Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

A Message from the CSuO

We will work together asa team, promoting
sustainability management
to enhance corporate
value and raising DJK’svalue to society.
Yuji Funawatari Managing Executive Officer & CSuO
Director

In April 2023, DJK established the Sustainability
Committee and the Sustainability Promotion
Department. Mr. Funawatari, the Chief Sustainability
Officer (CSuO), provided insights into thecircumstances behind this move and DJK’s future
initiatives.

Background to the establishment of the Sustainability
Committee and the Sustainability Promotion Department
I was appointed as CSuO and the officer responsible
for the Administration Division in April 2023. Ever
since joining DJK in 1987, I had been working inIndustrial Machinery and other business divisions.
After overseas postings in Europe and Singapore, I
returned to Japan in April 2021, when I became theofficer responsible for the Aviation & Social
Infrastructure Division, as well as Asia and Europe.
In April 2022, the DJK Group set forth a new
philosophy and the V2030 growth strategy, which
form the basis for the medium-term business plan
MT2024 we are currently pursuing. A large range ofsustainability-related issues became evident throughthe formulation of these measures. A sustainability
taskforce was set up within the Corporate Strategy
Division, and I was put in charge of it. In thiscapacity, I have endeavored to build a foundation forsustainability management at DJK.
The sustainability taskforce later transitioned into
the Sustainability Promotion Committee, with theaim of establishing the central position ofsustainability management within DJK. The

47

DAIICHI JITSUGYO CO., LTD.

committee held regular biannual meetings toformulate our Basic Philosophy on Sustainability,
declare our support for the recommendations of the
Task Force on Climate-related Financial Disclosures(TCFD), and build a new framework, unique to DJK,
that links the environmental management system(EMS) with materialities (important issues). These
efforts have been lauded by an external EMS
reviewing body. We also formulated internal
recommendations for the establishment of theIntegrated Risk Management Office and rules forstrategic business investment from the standpoint ofsustainability. After establishing the foundations forsustainability management from diverse
perspectives such as these, the Sustainability
Promotion Committee was renamed theSustainability Committee in 2023, and theSustainability Promotion Department wasestablished to promote specific initiatives as theSee p.49 for details
committee secretariat.

The importance of on-site responsivenessAt the annual meeting of division general managers
held in June 2023, I explained my duties as“responsible for the promotion of sustainability
management.” I can say with confidence that while
the DJK Group’s business activities over its 75-year
history have not been unsustainable, I am acutely
aware of the social trend in recent years toward agreater focus on aspects such as the environment,

human rights, and governance. This includes therequirement for due diligence at the front line ofsales. I believe that our systematic organization andenunciation of the Group’s sustainability
management will provide a boost for our businesses
at each site. Unless our business divisions areconvinced of the importance of sustainability
management, the process of implementing
initiatives to address the Group’s materialities mayplace an undue burden on on-site operations. I
believe it is my role, as someone closely familiar withthese operations over many years, to explain theGroup’s vision to each business division accurately
and methodically. As stated in our Basic Philosophy
on Sustainability, in pursuing businesses that are
responsive to various sites around the world,
enhancing corporate value, and pursuing sustained
and profitable growth — in other words, throughDJK’s sustainability management — we will practicemanagement that encompasses ESG, aiming forprofitable growth. I stress the importance of our own
mindset (reforming awareness) to contribute tosociety through businesses adapted to the era,
generate profits, and survive as a trading company
for the new era. Practicing sustainability
management based on an understanding of on-site
operations and enhancing corporate value to meetthe expectations of our stakeholders. I see these as
our two key themes.

Initiatives for the future
One of the priority themes for the activities of the
Sustainability Committee and the Sustainability
Promotion Department going forward is thepromotion of efforts for sustainability and theestablishment of assessment methods forachievements. As part of our awareness-raising
activities, I visit our sites in Japan and overseas,holding briefings where I review the Group’s history,
philosophy, and function as a trading company. At
the same time, we are in the process of building
systems to evaluate the progress and achievements
of initiatives to address the Group’s materialities.
We will establish and disclose target KPIs, carry out
monitoring with reference to external evaluations,
implement internal initiatives, and progress to thenext action. By steadily following this PDCA cycle, I
believe that we can further deepen the Group’s
sustainability management.
Since declaring our support for the TCFD
recommendations in August 2022, we have been
calculating and disclosing our Scope 1 (direct) and
Scope 2 (indirect) greenhouse gas emissions. At
present, our TCFD working group (WG) is engaged
in establishing methods for the analysis andevaluation of risks and opportunities. The WG
includes members from the Plant & Energy Business
Division, which has experience in biomass power

plants and other projects that contribute to theenvironment, and we are endeavoring to build aframework to integrate and boost the knowledge ofthe corporate and business divisions as we pursue
these initiatives. Sustainability also encompasses
diverse fields, such as the establishment of our
Human Rights Policy. Our most important initiative inthis context is the coordination of the Administration
Division and the Corporate Strategy Division inhuman capital management.

Creating a new history built on people
I just mentioned the need to reform employees’
mindsets. Based on our recognition that DJK also has
to change itself to accomplish this, we established asystematic human resources development programand implemented an engagement survey in the fiscal
year ended March 31, 2023. The results of thissurvey revealed a highly positive assessment
regarding the corporate environment, which enables
employees to exercise discretion and autonomy inperforming their duties. However, there were also
requests for DJK to support career advancement andupskilling. The results of the survey analysis wereexplained in detail to the management of thebusiness and corporate divisions and reflected ininitiatives in each division. We plan to conduct
regular surveys in the future to check the progress ofthese initiatives. We have also established a systemfor employees to self-assess their own desired careerplans, and we are considering the introduction of asystem of tailor-made training suited to each
employee’s life plan. Moreover, until now, our work
as a trading company has tended to be constrainedby time due to the need to respond to customers.
We have requested the general managers ofbusiness divisions and others to reform theirmindset, revising work processes and utilizing digitaltechnology with a focus on productivity rather than“working by the clock.” We will also create
comfortable working environments adapted to life
events such as marriage, birth, and nursing, with theadvancement of women in mind. Meanwhile,
expanding overseas businesses is essential for the
future growth of the Group. The Group alreadyboasts a multi-national workforce, but at present,
our global human resources largely compriseengineers. Going forward, we will develop
businesspeople capable of expanding ourbusinesses on the global market, including withforeign companies. Measures such as long-term
training and human resources exchange will enable
our employees to acquire more know-how
concerning our trading company function. We willcontinue to reform our mindset and take on new
challenges as we pursue sustainability management,
increasing DJK’s value to society.

DJK Report 2023

48

Outline

Sustainability

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Respect for Human Rights

Basic Philosophy on Sustainability
The DJK Group has declared as part of its philosophy “Connecting People, Connecting Technology and
Enriching the World,” and, as a trading firm that will lead the new era, is pursuing businesses that are
responsive to various sites around the world. We will enhance corporate value by strengthening ourmanagement base and actively addressing key issues in the environment, society, and governance throughour business activities. The DJK Group will pursue sustained and profitable growth while fulfilling its
corporate social responsibilities and aim for advancement alongside our stakeholders.

We believe that engaging in business activities with respect for human rights throughout the supply chain —not only those of our own employees but also the employees of our suppliers — is the foundation on which we
can realize our philosophy of Enriching the World. Based on this belief, we have recently established the DJK
Group Human Rights Policy.

DJK Group Human Rights Policy
Recognizing that respect for human rights is one of the essential elements of the DJK Group’s global businessactivities, our policy is as set out below.
Basic Policy on Human Rights

Sustainability Promotion System
The Sustainability Promotion Committee (currently the Sustainability Committee) was established in April 2022
for the purpose of maintaining DJK’s sustainable growth. The committee deliberates on sustainability-related
matters, including climate change. It is chaired by the Representative Director, President & CEO, and the
Director, Managing Executive Officer, Chief Sustainability Officer (CSuO) serves as the officer in charge. The
committee regularly monitors in-house initiatives and engages in the deliberation and consideration of future
initiatives. The contents of its deliberations are reported to the Board of Directors. The evaluation ofsustainability initiatives incorporates opinions from the perspectives of outside directors. In April 2023, we went
on to establish the Sustainability Promotion Department which, under the leadership of the CSuO, serves as thesecretariat for the Sustainability Committee, accelerating sustainability initiatives across the entire Group.

Prohibition of Discrimination
Under no circumstances shall the DJK Group discriminate on the basis of gender, ethnicity, place ofbirth, nationality, religion, ideology, age, physical disability, or other personal characteristics.
Prohibition of Harassment
The DJK Group shall not tolerate any form of harassment, including power harassment and sexual
harassment.
Protection of Privacy
The DJK Group shall strictly manage the personal information of its officers and employees, andshall not use it for any purpose other than that for which it was originally intended.
Workplace Safety

Board of Directors

The DJK Group shall strive to maintain a safe and hygienic working environment and comply withall laws and regulations concerning occupational health and safety.
Compliance with Labor-related Laws

Representative Director,
President & CEO

The DJK Group shall comply with labor-related laws and endeavor to maintain a healthy working
environment that is attractive and welcoming for all who work there. Management shall not impose
any work that requires excessive labor or compel employees to work overtime.

Director, Managing Executive Officer,
CSuO

Sustainability Committee

Elimination of Forced Labor and Child Labor
Under no circumstances shall the DJK Group tolerate forced labor or child labor.

Corporate divisions

Freedom of Association and Right to Collective Bargaining
The DJK Group is committed to respecting the freedom of association and the right to collective

Business divisions

Sustainability Promotion Department

bargaining in order to achieve an equitable working environment and to ensure both the well-beingof employees and the sustainable growth of the DJK Group.

Bases in Japan and overseas

Initiatives for the Respect of Human Rights

Initiatives of the Sustainability Committee (Content of Discussions)
Formulation of the basic philosophy on sustainability
and revision of the environmental policy
Matters related to risk management
Promotion efforts using the environmental
management system (EMS)
Targets to address materialities

49

DAIICHI JITSUGYO CO., LTD.

