NGK SPARK PLUG CO., LTD.

Integrated Report 2022
Year ended March 31, 2022
On April 1, 2023, NGK SPARK PLUG CO., LTD. will change its name to Niterra Co., Ltd.

To an energy efficientand environmentallyfriendly society

To a mobile societythat is fun andconvenient

Environment & Energy

Mobility

Using sensing technology to improve industrial efficiency

Providing maintenance services according to your lifestyle

Stable supply of regenerated energy

Improving electricity using ceramic components
Providing MaaS (Mobility as a Service) to fit special needs

The Future
We Envision

Realization
To bring
advanced
medical care topeople all over
the worldof a sustainable
society

MedicalA high-speed
communicationsociety where virtualand reality areconnected
Communication

Non-invasive diagnosis and treatment, provision of preventive
equipment and services using ultrasound technology

Provide infrastructure parts to support high-speed
communication

NGK SPARK PLUG CO., LTD. Integrated Report 2022

01

Our Thoughts

Corporate Message

IGNITE Your drive, dreams and SPIRITNGK SPARK PLUG has been a leader in manufacturing for 80 years.

We will pursue future opportunities and improve NGK SPARK PLUG’s

Fueled and motivated by our own drive, NGK SPARK PLUG will continue

unique and advanced technologies.

to IGNITE YOUR SPIRIT, instill passion in your hearts, and deliver

Our desire is to live in a healthier and more beautiful world where all our

Our diverse workforce will ignite our company to create new products andcutting-edge solutions as a leading manufacturer in the world.

dreams can come true.

to be a leader in innovation.

Every day, we continue to ignite the passion in our hearts and spark new

We will enhance our competitive advantage by understanding andideas in our minds to focus on achieving our goals for the future.

adapting to global changes.

Our mission is to continue to make the world a better place.

The Nittoku Way
The Nittoku Way refers to a set of philosophies based on business mottos cherishedby Morimura Gumi, the founding
company of the Morimura Group.
The Nittoku Way refers to the values ofCorporate
the NGK SPARK PLUG Group that all
Philosophy
employees commit to sharing andCSR
and Sustainability
passing down to the next generations.
Charter
About the Morimura Group, see

P.07

Long-termManagement
Plan

Corporate
Code of
Conduct

Corporate Philosophy

CSR and Sustainability Charter

At NGK SPARK PLUG, we aim to contribute to people all over the world by linking people
to technologies and delivering new values.
As a truly global corporation, we want to build stronger ties not only with customers andcommunities, but also with the local and global environments. We are always working to
make our corporate philosophy and our commitments a reality.

We contribute to developing a sustainable society, thereby improving our corporate value.

We are committed to delivering newof trust with our
stakeholders while

Three elements constitute our corporate philosophy.

making highly
transparent

森村グループについて

Medium-termManagement
Plan

CSR
Basic Policy

Qualityproducts

Involvementby allSloganCorporate Philosophy

Management
PolicyCommitment

Basic Traits
DokuritsuJiei

ShiseiShinjitsu
SoshiKantetsu

ActionGuidelines

ShikaiKeitei

Shared Values

With established trust andconfidence inside and outside
the company, we aim tocontribute to the peoples of
the world by creating andputting at their proposal
new values for the
future.

2

1

3

We offer a working environment inwhich each one of us isencouraged to make full use of hisor her personality and capabilities.
With all our power we arededicated to pursue management
based on trust and confidence.

With full use of the mostsuitable technology andour accumulated
experience, we continue
striving to offer newvalues to the peoples of
the world.

Ever onward! Always
mindful of what is thebest course, we swiftly
put it into action.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

02

value to people all over the world andWe build relations

decisions andWe cocreate andprovide new value
to help solve social
issues.

actions.

contributing to society, as expressed inour corporate philosophy.
This commitment is associated with ourconcept of sustainability, which is tohelp solve social issues throughbusiness activities.
The CSR and Sustainability Charter
presents a summary of this concept.

Shared Values
The Four Shared Values of the Nittoku Way
ShiseiShinjitsu

Sincerely, do our very best.

DokuritsuJiei

Believe in one’s own ability, andtake actions by oneself.

ShikaiKeitei

Unite efforts with the peopleof the world, and utilize eachother’s differences.

SoshiKantetsu

Have cherished desires, andcarry it through till the end.

Introduction
01

Page

The Future We Envision

01

Page

Realization of a sustainable society
02

for Value
3 Foundation
Creation

31

Our Thoughts

1 About Us
05

Message from the Chairman

07

History of Value Creation

09

Business Overview and Business Model

10

Changes in Financial and Non-financial

32

Message from the Sustainability Officer

33

CSR and Sustainability Committee

34

Review of Materiality Activities

35

Environment/Responding to Climate
ChangePage

Position04

37

Human Capital Management40

Respect for Human Rights

41

Discussion between Outside Directors

43

Corporate Governance48

Information Security

49

Risk Management

50

Compliance

2 Strategies for Value Creation

4 Financial/Corporate
Information

12

Message from the President

52

14

Value Creation Process

15

Priority Issues (Materiality)

17
18

Years

CONTENTS

53

Global Network

Examples of Materiality Initiatives (1)54Corporate Profile and Stock Information

Examples of Materiality Initiatives (2)55

Initiatives/External Evaluation

Medium-term Growth Strategies
19

Long-term Management Plan

21

Medium-term Management Plan

23

The Finance Officer Outlines the Financial

Page

Strategy
24

Business Strategy

28

Progress of Creation of New Business

Page

Pillars and Future Prospects
30

Financial Results Highlights for the Past 11

51

11
https://www.ngkntk.co.jp/

Intellectual Property

https://www.ngkntk.co.jp/english/
This report focuses on the information that is essential for the enhancement of our corporate value.
For details of our technologies, products and financial affairs, please visit our website. For detailed
information about our sustainability initiatives, please refer to our sustainability website.

Editorial Policy

Period Covered

NGK SPARK PLUG has been issuing an annual integrated report since 2017 with a view to helping all
stakeholders deepen their understanding of its medium- to long-term value creation efforts.
Under the 2030 Long-term Management Plan “NITTOKU BX” we formulated in 2020, our 2040
Vision is to “change drastically beyond the current way,” and we have established the slogan “Beyond
ceramics, eXceeding imagination.” Based on the vision, we have been pursuing business beyond
ceramics while keeping ceramics at the core of our operations, along with the major strategic themeof transforming our business portfolio that centers on the Automotive Components Group. In FY2021,
to achieve the Long-term Management Plan, we have formulated a medium-term management plan,
implementation of which will end in FY2024. This report provides an explanatory overview of theseplans and their progress, and its theme is getting readers to understand what sort of value the Groupis delivering.
This publication is also intended to serve as a tool to respond to various opinions and inquiries we
receive from stakeholders through our business and IR activities throughout the year. We look forward
to receiving frank opinions from many people.

FY2021 (From April 1, 2021 to March 31, 2022)*Also includes some information about our FY2022 activities.

NGK SPARK PLUG Communication
Summary

Scope Covered

NGK SPARK PLUG Integrated Report

NGK SPARK PLUG Group *Also includes some non-consolidated information about
NGK SPARK PLUG CO., LTD.

Guidelines for Reference

Shareholder Newsletter

The International Integrated Reporting Framework, the International Integrated
Reporting Council (IIRC)
Guidance for Integrated Corporate Disclosure and Company-Investor Dialogues for
Collaborative Value Creation, the Ministry of Economy, Trade and Industry

Securities Report
DetailForward-looking Statements
This report contains forward-looking statements regarding NGK SPARK PLUG’s
future plans, strategies and performance. Please understand that actual results may
differ substantially from these statements.

Financial information

NGK SPARK PLUG CO., LTD. Integrated Report 2022

03

Business Results Briefing
Presentation Materials

Corporate Governance Report

Sustainability website

Non-financial information

1

About Us
Page

04

CONTENTSNGK SPARK PLUG CO., LTD. Integrated Report 2022

04

05

Message from the Chairman

07

History of Value Creation

09

Business Overview and Business Model

10

Changes in Financial and Non-financial Position

Introduction

Message from the Chairman

The business environment is drastically changing. It is time companies had the courage and readiness to change with it. It istime to create new businesses that go beyond the current way. How can values be transformed, and how should the reason
for existence be established as a company? We asked Chairman of the Board Shinichi Odo for his thoughts.

The role of the automobile industry toward the realization of a decarbonized society
The NGK SPARK PLUG Group, since its founding in 1936, hasembraced the challenge of developing various technologies inorder to contribute to the development of society based on thecore technology of ceramics. Our growth has been centered on
the core business of automotive internal combustion engine
products, such as spark plugs and sensors, based on the cumulative effects of such efforts. We have built relationships oftrust with our customers and a stable revenue base.
However, the automotive components business, with which
we have grown together during our more than 80 years of history, is now entering a new era. The structure of the industry itself
is undergoing a major transformation amid accelerating global
moves toward achieving carbon neutrality (a decarbonized society) and progress with technological innovations such as electricvehicles (EVs).
According to the International Energy Agency (IEA), the combined sales of plug-in hybrid vehicles (PHEVs) in 2021 totaled
6.6 million new EVs worldwide, which is 2.2 times higher thanthe previous year. More than 30 million new EVs are expected tobe sold globally by 2030. Racing to keep pace with China, Europe and the U.S., manufacturers in Japan have also announced
EV production and sales strategies.
Amid these waves of change, we have been working to shift
to a business model that does not rely on internal combustion

engines. In 2020, we announced our long-term 2040 Vision,“Beyond ceramics, eXceeding imagination.” To face the challenges of the world so that we canhelp bring about a better society,we must venture beyond the fieldof ceramics rather than beingbound by our current businesses.
We are working to create new
business pillars with the readinessfor change.
Meanwhile, the world has many
internal combustion engines in operation. The automobile industry
has an obligation to meet demand
for the maintenance of thoseengines. As a company with aleading global market share inaftermarket parts, we must fulfill
Representative Director Chairman of the Board
our supply obligations to the end,
while working in collaboration withparts manufacturers.

We will solve social

issues with an attitude ofcocreation and establish
a unique purpose

An era for cocreation across generations and organizations
In FY2021, we faced not only environmental issues but also
threats to the sustainability of society in the form of the spread of
the novel coronavirus (COVID-19) that began in FY2020. In
addition, Russia’s invasion of Ukraine triggered new risks. In
addition to confrontations among the major advanced countries,
which have been concerns for some time, new rifts formed in thegeopolitical structure. Furthermore, an unforeseen energy crisis
now looms. Given the challenge of balancing stable energy
supply with progress toward decarbonization, securing energy
presents a major issue related to global market competitivenessparticularly for Japan, which lacks natural energy resources.
Industry, government, and academia must work together to findsolutions.
While the impact of COVID-19 has begun to subside, thethreat of infections has not disappeared, as seen in the lockdownin Shanghai, China. Russia’s invasion of Ukraine is also a
concern, as is its unexpectedly protracted timeline.
Even amid such a lack of visibility, however, one thing iscertain: the goal of achieving a decarbonized society by 2050
remains unchanged. Although the pace of progress has beenslowed by the energy crisis, we must work together globally.
Initiatives toward achieving carbon neutrality are currently led
by large companies. However, if they are to operate in Europe
and other areas where environmental standards are stringent,
they must carry out such measures across the entire supply
chain, including suppliers such as small and medium-sizedenterprises. Otherwise there is no point. In the efforts toward
decarbonization, we are beginning to see a movement ofcollaboration beyond the barriers of organizations and industries.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

05

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Message from the Chairman

It will become important to also have an approach of working
together with competitors for the benefit of the earth.
I also believe that one of the keys to driving innovation toward
solving social issues such as carbon neutrality is to activate
communication between generations. Generation Z, made up ofpeople born in the 1990s or later who tend to focus on how to
be useful in society rather than monetary value, is the generationthat will be responsible for the next generation of consumption. It
is also the generation that is serious about solving social issues.
How can we bring out their opinions and connect them tosustainable business? What is needed is the experience andknowledge of Generation X, born between 1965 and 1980, andGeneration Y, born between 1981 and 1994.
It is not a question of which needs to align with which. Instead,
we should look to communicate toward combining the different
values of the X, Y and Z generations. Using diversity, we cancreate new things. We must also actively promote collaboration
beyond the barriers of organizations. Rather than conducting
business based on conventional competition, we must take on
the challenge of solving social issues with a spirit of cocreation.
That approach is one of the ways that companies grow.
From that point of view, we should also consider the decline in
in-person communication stemming from the digitalization thathas advanced during the COVID-19 pandemic. Online meetings
have without question become the norm. They are highly efficientas they are excellent as a place for reporting and resolving
agendas. Meanwhile, they are difficult to function as a forum forfree discussion from which new concepts and ideas emerge.
While DX (digital transformation) is an urgent challenge forcompanies, I believe that a phase has arrived where we need tovalidate once again the merits of in-person communication anduse it effectively in combination with digital communication.

Last year, we introduced an in-house company system toclarify the responsibilities and authorities of each business andindividual. From this year, we have focused on developing “selfdisciplined creative human resources” who aim to improve
performance by disciplining oneself and demonstrating creativity.
To incentivize this, we set up a remuneration system aligned to
the roles and achievements of the management class.
It is also important to create an organization where diverse
talent can play active roles without any constraint. From thatpoint of view, we need to go beyond purely numerical results.
We need to add another dimension to our evaluation. For
example, employees may choose to work more efficiently andstudy a language in their spare time. Even if it does not link
directly to the work at hand, it is worth including such efforts in
our evaluation. If employees feel that the company values theirwork and is also investing in their growth, they will feel happy.
They will improve their human qualities, which in turn is a benefit
for the company. Improving employee engagement enhances
corporate value. It is important to spread this idea throughout
the organization, especially to the next generation of leaders andmanagement candidates who will be in a position to lead thecompany in the future.
For leader development, we have the HAGI Program, a nextgeneration managerial human resource development programthat I have been working on for many years. We also have the
Nittoku Business School, which selects human resources fromthe sectional manager class who are almost qualified toparticipate in the HAGI Program, as well as the Raise UP
Program, for the appointment of female managers. Step by step,
our young leaders have developed. I look forward to watchingthem grow in the future.

Having the courage to change, and the importance of following throughIn order to take on challenges for new fields and work toenhance corporate value, we must nurture and strengthen thehuman capital that serves as the source of such efforts.
Unfortunately, Japanese companies as a whole currently havethe lowest human investment per capita compared to otheradvanced countries. Investing in developing human resources ismore important than ever. In the past, labor was seen as a cost.
Growth was to be achieved by reducing costs through efficiency.
We must move away from such management style. We must

instead invest for the future with a long-term view, in line with thenational commitment of human capital investment as a growthstrategy under the “new capitalism.”
The COVID-19 pandemic dramatically changed how people
and companies interact, as well as values for working. We needto shift from the old approach, where people basically joined acompany for life, to a job-based system in which job content,
scope, and responsibilities are clearly defined and people are
evaluated based on their achievements.

In the past, leadership has always needed to follow a topdown, strong leadership style. When it is difficult to see thecorrect answer, we actively involve external human resources,
foreign nationals, or women into the management team in order
to complement each other’s strong areas and weak areas. In
addition to the recruitment of diverse human resources, which isalready underway, it will be important to bring more diversity into
our management system.
Although leadership styles may be diverse, I believe that there
are common and essential qualities to become professional
leaders. I constantly communicate the following two things to
our young leadership candidates, in a way to also remind myself.
The first is, “Always have the courage to change.” Of course,
there is no guarantee that change will improve a situation. In thatsense, we need to be prepared and courageous, not in a
halfhearted way. If after making a change, we choose to go backto the original, do we have a firm belief that the original way isthe best for realizing our dreams and ideals? In our judgement
criteria, we need an “axis that does not shake.”
Another important point that relates to this is that it isimportant to “follow through on what you decide to do.” Whether
you fail or succeed, do everything you can to follow through anddeliver results. We will learn from the results and carry themforward. When you cannot see the right answer, it is important torepeat the effort by trial and error, step by step. That is why weneed to train our people not to be afraid of becoming theproverbial “nail that sticks out.” We need people who can havebreakthrough ideas, so it is important to create the rightconditions to nurture them.

Establishing a unique purpose
We are now in the position of evolving current businesses while
fulfilling our obligation to supply products for internal combustion
engines. At the same time, we will develop new businesses.
Practicing what is known in management theory as
ambidextrous management can involve some difficult steering.
However, we will look for an exit for the ICE business while thiscurrent business is performing well. As we do so, we will
increase the proportion of the non-ICE business and shift ourbusiness portfolio. We consider it as our important mission tofind a balance between these two wheels if we are to bringabout a society where we can coexist with all stakeholders.
As we have strengthened the development of humanresources, our self-disciplined creative human resources aregradually developing. We now have a situation where they canthink, make judgments, and act on their own. We also had somesmall success stories in new businesses we developed byadvancing initiatives on four themes: Environment & Energy,

It is important to have the courage tochange. It is also important that, whether
you fail or succeed, once you decide to
do something, you follow through.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

06

Medical, Communication, and Mobility. I look forward to seeing
this younger generation achieve major successes. Their energy
will drive further progress for our business going forward.
We have grown together with the automobile industry, as aleading company in the field of internal combustion engine
products thanks to the support of all our stakeholders. We are ina time of great change in the surrounding environment and inpeople’s values. What should be the purpose (reason forexistence) of the NGK SPARK PLUG Group going forward? Wehave the shared value (axis) that we have developed so far, theNittoku Way. We will keep that as we work to solve social issues
with a strong commitment of each of our employees. Throughthis process, we will establish a purpose that is unique to ourcompany.
I would appreciate your understanding toward the challengesof the NGK SPARK PLUG Group along with your continuing
support.

Strategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

History of Value Creation

Timeline from Morimura Gumi to
NGK SPARK PLUG
Morimura Group’s
BackgroundIn New York,
Morimura Brothers Broadway 539, around 1893

The origin of the Morimura Group, the foremost ceramics conglomerate
in Japan, dates back to 1876, when the Morimura brothers, Ichizaemon
and Toyo, founded Morimura Gumi*1 to launch a pioneering foreign tradebusiness in the country.
The Group’s involvement in the ceramics industry began in 1904,
when the founders of Morimura Gumi formed Nippon Toki Gomei
Kaisha*2, from which the sanitary ware division and insulator divisionwere subsequently spun off into Toyo Toki Co., Ltd.*3 (1917) and NGK
Insulators, Ltd.*4 (1919), respectively. Okura Art China*5 was alsoestablished in 1919.
After that, in October 1936, the spark plug division of NGK Insulators,
Ltd. was spun off, and NGK SPARK PLUG was established, forming thefoundation of the Morimura Group today.

Ichizaemon Morimura in 1863

1876

1910
1930
1921
1919

1917
1904

Ichizaemon Morimura (right side) and Toyo in 1889

1897
1881
1876

Morimura Gumi

Nippon Toki converted into a joint stock company (Nippon Toki, Ltd.);
its sanitary ware division spun-off into Toyo Toki Co., Ltd.

Nippon Toki Gomei Kaisha established.

Morimura Bank established (merged with Mitsubishi Bank in 1929).

Morimura Brothers established. Identified potential in porcelain exports.

Ichizaemon Morimura VI and his brother Toyo founded Morimura Gumiin Tokyo, with Toyo starting an imported variety business in the US(March 1876)

Nippon Toki
Gomei Kaisha(June 1897)(January 1904)

Okura Art China(May 1919)

NGK Insulators started research on
manufacturing of spark plugs.

Nippon Toki’s insulator division spun off into NGKInsulators, Ltd.; Okura Art China established

Notes: 1.Currently, Morimura Bros., Inc.;
2. Later, Nippon Toki, Ltd., and currently, Noritake Co., Limited;
3. Currently, TOTO Ltd.;
4. Currently, NGK Insulators, Ltd.
5. Currently, Okura Art China. Inc.

Morimura BankNGK Insulators put spark
plugs on the market.

Morimura Gumi
Co., Ltd.

Toyo TokiCo., Ltd.

Nippon Toki,Ltd.

NGK Insulators,
Ltd.

(April 1918)(May 1917)(July 1917)(May 1919)

Merged with

Okura Art

Morimura Bros.,

TOTO

NoritakeNGK Insulators,

Mitsubishi Bank

China. Inc.

Inc.

Ltd.

Co., LimitedLtd.

NGK SPARK PLUG
CO., LTD.

(1929)(Reorganized in April 1950)(Renamed in July 1946)(Renamed in May 2007)(Renamed in April 1981)(Written name changed in May 1986)(October 1936)
Nippon Toki Gomei Kaisha in 1904

NGK SPARK PLUG CO., LTD. Integrated Report 2022

07

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

History of Value Creation

Our History of Challenges
IC packages

CERAMICA E VELAS DE IGNICAONGK DO BRASIL LTDAElectrostatic chucks
Hydrogen Leak
Detection Sensor

Medical-use oxygen
concentrator
Magoemon Ezoe, first president

NGK Spark Plug

Startup period (from1930 )

Temperature sensors forautomobiles

Cutting tools

Growth period (from1940 )

Solid Oxide Fuel Cell
(SOFC)

Oxygen sensors forautomobiles

Establishment period (from1960 )Development period (from1990 )

From present to future

Historicalbackground andsocial issues
Our
History of
Challenges

Domestic automobile industry depending on imports

Automobile production growing rapidly

Impact of high economic growth

Tackling new social challenges

Aiming to create a sustainable society

In Japan in the 1920s, when the domestic automobile
industry was still in its infancy, the supply of automobiles
was limited almost entirely to imports from the U.S. andEurope, and automotive parts, including spark plugs,
were also imported. The first president, Magoemon Ezoe,
decided to produce plugs using ceramics, a specialty
product of Japan, and led initiatives to launch domesticplug manufacturing.

In the 1940s, domestic automobile production rose to
46,000 cars, as automobiles and related parts
manufacturing developed into a major industry.
Accordingly, demand for plugs also increased. After
WWII, Japan ushered in a period of high economic
growth in the late 1950s, when the country was rapidly
becoming motorized.

From the late 1960s, pollution problems were emerging
as a negative effect of the high economic growth, and theautomobile industry was particularly called on to urgently
address air pollution problems. Looking to fulfill needs
related to such problems as well as resource
conservation, we started research to develop new
products that would help meet exhaust gas regulations.
These regulations were made more stringent year by
year, pushing up demand for high-performance plugs
and sensors.

From the 1990s, automakers began to focus on thedevelopment of electric vehicles, hybrid vehicles and fuelcell vehicles, as part of efforts to address environmental
and energy issues. Those years also saw the explosive
growth of information communication technologies
bringing about significant changes in many people’s
lifestyle. In order to provide products that would meet
new needs related to these societal trends, we promoted
research and development based on our technologies
built over long years.

Our business environment is undergoing an enormouschange brought about by a number of factors, such as AI
and IoT-driven digitization, the once-in-a-century
transformation of the automobile industry led by theconcepts of CASE and MaaS, and mounting concerns
over climate change and ESG-related issues. Recognizing
this situation, we are striving to reduce our dependence
on the production of automotive components for internal
combustion engines, which account for 80% of our net
sales, while creating new business projects aimed atachieving a sustainable society.

1936

1949

1967

1999

2000

NGK SPARK PLUG founded

Production of NTK Technical Ceramics started

Production of ceramic substrates and IC packages started

After the post-war confusion had settled down and spark
plug production was stabilized, we began applying ceramics
to develop new technologies and products for thediversification of our business. The new segment
development was promoted under the brand name of NTK.
Following this, we gradually broadened our ceramic productrange to include those for industrial and environmental uses.

