Shift up
Elevating society

ANNUAL REPORT 2022
NEC Networks & System Integration Corporation

NEC Networks & System Integration Corporation (NESIC) has established its new medium-term management plan Shift up 2024, with its
sights set on realizing a Sustainable Symphonic Society by 2030.
Under Shift up 2024, we will form even stronger relationships with ourcustomers and evolve our business model by continuing to advanceour transformation while working toward the realization of digitaltransformation (DX) and Beyond 5G. In these ways, we will continue
to strive to create new value for society.

BeyondBorders
2021
ANNUAL REPORT 2022

Shift up 2024
Elevating society
DX

Beyond 5G(next generation
networks)

Sustainable
Symphonic Society
Realization of a sustainable society
with prosperity that resonates for all

Provide services that anticipate future changes in society and technologies

Decarbonization

Energetic
communities

Smart industry

Work / lifestyles withgreater freedom

Safety andsecurity

HealthWell-Being

ANNUAL REPORT 2022

01

Our History

History of Honing Core
Competence

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

1953–

1960s–

Founding:
Telecommunication
Construction

Overseas Infrastructure
Construction

Technological
Capabilities &Credibility

Technological
Capabilities &Credibility

1990s–
System Integrator

Nationwide
Business
Capabilities

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. The
Company 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 symbolic of the NEC Group.

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

Main Initiatives 1950s – 1990sN ippon Electric Installation Company established in a spin-off from NEC CorporationC onducted first overseas project (construction and installation of switching equipmentin the Philippines)C onstructed the first television broadcasting facility AC onstructed satellite telecom infrastructure for the 1968 Olympic Games,
in Mexico City BC onstructed microwave telecom infrastructure for five Central American countries(simultaneous construction in multiple countries)A cquired special construction business and general construction business licenses forseven categories of construction businessE stablished the first overseas affiliate, in Brazil

C hanged the company name to NEC System
Integration & Construction, Ltd.
L
 isted on the Tokyo Stock ExchangeS trengthened sales structure for private sector
by creating a specialized divisionR einforced nationwide network by setting up
a business unit for regional sales
CB usiness for New Common Carriers (NCCs) took on
significant scale and received major orders from new private communications
companiesC onstructed communications equipment on Mt. Everest (enabling broadcast fromthe peak of Mt. Everest for the first time)E xpanded the enterprise system integration business C
Established S-iDC (Strategic Internet Data Center), NESIC’s first data center

A

B

Net Sales
Changes in the Business Environment

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 infrastructure

02

Over ¥10 billion
1974

ANNUAL REPORT 2022

Expansion in demand for telecommunications
infrastructure construction worldwide

Birth of NCC

Over ¥200 billion
1997

Technological
Capabilities &Credibility
2010s–

2020s–

Solution Provider

Toward Becoming
a Communication
Services Orchestrator

Nationwide
Business
Capabilities

Business
Creation
Capabilities

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
through turning 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.

Main Initiatives 2000s – 2020sE stablished CVC Fund to create new businesses through open innovation withstartup firmsE stablished K&N System Integrations Corporation as a joint venture with KDDI
Corporation in mobile network construction GL aunched joint business in low-power, wide-area (LPWA) communications protocol
for IoTE ntered onshore fish farming business utilizing ICTR ealigned head office to challenge itself to new work styles including disributed
work locations
M oved to the newly established prime market on Tokyo Stock Exchange, Inc.

C hanged the company name to NEC Networks & System Integration CorporationL aunched EmpoweredOffice work-style innovation solutions business andimplemented it internally in certain sections DEstablished nTOC (Network Total Operation Center) EP racticed EmpoweredOffice in all sections upon transfer of head office toBunkyo Ward Tokyo (Iidabashi Head Office)I mplemented initiatives in high-speed mobile networks andnext-generation broadcastingNESIC’s industry sector classification in the stock market changed from“construction” to “information & communication”E stablished sDOC
(Service Delivery Operations Center) FL aunched MVNO service for IoTI ntroducted telework system Companywide (spawned from a “Women’s Project
Experiment” idea created by female employees)

D

E

F

G

300 billion

Over ¥

2020

2000s

2010s

Advance of internet protocol (IP) and broadband
networks

Expansion of the use of cloudIoT and Fourth Industrial Revolution

Integration of communications and broadcasting
ANNUAL REPORT 2022

03

NESIC’s Strengths
The changes in our internal and external business environment have changed 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 ourstrengths into five categories.
At NESIC, our extensive line of business offers everything from construction to operation, and support services for avariety of customers ranging from corporations to government agencies. The diverse human resources underpinningthese businesses have refined their advanced technical skills through co-creation and self-implementation, a key element of our ability to develop businesses.
Moreover, because the Company urges and values efforts that promote interaction with other companies and thosein advanced 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

Technological capability

In addition to the construction services we haveprovided since our founding, we have expanded
our business into the ICT domain. We offer awide range of services from construction tomaintenance, operation, and cloud services at awide range of customer sites, including corporations, telecommunications carriers, government
agencies, and social infrastructure providers.

In addition to the technological capabilities wehave cultivated over the years, the advanced
technological capabilities we have acquired
through our self-implementation activities—in
which we integrate and master the cutting-edge
technologies of various partners—will play amajor role in resolving the increasingly complex
issues of society.

Technologicalcapability

Broadbusiness areas

Co-creation and
Self-implementation

NESIC’s Strengths

Speed and
Challenge spirits

04

Human
resources

Speed and Challenge spirits

Human resources

The sense of speed fostered through our cocreation experiences with customers and partners and our mindset for embracing challenges
through internal efforts, such as our pitch competition, will spur the creation of new value thatis well-suited to the current era marked by drastic changes.

Our diverse human resources who underpin our
extensive line of business, which has advanced
in step with the Company, create new value by
drawing on their various experiences, knowledge, and skills, contributing to the development of society and the growth of ourorganization.

ANNUAL REPORT 2022

Co-creation and
Self-implementation

 ur unique approach of co-creating and self-implementing with customers and various other stakeholdersO
has become a strength for our creation of new businesses aimed at resolving social issues.

Community development DX

Resolvingthe management issues
実証から実装に移るNESICが進めるローカル5Gof companies and the various「地域ネットワーク」と「インビルネットワーク」へのローカル5G×DX提供
social issues facing local
communities

Workstyle DX

Inter-building network(enterprises)

Regional network (public)

Extensive
track record
Example:Co-creation andself-implementation for
local 5G technology

Tokushima Prefecture’s disasterprevention and mitigation technology

Know-how leveraging Mitsui FudosanCo., Ltd.’s venues and opportunities

Resolve the issues of local communities(including remote medical examinations,farm management, river monitoring)

Implement diverse workstyles

Hiroshima Prefecture’s oyster farming
technology

Workstyle innovationin Tokyo PrefectureManage growth through the use ofunderwater drones in oyster farming

Create new workstyles

NESIC

Local 5G × DX
Yamanashi Prefecture’s tourist
information

Smartification of front lines at
a manufacturing company

Provide safe and secure mountainclimbing tours

Utilize in large factory areas

CATV scheme of revitalizing
commercial areas
Realize vibrant and attractive stationsquares

ANNUAL REPORT 2022

05

Contents

01

Introduction
01 Shift up 2024
02 Our History
04 NESIC’s Strengths
06 Contents

08

NESIC’s Growth Strategy
08 Message from the President	In the coming era of DX and next-generation networks, we will ambitiously
pursue new heights that are unlike extensions of the past.

14 Our Connection to Daily Life
16	Materiality
18	Materiality Matrix
20 Value Creation Model
22 Initiatives to Provide Value to Society through 2030
28 NESIC’s Strategic Road Map

30

Medium- to Long-Term Growth Strategy, Earnings Trend30	Looking Back on Our Previous Medium-Term Management Plan
32	Overview of Shift up 2024 New Medium-Term Management Plan
36	Financial and Capital Strategy
40	Financial & Non-Financial Highlights
42	Overview of Business Segments
43	Overview by Business Segment
DX Solutions BusinessNetwork Solutions Business
Environmental & Social Solutions Business46
 Special Feature: FLARE SYSTEMS × NESIC

46

ESG Initiatives

50

48 Special Feature: Joyo City (Kyoto Prefecture) × NESIC

Environment

SocialGovernance

50 Environment

54 Social

62 GovernanceDisclosures Based on TCFD Recommendations

54	Human Resource and Organizational
Strategies
58	Creating Mechanisms for Innovation
60	Communications with Stakeholders

62	Round-table Discussion among Outside
Directors
66	Corporate Governance74	Directors & Corporate Auditors

Governance
Strategy
Risk Management
Indicators and Targets
Measures for Achieving Targets

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

06

ANNUAL REPORT 2022

76

Supplemental Information for Annual Report 2022

The following supplemental information for Annual Report 2022 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

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

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

Editorial Policy
Since 2016, NESIC has been publishing its annual report to provide readers with a wide range of information on its business activities, including
the medium-term management plan and other business strategies aimed
at creating social value and achieving medium- to long-term growth aswell as its measures for realizing these strategies.
Annual Report 2022 was prepared based on our new medium-term
management plan Shift up 2024, which covers the three-year period fromthe fiscal year ending March 31, 2023 to the fiscal year ending March 31,
2025. Under Shift up 2024, we will continue to transform as an organization and evolve our business model and our relationships with customers
while working to realize DX × Beyond 5G, thereby creating new value forsociety.
To enable all of our readers to gain a better understanding of theGroup’s activities, we at NESIC strive to provide highly valuable information by engaging in dialogue with investors and other stakeholders andconstantly improving the content based on the feedback we receive as
result. We would greatly appreciate your opinions and suggestions after
reading this report.

Disclaimer
This report contains forecasts, outlooks, targets, plans, and other forwardlooking statements concerning the business performance, financial
condition, and other aspects 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 their nature,are subjective and characterized by uncertainty. Furthermore, forwardlooking statements are not guarantees of future results and actual performance could be greatly affected by various factors.

Period Covered
April 1, 2021 to March 31, 2022 (Certain information related to the period
following that noted above is also included.)

Regarding the Cover of Annual Report 2022
Based on our new medium-term management plan Shift up 2024, NESIC willcontinue to transform as an organization and evolve its business model and its
relationships with customers while working to realize DX × Beyond 5G, thereby
creating new value for society. This commitment of ours has been incorporated
into the cover page design of Annual Report 2022. The cover depicts NESIC’s
dedication to realizing a sustainable and prosperous society, which it likes to calla “Sustainable Symphonic Society,” through its creation in harmony withcustomers.

Scope of Report
NEC Networks & System Integration Corporation andconsolidated 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

Note: C ompany names, product names, and logos are contained in thisreport.
Note: D epartment names and job titles are accurate as of September 30,
2022.
Note: In publishing this report, we have taken the appropriate measureswhen conducting interviews and photo sessions to prevent the
spread of COVID-19.

Shift upElevating society

Contact
Investor Relations
Responsible department: IR Group of the Corporate Finance &Controller Division ustainability-Related Information
S
Responsible department: Corporate Communications Division

ANNUAL REPORT 2022
NEC Networks & System Integration Corporation

ANNUAL REPORT 2022

07

Message from the President

Yushi Ushijima
President and Chief Executive Officer (CEO)08

ANNUAL REPORT 2022

In the coming era of DX and beyond 5G,
we will ambitiously pursue new heightsthat are unlike extensions of the past.
Achievements and Challenges under thePrevious Medium-Term Management Plan
Beyond Borders 2021
Aiming to realize NESIC’s vision for 2030, themajor theme of our previous medium-term
management plan Beyond Borders 2021
(FY2020/3 to FY2022/3), was to build a business foundation for further growth into ournext medium-term management plan, a period
in which we expect the full-scale arrival of theDigital 5G era. To that end, we set out to go
beyond the borders of our markets, technology,
organization, performance, and other aspectsof our business.
I was convinced that NESIC would becomea strong and attractive company if its uniquemanagement resources were put to effective
use. Therefore, when I became president,
I declared that I would give the go-ahead tochange everything other than “contributing to
the betterment of society through communications technology,” a value that has been passed
down through the generations since our founding, if that is what was necessary to realize ourfull potential. In implementing Beyond Borders
2021, we began by developing a framework to“tear down” the barriers of awareness that had
been formed subconsciously by our employees. We newly established the Business
Design Operations Unit to bring members who
had been scattered throughout the Company
together to discover new technologies anddevelop new businesses, as well as promote
discussions from a Companywide perspective
and the integration of management resources.
In order to consolidate similar technologies
and concentrate management resources in thedigital and 5G fields, the Company was reorganized into function-specific business units. In

these ways, I have developed a foundation for
maximizing the use of resources throughout
the organization by overcoming its boundaries
and communicating, in my own words, ourcommitment to becoming a “No. 1 communications company” that encourages open andlively discussions across all divisions and positions within the Company. In addition to thefact that we are a communications company,
this reflects the importance of co-creation on
generating innovation through our close communication within and outside the Company,
including with our various business partners.
Beyond Borders 2021 was highly successful
in capturing the changes in society that havebeen triggered by COVID-19. In the digitaldomain, one of the focus areas of our business, we launched Symphonict and provided a
range of solutions based on this DX brandwhile developing new businesses and expanding our DX business through our co-creationand self-implementation business model. DX
orders have more than quadrupled from ¥6 billion
in FY2020/3 to ¥27.5 billion in FY2022/3 andour recognition has grown, gaining new customers as a result of the increasing trend
toward telework. In the area of 5G, the otherpillar of our growth strategy, we strengthened
our relationship with telecommunications carriers to become strategic partners and steppedup the pace of demonstration experiments for
local 5G services with a view to resolvingsocial issues. We have also enhanced the platform for strengthening focus areas through theestablishment of the Shin-Kawasaki TechnicalBase and the 5G Lab, as well as the Nihonbashi
Innovation-Base, where we train engineers andconduct demonstration experiments with business partners. Through the implementation ofan ambitious workstyle called distributed work,
we are beginning to see the entire organization,

ANNUAL REPORT 2022

09

Message from the President

including the head office staff, work collectively to deliver DX solutions to our customers.
In FY2022/3, the final fiscal year of Beyond
Borders 2021, profits declined due to theabsence of temporary demand related to the
GIGA School Program in the previous fiscal
year as well as other unexpected events, suchas the semiconductor and material shortages
and the loss recorded on a Myanmar project.
Regardless, we concluded Beyond Borders
2021 by eclipsing our targets and overcoming
our performance barriers.
The main reason behind the success of ourprevious medium-term management plan isthe change in the mindsets of our employees
who now understand the joy of transcending
borders in order to become the type of company we aspire to be and embrace new challenges with confidence.
However, this change in mindset has yet toexist in all of our employees, and we must be
in a position to continue to make new changes
and not be content with the changes that havebeen made to date. This, I believe, is the biggest challenge that awaits us. In terms of themindset of our employees, we must break freefrom our passive stance of constantly meetingcustomers’ needs and exceeding their expectations, which stems from our long history ininfrastructure development. Instead, we mustswitch to a more active mindset that anticipates and identifies the issues facing customers and society and propose solutions to such
issues. This is the defining feature of our new
medium-term management plan.

New Medium-Term Management Plan
Shift up 2024
Our new medium-term management plan
Shift up 2024, is our second stage along theroad to 2030.
The role of companies in addressing social
issues, such as the declining birthrate andaging population and the resulting decrease in
the working population as well as the depopulation of rural areas and digital divide, continues to increase in significance as we work torealize the Sustainable Development Goals(SDGs) by 2030. Meanwhile, the use of digitaltechnology in society has advanced rapidly
over the past three years and this, combinedwith the development of 5G and other forms of

10

ANNUAL REPORT 2022

next-generation network technology, has
expanded the possibilities for resolving social
issues through technology.
With a view to 2030 and as a “communication services orchestrator,” NESIC will optimallycombine its DX and Beyond 5G (next-generation
networks) and expand the scope of the value it
provides from the conventional “ways of working” to “ways of living,” thereby creating uniquevalue through the development of carbon-freeand vibrant communities and the realization of
more flexible workstyles and lifestyles. What
we foresee beyond that is a sustainable society with prosperity that resonates for all, or inother words, a “Sustainable SymphonicSociety.”
We will not evolve as an organization if our
new medium-term management plan is perceived as an extension of our previous one.
Shift up 2024 was decided as the name for our
new medium-term management plan toexpress our commitment to continuing toevolve by stepping up a gear.
By drawing on the knowledge gained
through our digital and 5G initiatives and demonstration experiments over the years, we willleap forward to the application stage andenable the use of DX Beyond 5G as a tangible service. In order to implement this service throughout society and help address its
various issues, we must continue to strengthen
our ties with customers. From our “co-creation”
approach aimed at addressing the individual
needs of customers, we will shift up to a “creation in harmony” relationship in which wecreate new forms of social value by constantly
working together with customers to overcome
various issues and ensuring that such efforts
resonate throughout society.

Transitioning to a Spiral-Type
Business Model
The continuous advancement of our businessmodel is of paramount importance to the success of Shift up 2024.
Under the Symphonict brand, we bundle
cloud computing and other cutting-edge technologies in an optimal form for our customers.
We also draw on our Digital 5G technologies
and self-implementation business model toco-create new solutions with customers andcreate value unique to NESIC, which isprovided seamlessly through to the actual
application and operation process. This business process was developed over the courseof Beyond Borders 2021. Under Shift up 2024,
however, we will incorporate “consultation” into
this process and transition to a spiral-typebusiness model.
We have accumulated a wealth of knowledge on the use of DX, particularly in the areaof workstyles, both internally and throughco-creation. As I have stated from the past,
our spirit of sparing no effort on behalf of ourcustomers is deeply ingrained in our selfimplementation. Having actually utilized its
various digital technologies and informationand communications technology (ICT), one of
the strengths of the Company is its ability toshare with customers information on what has
worked, what has not worked, and all of thetrial-and-error and methods used while making
practical proposals. Another feature that is
unique to NESIC is the ability to propose solutions based on its thorough knowledge of thefrontlines that has been accumulated throughits application and operation processes forcustomers in a vast range of businessdomains. Unlike other consulting companies,
we develop and operate systems and solutions
with a starting point of self-implementationand frontline operations-based consultation
services, through which the data and insight
we acquire will be used to uncover issues thathave gone unnoticed by our clients, propose
solutions to such issues, and convert theminto new business opportunities. In this way, asa strategic partner, we will develop recurring
relationships to create value in harmony withcustomers and the know-how we gain as aresult will be reflected in our creation of newvalue for society including new customers.
This type of positive cycle is the aim behind
our new business model. Going forward, we
will remain fully committed to achieving thesustainable growth of our business while creating new and distinctive value that leverages
the know-how unique to NESIC in an even timelier manner.

ANNUAL REPORT 2022

11

Message from the President

Our Evolution into a “DX-Native” Company
The key to the success of our new businessmodel is our evolution into a “DX-native” company. We will continue to evolve as an organization by employing new DX technology in all
our business processes and refer to the knowhow gained through our self-implementation tocontinue to enhance our consulting capabilities. To that end, we must continue to not only
hone the capabilities of our highly skilled andspecialized engineers but also ensure thateach member of our organization blossoms
into a DX professional. For instance, just likethe three Rs in education (reading, writing, andarithmetic), a culture in which each employee
is committed to adjusting their work processes

such as through no-code development isexactly what the Company should pursue asan organization that boasts a competitive edgein self-implementation and co-creation implementation and prospers through the development of its employees. At our new headquarters,
to which we plan to relocate during FY2023/3,
we will advance even further with self-implementation and co-creation implementation
with customers and partners by capitalizing on
the benefits of leasing an entire building subject to minimal restrictions. Moreover, the ShinKawasaki Technical-Base will serve serves as
the core base for providing DX training to all
employees, in addition to the development ofhighly skilled technical experts. We are also
drawing up a plan to provide our wealth ofknowledge to customers in order to facilitate
their development of DX professionals and aim
to bring this scheme to reality over the courseof Shift up 2024.
It is imperative that we continue to strengthen
our human resources not only from a technicalaspect but also from the viewpoint of our corporate culture. As I stated previously, strengthening our corporate culture is essential to
becoming an organization that consistently
evolves and actively uncovers issues while
proposing solutions to such issues, rather than
one that takes a passive approach. With this inmind, the Corporate Culture Design Office andthe Well-being Promotion Office were established to underpin the growth of employees.
Both departments take the initiative to executea series of ideas aimed at enhancing employee
motivation. For instance, the Corporate Culture
Design Office holds events in which employees
make proposals toward the establishment of abusiness and grant approval for its development. We will continue to stress the importance of increasing employee engagement andpromoting inclusion and diversity while monitoring our employee engagement score andour ratio of women in management positions
as a measure of our KPI.

Strengthening Our Capacity to
Resolve Issues
One of the important themes of our new
medium-term management plan is thestrengthening of our capacity to resolve
issues. Over the years, the Company has

12

ANNUAL REPORT 2022

accumulated sophisticated technologies in linewith the creation of mission-critical systems by
telecommunications carriers and other infrastructure providers. Under our previous
medium-term management plan, we developed
multi-skilled engineers for next-generation
networks and moved forward with preparations to expand our lineup of local 5G services
with our sights set on the next stage of ourjourney. By utilizing DX and next-generation
networks with the assets it has accumulated
to date in a vast range of fields, including firefighting and disaster prevention, CATV, andworkstyle innovation, the Company will strive
to create social value by establishing a business that is conducive to the creation of digital
towns and safe, secure, and sustainable communities. We will also look to create a business model whereby the Company itself is theoperator, much like in the case of the onshore
fish farming business. We will diversify profit
opportunities and create synergies by utilizing
the insight we gain in the process as a business operator in our existing businesses.
Under Shift up 2024, we declared our commitment to addressing climate change in all ofour businesses as a measure of advancing
solution capabilities. While there are a numberof social issues we must address, climatechange is considered one of the most criticalissues by management. In relative terms, ourindustry is not as susceptible to the effects ofclimate change. However, from a global environment perspective, we believe the businesses we have operated over the years andour accumulated know-how will make significant contributions by mitigating climatechange through the reduction and optimizationof energy use, as well as by adapting to climate change through the strengthening of ourframework for responding to natural disasters.
By reframing our view of the business fromone based on addressing other issues withinsociety to one based on realizing an evengreener society, we will look to create services
that are even more capable of resolving issues.
Meanwhile, we established a policy to reducegreenhouse gas (GHG) emissions from ourinternal operations by 55% by FY2031/3 compared with FY2020/3 levels and began disclosing information based on the recommenda­tionsof the Task Force on Climate-related Financial
Disclosures (TCFD) framework in June 2022.
Going forward, by having every member of

NESIC work closely with the Carbon Neutral
Promotion Division, a Companywide specialized organization established in April 2022, wewill remain committed to resolving the issue ofclimate change.