Monitoring of initiatives related to climate change
Sustainability promotion, including Group companies
Consideration of response to ESG-related laws atoverseas bases
Formulation of the Human Rights Policy

See our website for details(1) Scope of Application (2) International Norms and Compliance with Laws and Regulations(3) Implementation of Human Rights Due Diligence (4) Remedial Measures(5) Education and Raising Awareness (6) Dialogue with Stakeholders(7) Information Disclosure (8) Promotion System

DJK Report 2023

50

Outline

Human Resources

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Approach to Human Resource Training and the Enhancement of Internal Environments
Approach to Human Resource Training
Develop human resources and build organizations possessing both the flexibility and strength to adapt
to changes in the environment
Approach to the Enhancement of Internal Environments
Aim to deepen and enhance recruitment, education and training, and internal systems, pivoting on highlevel expertise, autonomy, diversity, health and productivity management

Approach to Human Resource Training

Human Resources Development Program

As we strive to achieve our V2030 growth strategy, we have established “a company full of good work partners”
as our vision for human resources development. We have defined our image of these human resources asfollows, and reflected this definition in various personnel-related measures.
RESILIENCE: The mental flexibility to turn business experience into an opportunity for self-transformation
FAITH: Respect for cooperation in work and the ability to build mutual trust
PROFESSION: Contribution to all stakeholders

We will develop human resources who can connect people through their positive attitude, connect
technology through their thorough knowledge, and enrich the world through their devoted actions.

DJK’s Human Resources Development Committee, composed of members elected from all the business divisions, the Engineering Division,and the Administration & Accounting Divisions, meets four times each year.
The President & CEO and the Senior Managing Executive Officer, who are the Representative Directors, also participate in committee
meetings. Through the vigorous exchange of opinions with committee members, they have established a systematic human resources
development program based on business strategies.
We have also implemented overseas human resources development committees linked to four overseas areas: the Americas, Europe,Asia, and China. We are working to share DJK’s philosophy with our overseas employees and expand business with foreign companies. Just
as we provide opportunities for our Japanese employees to gain experience through overseas postings, we are also creating opportunities
for overseas employees to work at posts in Japan and other bases. We are progressively building systems to revitalize human resources
mobility within the Group, aiming to deepen intercultural understanding by promoting diversity and expand our businesses in each region.

Human Resources Strategies

Human Capital Management
We approach human resources development with a long-term perspective, aiming to invest in our humancapital while also achieving the sustained enhancement of corporate value. We endeavor to impart to each of
our employees the aspiration to be a businessperson who can think independently and involve those aroundthem to bring ideas to reality.
Through human capital management, we will transform the growth of our employees into a growth engine for
DJK by connecting it with the enhancement of our basic business strength and employee motivation for work.
We will return these benefits to our stakeholders through higher corporate value.
Enhancing DJK’s basic business strength

For new employees, we will implement safety education from the training stage, covering the items necessary when delivering equipment, while formid-career recruits, we will focus on the recruitment of personnel with advanced qualifications, thereby enhancing our expertise, to achieve our aimof being the next-generation engineering trading firm.

Boosting employee motivation for work and growth

In its seven business domains, DJK does business across a wide range of markets and industries. Our customers and suppliers are highly diverse, anddeepening our understanding of this diversity provides us with earning power. With the aim of promoting diversity, we are progressively creating
environments to empower women and taking a more multi-faceted approach to our recruitment activities. We are promoting a higher proportion of
women in core positions and the recruitment of foreign personnel and mid-career recruits.

Developing the management capabilities of potential senior managers

We are promoting a more diverse range of practical experience for the purpose of developing potential senior managers. By systematically deploying
personnel to DJK’s affiliates in Japan and overseas, we are progressively developing human resources with management sense.

Expected Results

Personnel Investment

Specific Measures

Related Indicators / KPIs

For NEWCOMER
Learning business basics
Sharing corporate philosophy and history

Implement group training for recent recruits
Raise motivation to learn through fee sub-sidies
Pay support and allowances for the acquisi-tion of public qualifications

DJK WAY basic education
Common education: Group training by level
Individual education: Implement subscription education

Attendance rates for various group training
sessions
Attendance rates for subscription education

For MID-LEVEL
Learning business applications
Cultivating the autonomy of mid-level personnel

Implement training by positions group for mid-level personnel
Raise motivation to learn through fee subsidies
Pay support and allowances for the acquisition of public
qualifications

Education in line with career design
Common education: Group training by positions group
Individual education: Implement subscription education
to improve skills

Attendance rates for various grouptraining sessions
Attendance rates for subscription
education

Next-generation engineering trading firm
Strengthen high-level expertise

Diversify graduate and mid-career recruit-ment activities
Enhance health and safety education for construction
Pay support and allowances for the acquisi-tion of
public qualifications

Strengthen recruitment of new science and engineering graduates
Education for work supervisors and construction supervisors
Expand the range of technical public qualifications eligible for support

Proportion of science graduatesand mid-career recruits
Participation rate in various
education ses-sions

Diversity promotion Intercultural understanding
Earning power in the global market

Diversify graduate and mid-career
recruitment activities
Revise the salary system bypositions group and level

Strengthen recruitment of womenand foreign personnel
Promote the use of the positionsgroup switching system

Proportion of women among corehuman resources
Gender pay gap
Proportion of foreigners among recruits

Improve employee engagement
Promote employee health

Promote various work style reform
measuresCover the expense of Group
insurance premiums

Ensure an appropriate amount of overtime
Promote the utilization of paid leave
Employee engagement surveys

Overtime hours by division
Paid leave utilization rate
Results of engagement surveys

Improve the risk management abilities of senior
managers and potential senior managers
Continually deepen quality management

Select promising mid-level personnel
Create opportunities for personnel
changes to achieve greater versatility

Experience in both business divisions andAdministration & Accounting Division
Create management opportunities ataffiliated companies in Japan and overseas

Manage the careers of potential senior
managers based on a skill matrix

51

DAIICHI JITSUGYO CO., LTD.

Business
Strategies

Enhancing DJK’s
basic businessstrength

We launched the operation of DJK’s new personnel system in the fiscal year ended March 31, 2022. Unlike the previous membership-stylepersonnel system, the new system clearly defines the roles associated with each duty. Based on the main themes of developing humanresources to lead the next generation and enhancing job satisfaction, the new system established the professional positions group (P positions)and the technical positions group (T positions), in addition to the management positions group (M positions: former management positions)beyond the career track positions group, allowing employees to choose the positions group that best suits their individual needs.
We verify the effectiveness of measures under our human resources strategies by summarizing the opinions of employees throughengagement surveys and individual interviews by the Personnel Department, based on employees’ self-assessment reports. This input isthen used to amend measures and formulate new measures, creating a cycle of improvement. In the engagement survey implemented in
March 2023, we found that some employees indicated a shortage of medium-term educational measures. We have therefore improved thesystem to enable employees to discuss their long-term career path at self-assessment interviews. We are also promoting internal discussion
aimed at more autonomous career-building.
We established our General Employers Action Plan as interim targets in April 2023, which will be linked to various measures based onhuman capital management. We are pursuing the following targets under MT2024.
Target 1 Ratio of female employees in career track positions: 10% Recruit female new graduates into career track positions

FY2023 result: 5 females out of a total of 22

Target 2 Paid leave utilization rate: 70% Childcare leave utilization rate among male employees: 100% Share the status of paid leave utilization

FY2023 result: 59.7%

Target 3 Create rewarding workplace environments

FY2023 result: Shared with all divisions

Share the results of engagement surveys and improvement measures throughout DJK

History of our human resources strategies

October

April
Established special leave for the purpose of childcare
Created our unique system of childcare leave at the time of childbirth,
encouraging expectant fathers to utilize childcare leave
Abolished age-based pay, revised the starting salary, and raised salaries
Applied a salary table by role to all employees, based on the philosophyof the new personnel system
Revised the employee rehiring system
Improved the treatment of rehired employees from 60 to 65 years of age
through the creation of roles and levels and the payment of salaries
based on evaluation

Commenced subscription education
Adopted a company-sponsored system of self-selection education
adapted to our busy employees’ ambitions to learn
Renamed the Human Resources Development Committee
The committee discusses various education measures throughthe participation of members from all divisions, based on humancapital management2023

an employee
March Implemented
engagement survey

April New philosophy; V2030; personnel strategy taskforce; MT2024

2022

Boost employee
motivation for workand growth2021
Ensuring long-termvalue-focusedmanagement

2019

April Launched the new personnel system

Established the management positions group (M positions), theprofessional positions group (P positions), and the technicalpositions group (T positions)January Launched the Group insurance program

Established and launched the Group insurance program, subsidized
by DJK, with the aim of protecting employees and promoting theirhealthApril Revised the evaluation system

Achieved greater fairness through the launch of a cloud-based target management system and relativeevaluation at each level companywide, as well as the creation of an evaluation of the utilization of abilities
DJK Report 2023

52

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Human Resources

Employee Engagement

ColumnAiming to Connect the DJK Group Through Our Philosophy

Purposes of engagement surveys

We have implemented an employee survey on engagement for the purposes of strengthening our humanresources strategies (human capital investment, employee development and education, improving working
environments, etc.) and promoting sustainability management.