In the late 1960s, the silicon semiconductor integrated circuit(IC) became a mainstream standard and its mass production
began in Japan and the US. Following this trend, we started
manufacturing ceramic substrates and IC packages byapplying our ceramics technologies.

NGK SPARK PLUG was established through the spin-off ofthe spark plug division of NGK Insulators. The founding
business of producing spark plugs has grown to make thecompany the world’s top manufacturer of the product.

1937

Automotive Components

Production of NGK Spark Plugs started
In 1930, we released NG Spark Plugs, Japan’s first
domestically produced spark plug, and began producing
NGK Spark Plugs in 1937.

1958

Ceramics

Ceramics

Ceramic cutting tools developed
The importance of ceramic industrial tools increased,
particularly in relation to electricity, automobiles, chemicalengineering and machinery, and we developed ceramic cutting
tools for cutting hard materials to be put on sale in 1958.

1959
Overseas business expansion
Japan entered the high economic growth period, boosting
exports. Driven by this trend, we established our first overseas
base in Brazil, CERAMICA E VELAS DE IGNICAO NGK DO
BRASIL LTDA, in 1959, and began to promote overseas
advancement ahead of competitors to build strong global
networks.

Revenue trend

1982

Ceramics

Automotive Components

Production of oxygen sensors for automobiles started
In Japan in the 1960s, as the full-scale motorization of society
progressed, environmental degradation such as air pollution
became a social issue. In response, exhaust gas regulations
were made stricter. To help related industries ensure
regulatory compliance, we began developing various sensors,
primarily in association with exhaust gas, such as zirconia
oxygen sensors and wide range oxygen sensors.

1989

Ceramics

Sales of electrostatic chucks started
In the late 1980s, requirements for higher integration andlower cost of semiconductor elements intensified, whichgave rise to a shift to ceramic components, characterized
by the material’s excellent heat and abrasion resistance, tobe used for semiconductor production equipment. In
response, we promptly introduced ceramic electrostatic
chucks, and commenced mass production of the product inthe 2000s to expand sales.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

08

New Businesses

New Businesses

Sales of medical oxygen concentrators started

Building new business pillars

We started research on the possibility of medical
applications of bioceramics in the 1970s, looking to future
opportunities afforded by the progress of population aging.
Related results included the rollout of the bone prosthesis
Ceratite in 1990 and oxygen concentrators for medical use
in 1999.

Under the NITTOKU SHINKARON long-term management
plan started in FY2010, we accelerated efforts to establish
new business pillars. The 2030 Long-term Management Plan
“NITTOKU BX” also started in FY2020, aiming to transform
our business portfolio by 2040. We continue with thesechallenging efforts, seeking out every possible new field byapplying our core ceramics technologies including hydrogenleak detection sensors and the solid oxide fuel cell (SOFC).

Business Overview and Business Model

Strategies for
Value Creation

About Us

Introduction

2%

6%

Ceramics

number of businesses, and are currently accelerating business development in the Ceramics and the New Businesses to transform thebusiness portfolio, while maintaining high profitability in the core Automotive Components.

19%

Customers

North
America

25%

17

%

Composition of
net sales by segment in
FY2021

Composition of
net sales by region in
FY2021

79%
Main businesses

4

Japan

Automotive
Components

Business segments

Financial/Corporate
Information

Centraland
OthersSouth
America%

New Businesses
and Others

The 80-year history of NGK SPARK PLUG started with the production of plugs. Then, applying its core ceramics technologies, we developed aFoundation for
Value Creation

End-users

Europe

Asia

24%

25

%

Value offered

Automotive Components

Plugs

Sensors

Ceramics

SPE

Cutting tools

Semiconductor packages

Medical(oxygen concentrators)

Automobile and motorcycle
manufacturers

Automobile and motorcycle
users

General purpose engine
manufacturers

General purpose engine
users

Components distributors

Automobile industry

Semiconductor production
equipment manufacturers

Semiconductor industry
Communication industry
Automobile industry

Automotive and aircraftcomponents manufacturers
Tool distributors

Metal components
processing users

Semiconductor manufacturers
Semiconductor inspection
components manufacturers
Assembly manufacturers

Electronic device industry
Automobile industry

Higher performance of electronic
devicesRental operators

Home patients
Medical institutions

Improvement of symptoms

Machine manufacturers

Power generation business
operators
PlantsData centers
Public facilities
Retail facilities
Households, etc.

New Businesses (SOFC)

SOFC cell stacks

NGK SPARK PLUG CO., LTD. Integrated Report 2022

09

Higher fuel economy
Cleaner exhaust gas
Contribution to a convenient mobile
societyEnhanced performance ofsemiconductors
Contribution to a digital society
Reduction of manufacturing lead timeAchievement of precision components
machining

Higher quality of life

Distributed power sources
BCP preparedness
Contribution to a decarbonized society

Strategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Changes in Financial and Non-financial Position

Financial Highlights
Profit/return on equity (ROE)
attributable to owners of the parent

Revenue/Operating income/Operating income ratio
J-GAAP(Millions of yen)

IFRS

500,000
400,000
300,000

425,013409,912(%)(Millions of yen)30

100,000

491,733

427,546
20

16.4

13.7

200,000
100,000

426,073

67,27958,385

11.4
48,44715.4

11.1

75,5120

2018

Operating income

2019

2020

IFRS

(%)

12.0

12.5

10.9
8.4

44,33542,63833,6989.1

60,2002018

Profit attributable to owners of the parent

2019(Number of employee)

5

6,303

6,773

6,478

3,286

6,482

3,326

3,134

3,017

2,000

3,344

6,255

3,184

3,447

20,00015,000

3,027

3,298

In Japan

44.9

45.7

45.3

15,994

16,43016,391

16,14540.6
15,322

2018

2019

2020

20
10

2021 (Fiscal year)

0

2017
Total number of employees

2018

2019

2020

Percentage of overseas employees

ROE increased by 3.4% year on year due to an increase in the profit
attributable to owners of the parent.

Since FY2021, the intellectual property department and internal
companies are working together to build the appropriate profile of patent
holdings toward the transformation of our business portfolio.

Equity ratio attributable to owners of the parent

Return on invested capital (ROIC) ROIC: Operating income after tax/Invested capital

CO 2 emissions

Sales percentage of precious metal plugs andwide range oxygen sensors(10,000 tons)(%)

J-GAAPIFRSJ-GAAP

(%)

35

10.0

80
60

IFRS

12

100

64.3

63.4

59.7

58.2

30

8.2

8

62.5

40

6.3

50

28.46

29.09

27.58

25

7.9
5.5

4

25.67

40

26.51

20

30

15

20

10

20

10

5
0

0

0

2017

2018

2019

2020

2021 (Fiscal year)

2017

2018

2019

2020

2018

2019

2020

2021 (Fiscal year)

CO 2 emissions

Equity ratio attributable to owners of the parent increased year on year
due to the partial repayment in FY2021 of bank borrowings, which weretaken out in FY2020 to secure liquidity on hand following the spread of
COVID-19.

ROIC was 7.9% for FY2021 due to an increase in profits driven by anincrease in sales of spark plugs for aftermarket parts in the Automotive
Components business and SPE products in the Ceramics business,
although inventories were built up due to logistics disruptions.

CO2 emissions as a cause of climate change has been on a declining
trend due to our CO2 reduction efforts and a decline in the CO2 emissions
conversion factor of electric power. As a priority issue to tackle, we aim at
reducing CO2 emissions by 30% by FY2030 from the FY2018 level.

Cash dividends per share/Dividend payout ratio

J-GAAP

(Yen)

IFRS

300.00240.00209.37296.04J-GAAP(Yen)

188.59

34.2

(%)

50

42.9

120

204.74

IFRS

150

31.8

34.5 10290

28.7

120.00

60

60

60.00

30

10

0

0

180.00163.06

0

2017

2018

2019

2020

2021 (Fiscal year)

70

2017

2018

Cash dividends per share

70

2019

60

2020

37

37

2020

2021 (Fiscal year)

27

2017

2018

2019

Wide range oxygen sensors

As a priority issue, we aim to increase the sales percentage of precious
metal plugs and wide range oxygen sensors, which are part of ourenvironmentally friendly products “Nittoku Green Products,” to 50% or more.

(Number of employee)

(%)

17.0
14.5

13.6

12.5

200
100

113

146

133

123

2021 (Fiscal year)

2017

2018

2019

2020

20

100

15

75

10

50

5

25

0

0

95

100

(%)

96

48

50

49

Number of female/foreign-national/mid-career employees in managerial posts
Percentage of female/foreign-national/mid-career employees in managerial posts

2019

2020

Capital expenditures/depreciation

R&D expenses

Number of paid-leave days used (non-consolidated)

Number of reports from whistleblowers(Number of days)(%)(Number of reports)

30

100

100

80

80

60

60

40

40

20

20

0

0

60,00040,00020,00056,587

20,92030,00051,00429,58933,44437,94034,70031,95237,591
23,9790

2017
Capital expenditures

2018

J-GAAP(Millions of yen)

2019

2020

2021 (Fiscal year)

25,28328,072

IFRS

28,315

26,11578.5

23,68515.4
10,000

10

0

0

2017

2018

2019

2020

2017

2021 (Fiscal year)

Number of paid-leave days used

Our ratio of R&D expenses to sales has been in the range of 5% to 6%. It
reached 4.8% in FY2021.

85.6

16.6

2018

16.7

2019

Rate of paid-leave days used

14.02020 (Fiscal year)*Fiscal year starts October.

The management and labor cooperate in encouraging the use of paid
leave, and the number of paid-leave days used has increased year by
year. However, the number of paid-leave days used in FY2020 (October
2020 to September 2021) fell mainly due to the impact of suspension ofbusiness caused by the COVID-19 pandemic.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

102021 (Fiscal year)

A total of about 50 employees, male and female employees combined,take childcare leave every year. The return-to-work rate has remained
consistently high over the years.

71.2

20

20,000Depreciation

Automotive-related activities centered on improving the efficiency of
production of existing equipment. We maintained the same level of capital
expenditures. We will continue to invest in the non-ICE business for
medium- and long-term growth.

84.4

40

Number of employees who took childcare leave
Percentage of employees who returned to work after taking childcare leave

We are promoting the diversity of management personnel, including
women. As a priority issue, we have set a target of increasing thepercentage of women, foreign nationals and mid-career employees inmanagerial posts to 25%.

IFRS

60

0

2018

The basic policy of the dividend payout ratio is 40% as stated in theMedium-term Management Plan. In addition, the dividend amount islinked to the profit attributable to owners of the parent, excluding
temporary gains and losses, which are generated separately from ordinary
business activities. As a result, the full-year cash dividend increased by 42
yen year on year to 102 yen per share in FY2021.

J-GAAP

59

20

2017

2021 (Fiscal year)

100
80

58

Earnings per share increased year on year due to an increase in the profit
attributable to owners of the parent.

(Millions of yen)

94

94

137

0

Dividend payout ratio

40(Number of employee)

11.7

20

22

41

Number of employees who took childcare leave;
percentage of employees who returned to work
after taking childcare leave (non-consolidated)

300

30

39

Percentage of female/foreign-national/mid-career
employees in managerial posts (non-consolidated)
400

40

39

34

Precious metal plugs* Calculated based on the CO2 emissions conversion factors of respective fiscal years.

Earnings per share

37

0

2017

2021 (Fiscal year)

2021 (Fiscal year)

Against the background of M&As in and outside Japan, etc., theconsolidated number of employees tended to increase.

In the Automotive Components business, our revenue and profits
increased year on year due to an increase in sales of aftermarket parts ofspark plugs and the expansion of scale of the Ceramics business, despite
an impact of the shortage of semiconductors.

(%)

30

5,000

3,228

Outside Japan

50
40

0

2017

ROE attributable to owners of the parent

43.2

10,00002021 (Fiscal year)(%)

25,0004,000

38,3672020

Number of employees at work/percentage of overseas employees(Number of patents)

6,000

10

0

2017

Number of patents held
8,000

15

0

2021 (Fiscal year)

Operating income ratio

J-GAAP

25,00002017
Revenue

75,00050,00010

47,389Non-financial Highlights

65

73

80
63
41

2017

2018

2019

2020

2021 (Fiscal year)

Number of reports from whistleblowers

Regarding the Corporate Ethics Helpline, an internal reporting system, weare creating an environment where employees feel comfortable inconsulting and reporting, by promoting the system on an ongoing basis
through holding seminars, creating posters and distributing pocket-size
cards.

2

Strategies for
Value Creation
Page

11

CONTENTS
12

Message from the President

14

Value Creation Process

15

Priority Issues (Materiality)

17

Examples of Materiality Initiatives (1)18

Examples of Materiality Initiatives (2)Medium-term Growth Strategies

NGK SPARK PLUG CO., LTD. Integrated Report 2022

11

19

Long-term Management Plan

21

Medium-term Management Plan

23

The Finance Officer Outlines the Financial Strategy

24

Business Strategy

28

Progress of Creation of New Business Pillars and Future Prospects

30Intellectual Property

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Message from the President

We have completed the first year of our Medium-term Management Plan, which began in April 2021. Under theslogan, “Break to change. Change to create,” what changes have we carried out toward the transformation of ourbusiness portfolio? Representative Director, President Takeshi Kawai talks about the new challenges that haveemerged as we move forward.

The importance of constantly sharing the sense of crisis across the entire company
Over its history of more than 80 years, NGK SPARK PLUG has
grown against the backdrop of
economic development in Japanand overseas by improving andadvancing its products used ininternal combustion engines(ICEs), such as spark plugs andsensors. However, technologicalinnovations such as electricvehicles (EVs) are rapidly
progressing in the automobile
industry amid accelerating efforts
We will be constantly on thearound the world to achieve
lookout for “Something New,”
carbon neutrality (decarbonized
as we strive to contribute tosociety) by 2050. The automobile
industry is hurtling into an era in
the sustainability of society
which we will need to embrace
Representative Director President Chief Operating Officer
challenges that surpass
conventional commonsense andimagination.
In the face of these changes inthe business environment, wehave been working hard to further
strengthen our current businesses,
create new businesses, andstrengthen our business infrastructure. In addition, in 2020, we
formulated the 2030 Long-term Management Plan “NITTOKU
BX,” the primary thrust of which is the transformation of ourbusiness portfolio. We are working to transform our businessportfolio based on a scenario where products for internal

Without change, there isno growth. Without risk,
there is no opportunity.

combustion engines peak in the mid-2030s. By 2030, we aim
for the ICE business, which had accounted for 80% of revenue,
to account for 60%, and the non-ICE business to account for40%.
We have further broken down NITTOKU BX to form our
Medium-term Management Plan, which began in April 2021. The
slogan is “Break to change. Change to create.” Under our policyof Dokuritsu-Jiei, we have also embarked on a transformation of
our organizational structure, starting with the introduction of an
in-house company system. Changing a conventional approachsignificantly in a challenging market environment will involvesome pain. However, in order to achieve sustainable growth forboth society and the Company, we must carry out our vision to“Change drastically beyond the current way.”
In addition to the need for responding to the sustainability ofsociety, FY2021 brought various challenges, such as thelingering threat of the COVID-19 pandemic since the previous
fiscal year and ongoing semiconductor shortages and soaring
materials prices. From the end of the fiscal year, the world was
also exposed to a severe energy crisis caused by Russia’s
invasion of Ukraine. We need to closely monitor risk factors suchas rising raw materials prices, transportation costs, and energy
prices due to the Russia-Ukraine situation, as well as the impactof these factors on the global shift to EVs.
Meanwhile, as we work toward transformation, each of ourbusiness companies was able to respond with a sense of speed
to unexpected crises such as soaring raw materials prices. We
consider this experience as a pathway to transforming ourbusiness model in the future.

In-house company system improves our ability to adapt to changes
In FY2021, the Company recorded record-high revenue of 491.7
billion yen and operating income of 75.5 billion yen. There were
three main reasons for this. The first is that spark plug
aftermarket parts boosted sales. Due to the semiconductor
shortage, automobile production slowed down, and sales of
products for new automobiles fell. Meanwhile, the market forused cars was revitalized. Sales of profitable aftermarket parts
were strong, and the weakening of the yen gave us a further
tailwind.
Second, overseas transportation costs, energy prices, and theprices of precious metals used as raw materials for highNGK SPARK PLUG CO., LTD. Integrated Report 202212

performance plugs all soared. In response, we moved fast tonegotiate raw materials prices and pass on the increased costs
to selling prices. The in-house company system that we
introduced in the previous year enabled us to better adapt tochanges in the market environment as a role of each businesscompany.
Third, we also made steady progress in revenue and operating
income of the non-ICE business. By leveraging the coreceramics technology, products for semiconductor production
equipment positioned in the growth business boosted sales andcontributed to revenue. In terms of new businesses, the solidIntroduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Message from the President

oxide fuel cell (SOFC) business began mass production in
FY2020. We are building a structure that can generate profits forthe non-ICE business as a whole.
Based on these results, our FY2022 full-year plan forecasts
revenue of 570.5 billion yen (up 16% year on year) and operating
income of 96.0 billion yen (up 27.1% year on year). In the
Automotive Components, we expect that sales of products for
new automobiles will grow as the semiconductor market
recovers. In terms of growth businesses, in addition to strong
sales of products for semiconductor production equipment, we
expect growth in areas such as the respiratory business in the
medical field as issues such as component shortages andtransportation network problems are resolved.
In terms of risk factors, precious metal prices, energy prices,and transportation costs all continue to rise mainly due to theimpact of the Russia-Ukraine situation. We also need to keep aclose watch on the possibility that the recovery of automotive
semiconductors could take longer than expected. However, we
assume that the direct impact on sales in the Russian market will
be minor. In FY2021, we achieved a total annual price increaseof 4.5 billion yen for products for new automobiles and theaftermarket as a response to soaring raw material prices. We willcontinue negotiations in FY2022, targeting an annual priceincrease of 5.1 billion yen. We are also working to streamline
design changes for precious metal plugs used in the aftermarket
and building a business structure that, even at manufacturing
sites, is resilient to the impact of raw material prices.
For annual dividends, we plan to increase the dividends by 36
yen from the previous year to 138 yen per share, based on thepolicy of a dividend payout ratio of 40%.

Regardless of the era, we return toour company’s DNA, which we havecarried through a history of challenges
and transformations.

From point to surface. We will target growth from one small business seed
We have completed the first year of our Medium-termManagement Plan, which began in April 2021. Under the plan,
we have been working to take on challenges beyond the current
way and drive transformations. Although the businessenvironment has changed more than expected, we haveproduced positive results, while also identifying areas to improve.
In terms of business, as mentioned above, the growthbusiness, including the semiconductor production equipment
business, has become one of our pillars of revenue. In new
businesses, we are also moving forward with mass production in
the fuel cell business. We are making steady progress toward
our goal of transforming our business portfolio. Going forward,
we face the question of how we can continuously shape the next
set of new businesses to help resolve social issues. We mustmove toward a phase in which each of the separate businessthat we have set up links with other surrounding businesses andcollaborates. This will expand our business from point to surface,
thereby contributing to society more broadly.
For example, marine pollution has caused the social issue ofsmaller catches and food shortages. In response to this, wehave used sensing technology to create a water quality sensing
system for land-based aquaculture businesses. By expanding
this business with a focus on water quality management, we
expect to broaden its scope of use beyond the industrial sector

to aquariums and household aquariums. In addition, at the endof November 2021, we launched Doctor Link, a preventive
maintenance service for automobile maintenance shops thatutilizes our sales network and connected technology. Using dataon automobile usage and maintenance history of connectedvehicles, the service proposes the optimal timing and content ofmaintenance to automobile maintenance shops. Going forward,
we plan to expand this business as a data service, incollaboration with the insurance and non-life insurance
industries.
However, as we pursue new businesses, we should not justtake on anything at all. We must be able to say why we need to
do that business. We must start by asking the question, “Why
NITTOKU?” The business might be one that draws from ourstrengths. Or it might give us a way to collaborate with external
companies so that we can add missing pieces to our coreassets.
In terms of the question of what business we should do, wemust invest not only in new businesses but also in the
Automotive Components Business. While we meet the obligation
to supply aftermarket parts for internal combustion engines, wewill also collaborate and invest in equipment as necessary in the
Automotive Components Group.

headquarters must take a long-term view in its judgments. We
must closely work together to strengthen governance while
striking a balance between the long term and the short term.
In April 2022, we launched a new personnel system that ties
into the performance of each internal company. It sets desired
skills, rewards, etc. based on the role, difficulty, etc. Regardlessof the position or career, for example, we have set a wide rangeof salaries, even for the same position. In this way, those whohave worked hard will earn greater rewards.

A company that lets the earth shine. Showing our commitment to the world
Alongside the development of society, we have established ourvalue of existence with a focus on products for internal
combustion engines and built relationships of trust with our
stakeholders. In this era of dramatic changes in society and invalues, if we are to grow sustainably, it is indispensable to remaincommitted to contributing to the sustainability of society. For thisreason, in addition to creating new businesses, we have
responded to new trends such as the shift to EVs. While meetingthe supply needs of products for internal combustion engines,
we have also created a large number of environmentally friendly
products.
To reflect this situation, we decided to change the English
name of the Company from NGK SPARK PLUG to Niterra. Thisis part of our way of showing our future path and ourcommitment to work toward our goals. “Niterra” is a coined

Those who work hard will be rewarded. Launch of new personnel system
To transform our business infrastructure to align with theMedium-term Management Plan, we have put in place an inhouse company system that clarifies responsibilities andauthorities. This has helped us to respond to changes in thebusiness environment.

Our goal is to change the distribution of capital and improve
employee engagement so that those who work hard will be
rewarded. If anyone feels that their evaluation is lower than
expected, I ask them to share their thoughts and ideas with their
managers and departments at headquarters. In order totransform the Company, to change drastically beyond thecurrent way, we need to foster a corporate culture that
deliberates on matters thoroughly without fear of confrontation.

While we are better able to adapt to change, and to do sofaster, certain challenges have come to light. Among these is atendency at each internal company to shortsightedly focus on
boosting numbers so that they can meet their KPIs or KGIs. To
correct this situation, the strategic department at the

NGK SPARK PLUG CO., LTD. Integrated Report 2022

13

word that combines the Latin terms “Niteo,” which means toshine, and “terra,” which means the planet earth. It conveys ourdetermination to be a company that lets the earth shine.
Regardless of the era, our company’s history has been aseries of challenges and transformations. We need to return tothat DNA. Although new challenges always bring risks, you
cannot create opportunities without taking some risks. Each of
our employees needs to have a strong awareness of that. Under
the company-wide concept of “Change (transformation) with(co-existence) Will (will)!!,” which is set forth in the Action
Guidelines, we will work to solve social issues while remaining
aware of our new mindset of “Something New.” I would like tothank all of our stakeholders for your continued support andguidance.

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Value Creation Process

Change drastically beyond the current way

2040 Vision
Exter nal environment
Global environmental issues
International issues
Establishment of a society
where economic development
and resolution of social issues
are compatible

Our 2040 Vision is to “change drastically beyond the current way.”
In the past, as we thought about “What ceramics can do,” we made our journey as a manufacturing corporation.
The world has changed. There are technological innovations such as the electrification of automobiles and higher demand for semiconductors. We must face challenges suchas climate change. To help bring about a better society, we must not limit ourselves to thinking about “What ceramics can do.” We must meet the challenge of going “beyond
ceramics” and “exceeding the imagination” of society and ourselves.
“Beyond ceramics, eXceeding imagination” is our 2040 Vision, and we will create a new NGK SPARK PLUG Group.