In Closing
In formulating Beyond Borders 2021, we took
a top-down approach in order to break away fromour traditional mindset and start from scratch.
When formulating Shift up 2024, however, we
engaged everyone from young employees to
executive officers in the discussions, whichwere held across all of our departments. To
firmly reflect the views of not only the people
in the Company but also of the stock market
and customers, we also solicited various input
from our outside directors. I am proud of thefact that a culture in which we are able toshare our views on the aspirations and discuss
the future of NESIC has been instilled throughout the organization, and because our new
medium-term management plan reflects thedesires of our employees, I am convinced that
Shift up 2024 will prove to be a success.
We will achieve sustainable increases incorporate value as long as our employees are
self-driven and a culture of continuous change
becomes ingrained throughout the organization. Under Shift up 2024, we will continue to
evolve by breaking from our conventional waysof thinking and not being content with thestatus quo.
Lastly, the Company transitioned to thePrime Market of the Tokyo Stock Exchange inaccordance with the market restructuring thattook place in April 2022. While the requirements under the Prime Market are those thatdemand higher standards, particularly from agovernance perspective, we will embrace thischallenge and use it to strengthen our management while continuing to engage with all of our
stakeholders. I ask for your continued understanding and support as we strive to further
expand our business and provide even morevalue to society in the coming years.

President and Chief Executive Officer (CEO)ANNUAL REPORT 2022

13

Our Connection to Daily LifeNESIC Contributes to a Safe, Secure, and Plentiful
Tomorrow in Various Contexts of Daily Life.
1 Broadcasting2 	Workstyle Innovation

3 Airports

4 Hotels

Construction, operation, andmaintenance of digital TV
broadcasting facilities, relay
stations, and studio, facilities,
as well as installation offiber-optic cable for cuttingedge 4K and 8K broadcasting

Creation of an environment that allows people to work from any
location, such as home or satellite offices, through the combinationof physical and digital spaces by bringing together various cloudbased tools and applying cutting-edge technologies. Establishmentof a venue that enables people to co-create as a team by transcending organizational and corporate boundaries and a way of working
that generates innovation by resolving the issues of communication,
management, and administrative tasks.

Visual Docking Guidance
Systems (VDGS), air traffic
control systems, airport
information, and a broad arrayof other services

Comprehensive hotel solutions
such as telephones andswitching equipment, room
management systems, andsystems for providing guests
with information

3

1

4

2

5
9

8

6

7
7

5 	Mobile

Communications
Network
Installation of mobile basestations indispensable for daily
communication via smartphone
and flip phone, and overall network
support, together with system
integration of core networks

14

ANNUAL REPORT 2022

6 	Fire-Fighting &7 	Railways & Roads

8 	Disaster Prevention

9 	Shops & Public

Ambulance

Support for public transportation by constructing andmaintaining telecommunications networks and othersystems for railway andhighway traffic control

Warning systems that provide
information at times of emer­
gency (earthquake, tsunami,
typhoon, etc.) via simultaneous
announcements over disasterprevention communication
systems for greater safety andsecurity in daily life

Creation of convenient user
environments for customers
including Wi-Fi and local 5G,
information distribution
systems, and value-added
video services

Construction of command
systems and radio systems
enabling rapid responses to
119 emergency calls, and theprovision of multilingual callcenter services

Facilities

10 Oceans

11 Space12 	Local Governments & Education

13 	Primary Industry

Installation of submarine
cables that support international communication, andsupport for earthquake warning
systems by integrating submarine seismometers

Support for communicationand operational control withvarious artificial satellites andspacecraft, including asteroid
exploration

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

Support for the transformation of businessmodels in agriculture, forestry, fisheries, and otherprimary industries by means of digital technology, such as by promoting the safe and secure
production of high-quality salmon through digitaltransformation of the aquaculture industry using
the latest ICT technology

11

10

12

13
14

17
16

18

15

14 Plants
Provision of IoT systems able
to detect, manage, and utilize
the location of people andthings in real time at plants andother production sites

15 	Network Total

16 	Comprehensive

Operation Centers

Technical Centers24/7 customer network support
ranging from security monitoring to network operation

Comprehensive technicalservices ranging from evaluation to SI of new technology tomaintenance and repair thatrun 24/7

17 Data Centers

18 Contact Centers

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

ICT system failure response,
help desk, and other support
services for customer systemadministrators and systemusers, and interpretation
services in multiple languages: NESIC’s service platform

ANNUAL REPORT 2022

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Declining and aging population anddecreasing 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 importance of ensuring people’s physical,
mental, and social well-being
Respect for diversity
Cultivation of a culture ofco-creation

Opportunities for NESIC

Risks for NESIC

Changes in workstyles at enterprises andlocal 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 climate change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, andquality due to lack of timely response tochangeLoss of relationships with co-creation
partners due to lack of importance placed onsustainability

Bolster international competitiveness by
ensuring diversity of directors
Expand opportunities for new businessdevelopment by speeding up innovation

 nhance credibility by strengtheningE
governance and establish a foundation forbusiness growth by ensuring rapid
decision-making
Enhancement of social reputation bystrengthening our response to diversifyingsocial needs

Secure exceptionally talented personnel andreduce employee turnover by actively
engaging in human capital management anddisclosing such activities
Expand growth opportunities and increase
engagement through proactive investment in
human resourcesTransfer knowledge and skills to younger
generations by creating opportunities wheresenior employees can play an active role

STEP

Materiality Identification Process

16

ANNUAL REPORT 2022

01

Dysfunctional governance and internal 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 in employee
turnover, and lack of motivation andengagement due to the lack of importanceplaced on human capital management

STEP

02

Confirmation of social issues(overseas / domestic)

Interviews and internal discussion
on important initiatives at NESIC

Verify global issues based on megatrends
and discussions with investors andother external parties

Interviews with top management and free
discussions among top management
were held on the vision for society and thevision for NESIC, within the context ofimportant initiatives that the Company
should undertake.

Create work environments in which
everyone can take initiative

Vision for Society

An inclusive and sustainable society
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

We aim to provide environments where
everyone, regardless of age, gender, or
nationality, can work proactively and tothe best of their abilities without regard tolocation.

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

Provide robust services that underpin safety and security in evolving
societyProvide robust services that underpin safety and security inevolving society

We will support the development andadvancement of ICT essential for economic growth by creating safe and secureservices that offer high quality andnational reach.

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

Strengthen innovation
capabilities to create
new value romote a culture that encourages
Pchange and embrace of newchallenges
 ccelerate co-creation and the useAof various services in our own
business practices to better
understand the customers’ pointof view

STEP

03

Create a culture where
employees can takeinitiativeImprove the Well-being of
employees
 ncourage frank and openE­discussions, and enhance thecorporate culture as a facilitator ofself-growth

STEP

04

STEP

05

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 the Company initiatives to beundertaken to realize the visions that were
examined in Steps 01 and 02, which was
followed by discussions with top
management.

The candidate materiality issues
proposed in Step 03 were explained to theoutside 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 2022

17

Materiality Matrix
The matrix chart below classifies and systemizes the relationship between our business and the ESGs and the SDGs
with respect 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 new medium-term management plan.
SDGs (Relevant SDG 169 targets are listed)

Materiality

Concrete Image of Materiality Issues
Being RealizedESG
No poverty

Zero hunger

1.1•P articipation of a wide range of individuals fromdifferent generations and backgrounds insociety and diverse workstyles
Create work•A
 work environment in which employees canenvironments indemonstrate their full potential
which everyone•A
can take initiative  work environment conducive to the creationof even greater value through innovation•W ell-being work style that fulfills both workand life•A
 community in which a diverse group of people
can naturally and enjoyably communicate andco-create•A living environment where regional disparities
do not exist and necessary information andDevelop pleasant services are available regardless of locationand plentiful•A comfortable and convenient community
communities
where people want to continue to livewith cutting-edge•A community where visitors can discover andInitiatives to technologies
fully enjoy the attractions and that residents can
Provide Value
take pride in
to Society•S hare the enthusiasm, excitement, and emotionof sports, entertainment, and other activities ina variety of venues

Provide robust
services that
underpin safety
and security inevolving society•H ighly secure communication infrastructurethat supports economic activities•E nergy and other social infrastructures that are
optimized to facilitate the realization of acarbon-free society•A sustainable social infrastructure realized
through efficient development, maintenance,and management•A society resilient against increasing andintensifying natural disasters•A society that protects its abundance of landand sea and that ensures consistent supplies
of food•A safe and secure society conducive to theprevention and early detection of accidents andcriminal acts

Good healthandwell-being

Qualityeducation

Genderequality

Clean waterandsanitation

Affordable
and cleanenergy

3.4

4.4

5.5

8.1

5.b

8.2

•E
 mbrace a culture that encourages change andInitiatives for Strengthen
the pursuit of challenges
innovation
Growth at•S tep up the pace of co-creation and selfcapabilities to
NESIC
create new value implementation practices that underscore theview of customers

ANNUAL REPORT 2022

10.2
10.3

8.8
8.10

5.5

8.1

11.2

12.8

5.b

8.2

11.3

12.b

8.9

11.7

9.1

8.10

S/E

1.5

2.3

3.6

2.4

6.4

7.2

8.1

9.1

11.2

12.2

6.b

7.3

8.4

9.4

11.3

12.4

7.a

11.5

12.5

7.b

11.6
11.7
11.b

S/E

8.5

10.2

12.6

8.8

10.3

12.7

G

4.4

5.5

8.2

9.5

4.4

5.5

8.2

9.5

4.5

5.b

8.5

S

S

3.4

4.7

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.

18

Sustainable Responsible
cities andconsumption,communities production

8.5
S/E

1.1

•E
 nhance employee well-being
Create a culture
frank and open discussions,where employees • Encourage
can take initiative and enhance the corporate culture as a facilitator of self-growth

9.5

Reducedinequalities

8.3

5.5

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

Decent work
Industry,and economic innovation,
growthinfrastructure

8.8

10.2
10.3

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

ClimateactionLife below
water

13.1

Life on land

Peace, justicePartnerships
and strong
for the goals
institutions

15.2

Accelerating
Original Value
Creation

Basic Strategy 2

Advancing Solution
Capabilities

Basic Strategy 3

Transform
all businesses toensurethey address
climate change

Evolve into
DX-Native
Company

17.16
17.17

〇

13.1

14.1

Initiatives and specific targets (Numerical targets for initiatives
without a specified fiscal year are based on FY2025/3)

16.10

14.2

〇

• Increase sales from partner-type smart recurring business and advanced ICT operation(data utilization) business to ¥30 billion• Increase sales from DX-based industry business to ¥10 billion*1•E xternal sales and monetization of DX human resource development function (College
Concept)•E xpand orders through services that make extensive use of Symphonict (DX services andinfrastructure)(Expand Symphonict implementation services)〇•E xpand sales of DX-based public business to ¥10 billion (in DXS)
(total value including*1)•S ales of ¥20 billion of digital town business•E xpand orders through services that make extensive use of Symphonict (DX services andinfrastructure)(Expand Symphonict implementation services)•P rovide municipal DX coordination services to 150 local governments by 2025
• Increase sales from multi-connectivity business to ¥10 billion*2(provide L5G and various other systems and develop a secure infrastructure)• Increase sales from social infrastructure business (in NWS) to ¥25 billion*3(Expand solutions businesses utilizing satellite images and AI)〇• Expand sales of multi-connectivity business to ¥10 billion (total value including*2)(data operations business through automation and AI prediction using infrastructure
operations data)• Expand sales of social infrastructure business to ¥25 billion (in NWS) (total value including*3)(provide resilient social infrastructure services through the use of observation dataobtained from satellites and ocean floors)• Increase sales to ¥20 billion by strengthening measures toward the realization of a green
society (in ESS)
• Install immersion cooling systems at a major data center•E stablish onshore fish farming business and increase sales to ¥30 billion(FY2030/3: includes franchises)•R educe Scope 1 and Scope 2 CO2 emissions from business activities by 40% in FY2023/3
over FY2020/3, reduce by 55% in FY2031/3 over FY2020/3, and realize net-zero emissions by FY2051/3
Establish Scope 3 CO2 emission reduction targets for the entire supply chain by FY2024/3

17.16
17.17

〇

13.1

14.1

15.1

16.1

13.2

14.2

15.2

16.6

〇

17.2
17.7
17.16
17.17

〇

13.1

16.1

17.16

13.3

16.5

17.17

16.7

〇

•W
 omen account for 30% of all directors (by FY2031/3)•S hareholder return: Maintain dividend on equity (DOE) of 5.0%•C
 onduct investor relations (IR) activities focusing on individual business field〇• Training of highly skilled professionals and human resource investment: ¥5 billion (on acost basis)(400 Consulting personnel, 1,800 DX Professionals, 800 Beyond 5G professionals)•C onduct business investments of ¥17 billion (on a cost basis) and M&As and othergrowth investments of ¥38 billion (on a cash basis)• IT investment: ¥8 billion (on a cost basis) (including cost of relocating the head office)•C ontinue to hold NESIC’s pitch competition〇•E mployee engagement score: 50% (Tier 1 level) (FY2025/3)(The score, which is based on a survey conducted by the global human resource consulting company Kincentric, of 50% generally corresponds to the world’s top 25% and,accordingly, the Tier 1 level.)•P ercentage of female managers: 10% (FY2027/3)•P ercentage of paid leave taken: 100% (FY2027/3)•P romote the taking of the Japan Health Master Examination•H old psychological safety workshops across the Group

17.16
17.17
〇

13.3

*1 N
 umerical target (sales of ¥10 billion) comprising initiatives for “creating work environments in which everyone can take the initiative” and “developing pleasant and plentiful
communities with cutting-edge technologies”*2 N umerical target (sales of ¥10 billion) comprising initiatives for “developing pleasant and plentiful communities with cutting-edge technologies” and “providing robust services
that underpin safety and security in evolving society”*3 N umerical target (sales of ¥25 billion) comprising initiatives for “developing pleasant and plentiful communities with cutting-edge technologies” and “providing robust services
that underpin safety and security in evolving society”
ANNUAL REPORT 2022

19

Value Creation Model
With the formulation of our new medium-term management plan, 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 and ”Beyond 5G”­next-generation 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 the initiative,” “develop pleasant and plentiful communities with cutting-edge technologies,” and “provide robust
services that underpin safety and security in evolving society.”

I N P U T​

Social CapitalDX customers
Co-creation partners in business

Financial Capital
Strong financial base

MEANS OF VALUE CREATION(Strengths)

Broad businessareas

Consulting personnels / DX professionals
Beyond 5G professionals

Co-creation and
Self-implementation
Intellectual Capital
Nihonbashi Innovation-Base
Shin-Kawasaki Technical-Base

Manufactured Capital

Human resources

24/7 service

Natural Capital
Declaration of Support for the
TCFD Recommendations

20

ANNUAL REPORT 2022

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

Technologicalcapability

Human Capital

Nationwide service network

GROWTH

Speed and
Challenge spirits

From
co-creation tocreation-in
harmonyFurthermore, in order to continue to create such value for society, we will implement three initiatives that are­ articularly important to the growth of our business (materiality): “sound and highly transparent management,” on thepbasis of which we will “strengthen innovation capabilities to create new value” and “create a culture where employees
can take initiative.”
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.

O U T P U T​
Value Provision for 2030
Materiality Issues
Growing areas

DX

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(next generation
networks)

Growth at NESICSound and highly transparent
management
Strengthen innovation capabilities
that create new value

OUTCOME

Sustainable
Symphonic Society

Realization of a sustainable
society with prosperity that
resonates for all

DRIVERSCreate a culture where employees
can take initiative

ANNUAL REPORT 2022

21

Initiatives to Provide Value to Society through 2030

Create work environments

in which everyone can take initiative
Vision for Society

An inclusive and sustainable society
created through communications
Create work environments in which
everyone can take initiative

By utilizing the know-how accumulated through our self-implementation activities since 2007 and digital technologies,
we provide solutions tailored to the changing workstyles and business environment of the New Normal, such as therealization of a co-creation environment that will spur greater innovation and business processes.

22

ANNUAL REPORT 2022

Initiatives to Realize This Materiality (number of new releases)

11

for provision of new services

2

for experiments
September 2021 to June 2022

Launch of Municipal DX Coordination Service toFacilitate the Digitalization of Local Governments
NESIC launched its Municipal DX Coordination Service,
which visualizes and analyzes municipal operations to propose services that are best suited to formulating DX promotion plans and improving operational efficiency.
The trend toward digitalization has accelerated in recent
years under the direction of the government, and local
municipalities are being urged to improve the convenienceof residential services and increase operational efficiency
through the use of digital technologies. However, proceedingwith efforts toward digitalization, such as determining whichpart of operations to incorporate and deciding on ICT services, is not an easy task.
For the Municipality DX Coordination Service, digitalization promotion consultants work with customers to visualize
and analyze the current state of operations, determine which
services to digitize, and compile a list of countermeasures.

Based on these results, we propose ICT and DX services andoperational services that are designed to address customers’ issues, support the formulation of DX promotion plans,
and promote digitalization and structural reform. Moreover,
we provide a one-stop service that identifies new issues andproposes improvements through data analyses after thestart of operations, thereby constantly facilitating the digitalization activities of our customers.
Going forward, we will continue to provide services byworking alongside our customers and contribute to thedigitalization of municipalities, thereby reforming workstyles
and front-line operations, enhancing the quality of residential
services, and realizing the Vision for a Garden City Nation.
Excerpt from press release (issued on February 21, 2022)

Establishment of Canario as a Communication Service Brand
We have established our new communication service brand,
Canario, for the business communication domain and reorganized our existing service names under this brand.
As workstyles diversify in the New Normal, we continue
to see changes in the value necessary for business communication. NESIC has been quick to introduce new workstyles
under the New Normal and has worked to provide flexible
solutions that align with changes in the business environment of users. For instance, we introduced telework for all
employees in 2017, and in 2019, we introduced a distributed
work practice based on the use of satellite offices, while in2020, we reformed work processes based on the adoption ofa remote work system.
Canario was established based on our desire to liberatebusiness people from unnecessary communication throughthe power of digital technologies and realize an affluent

society. It also represents our determination to continue toprovide a wide range of communication methods that offer
highly valuable experiences to our customers.
Moving ahead, we will focus on expanding the lineup andsales of Canario services and help resolve the issues of ourcustomers by proposing new methods of communication.

Canario logo

Excerpt from press release (issued on February 2, 2022)

ANNUAL REPORT 2022

23

Initiatives to Provide Value to Society through 2030

Develop pleasant and plentiful communities

with cutting-edge technologies
Vision for Society

An inclusive and sustainable society
created through communications
Develop pleasant and plentiful communities with cutting-edge technologies

Through the combination of our next-generation networks and cutting-edge digital technologies, we will work with ourpartners to address the various issues of local communities and facilitate the creation of safe, secure, convenient, andattractive communities, such as smart cities, and realizing more affluent lives for people in the process.

24

ANNUAL REPORT 2022

Initiatives to Realize This Materiality (number of new releases)

6

for provision of new services

8

for experiments
September 2021 to June 2022

Full-Scale Launch of Community Development Services Leveraging
Digital Technologies and Ability to Deliver Optimal Solutions—Contributing to the realization of smart cities through digital shift in community development—
At NESIC, we have moved full steam ahead with sales activities for our community development services, which draw on
digital technologies and our ability to deliver optimal solutions to customers.
This service responds to the growing needs for community development in recent years with an awareness of sustainability and ensuring high levels of resilience. Through theprovision of new value created by combining diverse network
environments with integrated management and analysis ofdata, we will promote a wide range of digital shift of communities and contribute to the realization of smart cities.
The Company’s strengths underpinning these efforts
were cultivated through its years of experience in developing
infrastructure and providing solutions to address customers’issues as well as its track record of digitalizing the operations of numerous customers through its self-implementationand co-creation practices. Going forward, we will focus ourattention on the following areas, in which we will be able to
make the most of our strengths.

• Smart Buildings
We provide a variety of services that contribute to improvements in the efficiency, safety, and security of building operation and management, such as the building environment
monitoring and security related activities of building managers and infection prevention measures for tenants, as well as
digitalize building management through the interconnectivityof these services.
• Smart Energy
As a system integrator that promotes the use of renewableenergy through multi-vendor services, we facilitate the development of locally produced, locally consumed energy systems for municipalities while helping realize zero-carbon andindustrial development in local communities.
Through the realization of digital shift for customers
involved in community development, we will help addresssocial issues and achieve a sustainable society.
Excerpt from press release (issued on July 6, 2021)

Start of Demonstration Trials to Revitalize Station Squares Using Local 5G
in ­Collaboration with Heart Network
NESIC began conducting demonstration trials with Heart
Network Co., Ltd. to revitalize the area in front of JR Niihama
Station through the use of local 5G.
We have seen a growing need for the revitalization ofregional towns and cities in recent years as a result of thedeclining birthrate and aging and decreasing population. For
that reason, local governments and companies are undertaking a range of measures to inject more energy into thesecommunities and enhance their appeal.
These experiments are being conducted with the aim ofdeveloping attractive communities by helping resolve theseissues through the use of local 5G environments. We will
create lively and attractive station squares by establishing anenvironment that encourages people to visit through the useof smart signages that provide up-to-date information andvirtual reality (VR) cameras that distribute 360-degree
images in real time as well as an ultra-high-speed wireless
LAN environment based on a local 5G network. In addition,
we will work to ensure the safety and security of communities by utilizing a 4K camera system with image recognition
capabilities that detect the falls and analyzes the flow ofhuman beings.
Going forward, Heart Network and NESIC will utilize local
5G in a more realistic setting to help resolve the issues of
local communities and ensure their safety and security byclosely identifying with their needs.
Excerpt from press release (issued on November 4, 2021)

ANNUAL REPORT 2022

25

Initiatives to Provide Value to Society through 2030

Provide robust services that

underpin safety and security inevolving society
Vision for Society

An inclusive and sustainable society
created through communications
Provide robust services that underpin
safety and security in evolving society

Accompanied by our long-cultivated and highly trusted infrastructure development capabilities and our nationwide
service network, we will help realize a sustainable society by utilizing the most cutting-edge digital technologies todevelop and provide maintenance for safe and secure ICT infrastructures that are resilient even against earthquakes,
typhoons, and other natural disasters.