Outline of the survey results

DJK’s corporate environment received a highly positive evaluation in terms of respect for employees’ opinions
and enabling employees to exercise discretion and autonomy in performing their duties. Aspects such as our
initiatives to reduce overtime, the deployment of an appropriate number of employees, and human resources
development from a long-term perspective received a low evaluation.
These results clearly indicate that, while employees are engaging in their work with a sense of worth, thelarge amount of discretion they are given places them under a high burden, and long-term companywide efforts
should be made to address this issue.
Regular employees (working in Japan) and part-time employees

Survey subjects
Number of respondents / number of subjects

506/565 (respondence rate: 89.6%)

Item

Grade

Average score among all survey subjects

Employee satisfaction rating

A

3.75

01_Company attractiveness

B

3.31

02_Targets and directions

B

3.45

03_Interpersonal relationships

B

3.72

04_Labor environment

B

3.48

05_Career outlook

B

3.26

06_Evaluation and pay

B

3.34

07_Work attractiveness

B

3.62

08_Skills and deployment

B

3.13

09_Mental and physical health

B

3.19

+

+
+
+

Key human resources-related indicators (non-consolidated)
FY2019FY2020

FY2021

FY2022

Number of employees
MaleFemale

508
369
139

524
389
135

558
421
137

591
441
150

Average length of service (years)
Male
Female

12.3
13.0
10.3

12.9
13.7
10.1

12.6
12.9
11.5

12.7
13.4
10.3

Paid leave utilization rate* (%)
Number of employees taking childcare leave
Number of employees working shorter hours

56.0
9
3

49.9
8
7

56.8
10
6

59.7
15
12

Ratio of employees returning to work after childcare leave (%)
Number of employees taking nursing care leave
Job turnover rate (%)

100
0
6.0

100
0
2.7

83.3
0
3.9

85.7
0
4.3

Average training hours per employee*2 (hours)

8.5

13.6

5.4

9.3

*1 Paid leave utilization rate = number of days of paid leave taken ÷ number of days of paid leave granted × 100.
*2 Figures are limited to those organized by the Personnel Department, but other education and training programs are also provided by each organization.

DAIICHI JITSUGYO CO., LTD.

Senior Executive Officer,
General Manager of Corporate Strategy Division

Toward a Greater Recognition of Our Philosophy at Overseas Bases

We disclosed the results of the survey to employees and held briefings for each division general manager andtraining for corporate officers. By continuing to implement measures for improvement, we aim to enhance
working environments to bring about better job satisfaction and business results.

53

Zenichiro Minami

ColumnConclusion

1

In the process of formulating the V2030 growth strategy launched in April 2022,
we reviewed DJK’s founding spirit and corporate principles, preserving this“philosophy in the early days” as our foundation as we began considering our
new philosophy, based on our aspiration to evolve to meet the demands of thisera of profound transformation. We clarified our mission, vision, and values,summarizing them in our philosophy, so that our social responsibility as amember of society is clearly reflected in the meaning of our work, and so that
DJK will continue to be a company that society can depend on. This includes
management with an awareness of contributing to the global environment,
well-being, and human rights, at the same time as business growth. After V2030
was established, we spent around one-and-a-half years implementing
information sessions at each division, each base in Japan and overseas, andeach Group company, to spread an understanding of the new philosophy,
based on the idea that it is the most important that all employees of the DJK
Group fully understand it. These activities were intended not only to facilitate
understanding of the background to the formulation of our new philosophy andthe hopes and aspirations embodied in it, which are difficult to convey inwriting, but also to encourage employees to put it into practice. Our questionand-answer sessions brought a greater sense of clarity to DJK’s orientation
toward growth, and we gained the empathy and support of many employees.
Going forward, our efforts to spread this philosophy will go beyond
information sessions to include measures such as multilingual support and thedisplay of posters at each base. In addition, by actively providing information on
initiatives to achieve our philosophy through integrated reports, briefings forinvestors, and other forums, we aim to win the support of all our stakeholders
and connect the DJK Group through our philosophy common to all employees.

I joined DJK EUROPE GMBH in 2011 as a sales engineer. I was assigned to the
Prague Branch, where I now serve as Branch Manager. I had DJK’s philosophy
and the V2030 growth strategy explained to me when I visited the DJK
headquarters in May 2023, and this increased my desire to share the approachbehind this philosophy, and the working style based on it, with all my staff at
the Prague Branch. I was happily surprised to find that my request that thisphilosophy should be shared with all staff across Europe was also accepted
immediately.
A workshop on DJK’s philosophy and V2030 growth strategy was held in
Bulgaria in late June. Until now, we had little understanding of DJK’s mission,
vision, and the difference between the two. At the workshop, however,outstanding examples were used to explain the philosophy, with anemphasis on practical aspects. This link between theory and practiceenriched our under-standing, indicating how we should apply DJK’s
philosophy in everyday operations. As the saying goes, “practice makes
perfect.” I really felt that practice is key, and will bring us success.
In Europe, we work in small groups in different offices, composed ofdifferent genders, workplace positions, and ages. This diversity leads to thecreation of ideas and a broad range of opinions. We are “One Group, One
Team, One DJK,” and this gives form to our mission and vision. Through thisworkshop, I gained an understanding of just how important DJK’s
philosophy is for all employees. I strongly feel that forums like this should
be provided for all officers and employees in the DJK Group.

Jan Vacek
Prague Branch Manager,
DJK EUROPE GMBH

DJK Report 2023

54

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Environment

Approach to the Environment

As a highly respected industry partner, the DJK Group’s goal is to contribute to the development of a highly innovative global society
In accordance with its Basic Philosophy on Sustainability, the DJK Group will contribute to a sustainable,enriched world.
To accomplish our corporate philosophy, “Connecting People, Connecting Technology and Enriching theWorld,” we are committed to resolving customers’ environmental issues through our business activities bycapitalizing on our engineering functions. The DJK Group aspires to always be a valued partner for its
stakeholders.
We operate an environmental management system (EMS) established based on the environmental policy
and strive to continuously improve it.
We handle products that help protect and improve the global environment and contribute to themitigation of climate change through our business activities.
We recognize the importance of biodiversity, as well as the importance of forests, water, and otherlimited resources, and strive to reflect this recognition in our business activities.
We comply with applicable environmental laws, regulations, and accords in Japan and interna-tionally in
conducting business activities.
We provide continuous education to help all directors, executive officers, and employees of the DJK
Group deepen their understanding and awareness of environmental management.

System for Promoting the Environmental Management System
Since January 2004, we have operated an environmental management system (EMS) based on ISO14001 to
systematically promote the reduction of environmental impact.
We have designated the Representative Director, President & CEO as the top management and the General
Manager of the Administration Division as the person in charge of environmental management. Based on ourenvironmental policy, the EMS Promotion Committee plays a central role in implementing the PDCA cycle andmaking continuous improvements. Through this system, we are accelerating our initiatives to address climatechange in terms of both risks and opportunities.
EMS promotion
organizational chart

Top Management: Representative Director, President & CEO
Environmental Management Officer: Senior Executive Officer,

General Manager of Administration Division

Strategy
We have identified contribution to a sustainable
earth as one of our materialities and we have set thetarget of realization of a decarbonized society. In
addition to setting reduction rate targets for our own
Scope 1 and 2 emissions, we have launchedinitiatives through our businesses, such as engaging
in decarbonization as part of our investment
strategies under the V2030 growth strategy.
Specifically, these include initiatives such as ourinvestment in a biomass power generation company
in Tahara City, Aichi Prefecture, promoting the
introduction of binary power generation equipment,
and our investment in a company with ammonia
production technology that reduces environmental
impact.
Governance
The Sustainability Committee engages in deliberationand consideration concerning sustainability-related
initiatives, including initiatives to address climatechange. The Sustainability Promotion Department,
which serves as the committee’s secretariat, plays acentral role in promoting these initiatives.

Metrics and targets
At DJK, we target carbon neutrality, with net zero
greenhouse gas (GHG) emissions by FY2050, taking
FY2020 as our reference year. By FY2030, we aim to
reduce GHG emissions by 46% compared to FY2020.
We will work toward achieving these targets,
reducing Scope 1 emissions by replacing our
gasoline-fueled business vehicles with hybrid
vehicles, as well as considering the introduction ofEVs, and reducing Scope 2 emissions throughinitiatives such as switching to electric power fromrenewable energy and introducing energy-saving
equipment.
Scope1

Scope2

See p.49: Sustainability Promotion System for details

We have formed a cross-divisional working group
to consider scenario analysis, as this requires
comprehensive efforts based on the dual
perspectives of sales and finance.
Risk management
The Risk Management Committee performs a central
role in DJK’s risk management, and also considers
sustainability-related risks among its agenda items.
However, climate change risk and other importantrisks that should be addressed as a priority aremonitored by the Sustainability Committee. To
implement effective and efficient risk management,
the Risk Management Committee manages climate(t-CO2)

1,617

1,617

619

559

998

1,058

FY2020

FY2021*We are currently calculating emissions for FY2022(t-CO2)

1,617

46%

reduction comparedto FY2020

743
0
FY2020

FY2030FY2050*Scope 1: Direct GHG emissions from the business itself (the combustion of fuel,industrial processes)
Scope 2: Indirect GHG emissions associated with the use of electricity, heat, or
steam provided by another company
DJK and its consolidated subsidiaries in Japan and overseas have been included in
the calculation of emissions, but small bases with a limited effect on overall
emissions have been excluded. The estimated emissions from the personal use ofvehicles by local staff at overseas subsidiaries have been excluded from thecalculation of Scope 1 and Scope 2 emissions.

Main environment-related initiatives

EMS Promotion Committee
Chairperson of EMS Promotion Committee: General Manager of Sustainability Promotion Departmentchange risk, together with other risks, in line with
DJK’s strategies, based on the Risk Management
Regulations.

March Launched the solar power generation business

June

DJK Kasama Solar Power Plant(approx. 1.78 million kWh/year)

EMS Promotion OfficeApril

EMS Internal Auditors

Began handling binary power generation equipment

Signed a capital and business agreement with Tsubame BHB

April

Commercialized an on-site ammonia synthesis system
Promoted the spread of low-environmental-impact ammonia technology

Established the office of CSuO
Launched the Sustainability
Promotion Department

December Identified materialities

EMS Promotion Committee Members
EMS promotion committee members
from the divisions and branches

Initiatives to Address Climate Change
Addressing the TCFD Recommendations
We pursue sustained and profitable growth by actively addressing key issues in the environment, society, andgovernance through our business activities.
Climate change brings both risks and opportunities to DJK’s businesses. We declared our support for therecommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) in August 2022, we havecommenced analysis and consideration in line with the recommendations, and we are progressively disclosing
information based on them.

