCompensation Committee, which consists of a majority of independent outside directors, discusses nominations and voices theiropinions. The Board of Directors deliberates on the agenda fornominating directors, and the Board of Auditors deliberates andconsents to the nomination of corporate auditors, which aresubmitted for approval by the General Meeting of Shareholders.

Message from a Newly Appointed Outside Director
I recognize NESIC’s steady progress toward building a businessfoundation for the creation of new and unique value, leveraging
strengths that include advanced communication technology
and broad business areas, and looking at areas of growth froma long-term perspective based on management policies thatwelcome ever-changing culture while constantly anticipating
the times ahead.
Amid dramatic changes in values and the social environment,
and with the rapid popularization of new workstyles, an essential factor in realizing a sustainable society where everyone canwork proactively is strengthening our capacity to resolve issues
through the self-implementation that NESIC aims for under the
medium-term management plan Shift up 2024. In conducting
self-implementation, we must be able to develop a field in which
diverse human resources can play an active role, and proactively carry out dialogues and engagement to connect to opportunities, in addition to the obvious pursuit of advanced
governance and appropriate risk awareness.

70

ANNUAL REPORT 2023

Dismissal Policies and Procedures

On dismissing a director, NESIC’s Board of Directors explains thereasons for their dismissal to the Nomination and Compensation
Committee, which mainly consists of independent outside directors, in the event that a director is not adequately carrying out
their duties. After receiving suitable advice, the Board of
Directors makes a decision and moves to dismiss the director,
which requires approval by the General Meeting of Shareholders.

I have supported companies in all aspects of sustainability,
including the themes of ESG management, integrated thinking,the environment, human rights, and diversity, equity, and inclusion (DEI), through my experience working in the economics
and finance domains at a think-tank and an asset managementcompany and my management of a consulting company.
Maintaining a broad perspective to respond to the expectations of all diverse stakeholders, NESIC will strive to contributenot only to creating value for society but also its sustainablegrowth through constructive discussions with members of theBoard of Directors.

Mikiko Morimoto
Outside Director

Director Remuneration
Basic Policy on Director Remuneration 
NESIC’s remuneration systems reflect work responsibilities andresults. Remuneration for directors is set at an appropriate level
and linked with the business performance, etc., in order to
Basic Policy on Director Remuneration <Calculation Method for Remuneration>(As of the Fiscal Year Ended March 31, 2023)•F ixed compensation (monthly compensation)
Fixed compensation is paid each month as a salary in amounts
based on basic remuneration commensurate with rank, duties,
and responsibilities, plus consideration for the individual performance of each director.
•P erformance-linked compensation (bonuses)
Bonuses are paid at a certain time every year in amounts
decided for each individual based on their rank and evaluation of
performance. Growth in net sales and operating income is usedin this calculation because they are key indicators for achieving
NESIC’s medium-term management plan. The base amount isequivalent to 40% of the bonus paid in the previous fiscal year
multiplied by year-on-year growth in net sales, and 60% of thebonus paid in the previous fiscal year multiplied by year-on-year
growth in operating income.
Indicator

Fiscal year ended
March 31, 2022

Fiscal year ended
March 31, 2023

Year-on-year
growthNet sales(¥ billion)

310.3

320.8

103.4%

Operating income(¥ billion)

23.2

22.8

98.1%

•N
 on-monetary compensation (stock compensation)
At a certain time each year, directors receive restricted-transfer
stock remuneration based on their rank with the objective ofproviding incentive for constantly improving NESIC’s corporate
value and aligning the values of directors with those ofshareholders.
<Decision-making process>•A t the Board of Directors’ meeting held in February 22, 2021,
NESIC passed a resolution governing how to decide the particulars of remuneration for each director.
Individual compensation of directors for the fiscal year underreview is determined based on the decision-making policy
approved by the Board of Directors and by respecting the viewsof the Nomination and Compensation Committee, which comprises a majority of independent outside directors and ischaired by an independent outside director. The Board of
Directors has determined that the details of individual director

maintain competitiveness in the industry and function as anincentive to improve business performance.