26

ANNUAL REPORT 2022

Initiatives to Realize This Materiality (number of new releases)

7

for provision of new services

3

for experiments
September 2021 to June 2022

Demonstration Trials of Local 5G Services at Showa Base—The First of Its Kind in Antarctica—
As a part of an industry-academia collaborative research
aimed at promoting the smart use of Showa Base, NESIC,
the National Institute of Polar Research, and the Research
Organization of Information and Systems began conducting
demonstration trials on a mobile wireless communication
system using local 5G, the first of its kind in Antarctica.
At Showa Base, transceivers are basically the only
method of communication available outdoors. However,during this demonstration trial, local 5G communication will
be accessible through the use of smartphones and otherdevices. By improving the outdoor communication environment around Showa Base and establishing a high-capacity,
high-speed, and wide-area data communication environment,
we aim to enhance the efficiency of operations of the observation team, which involve the use of video and various
applications, as well as the safety of the observation teammembers. Moreover, through the verification of radio wave
propagation and communication environments, we will
establish an environment conducive to the use of drones
and automated driving.
Looking ahead, we plan on promoting the smart use of
Showa Base through the use of leading technologies by
evolving its data communication environment based on the
results of this demonstration experiment. We expect
improvements in Antarctic observations from a variety of
facets as a result, including monitoring and remote controlof base facilities, the safety of the observation team, communication between team members, control of observation
devices, and the introduction of new observation methods.
Excerpt from press release (issued on February 25, 2022)

Development of Visual AI Platform to Facilitate the Introduction of AI-Based Video Services—Launch of Intrusion Detection Service as First Phase of Initiative—
NESIC developed the Visual AI Platform specifically for its
video analysis service and launched the Intrusion Detection
Service as the first phase of this initiative.
With the proliferation of security cameras and the emergence of AI engines for video analysis, AI-based video utilization is being considered in a variety of situations. In the past,
such use of video entailed developing a series of systems
from the selection of imaging devices to the development ofapplications for video analysis, and the amount of time andinitial investment required to begin operations were an issue.
This platform is unique in that it can be developed specifically for the functions needed for application and integrated easily into business processes by linking to cloudservices. These distinctive features ease the burden on bothcustomers and service providers when implementing
AI-based video application services.
Our Intrusion Detection Service combines highly sophisticated AI technology with our abundance of know-how toaccurately and efficiently monitor intrusions, helping ensure
safe and secure environments.
Going forward, we will develop an array of services using
this platform, including disaster prevention and labor management, while promoting co-creation activities with partnercompanies that provide video-related services.
Excerpt from press release (issued on August 26, 2021)

ANNUAL REPORT 2022

27

NESIC’s Strategic Road Map​

DX

2019

2021
Beyond Borders 2021

2022
New Medium-Term Management Plan Shift up 2024

Preparation period
for continuous growth

Evolution

into a new businessstructure

Realizationof “DX

Beyond 5G”

Co-creation and Self-implementation
business model

Self-implementation-based consulting

New Medium-Term Management Plan

Shift up 2024
Elevating society
DX and Beyond 5G

From demonstration
to realization

Relationship withcustomers

From co-creation
to creation inharmony

ANNUAL REPORT 2022(¥ billion)

Net sales
Operating income
Operating margin
ROE

Business model

Non-financial Targets

From project-type
to spiral-type

Under our new medium-term management plan Shift up 2024, we will give form to the Digital× 5G demonstrations conducted under, our previous medium-term management plan, bydeveloping services that are geared to resolving social issues. We will also evolve our cocreation relationships with customers into strategic partnerships that collectively overcome
the increasingly complex key issues of society. As for our business model, we will build recurring relationships in which we constantly work in harmony with customers and increase thevalue we provide, thereby evolving our business model into one that achieves businessgrowth in a spiraling manner. Through these and other initiatives, under Shift up 2024, we aim
to create new forms of social value and realize a sustainable and prosperous society that welike to call a “Sustainable Symphonic Society.”

28

Financial Targets

Consulting resource
Human Resources(Employees)

DX resource
Beyond 5G resources

Engagement score(Researched by Kincentric)

Woman manager ratio

GHG emission (SCOPE 1, 2)

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

FY2022/3

FY2025/3target

310.3

370.0

23.2

34.0

7.5%

9.2%

11.6%

13%+

FY2022/3

FY2025/3

180

400

800

1,800

600

800

33%

This score generally corresponds to
50% * theworld’s top 25%, and accordingly the Tier 1 level.

5.9%(2022/4)

8,456t-CO2(FY2020/3)

FY2027/3

FY2031/3

10.0%
55% reduction

ANNUAL REPORT 2022

29

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
Specific Measures
Launch of DX ProjectUnite the engineers of each business division to develop new services through co-creation activities and the sharing of know-how
Promotion of open innovation with venture companies through venture funds
Spur innovation by actively making use of the know-how and resources of external partners
Strengthening of existing businesses by reexamining from the ground up
Expand the scope of business from EmpoweredOffice to workstyle innovation solution

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“change gears for sustainable profit growth.” These measures included reinforcing our business structure and foundation
with an eye on future changes in the environment in a bid to enhance our growth potential and profitability.
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 digital businesses through the use of cutting-edge technology.
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 investment in a venture capital fund in the U.S.

Financial Results of Beyond Borders 2021
Target for
FY22/3Results
FY22/3

Net sales

310

310.3

Operating income(Operating margin)

20
6.5%

23.2
7.5%

ROE

10%+

Expansion of DX orders(¥ billion)

11.6%

¥
¥

6 billion
FY20/330

ANNUAL REPORT 2022¥

27.5 billion

13 billion
FY21/3

FY22/3

The structural reforms with the goal of sustainable income growth in the DX/5G era have finished.

1

Strengthening of competitiveness, andgrowth power for the Digital & 5G age

2Strengthening of the base, schemes, andstructure to create advanced technologies
and new businesses

3

Acceleration of innovation through
All-NESICDX business expanded with Symphonict.
 ew businesses were created using the co-creation andNself-implementation business model.

 nvironment enabling new technology education and demE
onstration was enhanced.
(Shin-Kawasaki Technical-Base / 5G Lab)
Incubation was accelerated using U.S. venture capitals etc.

 ew Nomal workstyles were implemented using theN
Nihonbashi Innovation-Base and at distributed offices.
DX proposal model encompassing the entire Company

We focused on developing various DX services and deploying next-generation network services in an effort to enhance ourgrowth potential via the use of digital and 5G technologies, while strengthening our business foundation by reforming our organizational structure and corporate culture and establishing the Shin-Kawasaki Technical-Base. Our DX orders have increased
significantly as a result, more than doubling our results each year, and this has led to the expansion of our high-value-added
service-based businesses. Combined with improvements in resource efficiency and project management capabilities, our profit
level grew due to substantial increases in our gross margin and operating margin. Moreover, our measures geared to future
growth have begun to bear fruit, such as the emergence of new businesses through our co-creation activities with industry,
government, and academia in a variety of fields.

Specific Initiatives
Providing Support through the Self-Implementation Expertise of Our Staffing Divisions
At NESIC, all of our employees are actively proposing new solutions to customers by understanding their role as salespeople inorder to promote our business through a collective Groupwide effort.
Together with the employees of our sales and business divisions, the members of our staffing divisions also visit customers topromote activities that help resolve their issues by drawing on our years of experience in self-implementation.
Our strength at NESIC is the ability to propose solutions to customers with the know-how we have accumulated from our selfimplementation activities. With the staffing division in particular, its ability to propose solutions based on the same user perspective as our customers—in terms of not only the benefits but the drawbacks and the inconveniences as well—after actually having
used the product is a value unique to NESIC.

Establishment of the New Normal Project in Response to Changing Business Environment
In response to the rapid pace of digitalization, the introduction of new workstyles, and the arrival of the New Normal as a result of
COVID-19, we established the New Normal Project and have been promoting activities for this Companywide initiative ever since.
By leveraging its strength of “Speed and Challenge spirits,” NESIC is undertaking a range of initiatives that adapt swiftly to the changing times through a united team effort—involving everyone from its directors to its youngest employees—that are unbound by theirrespective business divisions. In this way, we are working to continue developing new businesses and reforming our internalbusiness processes.

ANNUAL REPORT 2022

31

Overview of Shift up 2024 New Medium-Term Management Plan
Spiral-Type Growth Model: A Recurring Model Based on Consultation
The evolution of our business model is of paramount importance to the achievement of our new medium-term management plan. We
will continue to address our customers’ issues by refining our existing strengths and adding a new element in the form of consulting
services based on our self-implementation practices. Through a virtuous cycle in which this knowledge is used toward the creation ofeven more value, we will create new value for society and help realize a sustainable society. ( P10)

Realize the customers
success and sustainability

Consultation based on expertise
obtained through experience inco creation & self implementation

A factor added to new strengths
in the new medium-term
management plan

Win Customers
Strengths and assets developed
under the previous mediumterm management plan

Design / Suggest

 igital × 5GD
Symphonict
Co-creation and selfimplementation business
model

Create value
Be smarter

Seek original value
Accelerate shift toservices

High customer value
Long-term relationshipof trust

1

Realize(Spiral of quality improvement)

運用
OperateOperateSite specificconsultation

Create new social value

Basic Strategy

Existing strengths
and assets

Accumulate
know-how,data toenhanceinsight

SI capabilities
Technologicalcapabilities
Field capabilities
Nationwide coverage

Apply DX torealization andoperation
processes toimprove quality

Accelerating Original Value Creation

Provide DX × Beyond 5G optimum to customers with the value created through Symphonict
Underlying NESIC’s spiral-type growth model is its ability to create value to resolve the fundamental issues of each customer. We provide
original value through the development of self-implementation-based consulting services and industry-specific service models based on
the Symphonict brand, and the establishment of new services through our co-creation practices.

Develop original services
for “missing pieces” inaddition to integration

Issue driven value creationfrom the customers viewpoint

Optimize foreach customer

BX

GX

Consultation based on expertise
obtained through experience in
co-creation and self implementation /site specific consultation

Service models for specific businesstypes and specific applications

Speed and cost
optimization

Common platform services
leveraging our strengths

Innovation

Change of the customers
experiences

Climate issues

Workstyle innovation

DX introduction to on-sitebusinesses

ICT strategy

Hybrid work

Smart building

Smart factory

Digital marketing

Robotics

Energy management

Multi-connectivity

AIVideo / voice recognition

Security

Data usage / analysis

Services management

Automated monitoring &operation

Support for every site of the customers by 400 support bases nationwide
32

ANNUAL REPORT 2022

Co-creation, self-implementation,and innovation

CX

Basic Strategy

2

Advancing Solution Capabilities

Combine existing businesses and assets and evolve via DX × Beyond 5G network capabilities to create
value for society and sustainable communities
In order to accelerate the virtuous cycle of value creation centered on our spiral-type growth model, we will advance our solution capabilities by extensively reframing the issues that have been addressed by our existing businesses and combining our DX × Beyond 5G
network capabilities so that we continue to create value for society.

Provision to customers in Japanand overseas

Existing businesses

Fire and disaster prevention

DX

Beyond 5G

EmpoweredOffice (workstyle innovation)
Smart buildings
Smart industry

Building automation
IoT

DX

Beyond 5G

Renewable energy

Various operation centers
Technical baseCarbon neutrality
Energy management

DX

Business operation

CATV and video

Digital towns
Development of safe andsecure communities

Resilience

Beyond 5G

Transform all businesses to ensure they address climate change
Climate change is one of the most urgent social issues facing our business. At NESIC, the businesses we have engaged in to date havebeen able to address climate change by both mitigating and adapting to it. Regardless, we will improve our awareness in all businesses
from the viewpoint of realizing a green society and thereby expand our business through the advancement of our solution capabilities.

Mitigation of climate change(Reduction of greenhouse gas emissions)

Adapt to climate change

Offering value to customers

Digital towns and energy management

Smart industry(Office buildings and workstyles)

Social Infrastructure business(fire and disaster prevention,
Telecommunication, electric power, broadcasting, marine, national and local­government and other infrastructure)

Accelerate the shift
to clean energy

Reduce andoptimize energy
consumption(Electric power,
distribution andothers)Increase resilience
to increasingly
devastating natural
disasters

Response tochanges inecosystems

Onshore aquaculture businessand other businesses

Our actions

Reduce our emissions 55%, establish a new dedicated promotion bodyand carry out Companywide demonstrations* from the FY2019 level by 2030 (Scope1+2)

ANNUAL REPORT 2022

33

Overview of Shift up 2024 New Medium-Term Management Plan

Basic Strategy

3

Evolve into DX-Native Company

Develop a reference model for self-implementation by promoting DX in all business processes
Construction

Maintenance·D igitally transform the construction process(for quality enhancement and cost reduction)· Improve maintenance and operation assets
by DX· Transform infrastructure maintenance after construction into services and increase their added value· Integrate maintenance information systems
and use data in a more sophisticated way·C reate a new support service business model

Sales and marketing

DX×次世代Develop a reference
ネットワークのfor DX Beyond 5G
throughour own
自社実践としてimplementation
リファレンス化·S trengthen the digital marketing system·D iversify sales approaches matched with different
customer attributes

Administration andCompanywide IT platform· Implement DX across the whole group while
simultaneously standardizing processes·S trengthen the base for use of information anddigital literacy·C onsulting activities inside and outside thecompany

Relocate to new headquarters, accelerating the pace of self-implementation and co-creation implementation

Aims

Digital transformationof all businessprocesses

Data platform

DX

Develop a platform for the use of data thatenables highly sophisticated management
decisions to be made through the use ofdigital technology

Develop a system environment that can
flexibly and swiftly adapt to changes insocial and ICT environments

modernization
Utilization andadvancement of highly
skilled personnel

strategy

Infrastructure
Innovation ofmanagement platformsecurity

Establish an agile business foundationthat ensures the Company’s digitalcompetitivenessEstablish an infrastructure and security
platform that ensures high levels of security and convenience

Co-creation andself-implementation

Data-driven
management

Creation of added
value

Process innovation

Workstyle innovation

Transition from internal ICT infrastructure to a management platform that ensures the creation of business value
Redevelop our management platform to enable DX to be applied in all business processes.
Establish a management platform that facilitates the digital transformation of business development
and co-creation processes through the use and advancement of highly skilled personnel.

34

ANNUAL REPORT 2022

Foster highly skilled professionals who spur the creation of customer value as leaders of our evolution
into a DX-Native company
The key to implementing our spiral-type growth model and the three basic strategies it comprises is our human resources. We will foster
our employees into consultants who are unique to NESIC, DX professionals who enact specific reforms, and next-generation network­professionals who possess high levels of expertise and acquire additional talent when necessary.
Of the total number of personnel with relevant qualifications and the like

180

Consulting personnel

Advanced DX professionals

Beyond 5G professionals

400

2022/32025/3800

1,800

2022/36002022/32025/3·D evelop advanced professionals

mainly at the Shin-Kawasaki
Technical-Base(Consulting professionals,
DX professionals, beyond 5G network professionals)·R aise the level of DX literacy of all

employees and enhance their selfimplementation based on thisliteracy·S ell and monetize the function for

800

2025/3developing DX professionals(­college scheme)

Organizational Strategy

Reform the organization with a view to realizing DX × Beyond 5G
We have optimized our organization by adding marketability to our conventional focus on technologies, in order to provide customers witheverything from consulting services based on our self-implementation practices to support for adoption, operation, and maintenance in
an integrated manner. In addition, we have established the Carbon Neutral Promotion Division to promote the transformation of all businesses to ensure that they address climate change and to reduce greenhouse gas emissions from our internal business activities.

Point

Marketing & Sales Operations Unit

3

Point

Carbon Neutral Promotion Division

2

Business Process Innovation
Strategy Division

Point

1

Accelerate actions for the realization of DX× Beyond 5G and for shifting businesses toservices provision model (Reorganize someof the functions of the business units)

Business Design Operations Unit
Point

1

Point

1

Point

1

DX Solutions Business Unit

Point

2

Strengthen consulting and proposal capabilities (Integrate resources for sales promotion to build closer relationships withcustomers)

Network Solutions Business Unit
Environmental & Social Solutions
Business Unit

Point

3

Strengthen functionality for the implementation of strategies for carbon neutrality andto address climate change

Administration Staff

ANNUAL REPORT 2022

35

Financial and Capital Strategy

We will speed up our virtuous cycle ofvalue creation by actively investing in
growth and forging ahead with sustainability strategies.
Hiroyuki Sekizawa
Senior Vice President, Chief Financial Officer (CFO),
Member of the Board

Approach to Sustainable Shareholder Value / Corporate Value Enhancement
In order to achieve sustainable growth, NESIC believes in theimportance of integrating “maximizing financial value,” suchas sales and profit growth and capital efficiency, with“strengthening non-financial value,” focusing on materiality,
which consists of initiatives to provide value to society andinitiatives for growth at NESIC. We will actively invest toward
future growth and proceed with sustainability strategies tospeed up our cycle of corporate value creation from nonfinancial to financial and back to non-financial enhancement.
While doing so, we will ensure that these efforts and outcomes are clearly visible to all stakeholders, with whom wewill constantly engage in our quest to increase corporate andshareholder value.

Sustain Improvement in Corporate Value

Financial value

MarginROE

ANNUAL REPORT 2022•R
 einforce existing businesses•C reate new businesses

Cost ofsales ratio• Improve cost structure(increase efficiency of material
and outsourcing costs, advancein-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

36

Growth in
net sales•U tilize debt while considering
financial soundness

Non-financial value

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

Looking Back on Beyond Borders 2021
Under the previous medium-term management plan Beyond
Borders 2021 (“previous plan,” hereafter), we engaged in anarray of measures based on our policy of achieving sustainable increases in shareholder and corporate value. These
measures included increasing ROE; consistently realizing
returns on investments to the extent possible and in excess
of capital cost; enhancing non-financial value in the form of
ESG and management resources, such as our service platform and human resources, who are the source of our value
creation; and strengthening stakeholder engagement.
To maximize financial value based on improvements ofROE, we rolled out measures aimed at increasing profit
margin on sales and the total asset turnover ratio, which areboth components of ROE, in our business divisions andimplemented a PDCA cycle. From the vantage point of
increasing profit margin on sales, we have actively invested
in DX and next-generation network related businesses. Suchinitiatives include the development of high-value-added DX
services and platforms that serve as the foundation for suchservices under the Symphonict brand and capital alliancesand venture capital funds aimed at promoting co-creation
activities with cloud vendors and startups. These investments have led to the development of exceptional services,which, combined with the recent surge in demand for digitalization, have generated results in the form of significant
growth of the DX business and have become a competitiveedge toward the achievement of our new medium-term management plan and further growth thereafter.
In terms of improving cost efficiency, the restructuring of
our organization has led to more efficient use of fixed costs
through the flexible management of resources. Such efforts
have also led to higher standards in project quality andreductions in additional costs stemming from the ability toshare know-how with others within the organization.
Moreover, we have accelerated our investments in workstyleand business process reforms, such as self-implementation
for DX technology, streamlining our communication and thedigitalization of approvals, aiming to increase the productivity of the front lines, staffing divisions, and other facets ofour business. As a result of these measures, gross margin
improved 3.3 percentage points from 17.2% in FY2019/3,
prior to the start of the previous plan, to 20.5% in FY2022/3,
the final year of the previous plan, while the operating margin
gained 2.9 percentage points from 4.6% to 7.5% over thesame period.
In regard to enhancing asset efficiency, we directed ourattention to improving the cash conversion cycle (CCC) in aneffort to streamline working capital. We have strengthened
our system and structure for enhancing asset efficiency bypositioning our CCC improvement activities as a part ofinternal performance evaluations and promoted awarenessraising activities to ensure that every employee is fully committed to these activities. At the same time, we funneledefforts into areas that were in considerable need for improvement and immediately generated results, which were thenshared throughout the Company. By steadily engaging insuch efforts one after another, we have increased awarenessof cash flows throughout the organization. As a result, wewere able to improve the CCC by 10 days, from 96 days to 86
days, over the course of the previous plan.
Cash Conversion Cycle

(day)
Fiscal year
ended March
31, 2019

Fiscal year
ended March
31, 2022

Improvement

96

86

10

Accounts receivable
turnover (days)

132

123

10

Inventory turnover(days)

17

13

5

Trade payables turnover(days)

54

49

–5

CCC

As for the optimization of our business portfolio, we constantly analyze and assess our business from the perspectives of return on invested capital (ROIC) and growth potential
by establishing a hurdle rate that takes into account theweighted average cost of capital (WACC) and the current
ROE. For those businesses where issues were identified, we
took measures such as restructuring their framework andfunctions.
In FY2022/3, both net sales and operating income
decreased from the previous fiscal year due to the absence of
GIGA school-related demand and the provision of allowance
for losses related to our Myanmar business. Regardless,I believe our earnings structure and our business capabilities
in growth and high-value-added fields steadily improved
during the three years of the previous plan. Due to a significant improvement in profitability, ROE increased by 2.9 percentage points, from 8.7% to 11.6%, over the course of theprevious plan, achieving the 10% target we set as the standard for sufficiently exceeding the cost of capital.
Since strengthening non-financial value/ESG based onmateriality also constitutes the basis for improvements incorporate value, I have actively observed these items alongwith the maximization of our financial value. We have identified our material issues ( P16) for achieving a sustainablebusiness that grows in harmony with society, and haveactively invested in the development and utilization of personnel who will help spur innovation toward creating solutions tosocial issues and realizing business growth. Specifically,
NESIC established a new core center for training engineers
and the verification and evaluation of new technologies, suchas 5G. From the perspectives of well-being, health, and inclusion and diversity, it has also developed infrastructure tocreate a more comfortable workplace environment andenhance the capacity to spur innovation ( P54).
With respect to the environment, in December 2021, theCompany endorsed the recommendations of the TCFD in
response to social needs stemming from the urgency ofclimate change. As a part of our comprehensive range ofmeasures to address this issue, we newly established theCarbon Neutral Promotion Division in April 2022 andstrengthened our disclosure in this area with the aim ofbolstering our capacity to implement climate change
related strategies.