55

DAIICHI JITSUGYO CO., LTD.

2013

2014

2019

2021

August Selected for a “Joint Crediting Mechanism(JCM) Model Project” by the Ministry of
the Environment and the Global
Environment Centre Foundation (GEC)
March DJK Iida Solar Power Plant(approx. 1.10 million kWh/year)

2022

2023

March Invested in Tahara Bio-power LLC
Stable supply of electrical power sourced from renewable energy

April

Established the Sustainability Promotion Committee
Renamed the Sustainability Committee in April 2023

August Endorsed the TCFD recommendations
Joined the TCFD Consortium

Establishing the TCFD Analysis Working GroupWe have launched the TCFD Analysis Working Group as a subcommittee
under the Sustainability Committee. The working group identifies the risks
and opportunities of climate change, examines and discusses their impact on
DJK’s businesses from short-term, medium-term, and long-term perspectives.
We will endeavor to manage these risks and opportunities appropriately,
respond to climate change, and promote our business strategies.
DJK Report 2023

56

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Environment

Initiatives to Improve Plant Security

Efforts to Reduce Environmental Impact
Promoting Wider Use of Eco-friendly Products
Among all the types of industrial machinery we handle, we are strengthening our efforts to expand sales of
products that contribute to resource recycling, resource conservation, and reduction of workload and workforce inour customers’ product manufacturing. The variety of environmentally friendly products has been increasing year by
year, and in recent years, many of them have become useful for social infrastructure. The Group considers theprovision of products and services to be a contribution to society through business, and will continue to expand therange of products it handles, recognizing that environmental friendliness is the most important issue in business.

Business areas for environment-related products
Aviation and airport-related facilities

Small-scale wind turbines

Solar power plants
Electronic component factories

Binary power plants

Medical supplies factories
Semiconductor factories
Molding and processing factories

Berries Farm (strawberry seedling factories)
Painting factories
Biomass power plants

On-site ammonia supply systems
Automobile and parts factories

Lithium-ion battery factories

Business areas for environment-related products (inside factories)

Gas leak monitoring systems

Air conditioning and power rooms

Molding and processing

Plastic sorting equipment

Clean rooms

LOGITO logistics automation solutions
LOGITO logistics automation solutions

Water treatment and boiler rooms

LOGITO logistics automation solutions

Contributing to the Sustainable Development of Industries through LOGITO
Under the brand name LOGITO, we provide logistics automation solutions to achieve automatic operations andlabor-savings at manufacturing sites, factories, and logistics warehouses, aiming to resolve the issue of thedecline in the working population for manufacturing.
In addition to the knowledge and experience we have acquired over many years as a general machinerytrading company, our engineers, who possess extensive on-site experience, are able to propose the optimal
equipment from a diverse lineup in Japan and overseas to realize free designs with high cost-performance forour customers. We provide one-stop solutions,
Order/
On-siteLayoutEquipment
After-sales
construction/from factory analysis, layout proposals, andanalysisconcept
selection
supportdeliveryequipment selection to construction work andafter-sales service.
LOGITO will not only assist customers to
Design custom smart logistics
continue and expand their businesses: by
One-stop logistics automation solutions
from current status analysis, layout proposals, andpromoting workforce and workload reductions at
equipment selection to construction work andafter-sales maintenancemanufacturing sites, factories, and other facilities,
it will also contribute to the sustained developmentof industry in numerous ways such as improving
productivity, efficiency, quality, labor welfare, andeco-friendliness.

Initiatives for a Resource-recycling Society

Stocking and classification
Component mounting, assembly, and inspection

At DJK, we are working to establish smart factories and security, effectively
utilizing technology such as cameras and sensors to address social issues suchas aging plant facilities and labor shortages. As part of this effort, we havelaunched sales of gas leak monitoring systems manufactured by Konica Minolta,
Inc. Safety countermeasures against gas leaks are of the utmost importance, assuch leaks can cause fires and explosions.
Using this camera for gas leak inspections, previously carried out using gas
detectors, makes it easy to identify the source of leaks and determine any
abnormalities, even in elevated locations. The camera enables the visualizationof hydrocarbon gases and is available in two models: a handy type thatfacilitates everyday inspections and a fixed type that enables automated monitoring around the clock, 365 days a year. It also enables the visualization ofpools and pockets of gas from volatile solvents at worksites, assisting in the
improvement of work environments and the prevention of accidents. From thisperspective, we will work to promote the camera’s utilization, not only for plant
equipment but also for fuel depots, tankers, and various manufacturing sites.
We will also contribute to reducing environmental impact by monitoring the
diffusion of greenhouse gases (such as methane) into the atmosphere.

Packing and shipping

We strive to realize a resource-recycling society, one of our targets for a sustainable earth, by offering plastic
sorting equipment manufactured by Panasonic Production Engineering
Co., Ltd. Until now, sorting PS, PP, and ABS (types of plastic resin)* wasa costly and time-consuming process, requiring the exchange ofequipment for each plastic type. By contrast, this new equipment
features a technology enabling the simultaneous sorting of threeplastic types with high purity and high handling volume (500–700kg/h). The air nozzle used in sorting can also be customized to meeteach customer’s recycling needs, making the equipment easier to use.
We will further promote the reuse of recycled plastics (plastic resins)by spreading the use of this technology and equipment.
*Polyethylene (PS), polypropylene (PP) and acrylonitrile butadiene styrene (ABS)57

DAIICHI JITSUGYO CO., LTD.

DJK Report 2023

58

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Roundtable Discussion between Outside Directors

From diverse perspectives, we will contribute to management transparency
and enhance the corporate governance function up another level.
From the left:

Kazuo Nakayama

Yoshikazu Sakamoto

Namika Yamada

Outside Director

Outside Director

Outside Directorof Directors had resolved on them, the Board of Directors
promptly began to receive progress reports. I also think thatwith the establishment of the Integrated Risk Management
Office, systems are being put in place for the continuing companywide sharing of risk-related information, boosting themonitoring function.
Nakayama: I took office as outside director in June 2023. I
worked for 35 years at a general trading company, and I’ve
subsequently engaged with a wide range of different
industries and businesses. My impression of DJK at the time
was of a group of machinery specialists, but I feel that its
business range has expanded and become moresophisticated since then. Trading companies continue tochange in response to the needs of the world around them.
DJK has survived through 75 years of history, and I feel that it
has the power to fully transform itself in line with the times.
As an engineering trading firm, I think it will continue toaddress changes in market needs head-on and provide new
businesses that the world needs. Risk management, from acomplete range of perspectives, is essential for it toaccomplish this. I hope to utilize the experience I have gained
from my long corporate career to perform a useful role asoutside director.

Aiming for further development

Evaluating DJK
Sakamoto: I took office as outside director in 2015. I comefrom the standpoint of a tax accountant, but I use myprevious experience at the Regional Taxation Bureau, where I
met many corporate managers, to make a broad range ofrecommendations aimed at strengthening governance. The
opinions of the outside directors are earnestly received at
DJK, and I feel that our governance structure has improved toa certain degree.
Ever since I took office, I have seen a stronger corporate
management structure as the highest priority issue when
making recommendations. In the past, there was a strong
tendency to focus on sales, and this resulted in a lack of
corporate governance in some areas, such as crisis
management. The establishment of the GovernanceCommittee in October 2020 and the Integrated Risk
Management Office in April 2023 has helped to enhance ourcorporate management functions. Meanwhile, the V2030
growth strategy, DJK’s long-term vision, and the medium-termbusiness plan MT2024 were also formulated to clarify anddisseminate our management policy and vision. We alsoestablished a new philosophy, making it familiar to all

59

DAIICHI JITSUGYO CO., LTD.

employees, and focused our efforts on enhancing IR and PR
activities, promoting DX, and investing in human resources.
Through these comprehensive initiatives, I feel that we havemanaged to establish a structure that will serve as thefoundation for strategic business development.
Yamada: It was June 2020 when I was appointed outside
director of DJK. This was during the COVID-19 pandemic, andI participated in meetings of the Board of Directors andalmost all other forums online. However, I was able to receive
corporate information through close coordination, including
participation in corporate sales meetings and other forums,
without compromising my independence. Therefore, I neverfelt that I lacked any of the corporate information that formed
the basis for discussions by the Board of Directors. Efforts
toward the establishment of the Governance Committee
began immediately after I took office. All of the internal andoutside directors were able to participate in close discussions
regarding what kind of committee it should be, which I foundextremely meaningful.
DJK earnestly addresses recommendations by the outside
directors. For example, when I pointed out that continuing
progress reports were needed regarding risk management forbusiness projects and other proposals, even after the Board

Sakamoto: At present, DJK has disclosed the long-term
quantitative and qualitative targets established under theV2030 growth strategy and is pursuing its medium-termbusiness plan MT2024 as a way to achieve these targets. In
this context, I feel that we must not only maintain DJK’s
appeal, in terms of aspects such as its capacity for prompt
problem-solving through solidarity and cooperation, but also
develop these qualities further. Specifically, as expressed inour strategy of shifting from product-only sales to a products
and integrated solutions business model, we are not overly
focused on our existing commercial rights and products.
Rather, we have established a business investment budget ofaround ¥15.0 billion over the next five years to develop newmarkets and businesses. We have also announced initiatives
for decarbonization and are promoting efforts to bring aboutsustained growth.
Looking ahead, with projects tending to grow progressively
larger and longer-term, I believe that we must steadily engage
in project risk management and manage profits on a projectby-project basis.
Yamada: Entities such as the Integrated Risk Management
Office have already been established, and now we need todeepen the discussion about what to do in them. When
promoting new initiatives, I feel that, in addition to top-down
communication, we should be aware of creating frameworks
based on the opinions of employees. For example, I am
currently the only female director. It is a fact that the numberof female executive officers and managers presents an issue
for DJK. I think this is partly due to the current scarcity ofwomen managers and other role models in Japan’s maledominated trading company sector. The creation of concretemechanisms in the Sustainability Committee to reflect theopinions of female employees will be a key issue going
forward, as we promote human resources diversity.
Sakamoto: In the past, DJK has implemented employee
satisfaction surveys to improve employees’ working

environments and raise awareness. Based on the results ofthese surveys, we have revised employee education andrecruitment methods, established a childcare support
program and other systems, and revised the salary system forengineers and other professionals. Further efforts are needed
to promote DJK’s human resources strategies and diversity
initiatives in the context of society-wide labor shortages.
Nakayama: I believe that the problem of ensuring aworkforce while maintaining a balance between the labor
environment and pay is one common to Japanese companies
in general, as are efforts to secure diversity, including theempowerment of women. Regarding the promotion of
women in particular, from my own experience, I doubt thatmale managers and others always evaluate men and women
on a fair playing field. To turn these great cogwheels towardchange, perhaps we need to consider a wider array ofmeasures, such as training initiatives to eliminate unconscious
bias, preferential treatment for women and other so-calledaffirmative action measures.