compensation for the fiscal year under review is in line with thedecision-making policy.
•D ecisions on the amount of fixed compensation (monthly
compensation) of directors and the evaluation and allocation of
bonuses based on the performance of the divisions of which
the director is in charge, excluding directors who do not engage
in business execution, are delegated by the Board of Directors
to President and Representative Director Yushi Ushijima. The
reason for delegating this authority is that NESIC has determined that the President and Representative Director is best
suited to evaluate the performance of the business divisionsof each director, while extensively monitoring NESIC’s overall
performance.
Decisions on delegated matters are made within the boundaries of the total amount of compensation as determined byresolution of the General Meeting of Shareholders, based on
the results of deliberations by the Nomination andCompensation Committee.
Stock-based compensation shall be granted in accordancewith the rank of each director and the number of shares to beallocated to individual directors shall be decided by the Boardof Directors.
Breakdown of Director Remuneration(excluding directors in non-executive positions)Fixed compensation

Restricted-transfer
stock remuneration

38%(long-term incentives)

Fiscal year
ended
March 31,2023

13%
Performance-linked
remuneration(short-term incentives)

49%
Remuneration for directors not involved in business execution
is paid as a monthly fixed amount that is not linked to businessperformance due to their role of supervising business execution.

ANNUAL REPORT 2023

71

GovernanceCorporate GovernanceDirector and Auditor Remuneration in the Fiscal Year Ended March 31, 2023
Breakdown of total remuneration (¥ million)

Total remuneration(¥ million)

Directors
Outside directors
Auditors
Outside auditors
Total

Fixed compensation(monthly)

Performance-linked
compensation (bonuses)

Non-monetarycompensation (stocks)

Number of eligible
directors (people)

206

93

88

23

9

24

24

—

—

3

44

44

—

—

5

10

10

—

—

3

250

137

88

23

14

34

34

—

—

6

Notes: 1. Directors who also serve as employees do not receive a salary (including bonus) as an employee.
2. As of the end of the fiscal year under review, there were nine directors (three of whom are outside directors) and four corporate auditors (two of whom are outside auditors).
3. D
 irectors (excluding directors in non-executive positions) receive bonuses as performance-linked compensation and stock with transfer restrictions as non-monetarycompensation.

Shares Held for Strategic Reasons
NESIC does not hold shares of other listed companies for the
purpose of strategic shareholdings in principle. However, we
exceptionally hold shares of other companies as strategic shareholdings if we judge that it is necessary for business cooperation with other companies and business relationships withinvestees. In such cases, the Board of Directors annually examines the appropriateness of holding individual strategic shareholdings by examining whether the purpose of holding thesestrategic shareholdings is appropriate, and whether the benefits
and risks of holding them are commensurate with the cost ofcapital. We consider the sale of these strategic shareholdingsthat are judged to be dilutive as a result of the verification andreduce the amount of the strategic shareholding. In the fiscal

year ended March 31, 2023, the Board of Directors’ meeting heldon May 2022 received reports and debated the status of strategic shareholdings.
NESIC appropriately exercises voting rights for these strategic
shareholdings after comprehensively determining whether thecontent of such proposals will contribute to the enhancementof the corporate value of the investee company and the NESIC
Group over the medium-to long-term.
Strategic shareholdings (as of March 31, 2023)

Four listed companies¥2,238 million

Evaluation of the Board of Directors’ EffectivenessTo improve the functions of the Board of Directors, since the fiscal
year ended March 31, 2016, NESIC has evaluated and examinedthe effectiveness of the Board of Directors. Below, we summarize
the results of the effectiveness evaluation and the process ofanalysis conducted in the fiscal year ended March 31, 2023.
Improvement Activities Undertaken in
Fiscal Year Ended March 31, 2023 
In the fiscal year ended March 31, 2023, we aimed to enhance
discussions related to the progress of the new medium-term
management plan and discussions related to sustainability,
carbon neutrality, and engagement, which we have adopted as
non-financial targets under this plan. At the same time, NESIC took
measures to strengthen its provision of information and support
system in order to ensure appropriate monitoring of businessexecution and decision-making (held multiple discussions on key
issues, enhanced the quality of preliminary briefings for the Boardof Directors, and improved the swift provision and format of documentation to board members). Additionally, we considered measures to enhance the effectiveness of the Special Committee,
which acts as an advisory body to the Board of Directors.