ANNUAL REPORT 2022

37

Financial and Capital Strategy

Regarding our engagement with capital markets, we havebeen actively involved in IR activities, which have createdmore opportunities to engage with investors and analysts.
Personally, I have engaged in dialogue with many investors asa member of management ( P61).

By virtue of these financial and non-financial activities,
our total shareholder return has significantly outperformed
TOPIX since the start of the previous plan. We havealso seen results through our first-time selections in the
JPX-Nikkei Index 400 and various ESG indices.

Total Shareholder Return(Times)
8.0
7.0
6.0

Beyond Borders 2021 mediumterm management plan wasannounced in May 2019

NESIC
TOPIX
*P
 rice including dividends relative to TOPIX, withthe closing price on March 31, 2011, set at 1.

5.0
4.0
3.0
2.0
1.0
0.5

2012/3

2013/3

2014/3

2015/3

2016/32017/3

2018/3

2019/32020/32021/32022/3（FY）* Total shareholder return: Total shareholder return, including capital gains and dividends*M ethod 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 based on Bloomberg data)

Outside Evaluations

JPX-Nikkei 400

FTSE4Good Index Series

FTSE Blossom Japan Index

MSCI Japan ESG SelectLeaders Index in 2022*

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.

Financial and Non-Financial Strategies under the New Medium-Term Management Plan Shift up 2024
Under the new medium-term management plan Shift up
2024 (“new plan,” hereafter), we will continue to invest
toward further growth and proceed with sustainability strategies to accelerate the cycle for creating organically linked
financial and non-financial value.
While we were able to achieve results under the previousplan, our profit levels varied significantly depending on client
investment trends, and we believe that the stability of profits
remained an issue in terms of reductions in the cost of capital. Accordingly, the Company will establish a spiral-type
growth model ( P32), which will be paramount to its growthstrategy, and thereby transition to a business model thatfacilitates the sustainable growth of society, customers, andthe Company, aiming to expand profit through improvements
in sales and profitability. To that end, we plan to invest a totalof ¥30 billion (on an expense basis) in businesses, humanresources, and information technology under the new plan.
While this amount is well in excess of the ¥5 billion to ¥6billion we invested on average each year under the previousplan, we will compensate for this increase through the38

ANNUAL REPORT 2022

30 billion

3 years total ¥Cost bases excluding M&A investment

Business
investment• Enhancement of Symphonict• Service shift of existing business• Investment for climate issue¥17 billion

Human
investment• Enhancement of consulting
capability• Development of DX resources¥5 billion

IT investment• DX shift of internal process• Renewal of basic operations
system• Office investment¥8 billion• Enforcement of provision value
and competitiveness• Enhancement of regional system& global system

Separate fromthe above

etc.

M&A

expansion of sales and improvement in profitability. And wewill strive to achieve our targets for operating margin of 9.2%
and ROE of 13% or more by achieving both investment for
growth and profit growth. In addition, we will continue tohone our efforts to improve CCC and refine our ability togenerate operating cash flows, through which we expect free
cash flows (excluding M&As, investments, etc.) to expand to¥40 billion over the three-year period of the new plan.
We have a responsibility to consistently provide highly
reliable services, including the development of social andpublic infrastructure, and this entails having a sound financial foundation in place. In regard to capital allocation, ourpolicy is to prioritize M&As and investments based on ourbusiness strategy, while giving consideration to stable shareholder returns upon securing cash on hand that is equivalent
to approximately two months of net sales in preparation for
sudden needs for funds going forward. Meanwhile, if theneed for funds were to arise, we will prioritize the use ofloans to the extent that it does not impair the Company’s
financial position upon ensuring cash on hand for security,and through this means, take shareholder value into
consideration.
In addition to improving sales and ROE, I believe nonfinancial value and ESG will mitigate future risks for bothsociety and the Company, and contribute to increases incorporate value from the perspective of achieving businessgrowth and reducing the cost of capital. We have set nonfinancial indices such as the reduction of greenhouse gas
emissions, the development of highly skilled professionals,

and the achievement of a high employee engagement scoreas management targets under the new plan. We will alsotransform all of our businesses to ensure that they are able
to address climate change and work to strengthen our disclosure in this area ( P28). Along these lines, under the newplan, the Company will steadily increase its growth potential
and profitability by transitioning to a sustainable businessmodel so that it continues to take further steps ahead overthe medium to long term.

Funds and Breakdown by Purpose of Use in the New MediumTerm Management Plan(¥ billion)

120

120
Shareholder return

Free cash flows

40

22

M&A, etc.

38

Cash in hand balanceat the end of March
2022

80

Funds

Ensuring security

60

Breakdown by
purpose of use

Shareholder Returns
Based on a sound financial position and after securing funds
for investment in future growth, the Company comprehensively takes into account consolidated business performance, free cash flows, the expectations of eachshareholder, and other factors, while emphasizing dividendon equity (DOE) as a dividend indicator rather than the dividend payout ratio, which is influenced by short-term business performance. In the process, we pay stable dividends
on a continuous basis to shareholders who have continued
to support us over the long term.
In view of Shift up 2024, the Company has decided toraise the level of returns to shareholders in light of its higher
profit levels. Specifically, we raised the DOE from 4.5% to5.0% based on the projected levels of ROE and dividend
payout ratio. Accordingly, following an increase in the annual
dividend per share for the 16th consecutive year, from ¥43
per share in FY2022/3, we plan to increase the dividend to¥46 per share in FY2023/3. Going forward, we will work toprovide even higher levels of return to shareholders by continuing to strengthen our business capabilities. Decisions onshare buybacks will be made based on a comprehensive
review of investment in future growth and share price, costof capital, increases in shareholder value, and other factors.
While it continues to increase significantly, we will strive toraise the level of TSR even further by increasing both financial and non-financial value through our pursuit of Shift up
2024 and the strengthening of our engagement withinvestors.

43

Cash Dividends per Share*

46

(¥)

Increasing dividends for the
16th ­consecutive year

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（Plan）(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.
*E stimates as of April 28, 2022.

ANNUAL REPORT 2022

39

Financial & Non-Financial Highlights

Financial Data

Orders Received / Net Sales

Operating Income / Operating Margin

Despite the major impact of the absence oflarge projects such as the GIGA School
Program and semiconductor / material shortages, leading to a decline in net sales, priority
fields, such as the DX-related and telecom
businesses, steadily expanded.

Despite a decline in operating income due tolower net sales and an unprofitable project,
operating income and operating margin­surpassed the targets under the previous plan,
through improvements in cost efficiency andadded value.

(¥ billion)

(¥ billion / %)

400

9

336.9
339.1 310.3

25.6

305.0
303.6

20

200

11.1

8.9
8

12.8

10

0

Orders received

Net sales0
2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

Operating income (left)

Operating margin (right)

9.4

4.8

4.6

4

3.2
3.1

4

2

0

0
2018/3 2019/3 2020/3 2021/3 2022/3 （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

The owner’s equity ratio came to 52.9%. As acompany that facilitates the development ofsocial infrastructure, we will maintain a solid
financial base.

Despite a decrease due to lower incomes, ROE
remained above the 10% target of the previous
plan as capital efficiency improved due tohigher profitability and working capitalefficiency.

Despite an increase in net cash used in investing activities, free cash flows increased due toan outweighing increase in net cash provided
by operating activities.

(¥ billion / %)(%)(¥ billion)

160
123.7

120
99.5
80

104.9

47.9

100

15

80

12

47.9

49.4

60

52.9

9

8.7

20

0
2018/3 2019/3 2020/3 2021/3 2022/3（FYE）

Owner’s equity (left)

ANNUAL REPORT 2022

Owner’s equity ratio (right)

8.8

7.6

6
5.4

40

0

11.6
10.6

110.4

48.5

25

13.5

134.7

40

40

0

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

7.4
2.7

3

100

8

6

16.2

4.6

15.0

12
6

5.4
4.1

15.7

16

23.2
7.5

7.5

284.7
300 287.8
267.9 277.9

Despite a decline in net income attributable toowners of the parent due to lower operating
income, the ratio of net income to net sales
improved to 4.8% due to less extraordinary
losses.
(¥ billion)

30

336.8

Net Income Attributable to Owners of
the Parent

6.1

ROE
ROA

20

17.4

15

9.3

7.1

3

0

22.7

10
5

8.4
4.8
2.0

13.1

15.5

6.2
2.8

0
–5

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

12.9

–10

–2.8
–5.6

–4.3
–6.7

–7.2

2018/3 2019/3 2020/3 2021/3 2022/3 （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.

Bearing in mind the importance of protecting
the global environment, we are striving to
reduce the amount of waste emissions fromour business activities.

(t-CO2)(t)

12,0001,200,000

1,137,240

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 / %)

8,000

8,456

8,062

8,321 900,000

6,000

600,000

4,000

6,000

3,000

300,000

24

6,000
6,867

9,525
9,000 8,680

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

5,009

4,841 4,871

15.1

15.7

4,500

5,647

3,642

3,273

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

Scope1+200

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

(Employees)

Average Monthly Overtime (Per Employee) /Ratio of Employees Taking Paid Leave /Ratio of Male Employees Taking
Childcare Leave
While temporarily affected by the introductionof super flextime and hourly paid leave systems, making our workstyle more flexible, wewill continue to work to achieve even more
efficient and effective workstyles.
(Hours / %)

160

143
131

120

109
97

97

96

96

80

15

24.5
18.9
67

19.7
69

19.0
72
60

11.5

5

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

Number of new graduate hires
Number of mid-career hires

0

60
30.3

41

8
0

4.6

5.2

6

0
2018/3 2019/3 2020/3 2021/3 2022/3（FYE）

Number of Internal Reports (Sexual
Harassment and Human Relations /Corporate Ethics)
We have established individual hotlines formatters related to sexual harassment/humanrelations and corporate ethics and are working
to ensure management transparency andsoundness.

100

100

80

80

60

60

22.3

10
40

4.2

(Case)

25

20

80

3.7

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

Scope3*

New graduate and mid-career hires continues
to rise each year and individuals of various
backgrounds are thriving in their respectiveroles.

18

12

1,500

*S
 cope 3: Only data for the fiscal year ended
March 31, 2021. See P52 for details.

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

17.2

3,000

2,000

0

16.8

2,944
3.0

0

16.2

4,996 5,090

1.9

3.9

9.3

54
40

40

20

20

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

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

0

61

41
51

24
0

68

22

26

18

33

2018/3 2019/3 2020/3 2021/3 2022/3 （FY）

Sexual harassment and human relations
Corporate ethics

ANNUAL REPORT 2022

41

Overview of Business 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,
we will continue to enhance our ability to create social and customer value through the data we accumulate via theserecurring business processes.
To that end, we have optimized our organizational structure by adding a market-specific approach to our existing technology-specific organization and optimized our business segments. Going forward, we will proceed with the new
medium-term management plan based on these new business segments.
Breakdown of Net Sales

Operating Income
Consolidated operating income¥23.2 billion

2%37%

FY2022/3

35%¥13 billion

Consolidated
net sales¥310.3 billion¥10.8 billion¥8.2 billion

FY2022/3

26%–¥8.9 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 ¥108 billion

Operating Income ¥13 billion

Network Solutions Business

Net Sales ¥81.9 billion

Operating Income ¥10.8 billion

Environmental &Social Solutions Business
Net Sales ¥115 billion

Operating Income ¥8.2 billion

FY2022/3

FY2022/3

FY2022/3

The DX Solutions Business provides
network environments and ICT tools forworkplaces and other systems andservices, 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 spur business innovation
through the use of AI, the IoT, the metaverse, and other cutting-edge digitaltechnologies. We also help diversify andenhance the quality of new workstyle
approaches by addressing social issues
such as balancing work with childcare
and nursing care, increasing job satisfaction, and preventing the spread of COVID19 and other infectious diseases.

The Network Solutions Business provides
system development, maintenance, andoperation services for network infrastructures that require advanced and specialized technical capabilities and ensure
reliability, including networks for telecommunications carriers, transmission andstudio facilities for broadcasters, spacerelated businesses, such as satellite andspace exploration operations and groundobservation, and marine businesses, suchas submarine communication 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 touse our aforementioned abilities toaddress 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 forrailways 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.

* FY2022/3 figures shown above have been reclassified to reflect the restructuring of business segments in April 2022.

42

ANNUAL REPORT 2022

Overview by Business Segment

DX Solutions Business
Utilizing our DX-related know-how accumulated

V‌I‌S‌I‌O‌N

through workstyle innovation and knowledge indata use, we will resonate with our customers
and help transform their business models andachieve sustainable management on the roadto becoming the leading provider of DX
services.

Opportunities / Threats

Seiji Shiga
Senior Vice President
Executive General Manager,
DX Solutions Business Unit

Strengths / Features

Purpose of DX expanding beyond workstyle innovation to theExtensive customer relationships and a proven track record culti-

strengthening of management and the business itself as well asvated through the development of various ICT infrastructures

extending to the public sector

Capabilities to apply the high level of technology and service plat-Change in needs from a business model centered on product SI toforms, such as operation and maintenance, required to the NECa solution service delivery model that utilizes cloud services

Group on a multi-vendor basis
Know-how related to DX and workstyle innovation cultivatedthrough co-creation activities with customers and Companywide
self-implementation activities and its provision capability as a real
solution

Strengths / Features 
We are currently seeing a rapid trend toward cloud computMoreover, we will expand the scope of application of ouring as a means to reform workstyles and business proknow-how on workstyle and business process innovation
cesses. By anticipating this trend and accelerating
the 年 3 月期
from corporate offices to the smart industry domain, where it
2022
implementation of the use of DX technology through cowill be utilized on factories, as well as to the public domain,
実績has1,080 億円
creation with customers and partners, the Company
where it will be used by government agencies to resolve
transformed its business model from one centered on prodsocial issues in new areas such as laborsaving, optimization
2023 年 3 月期
uct SI to a solution service delivery model based on theof logistics and employee flow at factories, and improveimplementation of the use of DX technologies.予想
This has XXX
led
ments to residential services and revitalization of regional
億円
to a rapid uptake of demand for workstyles tailored to thecommunities by local governments.
new normal that have been expanded in the wakeof2025
年 3 月期
COVID-19.
Net Sales
Operating Income
目標値
1,300
億円
Under the new medium-term management plan,we will(¥ billion)(¥ billion)build on this model by working in unison with our customers
to develop recurring relationships. We will expand our
150
20
19
system operation and maintenance services for the non-core
130
117
business fields of our customers by drawing on our long120
16
15
108
cultivated know-how on the use of DX technology and our SI
13
9012
application capabilities, a perennial strength of ours that iswell-versed in the business of our customers. We intend to60
8operate our business through “offerings” in which data / AI
analysis based on various operational information obtained
30
4will visualize customer issues and make proposals for
improvement, and thereby expand business. Through this002022/3 2023/3
2025/3(FY)
2022/3 2023/3
2025/3(FY)(Forecast)(Plan)(Forecast)(Plan)
cycle, we will provide high-value-added services that will
provide further strength to our customers’ businesses.
*F Y2022/3 figures shown above have been reclassified to reflect the restructuring ofbusiness segments in April 2022.
ANNUAL REPORT 2022

43

Overview by Business Segment

Network Solutions Business

V‌I‌S‌I‌O‌N

We offer advanced technologies with highspecialty to connect society from the floor of
the ocean to the far reaches of outer space in

Kazuhiko Takeuchi

optimal forms to help realize a digital society

Senior Vice President
Chief Engineering Officer (CENO),
Member of the Board
Executive General Manager,
Network Solutions Business Unit

with greater security and convenience.

Strengths / Features

Opportunities / ThreatsPromotion of wider use of 5G technology to realize the DigitalUnrivaled strengths in communications technology as a member of

Garden City Nation concept

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

years of experience

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

outer space and strengthening of disaster response)

communications

Break free from vendor lock-in through the trend toward openness

Extensive customer base in social infrastructure and deep under-

and virtualization

standing of our customers’ business activities acquired through ouryears of providing maintenance and operation services

Strengths / Features 

2022 年 3 月期

There is a need among telecommunications carriers tosatellite operation know-how to the private sector and pro実績 1,080 億円
streamline capital investments and reduce costs, and thevide services such as satellite image analysis using AI. In the
Company views this need as a business opportunity.
In 年 3 月期
marine field, we will transfer submarine network technology
2023
edge/access network, including base stations, we will not
for use in the installation of power lines in offshore wind
XXX 億円
only increase operational efficiency through DX予想
but will also
power generation, which is expected to increase in demand
convert our know-how into solutions. Meanwhile, in regard togoing forward.
the core network infrastructure, we will provide2025
solutions年
to 3 月期
new issues that emerge along the trend toward openness.
Net Sales
Operating Income
目標値
1,300
億円
(¥ billion)(¥ billion)
The Company will also work to develop services that help
telecommunications carriers reduce their operational costs,
97.0
100
15
including business process outsourcing (BPO) and auto14.0
85.0
mated operational monitoring services. In addition, we will
81.9
80
12
actively engage in the local 5G market, which is expected to10.8 11.0
expand going forward, and leverage our strengths in both of60
9base stations and core network development with a view to
becoming one of the leading 5G infrastructure companies in40
6Japan. We will also combine the industry and business
20
3know-how of NESIC and other companies in order to develop
a vertical organization that extends to the service domain.
00
In the social infrastructure field, we will transition to busi2022/3 2023/3
2025/3(FY)
2022/3 2023/3
2025/3(FY)(Forecast)(Plan)(Forecast)(Plan)
nesses that help resolve social issues through the integration of DX and AI into our existing technologies and deploy*F Y2022/3 figures shown above have been reclassified to reflect the restructuring ofbusiness segments in April 2022.
our existing business know-how and solutions to adjacentindustries. In the outer space field, we will transfer our

44

ANNUAL REPORT 2022

Environmental &Social Solutions BusinessOn the strength of our engineering capabilities

V‌I‌S‌I‌O‌N

and our full-service structure, we aim tobecome a business operator that helps createand develop communities where people cancontinue to live safely and with peace of mind
while helping revitalize regions by achieving a
recycling-oriented society worldwide.

Opportunities / Threats

Hiroshi Nagao
Senior Vice President
Executive General Manager,
Environmental & Social Solutions
Business Unit

Strengths / Features

Increase in ICT investment triggered by the realization of a green

Nationwide support service system that covers everything fromsociety and the digitalization and disaster prevention and mitigationenterprise to mission-critical telecommunications infrastructure

by local governments

NESIC’s 24/7 full-service structureDecline in legacy system maintenance due to the shift from productNationwide response within two hours from approximately 400

SI business to cloud services

locationsJapan’s leading nationwide construction resource

Strengths / Features 
The Environmental & Social Solutions Business2022
boasts frontwith providers of microgrids and other electricity manage年 3 月期
line capabilities that have been cultivated through the develment services.
実績 and
1,080 億円
opment of infrastructure for various local governments
In addition, we will improve both the quality and profitabilitysocial infrastructure providers based on a comprehensiveof our construction and service infrastructures, which under2023 年 3 月期
construction and service structure that spans all of Japan.
pin our Groupwide operations, by utilizing DX technologies,
Based on these capabilities, the Company will 予想
engage inXXX
thesuch as for assessing risks through the use of AI and visual億円
business of developing new communities and digital towns
izing the activities of the front lines through the use of data.
by strengthening the DX field. We will embrace2025
the challenge
年 3 月期of resolving regional social issues such as “safety and secuNet Sales
Operating Income
目標値 and1,300
億円
rity,” “environmental awareness,” “regional revitalization,”(¥ billion)(¥ billion)“economic circulation” through disaster countermeasuresthat utilize video information, data, and AI; regional services
150
20
140
that utilize next-generation networks and DX technology; and126
16.0
onshore fish farming aimed at advancing primary industries.
115
120
16
In so doing, we will work to develop communities where
12.5
90
12
people can continue to live safely and with peace of mind.
In terms of environmental consideration, we will review
8.2
60
8the know-how we have accumulated to date from the perspective of a green society while helping to resolve issues
30
4and expand our business. We will approach this from theviewpoints of addressing the need for power-saving mea002022/3 2023/3
2025/3(FY)
2022/3 2023/3
2025/3(FY)(Forecast)(Plan)(Forecast)(Plan)
sures through the provision of liquid immersion-cooled data
centers and the shift to smart buildings that utilize our pro*F
 Y2022/3 figures shown above have been reclassified to reflect the restructuring ofprietary building management system as well as cooperating
business segments in April 2022.