Role as outside directors
Yamada: I hope to make use of my experience as an
attorney: for example, by expressing opinions on risks andother facets of various projects, including strategic business
investment, from a third-person perspective. To that end, I
need the ability to deliberately refrain from “reading theroom,” as it were. I believe in the importance of adopting a
stance where I clearly and methodically present my doubts
and opinions.
At the same time, it is vital for DJK to carefully anddeliberately sift through the management issues it faces andleverage its management resources to address these issues. I
believe that this approach will lead to the steady
improvement of governance and, by extension, enhance DJK’ssocial value.
Nakayama: I believe that our essential and most importantrole as outside directors is to help maintain the transparencyof business decisions and the decision-making process. If
managers have to provide outsiders who have little
knowledge of their company with a clear and concise
explanation of the reason for promoting each measure andthe kind of benefits expected from it, answer unexpected
questions, and repeat this process over and over, it will resultin greater management transparency. I think that enhancing
management transparency in this way is our raison d’etre as
outside directors. To perform this role, we need the ability to
see through the explanations provided by the Company. This
comes from our past experience and knowledge. I feel that it
is crucial for us to be “benevolent strangers.”
Sakamoto: To avoid risks, I consciously adopt a questioning
attitude toward information presented by the Company byasking, “Are we sure about that?” I think that Director
Nakayama made a very important point regarding thetransparency of the business decision-making process. I feelthat our con-sultations with the management team andothers through the Governance Committee make a great
contribution here. As the committee’s chairperson, whileaware of my role as a facilitator, I hope to reflect the opinions
of internal and outside directors and others to enhance thefunction of the committee and DJK’s governance.

DJK Report 2023

60

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Directors and Audit & Supervisory Board Members (As of June 22, 2023)
5

Osamu Fukawa
April 1992
April 2019
April 2020
April 2021
June 2021

April 2022

7

11

10

5

3

4

6

7

8

9

June 2015
1

1

Ichiro Uno
April 1982
April 2013
April 2014

June 2016
April 2017
April 2022

Representative Director, President & CEO

2

Ryuichi Ninomiya
April 1984
April 2011

Joined the Company
Executive Officer, General Manager, Osaka
Business Div., and Osaka Branch Manager
Executive Officer of the Company,
President of DAIICHI JITSUGYO(AMERICA), INC.
Managing Director of the Company
Representative Director, President & CEO
Representative Director, President & CEO(to present)

April 2015
April 2019
June 2019
April 2022
April 2023

Masatoshi Ueno
April 1985
April 2013
June 2019
April 2022
April 2023

Director, Managing Executive Officer

Joined the Company
Executive Officer, General Manager,
Electronics Business Div.
Managing Director
Director, Managing Executive Officer
Director, Managing Executive Officer & CDO(to present)

4

Representative Director,
Senior Managing Executive Officer

Joined the Company
Executive Officer, General Manager, Nagoya
Business Div., and Nagoya Branch Manager
Executive Officer of the Company, Managing
Director of DAIICHI JITSUGYO ASIA PTE. LTD.
Executive Officer, Nagoya Branch Manager of
the Company
Managing Director, Nagoya Branch Manager
Director, Managing Executive Officer,
Nagoya Branch Manager
Representative Director, Senior Managing
Executive Officer (to present)

April 1980
April 2006
June 2008

April 2012
April 2014
June 2015
June 2020
March 2021

11 Toshihiko Matsumiya

April 1987

April 1971
July 1972
October 1979

April 1990
April 2019
April 2021

April 2022

DAIICHI JITSUGYO CO., LTD.

Joined New Japan Securities Co., Ltd.
(current Mizuho Securities Co., Ltd.)
Joined the Company
Executive Officer, General Manager, Plant &Energy Business Div.
Managing Executive Officer, Osaka BranchManager, and General Manager, Plant &Energy Business Div.
Managing Director, Managing Executive
Officer, Osaka Branch Manager, and General
Manager, Plant & Energy Business Div.
Director, Managing Executive Officer, Osaka
Branch Manager (to present)

March 1983
July 1991
October 2011
June 2012
June 2020

Outside Director

Joined MITSUI & CO., LTD.
General Manager, Planning & Administrative
Division
C.A.O, Asia Pacific Business Unit and S.V.P,
Mitsui & Co. (Asia Pacific) Pte. Ltd. (inSingapore)
Managing Officer, General Manager, FoodBusiness Unit
Executive Managing Officer, General Manager,
Food Business Unit
Representative Director, Executive Vice
President, JA MITSUI LEASING, LTD.
Adviser
Outside Director, ISEKI & CO., LTD.
(to present)
Director of the Company (to present)

Yasushi Marumoto Director, Managing Executive Officer

June 2021

61

Joined Tokyo Regional Taxation Bureau
Ishida Tax and Accounting Office
Registered as a tax accountant
Established Yoshikazu Sakamoto Tax
Accountant Office (current Sakamoto, Koyama& Numazawa Tax and Accounting Office)(to present)
Director of the Company (to present)

Kazuo Nakayama

June 2023

3

Outside Director

2

9

6

Outside Audit &Supervisory Board Member

Joined Pioneer Corporation
Joined Ryutsu-Giken Co., Ltd.
Joined Deloitte Haskins & Sells(current Deloitte Touche Tohmatsu LLC)
Registered as a certified public accountant
Partner of Tohmatsu & Co.
(current Deloitte Touche Tohmatsu LLC)
Established Toshihiko Matsumiya Certified
Public Accountancy Office (to present)
Audit & Supervisory Board Member of theCompany (to present)
Outside Audit & Supervisory Board Member,KDDI CORPORATION (to present)

Yuji Funawatari
April 1987
April 2017

Joined the Company
Executive Officer, General Manager,
Administration & Accounting Div.
Executive Officer, General Manager,
Accounting Div.
Managing Executive Officer, CFO, andGeneral Manager, Accounting Div.
Managing Director, Managing Executive
Officer, CFO, and General Manager,
Accounting Div.
Director, Managing Executive Officer, CFO, andGeneral Manager, Accounting Div. (to present)

Yoshikazu Sakamoto

April 1975
July 2010
September 201012

Director, Managing Executive Officer

April 2019

April 2021
April 2023
June 2023

8

Director, Managing Executive Officer

Joined the Company
Executive Officer, General Manager,
Pharma Business Div.
Executive Officer of the Company,
Managing Director of DAIICHI JITSUGYO ASIA
PTE. LTD.
Managing Executive Officer of the Company
Managing Executive Officer & CSuO
Director, Managing Executive Officer & CSuO
(to present)

Namika Yamada

December 2018
January 2019
May 2019

June 2019
June 2020
January 2021

Registered as an attorney at law
Joined Kowa Law Office
Supporting Member, Compliance Team,
Ministry of Education, Culture, Sports, Scienceand Technology (to present)Compliance Hotline Contact Person, All Japan
Judo Federation (to present)
Director of the Company (to present)
Joined Yamada Ozaki Law Office (to present)

10 Akihiro Kawai
April 1984
June 2020

Full-time Audit & Supervisory Board Member

Joined the Company
Full-time Audit & Supervisory Board Member(to present)

12 Mitsuyoshi Koyama
April 1981
September 2015

June 2016
December 2022
January 2023

Outside Director

Outside Audit &Supervisory Board Member

Joined Tokyo Regional Taxation Bureau
Registered as a tax accountant
Established Mitsuyoshi Koyama Tax
Accountants Office (current Sakamoto,
Koyama & Numazawa Tax and Accounting
Office) (to present)
Audit & Supervisory Board Member of theCompany (to present)
Outside Auditor, Hotel Management
International K. K. (to present)
External Audit & Supervisory Board Member,
Itoki Corporation

DJK Report 2023

62

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Corporate Governance
Overview of the Company’s Corporate Governance
Board of Directors

Basic Corporate Governance Policy
From the perspective of reinforcing our corporate capabilities to survive global competition, we place highpriority on promoting accurate and speedy business decision-making, while at the same time, enhancing ourmanagement oversight function to ensure the transparency of our business.

Transition to Stronger Corporate Governance
At DJK, we are working to strengthen corporate governance by ensuring the diversity of the Board of Directors
while also making the Board progressively more effective through measures such as effectiveness evaluation andthe establishment of the Governance Committee.
Directors
Initiatives and Events

2009

Number of Directors

OutsideDirectorFemale Outside
Directors
Proportion of
Outside Directors

Introduction of a system of stock-based remuneration(abolition of retirement bonuses)
Until 2010: 14 (all internal)

0%

2011

Transition to the executive officer system
Reduction in the number of directors (14Corporate governance system

General Meeting of Shareholders

2016: 8 (6 internal, 2 outside)

2016

Increased the number of outside directors to 2
Appointment of a female outside director
Commenced evaluation of the effectiveness of the Boardof Directors

2018

Revision of Japan’s Corporate Governance Code• Efforts to establish an advisory committee on
nomination and remuneration, etc.