P.15: Priority Issues(Materiality)

Response to social issues

Priority issues

Managerial capital(Materiality)

FY2021Business Model
Business Fields

Value offered

P.21: Medium-term Management Plan, P.24: Business Strategy

Environment & Energy

E (Environment)
Responding to climate change

Financial capital

71,910
A+ AA62.5

Cash flows fromoperating activities
Rating:Providing environmentally friendly
products

S (Society)
Development of technologies,
products, and businesses forcontributing to the resolution ofsocial issues

G (Governance)
Corporate governancemillion yen(R&I)

Energy(JCR)

Capital adequacy ratio:

37

47

bases
in Japan%bases
outside Japan

Medical23,685
6,255

million yen

Safety in automobile driving
Providing maintenance services
according to your lifestyleCommunication

MedicalBusiness infrastructure

P.31: Foundation for Value Creation

Human capital
Consolidated
number of employees:

Action against Priority Issues

16,145Social capital
Number of countries
where our products are sold: about

Electricity:

Input of raw materials:
Input of water
resources:

P.20: 2030 Long-term Management Plan “NITTOKU BX,” P.21: Medium-term Management Plan

2030 Long-term Management Plan
“NITTOKU BX”
Medium-termManagement Plan
(four years)

SeventhMedium-termManagement Plan

MWh

Higher performance of electronic
devices

Corporate Governance140

485,250
56,0001,650,000

Higher QOL
Safety in surgical operations

Communication

Number of patents:

Natural capital⇒ P.15: Priority Issues(Materiality)

MobilityIntellectual capitalCompliance

Information security

Mobility

Ceramic material
technology
Application technology
in harsh environments
Disparate material
bonding technology
Sensing technology
Rapid high-temperature
heating technology
Global production andsales system

Management Strategies

Risk management

Cleaner automotive exhaust gas
Higher fuel economy
Reduction of environmental
pollutants
Reduction of energy consumption
in manufacturing
Using sensing technology to
improve industrial efficiency
Stable supply of renewableenergyCore
Competence

Manufacturing capital

R&D expenses:

Global human resourcesmanagement

Environment &Shisei-Shinjitsu

Dokuritsu-Jiei

Shikai-Keitei

tons

The Nittoku Way

m3

Enforcement of Managerial Capital

NGK SPARK PLUG CO., LTD. Integrated Report 2022

14

Medium-termManagement Plan
(five years)
Soshi-Kantetsu

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Priority Issues (Materiality)
We are committed to contributing to the realization of a sustainable society, thereby aiming to increase our corporate value.
Amid the industrial environment around us marking a tipping point, we first need to accurately understand the risks which
affect our sustainable growth as well as opportunities, and then define priority issues (materiality) to be addressed by theGroup in reference to ESG (Environmental, Social, and Governance) factors and set appropriate goals from medium- tolong-term perspectives.

Taking the above-stated steps, we have identified eight priority issues for each ESG area after taking risks and opportunities
into consideration, and various initiatives aimed at realizing a sustainable society have been set in association with eachissue. To implement these initiatives, progress will be monitored by the CSR and Sustainability Committee, and reviews will
be conducted in response to the changes in the business environment, stakeholders expectations and activity conditions.

Steps to define priority issues
Social issues
STEP

Risks and opportunities related to businesses

1

Identify issues
Identify social requirements (issues) in reference to theUnited Nations Global Compact, SDGs, ISO 26000, GRI
Standards, ESG surveys, industry guidelines and othercompanies’ benchmarks.

STEP

Global environmental issues

Environment

Climate change
Decarbonized society
Environmental destruction

2

Analyze and prioritize issues
Conduct materiality assessment for stakeholders inreference to international guidelines and ESG surveys
used in Step 1, and for our company in consideration of
past activities and future management plans, and create
an assessment results map.

STEP

3

International issues
Protectionism
Emerging economies
Disparities in society
Human rights

Decline in the number of internal combustion engine
vehicles

Risk

Reduction of greenhouse gas emissions

Risk

Opportunity

Change in people’s preferences regardingtransportation means and consumption

Risk

Opportunity

Stricter environmental regulations

Opportunity

Expanding demand for automobiles in emerging
economies

Opportunity

Effective use of renewable energy

Opportunity

Distributed power sources, and local production andconsumption of energy

Opportunity

Efficient use of CO2 for a decarbonized society

Opportunity

Stricter regulations on hazardous chemicals

Risk

Opportunity

Society
Expansion of the sensing field

Opportunity

Diversification of human resources

Risk

Respect for human rights

Risk

Diversification of work styles and values

Risk

Opportunity

Diversification of management personnel

Risk

Opportunity

Opportunity

Select priority issues
Using the map made in Step 2, select higher materiality
items as priority issues, with approval by the CSR and
Sustainability Committee, which includes outside
directors as members.
High

Importance to stakeholders
MediumPriority
issuesImportance to our company

High

Establishment of a society
where economic development
and resolution of social issues
are compatible

Speedier business decisions

Robots, automation, labor saving
Artificial intelligence (AI)Sensing IoTNanotechnology
Biotechnology
Aging society with a decreasing
birthrate/Population explosion
Diversity
Pandemic
Earthquakes
Work-life balance

Governance

NGK SPARK PLUG CO., LTD. Integrated Report 2022

15

Opportunity

Stable procurement of raw materials

Risk

Geopolitical risks

Risk

Earthquakes and disasters caused by climatechangeRisk

Implementation of compliance

Risk

Measures for information security (cyberattacks)

Risk

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Priority Issues (Materiality)

Priority Issues

Reasons for Identification as Priority Issue

Major Initiatives

Environment

Responding to climate change

The impact of climate change, including the increased severity of natural disasters,
hinders the sustainable development of society. For this reason, the world faces thecommon challenge of reducing CO2 and other greenhouse gas emissions that cause
climate change, while aiming to realize a decarbonized society. The Group also
recognizes that reducing CO2 emissions from business activities and supply chains is an
important issue.

Providing environmentally friendly
products

The earth’s resources are limited. To preserve the earth’s limited resources for future
generations, we must minimize the environmental impact of the products and services
used by the current generation. The Group has a bird’s-eye view of the entire lifecycle,
from when products and services are used to when they are disposed of. We will usethat position to contribute to the sustainable development of society by providing
products and services with lower environmental impact.

Society

Development of technologies,
products, and businesses contributing
to the resolution of social issues

Global human resources management

Corporate governance

GovernanceRisk management

The Group acknowledges that employees are the most important management
resources. We believe that respecting the diversity and individuality of our more than
16,000 employees around the world and creating an environment in which each andevery employee can play active roles will lead to the development of the Group.

CO2 emissions: 30% reduction from the FY2018 level
by FY2030

Dissemination and expansion ofSales ratio of precious metal plugs: at least 50%

environmentally friendly products

Sales ratio of wide range oxygen sensors: at least 50%

Development of fuel cells

Dissemination of high-efficiency distributed power supply
systems with an eye on the use of CO2-free hydrogen fuelP.30

Promoting substitution for lead-based piezoelectricmaterials

P.18

Development of sensing IoT business

Improving operational efficiency through automation,
optimization and generalization

P.29

Carbon Neutral as a service

Establishing and introducing a synthetic fuel (methane)manufacturing system

P.17

Percentage of female/foreign national/mid-career
employees in managerial posts: at least 25%

P.39

Improved results of employee satisfaction surveys

P.38

Percentage of female and foreign national directors: atleast 30%

P.46

Percentage of outside directors: at least one-third

P.46

Establishing a risk management system that contributes
to management decision making

P.49

Conducting compliance questionnaire surveys anddisclosing the results

P.50

Establishing an information security management system

P.48

piezoelectric materials

Recruitment of female, foreign
national and mid-career employees
Development of new personnel
systemTo achieve sustained growth and improve medium- and long-term corporate value, we
believe that it is important to structure the Board of Directors with a team of people fromdifferent backgrounds with a variety of expertise and experience.
We also focus on enhancing the supervisory function of the Board of Directors andensuring transparency in decision-making by improving the percentage of outside
directors on the Board of Directors.

Increasing the percentage of female

In the modern era of dramatic changes in the environment surrounding business, therisks that companies face are also diversifying. Responding to risks the wrong way
could put a company’s survival at risk. The Group strives to carry out risk managementfrom day to day, so that it can enhance its corporate value.

Management of signs of serious

ComplianceTo develop the business of our Group, we must continue to be a company that istrusted by society. With recognition that our Group is a member of society, we aim to be
a company that is trusted by all our stakeholders by appropriately meeting social
demand.

Information security

Information technology is becoming more sophisticated every day, and we handle avariety of information assets in our business. Meanwhile, as cyberattacks and other risks
increase, bolstering information security is key. The Group will also enhance information
security by positioning information assets as one of its management resources. We will
make effective use of them while protecting them appropriately.

Reference Page

Reduction of CO2 emissions

Development of lead-free
The Group is committed to taking on the challenges of the world. We willcocreate and provide new value to help solve these challenges, so that we cancontribute to realizing a better society.
The world faces various challenges from climate change to food shortages. We
continue to use our technology and our accumulated experience to offer newvalue to people around the world.

Goals and Outputs

and foreign national directors
Increasing the percentage of outside
directors

incidents and prevention of theiroccurrence

Awareness surveys and continuous
education for officers and employees

P.35

P.18

Maintenance and enhancement of theincident response organization andestablishment of a prevention system

NGK SPARK PLUG CO., LTD. Integrated Report 2022

16

Contribution to SDGs

Special
FeatureStrategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Examples of Materiality Initiatives (1)Responding to Climate Change

Boosting efforts to achievecarbon neutrality
We have set priority issues (materiality) for ESG as we shift our focus on the ICE-related business to new businesses that can
support a sustainable society. In the field of “Environment,” our materiality includes “Responding to climate change” and“Providing environmentally friendly products.” In the former, we will promote areas such as “initiatives aimed at realizing acarbon recycle-oriented society” and “internal carbon pricing.” Through these initiatives, we will contribute to the realizationof a sustainable recycle-oriented society.

Internal carbon pricing system and internal environmental funds
To accelerate efforts to reduce CO2 emissions across the company, we have launched the SX (Sustainability Transformation)
Project and are putting together a framework that includes, among other things, an internal carbon pricing system.
The internal carbon pricing system began in July 2021 with a framework that contributes subsidies for environmental
investment by internal companies from an internal environmental fund, which imposes a carbon tax commensurate basedon the amount of CO2 emitted by each internal company and uses the collected tax as its source. By visualizing CO2
emissions as an amount, we aim to increase incentives for achieving environmental goals, thereby promoting internal
companies’ voluntary capital investment in response to climate change issues.
In addition, we launched a system for evaluating CO2 emissions at each internal company and consolidated subsidiaries
in April 2022. We aim to create and introduce environmental financial indicators that promote sustainability management,
while using these systems as drivers for reducing CO2 emissions.

Initiatives aimed at realizing a carbon recycle-oriented society (Carbon Neutral as a service)
Small-scale methanation

CO2

CH4

e-fuelManufacture of synthetic fuels (CH4, e-fuel)

For CO2 emitted, a “carbon tax” is temporarily set aside
CH4
recovery

The collected amount is allocated as an internal environmental fund for use in investment support andinfrastructure development for decarbonization

CO2
recovery

Biogas recovery

Decarbonization

As a major contributor to
global warming, it needs
to be addressed.

Natural energy storage
Distributed power sources
Local production and local
consumption of electricity

Internal environmental funds

Carbon recycle-oriented society

Investment in renewableenergy equipment andCO2 reduction equipment
In-house Company A

Nittoku GroupInternal carbon pricing

Use of e-fuelEnables continued
use of internal
combustion engines
Continued use of existing
infrastructure

Incentives for billing and emission targets
according to CO2 emissions

Using synthetic fuels for SOFC generators
High-efficiency compact
power generation
with clean gas

H2production

CO 2 emissions slots
In-house Company A

Regarding climate change issues, we aim to reduce CO2 emissions by 30% by FY2030 from the FY2018 level, with the goal ofachieving carbon neutrality by 2050.
To achieve this, we are focusing on carbon recycling mechanisms, such as separating and recovering CO2 and using it as fuel,or using CO2 and hydrogen emitted from factories to create synthetic fuels. We are considering reducing CO2 emissions in the
future by separating and recovering CO2 in the atmosphere and reusing it as fuel. We will use these and other methods to reduce
our internal CO2 emissions and develop them as new businesses. We will also help to bring about a society in which CO2emissions steadily decrease, thereby helping to solve climate change issues.

Methanation: Technology for artificially synthesizing CH4 from CO2 and hydrogen
CH4: Methane
e-fuel: Fuel produced by synthesizing CO2 and hydrogen

NGK SPARK PLUG CO., LTD. Integrated Report 2022

17

Control department

Special
FeatureStrategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Examples of Materiality Initiatives (2)Providing Environmentally Friendly Products

Aiming to manufacture products that contributeto the realization of a sustainable society
Environmental considerations in the product lifecycle

Environment-friendly product certification system “Nittoku Green Products”

The Group has set the goal: “All products contribute to the improvement of the
global environment and contribute to making sustainable society come true”
as our 2040 Vision. We are working to develop and provide environmentallyfriendly products. For this reason, we are certifying products that haveparticularly high environmental performance as “Nittoku Green Products” andexpanding them throughout the product lifecycle.

The Group is committed to developing and providing environmentally friendly products. In this sense, all our
products can be described as environmentally friendly. Among our products, an environment-friendly productcertification system certifies products that have particularly high environmental performance from a productlifecycle perspective. At the Environmentally Friendly Products Certification Committee (held twice a year), which
is headed by the Central Environmental Committee Chairman, products that meet the certification criteria arecertified as “Nittoku Green Products” based on the evaluation in three environmental categories: energy saving,
resource saving, and substances of concern.
In FY2021, when the system was launched, eight products were certified. Through this system, the Group will
promote environmental considerations throughout the product lifecycle and communicate to all our stakeholders
the excellent environmental performance of our products.

Examples of environmental
considerations

Examples of environmental
effects

Manufacturingof raw materials

Reduction ofmaterials input

Effective utilization of resources
Reduction of CO2 emissions inmaterial manufacturing

Transportof raw materials

Change oftransportation
methodReduction of CO2 emissions intransportation for procurement

Streamlining within
the Group

Reduction of CO2 emissions in productmanufacturing, saving resources
Reduction of emissions of
substances of concern

Change oftransportation
methodReduction of CO2 emissions in
product transportation

Usage at thecustomer

Reduced energy
consumption inmachining

Reduction of CO2 emissions inmachiningEnd-user usage

Higher productperformance

Reduction of CO2 emissions inuse
Reduction of emissions of
substances of concern

Manufacturein the Group

Shipping

Disposal

Recovery of
products

Environmentallyfriendly products

Examples of products certified as “Nittoku Green Products”
Evaluation categories

Saving resources throughproduct recycling

Spark plug using precious metal

Wide range oxygen sensor

BIDEMICS “JX1”(iridium alloy) in the center®

for heat resistant alloy processing“ZFAS -U3”

Example of estimated reduction of CO2 emissions Precious metal plugs and wide range oxygen sensors
We assume that installing a precious metal plug or a wide range oxygen sensor improvesautomobile fuel efficiency by 2%, from 15 km/L to 15.3 km/L.
Over the course of driving 10,000 km in a year, gasoline consumption is reduced by 13 L per

Lightweighting, use of recycled raw materials, longer
life, etc.

Substances ofconcern

Non-use or reduced use of substances of concern,
etc.

Example of estimated reduction of CO2 emissions Solid Oxide Fuel Cell (SOFC)
CO2 emissions when purchasing electricity from electricity companies
When purchasing 1.66 million kWh* of electricity, the CO2 emissions associated with electricity
generation by power companies will be approximately 770 tons of CO2.

High-performance product installed

Electricity

Fuel consumption

Fuel consumption

1.66 million kWh

15 km/L

Fuel efficiency
improved by 2%

667 L
Amount of annual CO2 emissions
that can be reduced in
automobiles installed withhigh-performance products

Conversion
of CO2*

15.3 km/L
Gasoline consumption

Difference 13 L
×

654 L

approximately 30 kg CO2

If precious metal plugs are installed in 80 million automobiles, it will reduce CO2 emissions byapproximately 2.4 million tons per year.
Likewise, assuming that wide range oxygen sensors have been installed in 25 million units,
approximately 750,000 tons of CO2 emissions will be reduced.

Assuming installation in an automobile with a four-cylinder engine

NGK SPARK PLUG CO., LTD. Integrated Report 2022

18

CO2 emissions
Approximately
770 tons of CO2* CO2 emission coefficient 0.46

CO2 emissions when generated by fuel cells (SOFCs)
When the fuel cell (SOFC) generates 1.66 million kWh of electricity, the CO2 emissions will beapproximately 530 tons of CO2.

2.32 kg CO2/L

CO2 conversion coefficient of gasoline: 2.32 kg CO2/L (from Ministry of the Environment data)

Process design

Resource
savingConventional products installed<Calculation criteria>

Packagingspecifications

Reduced energy consumption* Annual power generation of SOFC system with an output of 200 kW=

Processes that create new products and services or improve them for the
better include research, development, process design, and packaging
specification design.
In these processes, the Group also checks whether CO2 emissions can be
reduced, whether resources can be reduced or used effectively, and whether
there are any substance of concern included or used. If we find a significant
impact on the environment, we implement necessary measures.
We will also ensure that our products and services comply withenvironmental and other laws and regulations, and that there are no ethicalissues.

Lead-free piezoelectric ceramics

Evaluation items (product lifecycle perspective)

Energy saving

unit per year. This lowers CO2 emissions by approximately 30 kg.

Gasoline consumption

Research

Nittoku Green
Products

Categories

Initiatives in the design and development of products and services

Product
development

Products that meet thecertification criteria

Electricity
1.66 million kWh

Conversion
of CO2CO2 emissions

Approximately
530 tons of CO2
Approximately 240 tons less CO2
emissions than when purchasing
electricity

When using 1.66 million kWh of electricity, electricity generated by fuel cells (SOFCs) can
reduce CO2 emissions by approximately 240 tons compared to electricity purchased frompower companies. In addition, by using the heat from fuel cells (SOFCs), the effect of reducing
CO2 emissions is improved.

Strategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Long-term Management PlanIn FY2020, NGK SPARK PLUG has formulated the 2030 Long-term Management Plan “NITTOKU BX,” deeming 2030 as a milestone year for the growth of the company over the next two decades.
We, as a company, work together to achieve 2040 Vision.

2030 Long-term Management Plan “NITTOKU BX”(from FY2020 to FY2029)

Long-term Management Plan “NITTOKU SHINKARON”(from FY2010 to FY2019)
Looking back on “NITTOKU SHINKARON”

2040 Vision and the Long-term Management Plan
2040
VisionChange drastically beyond the current way

Beyond ceramics, eXceeding imagination
For the solution of various social issues, we need to search for a new way of doing business by thinking beyond “What ceramics can

Net sales, operating income and operating income ratio
329,758 15.7

17.9

do.” We aim to meet the challenge of going “beyond ceramics” and “exceeding the imagination” of society and ourselves, thereby

383,272

372,919

17.3

14.4

409,91216.4 425,013

347,636

269,23210.7

284,746
8.6

28,7702010

24,4782011

Net sales (Millions of yen)backcasting from the 2040 Vision. We regard 2030 as a milestone year to ensure we are on the right path heading into 2040.

13.7

302,798
7.8

11.4

51,661

23,7542012changing “drastically beyond the current way” in 2040. We have created the 2030 Long-term Management Plan “NITTOKU BX” by

426,0732013

Operating income (Millions of yen)

62,196
2014

66,284
2015

Operating income ratio (%)

53,595
2016

67,2792017

58,38520182030 Long-Term Management Plan
“NITTOKUSHINKARON”

48,4472019 (Fiscal year)* We have been applying International Financial Reporting Standards (IFRS) since FY2019.

2020
Current

Long-Term
Basic Policy

Highly Profitable
Company
Progressive
Company
Human “Asset”
Company2030

2040
Vision*NITTOKU
BX

Our Ideal Image in the Year 2020
Monozukuri
Company

Back
Casting(2030 strategies and initiatives)

Unique core technology
Optimum quality created by all employee participation andmanufacturing/technological innovation
The No.1 leading company delivering “Real Value”
Global manufacturing and sales networks
Speedy, flexible business development capable of adapting
to change
Sustained growth through strategic investment
Corporate governance system for elevating corporate value
Assertive dialogue with stakeholders and contribution topeople around the world
Operations that will support the development of society
Fair corporate culture in which diverse personnel can further excel
Framework that allows people to be autonomous, challenging
and active
High professional pride and company loyalty

Milestones
Established a dominant position in spark plugs
Top market share of exhaust gas sensors

Direction

Structure of the 2030 Long-term Management Plan “NITTOKU BX”

Average operating income ratio of approx. 15% over 5 years
Overseas production ratio improvement (30% 40%)
Starting the RHQ system of delegated authority and strengthening
the Group’s abilities

The 2030 Long-term Management Plan
“NITTOKU BX” is a plan composed of three
Medium-term Management Plans: the seventh
Medium-term Management Plan (the last year ofwhich was the first year of the Long-termManagement Plan), a four-year Medium-termManagement Plan and a five-year Medium-termManagement Plan. We will further concretize this10-year plan.

Livelier discussions including outside directors and strengtheningof governance
Strategic M&A, establishment of joint ventures (WELLS, Japan MDM,NTK CERATEC, CAIRE, MORIMURA SOFC TECHNOLOGY, CECYLLS)
Established The Nittoku Way. All employees share the values that
Nittoku Group should adhere to, and pass on to the next
generation.

Medium-Term
Management Plan (4 years)

7th
Medium-Term
Management
Plan
April 2020

Medium-Term
Management Plan (5 years)

Eco Vision 2030
April 2021

1. Further evolving current
businesses
2. Establishing new
business pillars
3. Establish strong
business
infrastructures

April 2025

Break to change.
Change to create.

Extend for the future.
Spread out to exceed.

Respect Dokuritsu Jiei.
Start from scratch.

To foster a new corporate culture, wewill work toward sustainable growth.

P.21

Overview of NITTOKU SHINKARON

Our current businesses grew even more strongly. In our new businesses, although we continued to sow seeds,
we have not yet demonstrated our growth vision.

Shisei-Shinjitsu

Dokuritsu-Jiei

Shikai-Keitei

NITTOKU WAYNGK SPARK PLUG CO., LTD. Integrated Report 2022

19

March 2030

Soshi-Kantetsu

Introduction

Strategies for
Value Creation

About Us

Foundation for
Value Creation

Financial/Corporate
Information

Long-term Management Plan

2030 Long-term Management Plan “NITTOKU BX”

Strategy

Millions of units
140

Changes in the external business environment

Millions of units
2,500

120

“Transformation of Our Business Portfolio” for Growth

2,000

100

According to these graphs, which forecast the sales volume of new
automobiles and the numbers of automobiles owned by people aroundthe world, the number of those equipped with internal combustion
engines will continue to increase until around 2030. However, in the
middle of the 2030s, the number will peak and begin to go down. We
therefore need to shift to a business structure that does not rely on thesales of products used in internal combustion engines by the middle ofthe 2030s.

80

1,500

60

1,000

As the mainstay of the Long-term Management Plan, we will foster “business portfolio transformation.” As for ICE-related business, wewill be able to expand revenue and operating income until 2030 in line with an increase in the number of ICE-equipped automobiles.
However, in anticipation of the business environment in 2040, we need to pursue rationalization, higher efficiency and selection andconcentration. As part of this initiative, we have shifted to an in-house company system in April 2021, while some departments werespun off. With more clarification of responsibilities and authorities, we will transform ourselves with speed. In new businesses, we aim toachieve a business value of 200 billion yen by 2030, working to achieve growth in each area in terms of sales and profitability. We aim toturn these businesses into our profit pillars in 2040, although their operating income margin may be still low in that year. We will increase
efficiency in our ICE-related business with a focus on making profit, use the cash gained in that business for the growth businesses andachieve a profit growth rate that is higher than the market growth rate for the businesses. For new businesses, we will strictly screen thebusiness themes to be continued, thereby revitalizing the new businesses. In order to promote this kind of business portfoliotransformation, it is essential to achieve the following three aims: management innovation, clarification of responsibilities and authority,
and willful cultural change. We will break our dependence on ICE-related business based on this recognition.