72

ANNUAL REPORT 2023

Effectiveness Evaluation in the Fiscal Year Ended March 31, 2023 (1) Analysis and evaluation process
The evaluation of the Board of Directors’ effectiveness for the
fiscal year ended March 31, 2023, consisted of a questionnaire
given to all directors and auditors, and individual interviews basedon the results of the questionnaire. The questionnaire and individual interviews served to clarify the roles and primary functionsof NESIC’s Board of Directors, and elicited opinions about theissues based on functions that should be emphasized and thestatus and effectiveness of implementation of improvement
measures. Based on the outcome of this process, specific measures for improvement are discussed in pre-meeting briefings andmeetings of the Board of Directors.
(2) Summary of results of evaluation
The following is an overview of the evaluation of the effectivenessof the Board of Directors for the fiscal year ended March 31, 2023.
1 Although the Board of Directors’ discussions focus on “theroles and functions of NESIC’s Board of Directors,” which wasformulated in accordance with the evaluation of the effectiveness for the fiscal year ended March 31, 2021, we must continue to review its operations in order to strengthen functions
from this perspective.

2 The following issues, which were identified in the evaluation ofeffectiveness in the previous fiscal year, showed overall
improvement due to the implementation of planned
countermeasures.
•R eview the annual agenda for discussions, the methods for
managing agenda items, and the format and content of reports
from the standpoint of further demonstrating the roles andfunctions to be prioritized by the Board of Directors•A nalyze business strategy risks and operational risks andidentify issues and countermeasures•S trengthen discussions of the Nomination and Compensation
Committee and Special Committee•S trengthen provision of information and support system forensuring appropriate monitoring of business execution anddecision-making (continue to hold multiple discussions on key
issues, review methods for providing briefings and materials in
advance to board members and system for following up on
matters raised at the Board of Directors’ meetings, and improve
the training program for all board members, etc.)
Based on these results, we believe the Board of Directors is
operating appropriately and effectively.

(3) Future measures
To continue to improve the effectiveness of the Board of Directors,
the following measures will be taken in the fiscal year ending
March 31, 2024.
•E nhance discussions and examinations related reinforcing governance in the future (such as the role and function of the Board of
Directors and skills required of directors)•F ormulate reports and agenda items for each key theme in theannual agenda for discussions and hold planned discussions.
Additionally, enhance discussions by the Board of Directors
through off-site meetings and discussions of key themes held byboard members•A im to strengthen provision of information and support systemfor ensuring appropriate monitoring of business execution anddecision-making (continue to hold multiple discussions on key
issues, review methods for providing briefings and materials in
advance to board members and system for following up on
matters raised at the Board of Directors’ meetings, and improve
the training program for all board members, etc.)•S et Group governance as a key risk for NESIC as a whole to beaddressed and report the status of these activities to the Boardof Directors

Matters for Discussion at the Board of Directors’ Meetings
The Board of Directors convenes once a month, in principle, toactively discuss a variety of matters for two to three hours ingeneral (five to six hours if the preliminary meetings involving
independent officers are included). In addition to matters forresolution and reporting, “matters for discussion” were established
PeriodKey Issues

First
Quarter• Interim reports on the medium-term business plan(matter for resolution)• Reporting on the status of business execution (Business
Design Operations Unit; matter for reporting)•R eporting of the status of cross-shareholdings (matterfor reporting)•P roposals for disclosing information based on the Task
Force on Climate-related Financial Disclosures (TCFD)(matter for reporting)•S ubmission of Corporate Governance Report (matter forreporting)•R eporting on the implementation of the Nomination andCompensation Committee (matter for reporting)in order to strengthen discussions on key matters concerning thebusiness strategy and governance. During the year, discussions
were also held on the evaluation of the effectiveness of the Boardof Directors and engagement.

PeriodKey Issues

Third
Quarter•R eporting on the status of business execution(Marketing & Sales Operations Unit, back office personnel, Business Design Operations Unit, and DX Solutions
Business Unit; matter for reporting)•S tatus of initiatives related to sustainability promotion(matter for reporting)•R eporting on the implementation of the Nomination andCompensation Committee (matter for reporting)•R eporting on the status of business execution (DXSolutions Business Unit, Environmental & Social
Solutions Business Unit, Network Solutions Business
Unit, and Corporate Auditing Division; matter forreporting)
SecondQuarter

FourthQuarter•R eporting on progress of the medium-term businessplan (matter for reporting)•R eporting on the status of business execution(Environmental & Social Solutions Business Unit,
Network Solutions Business Unit, Marketing & Sales
Operations Unit, and Corporate Auditing Division; matterfor reporting) arbon neutrality initiatives (matter for reporting)•C•E valuation of the effectiveness of the Board of Directors(matter for discussion)•R eporting on the operational status of the internal
control system (matter for reporting)•R eporting on the implementation of the Nomination andCompensation Committee (matter for reporting)