2020

Established the Governance Committee
Increased the number of outside directors to 3
Increased the number of female directors to 2

2021

Revision of Japan’s Corporate Governance Code
• Initiatives to ensure the diversity of core humanresources, address sustainability issues, etc.
Introduced a system of stock-based remuneration withtransfer restrictions

2022

Introduced the employment-type executive officer system
Strengthened the performance-linkage of directors’
bonuses

17%

Appointment / Dismissal

Governance Committee(Nomination / Remuneration)

Internal Committee Outside Committee
Members: 2
Members: 3

25%

AdviceAppointment / Dismissal

Board of Directors
Internal
Directors: 6

OutsideDirectorss: 3

Appointment / Dismissal

Audit Audit & Supervisory Board
Full-time Audit &Supervisory Board
Member: 1

Outside Audit &Supervisory Board
Members: 3

Cooperation

2015

Decision-making / Oversight

Consultation

2015: 6 (5 internal, 1 outside)

The Company has concluded an auditing agreementwith the certified public accounting firm Deloitte
Touche Tohmatsu LLC to act as its independent
auditor. In addition to providing accounting auditing
services in a fair and unbiased manner, the auditing
firm provides advice on accounting matters as
appropriate.
As for the internal audit system of which thecentral organ is the Internal Audit Division, the job
execution of employees is checked and assessed as
to whether it is in accordance with laws andregulations and the Articles of Incorporation, as wellas with the basic internal control policy and thecode of conduct.

The Company uses an Audit & Supervisory Board
system comprised of three Audit & Supervisory
Board members, two of whom are outside Audit &Supervisory Board members. Audit & Supervisory
Board members attend every Board of Directors
meeting. In addition, the Full-time Audit &0%

Appointment of 1 outside director
Addressed Japan’s Corporate Governance Code• Established DJK’s policy on cross-shareholdings, etc.

Independent Auditor and the Internal Audit System

Audit & Supervisory Board

2011: 6 (all internal)

6)Supervisory Board member attends other importantinternal meetings to monitor the business execution
performance of directors from an objective
perspective. Audit & Supervisory Board members
work to ensure the effective implementation of theaudit by receiving reports on and explanations of
the audit plan and results from independent auditor;
exchanging opinions on the areas to be covered by
the audit, the audit methods, and the audit results;
sharing information; and taking other measures.

The Board of Directors comprises nine directors(including three outside directors). The board meetsonce a month in principle and holds extraordinary
meetings whenever necessary. The board
determines basic business policies and otherimportant matters through vigorous exchanges of
opinions while also fulfilling its function as anoversight body for business execution.
Moreover, in an effort to further enhance its
corporate value, the Company has adopted theexecutive officer system to conduct flexible andefficient business operations by separating thebusiness decision making and supervising functions,from the business execution function. The Company
dispatches certain executive officers to be in chargeof its consolidated subsidiaries in Japan andoverseas and to manage their business execution.

Independent
Auditor

Audit
Cooperation

Business Execution

2020: 9 (6 internal, 3 outside)

33%

Appointment

Audit

Representative Director,
President & CEO

Cooperation

Internal Audit Div.

Internal Committees

Sustainability Committee
Risk Management Committee, etc.

Management Committee

Business Divisions, Subsidiaries(in Japan and Overseas)
Corporate Divisions

2023: 9 (6 internal, 3 outside)

Internal Audit

33%

63

DAIICHI JITSUGYO CO., LTD.

DJK Report 2023

64

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Corporate GovernanceReason for Appointment of Outside Officers
Name
Yoshikazu
Sakamoto

OutsideDirectors

Outside Audit& Supervisory
Board
Members

NamikaYamadaGovernance Committee

Reason for Appointment
Yoshikazu Sakamoto has acquired extensive expert knowledge and insight into finance, banking, tax
affairs, and so forth through many years of service at the Regional Taxation Bureau. He chairs theGovernance Committee, established in 2020, helping the committee enhance the governance structureof the Group as a whole and providing appropriate advice and oversight to improve the quality ofCompany management. He has been appointed as an outside director.
As an attorney, Namika Yamada has extensive knowledge of corporate law. Given the Compa-ny’scurrent business situation, increased global management means that legal perspectives are even more
important, and she provides flexible and appropriate advice and guidance on compliance and othermatters based on such perspectives. She has been appointed an outside director based on expectations
that her advice will continue to enhance corporate governance.

Kazuo
Nakayama

In addition to having management experience at other companies, Kazuo Nakayama is well-versed inoverseas business and has a wealth of knowledge of a wide variety of domestic and overseas industries.
From an objective perspective based on such management experience and knowledge of otherindustries, he is expected to provide useful advice and guidance to the Group’s businesses. By
participating in the Governance Committee, he is also expected to con-tribute to strengthening theoverall governance structure of the Group and improving the quality of the Company. He has been
appointed an outside director based on these expectations.

ToshihikoMatsumiya

As a certified public accountant, Toshihiko Matsumiya is knowledgeable about finance and accounting
and has broad experience and insight, and we believe he is qualified as an outside Audit & Supervisory
Board member.

Mitsuyoshi
KoyamaAs a public tax accountant, we believe Mitsuyoshi Koyama can utilize his extensive knowledge of financeand accounting in our audit system, and is qualified to carry out his duties as an out-side Audit &Supervisory Board member.

Skill Matrix of Directors
Experience, Knowledge, etc.
Name

Position

Corporate Knowledge ofFinance
Legal affairs
management the industry, International
Sustainability
andand riskand corporate sales, andand ESGperspective
accounting management
strategymarketing

Attributes

Other

Gender Independence

Ichiro Uno

Male

RyuichiNinomiya

Representative Director,
Senior Managing
Executive Officer

Male

Ueno

Director,
Managing
Executive Officer

*1

Male

YasushiMarumoto

Director,
Managing
Executive Officer

Male

Osamu
FukawaDirector,
Managing
Executive Officer

Male

Yuji
Funawatari

Director,
Managing
Executive Officer

MaleYoshikazu
Sakamoto

Director

Male

NamikaYamadaDirectorFemaleKazuo
Nakayama

Director*2Male*1 Technology, IT, and DX*2 Knowledge of other industries

65

DAIICHI JITSUGYO CO., LTD.

Chairperson: Outside Director (Outside Directors: 3 / Representative Director, President & CEO /Composition

Representative Director, Senior Managing Executive Officer)

Year ended March 31, 2023
Number of meetings held:
Year ended March 31, 2023
Matters deliberated:

Six meetings (April, June, September, and December 2022, February and March 2023)
Officers’ remuneration (fixed remuneration, non-monetary remuneration), directors’ bonuses, directors’
terms of office, director candidates, skill matrix

Evaluating the Effectiveness of the Board of Directors
With regard to the effectiveness of the Board of Directors, the Board confirmed that efforts were being made to
improve issues identified in the previous fiscal year’s effectiveness evaluation and the effectiveness of its
response during the current fiscal year. The following initiatives were taken in the fiscal year ended March 31,
2023 based on the issues identified in the Board of Directors’ effectiveness evaluation results for the year ended
March 31, 2022. The Board will continue to work continuously to resolve issues.
State of initiatives to address issues identified in the previous fiscal year
Issue

Initiatives for the fiscal year ended March 31, 2023

Appointment of outside directors withcorporate management experience

Appointed an outside director with corporate management experience to enhance the diversityof the composition of the Board of Directors.

Strengthening of collaboration between theInternal Audit Division and outside directors

Established a system of regular reporting by the Internal Audit Division to the Board of Directors
to further strengthen internal controls.

Establish opportunities for discussions
throughout the year and ongoing discussions

Currently engaged in efforts to enhance corporate value over the medium to long term.

Questions for questionnaires (16 in total)

Representative
Director, President& CEO

Masatoshi

The Governance Committee was established on October 1, 2020, and has been operated as a voluntary
advisory body to the Board of Directors to deliberate on matters related to the nomi-nation and remunerationof top management (directors with representative authority) and directors, as well as other governance matters,
and to report and make proposals to the Board of Directors, with the aim of enhancing corporate value by
utilizing the knowledge and advice of outside directors, ensuring transparency and fairness, and strengthening
governance. The composition and activities of the committee are outlined below.

Issues and actions to be taken in the future

Composition of the Board of Directors (2 questions)Management of the Board of Directors (6 questions)

Ensure further diversity in the composition of the Board of Directors
Promote discussion aimed at enhancing corporate value over the medium to long term

Agenda of the Board of Directors (3 questions)
System to support the Board of Directors (5 questions)

Ensure sufficient time for consideration of meeting materials in advance ofmeetings of the Board of Directors (review the criteria for submission)

Officers’ Remuneration
Policy on Determining the Amount or Calculation
Method for the Amount of Remuneration for Officers
The Company has established a policy regarding thedetermination of the amount or calculation method
for the amount of remuneration for officers, which
encourages medium- to long-term growth ofbusiness performance and corporate value. The
remuneration system is commensurate with theduties of each officer.
The Governance Committee, upon consultationfrom the Board of Directors, deliberates and advises
the Board on remuneration for individual directors
other than outside directors. The Board of Directors
deliberates on the advice from the GovernanceCommittee and determines the amounts ofremuneration.
Remuneration for the Company’s officers is
composed of fixed remuneration, performance-linked
remuneration, non-monetary remuneration, etc. The
relative proportions of each form of remuneration for
executive directors and the amounts of remuneration

are determined by the Board of Directors based oncomparison and verification with the composition of
remuneration at other companies of a similar scalein the same industry and the remuneration paid
previously, as well as consultation and advice fromthe Governance Committee, from the perspective ofensuring objectivity and appropriateness.
Remuneration for Audit & Supervisory Board
members and outside directors, in light of the
independence of their positions, consists of fixed
remuneration only. Decisions on the amounts ofremuneration are made within the extent of the total
amounts passed in resolutions of the General
Meeting of Shareholders.