40
500

20
0
2015 2020 2025 2030 2035 2040 2045 2050

02015 2020 2025 2030 2035 2040 2045 2050

Worldwide sales of
new automobiles

Number of automobiles owned
by people around the world

Equipped with internal
Spark Ignition ICE
combustion engines
Source: Forecasts made by NGK SPARK PLUG based on data provided by IHS Markit Automotive through its “Mobility and Energy Future” service
FCEV

BEV

Diesel

PHEV

FHEV

MHEV

* Forecast when preparing Long-term Management Plan (2020)

Transformation of the business portfolio
Sales revenue composition

NGK SPARK PLUG is currently doing business with a focus on internal
combustion engines (ICE), but in the future, we need to be involved in
more than ICE business and embrace the challenge of starting new
businesses to transform our business structure. Specifically, as the2040 targets, we aim to decrease the proportion of ICE business in our
total sales revenue from the current 80% to 40% while raising that of
non-ICE business from the current 20% to 60%, thereby transforming
our business portfolio. To achieve these targets, we will decrease theratio to 60% and increase the ratio to 40 % for ICE business and nonICE business, respectively, as milestone targets for 2030 under the2030 Long-term Management Plan “NITTOKU BX.”

750.0 billion yen

Non-ICE business(Forecast)

60%
40%

426.2 billion yen

Sales revenue composition
ICE business

20%
80%

60%

40%

2030

2040

Secure profit while transforming the business portfolio

Growth business

ICE businessNew business

1%
2020(when preparing Long-term Management Plan)(Year)

Super efficiency and cash generation

Growthbusiness

Drastic development exceeding the market
growth rateNewbusiness

Selecting and choosing theme andcommercializing cutting-edge themes

10%

17%

Guiding principle

ICE
business

with Speed !!

In our Long-term management plan, we have upheld “Change with Will !!”as the guiding principle, meaning “with a strong commitment (‘Will’), we
will foster ‘Change’ for coexistence with society and people”. We aim toreform our organizations and business structure with speed to makeour company one that can coexist with stakeholders from a global
perspective.

Change from ICE-oriented businesses

ChangeSpirit of Dokuritsu Jiei (self-reliance)
Professional companies, organizations, and human resources
Optimize for speed

30%

FY2019with a Global mindset !!

FY2029(Forecast)

IGNITE YOUR SPIRIT
Make our dream come true

with Fairness !!

Change with Will !!

82%

Innovation

60%

Global thinking

Create a sustainable society
Diverse personnel
Strive for fairness

with

Will

Business fields to focus on

Specific measures

We are focused on both existing and new businesses in four fields: Environment & Energy, Mobility, Medical, and Communication. Our corecompetence includes ceramic materials technology, sensing technology and a global production/sales system. We will add “Something
New” to these to create new value and foster “Open Innovation” both internally and externally, thereby achieving further growth in the four
fields.

To an energy efficient and environmentallyfriendly society

1

Small, strong and agile head office to support the transformation of
our business portfolio
Quick management decisions supported by DX

To a mobile society that is fun andconvenient

Using sensing technology to improve industrial efficiency
Stable supply of regenerated energy

Environment &EnergyMobility

Providing maintenance services according to yourlifestyle
Improving electricity using ceramic components
Providing MaaS (Mobility as a Service) to fit special
needs

2

Core

Non-invasive diagnosis and treatment, and provision of
preventive equipment and services using ultrasoundtechnology

MedicalCommunication

Clarification of Responsibilities
and Authority

Strong authority and strict responsibilities to promote thetransformation of our business portfolio
Build an optimized structure and system for each business

Competence*
To bring advanced medical care topeople all over the world

Management Innovation

A high-speed communication society
where virtual and reality are connected
Provide infrastructure parts to support high-speed
communication

3

The 2030 Long-term Management Plan “NITTOKU BX” shows the
midway milestone for our 2040 Vision. Under this plan, we will strive
for business portfolio transformation, clarification of responsibilities
and authority and investment in new businesses. In line with theguiding principle, “Change with Will !!” which should be followed by all
employees, we will achieve “Beyond ceramics, eXceeding imagination”
to be reborn as a new NGK SPARK PLUG Group.
For the management targets for FY2029, we aim to achieve an
operating income ratio of 15% or more, ROE of 12% or more, and
ROIC of 10% or more.

Operatingincome ratio

15% or more

Willful Cultural Change

Undertake culture reform and strengthen the Group’s abilities*Ceramic material technology, application technology in harsh environments, disparate material bonding technology, sensing technology, rapid high-temperature heating technology, and global production and sales system

NGK SPARK PLUG CO., LTD. Integrated Report 2022

20Management target(FY2021: 15.4%)

ROE

12

% or more(FY2021: 12.5%)

ROIC

10

% or more(FY2021: 7.9%)

About Us

Introduction

term Management Plan “NITTOKU BX,” which will be the milestone for the vision. Here we explain the overview.

Protecting the global environment is the foundation of a sustainable society. For all our stakeholders, we must face it head on as a key
management issue.
On the premise of aiming for carbon neutrality in 2050, we have established “Eco Vision 2030,” which shows the vision (or goal) of
what we want to be by 2030 and the vision of what we will pursue until 2040.
For Eco Vision 2030, the impacts that our businesses and products would have on society and our company were analyzed, and 13
issues that would have a large impact were selected. Among them, the four issues that were considered to have a greater impact –“Responding to Climate Change,” “Expanding Environmentally Friendly Products,” “Conserving Water Resources,” and “Waste
Management” - were positioned as the four important issues, and numerical goals were set for them. Through the practice of Eco Vision
2030, our group will work together to contribute to the realization of global carbon neutrality and zero emissions.

VisionAchieving change beyond the current way

Specific target

Each company ensures its competitive
advantage and practice Dokuritsu-Jiei
Transformation of business portfolio
Run on two wheels while current and new businesses operate independently

Policy4 important issues
Eco Vision 2030 issues

Conserving Water
Resources

The milestone to be achieved in 2030
CO2 emissions:
30% reduction from the FY2018 level
Expand Nittoku Green Products
Water consumption intensity:
Keep below FY2018 level

Reduce at least 1% of waste intensity comparedto FY2018

Introduce individual systems and performance-based compensation
systems that match the business environment

Promote investment in non-ICE businessand conversion of human resources

Our vision for 2040
Implementing activities toward realization of a decarbonizedsociety

Achieve accelerated business growth

Measures

Further strengthen earning power through ROIC management*Aiming for carbon neutrality by 2050

Maximize the cash-generating capacity of the plug and sensor businesses

All products contribute to the improvement of the global
environment and contribute to making sustainable society cometrue

Break down the barriers of conventional thinking with NITTOKU DX
Value creation

Implementing sustainable business operations in response to
global water risks

Achieve over 95% effective utilization rate

Waste Management

Financial/Corporate
Information

In our Medium-term Management Plan, we will work on zero-based reforms to achieve our 2040 Vision and the 2030 Long-

Eco Vision 2030

Expanding Environmentally
Friendly Products

Foundation for
Value Creation

Medium-term Management Plan

Long-term Management Plan

Responding to
Climate Change

Strategies for
Value Creation

Transform all aspects of Nittoku culture, including management
decisions, business domains, work styles, and corporate climate

Contribution to society
to be accomplishedContribute to a global recycle-oriented society by promoting
zero emission

Improve business activities and start new businesses
to realize a sustainable recycling society
Set and implement sustainable business operation goals

Promote 3R (reduce, reuse, recycle) activities

Key
Initiatives

Other issues
Eco Vision 2030 issues

Integration with management

Globalization of EMS
Upgrading
EMS

The milestone to be achieved in 2030
Incorporate global environmental issues intobusiness strategy
Environmental KPI (Eco Vision 2030) initiatives andmanagement commitment to achieve themWork to improve environmental information sharing
with overseas Group companies as well as
monitoring and supervisory functions

Analysis of climate-related risks and Analyze climate change risks and opportunities andincorporate responses into business strategy
opportunities
Implementing environmental
compliance
Aim for zero violations of environmental laws and(compliance with environmental laws regulations and zero environmental accidents
and regulations and elimination ofenvironmental accidents)

Our vision for 2040

Continuing to carry out environmental information
sharing with overseas Group companies as well as
monitoring and supervisory functions
Ensuring business sustainability by analyzing
climate change risks and opportunities andincorporating responses into business strategy
Being a company trusted by society by maintaining
zero violations of environmental laws andregulations and zero environmental accidents
All employees have a high level of environmental
awareness and are able to contribute to therealization of a sustainable society as a company

Chemical substances management

Carry out appropriate chemical substancesmanagement and reduce environmental impact

Continuously carrying out appropriate chemical
substances management to help conserve
biodiversity

Green procurement

Achieving 100% introduction of the green
procurement system

Carrying out procurement with a low environmental
impact so that we can help realize a sustainable
society

Green logistics

Promoting green logistics and reducing CO2
emissions by optimizing logistics efficiency

Achieving green logistics globally

Enhancement of environmental
information disclosure

Responding to stakeholder requests and using
communication to foster dialogue

Business strategy

Continuing to incorporate global environmental
issues into business strategy

All employees take environmental education
programs and actively engage in environmental
conservation activities

Raising environmental awarenessTo achieve the transformation of our business portfolio, we will maximize cash generation in current
businesses and proactively allocate management resources optimally to growth and new businesses.

Performance
Goals

Current
businesses

Determine an appropriate business scale
and maximize cash generation throughultra-efficiency

Growthbusinesses

Achieve business growth that exceeds
the market growth rateNewbusinesses

Realize new businesses pillars andshorten the business creation cycle

We aim to achieve revenueof 600 billion yen andoperating income of 100
billion yen in the fiscal year
ending March 31, 2025, thefinal year of our 2025
Medium-term Management
Plan.

Cross-company operations
Invest in non-ICE business
Promote transformation of human resources portfolio
Strengthen earning power through ROIC management

FY2021

FY2024…FY2029

491.7

600.0

750.0

75.5

100.0

—

80%:20%75%:25%60%:40%Operating income ratio

15.4%

17%

15% or more

ROIC

7.9%

10%*

10% or more

ROE

12.5%

13%*

12% or more

Revenue(billions of yen)
Operating income(billions of yen)
Sales composition
ICE: Non-ICE* Calculated based on the business plan at the time of formulating the Medium-term Management Plan
(excluding additional M&A during the medium-term plan period)

Responding to stakeholder requests and using
communication to foster dialogue

NGK SPARK PLUG CO., LTD. Integrated Report 2022

21

Strategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Long-term Management Plan

Specific efforts
Efforts to improve
capital efficiency

Business continuity/withdrawal examination flow

Efforts to transform thebusiness portfolio

Cash flow planning

Shareholder return policy

The Finance Officer Outlines
the Financial Strategy

Efforts to improve capital efficiency

Target of
medium-term
plan

Operatingincome ratio

10%

P.24

ROIC
improvement
drivers

Key initiatives for
improvement

Cost ofsales ratio

Market share
increase in highvalue-added products

SGA ratio

Improvement ofequipment andlabor productivity

Unprofitable businesses
Monitoring target

Decision and rating to join theBusiness Transformation Division
Appointment of new company
presidents

Board of Directors

Cost reduction inindirect departments

ROIC

Revenue
Return on
invested
capital (%)

Focus points during the period of theMedium-term Management Plan

Working
capitalturnover (%)
Fixed asset
turnover (%)

Plan A

Business Company

Formulation of business plan

Reduction of inventories by
optimizing the supply chain

Business
Transformation
Division

Reduction of fixed assets
in the ICE business

Plan B

Reconstruction plan by M&A
Study of business sale,internal restructuring andwithdrawal

Global Strategy
Division

As part of our initiatives to transform the business portfolio, we introduced an in-house company system in April 2021. We have introduced this system
not only for business departments but also for functions at headquarters. The organization that used to be a part of the headquarters or functional
headquarters has been reorganized into the Global Strategy Division and Business Partner / Company, and a small number of strategic staff areassigned to the Global Strategy Division. The organizational structure is designed to position each business and function as an independent pseudocompany. Through this organizational change, each company receives internal capital allocated by the headquarters, and will be responsible not only forPL, but also for BS and CF, thereby clarifying responsibility for return on investment as well as a decision to invest. In addition, the responsibilities andauthorities, which were ambiguous in the past under the division system, will be clearly defined by for example optimizing the structure and rules tomatch the standards of the industry to which each company belongs. The Global Strategic Headquarters will promote global group management andaccelerate the maximization of the business value according to its business position under the policy of Dokuritsu-Jiei.

Corporate division

Divisions

Business support department

Business department

Business Partner (BP) / Company aims at providing high-value-added services that are market-competitive in order to contribute toenhancement of the business companies’ profitability. By introducing the in-house company system, we were able to visualize the costs ofeach organization and its contribution to the business, which have been difficult to come to surface. Also, the services will not be evaluatedbased on internal standards, and will be compared with those of market. By grasping the service levels of other companies and identifying
areas for improvement, we will improve the quality of our services step by step, and at the same time, we will expedite cost reduction by
separating services with high added value from those that should pursue higher efficiency.

Roles

Corporate
DomainImprovement of company-wide profitability by introducing Business Partners (BP) system

Business Partner (BP) / Company Aims

Planning of company-wide strategies Enhancement of global governance
Promotion of business portfolio transformation through optimal allocation of management resources
Business withdrawal/continuity governance

Global Strategy Division

Business Partner (BP) / Company

Providing market-competitive, high-value-added services

Contribution to the maximization of company-wide earning capacity
Advancement of the services provided Cost reduction through efficiency improvement

Improvement of company-wide earning capacity contributed by Business Partners (BP) /Improvement of the ability to adapt to changes by introducing systems and structure tailored to each market environment.
Achievement of KPI and KGI at each company

Business company/spin-off

Implementation process

Procurement / Accounting / Human Resources / Labor / IT / Public Relations /General Affairs / Intellectual Property Management / Quality Control / Environmental Safety

Business portfolio management
Disclosure segments
Investment efficiency

We will strengthen business portfolio management
by setting hurdle rates for each business segment.
Assessing the businesses using the two axes ofgrowth potential and investment efficiency, we
determine the future direction. KGI and KPI are set
for each company after defining expected roles
based on rating in accordance with eachcompany’s position in the market.

Continuous
monitoring interms of bothquantitative andqualitative
aspects

Management audit ofbusiness plan

Introduction of an in-house company system

New organizations from April 2021

Examiningbusiness direction

Business plan formulation and evaluation
Review of unprofitablebusinesses by setting rules
for business withdrawal

Efforts to transform the business portfolio

Traditional organization

Business plan decisionJudgment of businesswithdrawal/continuation

Regarding the ROIC management that was not fully in placethroughout the Group during the period of the previous Medium-termManagement Plan, we have identified priority measures that should
be undertaken to improve the investment efficiency. We will achieve
10% ROIC by subdividing the challenges and responsibilities thatmust be undertaken at individual business and monitoring KPIs. We
will continue to work on increasing our market share in high valueadded products, improving equipment and labor productivity as well
as reducing fixed assets in the internal combustion engine businessover the medium to long term. In particular, during the period of themedium-term management plan, we will focus on the following
priority measures: Cost reduction in indirect departments, review of
unprofitable businesses by setting rules for business withdrawal, andreduction of inventories by optimizing the supply chain.

Business strategy
Business
Strategy

P.23

We newly established the Business Transformation Division in order to judge as to whether to continue or withdraw from an unprofitable business.
The Business Transformation Division formulates and implements plans for the “business revitalization” of an unprofitable business or “withdrawal or
business sale, etc.” In the event that a company comes under the organization of the Business Transformation Division, a revitalization plan will be
formulated under the new company president. Simultaneously, the Business Transformation Division formulates another revitalization plan under
different point of view. Finally, the Global Strategy Division assesses them in respect of probability, thereby enabling us to implement the best
business strategy from multiple perspectives. The Board of Directors, Business Transformation Division and Global Strategy Division have all beenstrengthened with outside human resources to establish a system that enables a rational decision-making.

Generationof FCF(Investment
minimization)

Withdrawal
Revenuestructure reform

Revenue expansion
Achieve higher
profitability(Enhanced investment)

Revenue
expansion(Ascertainment of
future direction)

ICE
business

Automotive
components

GrowthCeramics
businesses

Growth potential

Business continuity/
withdrawal examination flow

NewNewbusinesses businesses

Medium- to long-term direction

FY2021

Grasp

Enhance cash generation and aim foreven higher profits

Understanding thecurrent situation

Build a profitable structure that isresilient to changes in the external
environment and expand sales

Improvement ofexpertise

Business scale growth exceeding themarket growth rate and improvementof profitability
Discover new businesses that will be
the pillars of new businesses andbuild scenarios for commercialization

Cost reductionNGK SPARK PLUG CO., LTD. Integrated Report 2022

22

FY2022

FY2023

ChangeImprovement

Business improvement

Improving thequality of service

FY2024

Expansion

Expansion of range

Recognize the current situation ofyour department, comparing with theservice level of other companies andmake improvements

Improve professional skills by
educating employees

Start preparing for external sales
Improve professional skills by
educating employees

Achieving both maximization of operational efficiency and improvement ofquality

Raise BP’s awareness of being a profit
center by watching its own income
statement

Identify problems and implement
countermeasures

Continuation of business evaluationand improvement

Consideration and implementation of
drastic measures in the event that
service improvement and cost reduction cannot be achieved during the
medium-term management plan period

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

The Finance Officer Outlines the Financial Strategy

Aim to reduce inventories by rectifying production
and logistics
We hope that the logistics disruptions that have continued sincelast year will be resolved as soon as possible. However, wecannot afford to look on at the situation without doing anything.
We are carrying out a project aimed at supply chain reforms. In
this project, we are working to rectify production and logistics byreviewing them globally. We want to prevent the problems suchas bottlenecks and backflow that can arise when things andinformation are not organized in production and logistics. For
example, one of these efforts is to reduce the number of productnumbers, which reduces the amount of time that products andwork in process remain at the production site or in thewarehouse. By bringing production processes and logistics closer
to optimization in this way, we can reduce inventories. We expectthat we will see the effects of this rectification gradually emerge inFY2023.
Through this rectification approach, as well as other measures
within the Group, we aim to improve ROIC by reducing working
capital, which is the denominator of ROIC. By also withdrawing
from the unprofitable business mentioned earlier, we aim toachieve the Medium-term Management Plan target of 10% ROIC.

While aiming to improve
capital efficiency, we will
steadily work toward thenext phase of growth.
Kenji Isobe
Executive Officer

Allocating earned cash for the next phase of
growthAchieved growth in both revenue and profits for
the FY2021 performance

Assess profitability and growth to determine
whether continuation of business is viable

FY2021 was a year in which we were exposed to a variety of
external factors, including soaring raw material prices andsluggish automobile production due to a shortage ofsemiconductors, as well as problems stemming from Russia’s
invasion of Ukraine in February 2022.
The consolidated performance resulted in growth in bothrevenue and profits. These results were buoyed significantly byexchange rate fluctuations and higher sales of our profitable
automotive aftermarket parts, which improved the product mix.
Operating income increased in FY2021. This resulted in an
improvement in ROIC, one of the key management control
indicators, which was 7.9%. However, from a qualitative
standpoint, challenges remain for the ROIC management that we
aim to achieve.
In adopting ROIC as a management indicator, we started froman awareness of the issue that although we are a highly profitablecompany, there may be room for us to increase capital efficiency.
Returning to that perspective and reviewing our business in
FY2021, we were forced to raise inventory levels due to factors
such as logistics disruptions and rising maritime transportation
costs. As a result, although operating income increased, we wereunable to reduce inventories in working capital. This meant that
our improvements fell short of ROIC management targets, so
challenges remain.

Our business is broadly divided into three businesses: the ICE
business, which includes the Automotive Components; thegrowth business, which includes the Ceramics; and the new
businesses that we will create to transform our business portfolio.
The biggest need for improvements to ROIC is in our cash cow,
the Automotive Components (ICE business). We break down
ROIC by business, set targets, and track progress in the
Automotive Components, as well as the Ceramics, which we plan
to grow.
In addition, each internal company breaks down ROIC into
trees and manages them individually. Furthermore, apart from the
ROIC for each business, we set the WACC (weighted average
capital cost). We maintain awareness of ROIC and WACC as we
operate the business and make investment decisions.
Meanwhile, we may decide to withdraw from low profit
businesses or businesses that are not expected to grow in the
future. For example, in FY2021, we withdrew from some productsin the medical business and sold all of our shares in Japan
Medical Dynamic Marketing, INC., an equity method affiliate. We
believe that through selection and concentration of suchbusinesses, we will achieve improvements in ROIC in the medium
to long term.

Our basic idea of how to use earned cash has not changed. The
ICE business is a cash cow of the Group. The cash earned fromthis business is actively distributed to new businesses, including
growth businesses, in a balanced manner to maximize long-term
profits.

Determine investment based on recoverability
Now I will talk more about how we use cash. It is not our policy to
distribute all cash earned from the Automotive Components toother businesses.
For example, there are areas where there is room for growth in
the Automotive Components, so we will invest if we have a viable
plan for recovery. In doing so, we will also consider the WACC
mentioned earlier.
In that sense, there is also plenty of potential to redistribute theearned cash to the Automotive Components. We will review andmake decisions each time so that we do not miss opportunities
for business expansion and profit maximization in the medium
and long term.
The automotive components business is expected to decline
after internal combustion engines have peaked. However, ourstrength is that we still have the earning power in the market foraftermarket parts. We can expect that situation to continue for awhile. New businesses in the Automotive Components could also
emerge from the global distribution network that operates in themarket for aftermarket parts. In that sense, there is room forinvesting in new projects in the Automotive Components torecover proceeds and return them to shareholders.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

23

In addition, we of course distribute cash to areas such as
growth businesses. From a longer-term perspective, we also feela need to consider investing in human resources. Money is not
the only asset a company has. People are also assets. I believethat we should also invest in people, which are a company’svaluable assets, as we drive the transformation of the businessportfolio.

Adhere to the profit return policy and promote IRwith a focus on fostering dialogue
With respect to shareholder returns, from FY2021, dividends
were fully performance-linked. We significantly changed ourannual dividend payout ratio to 40%. Our idea is basically tocontinue this policy.
In the last few years, we have seen the stock price behave likethat of an internal combustion engine stock. We feel that there isa gap between the evaluation from the stock market and theactual situation. There were occasions when I felt that despite our
performance being not so bad and that our profit margins very
high, our performance was not properly evaluated.
When we meet with shareholders and investors, we first tellthem about how well our company is performing. In particular,
after the automotive components business peaks, the businessfor aftermarket parts will remain for the next 10 or 20 years,
considering the number of automobiles owned. Our products
have a high market share and a high profit margin, so there is stillroom for steady growth. Focusing on these strengths in the
Automotive Components, we have explained them toshareholders and investors over the past year in particular. I think
the stock market now appreciates that the automotive
components business has continued to grow and continues toprovide a source of revenue. This has contributed to a recovery of
the stock price.
In addition, we announced that we will change the Company’s
English name to Niterra in FY2023. We did this out ofconsideration that the former company name “NGK SPARK
PLUG” leads to the categorization as an internal combustion
engine stock. That can become an initial barrier that holds backoverseas investors’ investments.
In FY2022, we held a business briefing for shareholders andinvestors in May. As well as our strengths in the Automotive
Components, we took the opportunity to communicate ourgrowth strategies in other businesses. For example, given thatthe semiconductor sector is very dynamic, we explained about
the SPE business, which deals with products for semiconductor
production equipment. We also talked about our new business,
the fuel cell business.
This kind of dialogue with shareholders and investors is also avaluable opportunity. We will use IR activities such as briefings tothoroughly communicate our business strategies and growthstrategies.