ANNUAL REPORT 2022

45

Special Feature: FLARE SYSTEMS × NESICNESIC has teamed up with FLARE SYSTEMS Ltd., a venture company specializing in local 5G, to commercialize a­software base station developed through the University of Tokyo’s cutting-edge local 5G technology and promote its
implementation throughout society. In this section, we will discuss the aim behind our co-creation efforts and our vision
for the future.
Implementing Local 5G via Software
Base Stations
Arikawa: First, I’ll briefly explain therelationship between FLARESYSTEMS and NESIC. Since around2015, NESIC has been conducting
R&D with Dr. Akihiro Nakao, a professor at the University of Tokyo anda leading expert in 5G research. This
led to an invitation from Professor
Nakao to work together toward thecommercialization of a softwarebase station at a time when 5G wasstill at the dawn of its revolution,and this was the reason behind theestablishment of FLARE SYSTEMS.
Mr. Nakagawa: In the past, it was
the role of manufacturers to commercialize the outcomes of basic
research conducted by universities;
however, we are no longer in an age
where products are sure to be purchased if created. Rather, we must

place emphasis on the ways inwhich these products are implemented throughout society. This isalso an extremely important point toconsider when promoting the use of
local 5G. In my mind, there is no
better scheme than to have FLARESYSTEMS take on the task of commercializing the University ofTokyo’s cutting-edge research
results, while NESIC assumes therole of implementing them throughout society, including maintenanceservices, by drawing on its knowhow as a system integrator.
Arikawa: NESIC has positioned
Beyond 5G (next-generation networks)

We will strive to continue to proceed
as a leader in cutting-edge technology.
Takayuki Nakagawa
Representative Director,
FLARE SYSTEMS Ltd.

46

ANNUAL REPORT 2022

as a major pillar of its strategy under
the current medium-term management plan. In order to expand theuse of local 5G throughout society,we must enhance our portfolio andprovide customers with a more
extensive range of options. We hope
to do so alongside FLARE SYSTEMS.
Local 5G enables the use of licensed
bands, which were only available totelecommunications carriers until
now, and will herald an age wherecompanies and local governments
will be able to utilize networks
according to their respective needs.
The software base stations developed by FLARE SYSTEMS can be
adjusted for additional functions by
updating the software, without
having to rely on the use of hardware. The fact that we can respondquickly not only to 5G but also to the
Beyond 5G is a major advantage. In
fact, we have received inquiries frommany customers already.

Mr. Nakagawa: I believe the industrial world is where we will see thebiggest change as a result of local
5G. For instance, local 5G can beused in the manufacturing industry
to ensure that products flowing
along the production line at speeds
invisible to the human eye are managed for quality assurance in atimely manner using high-definition
cameras. It would also facilitate theautonomous management of production operations.
Moreover, as local 5G enables
wireless connections between
devices, the layout of productionlines can be readily changed andthereby contribute to significant
improvements in production efficiency. We anticipate a rapid growth
in production innovation through theuse of local 5G in the years ahead.
Addressing Social Issues throughthe Use of Local 5G
Arikawa: We are also proceedingwith efforts to utilize local 5G toaddress the issues of primary sectors. In the fishing industry, we areconducting tests on the real-timemonitoring of underwater conditions
from land by transmitting

high-­precision images taken by aremotely operated underwater drone
at oyster farming sites via local 5G.
In this way, we believe that local 5G
is able to demonstrate its true value
not only in urban areas but also inrural areas, where the use of 5G
services offered by telecommunications carriers has yet to become
widespread. I believe the use of
local 5G in primary sectors, such as
agriculture and forestry, in addition
to companies in general will help
revitalize local regions.

Mr. Nakagawa: I agree. Because
software base stations can performthe functions of a base station witha general purpose server without theneed for special hardware, users
can build networks at low cost. Dueto their advantages from both anease of use and cost perspective,
I believe software base stations will
be embraced by a wide range ofcustomers.

Arikawa: We will leverage NESIC’s
nationwide network to ensure that
we provide solid support to not only
urban areas but to rural areas as well.
Taking a Three-Pronged Approachto “Elevating Society”
Mr. Nakagawa: Local 5G will
become the focus of wireless networks in the coming years. It is very
rewarding to be at the forefront ofsuch a turning point in time. I hopethat we continue to proceed as amarket leader while ensuring thatthe co-creation relationship between
the University of Tokyo, NESIC, andFLARE SYSTEMS remains intact.
Arikawa: Our goal at NESIC is tobecome a leader in local 5G, which
can be described as a private network. Going forward, we will utilize
our three-pronged approach to steer
the market forward while providing
society with value that is unique to
NESIC along the path to “ElevatingSociety,” the theme of our Shift up
2024 medium-term management
plan. Mr. Nakagawa, thank you verymuch for your time today.

We will provide value that is uniqueto NESIC along the path to“Elevating Society.”
Yohei Arikawa
Senior Manager,
Multi-wireless Development Group,
Digital-Town Promotion Division,
Business Design Operations Unit,
NEC Networks & System Integration Corporation

ANNUAL REPORT 202247

Special Feature: Joyo City (Kyoto Prefecture) × NESICAt NESIC, we are firmly devoted to supporting local governments in their promotion of DX. In this section, we will introduce
the DX initiatives we are promoting with Joyo City, which has selected us as its DX promotion partner.
Joyo city hall

Our Unique Consulting-BasedApproach
Mr. Araki: Our relationship withNESIC began upon our request to
introduce Zoom in order to address
the spread of COVID-19 and theneed to incorporate web conferencing. We received proposals from anumber of companies in regard to
the formulation of Joyo City’s DX
implementation plan. However,
NESIC’s proposal was unprecedented in Japan, identifying issues
that the city had to address throughdirect engagement with employees
in the entire city hall. This willingness to do whatever it takes to help
us achieve our goal was the main
reason for settling on NESIC.
Okuda: Over the years, the Company
has provided customers with support
on DX through its self-implementation
approach. We knew that we could
provide value that was unique to
NESIC to the city of Joyo by working
closely with them in their promotionof DX. I believe we were able to gain
the city’s understanding of theimportance of embracing change inall of its employees through thepromotion of DX and not being content simply with the formulation of
the plan.

Tomoya Okuda
Section Chief,
Keiji Branch Office,Kansai Branch Division,
Marketing & Sales Operations Unit

Takao: When we first discussed thisplan two years ago, DX in local

48

ANNUAL REPORT 2022

NESIC

government was an area that no one
had explored. Realizing that it was achance to learn how DX would bepromoted by a local government, weembraced the opportunity.
Identifying Issues through Direct
Engagement with Employees
Okuda: As a first step toward promoting DX, we began by ensuringthat all employees gained a better
understanding of DX. The mayor of
Joyo City, Mr. Toshiharu Okuda,
personally distributed a video to all
sections of the city hall expressing
the significance of DX and the city’scommitment toward this project,which inspired us even more to
firmly respond to such expectations.
We then asked the city hall employees to compile a list of their duties,
and began meeting them in person
twice a week to discuss the details.
While the list contains as many as
3,500 duties, we have alreadyengaged with more than 70 departments and are on the verge of completing interviews with all of them.
Ms. Wakayama: When conducting
interviews in each department,
NESIC was very supportive from theoutset, engaging in the formatting ofinterview sheets.
Mr. Araki: Mr. Okuda visited the city
hall so many times to join in on
interviews, sometimes for as longas 12 hours per week. It must havetaken a toll on him.
To be honest, there weremoments when I thought the service
was excessive. I jokingly said that I
would have turned down the projectif I was the president. However, wewere able to gain advice from aperspective that was unfamiliar toour organization, which served as anopportunity for our employees togain new insight.

Masato Araki	Administration Officer and Department of
Projects and Personnel Management

Mr. Tomita: Each section has its
own way of working. As members of
the same organization, it is not easy
to persuade them to change theirapproach. However, the objective
views provided by NESIC haveopened up possibilities to resolve
our issues.
Mr. Kakiuchi: While the project took
a toll on us as well, it turned out tobe a great opportunity to reassess
our operations, such as uncovering
inefficiencies. I believe this will
prove to benefit for handover at thetime of employee transfer, which
occurs regularly at the city hall.
Above all, I was pleased to see astronger vibe to make the city hall abetter place through the use of DX.

Takeshi Kakiuchi
	Department of Projects and Personnel
Management - Policy Planning Section- Administrative Reform Subsection

From Improving Work Efficiency to
Digitalizing Local Communities
Takao: The interviews have helped
shed light on the issues common to
all departments and the themes thatshould be addressed throughout theorganization. The next step will be
to model business processes basedon this information and to build afoundation to take concrete steps
toward DX. The highlight of thisproject is yet to come.

Seiji Takao
Senior Manager,
1st Consulting Group,
Business Process Innovation Strategy Division,
Marketing & Sales Operations Unit

Ms. Wakayama: Needless to say,there would be no city hall without
the residents of its city and so wewant to not only improve the work
efficiency of our organization but
also enable these residents to

Naomi Wakayama
 epartment of Projects and Personnel
DManagement - Policy Planning Section- Administrative Reform Subsection

experience the effectiveness of DX.
We have had more opportunities toshare views with neighboring municipalities as of late and hope to utilize
these opportunities to promote DX
in cooperation with other local
governments.
Mr. Araki: I agree. Joyo City isapproaching a major turning pointwith the opening of all lanes on the
Shin-Meishin Expressway and thefirst-ever outlet mall in Kyoto
Prefecture. We will look to accelerate DX toward the realization of a“new Joyo” and widen our association with other local governments.
By so doing, we will enhance thecity’s capabilities as an extensive
hub for collaborations and breathe
new life into the city throughimprovements in convenience andlifestyles, which, in turn, will
increase its permanent population.
We look forward to NESIC’s continued support as we work hand inhand toward this transformation.
Mr. Kakiuchi: I believe the improved
work efficiency at the city hall as aresult of DX and the innovating
employee workstyles will ultimately
lead to better services for the residents of Joyo City. This is thereason why I would like to see us
accomplish our goal of improving
work processes.

Mr. Tomita: It is essential not tomake working on DX an objective,
but improve the convenience of allresidents. Just formulating the plan
is not enough. We must firmly
assure its effectiveness while putting it into action.

Kouhei Tomita epartment of Projects and Personnel
DManagement - Policy Planning Section

Okuda: To be honest, I was a bit
hesitant at first when I saw the
workload that was involved in thisproject. However, I was very encouraged when Mr. Takao stood behindme by saying that it would not beable to achieve our objectives
unless the entire operations of thecity hall were addressed. I was also
inspired by the words of trust
offered by the staff of the city hall.
In order to fulfill the expectations ofeveryone involved, we at NESIC will
do whatever it takes to bring thisproject to completion. I kindly ask
for your continuous cooperation
going forward. Thank you all foryour time today.

ANNUAL REPORT 2022

49

Environment

Disclosures Based on TCFD Recommendations
In December 2021, NESIC announced its endorsement of the
TCFD. To promote sustainability management and realize an
inclusive and sustainable society, NESIC discloses information in line with TCFD recommendations, engages in efforts
to mitigate climate change-related risks, and creates andcaptures opportunities.
In addition to endorsing the TCFD, we have also joined the
TCFD Consortium to exchange information with other companies and financial institutions that endorse the TCFD.

Further, as a member of industry group The Communications
and Information Network Association of Japan (CIAJ), we
participate in efforts to address climate change led by the
Liaison Group of Japanese Electrical and Electronics
Industries for Global Warming Prevention, and promoteindustrywide efforts such as the Action Plan for Achieving a
Low-carbon Society to prevent global warming.

Governance
NESIC views climate change and other environmental issues
as critical for promoting sustainability management andrealizing our vision of an inclusive and sustainable society
created through communications.
Regarding issues critical to management strategy,
the Sustainability Management Committee, chaired by
the President, examines strategies and measures andexchanges information pertaining to sustainability and ESG
strategies, including climate change countermeasures, aswell as risks and opportunities with the potential of significantly impacting our business.
One outside director with deep insight into sustainability
attends Sustainability Management Committee meetings as
an observer. The Board of Directors directs measures basedon the results of deliberations by the committee and reports
to the Board of Directors. In this way, a system is in place for
the Board of Directors to oversee the Company’s climatechange measures to ensure that they are properly promoted.
In April 2022, NESIC established the Carbon Neutral
Promotion Division, directly controlled by the President, tofurther strengthen and promote carbon neutral strategies
and management. The Carbon Neutral Promotion Division
will formulate Companywide carbon neutral strategies,
policies, milestones, targets, and other structures, working
with related divisions to create competitive advantages,

uncover new business opportunities, co-create with customers and partners, and develop green transformation (GX)
strategies necessary for achieving carbon neutrality.

Management
andSupervision
Business
Execution

Board of Directors
Executive Committee

Business Execution
Committee

Management Quality Improvement Committee

Sustainability
Management
Committee

ESG Execution
Structure

The Central Environmental
Management Committee
Executive Officer in
Charge of the Environment
Carbon Neutral
Promotion Division

Chair: President
Members: Senior Vice Presidents
Observers: Outside director,
directors, outside expert

Operations andBusiness Units(business strategies,
risk countermeasures)

Staffing Divisions(Companywide strategies,
disclosure support)

Strategy
NESIC recognizes that assessing the business impact ofclimate change-related risks and opportunities, as well as
formulating countermeasures, are essential for both realizing
our vision of an inclusive and sustainable society createdthrough communications, and ensuring businesssustainability.
To understand the impact of climate change on our business and identify climate-related opportunities and risks,
NESIC referred to scenarios SSP2-4.5 and SSP1-2.6 in
the Sixth Assessment Report of the United Nations
Intergovernmental Panel on Climate Change (IPCC).
While we recognize the differences in degree of impact
between SSP2-4.5 and SSP1-2.6, we focus on SSP1-2.6 as
this has been deemed sufficiently large and there are no50

ANNUAL REPORT 2022

significant differences in terms of the direction of NESIC
business strategies. We will continue to monitor the businessenvironment, and as necessary, examine business conditions
under different scenarios.
Additionally, we referred to NEC Group assumptions
regarding decarbonization scenarios in Japan, comparedthem with business environment assumptions in long-term
Company strategies, analyzed the differences, and identified
risks and opportunities related to climate change.
We conduct scenario analyses through Companywide
discussions involving the environmental, planning and public
relations departments and business divisions, and will continue examining strategies going forward.

Main climate change-related risks
Category

Main risks (NESIC overall)

Timeline / Impact

Main initiatives

Government
policies and laws

• Lossof business opportunities due to inability tomeet customer and supply chain demands

Medium term /Medium• Reducingpower consumption through office andworkstyle innovation, procuring energy throughin-house PPA*

Markets and ratings• Cost
increases due to higher prices and lower
supplies of materials such as semiconductors,
resins and steel, leading to difficulties in obtaining
components and materials

Medium term /Medium• Encouraging suppliers• Implementingsustainability activities throughout
the supply chain to secure components andmaterials• Riskof credibility loss and litigation due to delays
or inadequate responses to the restoration ofcustomer facilities in the event of a large-scale
emergency or natural disaster• Increased
man-hours and costs in line with thefrequent occurrence of disasters and system
failuresLong term /Medium• Predictingdisasters using big data, visualizing
disasters through image analysis• Enhancing
disaster response capabilities throughuse of renewable energy (e.g., ensuring the safetyof evacuation centers)• Heat
stroke during outdoor work, increased healthrisks for employees due to high temperatures, anddecreased outdoor work productivity

Long term /Medium

• Utilizingrobots for remote operations• Managing
workers’ physical condition using
wearable devices

Physical risks* PPA: Power Purchase Agreement

Main climate change-related opportunities
Category

Main opportunities (NESIC overall)Markets• Increasingneed to utilize AI, IoT, and digital technologies as all of society moves toward
decarbonization• Expanding
business domain and market accessthrough collaborations and co-creations with othercompanies• Growingbusiness opportunities in new industries,
including regional new electric power providers

Resilience• Rising
demand related to citizen safety and security,
including disaster prevention and mitigation• Burgeoning
demand related to the strengthening
operation and management of critical social
infrastructure

Business segment

Main opportunities (by business)

DX Solutions
Business• In line with the rapidly growing need for decarbonization measures as a management issue, demandand opportunities are expanding for solution
services that include workstyle innovations and
ICT management based on DX, local 5G, IoT, andother ICT technologies

Network Solutions
Business

Environmental &Social Solutions
Business• Demandand opportunities are expanding forenergy saving and enhanced resilience in carrier
and public network infrastructure• Marinebusiness: Business opportunities expanding in line with increased demand for offshore
wind power generation• Aerospacebusiness: Business opportunities are
expanding with regard to environmental changes
and disaster prediction using satellite imagery andother analysis methods• Expanding
opportunities for business associatedwith the promotion of sustainable and resilient
community development, including regional
development and the Digital Garden City Nation
concept• Business
opportunities are expanding on demand
for renewable energy and diversified energy• Demandand opportunities are expanding forstable supplies of fishery resources unaffected byrising sea temperatures and reductions in GHG
emissions during transportation through local
production for local consumption

Timeline / Impact

Main initiatives

Medium term /Medium• Commercializing
businesses contributing todecarbonization (decarbonization management
support, co-creation businesses)• Creating
businesses that generate economic
cycles, starting with new electric power generation
leading to regional revitalization and development

Medium tolong term / High• Providing
optimal DX solutions for municipal
disaster prevention and corporate BCP measures,
including visualization using video and data
analysis technologies• Promoting
smart disaster prevention and mitigation businesses, from design and construction, tomaintenance and operational support

Timeline / Impact

Main initiatives

Medium term /High• Promoting
businesses and managed services that
include enhancements to the DX platform
Symphonict aimed at improving efficiency, visibility,and productivity through DX and AI• Enhancing
recurring consulting services for potential customer issues through operational services• Strengtheningand promoting the
EmpoweredOffice business with the addition ofcarbon neutral measures to office, workstyleinnovation and business process reforms

Medium term /High• Enhancing
technical capabilities in next-generation
networks such as 5G, DX, and AI imagery andstrengthening business through alliances andco-creation• Promoting
BPO in operations and management bypartnering more closely with customers• Enhancing
market and business developments
through co-creation with advanced partners in theoffshore wind and aerospace businesses• Providing
video surveillance and other predictive
detection services for increasingly severe natural
disasters

Medium term /High• Participatingin demonstration projects, strengthening market and business developments throughco-creation with partners in the energy and community development fields• Providing
clean energy in response to renewableenergy demands (solar power and storage batteries), promoting regional new electric providers, EV
infrastructure, and managed electricity businesses• Strengthening
R&D on advanced technologies that
contribute to carbon neutrality, including data
centers utilizing liquid immersion cooling technologies and market development through customer partnering• Promoting
the in-house commercialization of
onshore fish farming and enhancing businessdevelopment through co-creation with leading
local companies

ANNUAL REPORT 2022

51

Environment

Risk Management
In addition to torrential rainstorms, flooding, and other natural
disaster risks, the range of threats that companies must
consider, such as the Russian invasion of Ukraine, is
expanding.
NESIC continuously identifies risk diversification in thishighly changeable business environment, managing risks
from the perspectives of minimizing damage and ensuringbusiness continuity.
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 formeasures based on those strategies, leads measuresthrough deliberations, and in accordance with the Corporate
Governance Code, reports to the Board of Directors whileproviding ongoing disclosure to stakeholders outside theCompany.

Indicators and Targets
Since formulating its Environmental Policy in 1996, NESIC
has continued to reduce impacts from its business activities
on the environment. In providing customers with environmentally friendly products and services, we contribute tolowering environmental burdens throughout society andmaintain efforts to realize a sustainable society.
As a member of the NEC Group, in line with NEC
Environmental Targets 2030 (NEC Group targets for environmental management), we are engaged in reducing our
impact on the environment and risks, and expanding contributions through business activities.
To achieve NEC Environmental Targets 2030, NEC backcast five years from 2030, creating the NEC Eco Action Plan
2025, under which NESIC determined the following KPIs topromote activities• Reducing greenhouse gas emissions through the supply chain
As GHG emissions from the supply chain (Scope 3) are overwhelmingly greater than greenhouse gas emissions fromNESIC (Scope 1, 2), we are pursuing reductions throughout
the supply chain.
In the fiscal year ended March 31, 2021, reductions in
GHG emissions throughout the supply chain amounted to
1.14 million tons, of which NESIC emissions falling under
Scope 1 and 2 amounted to 394 tons compared to levels inthe same period of the previous year.
We will continue to lower Scope 1 and 2 emissions, promoting thorough visualization and refinement of Scope 3
and promote emissions reductions throughout the supply
chain.

<Major KPIs>
Fiscal year ending March 31, 2023 : 40% reduction in
CO2 emissions from business activities (Scope 1, 2)(compared to fiscal year ended March 31, 2020)
Fiscal year ending March 31, 2031 : 55% reduction in
CO2 emissions from business activities (Scope 1, 2)(compared to fiscal year ended March 31, 2020)
Fiscal year ending March 31, 2051 : Net-zero CO2 emissions
from business activities (Scope 1, 2)
Fiscal year ending March 31, 2024 : Set targets for supply
chain CO2 emissions (Scope 3)

Scope 3 Breakdown (Non-consolidated)<Growth strategy targets>Incorporate TCFD initiatives into management strategy(achievement of new medium-term management plan Shift up 2024)

(t-CO2)

Categories

FY2021/3

1 Purchased Goods and Services

585,067

2 Capital Goods

11,2203

Fuel- and Energy-Related Activities
Not Included in Scope 1 or Scope 2

1,397

4

Upstream Transportation andDistribution

9,678

5 Waste Generated in Operations

250

6 Business Travel
7 Employee Commuting

2,335
584

Downstream Transportation and9Distribution

27,22311 Use of Sold Products

498,276

12

Category 12: End-of-Life Treatment
of Sold Products
Total

1,211
1,137,240

Notes:
1. F
 igures for the fiscal year ended March 31, 2022,
will be disclosed on our corporate website in December 2022
(https://www.nesic.co.jp/english/sustainability/environment/)
2. Excludes categories 8, 10, 13, 14 and 15.