Overview of the Remuneration System for
Directors (Excluding Outside Directors)
DJK aims to further strengthen corporate governanceunder our medium-term business plan MT2024,
launched in FY2022. As part of this plan, we havereviewed our remuneration system for officers as
DJK Report 2023

66

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Corporate Governanceshown under “outline of each remuneration” in orderto further enhance corporate value over the medium
to long term.
Based on the resolution adopted by the Ordinary
General Meeting of Shareholders held on June 23,
2022, the Company has decided to change theamount of remuneration, etc. for directors from amonthly amount to a yearly amount, and within theamount of such remuneration, directors other thanoutside directors will be paid a bonus in the form of
performance-linked remuneration in addition to fixed
remuneration, determined comprehensively taking
into account trends in the level of remuneration andthe number of directors, as well as future prospects,
so as not to exceed ¥450 million per year.

Non-monetary remuneration, etc.
We have adopted a system of stock-based
remuneration with transfer restrictions, which isdesigned to pay a yearly fixed amountcommensurate with the role of each director and to
lift the restriction on transfer at the time of his/her
retirement from office.
Amount paid to each director = total performance-linked remuneration (Bonus A)*1
×

Total coefficients by position*1 Calculation method for total amount of performance-linked remuneration (Bonus A): Totalamount of performance-linked remuneration (Bonus A) = ¥89.76 million x (degree ofachievement of consolidated operating income against the annual target x 75% + degreeof achievement of profit attributable to owners of parent against the annual target x 25%)
Calculated as 130% if the achievement with regard to the annual target exceeds 130%.
*2 Coefficient of each director’s position

Outline of Each Remuneration

Position

Fixed remuneration
A monthly fixed amount of remunerationcommensurate with the clarified roles andresponsibilities of each position is paid in cash.
Performance-linked remuneration
There are two kinds of bonuses to be paid: bonus
linked to the Company’s business results indicators(hereinafter, “bonus A”) and bonus linked toindicators, etc. contributing to the achievement of
the medium-term business plan (hereinafter, “bonusB”). Bonus A is paid in cash based on the degree ofachievement of the consolidated performancetargets, and bonus B is paid in cash according to thedegree of achievement of the indicators, etc.
contributing to the achievement of the medium-termbusiness plan. The amounts vary within the range of
0% to 130% of the base amount.
Method for calculating performance-linked
remuneration (Bonus A)
Performance indicators for performance-linked
remuneration (Bonus A) are consolidated operating
income and profit attributable to owners of parent.
Consolidated operating income was selected as aperformance indicator because it was judged
appropriate as an evaluation indicator that properlyreflects the profits generated by the Group’s corebusiness, and profit attributable to owners of parent
was selected as a performance indicator because it
provides the results of investments aimed at growthand funds for shareholder returns, and because it
was judged appropriate as an indicator from theperspective of being responsible for the Group’s
ultimate performance.

Coefficient of each director’s position*2

Coefficient No. of directors

Representative Director,
President & CEO
Representative Director, Senior
Managing Executive Officer
Director, Managing
Executive Officer

Maximum

100

1¥29,318,000

74

1¥21,695,000

56

4¥16,418,000

Proportion of each remuneration by type (estimate)
Fixed remuneration

60%

Performance-linked
remuneration30%

Non-monetary
remuneration

10%

DJK’s policy is to hold shares of other companies
only when we judge that such shareholdings
contribute to the medium- to long-term improvementof DJK’s corporate value, taking into account
whether they are necessary for the purpose ofbusiness expansion, business creation, maintenanceand strengthening of cooperative structures, andbusiness operations. If we judge that the rationalityof shareholding cannot be verified, the shares are
sold after taking into consideration the situation of
the cross-shareholding partner. The Board of
Directors confirms the status of cross-shareholdings
each quarter and decides whether to continue or
reduce the shareholdings after verifying the purpose,
medium- to long-term economic rationality, andwhether there is a benefit commensurate withcapital cost. In the fiscal year ended March 31, 2023,
DJK sold out seven stocks and reduced two stocks.

Changes in the number of cross-shareholdings andthe amount recorded on the balance sheet
Number of cross-shareholdings

Total amount recorded on balance sheet (millions of yen)

58

54

48

7,819

7,735

8,013

FY2020

FY2021

FY2022

Internal Control System
DJK has established a “Basic Internal Control Policy” to ensure that the directors perform their duties incompliance with laws and regulations and DJK’s articles of incorporation, and to ensure the appropriateness of
our operations as a corporation.
From the perspective of further strengthening corporate governance, the directors endeavor to build an
effective internal control system and establish a structure for companywide legal com-pliance, while Audit &Supervisory Board members audit the effectiveness and functioning of the internal control system. If and whennecessary, Audit & Supervisory Board members must provide advice or recommend improvements to directors.

(Assuming 100% achievement of targets for performance-linked remuneration)

Incentive curve for performance-linked remuneration
Payout rate

130%2) System to store and manage information on business execution by directors

100%
Percentage
achievementof targets

0%

Basic Internal Control Policy

1) System to ensure that directors comply with laws and regulations and Articles of Incorporation in
the execution of their business duties

100%

130%

Total remuneration by type (millions of yen)

4) System to ensure that directors carry out job execution effectively6) System to ensure the fairness of operations of the corporate group comprising the parent company
and its subsidiaries

Officerclassification

Total remuneration(millions of yen)

Director

406

233

143

29

6

Audit & Supervisory
Board Member

22

22

—

—

1

Outside Director

17

17

—

—

3

Outside Audit &Supervisory Board Member

10

10

—

—

2

Performance-linked remuneration Non-monetary remuneration, etc.

3) System providing rules to manage possible losses and other matters of the Company and its
subsidiaries

5) System for ensuring that directors, executive officers, and employees execute their business duties
in accordance with laws and regulations and the Articles of Incorporation*Performance-linked remuneration is reflected in bonuses.

Total remuneration, total remuneration by type, and number of applicable officers for each officer classification

Fixed remuneration

Cross-shareholdings

Number of applicableofficers7) System for requesting staff to aid Audit & Supervisory Board members and ensuring the independence of those staff members from the influence of directors and the effectiveness of
instructions given to such assisting staff
8) System for directors, executive officers, and employees of the Company and its subsidiaries toreport to Audit & Supervisory Board members of the Company, system for making other reports to
Audit & Supervisory Board members, and system to ensure effective audit of Audit & Supervisory
Board members*Bonuses paid to six directors based on a resolution made at the 99th Ordinary General Meeting of Shareholders held on June 23, 2022, are not included.

67

DAIICHI JITSUGYO CO., LTD.

DJK Report 2023

68

Outline

Corporate GovernanceValue Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Risk Management

Compliance
As the basis of the compliance system, we are working to ensure that the Code of Conduct is thoroughly
understood within the Company. We have established the Internal Audit Division under the direct control ofrepresentative directors and formulated internal audit regulations. While promoting the establishment,
maintenance, and improvement of the internal control system, we are also working to develop and maintain thecompliance system, and conduct audits and training in each internal department as necessary.
We have established an internal reporting system, operated based on our internal reporting regulation, as aninternal reporting system for reporting violations of laws and regulations and other compliance-related facts,
under which the General Manager of the Internal Audit Division is the direct recipient of information.

Compliance Initiatives at Group Companies
Domestic affiliated companies (Daiichi Mecha-tech Corporation and Daiichi Jitsugyo Viswill Co., Ltd.) haveestablished their own code of conduct based on our code. The Daiichi Jitsugyo Code of Conduct is appliedmutatis mutandis at overseas associated companies, and is translated into the local language of each region.
We will build and maintain appropriate and global compliance systems at our regional headquarters in
Europe, the Americas, China, and Asia in order to strengthen compliance at overseas associated companies as
they expand their business further.

Code of Conduct
The Daiichi Jitsugyo Code of Conduct is divided into the following five categories. We are committed to fulfilling
our social responsibility as a company and to contributing to society.

1) Code of conduct for business partners, etc. 2) Code of conduct for investors3) Code of conduct for society 4) Code of conduct to create a better corporate culture5) Code of conduct as a member of an organization

Policy on Constructive Dialogue with Shareholders
Directors and executive officers, including the Representative Director, President & CEO, actively participate inbusiness results briefing meetings and other dialogues with investors, and conduct IR activities that emphasize
fairness, accuracy, and continuity in management strategies, business strategies, and financial information, as
well as good two-way communication.
The department in charge of IR plays a leading role in exchanging opinions with the Account-ing Division,
Administration Division, and Corporate Strategy Division to determine policies for IR activities.
We strive to promote investment opportunities and disclose information by holding business results briefing
meetings, etc. with the attendance of Representative Director, President & CEO and other members of the
management team and publishing business reports and integrated reports.

Information Disclosure
To enhance the transparency of its business, the Company proactively discloses information on a timely basis
mainly through the Corporate Communication Department. In addition, as one of its IR activities, the Company
holds business results briefing meetings to report on and explain business conditions and the future direction of
the DJK Group to shareholders and investors. At the same time, we promptly and appropriately disclose
management information via our corporate website and other forms of communication.

Our Understanding of Risk
We have established our V2030 growth strategy setting forth basic strategies such as aggressive investment, theshift from product-only sales to products and integrated solutions business model, capturing global growth, andthe promotion of digital transformation (DX). In this context, we have identified the creation of new businesses
as a key strategy. To accomplish this, it is vital that we make full use of a diverse range of methods to createbusinesses. In addition to conventional trading (buying and selling activities), these include methods such as
business investment, trading that incorporates the provision of solutions, and cross-border business utilizing ouroverseas and domestic networks. These entail an increase in the scale and complexity of transactions and arise in DJK’s business risks. Moreover, establishing an integrated management function covering the wide rangeof risks faced by DJK has become a crucial issue for our business activities today.