ANNUAL REPORT 2023

73

GovernanceDirectors & Corporate Auditors (As of June 23, 2023)
Directors

Yushi Ushijima

Hiroyuki Sekizawa

Osamu Kikuchi

Michitaka Ono

President (Representative
Director) and Chief Executive
Officer (CEO)Senior Vice President,
Member of the Board andChief Financial Officer (CFO)

Senior Vice President,
Member of the Board andChief Digital Officer (CDO)

Member of the Board

Michiko Ashizawa

Mamoru Yoshida

Mikiko Morimoto

Toru Kawakubo

Member of the Board(Outside Director)

Member of the Board(Outside Director)

Member of the Board(Outside Director)

Member of the Board

Naoki Iwasaki

Yohei Otani

Akiko Isohata

Koji Inagaki

Corporate Auditor (Full-Time)

Corporate Auditor (Full-Time)

Corporate Auditor(Outside Auditor)

Corporate Auditor(Outside Auditor)

Hiroto Sugahara
Member of the Board

Corporate Auditors

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ANNUAL REPORT 2023

Main Skills, Experience, and Expertise That NESIC Expects Of Members Of The Board And Corporate Auditors
Particular area that NESIC expects for Directors and Corporate Auditors
Name

Independence

Corporate
Management

Technology

Sales andMarketingGlobalFinance andAccounting

Sustainability
and ESGYushi Ushijima
Hiroyuki Sekizawa
Osamu Kikuchi
Michitaka Ono
Michiko Ashizawa
Mamoru Yoshida
Mikiko Morimoto
Toru Kawakubo
Hiroto Sugahara
Naoki Iwasaki
Yohei Otani
Akiko Isohata
Koji Inagaki
Note: These are the skills, experience, and expertise particularly expected of each Director and Corporate Auditor, and do not indicate all the skills, experience, and expertise possessed by each Director and Corporate Auditor.

Specific details of the skills, experience, and expertise expected of members of the board and corporate auditors
Item

Specific details

Corporate management

Experience in corporate management as a company representative, etc., or a high level of specialized
knowledge in management strategy

Technology

Experience as a manager in the technology strategy field in relation to the business of the Company(Network Solutions Business, Environmental & Social Solutions Business, and DX Solutions Business)

Sales and marketing

Experience as a manager in business involving analysis of the business environment and market, as
well as the formulation of business models, etc.

GlobalExperience as a manager in corporate overseas business or as an executive, etc., at an overseas subsidiary

Finance and accounting

Experience as a manager involved in accounting and finance, practical experience as an accountant at
an audit firm or accounting firm, or experience equivalent to thisSustainability and ESG

Experience in corporate management strategy and policy proposals concerning sustainability, ESG,
SDGs, etc., a high level of specialized knowledge in governance and risk management, etc., or experience as a corporate auditor or audit committee member

ANNUAL REPORT 2023

75

Corporate Data
Consolidated Ten-Year Summary
FY2014/3

FY2015/3

FY2016/3

FY2017/3

Orders received¥280,071¥299,097¥274,946¥279,241

Net sales

270,326

292,164

279,961

257,912Gross profit

44,69048,11045,162

42,585

Operating income

14,41816,158

14,111

9,974

5.3

5.5

5.0

3.9

8,257

7,791

5,996

6,549

Total assets*2¥189,059¥201,904¥196,505¥197,386

Net assets

89,166

94,173

94,397

96,674

Owner’s equity

87,51492,55992,73894,611

Cash flows from operating activities¥23,313¥ 2,460¥ 9,435¥22,634

Cash flows from investing activities(5,504)(3,929)(2,822)(2,697)

Free cash flows

17,809

(1,469)6,613

19,936

Cash flows from financing activities(3,824)(4,127)(1,402)(4,144)

Cash and cash equivalents at end of year

44,43438,95143,88959,648EPS¥ 55.35¥ 52.24¥ 40.27¥ 43.98

BPS

586.69621.54622.75635.34

20.0

21.3

23.3

24.0

ROE*4

9.6

8.7

6.5

7.0

ROA*5

8.2

8.3

7.1

5.1

Owner’s equity ratio

46.3

45.8

47.2

47.9

DOE ratio

3.5

3.5

3.8

3.8

Payout ratio

36.1

40.8

57.9

54.6

7,164

7,260

7,464

7,572

49,773,807

49,773,807

49,773,807

49,773,807

Performance Indicators (Millions of yen)