Strategies for
Value Creation

About Us

Introduction

Foundation for
Value Creation

Financial/Corporate
Information

Business Strategy

Automotive Components GroupKGI (New Medium-term Management Plan)

KGI

Operatingincomeratio
Free cash
flows

Annual average growth rate:

1%

1.5

Strengthmetal spark plugs already account for around 40% of sales, and by replacing regular nickel spark plugs with them, it
would be possible to achieve a significant improvement in fuel efficiency. By selling precious-metal spark plugs, which
help boost fuel efficiency, we will meet the needs of the market.

Integrated production system frommaterial development to manufacturing

Precious metal plug ratio by commercial distribution
80

Unique sales channels around the world

Precious metal plugs as apercentage of products
for original equipment

68%

60

times (compared with the amount for FY2020)

40

31%

Period for reaping the results in the aftermarket

With the tightening ofenvironmental regulations, theshift to precious metal plugs is
rapidly advancing for both original
equipment and the aftermarket

Asia

Demand for precious metal plugs is
expected to increase for the original
equipment market. Aiming to growsales in the future

FY2005 FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021

Projected ICE demandNot only do they improve starting, acceleration, and idling stability, but they also improve combustion efficiency by producing a stronger
spark. Replacing nickel plugs with precious metal plugs can improve fuel efficiency by approximately 2%, contributing to the reductionof carbon dioxide emissions as the number of vehicles equipped with precious metal plugs increases.

(Millions of units)

2,500

Number of 4W automobiles held globally
FCV

2,000

BEV
1,500

Electric

PHEV
FHEV

DieselMHEV

Spark Ignition ICE

ICE

Areas in which
we contribute

ICE+electric

1,000

500

Precious metal plugs, which are high value-added products, alreadyaccount for nearly 70% of original equipment plugs, but account for
only about 30% of products for the aftermarket. Because thepercentage of precious metal plugs for original equipment tends toindicate the percentage of precious metal plugs in the aftermarket
10 to 15 years from now, we expect that precious metal plugs will
increase in the aftermarket at an accelerated pace in the next fiscal
year and beyond. Automobile production is expected to peak out in
2030, and sales of products for original equipment are also expected
to start declining, but sales of precious metal plugs will continue toincrease because replacement demand for aftermarket products willcontinue beyond that time. In terms of unit sales prices, those ofaftermarket products are higher than those of products for original
equipment, so even if the overall sales volume of spark plugs starts
to decline, sales are expected to continue to grow beyond 2030,
contributing to earnings.

EV

The importance of tackling climate change has increased
substantially during the past few years, and governments aroundthe world have been moving swiftly to become decarbonizedsocieties. The automobile industry is in the midst of a once-in-acentury period of radical transformation, with automakers
developing electric vehicles (EVs) as nations move with greater
speed toward electrification in order to reduce CO2 emissions.
Amid this trend, the electrification of power trains is occurring
even faster than was predicted just a few years ago. HEVs
(hybrid vehicles) are expected to proliferate over the medium
term, while ZEVs (zero-emission vehicles) are likely to dominate
over the long term.
However, although the number of vehicles equipped with ICE
is expected to decrease after 2030, demand from the repair
parts market is expected to continue over the long term, as 60%of the total number of vehicles will still be equipped with ICE asof 2050, and more than three-quarters will remain compared tothe peak year.

China
Precious metal plugs as a percentage
of products for the aftermarket

0

Environmental contribution of precious metal plugs

Decarbonized society

Already promoting approximately
80% conversion to precious metal
plugs for original equipment, andincreasing the ratio of precious metal
plugs in the repair parts market

32%

20

External environment

North
AmericaandEurope

0

2020

2025

Spark Ignition ICE

2030
Diesel

2035
MHEV

2040
FHEV

2045
PHEV

2050 (Year)
BEV

FCV

Stricter environmental regulations

Forecast of spark plug sales volume and amount andperformance of aftermarket products by type
Assumptions for sales amount
Estimated based on the average unit price in the first half of FY2021
Estimated assuming that the current market share remains constantSales volume of plugs for original equipment
Sales volume of nickel plugs for aftermarket

Sales volume of precious metal plugs for aftermarket
2015

We have also been expanding our share of the market for exhaust gas oxygen sensors, for which demand has been growing in
response to a global tightening of environmental regulations. The expansion of regulatory scope to cover not only automobiles but also
motorcycles has resulted in a particularly large jump in demand for sensors for controlling the quantity of fuel injected. Demand for thesesensors for both autos and motorcycles has been rising. The need for sensors with higher performance that can assure compliancewith standards is mounting. Such sensors are more technologically advanced than the typical oxygen sensors that have been
mainstream until now, and include wide-range oxygen sensors capable of measuring oxygen concentration in exhaust gas more
precisely as well as NOx sensors capable of measuring nitrogen oxide.

Overall sales
amount of
spark plugs

2020

2025

2030

2035

2040

2045

2050

Like spark plugs, exhaust gas oxygen sensors now need to be high-value added products with a stronger environmental
contribution. Compared with regular oxygen sensors, our next-generation oxygen sensors and wide-range oxygen
sensors can contribute to reduced CO2 emissions through more precise measurement of oxygen concentrations, andthey therefore allow compliance with strict environmental regulations.
Although HEVs and ZEVs are expected to increase over the medium to long term, this does not mean that ICE equipped vehicles will
disappear immediately. Because it is important to reduce CO2 emissions during the transitional period of electrification, we will continue
to provide high value-added products to the market and contribute to the environment.

Sensors

Vision(2) Curtailing of investment thanks to productivity improvement and increase in capital efficiency
thanks to inventory reduction(1) Market share expansion in high value-added products

By concentrating investment on high-value added products like these spark plugs and exhaust gas oxygen sensors, maximizing
investment effectiveness, pursuing ultra-efficiency, and expanding our share of the market for high-profit-margin products, we will
maximize cash generation. We will curb increases in inventory by raising productivity, identify supply chain issues on a crossorganizational basis encompassing procurement, manufacturing, logistics, and sales, clarify responsibilities, and endeavor to trim
inventories.

Against the backdrop of these rapid moves toward decarbonization, the need for electrically-powered
Plugs
vehicles that offer high levels of fuel efficiency, such as HEVs and PHVs, is increasing. Our range of spark
plugs include the regular nickel type as well as precious metal types, which are highly fuel efficient. The
precious-metal spark plugs are said to offer fuel efficiency that is around 2% higher than the regular types. Precious-

NGK SPARK PLUG CO., LTD. Integrated Report 2022

24

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Business Strategy

Automotive Components

Looking back on the first year of the Medium-term Management Plan

Overview of FY2021

Revenue (billions of yen) and operating income ratio (%)
Revenue

Operatingincome
ratio

387.8
19.2

19.2

billion yen

387.8
137.8

%

21.2

162.3

281.7

2021

2022

Plug business

Revenuecomposition

444.0

250.0

Sensor business (Forecast)

Revenue increased by 22% year on year, reaching a new record high. Sales of spark plugs for original equipment were
noticeably sluggish in major regions as automakers’ production was constrained by the shortage of automotive
semiconductors, which had been continuing since the beginning of the period. Compared to FY2020, which saw a large
drop in sales due to the impact of the spread of COVID-19, sales remained slightly higher. On the other hand, strong demand foraftermarket spark plugs continued due to an increase in maintenance demand, and sales exceeded those of the same period of theprevious year, especially in North America, Europe, and China, resulting in overall sales of spark plugs for the aftermarket showing adouble-digit growth rate year on year. Although the sharp rise in raw material prices since the beginning of the fiscal year was a negative
factor for operating income, we have made efforts to reduce the impact through price revisions for both original equipment andaftermarket spark plugs to offset the sharp rise in prices. In addition, due to strong sales of high-margin aftermarket spark plugs,
operating income in the Automotive Components Group, including the sensor business, reached a record high.

Plugs

78.9

%

(Fiscal year)

Although sales volume declined throughout the year, foreign exchange effects resulted in a 3% increase in revenue
compared to the previous fiscal year. As with spark plugs for original equipment, the unstable automobile production
continued throughout the year due to factors such as the shortage of automotive semiconductors. Therefore, sales
volume declined for all major products with the exception of some products. From the fourth quarter onward, although automobile
production in North America, Europe, and other regions gradually recovered, sales declined slightly year on year when excluding theimpact of foreign exchange rates. Sales volume of exhaust gas oxygen sensors decreased 2.6% year on year in North America, 5.6%
year on year in Europe, and 13.3% year on year in China, falling below the level a year ago in all major markets and 3.2% year on year
overall. Demand for oxygen sensors for motorcycles, which increased significantly last year with the adoption of emission norms in India,
has also settled down, and results were almost on a par with the previous year.

Sensors

Changes in sales volumes of automotive products by region
Sales volume by region (FY3/21 vs FY3/22)

GlobalSpark plug + 10.2 % Exhaust gas oxygen sensors - 3.2 %(OEM: +1.4% AM: +13.1%)

Outlook for FY2022(Global automobile production: -2.1%)

Although we expect the supply shortage of components such as automotive semiconductors to continue, we anticipate a
gradual recovery from the second quarter onward. As automobile production recovers, we estimate that sales of spark
plugs for original equipment will also increase and that sales of spark plugs for aftermarket will remain at last year’s level,
and we plan to achieve a new record high in our revenue in FY2022 as well. With regard to price revisions due to soaring raw material
prices, we were unable to reflect all the effects of the price revisions throughout the year in FY2021 because we started our initiatives
during the period, but we will be able to reflect them from the beginning of FY2022. In addition, we will continue negotiations with
manufacturers with whom we are negotiating prices of spark plugs for original equipment, with the aim of further improving profitability.
Through these measures, we plan to achieve record-high operating income in FY2022 as well.

Plugs

EuropeChina

North America(Market: -8.7%)(Market: -6.7%)(Market: +1.2%)

Spark plug

Spark plug

Spark plug

OEM: -1.3% AM: +19.3%

OEM: -5.3% AM: +1.8%

OEM: -4.7% AM: +3.6%

Exhaust gas oxygen sensors

Exhaust gas oxygen sensors

Exhaust gas oxygen sensors-5.6%-13.3%-2.6%

As in the case of plugs, we plan a year-on-year increase in sales due to an expected recovery in automobile production
from the second quarter as a result of the resolution of supply shortages of semiconductors and other components. While
the sensor business, which is mainly OEM supply, is expected to face headwinds in the form of lower demand due to theaccelerating shift to EVs, we will continue to fulfill our obligation to supply high-quality products and meet the expectations of customers
so that the automotive industry as a whole can continue its business. Even after demand peaks out, we will continue to contribute to
the resource cycle for the creation of new business pillars by leveraging our advantages in terms of high market share to improve
profitability.

Sensors

ASEAN(Market: +29.4%)

Spark plug
OEM: +17.4% AM: +10.5%
Exhaust gas oxygen sensors+28.3%*The figures for spark plugs include those for motorcycles.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

25

About Us

Introduction

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Business Strategy

Ceramics

SPE

MedicalKGI (New Medium-term Management Plan)

Revenuebillion yen

KGI (New Medium-term Management Plan)

Ceramic material technology that canwithstand high-power plasma

Revenue

KGI

KGI
ROIC

35.0
17

Strength

Ceramic sheet lamination technology that
contributes to surface temperaturehomogenization, low particles, and wideranging surface temperatures%

Operatingincomeratio

Assumes5%
annualgrowth80

Annual average growthrate of revenue:

12% or more

Sales channels around the world%

Oxygen therapy
needs on the riseHigh growth rate due toincrease in COPD sufferers

60

Europe40

North
America

China
Japan

20

Increase in COPD sufferers
Rising demand for stationary
and portable models

0
FY2020

FY2021

FY2022

FY2023

FY2024

Vision200-billion-yen market in 2025

Looking ahead, we will be strengthening our development structure along with CAIRE Inc., which we acquired in FY2018, and plan todevelop new stationary and portable oxygen concentrators, demand for which is expected to increase in the North American andChinese markets in the future. As we expand sales globally, we are strengthening our sales capabilities in sales channels that are suited
to expansion in the Chinese market and for the needs of each region.
To help improve the quality of life (QOL) of patients around the world, we aim to achieve growth by expanding our product line-up andour sales channels led by CAIRE.

VisionDifferentiation throughproprietary technologythat meets customer
requirementsbillion yen

The global market for oxygen treatment is expected to continue to expand as the population ages and the number of COPD sufferers
increases, such that the projected size of the market in 2025 is 200 billion yen. In regional terms, the North American market is currently
the biggest, and the number of patients is expected to continue rising, and we believe that demand for portable oxygen concentrators,
in particular, will rise. And in the Chinese market, an increase in the number of people with COPD is expected to lead to higher demand
for stationary oxygen concentrators, and the market is forecast to grow at a faster rate than the U.S. market.

Outlook for semiconductor production equipment market(USD billion)

A lineup including portable andstationary oxygen concentrators

External environment

External environment
With the new high-speed telecommunications standard (5G)
proliferating and lifestyles changing as a result of the impact
of COVID-19, demand for chips for use in IoT and AI isincreasing, and total sales of production equipment for
upstream semiconductor fabrication processes are expected
to grow at a rate of 5% per year until 2025. Regarding
market needs, the memory market requires high-rise 3D
NAND devices, and what is important for these is theformation of minute yet deep memory holes, which ispossible with high-power plasma. In other words, theetching process is important. As a result, the etching device
market is expanding, and we intend to supply ceramicmaterial technology that can withstand high-power plasma.
And in the logic market, demand for etching devices is also
increasing as result of multi-patterning technology, which
breaks down lines produced with a single exposure intoeven finer, multiple patterns. We plan to employ ceramic
sheet lamination technology to contribute to technology forin-plane temperature homogenization, low particles, andwide-ranging surface temperatures.

30.0
13

Strength

Establishment of
production structure that isresilient to market changes
Inventory optimization, increase incapacity utilization rates, increase inlabor productivity, etc.

Labor productivity
improvement:

improved by

Development of new
oxygen concentrators

30%(compared to FY2020)

NGK SPARK PLUG CO., LTD. Integrated Report 2022

26

Launch of new
products(FY2024)

Diversification ofsales channels andsales regions

Revenue from
Chinese market
Annual average growth rate:25% or moreIntroduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Business Strategy

Ceramics

Looking back on the first year of the Medium-term Management Plan

Outlook for FY2022

Revenue (billions of yen) and operating income ratio (%)
Revenue

Operatingincome
ratio

95.5
15.4

Revenuecomposition

112.7

billion yen

95.5
15.4

SPE: We expect demand in the semiconductor production equipment component business to increase as investment in data centersand servers, 5G, and AI continues to grow and demand for semiconductors continues to rise. In these market conditions, byintegrating the proprietary technologies of our Sendai and Komaki sites, and by continuing to implement fundamental reforms suchas cost reductions and lead-time reductions through production innovation, we are looking to increase our share of the current
businesses and also to increase sales and profit by enhancing our manufacturing capacity. Furthermore, in new productdevelopment, we aim to capture new demand through differentiated services by continuing to strengthen promotions to customer
development departments with timely prototype support through the expansion of prototype and express lines.

19.4

13.5

%

%
2021

2022

(Forecast)(Fiscal year)

Medical: In the respiratory equipment-related business of the medical business, although demand for stationary home oxygen
concentrators is expected to decrease as the situation of COVID-19 infection has started to subside, demand for portable oxygen
concentrators is expected to increase as people will likely go out more often. As a result, revenue is expected to decrease slightly
year on year. On the other hand, operating income is expected to decrease year on year, despite our plans to raise prices forcustomers and improve production efficiency, as we expect increases in costs due to soaring raw material and transportation costs
as well as component supply issues and the resulting deterioration in production efficiency.

Overview of FY2021
SPE: Against the backdrop of rapid digitization in society and the economy triggered by the global spread of COVID-19, e-commerceand social media use are increasing, leading to increased investment in data centers and servers, 5G, and AI. In these circumstances,the demand in the semiconductor production equipment market rose due to strong capital investment by semiconductor memory
and logic manufacturers, which led to parts shortages and longer delivery times in various areas. However, the Group’s efforts toincrease manufacturing capacity, such as by improving capacity utilization rates, resulted in a 28% year-on-year increase in revenue
in the semiconductor production equipment components business, significantly exceeding the previous year’s results.

Packages: In FY2022, demand for semiconductors remains strong as in the previous fiscal year, but the current situation is affectedby the uncertain outlook for the situation in Russia and Ukraine and the sharp depreciation of the yen, which has caused raw material
and fuel costs to rise. Therefore, we will continue to promote productivity improvement activities, as we did in the previous fiscal year,
in order to secure profits. Because the semiconductor market is a growth area and is expected to continue to expand in the future,
we will increase revenue in areas where we can take advantage of our strengths in ceramics.

Medical: Revenue was almost on a par with the previous year’s figure, increasing 4% year on year. Up until the third quarter, highdemand continued for oxygen concentrators for home treatment use due to the resurgence of COVID-19. In the fourth quarter,
although the situation of COVID-19 infection began to subside to a certain extent, revenue landed at a high level on a par with theprevious year’s results. In the medical equipment field, we terminated the capital and business alliance agreement with Japan Medical
Dynamic Marketing, INC., with whom we had been collaborating in areas such as joint product development and utilization of sales
channels. As a result, we transferred all of our shares in Japan Medical Dynamic Marketing, INC., and a gain on sales ofapproximately 8.5 billion yen was recorded in the fiscal year ended March 31, 2022. This resulted in a significant one-time increase inoperating income.

Cutting tool business: Cutting tools for the automobile industry are expected to perform well in conjunction with the recovery of
production by automobile manufacturers, and cutting tools for the aircraft industry are expected to recover gradually from whenengine parts production was affected by COVID-19. Revenue is expected to grow as a result. In addition to the increase in sales, we
also expect an increase in profit due to cost reduction activities.

TOPICS

Construction of a new plant to meet growing demand for semiconductors

Packages: The semiconductor industry as a whole is very active, including for data centers, due to the stay-at-home demandcaused by COVID-19. Driven by this, demand for our semiconductor packages has also been strong. In addition, the effects ofproductivity improvement activities that have been underway since FY2020 have contributed to higher sales and profits in thesemiconductor package business year on year.

Demand for semiconductors is increasing against the backdrop of the rapid digitization ofsociety and the economy. In order to increase its ability to meet semiconductor demand, NTK
CERATEC CO., LTD., a member of the NGK SPARK PLUG Group, has acquired a site in the
Takayashiki Nishi district of Tomiya City, Miyagi Prefecture, to construct a new plant. The newplant will manufacture electro-static chucks, structural ceramics products, and other products,
aiming to realize highly efficient and high-quality manufacturing by optimizing the productionlines. The new plant will cover an area of approximately 12.4 hectares and is scheduled to start
operation in April 2025 as the main plant of NTK CERATEC.

Cutting tool business: Cutting tools for the automotive and aircraft industries improved after being impacted by COVID-19, resulting
in a 23% increase in revenue year on year. Sales of ceramic and cemented carbide products to these industries increased, especiallyin the Japanese, European, and U.S. markets. Sales to the aircraft industry are still in the process of recovery, but steadily increasing.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

27

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Progress of New Business Creation and Future Prospects

Ltd., respectively, and various new businesses being developedby the Business Creation Company (BCC), which was establishedin April 2021. BCC is an in-house company renamed from the
Global Innovation Division, which was established in April 2020 toconsolidate the development of new business pillars other thanthe SOFC business, which had previously been undertaken by
several divisions.
BCC has a shared awareness internally of its mission, which isto provide solutions that create a better quality of life for people
around the world. Going forward, we would like to further refine
the direction of future new business creation mentioned earlier
with BCC, and create a situation where we can promote thisdirection together as one. Currently, BCC is developing its
business in three main areas: Utilities (decentralized utilities),
mainly in the environmental and energy fields; Smart Mobility,
mainly in the mobility field; and Smart Health, mainly in the
medical field.
As progress to date, in the Utilities area, we have launched two
new products in 2021: the ozone gas generator Sumikaze andwater quality sensing. The ozone gas generator Sumikaze has
been developed as a product effective in combating infectious
diseases, as it exerts an inhibitory effect on airborne bacteria,
viruses, and odors. Water quality sensing is a technology for landbased shrimp aquaculture that automatically measures ammonia
and other substances in seawater, and we are continuing to build
systems for further labor-saving and automation in theaquaculture business.
In the Smart Mobility field, in 2021 we launched Doctor Link, asmartphone app that provides preventive maintenance services
connecting automobile maintenance shops and users.
In the Smart Health field, we launched SAMPO Touch, a healthsolution that sends photos of family members and grandchildren
to a smartphone by holding the smartphone over a dedicated
NFC tag* on the way to and from a walk, encouraging middleaged and elderly people to take a walk while at the same time
providing a way for family members to keep an eye on them. In
addition, we are steadily developing services related to femtech,which uses technology to solve women’s physical issues,
including a service that uses multiple sensors to relieve theanxiety of pregnant women and a service that uses sensors todetect the movement of pelvic floor muscles after childbirth andinform whether pelvic floor muscle training is being performed
appropriately. We are also working on a collaborative project for
medical-related solutions through investments in two startup
companies. Specifically, we are developing and marketing anaffordable and easy-to-use therapeutic gas generation device
and a device that uses low-temperature plasma to treat chronic
wounds.
The BCC new business projects will continue to require upfront investment for the time being, and their contribution to our

We will contribute to theharmonious coexistenceof humans, the Earth,and the universe
Toru Matsui
Representative Director, Member of theBoard, Executive Vice President, Assistantto President
Mirai Creation M&A Dept., R&D Div., andBusiness Creation Company

Future vision of new business creation
What should our new business creation look like as we looktoward our 2040 Vision, which defines “changing drasticallybeyond the current way” as our future direction? Discussions
were held to create a stronger and more concrete image of ourbusiness in 2040 and to draw a roadmap toward this vision. The
task force team members thought freely from perspectives notbound by conventional frameworks, and through repeatedexchanges of opinions, arrived at a vision of how businesses
should support people’s living environment in a future society andcontribute to its maintenance and development.
In a future where people will migrate to outer space and to the
moon’s surface beyond the Earth, it is likely that a regenerative
circulatory system that circulates water, air, food, and energy,
keeps them clean and generates no waste, will be realized as theliving environment there. Assuming that by 2040, somethingsimilar to a regenerative circulatory system will be introduced to
the general living environment on the Earth to avoid further
burden on the global environment, we have set our contribution
toward the realization of such a world as an ideal to aim for.
When we think about what we should do and can do to help
create new businesses in this direction, we realized that our
technologies and products already had several elements that cancontribute to a regenerative circulatory society. A major activity forthe future will be to re-evaluate, evolve, and develop thoseelements from the perspective of a regenerative circulatory
system that detects air, water, and energy, recovers andconcentrates them, and transforms them into a different state.
However, it is difficult for us alone to accomplish the innovations
required for a regenerative circulatory society. It is necessary tocomplement what we do not have or what we lack through M&As
and collaboration with other companies, and build a structurethat can provide more advanced solutions while enhancing
synergies.
As the organizational reform to this end, we established theMirai Creation M&A Dept. within the Global Strategy Division as ofApril 1, 2022. The Mirai Creation M&A Dept. will consolidate andaccumulate knowledge, experience, and know-how related to
M&A, which were previously dispersed throughout the company,
as a knowledge base, and will engage in M&A toward businessportfolio transformation. It will also have a second opinion function
for M&As in current business areas. It can be said that thisdepartment plays an important role in facilitating our move towardthe 2040 Vision.