52

ANNUAL REPORT 2022

FY2022/3

Undercalculation

Measures for Achieving Targets
In all segments, we will utilize DX to enhance technologies and services cultivated up to now with an awareness of both mitigating and adapting to climate change, and become engaged in the power managed services domain in the ESS segment. In termsof workstyle innovation, we will expand the application of accumulated know-how to the public sector and manufacturing facilities, while reducing paper usage and electricity consumption through process reforms and the use of foliage on worksites toenhance our responsiveness to the environment.
DX Solutions Business
NESIC utilizes DX application know-how cultivated through workstyle reforms to improve processes at manufacturing sites and otherfacilities with the aim of enhancing environmental efforts.
A model of DX on manufacturing shop floors with Symphonict
Start with ICT systems integration, construction, operation, and maintenance to expand into innovation and the digitalization of customers’ workstyles
and processes
Labor saving and shift tounmanned operation
Digitalization

Improving production efficiency
Automation of processes

ExpandVisualize and optimize flows ofgoods and humans

Improvement
proposals

Process innovation automation and digitalization
Location
information

Existing
systemVideo
monitoring

AI/BI

Visualization data
analysis

Digitalization

Carbon neutral

Data collection(IoT / 5G)

Network

Security

Fully managed

Systems integration andconstruction capabilities

DC-NOC-SOC
collaboration

Operation andmaintenance support

Network Solutions Business
Operate a business of solving issues confronting society by combining existing technologies with DX and AI
Existing businesses

Aerospacebusiness

Earth observation

Ground observation satellite operation

Point of focus

New markets and domain

DX and AI

Ground observation satellite operation

Satellite image solutions

Sustainable
Symphonic Society
Realization of a sustainable
and prosperous society

Broadcasting
business

Support for transmission and studios
Construction and maintenance

Submarine observation andcommunication

Marinebusiness

Submarine seismometer sensors
Submarine construction (HDD)

DX and AI

Technology
diversion and DX

Facility sharing and cloud computing
Services for existing and new customers

Offshore wind marine resources
development
Environmental monitoring

The only technology
for observing the earth
from outer space andfrom the ocean floor toresolve issues for society

Environmental & Social Solutions BusinessContinue offering eco friendly designs, products, and services; make efforts on zero carbon; and tackle climate change for stepping up
actions for solving regional issues

Customer base

DemandmarketStrengths

Design quality• Liquid immersion-cooled data centers and smart buildings, streets, and stadiums

Accelerate DX in building management and facilities
Coordinate an environmentally-friendly electricity-communication hybrid(Electrical equipment andtelecommunications)

Shift to smart site control with the use of renewable energy and energy management systems (EMS)
SupplymarketStrengths in construction
and support services

Step up solutions and services for power saving measures• Follow the advanced model region for decarbonization developed by the Ministry of the Environment,
set up PPAs, PPSs and SPCs, and make capital participation

Strengthen the power managed services business

ANNUAL REPORT 2022

53

SocialHuman Resource and Organizational Strategies
Employees are NESIC’s most important business resource. To ensure the Company can continue creating valuable solutions andservices for customers and achieve sustainable growth and development, we have been developing and expanding humanresources able to leverage expertise even in business environments where technologies and customer needs are rapidly changing and becoming increasingly sophisticated. Under the new medium-term management plan Shift up 2024, announced in May
2022, NESIC will realize DX × Beyond 5G, which are nearing the social implementation stage, and proactively invest in humanresources who will drive the provision of higher social value, while continuing to acquire and develop diverse human resources
with advanced expertise and accelerating initiatives in line with human resource strategies supporting the resolution of social
issues and business growth.
At the same time, we are moving forward the creation of mechanisms enabling diverse employees to continue working withpeace of mind, as well as the establishment of an environment in which all individuals can fully demonstrate their abilities andaccelerate co-creation, innovation, and the creation of new value. NESIC will promote well-being, inclusion, and diversity toenhance proactive communication among employees, all of which are indispensable for innovation. Through these activities,
diverse employees can freely exchange ideas, engage in work with excitement and enthusiasm, and create innovation and newvalue leading to a virtuous cycle facilitating ever higher engagement.

Establishing an Environment and Mechanisms Leading to Innovation
NESIC launched workstyle reform efforts ahead of othercompanies in 2007, creating various services throughCompanywide self-implementation and verifications. Basedon these results, we have repeatedly improved systems,
mechanisms and office environments. NESIC was among
the first to introduce telework and distributed work practices
throughout the Company, with the results and knowledge
gained from these demonstrations and proactively adopted
by customers during the pandemic, significantly contributing
to the resolution of customer issues.
In addition to resolving social issues, including labor shortage mitigation and productivity improvements through workstyle innovation, NESIC will continue to take on the challengeof creating innovation through self-implementation, which isthoroughly entrenched in our DNA, to improve systems andmechanisms, and develop human resources.

activities. Further, we regularly send personnel to our base in
San Jose, California, in an effort to develop and enrich humanresources who will lead innovation through co-creation withstartups and promote innovation through advanced
technologies.
In the DX domain, we are increasing sophistication andefficiency in all processes and businesses, including amongstaff members, and expanding level-based education systems and programs to ensure all employees are DX natives.
These digital transformations, as well as advanced technological areas such as next-generation networks and foundational
technology education, are conducted by the Shin-Kawasaki
Technical-Base. Going forward, we will strengthen technological capabilities through various t­ echnical training sessions,while proactively promoting human resource development
initiatives through strategic investments. ( P.38)

Accelerating self-implementation
NESIC engages in open innovation through frank discussions
and co-creation with customers, partner companies, andventure companies centered on the Nihonbashi InnovationBase, opened in 2020 as a hub for advanced technology
demonstrations and innovation creation.
Further, the new offices NESIC will relocate to sometimearound the end of March 2023 (located in Shibaura,
Minato-ku, Tokyo) are also being examined and planned foruse as a space for implementation and demonstration leveraging the advantages of leasing an entire building.

 romoting an environment facilitating autonomous workP
styles and career development
In the fiscal year ended March 31, 2022, NESIC eliminatedcore work hours and introduced the super flex and hourlybased paid leave systems as a means of enabling employees to establish autonomous workstyles. We also introduced
an in-house dual employment system aimed at encouraging
voluntary employee participation in Companywide projects,
as well as an online study service offering more than 16,600
courses employees can freely choose from, among otherefforts to promote the creation of an environment
enabling employees to autonomously develop their own
careers.

Developing and enriching advanced human resources
NESIC will consolidate upstream consulting personnel in theBusiness Process Innovation Strategy Division, establishedin April 2022 to strengthen highly specialized proposal activities and enhance human resources through a variety of

Inclusion and Diversity
In a business environment undergoing severe changes,
NESIC is strengthening inclusion and diversity initiatives
based on our belief that enabling employees with diverse
personalities to fully demonstrate their capabilities will leadto the creation of innovation essential for sustainable growth
while enhancing employee vitality and engagement. Having
established a diversity promotion team in April 2010 and
54

ANNUAL REPORT 2022

inviting outside experts to hold lectures and workshops for
managers, we have deepened their understanding of diversity promotion activities and made efforts to incorporate
them in daily management.
In April 2020, we established the Inclusion & Diversity
Promotion Committee, which is focused on continuous
efforts to raise awareness regarding the utilization of

diversity in business, creating a work environment wherefemale employees can demonstrate their capabilities andpromoting a work-life balance.
Everyone at NESIC will work together to further promote
the active participation of women and other efforts aimed at
cultivating a corporate culture enabling employees with adiverse array of attributes, including people with disabilities
and non-Japanese, to fully demonstrate their individuality
and creativity.
Promoting the active participation of women
Having announced an action plan based on the Act on
Promotion of Women’s Participation and Advancement in the
Workplace, NESIC set a target of 10% for women in management positions (by the fiscal year ending March 31, 2027) in
the Shift up 2024 new medium-term management plan, andis proactively engaged in promoting the active participationof women as an important management issue. We are working to improve ease of workand facilitate career develop•R atio of women in
management positions
ment by promoting systematic
2027 target:
development and training forassistant manager and man%ager positions, as well as(5.9% as of April 31, 2022)
cross-organizational support•A greement withand care that includes the
Challenge 203030 **A
 challenge set up by Keidanren for
introduction of a mentor
companies to have at least 30%
system to encourage active
women in board member positions
by 2030
participation among nextgeneration women.

10Encouraging employment of people with disabilities
NESIC proactively promotes the employment of people withdisabilities. We also make efforts to create more comfortable working environments for people with disabilities basedon our belief in the importance of long-term employment. We
proactively provide in house job coach support and conductongoing interviews and follow ups after an employee joins
the Company, resulting in a lengthening of the number ofyears worked by employees with disabilities, which averaged
16.0 years in the fiscal year ended March 31, 2022.
Supporting a balance between work and childrearing
To enable employees of both sexes to maintain a balance
between work and childrearing with peace of mind, NESIC is
engaged in high level efforts including the creation of work
systems enabling employees to approach work in a variety ofways, the enhancement of childcare-related systems and thecreation of an environment in which employees can easily
utilize childcare leave and return to work. In recent years, halfof employees utilizing childcare leave, including short-term
leave, have been men, with the return-to-work rate at 100%among both men and women.

“Platinum Kurumin”­certification markHighest-grade“Eruboshi” certification

Health Management
For NESIC to grow sustainably, it is essential that all employees, who constitute the drivers of corporate growth, maintaintheir health. Further, we believe that employees and theirfamilies who acquire healthy habits and maintain andimprove their health engender a state of physical, mental,
and social fulfillment (well-being) 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 and promote employee health.
<Health Management Declaration>
Creating a culture where employees can take the initiative—becoming Japan’s top, healthiest, and most communicative company—
NESIC will foster a corporate culture enabling all employees
and their families to maintain their physical and mental condition and take care of their health, while creating an environment and climate in which they can excitedly pursue their
dreams. With the health and vitality of all employees as ourdriving force, we will contribute to the realization of a prosperous society.
 ealth management initiatives
H
NESIC is promoting physical and mental health care, reductions in overtime work and the thorough use of paid leave.
In recent years, to reduce the risk of lifestyle diseases

in particular, we are enhancing and promoting initiatives
supporting smoking cessation, providing cancer screenings
free of charge for those eligible, and increasing health awareness and behavioral changes through the visualization ofhealth conditions. In visualizing health conditions, wearable
devices were distributed to all willing participants (approximately 3,000 people as of March 31, 2022) linked to a healthmanagement app used to promote exercise, autonomous
health management awareness and behavioral changes.
Further, as one measure for enhancing employee healthliteracy, since 2021 NESIC employees have participated in ahealth test conducted by the Japan Master of Health Literacy
Test Association. NESIC leads Japan with over 1,000
employees having received (basic) certification. These
efforts have been recognized by external organizations,
including being selected as a Certified Health andProductivity Management Outstanding Organization in 2022
(White 500, large enterprises category).
•R atio of employees
taking paid leave
2027 target

100%

Certified Health and Productivity
Management Outstanding
Organization 2022

(60% in fiscal year ended
March 31, 2022)

ANNUAL REPORT 2022

55

SocialHuman Resource and Organizational Strategies

One aim of NESIC Group materiality is to improve employee well-being.
Creating conditions enabling all employees to be physically, mentally, and socially fulfilled with high engagement will lead tothe creation of substantial social value, while also being important in terms of achieving further Group growth and becoming an
attractive company.

NESIC Group Well-being Promotion Structure
The NESIC Group well-being ideal Promotion concept As well-being means something different to each person, we
adopted the promotion concept “work and live in your own
way” so that each individual can maintain their own values
and intentions while mutually respecting others.

This image depicts Group well-being. With employees as main characters, thisEmployees and their families are looking ahead to the future well-being and romotion theme: WellBGs 
P–11 Themes We Value–
NESIC created WellBGs*, comprising 11 themes being
addressed on a company, organizational, and individual
basis, aimed at realizing, maintaining, and improving
well-being in an effort to promote a common awarenessand understanding of well-being.

Work environments should
facilitate the taking on of challenges!

ThanksNote: WellBGs is a trademark of NESIC❶ Everyone is naturally different!

Participation in society enriches life

❻ Harassment: No way, never!

❷ Everyone contributes to psycho- ❼ Convey gratitude with sincerity
logical safety❽P rioritize work-life balance❸ Team work achieves targets❾ Your work is meaningful!

VRexperience

ThanksNE❹ Work environments should facili- ❿ Participation in societytate the taking on of challenges!
enriches life
❺ Maintain personally appropriate
physical and mental healthEveryone contributes to psychological safety

Harassment: No way, never!

⓫ Find the key to your personalhappiness

Everyone is naturally different!
Let'srefresh!
ThanksConvey gratitudewith sincerity

Toward a better, stronger organization 
In addition to improving the well-being of all employees,
NESIC also places importance on improving connections
and engagement between the Company and employees.
Inculcating empathy with the Company mission and anunderstanding of the social significance of the work one isinvolved in, while at the same time drawing out and utilizing
the potential of individuals, we are consciously engaged in
the creation of an organization enabling all employees toexperience personal growth through work.

Engagement score status(Scores obtained from a survey conducted by global human resource
consultancy Kincentric).

Survey for the
fiscal year ended
March 31, 2021

Survey for the
fiscal year ended

23%

33%

March 31, 2022

Target for the
fiscal year ending
March 31, 202550%

* This score generally
corresponds to theworld’s top 25%, andaccordingly the Tier
1 level.

56

ANNUAL REPORT 2022

SIC

To this end, the Well-being Promotion Office was established in April 2021. In addition to employee health, this office strives
to maintain and improve employee well-being through cultural measures including the promotion of diversity and inclusion andthe creation of a psychologically safe work environment.

image expresses how each person proactively cultivates well-being.
sustainable society created by the Group.

Prioritize work-life balance

Team work
achieves targets

What is yourWell-being?

Gr

ou

p

Focus activities:
Psychological safety initiatives 
NESIC believes psychological safety
efforts are indispensable for enabling all
employees to share frank opinions andask simple questions regardless of theirposition or experience within the organization or team. To
this end, in addition to Companywide seminars, workshops
are held for executive class employees and below. Ryosuke
Ishii of ZENTech Inc., a leading expert in psychological safety
in Japan, was invited to lecture on the correct way to learn
psychological safety and other topics aimed at empowering
each individual employee to take concrete actions.
Fiscal year ended
March 31, 2022:

Implemented for executive officers and generalmanagers

Fiscal year ending
March 31, 2023:

Implemented for assistant general managers andsenior managers

Maintain personally appropriate
physical and mental healthThanksYour work ismeaningful!

My sense is that NESIC initiatives are on track because of
considerations for the organization and future on the partof everyone working in the Corporate Culture Design
Office, Personnel Relations Division, Well-being Promotion
Office, and in particular, the proactive participation ofsenior management and other managers. Although
efforts aimed at achieving organizational improvements
cannot be achieved overnight, if everyone at NESIC,
including executives and senior management, works
tenaciously on actions they have committed to, great
strides will be made in the future. I will continue to work inharmony with you all!
Ryosuke Ishii
Director, ZENTech, Inc.
Director, Japan Institute of Cognitive Science
Researcher, Keio University Graduate Schoolof System Design and Management

Toward in-house penetration 
In-house penetration implemented from a variety ofperspectives.
Events with outside experts•E vent promoting well-being considerations with Yoshiki
Ishikawa, President of Well-being for Planet Earth•D iscussion on the importance of cancer screenings with
Ichiro Ishida, Director of the Japan Cancer SocietyI n-house briefing session: Making friends with well-being
in about 30 minutes
In-house briefing sessions are held as an opportunity tomake well-being a personal priority.

 ideo: Making friends with well-being in five minutes
V
NESIC distributed an original program produced in-housecomprising well-being elements presented by executive
officers responsible for facilitating learning and understanding about the use of WellBGs
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57

SocialCreating Mechanisms for Innovation

Our Approach to Becoming a No.1 Communications Company
One of the essential elements for a company to continue to change and grow is innovation, and the key to achieving thisis vigorous communication. As part of our efforts to achieve our own growth in materiality, we have set forth the goal of“strengthening our ability to innovate to create new value,” and are fostering a corporate culture that encourages eachand every employee to change and to embrace new challenges. Along with messages from the president, the employees
themselves take the initiative in establishing and implementing initiatives to spur innovation, and by sharing these initiatives, we continue to take on the challenge of creating new value.

NESIC Group Pitch Competition

Town Hall Meeting

The Corporate Culture Design Office sponsored a business idea contest for employees of NESIC and its Group
companies in Japan. The purpose of this contest is tofoster a culture in which all employees, regardless ofage, position, or affiliation, who are willing to take on
new challenges are nurtured and highly recognized.
Employees receive a presentation to evaluate each idea,
and ideas that pass further review by external judges
and management are considered for commercialization.
The first contest, held between April 2021 and February2022, received 133 entries.

In addition to “Ushijima Radio,” an audio distribution oftalks between the president and guests for employeesthat has been conducted for some time, and “Ushitube,”
video content that provides timely information within theorganization, town hall meetings are held as a forum for
dialogue between management and employees and are
streamed online in real time. We conduct video distribution on themes such as materiality and sustainability
that must be addressed throughout the organization,and invite Group companies to participate in such distribution with the aim of strengthening inter-company ties
and creating synergies. By utilizing Slido, a cloud service
that allows voting and surveys to be conducted in realtime, we are able to achieve two-way communication.

Promoting Internal Exchange via Online Events
In light of the limited opportunities to interact as a resultof COVID-19, we hold a variety of online events to stimulate communication not only within departments but
also across departments.
In the fiscal year ended March 31, 2022, we held an
event in which approximately 140 people, from new
employees to executive officers, participated and interacted together to solve mysteries.
In such ways, we promote internal communication
across departmental boundaries, which is essential tospurring innovation.

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Establishing an Environment Suited to Spurring Innovation
The strengthening of technological capabilities and human resource development is indispensable for spurring innovation. We are reinforcing our foundation for sustainable growth by establishing an environment that facilitates these
efforts. Furthermore, by setting up facilities for the evaluation and verification of cutting-edge technologies and showcases to offer hands-on experiences of the solutions we provide, we are creating a venue for co-creation with customers.
We will continue to accelerate innovation through self-implementation and co-creation activities to create new value
unique to the Company.

Shin-Kawasaki Technical-BaseThe Shin-Kawasaki Technical-Base was established in
November 2020 for the purpose of evaluating and verifying
advanced technologies and training engineers. Equippedwith educational facilities using actual equipment, thefacility plays an important role in strengthening our technological capabilities by passing on fundamental technological skills, improving expertise, and enhancing safety andquality through practical education. It is also used as avenue for developing new businesses through the evaluation and verification of cutting-edge technologies, including
co-creation with customers and partners, and serves as acornerstone of our innovation, as we have obtained a fulllicense for a local 5G experimental test station to demonstrate applications in a real environment.
Shin-Kawasaki Technical-Base

Nihonbashi Innovation-BaseThe Nihonbashi Innovation-Base was established in
February 2020 as a venue for creating open innovation
through the seamless use of digital technology andco-creation with customers and partners. In July 2022,
we set up a showcase for resolving issues that consistsof solutions to promote DX in local governments and forwhich we began accepting customer tours, further accelerating co-creation by leveraging the know-how accumulated through our self-implementation practices.

Relocation of Company Headquarters:
Positioning the New Head Office Building
as a Hub for Creating New Workstyle
Concepts
We have decided to relocate our headquarters, with themove slated to take place at the end of fiscal year
ending March 31, 2023. The new head office building will
be positioned as a venue for demonstrating the use ofadvanced networks, such as local 5G, and cutting-edge
DX solutions. We will also create a new workstyle concept with an eye on 2030 through our self-implementation practices and co-creation with customers andpartners. In preparation for the relocation, we will selecttechnologies to be introduced at the new head office andlook into study themes to be demonstrated at this facility.

President Ushijima explaining how the Nihonbashi Innovation-Base isconnected to Silicon Valley via Zoom on Ushitube

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SocialCommunication with Stakeholders

Communication with Customers
NESIC recognizes the important role that creation in harmony with its customers, as strategic partners, plays in its
efforts to put into practice the recurring and cyclical growthmodels outlined in its Shift up 2024 medium-term management plan.
We conduct customer satisfaction surveys to identify ourstrengths and weaknesses in dealing with customers, which we
use to make improvements and strengthen our communication
with them. In addition to the satisfaction survey for ongoingcustomers and survey on the evaluation of our solutions andservices, we initiated an additional satisfaction survey for new
customers in the fiscal year ended March 31, 2022.

As business styles evolve, we will listen carefully to thevoices of a broad range of customers and work to make thenecessary improvements that fully address expectations.
<Results of the latest survey>
In the latest customer satisfaction survey, more than 90%
of respondents marked satisfied as their reply. Moreover,evaluations improved across almost all of the areas surveyed, including the continued use of our solutions andservices as well as the degree of recommendation.

Communication with Suppliers
In the project orders it receives, NESIC utilizes labor suppliers who subcontracts for such on-site work as installationand local coordination, as well as suppliers of hardware andsoftware for system integration projects. These suppliers areimportant stakeholders who are essential to the execution of
our business. While communicating with suppliers throughbusiness trend briefings, visits, and surveys, we are strengthening the cooperation structure throughout the supply chain
with the objective of contributing to SDGs. In this way, ourprocurement activities are sustainable and fair.

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(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
NESIC 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 at each stage of contracting, awareness, self
assessment questionnaire (SAQ), and on-site inspection.
In October 2020, we revised and renamed our SupplyChain CSR Guidelines to the Guidelines for Responsible
Business Conduct in Supply Chains. We have also begun
to ask suppliers to sign the Declaration Concerning
Responsible Business Conduct in the Supply Chains.
For more information, please see the following link.
https://www.nesic.co.jp/shizai/shizai_sustainable.html(In Japanese only)
In addition to inspections of documents presented to us
by signatories to the Declaration outlining the state of progress concerning activities to promote responsible corporate
activities, we provide feedback on evaluation results.

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Details of the Company’s Declaration of Partnership Building
AnnouncedP romoting cooperation, coexistence, and co-prosperity withbusiness partners
The Company has announced details of its Declaration ofPartnership Building in support of the aims outlined by theCouncil on Promoting Partnership Building for Cultivating the
Future (the Cabinet and Office and Ministry of Economy,
Trade and Industry of Japan, and others). We aim to build new
partnerships by promoting cooperation, coexistence, andco-prosperity with supply chain partners and businesses
seeking to create value.