Operating income to net sales (%)
Net income attributable to owners of the parent
Financial Condition (Fiscal year-end) (Millions of yen)

Performance Indicators (Millions of yen)

Per-Share Indicators (Yen)*3

Cash dividends
Key Indicators (%)

Other (Fiscal year-end)
Number of employees
Number of shares outstanding*1 U
 .S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥133.53 = US$1.00 as of March 31, 2023.
*2 P artial revisions to accounting standards for tax-benefit accounting (Corporate Accounting Standard No. 28, February 16, 2018) have been adopted from FY2019/3.
Accordingly, the figures for FY2015/3 to FY2018/3 have been retroactively adjusted to comply with this revision.
*3 O
 n June 1, 2020, NESIC conducted a 3-for-1 stock split of its common shares. The figures for per-share indicators for fiscal years prior to FY2020/3 have been retroactively
adjusted to reflect this stock split.
*4 R
 OE (Return on Equity): Net income attributable to owners of the parent / Owner’s equity during the term [Average of owner’s equity at the beginning of the term and at the end of
the term] x 100*5 R
 OA (Return on Assets): Ordinary income / Total assets during the term [Average of total assets at the beginning of the term and at the end of the term] x 100

76

ANNUAL REPORT 2023

FY2018/3

FY2019/3

FY2020/3

FY2021/3

FY2022/3

FY2023/3(Thousands of U.S. dollars)*1¥287,831¥284,739¥304,978¥336,877¥336,759¥356,043$2,666,389

267,939

277,949

303,616

339,109

310,334

320,8022,402,471

44,26547,681

54,374

63,92963,47366,545498,352

11,057

12,774

16,24525,56323,181

22,751

170,381

4.1

4.6

5.4

7.5

7.5

7.1

—

7,357

8,885

9,422

15,74515,021

13,813

103,444(Thousands of U.S. dollars)*1¥207,643¥216,171¥230,244¥250,338¥254,701¥267,000$1,999,550

101,732

107,608

113,510

127,117138,149

145,714

1,091,245

99,473

104,888

110,366

123,682

134,742

141,242

1,057,754(Thousands of U.S. dollars)*1¥ 4,779¥ 8,396¥12,935¥17,383¥22,674¥ 2,816$ 21,088(2,802)(5,604)(6,726)(4,289)(7,162)(4,934)(36,950)

1,976

2,791

6,208

13,093

15,511(2,117)(15,854)(4,366)(5,615)(2,300)(2,388)(4,267)(9,243)(69,220)

57,28154,35458,321

68,426

79,732

68,549513,360(Thousands of U.S. dollars)*1¥ 49.41¥ 59.67¥ 63.28¥105.73¥100.85¥ 92.74$0.69

668.01704.40741.12830.47904.66948.23

7.10

24.7

26.0

27.3

35.0

43.0

46.0

0.34

7.6

8.7

8.8

13.5

11.6

10.0

—

5.4

6.1

7.1

10.6

9.3

8.8

—

47.8

48.5

47.9

49.4

52.9

52.9

—

3.8

3.8

3.8

4.5

5.0

5.0

—

49.9

43.6

43.2

33.1

42.6

49.6

—

7,657

7,743

7,818

7,537

7,675

7,825

—

49,773,807

49,773,807

49,773,807

149,321,421

149,321,421

149,321,421—

ANNUAL REPORT 2023

77

Corporate Data

Stock Information (As of March 31, 2023)
Number of Shareholders

16,038

Common Stock Authorized

300,000,000 shares

Issued149,321,421 shares

Trading Unit

100 shares

Major Shareholders (Top 10)
Name of Shareholder

Number of
Shares Held(Thousands)

Percentage ofTotal Shares
Outstanding

NEC Corporation

57,32038.48

Custody Bank of Japan, Ltd.
(Sumitomo Mitsui Trust Bank, Limited beneficiary trust account,
NEC Corporation retirement benefit trust account)

19,200

12.89

The Master Trust Bank of Japan, Ltd. (Trust account)

12,035

8.08

Custody Bank of Japan, Ltd. (Trust account)

7,013

4.71

STATE STREET BANK AND TRUST COMPANY 510312

4,034

2.71

Sumitomo Realty & Development Co., Ltd.

3,600

2.42

STATE STREET BANK AND TRUST COMPANY 510311

3,269

2.20

Employees’ Stock Ownership Plan

1,853

1.24

Morgan Stanley MUFG Securities Co., Ltd.