Challenges of the Business Creation Company
Businesses classified as our new business pillars are broadly
divided into two categories: the solid oxide fuel cell (SOFC) cellstack business, which has begun production at Group companies
MORIMURA SOFC TECHNOLOGY Co., Ltd. and CECYLLS Co.,NGK SPARK PLUG CO., LTD. Integrated Report 2022

28

business performance will be some time in the future. Meanwhile,
we expect sales from the launch of solid oxide fuel cell (SOFC)
cell stacks by Group companies MORIMURA SOFCTECHNOLOGY Co., Ltd. and CECYLLS Co., Ltd.

Transcending departmental barriers to create acollaborative system
The R&D Div. is expected to create inventions that will form thebasis of core technologies, and its efforts from a medium- tolong-term perspective have a different time horizon from those of
BCC, which aims to quickly launch new businesses. For thisreason, until now, the efforts of the R&D Group and BCC havenot been very well coordinated, with each developing in a different
direction. Going forward, however, we intend to strengthen
cooperation between the R&D Group and BCC, and to promote
development in a flexible and active manner while mutuallystimulating each other. As a leading example, a cross-functional
project team was formed with R&D members, BCC members,
and members of the Production Engineering Company. In
October last year, the team began developing a solution tosynthesize CO2 recovered from gas furnaces and other sources inplants with hydrogen and reuse it as fuel.
Carbon neutrality is one of the key themes for the R&D Div. in
FY2022, and we will devote our resources to this area, focusing
on the development of elemental technologies to improve theefficiency of CO2 recovery and reuse in plants as mentioned
above, as well as on research into functional materials for EV
applications. We also plan to accelerate R&D activities throughDX.
We look forward to your continued support as we go throughchanges and take on challenges going forward.
*NFC tag: A tag equipped with near field communication technology.

About Us

Introduction

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Progress of New Business Creation and Future Prospects

Examples of new business activities (1)Examples of new business activities (2)First attempt in theservice field by leveraging
the sales network

Developing new markets
by considering the ways
to provide value

Automobile preventive maintenance service “Doctor Link”

Land-based aquaculture technology “water quality sensing”

Sei Kawamoto and Takanori Horiguchi

Seiji Oya

Mobility Business Dept.,
Business Creation Company

Utility Business Dept.,
Business Creation Company

Taking on the challenge of entering the digital
service field
Doctor Link is a preventive maintenance service developed forautomobile maintenance shops. By attaching a dedicated device
to a vehicle, the condition of the vehicle and the wear and tear of
its parts can be checked through a smartphone app. This allows
users to know the appropriate timing for maintenance, andallows maintenance shops to make persuasive maintenanceproposals to users based on quantitative data. In addition tobringing a high level of convenience to users, the product will
also make a significant contribution to maintenance shops interms of strengthening relationships with users and improving
operational efficiency.
It is a bold challenge for us to enter the completely new field ofdigital services. As the market environment surrounding uschanges dramatically, we need to leverage our strengths whilechanging drastically beyond the current way in order to develop
new business pillars. Therefore, we have focused on digital
services that meet the needs of maintenance shops as abusiness that can leverage the strengths we have developed up
until now and that is scalable for the future. We saw many
opportunities in the automobile maintenance industry, a market
worth more than 5 trillion yen annually and facing a variety ofchallenges in a changing market environment.

Strengths of the sales network and partnerships
Over the years, the Automotive Components Group has developed
a commercial distribution network for the aftermarket, in which
products are wholesaled to parts distributors in a wide area andfrom there sold to maintenance shops through parts dealers invarious regions, who are secondary wholesalers. The distributors’
association, which has about 400 parts dealers as members, isable to approach about 80% of the more than 70,000
maintenance shops in Japan. The breadth of this network andthe partnerships with local parts dealers are two major strengths
that no other company has.
In the start-up phase survey, we visited dozens of maintenanceshops through the introduction of parts dealers affiliated with the

distributors’ association, and conducted a questionnaire surveyof approximately 1,000 users and 200 maintenance shops. The
survey results highlighted issues that maintenance shops andusers were facing, and we came up with the idea of digital
service solutions that would connect both parties with keywords
such as peace of mind, trust, and satisfaction.
The development of Doctor Link was our first challenge increating a service as a company that had specialized in
manufacturing. We had to establish an operation system groping
our way, and there were several times when we ran into
obstacles. Although it also took time to establish technologies toprovide solid value, such as linking dedicated devices andsmartphone apps, we were able to successfully launch theservice in November 2021.

Application of exhaust gas detection technology
to shrimp aquaculture
We have developed a water quality monitoring system utilizing
water quality sensing technology for land-based whiteleg shrimp
aquaculture facilities and began marketing the system in
November 2021. This system utilizes the technology (structuraldesign, reliability design, etc.) cultivated through the developmentof exhaust gas oxygen sensors, one of our core businesses, toautomatically measure nitrogenous components such as
ammonia, which is harmful to marine products in seawater, andvisualize water quality information.
Land-based aquaculture with qualified management of water
quality enables the provision of safe and secure marine products
without the use of chemicals, and contributes to addressing
social challenges such as the depletion of marine resources due
to overfishing and the resulting tight supply and demand ofprotein sources, as well as environmental pollution caused byoffshore aquaculture. In particular, Japan relies on imports formore than 90% (220,000 tons) of its annual shrimp consumption,and the widespread use of land-based aquaculture is expected
to eliminate future supply risks.

Forming a large business group with digital
services
To expand sales of Doctor Link to maintenance shops, we are
currently holding seminars for parts distributors in a wide areaand local parts dealers to communicate the value of introducing
the service, and are actively developing a website to demonstrate
the service and its usage in an easy-to-understand manner toincrease awareness among users and maintenance shops.
Through such sales and marketing activities, we will incorporate
market feedback and continue to add functions and make
improvements to meet the needs of our customers.
In the future, we would like to introduce Doctor Link to 6,000
maintenance shops. However, we do not intend to specialize inthis area, but rather to expand the range of our services throughfuture development. We are also looking to create new value by
utilizing the data obtained from vehicles with Doctor Link, andour goal is to form a large business group with these services.
In addition, we have established a network of sales channels
to local maintenance shops in regions across the world, and wewould like to consider the possibility of providing digital services
including Doctor Link in the same way as we do in Japan inthese regions.

Learning aquaculture know-how andrestructuring the value proposition
Sensing does not lead to much value by itself. We believe thatthe sensing technology we provide should include proposals forwhat to do and what to realize with the sensed information.
The water quality monitoring system developed this time
automates ammonia detection, which is conventionally done
manually in shrimp aquaculture, and visualizes water quality data.
Although the value of this system is well understood by operatorswith experience in shrimp aquaculture, there are very few such
existing operators. For this reason, we target operators who are
considering new entry into land-based shrimp aquaculture.
However, because they do not know how to utilize this systemand how to improve the efficiency of their farming, it does notlead to value provision to our customers. Having gained anunderstanding of this situation through interviews with the target
audience, we are working to rebuild our value proposition by
starting with learning aquaculture know-how ourselves in order
to be able to make post-sensing proposals regarding initiatives
related to water quality monitoring systems.
As part of these efforts, we are currently developing the NTK
Shrimp Aquaculture System, which combines a water quality

NGK SPARK PLUG CO., LTD. Integrated Report 2022

29

monitoring system, an automatic feeding system, and an
automatic water change system. Of the three major elements ofaquaculture operations, namely, feeding, water change, andcleaning, the new system will save labor in feeding and waterchange. Going forward, we will accumulate more aquacultureknow-how and reflect it in the development of the system tofurther reduce labor, thereby raising the value of the system to alevel where even newcomers to the shrimp aquaculture industry
can farm shrimp after receiving short-term training.
We hope to promote similar operational reforms for primaryindustry-type aquaculture businesses, which lag behind inquantification, labor saving, and systemization, by leveraging theassets we have cultivated in the secondary industry, thereby
transforming them into highly sustainable businesses. We
recognize that this is a solution to a problem that only we cansolve with our deep experience in the secondary industry andthat it is also our social responsibility.

Technology with potential for expanding various
possibilities
As a new development in water quality sensing, we are currently
developing a system that not only detects nitrogenous
components such as ammonia, but also measures otherparameters to determine the state of shrimp growth and link thisto a labor-saving system to further improve the efficiency of
aquaculture operations.
In addition, we have an internal team that is developing aseawater filtration system, and if a filtration system foraquaculture is realized there, it will be possible to construct afully circulating land-based aquaculture system. This would makeit possible to conduct aquaculture business not only in coastal
areas where seawater is abundant, but also in inland areas,making the U.S. market, which is the world’s second largest
shrimp consumer but where aquaculture has not beenpromoted, a future target.
Another perspective is to focus on nutrients contained inwastewater from shrimp aquaculture systems. If these nutrientsare used as fertilizer for hydroponic cultivation of vegetables, theclean water from the system can be circulated for shrimp
aquaculture again.
In this way, water quality sensing has a wide range of potential,
and we believe that by firmly establishing a scheme for providing
value, we can expect significant growth.

Strategies for
Value Creation

About Us

Introduction

Fuel cell business strategy

Our policy for intellectual property

Among the new business pillars that we are focusing on, the fuel cell business is currently the largest in scale and is expected tocontribute to a sustainable society. Solid oxide fuel cells (SOFCs), which have particularly high power generation efficiency and canefficiently use a wide variety of fuels, are expected to see further diffusion and growth in Japan and overseas in response to theaccelerating trend toward decarbonization.
MORIMURA SOFC TECHNOLOGY Co., Ltd.*1 and CECYLLS Co., Ltd.*2 have launched a business strategy for cell stacks that are
key components of SOFCs to develop a full lineup of SOFCs for residential, commercial, and industrial use in the fuel cell market.

We appropriately create, protect, manage, and utilize intellectual property in close coordination with related departments,
internal companies, and Group companies, under our policy to honor intellectual property including patents, designs,
trademarks, copyrights, and trade secrets.

*1: Joint venture by five companies: Noritake Co., Limited, TOTO Ltd., NGK Insulators, Ltd., Morimura Bros., Inc., and NGK SPARK PLUG

ActionGuidelines*2: A joint venture by Mitsubishi Heavy Industries, Ltd. and NGK SPARK PLUG

The development of SOFCs for residential and commercial use targeting the Japanese market is pursuing smaller, lighter, and cheaper
products by leveraging their ultra-high efficiency potential and high degree of design freedom. On the other hand, industrial-use SOFCs
are targeted at the North American, European, and Korean markets, where we plan to demonstrate our superiority in life-cycle costs,
such as long life and high heat utilization.
In March 2021, MORIMURA SOFC TECHNOLOGY Co., Ltd. launched mass production of SOFCs for commercial and industrial usethat realized simultaneously reducing size and weight and high power density and achieved lower cost. Going forward, we plan toexpand the adoption of SOFC in various forms, including for residential use. Meanwhile, CECYLLS Co., Ltd. started mass production of
SOFC cell stacks for high-power fuel cell systems in August 2021.
The Group will continue to develop next-generation stacks and at the same time, will consider investments for business expansion toprepare for the full-scale orders expected in the future. The fuel cell market is expected to grow to 200 billion yen in the fiscal year
ending March 31, 2030, and the Group intends to acquire sales of 45 billion yen in this market.
SOFC rollout
For bothcompanies, CO2
reduction effectof approximately
30% in relation
to grid power

Residential use

0.7-2kW

Commercial use

2-10kW

20-100kW

Create intellectual property, aiming to further improve our corporate value.
Honor intellectual property rights of third parties.
Comply with laws and regulations regarding intellectual property in individual countries.

Intellectual property activities according to the management strategy outlined in the 2030 Long-term Management Plan “NITTOKU BX”
One of the major strategic pillars of our Long-term Management Plan is the transformation of our business portfolio. We are promoting
various measures for the tasks, positioning intellectual property activities as an important element in this management strategy.
1. Protect new technologies and inventions from the initial stage of development to the mass-production stage, and create intellectual property.
2. Search patents utilizing AI, and deploy high-value-added patent information within a company.
3. Negotiate and manage complicated contract clauses regarding intellectual property based on legal knowledge.
4. Protect our brands, and detect and eliminate counterfeit goods, in coordination with customs offices and government agencies of thecountries throughout the world.
5. Develop regulations and management rules which comply with laws and regulations of individual countries.
6. Lay the groundwork for the promotion of efficient intellectual property strategy, such as response to DX, compliance with working styles thatmeet the needs of the times, and remote work.

Industrial use

100kW or more

*Current businesses are related to the Automotive Components Group, growthbusinesses include business related to components for semiconductor production
equipment and respiratory-related business, and new business pillars are related to thefocus areas of Smart Health, Utilities, and Smart Mobility, as well as fuel cell business.

Intellectual property activities by business field
Establishment of CVC fund to accelerate creation of new business pillars

Partner:

Financial/Corporate
Information

Intellectual Property

Progress of New Business Creation and Future Prospects

To step up the creation of new business pillars, we
believe that it is essential to cooperate with startups thatpossess leading-edge technologies, business models,and ideas, so along with Pegasus Tech Ventures, in April
2021 we set up a CVC (corporate venture capital) fund
for the purpose of investing in startups around the world.
In the first fiscal year, we made small investments in threeventure companies that fit our strategy out of the many
venture companies listed through sourcing. We willcontinue to be ramping up the creation of new businesspillars through the provision of cash to and the forging ofbusiness alliances with startups from countries all over
the world that possess advanced technology.
We have traditionally been investing in such startups
indirectly through venture capital firms, and haveestablished a network comprising numerous partners.
Yet when we began actually collaborating with them, werealized we had issues with skills that are necessary,such as those related to coordinating activities withcompanies, making investments, and pursuing M&A. But
this new CVC fund will not only help to further increase
our network of startups, but will also allow us to make up
for our weaknesses on the skills side. We have therefore
completed the establishment of an investment structure
for new business pillars. From now on, we will accelerate
the creation of new business pillars as we press forwardwith investments that are in line with our strategy.

Foundation for
Value Creation

Current businesses

Small equity stakes
Expected no. of transactions Approx. five each year
Stages targeted
Seed capital to Series A funding
Sizes of equity stakes Several tens of millions of yen to several hundreds ofInvestment criteria

Examples of intellectual property mix activities

In our current businesses, which are the pillars of our earnings, we
aim to secure a competitive advantage through IP mix activities that
protect our technologies and know-how in multiple aspects, andcontinue to contribute to maximizing profitability.

million yen, 10 billion yen over six years
The startup matches our portfolio of new businesspillars, the business domain targeted is broad, thebusiness has potential, and there is a vision for thebusiness
There is a high degree of affinity with our new
business pillars, and the startup possesses abusiness, technology, and human resources thatwill complement/expand our portfolio
The startup possesses technology, intellectual
property, and skilled people or teams of the like weare lacking as we endeavor to establish our new
business pillars

Defense with a superiority patent portfolio
Brand protection by detecting and eliminating counterfeit products
Defense through know-how secrecy

Patent asset index for spark plugs (comparison with competitors with our company as 100)

Number of patents heldPatent Asset Index TM(2021)(Number of reports)

8,000
NGK Spark Plug

6,000
4,000

Average 3 major
companies

2,000

0

50

100

150

Source: Created from LexisNexis PatentSight
The Patent Asset Index of LexisNexis® PatentSight® is used for the evaluation. The Patent Asset
Index is an index that comprehensively takes into account the technology perspective, market
perspective, and number of patent applications and rights with valid legal status (pending applications
and patents that have been granted).

M&A

6,303

6,773

6,478

3,017

3,134

3,326

3,286

3,344

3,447

6,482

6,255

3,184

3,027

3,298

3,228

0

2017
In Japan

2018

2019

2020

2021 (Fiscal year)

Outside Japan

Growth businesses

Stages targeted
From Series A funding and onwards
Sizes of equity stakes 50 billion yen over four years
Purpose of investment
To acquire a business, technology, intellectual

Based on the intellectual property activities of current businesses, we aim to support business execution and growth from an intellectual
property perspective by building a patent network and conducting clearance activities to investigate infringement of third-party
intellectual property rights.

property, customer base, or human resources thatmatches, complements, and expands our portfolioof new business pillars
To acquire technology, intellectual property, acustomer base, or skilled human resources of thelike we are lacking for our portfolio of new businesspillars or for our projects
To expand our business portfolio and achieve
rapid commercialization in business domains witha high degree of affinity with our projects

New businesses
The number of patent application publications in new business areas has increased overthe past three years. We are also pursuing patent applications overseas in anticipation of
future business development. In the future, we will promote efforts to shorten thebusiness creation cycle by utilizing an IP landscape* as one of the materials forconsideration at the initial stage of business creation, together with the Business Creation
Company, which is in charge of creation of new business pillars.

Pegasus Tech Ventures

NGK SPARK PLUG CO., LTD. Integrated Report 2022

30

*IP landscape: Analysis that incorporates IP information into management and business information when
formulating management and business strategies, and sharing the results (including a bird’s-eye view of thecurrent situation and future prospects) with management and business managers.

Trends in the ratio of the number of publishedpatent applications related to new businesspillars in the past three years (Total is 100%)
(%)

30
25
20
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2021 (Fiscal year)3Foundation for
Value Creation
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CONTENTS

32 Message from the Sustainability Officer
33 CSR and Sustainability Committee
34 Review of Materiality Activities
35 Environment / Responding to Climate Change
37 Human Capital Management
40 Respect for Human Rights
41 Outside Directors’ Roundtable Discussion
43 Corporate Governance48 Information Security
49 Risk Management
50 Compliance

NGK SPARK PLUG CO., LTD. Integrated Report 2022

31

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Message from the Sustainability Officer

to promote environmentally friendly capital investment at as low a
cost as possible.

We will promote
activities to solve social
issues while pursuing“transformation beyond
the current way”

Certifying environmentally friendly products andpromoting them both internally and externallyAnother pillar of our activities in the environmental field is the
manufacture and dissemination of environmentally friendly
products. We have been striving to improve environmental
performance by developing products with enhanced functions to
reduce exhaust gas emissions and improve fuel efficiency. In
FY2021, we launched a system to certify products withparticularly high environmental performance from the threeperspectives of energy efficiency, resource conservation, andenvironmentally hazardous substances as Nittoku Green
Products. In the first year of the project, eight products werecertified, including precious metal plugs and wide range oxygen
sensors. Through the operation of this system, we will makeinformation on environmentally friendly products visible to the
public, first of all, to promote awareness within the company andencourage development with a higher level of environmental
awareness, and also externally, to make our stakeholders awareof our environmental contribution.

Hiroyuki Maeda
Executive Officer

Transformation of sustainability activities beyond
the current way
Sustainability management, which aims at sustainable
development of companies and enhancement of social value, hasbeen attracting attention in recent years. Taking the environmental
field as an example, as awareness of the global warming crisis
grows around the world, the Japanese government declared in
October 2020 that the country will achieve carbon neutrality by
2050, and Japan is now steering toward a full-fledged carbonneutral society. In April 2022, I assumed the position of
Sustainability Officer, and I am keenly aware that we are facing
the tidal wave of major change.
Under these circumstances, if our activities do not go beyond
the current framework, we will remain far from the goal ofachieving our objectives. Because we are committed to “change
drastically beyond the current way,” we will continue to pursue“transformation beyond the current way” in our sustainability
activities as well.

Activities to resolve ESG issues under the Longterm Management Plan
One of the “transformations beyond the current way” is a change
in the way the CSR and Sustainability Committee operates.
Previously, the committee was chaired by an internal director, butfrom FY2022, it has been chaired by an outside director and will
engage in lively discussions, sometimes involving external
experts.
The major approach of ESG-related activities is expressed in
the eight issues identified as priority challenges in the 2030 Longterm Management Plan “NITTOKU BX.” One of these challenges,
responding to climate change, has been addressed by setting atarget of reducing CO2 emissions by 30% from the 2018 level by2030. In addition, with regard to providing environmentally friendly
products, we are focusing on the diffusion and expansion ofenvironmentally friendly products that contribute to the realizationof a zero-emission and recycling-oriented society.

Concerning corporate governance, we have transitioned to acompany with the Audit and Supervisory Committee to further
speed up management decision-making and execution.
In addition to the eight issues mentioned above, we havealso established a working group to address human rights issues
and have started activities since FY2022 to ensure that humanrights are taken into consideration throughout the entire supply
chain of the Group.

Envisioning a service that contributes to therealization of carbon neutrality
Furthermore, we envision carbon neutral as a service as a way tocontribute to the reduction of CO2 emissions in the region. This isa cyclical system that collects CO2 emitted from factories andother sources and reacts it with hydrogen to produce methanegas, which is used as a power source to drive machinery. Thissystem is provided as a service by integrating it with our specialty
products and technologies. Although similar systems have been
proposed in the gas and electric power industries, they requirevery large facilities. We aim to provide a relatively small, highly
efficient service in a price range that is affordable to businesses
that are not so large.
In order to realize this service, it is necessary to incorporate avariety of elemental technologies, and we are looking tocollaborate with other companies. We will create the Hydrogen
Forest in Komaki City, Aichi Prefecture, as a demonstration site
for a recycling-based system, and accelerate our efforts toward
its practical application.

Group-wide initiatives to reduce CO2 emissions
As for the reduction of CO2 emissions mentioned above, it isimportant to make it a company-wide effort in the course of ourmanufacturing activities. Last year, we launched an internalcarbon pricing system and an internal environmental fund in orderto create a situation in which each and every employee, including
those in the business departments that account for a large
percentage of our CO2 emissions, is involved in reducing CO2
emissions as a personal concern.
Under the internal carbon pricing system, when a businessdepartment (company) introduces equipment, it converts the CO2
emitted during the use of the equipment into a monetary value
and adds it to the equipment price when applying for theequipment. A carbon tax of 10,000 yen per ton of CO2 emitted isalso imposed on CO2 emitted from within the company, and aninternal environmental fund that accumulates the tax collected isused to subsidize investment in environmentally friendly
equipment.
These systems were discussed and structured by the
Sustainability Transformation (SX) Project, which includes
directors and key business department personnel. Furthermore,
the Sustainability Strategy Dept. has held dozens of briefing
sessions and repeatedly explained the systems to promote
understanding among managers and even staff in the field.
Through this process, the importance of the initiatives has been
understood by the business departments, and recently I feel thatthe mindset has changed to one of trying to use the fund’s money

Creating a workplace where diverse humanresources can thrive and play active roles
In order to “change drastically and transform beyond the current
way” as mentioned at the beginning, we must also change ourhuman resource portfolio. What we are looking for now is people
who can bring about transformation. Although we may hire suchpeople from outside the company, we believe it is fundamental todevelop them internally.
I also believe that change and transformation can only occur
when human resources with diverse individualities coexist. One of
our priority issues is to promote the recruitment of women, foreign
nationals, and career professionals, and recently we have been
focusing on the development of female managers in particular. In
the Raise UP Program that we launched in 2019, several

NGK SPARK PLUG CO., LTD. Integrated Report 2022

32

executives serve as mentors to support participants. In fact, I am
one of the mentors, and I took on the role of mentor because I
wanted female managers to always have a higher perspective. I
actually feel that the awareness of the participants has improved
as a result of the program.
Furthermore, we invite outside lecturers to hold annual
lectures for executives, managers, and supervisors, aiming togive employees, regardless of gender, a diverse range ofperspectives. Because many of our employees have limited
opportunities to interact with people outside the company, we
provide an opportunity for them to learn how society is advancing
today by having lecturers introduce forward-looking examples.