Communication with Shareholders and Investors
NESIC has a disclosure policy of explaining its businessconditions and management policies to shareholders andother stakeholders in an accurate and timely manner.
Management periodically engages in dialogue with shareholders and investors on capital markets in Japan and overseas, including through briefings and interviews. In dialogue
with participants in capital markets, in addition to dialogue
by the investor relations section, we regularly set up briefings
for investors, individual meetings, and other opportunities for
dialogue with the president and other senior management,
as well as engagement with investors responsible for ESG incooperation with the department in charge of sustainability.
To further understanding of our focused businesses, wehave held briefings led by executive general managers incharge of business units since the fiscal year ended March
31, 2020. In May and June 2022, we held small meetings forsell-side analysts on the segment strategies of our newly
announced medium-term management plan. NESIC wasamong the first companies to switch to online meetings andbriefings from March 2020 to prevent the spread of COVID19. In light of the significant increase in the number ofengagements with market participants thanks to the higher
efficiency of online meetings, as well as the growing interestof capital market participants in the Company’s core areas,
we continued to actively engage in dialogue with the market
in the fiscal year ended March 31, 2022.
The opinions and requests received from these meetings
are reported to all executives, including independent directors and auditors, from the investor relations section, andreflected in efforts to strengthen management and improve
corporate value.
Number of IR meetings (excluding large-scale meetings)(meetings)
241

250

206

200

165

150
100

101
77

50
0

14

25

32

36

38

2018/3

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

Management response

Examples of Opinions Received at Meetings with Investors and NESIC’s Responses

OpinionResponses to these opinions:

Looking at the way NESIC approaches environmental,social, and governance, or ESG, concerns, I believe that themost important theme of S (Social) is people. In addition toan explanation of current numerical data, I would like NESIC
to provide details of its progress in implementing initiatives
and achieving targets. In particular, information from theengagement survey would be helpful.

Under the new medium-term management plan, we identified non-financial
targets ( P28) and disclosed human resource-related targets, including
engagement scores. Looking ahead, we will provide an explanation of progress toward these targets. In this integrated report, we have also expanded
our explanation of efforts to strengthen human resources from both theinnovation creation and I&D / Well-being perspectives ( P54–57).

OpinionResponses to these opinions:

I am aware that the industry poses a low risk on the environment. As a global issue, I still believe there is a need fordisclosure for comparative purposes. Coupled with expectations from a business contribution perspective, I would thinkthat the Company could highlight the appeal of its initiatives.

NESIC has expressed its support for the recommendations of the TCFD anddisclosed information based on the TCFD framework on its website and in
this Integrated Report ( P50–53). From a business perspective, we havedeclared that all of our businesses will work to address the issue of climatechange in new medium-term management plan. Drawing on our inherent
accumulated strengths, we will strengthen our efforts with a greater awareness of the environment.

OpinionResponses to these opinions:

I understand that the key to increasing NESIC’s earnings is
to improve the gross profit margin by transforming its
business model. I hope that the Company will disclose
information on this point in a clearly visible way.

Further fine-tuning our efforts to address the needs of investors, we haveinitiated steps to disclose new data that can be provided on an ongoingbasis. This includes service ratios, gross profit margin, and order backlog bysegment in conjunction with its quarterly financial results announcements.
This initiative is designed to provide details of changes and the current
status of the Company’s business in an easy-to-understand manner.
Looking ahead, we will consider measures to ensure the disclosure of more
understandable information.
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61

GovernanceRound-table Discussion among Outside Directors
NESIC’s three outside directors sat down to actively share their views on the new medium-term management plan,
governance, and other matters.

Outside Director

Outside Director

Outside Director

October 1996:

April 2009:

November 2003: Officer, Ethics Office, Texas Instruments
Japan Limited* Resigned in September 2009
October 2009:
Chief researcher, Business Ethics ResearchCenterJanuary 2010:
Representative director, Wellness Systems
Institute Co., Ltd. (present position)
April 2016:
Chair of the board, NPO GEWEL* Resigned in March 2019
April 2018:
Senior researcher, Business Ethics ResearchCenter (present position)
June 2019:
Outside director of the Company(present position)

Michiko Ashizawa
Joined International Department,
Century Audit Corporation(currently KPMG AZSA LLC)
* Resigned in May 2001
September 2003: Joined Industrial Revitalization Corporationof 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 andBusiness Administration) at Yokohama City
University (present position)
Associate Professor in Graduate School ofInternational Management at Yokohama
City University (present position)
September 2016: Part-time instructor in Graduate School ofBusiness Administration at Keio University(present position)
June 2018:
Outside director of the Company(present position)

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Mamoru Yoshida
April 2012:
April 2013:
April 2015:

June 2015:

June 2016:
June 2020:

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

Kuniko Muramatsu

Looking Back on the Previous Medium-Term
Management Plan Beyond Borders 2021
Ashizawa: The previous medium-term management plan
concluded with brisk results and so there is a vibe within
the organization to take another step forward under Shiftup 2024, the new medium-term management plan. I amvery pleased to see that what NESIC has accumulated
over time has received tremendous recognition amid thechanges in the times and yielded both quantitative andqualitative results.
Muramatsu: I agree. The fact that the Company was able
to achieve the final year targets for Beyond Borders 2021
that it had reached a year in advance yet again in the final
year of that plan, despite the effects of the semiconductor shortage and other challenges it faced, is a testament
to the strengthening of its underlying capabilities as wellas the possibilities that lie ahead. The Company has also
accelerated its workstyle innovation in line with the movement toward the New Normal amid COVID-19 l, in addition to steadily gaining ground on major issues such as
promoting awareness of materiality.
Yoshida: I, too, believe that the self-implementation,
remote work, satellite office, and other efforts that theCompany has been making ahead of everyone else haveflourished amid its changing business environment. On theother hand, the number of customers has doubled almost
instantly and the issue of how to manage this increase hascome about. I will keep a close eye on the Company’s
initiatives under the new medium-term management plan.
New Medium-Term Management Plan Shift up 2024
Ashizawa: As illustrated by its slogan, “Elevating society,”the new medium-term management plan reflects theCompany’s strong determination to become a company
that continues to be valued highly by society. What
impressed me when I took part in the discussions on
Shift up 2024 from its formulation stage was the initiative
taken by President Ushijima to engage employees ofvarious positions and departments in the discussions.
I am convinced that this will help promote awareness ofthe new medium-term management plan throughout theCompany and convey a strong message to those outside
the organization.
Muramatsu: What I paid close attention to during theseries of discussions held by the Board of Directors was
the formulation process of the plan. As Ms. Ashizawa
just said, a diverse group of young to mid-level employees
came together to develop the plan under the leadershipof the management team. I believe this was an excellent
approach in terms of strengthening the commitment of
employees and enhancing the effectiveness of the plan.
I asked questions and made recommendations

particularly in regard to how sustainability perspectives
were going to be incorporated. The Company’s aim
toward the “Realization of a sustainable society withprosperity that resonates for all” has become an evengreater possibility through its pursuit of materiality, andI commend the fact that sustainability perspectives wereincorporated into the Company’s strategy under Shift up
2024 by “advancing solution capabilities.”
Yoshida: DX and 5G are simply mechanisms on their own.
The Company will be called on to determine the types ofgoals that it strives to achieve and its approach to that end
through the use of these mechanisms. From that perspective, I am impressed by the fact that the plan was formulated using a backcasting approach, whereby NESIC’svision of the type of company it aspires to be by 2030 isestablished and the three years leading up to 2030 areused toward the realization of this vision. I believe the plan
clearly demonstrates the Company’s stance of creating
unique value toward the realization of its goal, by shiftingup from “co-creation” to “creation in harmony” and continuing to expand the Symphonict platform, which promotes
multi-cloud and the use of data. However, as the operating
margin approaches the 10% level, the expectations placedon management will change completely. As long as it
remains committed to adjusting and filling the gap
between its ambitious goals and its current state, I believe
the Company will continue to evolve as an organization.
Muramatsu: I feel exactly the same way. As it shifts up toa new stage, the Company is currently in a transitional
period in which it must examine its decision-making process and execution structure, as well as the role of humanresource development, employee evaluations, and organizational development. I look forward to actively providing
advice from an objective and external point of view.
Ashizawa: Because I am often involved in research on
startup companies and co-creation activities with theyounger generation, I tend to feel that changes need to be

I am impressed by the fact thatthe plan was formulated using
a backcasting approach,toward realizing its vision
as the type of company it
aspires to be by 2030.

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63

GovernanceRound-table Discussion among Outside Directors

We were truly convinced byPresident Ushijima’s
passionate remarks about
the value of NESIC’sconsulting services.

made as early as possible. However, Mr. Yoshida, who
has a wealth of experience in management, stated that
we must proceed with caution when making “excessive”
changes. Through the sharing of such multifaceted perspectives, I am sure that the things that should bechanged and the things that should not be changed will
become apparent.
Yoshida: It is important to not only eliminate the traditional Japanese corporate structure but to also effectively combine the merits of a pyramid organizational
structure in terms of the things that can be accomplishedonly through this approach and a flat organizational
structure in which the younger generation can actively
participate within a free and open culture. For instance,with regard to the new business mentioned earlier by Ms.
Ashizawa, it is necessary to have a leadership group inplace in the form of senior management and complement
it with some youthful energy. I believe the Company must
be aware of how to manage the new challenges it will
undertake while ensuring the continued success of its
existing businesses.
Ashizawa: In our discussions on the new medium-term
management plan, the topic of “consultation” wasaddressed in a rather hostile manner. Since the term also
carried a theoretical meaning, everyone was opposed to it
at first.
Yoshida: Based on my own experience in actual business,
I did not have a very good image of the term “consultation” either. This is because proposals that do not reflect
a clear understanding of the actual business of a company
are often ineffective. However, when NESIC explained its
unique consulting concept, which involves working
closely with customers to identify the changes they hopeto achieve and then implementing a spiral of co-creation,
I came to believe that the realization of a highly valuable
on-site consulting service that is unlike anything else wasa possibility.

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Ashizawa: We were truly convinced by President
Ushijima’s passionate remarks about how, amid the rapid
evolution of technology and the profound growth in theapplication of DX, NESIC’s consulting services would besincerely valued if they could relate to customers basedon the Company’s own experience of implementing DX by
overcoming challenges one at a time.
Muramatsu: President Ushijima decided to use that termin the sense of changing the mindsets of his employees
as well. Management and other members must carefully
explain the very definition and true intent of NESIC’s consultation to each employee, in the same manner as theywould to those outside of the Company. Of course, it isalso important that they promote understanding of thereasons for incorporating sustainability and carbon neutrality factors into the strategies. Once these factors are
fully understood, I believe that each employee will be able
to carry out their respective duties on their own.
Promoting Inclusion andDiversity toward Realizing Creation in Harmony
Muramatsu: While the term co-creation and self-­
implementation is used rather casually, co-creating andthen applying a project entails a highly sophisticated anddiverse skillset. The Company’s diverse team of personnel
is equipped with the fundamental skills that have been
accumulated through self-implementation, the ability topromote collaboration by connecting people and­technologies, and extensive know-how on everythingfrom proposals to implementation and construction.
I believe the Company will be able to contribute to resolving a wide range of social issues as long as it is fully
aware of, assembles, and demonstrates the strengths of
its diverse workforce.
Ashizawa: This is a key theme of the new medium-term
management plan. A process in which you engage withpeople from fields or cultures that are different fromthose interacted with to date can cause friction. I believe
the key to spurring innovation through creation in harmony is the realization of true inclusion and diversity,
which entails the acceptance and integration of different
ways of thinking.
Muramatsu: This may come across as a bit harsh to say,but based on employee engagement scores, we can seethat only 20%-30% of employees feel that they are demonstrating their full potential. In an era marked bychanges to management styles and society, innovation
will not occur unless we embrace the differences andstrengths of each individual and broaden our perspectives. This is why “inclusion” comes first in inclusion anddiversity. In this regard, I commend the Company forestablishing KPIs and demonstrating a serious commitment to achieving them under the new medium-termmanagement plan. As an outside director, I will draw on
my relevant background and expertise gained over theyears to help the Company achieve its goals.
Defensive and Offensive Governance
Muramatsu: We have also had a few discussions on how
to manage the increasing number and level of geopolitical and other risks under the premise of promoting a
medium- to long-term global strategy. In terms of risk
monitoring, as an outside director, I have consistently
advised the Company to strengthen its system and otheraspects of this area.
Ashizawa: Meanwhile, NESIC’s market is expanding at a
rapid pace through global co-creation. Accordingly, if too
much emphasis is placed on defensive governance, thenthe offensive side will lag behind. I try to always encourage the Company to take the necessary risks and boldly
take the offensive without being too defensive.
Yoshida: From a defensive perspective, as the chair of
the newly established Special Committee, I closely monitor the existence of transactions that may conflict with
the interests of minority shareholders, such as profits
from business with NEC, the cost of procured materials,
and the conditions concerning those who are transferredfrom NEC.
Ashizawa: As an NEC Group company, the Company
boasts many benefits from a collaboration point of view.
As outside directors, we will strictly monitor the concerns
raised over the parent-subsidiary listing. However, wemust also focus on how the NEC Group’s assets will beincorporated into NESIC. This is another theme thatshould be interpreted from both offensive and defensive
perspectives.

sound management team that extends beyond the performance of senior management. The directors always
listen carefully to our advice and address our difficult
requests right away, and, therefore, I believe the Company
is operating under highly effective management.
In Closing
Muramatsu: We must discuss the strengths of NESIC
from not only a uniqueness aspect but also based on a
firm understanding of the true nature of its business. For
instance, we will continue to encourage the Company toverify its strengths and weaknesses through global
frameworks on ESG assessment and utilize this information to enhance the quality of its management.
Yoshida: Through the steady execution of its strategy,
I believe NESIC is fully prepared to shift up to the nextstage. That said, I have the impression that, during thetwo years since I became an outside director, there has
been very little awareness in regards to the Company’scompetition, due to its favorable external environment
and the unique nature of its business. As NESIC takes
further steps toward realizing its vision by 2030, I hope
we can discuss more in-depth the type of value it must
create by getting a clearer picture of its competition.
Ashizawa: Over the past four years, the Company has
steadily gained strength under the leadership of President
Ushijima and, because of that, I take pride in the fact that
I am associated with NESIC. However, not everyone in theorganization may have taken notice of this success.
Therefore, I will provide the necessary advice to ensurethat the Company’s success is verbalized and communicated within and outside of the organization, inspiring allof its employees to take pride in being a member of
NESIC and to strive toward its further growth.

Muramatsu: I certainly agree. For example, the Group asa whole has significant assets and knowledge at its disposal from an environmental front as well. For thatreason, I believe NESIC can develop new businesses andincrease corporate value on initiatives those related to
the TCFD in a timelier manner, if the Group can work
together to the extent possible.
Ashizawa: In 2021, the Company established theNomination and Compensation Committee, for which
I have served as the chairperson. We have held discussions on the nomination of those senior management
candidates who can boldly embrace change throughout
the organization and demonstrate their vision both internally and externally within a rapidly changing businessenvironment. We have also shared views on the selectionof candidates from the perspective of the Company’s
strategies, in addition to its traditional approach tohuman resources, as well as on the development of a

I hope the Company
continues to carry out
discussions on its strengths
and weaknesses to enhance
the quality of its
management.

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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.
In April 2022, NESIC’s Basic Policy on Corporate Governance
was established to outline the Company’s basic approach tocorporate 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 one-thirdof the total number of directors. Candidates for the position of
director are nominated with due consideration paid to diversity,
such as their experience, knowledge, specialization, and gender.
This structure facilitates active deliberations at meetings of theBoard 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 andobjective audits by corporate auditors from an independent
standpoint are effective for the sound management of theCompany. In addition, the Nomination and Compensation
Committee, chaired by an independent outside director andcomposed of a majority of independent outside directors, hasbeen established to deliberate and examine the nomination andremuneration of directors from the viewpoint of ensuring transparency, validity, and objectivity. Moreover, the Company has
established the Special Committee, composed solely of independent outside directors, to deliberate and review material transactions or actions that conflict with the interests of the controllingshareholder and minority shareholders in order to ensure independence from controlling shareholders and to protect thecommon interests of shareholders.
Starting with business execution that prioritizes compliance firstand foremost, NESIC will examine and build an optimal corporate
governance structure while listening to market demands.

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

2000

2005

(year)

2010

2015

2020

2021

2022

Introduced executive officer system
2005

Reduced maximum number of directors from 20 to 10. Shortened terms of directors to one year
2016

2006

F
 irst independent auditor
2008
First independent
director

Improved
managementtransparency

2015S tarted to evaluate the Board of Directors’ effectiveness.
Systemized training of directors and auditors

Two independent auditors

2012
Two independent directors

2017
Three independent directors
2021
Reorganized to Nomination andCompensation Committee

2016
Set up advisory panel

2021
Established Special Committee
2008College (internal controls)

Improved
diversity on Boardof Directors*

2016
Corporate management

2012
Attorney

2020
Corporate management
2018
College (business administration)

Strengthened
remuneration
system linked tocorporate value

2017
Corporate
management

2019
CSR / Corporate management

2017 Introduced
stock-linked
remuneration
system2019
Introduced transfer-restricted stock
remuneration system* Only for independent outside directors

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

67%

End ofJuly 201770%

End ofJune 201278%

End ofJune 2008

88%
0

66

ANNUAL REPORT 2022

20%

40%

60%

80%

Inside the Company

Outside the Company

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
General Meeting of Shareholders
Elect / Dismiss

Elect / Dismiss

Elect / Dismiss

Management andSupervision
Audit

Board of Directors (Directors)

Board of Corporate Auditors(Corporate Auditors)

3 Outside Directors

2 Outside Auditors

Nomination and Compensation Committee

Supervise

Cooperate

Audit

Cooperate

Special Committee

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

2 Corporate Auditors and Board of

As the principal decision-making authority within
the Company, the Board of Directors makes
decisions on important matters based on theprocedural rules of the Board of Directors, and it isalso positioned as a venue for deepening discussions about the broader direction of corporate
strategy, including the medium-term businessplan. The term of Directors is set at one year toclarify the management responsibilities of
Directors and strengthen the management
structure.

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 and employees.
In this way, corporate auditors adequately monitor
the directors as they perform their duties.

4 Nomination and Compensation Committee

Corporate Auditors

Previously, the Advisory
Panel for Nominations
and Remuneration

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 to theconsent of the Board of Corporate Auditors.
				
1. 	Matters 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)

5 Special Committee

3 Executive Officers,

Executive Committee,
and Business Execution Committee

NESIC has introduced an executive officer system
to separate management supervision frombusiness execution. NESIC has also formed the
Executive Committee to discuss importantmatters related to corporate management andbusiness execution and this Committee enhances
the deliberations and ensures appropriate decision making. The Business Execution Committee
was set up to report on the status our businessexecution, such as monitoring progress withrespect to meeting budgets adopted by the Boardof Directors, with the aim of sharing management
information and promoting execution efficiency.
Newly establishedObjective:	
The Special Committee has been established to deliberate
and review material transactions or actions that conflictwith 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 theBoard 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 the Company’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 major transactions take place)

ANNUAL REPORT 2022

67

GovernanceCorporate Governance

Relationship with Parent Company
As a member of the NEC Group, NESIC benefits greatly frombeing in charge of system integration and maintenance services
among the services provided by NEC Group companies, andfrom being able to tap into recognition of the NEC brand andhaving access to business resources, such as technologicalcapabilities and human resources. In particular, in the DX
Beyond 5G, which NESIC is focusing on, NECʼs technologicalcapabilities are outstanding, not only in network technologies
such as 5G, but also in facial recognition technology in thedigital realm. We intend to deploy these technologies more thanever to increase corporate value. With that said, however, NESIC
is an independent listed company that engages in businesswhile making business decisions on its own accord. This translates into credibility as a listed company from our customers
and business partners, while improving the morale of ourprovision of the NEC Group’s relentless focus on quality to thedevelopment of multi-vendor services. In transactions with theparent company, the Special Committee was established in
FY2022/3 to deliberate and review material transactions or
actions that conflict with the interests of minority shareholders. Business transactions with the parent company are
decided based on proper negotiations while referencing prevailing market prices. Terms and conditions are on equal
ground with other business partners and to avoid conflicts ofinterest, the Special Committee and the Board of Directors
verifies all business transactions with the NEC Group. As alisted 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 theCompany stronger and leads to higher corporate value. In

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 value added by providing solutions in tune with the needs of its customers andsociety. Independent businesses generate over 70% of net
sales. In particular, one of NESIC’s unique strengths is its

order to benefit from these advantages as a member of the
NEC Group and as a listed company, NESIC must have systems in place for protecting the rights of general shareholders.
With this in mind, the Company is strengthening its corporate
governance structure by, for example, enhancing the composition of its independent directors and auditors, as noted above.

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.

68

ANNUAL REPORT 2022

The independent outside directors and auditors have diverse
knowledge and experience in corporate management, accounting, business management, sustainability management, corporate governance, and risk management.
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.

Attendance during
FY2022/3
Name

Reason for Nomination

Main Concurrent Positions *²

MichikoAshizawa

Ms. Ashizawa has gained a wealth of experience throughher roles as a certified public accountant at an auditing
firm and in rehabilitation projects for large corporations at
the Industrial Revitalization Corporation of Japan. She isalso an expert in all aspects of business management,
including through her current research in corporate restructuring, M&As, and other areas, and has worked as an
instructor at a graduate school. Based on her breadth ofknowledge in finance and management, we believe she willcontinue to play an appropriate role in advising and supervising the Company’s management from an objective
standpoint, and has been appointed for these reasons.