Risk Management System
We have established the Risk Management Committee and we are engaged in constructing an enterprise risk
management system to identify and narrow down risks, determine the order of priority, implement subsequent
activities and the PDCA cycle to address these risks, report to the Board of Directors and determine policies, aswell as supervise efforts to spread knowledge, compliance, and awareness among officers and employees.
In April 2023, we established the Integrated Risk Management Office as the core division that will drive thisenterprise risk management system. The aims of the Integrated Risk Management Office include:

1) Involvement in deliberations concerning various business transactions and important proposals for the
purposes of examination and monitoring in line with DJK’s risks
2) Raising the standard of risk management through communication with business divisions
3) Establishing methods for the integrated management of the wide range of potential risks faced by DJK
as a whole
4) Integrating the specialized risk management capabilities in each field both within and outside DJK toboost risk resilience and competitive strength; promoting activities to increase capacity to generate
corporate value, etc.

Management of Business Risks
Until now, our system for managing business risks comprised deliberations based on the clear separation of
application and approval processes, with corporate divisions, the officer in charge, and the Board of Directors
approving trading and business investment applications by each business division in accordance with the rules
on internal controls and various other rules.
For facilitating complex, large-scale projects, however, it is vital to consider the appropriate terms, conditions,and forms of transactions. Therefore, we have changed the system to enable corporate divisions and theEngineering Division to take the lead, participating from the initial stage of project planning to optimize theterms, conditions, and forms of transactions, before the application is submitted and examined. Under the new
system, these divisions also work together to implement the project after the project contract is signed.

Enterprise Risk Management (ERM) System
See our website for details

Securities Report: https://www.djk.co.jp/ir/securities.html (in Japanese)
Corporate Governance Report (Corporate Governance page): https://www.djk.co.jp/en/ir/governance.html

69

DAIICHI JITSUGYO CO., LTD.

Our previous risk management approach mainly consisted of examining matters submitted in advance for any
risks and minimizing these risks, or handling any risks that had begun to emerge.
Going forward, for the purpose of managing various potential risks as well the Company will face, we will
strengthen our efforts to achieve a new risk management approach aimed at establishing more proactive,
predictive, and systematic methods for the autonomous identification of risks companywide (across all divisions
including management and corporate divisions) and, among these, the identification and handling of key risks
for DJK.

DJK Report 2023

70

Outline

Value Creation Strategies

Sustainability Strategies to Support Value Creation

Data Section

Risk Management

Business Risks
Business Risks

Impact on the Company

Measures to Address Specific Impacts

Risk of Change in
the Macroeconomic
Environment

Around the world, protectionism is becoming prevalent, growth is slowing in China and emerging
economies, and there are concerns over a global economic slowdown and the emergence of
global geopolitical risks due to the impact of the conflict between the United States and China.
Accordingly, the stagnation of economic activities in these regions may cause the DJK Group’s
performance to deteriorate. In particular, we recognize that the restructuring of the supply chain,
which has been heavily reliant on China, and political trends in the United States and politicaland economic conflicts in any region that could affect our investments are highly significant risks
to our business performance.

We have established a system for promptly obtaining and deploying information through close communication with ourGroup companies in each overseas country, which we have strengthened coordination with as we expand our overseas
business through our global four axes network. The Company is also structured to minimize the risk of performance
deterioration by taking advantage of the agility of its business portfolio to shift business promptly and to provide maximum
support to business partners in politically unstable or economically slowing regions.

Risk of Increased
Proportion ofOverseas Sales

We expect the ratio of overseas sales to total sales to continue to increase as we steadily
implement our medium-term business plan. Therefore, a possibility exists whereby theinternational financial environment, tax systems, exchange rate trends, trends in crude oil andraw material prices, shipping cost trends, and capital investment trends for customers’
production bases could affect the business results of the DJK Group. In addition, DJK’s overseas
business activities are exposed to the risk of unexpected changes in political systems or
economic environments, and social disturbances based on legal and regulatory changes.

We strive to minimize the risk of a decline in earnings by leveraging the Group’s global network and relationships with awide range of business partners to promptly grasp information and trends and select the most appropriate form oftransaction.

Risk Related toInterest Rates andthe Procurement ofFunds

Although we aim to flexibly and stably procure working capital and reduce interest costs, there
is no guarantee that we will be able to procure funds on favorable terms in a timely manner inthe event of instability in the financial markets or a downgrade in the credit rating assigned by arating agency due to deterioration in the Group’s creditworthiness, which may limit our businessactivities. Therefore, should the balance of the DJK Group’s financial income and expenses deteriorate because of the trend in net sales or in interest rates, it could negatively impact the DJK
Group’s business results and financial position. In addition, if substantial turmoil occurs in major
financial markets in Japan or overseas, financing costs could increase.

We will strive to continue good relationships with financial institutions and build and deepen relationships withinstitutional investors through timely dialogue, as well as diversify our funding sources. We also strive to flexibly and stably
procure working capital and reduce funding and interest costs through our contingency funding policy and throughmaintaining or improving our credit rating by maintaining a favorable financial condition.

IT Systems Risk

DJK strives to heighten security, perform computer system data backups and other measures inorder to protect systems and data. However, in the event systems or communications networks
suffer a significant outage on account of natural disasters, computer virus infection, unauthorizedaccess, constraints to power supply, major power outage, malfunction, trouble or other reason,business operations, chiefly order management for customers and vendors, may be hindered,incurring great cost or causing serious damage to the reputation of the DJK Group, with thepotential of exerting a negative impact on performance and financial position.

As one of our business continuity measures, we use data centers or cloud services with sufficient security to protect oursystems and data, and we have introduced monitoring systems for computers and other end devices used by our
employees to prevent computer viruses and unau-thorized access. In response to the impact on business activities causedby the failure of power and telecommunications infrastructure, the Group has established an emergency response plan toquickly move to a safe area and take measures to minimize the period of business interruption.

As the Group expands its range of services and the size of business transactions grows, we
anticipate that as accidents occur in tandem with an increase in large-scale plant projects, thiswill lead to increased legal responsibility and incurring expenses, and a decline in market value
as technology becomes obsolete.

We are working to improve our market responsiveness and competitiveness to avoid risks and capture business
opportunities by hiring engineers with sufficient skills, developing a personnel evaluation system for them, andstrengthening the legal and administrative units involved in concluding contracts.

The Group’s business performance and financial position could be affected by contractual liabilities and expenses incurred due to the discovery of defects and other problems following theinspection of delivered equipment for remote launching, test operations, acceptanceinspections, etc., which have increased in recent years.

We will further accumulate the know-how we have gathered to date and promptly verify best practices, as well as avoid
risks by strengthening the functions of our legal and administrative units.

Credit Risk

As of the end of the consolidated fiscal year under review, the total notes and accounts receivable-trade of the Group amounted to ¥45,242 million, or 29.7% of total assets. As a result, theGroup is exposed to the risk of losses on account of the credit of its business partners
worsening or their businesses failing. The Group’s business results and financial position may beaffected in the event that the business partner experiences a liquidity crisis or a chain reaction
bankruptcy due to a deterioration in the business environment, or a specific major debtor
experiences business problems which lead to an inability to recover the extended credit.

DJK acts in accordance with its rules regarding authority to approve transactions and risk management, setting maximum
credit and transaction amounts in its required transaction approval procedures, requires collateral or guarantees dependingon the credit rating of the debtor, and puts in place risk hedges, such as the factoring or securitization of debt.

Risks in Long-term
Strategies and theMedium-term
Business Plan

The growth strategy and medium-term business plan that began in fiscal 2022 cover the medium
to long term, and the potential period of risk is also the medium to long term. In addition, if thebusiness-related investments and other investments that we are actively promoting do not
produce sufficient effects, the Group’s performance and financial position may be affected.

We are working to minimize risk by improving our ability to consider investments, centered on the corporate strategy unit,
which is strengthening its functions. Once an investment is made, we will analyze progress based on periodic verification,
consider and decide whether or not to change the investment, and disclose the results promptly.

Risk of DisasterThe occurrence of disasters such as earthquakes, typhoons, fires, and infectious disease
outbreaks could cause damage to the Group’s offices, factories, directors, executive officers andemployees, and other related assets, which could hinder sales and production activities, and any
serious damage could affect the Group’s performance and financial position. Furthermore,should one of the DJK Group’s major business partners suffer substantial damages from adisaster, the suspension of the business and production activities of the business partner could
have a negative effect on the performance of the DJK Group.

In addition to formulating a basic business continuity plan, the Company has prepared a risk management manual fordisasters, introduced a safety confirmation system, and conducted dis-aster drills and other measures.

We recognize that the various risks outlined in the TCFD’s recommendations will have a significant impact not only on our Group, but also on our supply chain. In addition to the direct andfinancial impact of increased tax burdens, technical problems with the products and goods we
handle, reduced demand in the market, and the resulting decline in corporate reputation could
be factors that worsen the performance and financial position of our Group.

We have established an organization that specializes in handling climate change issues, and we are actively working torealize a decarbonized society and address environmental issues by setting scenarios, calculating impact amounts, andconducting ongoing monitoring, as well as providing environmentally friendly products and services to our customers,
manufacturing companies, in the supply chain in which we are positioned.
In addition to issues related to climate change, factors such as demand and the principle of competition in our businessdomains are changing due to changes in various standards related to environmental destruction, human rights, diversity,and other matters, as well as markets. We are aware that any delay in our response to these changes may affect thebusiness results of the DJK Group, and we are engaged in formulating corporate standards that conform to the various
supply chain due diligence measures implemented by global companies.

Business
Development Risk

Sustainabilityrelated Risks

71

DAIICHI JITSUGYO CO., LTD.

DJK Report 2023

72