The Group will work together in order to achieve
the transformation
We conducted another employee satisfaction survey in FY2021,
which resulted in a 46.6% satisfaction rate. This result indicatesthat there is still a gap in awareness between the management
team and staff in the field.
We have a history of focusing on automotive-related spark
plugs and sensors as our main products, and we are currently
trying to transform our portfolio in anticipation of the future
peaking out of the internal combustion engine market. However,even among our employees there is a lack of awareness of how
we are working toward this goal. We need to make our
employees more aware of our new business activities and theirsignificance. Also, as was mentioned earlier, I believe that job
satisfaction will improve if there is greater recognition of the factthat our products contribute to solving environmental issues.
However, we will not be able to move in the right direction if it
is only something being promoted by senior management. It isessential that top management communicates management
policies firmly, that managers deepen their understanding, andthat managers convey the same thoughts and feelings as top
management to their subordinates.
Recently, due to work style reforms and the response to the
COVID-19 pandemic, people are spending less time working in
the office. In order to eliminate communication loss arising fromsuch circumstances, I encourage supervisors and subordinates
to make time for dialogue and have one-on-one meetings.

We are committed to solving social issues anddemonstrating the value of our existence
Since its establishment in 1936, the NGK SPARK PLUG Grouphas promoted its business activities while contributing to society
by pursuing the possibilities of ceramics under our principles of“involvement by all” and “quality products,” which we believe are
the foundation of Monozukuri (innovative and quality
manufacturing).
Whether it is climate change or the depletion of oil resources,
these issues have been pointed out for a long time, but recently
they have emerged as issues that can impact the entire planet.
Rather than standing still and turning our eyes away from theseissues, we need to address them with sincerity, transform ourown business models, and respond to them by involving othercompanies in collaboration with us. In pursuing such activities,
we intend to firmly demonstrate the value of our existence.

About Us

Introduction

Foundation for
Value Creation

Strategies for
Value Creation

Financial/Corporate
Information

CSR and Sustainability Committee

Sustainability activities will be pursued

CSR and Sustainability Charterwith the strengths of Nittoku at the core.

We contribute to developing a sustainable society, thereby improving our corporate value.

In June 2022, the General Meeting of Shareholders approved a change in thedesign of our organization to clarify the separation of management and execution,delegate authority, and strengthen governance. As a result, the CSR and
Sustainability Committee will be positioned as an advisory committee to theBoard of Directors. Director Takakura, the newly appointed chair of thecommittee, shared her thoughts.

We build relations of trust with our stakeholders while making highly transparent decisions and actions.
We co-create and provide new value to help solve social issues.

We are committed to delivering new value to people all over the world and contributing to society, as expressed in our corporate
philosophy. This commitment is associated with our concept of sustainability, which is to help solve social issues throughbusiness activities.
In April 2020, we established the CSR and Sustainability Charter to present this concept more clearly and to communicate it
widely both internally and externally. At the same time, we renamed our CSR Policy, which outlines the Group’s action guidelines
for CSR, to the CSR Basic Policy.

Chiharu Takakura
Outside Director, Chair of the CSR and Sustainability Committee

Reducing negative impact to zero and the future beyond
Recently, many companies have come to share a common understanding that solving the various problems facing society, suchas the risk of climate change and labor human rights issues, is one of the challenges facing companies. Many of the activities
based on this common understanding can be described as activities to reduce the negative impact on society caused bycorporate activities to zero. Even more recently, there has been a debate, especially in Europe, about how to recover fromnegative impacts after they have been reduced to zero.
I believe that we have reached a stage where we should take a long-term perspective on our overall sustainability activities,
including the environment.

The
Nittoku Way

Risk Management Policy
Corporate
Philosophy

Human Rights Policy

CSR andSustainability Charter

Mission and vision of the CSR and Sustainability Committee

Long-termManagement
Plan

Based on the mission and vision of the Medium-term Management Plan, this committee will consider and formulate a new
mission and vision that adds a sustainability perspective to our activities.
In our deliberations, we first took the viewpoint that without a sustainability perspective, it will be difficult for both ourbusiness and organization to survive in the society of the future, and we looked back at our core competencies and management
philosophy, and reaffirmed what we have valued, what is excellent, and what is good. With these elements at the core, we
discuss what we can do to solve social issues in a rapidly changing society. The committee will fully discuss these issues andformulate measures in response after submitting them to the Board of Directors.

Information Disclosure
PolicyEnvironmental Policy
Human Resource Policy
Occupational Healthand Safety Policy
Social Contribution
PolicyTax Policy

Compliance Policy

Corporate
Code of
Conduct

Medium-termManagement
Plan

CSR
Basic Policy

Qualityproducts

Involvementby allQuality Policy
Information Security
PolicyProcurement Policy

CSR and sustainability promotion system
Reporting

CSR and Sustainability Committee

Basic Traits

Fostering understanding and empathy for sustainability and making it a personal concern
In order to accelerate our sustainability activities, this committee is considering the CSR and Sustainability Committee Mediumterm Plan, an action plan for the next three years corresponding to the period covered by the Medium-term Management Plan.
In the first year, we will focus on fostering understanding and empathy for sustainability, mainly within the company. Basedon this, from the second year onward, each and every employee will voluntarily link sustainability to their work. This activity ismaking sustainability a personal concern. Based on these results, in the third year, we will integrate sustainability into ourmanagement plan and vision.

DokuritsuJiei

ShiseiShinjitsu
SoshiKantetsu

Sustainability Strategy Dept.

Shikai-Keitei

Shared Values

Transformation is possible only in an organization with a heightened sense of self-affirmation

Board of Directors
Advising

Risk Management
Committee

Compliance
Committee

Quality
Committee

Information Security
Committee

Environment
Committee

Safety and HealthCommittee

Committee structure

For the Company, integrating sustainability into our management and business activities is a major transformation. The slogan of
our Medium-term Management Plan is “Break to change. Change to create.” However, some of our stakeholders may beconcerned that the good things that we had up to now may also be destroyed. It can also be said that because of theCompany’s successful experience, there is reluctance to take on new challenges because of a fixation on best practices.
This process of transformation is not easy. What is important is to clearly identify the parts that can be destroyed and theparts that should be left behind, and to take on the challenges of the future. The parts that should be left behind are our corecompetence and management philosophy, the pride and sincerity of our employees, and the source of our desire to contributeto society through our work. I believe that transformation can be brought about only when we recognize these strengths of
Nittoku anew and enhance our sense of self-esteem as an organization.
We will continue to pursue
FY2022
FY2023
FY2024sustainability
activities from a medium- toIncorporation into our business for the
Fostering
Making it a personal
Long-term Management Plan and Vision
long-term
perspective,
while firmly
understanding andIntegration of sustainability andconcernprotecting
whatshouldbe valued. We hopeempathyeconomic rationalitythat you, our stakeholders, will have highSublimation of awards program
Proposal for incorporating sustainability elements in
Lectures by external experts
Consider incorporating
the next Medium-term Management Plan
expectations for our future sustainability
Promote incorporation into our business for thesustainability elements in the next
Executive training
Long-term Management Plan and Vision
Medium-term Management Plan
activities and support us in our efforts.

The newly formed CSR and Sustainability Committee is positioned as an advisory committee to the Board of Directors and has
two functions: to report and make recommendations in response to the Board of Directors’ advising, and to supervise eachexpert committee.
In discussions, external experts will be invited to enhance the knowledge and perspective of the committee, themanagement team, and the Group as a whole, and discussions will be held to promote sustainability management with a longterm perspective.
Chair Chiharu Takakura, Outside Director
Committee member Toru Matsui,
Member of the Board, Executive Vice President

Committee member Mikihiko Kato,
Member of the Board, Standing Audit and Supervisory Committee Member

Head of the Secretariat Hiroyuki Maeda,

Executive Officer (Officer in charge of Sustainability Strategy Dept.)

Secretariat General Manager of Sustainability Strategy Dept. etc.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

33

Guest committee
members
Sustainability experts(Each theme)

About Us

Introduction

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Review of Materiality Activities

See P.15
We have identified eight priority issues (materiality) to be addressed in order to realize a sustainable society.
For these priority issues, we have defined major initiatives, targets, and outputs, and are carrying out activities from a medium- tolong-term perspective. For FY2021, we have made progress as follows. We will continue to address these issues and contribute to
the realization of a sustainable society.

Major Initiatives

Progress in FY2021

Environment
Major Initiatives

Progress in FY2021

Specific Activities

Goals and Outputs

We have introduced internal carbon pricing and an internal environmental fund as measures to promote the reduction of CO2 emissions.
Each company set its own targets and promoted CO2 reduction activities.
Obtained SBT certification for Scope 1, 2, and 3 reduction targets.

Major Initiatives

Providing environmentally friendly products

Dissemination and expansion ofenvironmentally friendly products

Goals and Outputs

Sales ratio of precious metal plugs: at least 50%
Sales ratio of wide range oxygen sensors: at least 50%

Specific Activities

Progress in FY2021

40%
37%

Specific Activities

Launched the environment-friendly product certification system. Products that meet the criteria will be certified as
Nittoku Green Products. Eight products were certified in FY2021.
Certified spark plugs with a precious metal (iridium alloy) center and ZFAS®-U3 wide range oxygen sensor as Nittoku
Green Products.

Progress in FY2021

Development of technologies, products, and businesses contributing to the resolution of social issues

Specific Activities

Society

Major Initiatives

Progress in FY2021

Specific Activities

Development of fuel cells
Development of lead-freepiezoelectric materials
Development of sensing IoT business
Carbon Neutral as a service

Goals and Outputs

Dissemination of high-efficiency distributed power supply
systems with an eye on the use of CO2-free hydrogen fuelPromoting substitution for lead-based piezoelectric materials
Improving operational efficiency throughautomation, optimization and generalization
Establishing and introducing a synthetic fuel(methane) production system

Established a production system for full-scale mass production of SOFC cell stacks
Continued to introduce and propose lead-free piezoelectric materials
Established a showroom for a water quality management system for land-based shrimp aquaculture, and continued
to introduce and propose the system
Completed feasibility verification of CO2 collection and hydrogen production technology

Progress in FY2021
Specific Activities

In order to improve the efficiency of production activities through integrated production from cells to stacks, thefunctions of the cell production process at the plant in Ise City, Mie Prefecture, will be consolidated to the plant inKomaki City, Aichi Prefecture, where the stack production process is located. The base consolidation began in
FY2022, and operation will start in FY2023.
Certified HPDS-6 series planar-type fuel cell E-specifications stacks as Nittoku Green Product.
Exhibited and introduced lead-free piezoelectric materials at the Sustainable Materials Expo (held in December 2021).
Certified lead-free piezoelectric ceramics as a Nittoku Green Product.
Established a showroom and laboratory for a water quality management system for land-based shrimp aquaculture
in Komaki City, Aichi Prefecture.
Certified the water quality management system as a Nittoku Green Product.
—

Progress in FY2021
Specific Activities

NGK SPARK PLUG CO., LTD. Integrated Report 2022

34

Percentage of female and foreign national directors:
at least 30%
Percentage of outside directors: at least one-third*As of June 24, 2022

In order to achieve sustained growth and enhance corporate value over the medium to long term, the Board of Directors continues tobe composed of a diverse group of people with different backgrounds in terms of expertise and experience.
In order to strengthen the supervisory function of the Board of Directors and further ensure transparency in decision-making, theCompany has transitioned to a company with an Audit and Supervisory Committee, and the majority of the Board of Directors is
composed of outside directors.

Risk management

Management of signs of serious
incidents and prevention of theiroccurrence

Goals and Outputs

Establishing a risk management system that
contributes to management decision making

The risk map was updated by the Risk Management Committee
The Risk Management Committee met twice and updated the risk map.
Risks that have been addressed were excluded from the priority risks in FY2021, and risks newly determined to be ofhigh priority were added to the priority risks in FY2022.

Compliance

Awareness surveys and continuous
education for officers and employees

Goals and Outputs

Conducting compliance questionnaire surveys anddisclosing the results

Conducted compliance questionnaire surveys
Conducted compliance questionnaire surveys. Approximately 8,800 people were surveyed, for a response rate of 83%.
We plan to identify divisions with issues based on the questionnaire results and conduct interviews with them.

Governance
Major Initiatives

Goals and Outputs

45% (5 out of 11 directors)*
64% (7 out of 11 directors)*

Governance
Major Initiatives

Corporate governance

Increasing the percentage of female
and foreign national directors
Increasing the percentage ofoutside directors

Governance
Major Initiatives

Percentage of female/foreign national/mid-career
employees in managerial posts: at least 25%
Improved results of employee satisfaction surveys

Implemented the Raise UP Program (selective female manager promotion training).
Held a lecture for those in managerial positions on the theme of diversity to promote awareness-raising andeducation among managerial personnel.
Held a briefing session on the new personnel system, and it was attended by all applicable employees.
Held a briefing session for officers and general managers in order to utilize the results of the employee satisfaction
surveys for workplace improvement.

Governance

Reduced by 8.87% (265,100 tons)

Goals and Outputs

17.0%
Satisfaction level: 46.6% (response rate: 87.6%)

Specific Activities

CO2 emissions: 30% reduction
from the FY2018 level by FY2030

Progress in FY2021

Major Initiatives

Recruitment of female, foreign
national and mid-career employees
Development of new personnel system

Responding to climate change

Reduction of CO2 emissions

Environment

Global human resources management

Society

Information security

Maintenance and enhancement of theincident response organization andestablishment of a prevention system

Goals and Outputs

Establishing an information security management
systemGroup companies in the U.S. and China obtained the TISAX certification (in Japan, the headquarters, related plants, and Group companies have already obtained the certification in FY2020).
The Information Security Committee met twice.
Issued “CSIRT communication” to inform and educate employees about information security.

Introduction

Environment

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Responding to Climate Change

In July 2020, the NGK SPARK PLUG Group announced its support for the Task Force on
Climate-related Financial Disclosures (TCFD) recommendations.
Based on the TCFD recommendations, we disclose important information related toclimate change as outlined below.

Environmental Policy
As a globally developing core manufacturing corporation, we aim to promote environmental conservation activities linked withcorporate management maintaining a good balance with corporate growth, based on “Involvement by all” in order tocontribute to the construction of a sustainable society.
ActionGuidelines

About Us

GovernanceOur group is aware that climate change and other environmental issues are serious business issues.
Regarding the approach of management concerning climate change, the CSR and Sustainability Committee* (chaired by an outside
director and meeting four times a year), an advisory body to the Board of Directors, compiles recommendations based on climaterelated risks and opportunities and reports to the Board of Directors, which then makes decisions on these recommendations.
In addition, the sustainability department reports to the CSR and Sustainability Committee on the progress of priority issues,
including the response to climate change, which is then reviewed and monitored by the committee. For detailed activities including
reduction of CO2 emissions, the Environmental Committee (twice a year) checks progress towards the targets and confirms issues to beaddressed in order to make continuous improvement. Furthermore, risks associated with climate change are assessed in light ofcompany-wide risk management at the Risk Management Committee (twice a year).
The CSR and Sustainability Committee is responsible for supervising the Environmental Committee, Risk Management Committee,
and other specialized committees, and information on progress in reduction of CO2 emissions and risk assessment is also shared with
the CSR and Sustainability Committee. In addition, important decisions made by each specialized committee are reported to the Boardof Directors through the Corporate Management Committee, which deliberates, decides, and supervises important matters in theexecution of business operations.

Through all of our business activities, we make particular efforts to reduce CO2 emissions toward a decarbonized society, conserve
water resources, manage waste, and develop, offer and expand environmentally friendly products.
We strive to conserve the ecosystem through the control of chemical substances that place a burden on the environment.
We strive to raise environmental awareness among our employees to ensure that they all positively participate in activities.
We observe the laws, ordinances, and agreements concerning environmental conservation.
We aim to substantiate information disclosure to stakeholders and communication activities, and also conduct activities forcoexistence with the regional community.
In order to achieve these targets, we will strive to make ongoing improvements to our environmental management system.

Promotion system
Our group has a matrix-type structure including internal companies and respective regions, promoting environmental activities while
having individual roles clarified.
Each internal company manages its own targets on items relevant to business activities for the practice along with its business.
Meanwhile, we conduct such activities as compliance of regulations, raising environmental awareness, and communication with local
society mainly on the regional basis in accordance with action plans. Various working groups are set up as cross-functional teams
across the internal companies for promoting activities.
The Central Environmental Committee, attended by President, directors, company presidents, regional environmental
administrators, and heads of the working groups, confirms the progress toward the targets and issues in relation to each activity, forcontinuous improvement.

*In June 2022, we transitioned to a company with an Audit and Supervisory Committee and positioned the CSR and Sustainability Committee as an advisory body to the Board of Directors.

P.43 Corporate governance system chart

Examples of what was discussed and determined in terms of climate change
Endorsement of the TCFD recommendations (Corporate Management Committee in July 2020)
Approval of the priority issue (materiality): “CO2 emissions: 30% reduction from the FY2018 level by FY2030” (CSR and Sustainability Committee in March 2020)

Environmental activity promotion organizations

Approval of “Eco Vision 2030” (Environmental Committee in March 2021)

Environmental Administrator(President)

Approval of “Aiming for carbon neutrality in 2050” (CSR and Sustainability Committee in March 2021)

Central Environmental
Committee Chairman
Chief Central Environmental
Administrator

Central Environmental Committee

Strategy (risks & opportunities)

Environmental
ISO Bureau

Internal Environmental
AuditorRegional environmental administrator

Company president

Head of the working group

Environmental Committee

Internal companies

Working groups

Each region“Each region” refers to regions inJapan where the Headquarters,
Komaki and Ise plants, andGroup companies are located.

Divisions of each internal
company

Climate-related risks
With regard to climate-related risks, the sustainability department drafted the following risks according to the TCFD risk categories anddiscussed them with the director in charge of the sustainability department and related departments: risks related to the transition to alower-carbon economy, which may emanate mainly in the course of a 2°C scenario; and risks related to the physical impacts of climatechange, which may emanate under a 4°C scenario without achieving global targets for reducing CO2 emissions.
The three terms used below, “short term,” “medium term” and “long term,” have the following meanings:

Cross-divisional specialized task
forces to carry out surveys andmeasures regarding energy
conservation and hazardous
substances management

Short term

Biodiversity conservation

until around 2025 in line with the target year of our Medium-term Management Plan

Medium term

Recognizing the conservation of biodiversity as a critical global challenge, NGK SPARK PLUG Group identifies it as a material
environmental issue for us to address, along with global warming mitigation and resources recycling. Based on this view, we establishedthe NGK SPARK PLUG Group Biodiversity Action Guidelines in April 2013. Using the guidelines as a guide, we are working to remainaware of the fact that our activities, particularly involving energy and resource usage, are inevitably causing impacts on biodiversity, andare taking appropriate measures to reduce such impacts throughout our business operations, in cooperation with business partners andexternal groups.

until around 2030 in line with the target year of our Long-term Management PlanLong term

until around 2040 in line with the vison of our Long-term Management Plan

Main scenarios and projections used in the study
2°C scenario : IPCC RCP2.6, IEA ETP 2DS, etc.
4°C scenario : IPCC RCP8.5, IHS Markit Automotive “Mobility and Energy Future” service data, etc.

P.21 Eco Vision

NGK SPARK PLUG CO., LTD. Integrated Report 2022

35

Introduction

Strategies for
Value Creation

About Us

Foundation for
Value Creation

Financial/Corporate
Information

Financial impact

Revenue target
in our Long-termManagement Plan

Responding to Climate Change

Risk item

Business impact (risk)

Assessment

Timing of the(impact)

impactExamined business

Product

Small Medium Large Short term Medium term Long term

Carbon tax
Policy and legal

2°C scenario

economy4°C scenariochangeSale of gasolinepowered vehicles

In countries that ban the sale of gasoline-powered vehicles, OEM demand will
disappear, resulting in a decrease in sales.

Shift incustomerpreferences
Shift in investor
preferences
Shifts in job-seekers’
preferences
Increased severityof extreme
weather events

Chronic

impacts of climate

The achievement of GHG reduction targets will be required, resulting in increases
in the costs of, for example, making capital investments and purchasing electricity
generated from renewable energy sources.

Proliferation of energysaving and renewableenergy technologies
Development of
new technologies

Risks related
to the physical

Regulations
on carbon
emissions

Reputation Acutea lower-carbon

If a carbon border tax is introduced, taxes will be levied on products to be exported,
resulting in the reduction in the cost competitiveness of the products.

Markets

the transition to

Carbon bordertax

Technology

Risks related to

If a carbon tax is introduced, taxes levied on fuel will increase procurement costs,
resulting in a rise in the costs of energy and raw materials.

Typhoons and other extreme weather events will cause damage to plants and otherfacilities, resulting in shutdown or a decrease in production. Furthermore, additional costs
will be incurred to restore equipment. Non-life insurance premiums will also increase.

Employees who work in extreme heat will frequently get heat stroke. To reduce theirincreased physical burden, the cost of dealing with extreme heat and labor costs will
increase.

concentrators, cutting
tools, bearing balls, etc.

(FY2029)

Under either a 2°C or 4°C scenario, demand for non-fossil energy
sources is expected to grow. Therefore, we will continue to enhance
our measures taken in the relevant markets.
Under a 2°C scenario , the proliferation of hydrogen infrastructure is
expected. Therefore, the market may grow at an increasing rate.

SPE, packages, oxygen(FY2021)450 billion yen

Impact on part of therevenue of 106 billion yen(FY2021)300 billion yen(FY2029)

Under either a 2°C or 4°C scenario, the impact on risks andopportunities is small.

Conducting business globally in many fields, our group faces various risks and opportunities in each type of business. Therefore, wegrasp and respond to risks and opportunities on a business company basis. The risks and opportunities related to climate change arealso being addressed by closely monitoring regulatory trends and assessing their respective impacts on business.
The Risk Management Committee evaluates risks from a company-wide perspective by analyzing their impact, likelihood of occurrence, and status of countermeasures to determine whether or not they will have a significant impact on our business activities. Risks
evaluated as significant are designated as priority risks and the departments in charge of the risks are selected, and the Risk Management Committee confirms the status of mitigation activities.
Meanwhile, the CSR and Sustainability Committee checks key opportunities. The Committee incorporates, when necessary, theseopportunities into our management strategy and priority issues (materiality).

With regard to climate-related opportunities, we examined, according to the TCFD categories, opportunities for management reform tobe accomplished through efforts to mitigate and adapt to climate change.

P.49 Risk Management

Major opportunity

Resource efficiency

The increasing adoption of new energy-saving and renewable-energy technologies will reduce energy costs.

Energy source

The increased demand for hydrogen as a fuel exempt from carbon tax will provide new opportunities in the hydrogen energy market.