Board ofDirectors

Board ofCorporate
Auditors· Associate Professor, School of Economics
and Business Administration, Yokohama
City University· Associate Professor, Graduate School ofInternational Management, Yokohama City
University

13/13

—

KunikoMuramatsu

After serving as the head of the corporate ethics office andthe person in charge of diversity promotion at a foreign
semiconductor manufacturer, Ms. Muramatsu set out todevelop a foundation for a sustainable society by establishing Wellness System Institute Co., Ltd., where she serves
as an advisor on sustainability management while operating the company herself. She has also gained diverse
experience through her roles as the head of a non-profit
organization and as an instructor at a university. Based onher global perspective and exceptional knowledge incompliance, diversity promotion, and other areas, we
believe she will continue to play an appropriate role inadvising and supervising the Company’s management froman objective standpoint, and has been appointed for thesereasons.

· Representative Director, Wellness Systems
Institute Co., Ltd.
· Outside Director, YOKOWO CO., LTD.
· Outside Director, Kyushu Railway Company· Outside Director, ROHM Co., Ltd.

13/13

—

MamoruYoshidaMr. Yoshida has gained a wealth of management skills andstrategy-building capabilities from serving as a business
manager in multiple fields, including overseas business. He
also possesses extensive knowledge and experience intechnology management, monozukuri (manufacturing)marketing, and other areas through his previous role as achief technology officer. He has also been reforming
corporate governance as a senior audit & supervisory board
member since 2016. Based on his knowledge of monozukuri (manufacturing) and his extensive experience as acorporate manager, we believe he will continue to play anappropriate role in advising and supervising the Company’s
management from an objective standpoint, and has been
appointed for these reasons.

—

13/13

—

Masayuki
Horie

Mr. Horie has gained extensive knowledge in IT risk management and internal controls primarily in corporate management through his role as a university professor, andpossesses a wealth of experience from serving as chair of
the Japan Auditing Association. Based on his knowledge
and experience, we believe he will continue to conduct
audits on the legality of business execution and othermatters from a fair and objective standpoint, and has been
appointed for these reasons.

· Professor, College of Commerce, Nihon
University· Outside Auditor, INTELLIGENT WAVE INC.

13/13

14/14

Akiko
Isohata *¹

Ms. Isohata is an expert in corporate law and corporate
governance and has gained a wealth of experience throughher role as an attorney in the field of general corporate law.
Based on her knowledge and experience, we believe shewill conduct audits on the legality of business execution
and other matters from a fair and objective standpoint, andhas been appointed for these reasons.

· Partner, Tokyo Hatchobori Law Office——

Notes:
1. Ms. Akiko Isohata was newly appointed as a corporate auditor at the 90th General Meeting of Shareholders held on June 24, 2022.
2. Main concurrent positions are as of June 24, 2022.

ANNUAL REPORT 2022

69

GovernanceCorporate GovernanceInvigorating Discussions by Board of Directors / Support System for Independent Directors and Auditors to Fully Function
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 and having
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 beforehand and holds
pre-meeting briefings each month (lasting about three hours) for
independent directors and auditors with the aim of enhancing
deliberations by the Board of Directors. At these briefings, participants receive explanations of the agenda items before the Boardof Directors and are updated on the Company’s current businessexecution. In addition to these venues for independent directors

and auditors to engage with the Company, NESIC creates opportunities for information to be exchanged among only the independent directors and auditors. Advice for the Company’s
management that was discussed at these exchanges is thenpassed onto the Representative Director and reflected in the
Company’s management.
Moreover, to further improve their skills, all directors and auditors are given opportunities to obtain the necessary informationand knowledge to management and to supervise management.
Training sessions on the theme of corporate governance andleadership were held twice in the fiscal year ended March 31,
2022. Independent directors and auditors have adequate accessto information on Company’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 or auditor, NESIC’s Boardof 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 andexperience to lead management and can contribute to the development of our business.
Headed by an independent outside director, Nomination andCompensation Committee, which consist of a majority of independent outside directors, discuss nominations and voice their opinions. The Board of Directors deliberates on the agenda fornominating directors, and the Board of Auditors deliberates and70

ANNUAL REPORT 2022

consents to the nomination of corporate auditors, which are submitted for approval by the General Meeting of Shareholders.

Dismissal Policies and Procedures
On dismissing a director, NESIC 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.

Director Remuneration
Basic Policy on Director Remuneration 
NESIC’s remuneration systems reflect work responsibilities and results. Remunerations for Directors are set at an appropriate level andlinked with the business performance, etc., in order to maintain competitiveness in the industry and function as an incentive to improvebusiness performance.

Decision-Making Methods and Process for Remuneration <Method for calculating remuneration>•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 evaluationof performance. Growth in net sales and operating income isused in this calculation because they are key indicators forachieving the Company’s medium-term management plan.
The base amount is equivalent to 40% of the bonus paid in theprevious fiscal year multiplied by year-on-year growth in net
sales, and 60% of the bonus paid in the previous fiscal year
multiplied by year-on-year growth in operating income.

Indicator

Fiscal year
Fiscal year
ended March ended March Year-on-year
growth31, 2021
31, 2022

Net sales (¥ billions)

339.1

310.3

91.5%

Operating income (¥ billions)

25.6

23.2

90.7%

•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 the Company’s
corporate value and aligning the values of directors with thoseof shareholders.
<Decision-making process>At 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 ischaired by an independent outside director and composed of amajority of independent outside directors. The Board of Directors
has determined that the details of individual director

compensation for the fiscal year under review is in line with thedecision-making policy.
Decisions on the amount of fixed compensation (monthly
compensation) of directors and the evaluation and allocationof 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 the Company has
determined that the president and representative director isbest suited to evaluate the performance of the business divisions of each director, while extensively monitoring theCompany’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)
Fixedcompensation

38%

Restricted-transfer stock
remuneration(long-term incentives)

Fiscal year
ended
March 31,
2022

13%

Performance-linked
remuneration(short-term incentives)

49%

Remunerations for Directors not involved in business execution
are paid as a monthly fixed amount that is not linked to businessperformance due to their role of supervising business execution.

ANNUAL REPORT 2022

71

GovernanceCorporate GovernanceDirector and Auditor Remuneration in Fiscal Year Ended March 31, 2022
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)

204

91

88

23

9

24

24

—

—

3

44

44

—

—

4

10

10

—

—

2

248

135

88

23

13

34

34

—

—

5

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, 2022, the Board of Directors
meeting held on May 2021 received reports and debated thestatus of strategic shareholdings.
NESIC appropriately exercises voting rights for these strategic
shareholdings after comprehensively determining whether thecontent of such proposals will contribute to the enhancement of
the corporate value of the investee company and the NESIC
Group over the medium-to long-term.

Strategic shareholdings (as of March 31, 2022)
Four listed companies¥72.8 million

Evaluation of the Board of Directors’ EffectivenessTo improve the functions of the Board of Directors, since thefiscal year ended March 31, 2016, NESIC has evaluated andexamined the effectiveness of the Board of Directors.
Below, we summarize the results of the effectiveness evaluation and the process of analysis conducted in the fiscal year
ended March 31, 2022.

support system in order to ensure appropriate monitoring ofbusiness execution and decision-making (held multiple discussions on key issues, enhanced the quality of preliminary
briefings, improved the format of documentation, and conducted off-site meetings).
Effectiveness Evaluation in Fiscal Year

Improvement Activities Undertaken in Fiscal Year Ended
March 31, 2022 
In FY2022/3, NESIC’s Basic Policy on Corporate Governance
was formulated, clarifying the Company’s basic approach tocorporate governance. We also formulated our annual agenda
for discussions and reviewed our method for managing
agenda items based on the roles and functions to be prioritized by the Board of Directors, as clearly stated in the evaluation of the effectiveness of the Board of Directors for
FY2021/3, in addition to reviewing the criteria for agenda
items of the Board of Directors’ meetings. Moreover, in formulating the new medium-term business plan, which will commence in FY2023/3, we worked to strengthen discussions on
the new plan at the Board meetings by confirming the business environment of the Board of Directors, providing interim
reports, and holding discussions on three separate occasions
from the concept formulation stage. In addition, the Company
took measures to strengthen its provision of information and72

ANNUAL REPORT 2022

Ended March 31, 2022 (1) Analysis and evaluation process
The evaluation of the Board of Directors’ effectiveness for the
fiscal year ended March 31, 2022, consisted of a questionnaire
given to all directors and auditors, and individual interviews
based on the results of the questionnaire. The questionnaire
and individual interviews served to clarify the roles and primaryfunctions of the Company’s Board of Directors, and elicited
opinions about the issues based on functions that should beemphasized and the status and effectiveness of implementation of improvement measures. Based on the outcome of thisprocess, specific measures for improvement are discussed in
pre-meeting briefings and meetings of the Board of Directors.
(2) Summary of results of evaluation
The following is an overview of the evaluation of the effectiveness of the Board of Directors for the fiscal year ended March
31, 2022.

·A lthough the Board of Directors’ discussions focus on “theroles and functions of the Company’s Board of Directors,”
which was formulated in accordance with the evaluation of
the effectiveness for FY2021/3, we must continue to review
its operations in order to strengthen functions from thisperspective.
· “ Formulate annual agenda for discussions and review methods for managing agenda items in light of the roles andfunctions of the Board of Directors,” “review role of Board of
Directors in process for formulating the next medium-term
management plan,” and “discuss issues for the next mediumterm management plan and long-term issues for improving
corporate value,” which were identified as issues in the evaluation of effectiveness for FY2021/3, have improved on thewhole through the implementation of the measures that were
set in place.
 Based on these results, we believe the Board of Directors
is operating appropriately and effectively.

(3) Future measures
To continue to improve the operations of the Board of
Directors, the following measures will be taken in FY2023/3;·R eview the annual agenda for discussions, the methods for
managing agenda items, and the format and content ofreports from the standpoint of further demonstrating theroles and functions 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 andCompensation 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 and system for following up on mattersraised at the Board of Directors’ meetings, and improve thetraining program for all board members, etc.)

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 FY2022/3, in addition tomatters for resolution and reporting, a new category “mattersfor discussion” was established in order to strengthen
PeriodFirst
Quarter

SecondQuarter

Key Issues·E valuation of the effectiveness of the Board of
Directors (matter for reporting)·S tatus of sustainability initiatives(matter for reporting)·R eporting of the status of cross-shareholdings(matter for reporting)·S ubmission of Corporate Governance Report(matter for reporting)·A llocation of director compensation amounts(matter for resolution)·F ormulation of next medium-term business plan(matter for reporting)·R eporting on the status of business execution(Business Design Operations Unit, Network
Infrastructure Business Unit, and Engineering &Support Services Business Unit; matter for reporting)·L iability insurance of corporate officers(matter for reporting)discussions on key matters concerning the business strategy
and governance. During the year, discussions were also heldon the formulation of our new medium-term business plan,
which commenced in FY2023/3, and the evaluation of theeffectiveness of the Board of Directors.

PeriodKey Issues

Third
Quarter·P rogress of formulation of next medium-term business plan (matter for reporting)· ICT and DX strategies for next medium-term businessplan (matter for reporting)·S election of and application for new market classification and response to corporate governance code·R eview of criteria for discussions by the Board of
Directors (matter for resolution)·R eporting on the status of business execution(Digital Solutions Business Unit, Network
Infrastructure Business Unit, and Marketing & Sales
Operation Unit; matter for reporting)FourthQuarter· Interim reports on next medium-term business plan(matter for discussion)·E stablishment of NESIC’s Basic Policy on Corporate
Governance (matter for resolution)·R eporting on the implementation of the Nomination
and Compensation Committee (matter for reporting)·R eporting on the operational status of the internal
control system (matter for reporting)·E valuation of the effectiveness of the Board of
Directors (matter for discussion)·R eporting on the status of business execution (Digital
Solutions Business Unit, Engineering & Support
Services Business Unit, and Marketing & Sales
Operation Unit; matter for reporting)

ANNUAL REPORT 202273

GovernanceDirectors & Corporate Auditors (As of June 24, 2022)
Directors

Yushi Ushijima

Osamu Noda

Hiroyuki Sekizawa

Kazuhiko Takeuchi

Michiko Ashizawa

Kuniko Muramatsu

Mamoru Yoshida

Junji Ashida

President and Chief Executive
Officer (CEO)Member of the Board(Outside Director)

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

Member of the Board(Outside Director)

Senior Vice President,
Chief Financial Officer (CFO),
and Member of the Board

Member of the Board(Outside Director)

Senior Vice President,
Chief Engineering Officer (CENO),
and Member of the Board

Member of the Board

Main Background and Specializations That NESIC Expects of Each Board Member
Name

Yushi Ushijima
Osamu Noda
Hiroyuki Sekizawa
Kazuhiko Takeuchi
Michiko Ashizawa
Kuniko Muramatsu
Mamoru Yoshida
Junji Ashida
Toru Kawakubo
Naoki Iwasaki
Yohei Otani
Masayuki Horie
Akiko Isohata

74

ANNUAL REPORT 2022

Independence

Corporate Management

Technology

Corporate Auditors

Toru Kawakubo
Member of the Board

Naoki Iwasaki

Yohei Otani

Masayuki Horie

Akiko Isohata

Corporate Auditor (Full-Time)

Corporate Auditor(Outside Auditor)

Corporate Auditor (Full-Time)

Corporate Auditor(Outside Auditor)

Areas of Special Expectations
Sales and Marketing

GlobalFinance and Accounting

Sustainability and ESG* These are areas in which the expertise and experience of each board member in particular can be expected
to be demonstrated, and does not represent all of the skills and expertise possessed by each board member.
ANNUAL REPORT 2022

75

Corporate Data
Consolidated Ten-Year Summary

FY2013/3

FY2014/3

FY2015/3

FY2016/3

Performance Indicators (Millions of yen)Orders received¥241,271¥280,071¥299,097¥274,946

Net sales

235,716

270,326

292,164

279,961

Gross profit

37,182

44,69048,11045,162

Operating income

12,483

14,41816,158

14,111

5.3

5.3

5.5

5.0

7,246

8,257

7,791

5,996

Total assets*2¥167,472¥189,059¥201,904¥196,505

Net assets

85,974

89,166

94,173

94,397

Owner’s equity

85,26687,51492,55992,738Cash flows from operating activities¥ (1,723)¥23,313¥ 2,460¥ 9,435

Cash flows from investing activities(3,429)(5,504)(3,929)(2,822)

Free cash flows(5,152)

17,809

(1,469)6,613

Cash flows from financing activities(2,066)(3,824)(4,127)(1,402)

Cash and cash equivalents at end of year

30,31544,43438,95143,889EPS¥ 48.57¥ 55.35¥ 52.24¥ 40.26

BPS

571.58586.68621.53622.75

Cash dividends

15.00

20.00

21.33

23.33

ROE*4

8.8

9.6

8.7

6.5

ROA*5

7.7

8.2

8.3

7.1

Owner’s equity ratio

50.9

46.3

45.8

47.2

DOE ratio

2.7

3.5

3.5

3.8

Payout ratio

30.9

36.1

40.8

57.9

6,024

7,164

7,260

7,464

49,773,807

49,773,807

49,773,807

49,773,807

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

Key Indicators (%)

Other
Number of employees
Number of shares outstanding (FYE)*1 U.S. dollar amounts have been translated from yen, for convenience only, at the rate of ¥122.39 = US$1.00 as of March 31, 2022.
*2 P artial revisions to accounting standards for tax-benefit accounting (Corporate Accounting Standard No. 28, February 16, 2018) have been adopted from the fiscal year ended March 31, 2019.
Accordingly, the figures for the fiscal year ended March 31, 2015 to the fiscal year ended March 31, 2018 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 ROA (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 2022

FY2017/3

FY2018/3

FY2019/3

FY2020/3

FY2021/3

FY2022/3(Thousands of U.S. dollars)*1¥279,241¥287,831¥284,739¥304,978¥336,877¥336,759$2,751,523

257,912

267,939

277,949

303,616

339,109

310,334

2,535,615

42,58544,26547,681

54,374

63,92963,473

518,612

9,974

11,057

12,774

16,24525,56323,181

189,402

3.9

4.1

4.6

5.4

7.5

7.5

—

6,549

7,357

8,885

9,422

15,74515,021

122,730(Thousands of U.S. dollars)*1¥197,386¥207,643¥216,171¥230,244¥250,338¥254,701$2,081,060

96,674

101,732

107,608

113,510

127,117138,149

1,128,760

94,611

99,473

104,888

110,366

123,682

134,742

1,100,923(Thousands of U.S. dollars)*1¥22,634¥ 4,779¥ 8,396¥12,935¥17,383¥22,674$185,260(2,697)(2,802)(5,604)(6,726)(4,289)(7,162)(58,517)

19,936

1,976

2,791

6,208

13,093

15,511

126,734(4,144)(4,366)(5,615)(2,300)(2,388)(4,267)(34,863)

59,64857,28154,35458,321

68,426

79,732

651,458(Thousands of U.S. dollars)*1¥ 43.98¥ 49.41¥ 59.67¥ 63.28¥105.73¥100.85$0.82

635.34668.01704.40741.12830.47904.66

7.39

24.00

24.66

26.00

27.33

35.00

43.00

0.35

7.0

7.6

8.7

8.8

13.5

11.6

—

5.1

5.4

6.1

7.1

10.6

9.3

—

47.9

47.9

48.5

47.9

49.4

52.9

—

3.8

3.8

3.8

3.8

4.5

5.0

—

54.6

49.9

43.6

43.2

33.1

42.6

—

7,572

7,657

7,743

7,818

7,537

7,675

—

49,773,807

49,773,807

49,773,807

49,773,807

149,321,421

149,321,421—

ANNUAL REPORT 2022

77

Corporate Data

Stock Information (As of March 31, 2022)
Number of Shareholders

16,776

Common Stock Authorized

300,000,000 shares

Issued149,321,421 shares

Trading Unit

100 shares

Major Shareholders (Top 10)
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)

15,742

10.57

Custody Bank of Japan, Ltd. (Trust account)

7,790

5.23

Sumitomo Realty & Development Co., Ltd.

3,600

2.42

THE BANK OF NEW YORK MELLON 140044

1,828

1.23

Employees’ Stock Ownership Plan

1,823

1.22

BNYM AS AGT/CLTS NON TREATY JASDEC

1,177

0.79

STATE STREET BANK AND TRUST COMPANY 510312

1,134

0.76

STATE STREET BANK WEST CLIENT–TREATY 505234

1,106

0.74

Name of Shareholder

Notes: *1 S hares held by 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 shares of the Company to its retirement benefit trust. The percentage of material voting rights held by NEC
Corporation as of March 31, 2022 was 51.42%.
*2 The percentage of total shares outstanding is calculated based on the number of shares excluding treasury stock (379,090
shares) and shares that are in the company’s name in the shareholder registry but are not substantially owned (300 shares)
and shown to two decimal places.
*3 The number of shares held is rounded down to the nearest thousand.

Breakdown of Shareholders by Type
(%)

100

0.28
7.08

80

21.92

0.28
7.38

0.27
6.85

17.20

20.00

0.26
10.29
19.22

0.25
8.06
18.32

60
41.18

41.15

41.15

41.25

41.12

40
0.73
20
28.81

0.44

33.56

0.23

0.96

1.42

31.49

28.01

30.82

2020/32021/32022/30
2018/3

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

78

ANNUAL REPORT 2022

(FYE)

Corporate Overview (As of March 31, 2022)
Name	
NEC Networks & System Integration
Corporation

Major Consolidated Subsidiaries

Head OfficeIidabashi First Tower, 2-6-1 Koraku,
Bunkyo-ku, Tokyo 112-8560, JapanJapan

Established

December 1, 1953

Registered as a
Stock Company

November 26, 1953

Capital¥13,122,000,000

NICHIWA Co.
NEC Net Innovation, Ltd.
NESIC advanced aquaculture, Inc.
NetsForest RAS Technologies, Inc.

Number of Employees	5,090 (Non-consolidated),
7,675 (Consolidated)
Fiscal Year

April 1–March 31

Ordinary General
Shareholders Meeting

Annual meeting held in June

Listing

NEC Magnus Communications, Ltd.

Q&A Corporation
K&N System Integrations Corporation
NEC Networks & System Integration Services, Ltd.

Tokyo Stock Exchange, First Section*Japan* Prime market after April 4, 2022

NESIC BRASIL S/A

Ticker Code1973

NESIC (Thailand) Ltd.

Accounting Auditor

KPMG AZSA LLCNESIC PHILIPPINES, INC.

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

Networks & System Integration Saudi Arabia Co. Ltd.
ICT Star Group Myanmar Co., Ltd.

Outside Evaluations

JPX-Nikkei 400

FTSE4Good Index Series

FTSE Blossom Japan Index

MSCI Japan ESG SelectLeaders Index in 2022*

SNAM Sustainability
Index

DX Certification

Certified Health andProductivity Management
Outstanding Organization 2022

“Platinum Kurumin”
certification markHighest-grade “Eruboshi”
certification

Top Hundred Telework
Pioneers* THE INCLUSION OF NEC Networks & System Integration Corporation IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN,
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 ITS AFFILIATES.

Editorial Postscript
The environment in which we operate has changed dramatically in recent years. This is largely due to the rise of geopolitical risks andmultiple issues including the incidence of COVID-19 and the large-scale disasters attributable to climate change. As new social issues
continue to emerge and the world’s values evolve along with these changes, communication can be expected to play an increasingly
important role in society. In this integrated report, we have enhanced the disclosure of ESG information including our response to climatechange and human capital-related initiatives, and made other improvements to disseminate information with higher value based on the
demands of society and the opinions of our stakeholders concerning our strategies for implementing sustainability management,
including the non-financial initiatives in our new medium-term management plan.
We will continue to shift up to a higher level in an effort to help realize an inclusive and sustainable society created through communication.

ANNUAL REPORT 2022

79NEC Networks & System Integration Corporation
2-6-1 Koraku, Bunkyo-ku, Tokyo
112-8560, Japan
Telephone: +81-3-6699-7000
Website: http://www.nesic.co.jp/english/

221100400-EI-00