1,288

0.86

GOVERNMENT OF NORWAY

1,231

0.83

Notes:*1 S
 hares held Custody Bank of Japan, Ltd. (Sumitomo Mitsui Trust Bank, Limited beneficiary trust account, NEC Corporation
retirement benefit trust account) give NEC Corporation material voting rights because NEC Corporation has contributed sharesof NESIC to its retirement benefit trust. The percentage of material voting rights held by NEC Corporation as of March 31, 2023
was 51.41%.
*2 The number of shares held is rounded down to the nearest thousand.
*3 The percentage of total shares outstanding is calculated based on the number of shares excluding treasury stock (366,954
shares) and shares that are in the company’s name in the shareholder registry but are not substantially owned (300 shares) andshown to two decimal places.

Breakdown of Shareholders by Type
(%)

100

80

0.28
7.38

0.27
6.85

17.20

20.00

0.26
10.29
19.22

0.25
8.06

0.25
7.85

18.32

21.73

60
41.15

41.15

41.25

41.12

41.13

40
0.44
20

33.56

0.23

0.96

1.42

1.61

31.49

28.01

30.82

27.43

2020/32021/32022/32023/30
2019/3Financial institutions
Investment securities firms
Other institutions
Foreign entities (institutions, individuals)
Individuals and others
Treasury stock

78

ANNUAL REPORT 2023

(FYE)

Corporate Overview (As of March 31, 2023)
Name	NEC Networks & System Integration
Corporation

Major Consolidated Subsidiaries

Head Office	3-9-14 Shibaura, Minato-ku, Tokyo
108-8515, JapanJapan
NEC Magnus Communications, Ltd.
NICHIWA Co.
NEC Net Innovation, Ltd.
NESIC advanced aquaculture, Inc.
NetsForest RAS Technologies, Inc.
Q&A Corporation
K&N System Integrations Corporation
NEC Networks & System Integration Services, Ltd.

https://www.nesic.co.jp/english/
Established

December 1, 1953

Registered as a
Stock Company

November 26, 1953

Capital¥13,122,000,000

Number of Employees 5,176 (Non-consolidated),
7,825 (Consolidated)
Fiscal Year

April 1–March 31

Ordinary General
Shareholders Meeting Annual meeting held in June
Listing	Tokyo Stock Exchange, First Section(Ticker Code: 1973)
Accounting Auditor

Overseas
NESIC BRASIL S/A
NESIC (Thailand) Ltd.
NESIC PHILIPPINES, INC.
Networks & System Integration Saudi Arabia Co. Ltd.
ICT Star Group Myanmar Co., Ltd.

KPMG AZSA LLC

Transfer Agent	Sumitomo Mitsui Trust Bank, Limited
1-4-1, Marunouchi, Chiyoda-ku,
Tokyo 100-8233, Japan

Outside Evaluations / Selection of Indices

JPX-Nikkei 400

FTSE4Good Index Series

FTSE Blossom Japan Index

MSCI Japan Empowering
Women (WIN) Select Index*

SNAM Sustainability Index

iSTOXX MUTB Japan
Platinum Career 150 Index

DX Certification

Certified Health andProductivity Management
Outstanding Organization 2023

“Platinum Kurumin”
certification markHighest-grade “Eruboshi”
certification*	THE INCLUSION OF NEC Networks & System Integration Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMESHEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF NEC Networks & System Integration Corporation BY MSCI OR ANY OF ITS AFFILIATES.
	THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITSAFFILIATES.

Editorial Postscript
Thank you for reading to the end of Annual Report 2023.
We have adopted a vision for realizing a sustainable society with prosperity that resonates for all, in other words, a “Sustainable
Symphonic Society,” by 2030. In this report, we disclosed our progress in Shift up 2024, which is a vital step in the achievement of thisvision, and reported results from the first year of the plan and issues to be addressed for further growth going forward.
Furthermore, we have made improvements to disseminate more valuable information based on requests from society and the opinions of our stakeholders regarding strategies for implementing sustainability management, including non-financial initiatives, such as
further enhancing the disclosure of ESG information, namely our response to climate change and human capital initiatives.
We will continue moving forward, further shifting up to realize our vision for society, and for NESIC.

ANNUAL REPORT 2023

79

NEC Networks & System Integration Corporation
3-9-14 Shibaura, Minato-ku, Tokyo 108-8515, Japan
Telephone: +81-3-4212-1000
Website: http://www.nesic.co.jp/english/

231100400-EI-00