Metrics and targets
In the 2030 Long-term Management Plan “NITTOKU BX,” which was announced in May 2020, our group has set the goal: “CO2emissions: 30% reduction from the FY2018 level by FY2030.”
Meanwhile, to enhance environmental conservation activities from a long-term perspective, we formulated Eco Vision 2030 in April
2021. It stipulates the achievement of carbon neutrality by 2050 as a long-term goal.
In order to further promote CO2 emission reductions toward achieving these targets, we have set the CO2 emission reduction rate
as one of the evaluation indicators in the performance-linked stock remuneration system for directors (excluding directors who are Audit
and Supervisory Committee Members and outside directors) and corporate officers (excluding employment-type corporate officers). In
addition, the Group has introduced internal carbon pricing (ICP)
CO2 reduction targets and results
to promote Group-wide efforts to reduce CO2 emissions. We
Items
TargetResults
collect 10,000 yen per ton of CO2 emissions from emission
departments and use the collected amount as an internal
30% reduction from the Reduced by 8.87% fromthe FY2018 level in FY2021
Scope 1 and 2
FY2018 level byenvironmental fund to support investment and infrastructure[Emissions: 265,100 tons]
FY2030development for decarbonization.
Scope
3
Furthermore, we are also working to reduce CO2 emissions
Increased by 1.45%
Category 1 Purchased goods and
30% reduction from thefrom the FY2018 levelservices
throughout the supply chain. We ask our business partners
FY2018 level byPart of Category 4 Transportation
in FY2021(suppliers) to set a target for reducing CO2 emissions and work
FY2030and delivery (upstream)[Emissions: 11.23 million tons]
Category 11 Use of sold goods
toward achieving the target. We also offer support for them as*The above CO reduction targets were certified as well-below 2°C (WB2°C) targets by the SBT
deemed appropriate.

To conform to fuel efficiency regulations, demand for high value-added products will increase.

Products and services

The hydrogen energy market is expected to grow due to mandatory reduction of GHG emissions. Increased demand for hydrogen technologies andSOFCs will provide business opportunities.
In disaster preparedness, local consumption of locally-produced energy (distributed power generation) will receive attention, resulting in increased
demand for SOFCs.

Markets

The development of new climate-related technologies that meet social needs will provide business opportunities.

Resilience

Under a 4°C scenario , further energy conservation and toxic-gasemission control will be required in terms of internal combustion
engines. Therefore, we will take measures to improve the performanceof internal combustion engine parts.

Impact on part of therevenue of 387.8 billion yen

Risk management

Climate-related opportunities

AspectFuel cells

Under a 2°C scenario , sales of internal combustion engine parts are
expected to decline in the future due to stricter regulations on vehicles
with internal combustion engines. On the other hand, opportunities willarise in the electric vehicle market and other new markets.

For the Automotive Components Group, under the 2°C scenario, sales are expected to decline in the future due to stricter regulations. Therefore,
the transformation of our business portfolio is required.
For other business types, under either a 2°C or 4°C scenario, we will conduct business flexibly and strategically while keeping a close watch on
market trends. Thus, we have high resilience in terms of both medium- and long-term perspectives.

Job seekers’ opinions will turn against internal combustion engines. Accordingly, job
seekers will not choose us as their place to work.

Rising mean
temperatures

Sensorsbusinesses

Investors’ opinions will turn against internal combustion engines, resulting indivestments.

Plants in areas facing severe water shortage will be forced to shut or slow down
operations due to limitations on water usage, resulting in the cost of shifting
production to other plants, increased transportation costs and the like.

Group

Other

After the 2030s, the number of people who choose ZEVs even as used cars will
increase, resulting in a decline in demand for spark plug replacement and eventuallya decrease in sales.
Products that emit less CO2 in their life cycle will be chosen, resulting in a decreasein the sales of conventional products.

Changes in precipitation
patterns and variability
in weather patterns

Glow plugs,

business

Expenditures on the research and development of new technologies will increase.

Sea level rise

Spark plugs,

Components

Fuel cell

The introduction of new energy-saving and renewable-energy technologies will
increase the cost related to, for example, capital investments.

Rising sea levels will increase the risk of flooding and storm surges. Plants andtransport infrastructure located in coastal areas will be damaged and supply chains
will be broken, resulting in the extra costs of addressing these problems.

Automotive

Responses to future business risks and opportunities

In disaster preparedness, the continuous reinforcement of the BCM and BCP of our group, including our supply chain, will help enhance ourresilience.

Business risks, opportunities and responses under the climate-related scenarios
To further clarify climate-related risks and opportunities, we examined business environments and responses by business type underboth 2°C and 4°C scenarios.
As a result of our examination, no existential impact from physical risks has been identified.
With regard to our business related to internal combustion engines, whose sales revenue makes up 80% of the total at present, weare facing a major change. On the other hand, geared toward the realization of a decarbonized society, hydrogen-related and other newneeds and markets are expected to arise. Therefore, in the 2030 Long-term Management Plan “NITTOKU BX,” we take up“Environment & Energy” as one of the business fields to focus on. Toward 2040, we will push forward with the transformation of ourbusiness portfolio (40% ICE business, 60% non-ICE business).

2

Initiative in June 2022 as science-based targets (SBT).

NGK SPARK PLUG CO., LTD. Integrated Report 2022

36

Introduction

About Us

Foundation for
Value Creation

Strategies for
Value Creation

Financial/Corporate
Information

Human Capital Management

Human Resources Strategy

Human Resource Policy

Our human resources strategy focuses on how to develop and acquire the human resources needed to achieve the vision of our Longterm Management Plan “NITTOKU BX” and our Medium-term Management Plan. We have defined the image of human resources weseek and are advancing a human resources strategy to bridge the gap between those human resources and current human resources.
In order to implement our management strategy and realize the transformation of our business portfolio, we seek to develop all of
our employees into self-disciplined creative human resources who are able to work independently and create new ideas. Moreover, weselect and develop managerial human resources from among these employees, and focus on developing specialist human resources
who promote innovation and DX to respond to changes in the environment.
In addition, in order to develop self-disciplined creative human resources, we are building a system to confirm the voluntary will (Will)of employees and assign the right people in the right roles where they can work according to their Will. Furthermore, we will also work
to improve the skills of our employees so that they can produce results in the places where they are assigned.
While supporting the further development of existing human resources in this way, we are also proactively seeking external specialist
human resources to create technologies and new businesses that can respond to rapid changes in the environment. In addition, we
have already created a database for global talent management and have a good understanding of human resources close to
management, so we will shift our focus to how to effectively manage them.
The Human Resources Strategy Dept. will take the lead in implementing these measures to develop diverse and autonomous
human resources and build a foundation for our sustainable growth.

We acknowledge that employees are the most important management resources. In light of this, we respect the diversity andindividuality of our employees, making the most of our self-disciplined creative human resources and striving to promote thefurther development of our group as a whole.
ActionGuidelines

We will develop human resources who have ambitions and are capable of taking action to change and transform (self-disciplined
creative human resources), and create an environment in which they can play an active role.
We will foster a corporate culture in which human resources with diverse personalities can demonstrate their abilities, and promote
the placement of the right people in the right roles.

Approach to human capital management
In our Long-term Management Plan “NITTOKU BX,” we have set “Beyond ceramics, eXceeding imagination” as our vision for 2040. The
core message of this vision is to be a company that coexists with a diverse range of human resources with aspirations. We are not only
concerned with “What ceramics can do,” but also with the acquisition and development of diverse and autonomous employees as amanagement strategy to take on challenges beyond the realm of ceramics and beyond the world and our own imagination.
Specifically, in January 2021, we announced the Work Style Reform Declaration to promote diverse work styles, and in April of thesame year, we introduced an in-house company system and spun off some businesses. In addition to clarifying the responsibilities andauthority of each business and individual, we have created an environment that facilitates the individuality and characteristics of eachbusiness. Some companies are operating a system to identify the individuality and abilities of employees and match them with jobs intheir fields of interest. In addition, we continue to focus on the development of the younger generation through the HAGI Program fordeveloping the next generation of managerial human resources and the Raise UP Program, which promotes the advancement of
women. Looking outside the company, we are actively promoting open innovation such as the Venture Lab*, which is intended toconnect with industry, government, academia, or overseas advanced technologies and their groups.
In terms of human resource diversity, the Group has set numerical targets of 25% women, foreign nationals, and career hires inmanagerial posts and 30% or more women and foreign nationals on the Board of Directors by 2030. At the end of FY2021, the former
is 17% and the latter is 18%. These indicators are not set with the intention of focusing solely on gender or nationality. We arecommitted as a management team to making efforts to create an organization that embraces and makes the most of the colorful
individuality and characteristics of our employees.
Furthermore, in April 2022, the personnel system has undergone a major change. In order to accelerate the creation of selfdisciplined creative human resources who can realize the themes of the Medium-term Management Plan, “Break to change” and“Change to create,” we have incorporated the Group Human Resource Policy, which clearly defines the direction of human resource
policies that the entire Group will pursue, and have created a highly fair personnel system that rewards achievements and challenges
regardless of age or other backgrounds.
Also, we promote health and productivity management, believing that it is essential for the sustainable development of the Group
that employees work in good physical and mental health. In addition to our annual employee satisfaction survey, we have introduced aquantitative indicator as a tool to visualize engagement that can be checked by line managers, along with the one-on-one meeting
between superiors and subordinates, which have been introduced on a trial basis in FY2019. We have also introduced GOOD
MORNING COLOR, developed by ignArt, a new company launched in 2020, and are actively working to improve workers’ self-care andworkplace communication.
In order to combine different “knowledge” to achieve a future that is beyond the current way, the Nittoku Group will continue towork to promote diversity, equity, and inclusion as its management strategy.

Human resources strategy

Long-term Management Plan
NITTOKU BX

Medium-term Management Plan
Realization of the transformation of
the business portfolio
Human resource policy,
work style reforms, anddiversity promotion

Current
human
resources

Image ofhuman
resources
we seek

Identify gaps andtransform our humanresources portfolio

TalentManagement

Establish medium- to long-term personnel plan

Further utilization of current human resources

Acquire external specialist human resources

Allocate the right people in the right roles and improve their skills

Strategic recruitment

Develop and create self-disciplined creative
human resources*Bases for creation of new business pillars in Silicon Valley, Tokyo, and Germany

Develop managerial
human resources(HAGI*1, NBS*2)

Restructuring of personnel system*1 HAGI: Program to develop the next generation of global managerial human resources*2 NBS: Nittoku Business School

NGK SPARK PLUG CO., LTD. Integrated Report 2022

37

Develop specialist
human resources(DX and innovation)

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Human Capital Management

Employee skill enhancement and career development

New personnel system

We conduct a variety of training programs to improve the skills of our employees. In addition to level-specific training for promotion andspecialized training participated voluntarily by employees to improve their own skills, we also offer a variety of programs such as training
for manufacturing, which focuses on quality and other areas, to support employees’ career development.
In addition, we have a career consultation helpline where employees can consult with us about their daily work and careerconcerns. Employees certified as career consultants provide one-on-one counseling to employees who visit the counter to discuss theiroverall career concerns and work-related issues. The career consultants do not provide solutions but instead help the questioners findanswers for themselves.
We are also working on My Career, a framework to help employees envision their future careers and think about the approach theywant to take. This clarifies each employee’s Will (what kind of work he or she wants to do) and Can (what kind of work he or she iscapable of doing). It is an opportunity for each employee to think about his or her own career, and if it is possible to match the indicatedWill with the human resources being recruited at each company, we will consider arranging transfers and other measures.

In order for the NGK SPARK PLUG Group to achieve true “Dokuritsu-Jiei” (independent spirit), it is important to create self-disciplined
creative human resources, who are strongly aware of his or her own role and is able to link it to his or her actions. Therefore, we haverevised the existing personnel system to a new system aimed at creating self-disciplined creative human resources.
Under the new personnel system, self-discipline, creativity, achievement, and challenge have been newly added as evaluation
elements common to the Group. The entire Group will work together to develop self-disciplined creative human resources who canrealize the themes of the Medium-term Management Plan to “Break to change” and “Change to create.”
We have introduced a system in which employee compensation reflects the results produced by each company, and we expect
each employee to be aware of the output that contributes to our business and performance, and to work in a more efficient manner.
A role grading system was introduced for core positions, and by setting role ranks and salaries according to the roles required, thesystem was changed so that the actual roles played by the employees and their compensation are aligned, regardless of their years ofservice. In addition, as core position human resources who contribute to the Company by utilizing their high level of expertise, we haveestablished a qualification as specialist positions (SP positions) that are not limited to research positions. The M positions, the traditional
managerial positions, will focus on management, while SP positions will concentrate on demonstrating their expertise to promote more
efficient business operations. By further clarifying the roles of each individual, we will realize speedy innovation and the placement of theright people in the right roles to promote the achievement of organizational goals.
The reformed personnel system will be monitored for system evaluation and confirmation of retention status while conducting
employee satisfaction surveys, and will be revised and refined as necessary in the future as well.

Development and management of managerial human resources
As our business expand globally, in 2016, we started a program to find and develop the next generation of global managerial humanresources, targeting all Group companies. This program is intended to facilitate the employment and promotion of candidates regardlessof nationality and to provide them with opportunities and environments that allow them to demonstrate their abilities. It was named the“HAGI Program” after Hagi City in Yamaguchi Prefecture, where the Shoka Sonjuku school developed diverse human resources at theend of the Edo period. Chairman of the Board Shinichi Odo serves as the head of the program. Under the program, seminars havebeen held on a continuous basis to provide employees with opportunities to learn together with a focus on gaining practical knowledge
from a company-wide perspective. We are thereby developing leaders with the will and sense of mission required to take the NGKSPARK PLUG Group into the future.
Targeting human resources in Japan, we run Nittoku Business School classes for employees who are almost qualified to participate
in the HAGI Program. For these classes we have prepared a curriculum that helps participants develop logical thinking and acquire
knowledge and skills regarding management strategies, marketing and presentations. It also includes case studies based on actual
examples and is intended to help participants to develop the spirit, techniques and physical stamina required of leaders.
Employees who have completed the HAGI Program and the Nittoku Business School curriculum have already been making
contributions in core positions within the Group. We have also established a selective human resources development program for eachof North America, Europe, Asia and other regions and implement the program four times a year for the development of businessleaders.
In addition, the Human Resources Committee, whose members consist of members of management, has been meeting once amonth since FY2018 to discuss personnel matters for core positions within the Group.

Qualification system for core positions

Managerial positions (M positions)

Functional qualifications

M1(Number of employee)

Core

40
30

150

30

26

120

30

84 23.6

40

30

9

2019

2020

0
Male

3

0

2021 Fiscal year
Female

34.4

21.1

60

10

Female

101

90

20

8

Rank 4
Rank 5

27

26

2019

2020

Male

Percentage of female

M2(supervisor)

10

40

8

30

6

20

4

10

2

21
0
2021 Fiscal year

6

5

2020

SP1
(senior specialist position)

do not havefunctional qualifications

SP2(lead specialist position)

SP3(supervising specialist position)

The Group conducts employee satisfaction surveys for the following three purposes: (1) to understand employee motivation and senseof burden, (2) to understand the current status, verify the effectiveness, and consider measures for “Change (transformation) with (coexistence) Will (will),” the Action Guidelines set forth in the Long-term Management Plan, and (3) to improve the workplace throughexamination of the results.
The survey results of each individual department are fed back to the departmental heads to notify them of the department’s
situation and challenges indicated by the results. For items with low engagement, countermeasures are considered through exchangesof opinions within departments to improve workplaces, and in some cases, companies launch projects to proactively engage in suchactivities. The HR development department is also working to offer a better working environment for employees by identifying issues tobe resolved through interviews with young employees at each workplace, and the employee satisfaction survey has become an
important tool for reform.
The satisfaction rate in the FY2021 survey was 46.6%, almost unchanged from the previous year. The external environment
surrounding the Group is changing rapidly, and the Group is in the midst of a period of major transformation, including the introductionof the in-house company system and spin-offs of some businesses. In order to improve employee engagement, we will not only
continue to continuously disseminate information internally, but also invest in people and the work environment by reflecting the effortsof each company and individual in evaluations and compensation, and strive to improve the results of the employee satisfaction survey.

6

0

2019

SP positions

Employee satisfaction survey(Number of employee)

50

Rank 6
Rank 7

Recruitment of foreign-national new graduates（％）

Fellows

Rank 2
Rank 3In terms of recruitment, in order to respond quickly to changes in the business environment, we aggressively pursue employment of
mid-career personnel who can immediately take on a job effectively, mainly in the new business and IT departments.
We are also promoting the employment of foreign nationals in our effort to adapt to the rapid advancement of globalization andencourage diverse talent to play active roles. For new graduates, we have been employing around three to five foreign nationals every
year, recently with a special focus on the employment of foreign nationals who have acquired not only Japanese language skills but also
more specialized skills from overseas universities, in addition to those who have studied in Japan.
We are also conscious of increasing the ratio of female employees and the employment rate of people with disabilities. The
inclusion of mid-career employees and foreign nationals in each workplace has helped increase our diversity awareness across thecompany.
New graduates employment

Role grade(advisor)

positions(Number of employee)Role grade

Rank 1

Recruitment strategy

Mid-career employment

Specialist positions (SP positions)2021 Fiscal year

NGK SPARK PLUG CO., LTD. Integrated Report 2022

38

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Human Capital Management

Diversity, equity, and inclusion (DE&I)
Interview with a female manager

We consider diversity, equity, and inclusion to be one of our most important management strategies as we believe that diversity,
equity, and inclusion are essential for companies to attain sound growth and ensure happiness for all employees. We strive torecognize and accept diverse human resources regardless of gender, age, disability, nationality, as well as lifestyle and personality,
and to provide each with the best support and opportunities in a fair manner. We utilize new values and ideas coming from an
employee-friendly workplace that accepts such people by combining different “knowledge.”*Raise UP Program, a selective female
manager promotion training, wasimplemented based on the concept“one step forward in a resilient manner
while staying true to oneself”*Combining different “knowledge” means combining human resources with different attributes, values or ideas.

State of no diversity

State in which diversity reduces productivity

Assimilation

Visiondistrust

General Manager of Human Resources Strategy Dept., Global Strategy Div.

Providingopportunities anddeveloping eachindividual so they
can make theirown uniquecontribution

Communication

Exclusion

Natsuki Hirano

State of DE&I

High level oferrorsGap in stresslevelsIn 2019, taking over the achievements of the DIAMOND Project implemented up to FY2017, the Diversity Team has taken the lead inlaunching the Raise UP Program to accelerate the increase in the percentage of women in managerial positions. The program will
provide training for approximately six months for a small group of female manager candidates. Upon completion of the training, trainees
will take a promotion examination like other candidates for promotion, and if they pass the examination, they will be promoted to
managerial posts.
Although this program is often viewed as being only for female manager candidates who undergo training, this is not the case. In
order to promote a culture that values diversity, all managers participate in kick-off meetings and listen to the strong ideas expressed by
the chairman, president, and executives in charge. In addition, a mentor system is in place during the training, in which multiple
executives play a supportive role. There have been comments from executives that they have made new discoveries through interaction
with the trainees.
The bonds between trainees are strong, and I think it is great that trainees and experienced trainees are able to work
autonomously, discussing their problems during and after the training, and senior trainees giving advice to junior trainees.
On the other hand, it is desirable that the ratio of male to female managers should be equal to the ratio of male to female
employees, even without special programs. With that in mind, it is our ultimate goal to dissolve this program.

Initiatives to promote DE&I
Since 2013, as our first step toward diversity promotion, we have been putting effort in creating working environment across thecompany where women can truly thrive and play active roles. We are trying to change the mindset of both managers and female
employees themselves, regarding the empowerment of women as a driver for the reform of our corporate culture.
Raise UP Program (selective female manager promotion training)This is a selective training program for female employees whose next stage of growth will be managerial positions, to acquire the knowledge,
skills, and attitude required to become what they want to be. The program embraces the concept “one step forward in a resilient manner whilestaying true to oneself,” and the first word in the name of the program represents the components that make up the concept: Resilient, Active, I(true to oneself), Smart, and Exceed (one step forward). We have appointed several executives as advisory board members for the program,providing opportunities for trainees to voluntarily seek advice and support for their efforts in the program, and acquire multiple mentors. Trainees
will gain the perspective required of managers, and at the end of the training, they will give a presentation in front of the chairman and president.
Through the training, we help trainees get ready to become managers and to take on challenges with confidence.

After completing the program, which I
initially participated in with somehesitancy, my awareness of management
posts has changed dramatically

Lectures for those in core positions
We hold annual lectures on diversity for executives, managers, and section chiefs, by inviting prominent outside lecturers. By providing
opportunities to acquire knowledge of advanced cases, we help participants change the way they think and raise awareness while spreading
the significance of promoting diversity.

Namiko Nishimoto
Diversity Promotion Team Leader,

MT training (mimi-tako training)

HR Development,

The name of this training, “mimi-tako (MT),” is derived from a Japanese phrase meaning “hear enough.” To raise managers’ awareness, the MTtraining is held repeatedly under the themes of, for example, diversity, the Nittoku Way, and compliance to the extent that trainees feel they haveheard enough.

HR Development Dept.,
HR Communication Company

When I was first invited to participate in the Raise UP Program, I was a bit hesitant. I had never thought about becoming a manager
before. However, I had participated in the DIAMOND Project training program and decided to take part in this program as well because
I was interested in the training.
The training in this program was structured in such a way that it enabled me to think carefully about where I want to be, and it wasmore difficult than any other training I had experienced before, making it a considerable challenge to complete. At the end of the
program, we had to make a presentation in front of the chairman and president, and we had to rework our materials many times inorder to achieve that goal. The mentor executives also consulted with me and helped me rehearse my presentation. Such experienceswere stimulating, and participating in the program was a great opportunity for me to review my career.
My own awareness has changed dramatically as a result of participating in the program, and I feel less discouraged aboutbecoming a manager. Rather, I now feel that I have a special opportunity to become a manager, so I should make the most of it.
Even now, female employees may have an image of female managers as being “special people” or “needing strong leadership tolead their subordinates,” but there are many different kinds of people in management positions, both men and women. We will continue
our efforts to increase the number of female managers and other attractive leaders in our company who make the most of theiruniqueness.

Proportion of female employees
Selected as a Nadeshiko Brand company for FY2021 as acompany that promotes the empowerment of women
As a company that excels in theempowerment of women, we wereselected as a Nadeshiko Brand
company for FY2021, which is jointly
selected by the Ministry of Economy,
Trade and Industry and the Tokyo
Stock Exchange. This is the second
time for us to be selected as aNadeshiko Brand company following
the selection in FY2018.

（％）

20

14.7

14.8

15.4

16.0

2.49
1.24

2.28
1.53

2.94
1.83

2.99
2.60

3.23

2017

2018

2019

2020

2021

Section Chiefs

Managers

15

15.6

10

4.39

5

0
Generalists

FY

NGK SPARK PLUG CO., LTD. Integrated Report 2022

39

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Respect for Human Rights

Human Capital Management

Work style reforms

Human Rights Policy

To improve productivity and develop self-disciplined human resources, we have formulated Work Style Reform Declaration
based on two pillars: promoting comfortable remote work and creating new value with tools responding to change.
We are working to put in place a remote access environment and introduce a telephone extension system even available
for employees working remotely or on business trips to realize the work style reforms.
We are also promoting the creation of working environment where employees can more easily work remotely by
eliminating a requirement for attendance (clock-in time), offering a remote work allowance, putting in place satellite offices andsharing information on ingenious approaches for remote work taken at workplaces. We will review the modality of organization
as well as our business management through the promotion of remote work, and create self-disciplined human resources who
are not tied down to tradition and capable of creating new value.
In addition, with the aim of increasing opportunities for our employees to play an active role in the company, we launcheda second job system in October 2021. This program is available to those who meet the requirements and obtain permission,and is expected to have positive effects such as the formation of new contacts, acquisition of diverse work styles, personal
growth and self-realization, and expansion of business opportunities.

Based on the Universal Declaration of Human Rights, the ILO Declaration on Fundamental Principles and Rights at Work, theUN Global Compact, and the UN Guiding Principles on Business and Human Rights, we understand the need to respect thehuman rights of all people who are affected by our business activities and will make our best effort to protect the dignity ofthese people.

ActionGuidelines

Work Style Reform Declaration

We do not discriminate against people or infringe upon their human rights based on race, ethnicity, religion, nationality, place of birth,social status, belief, age, disabilities, physical features, gender, sexual orientation and others.
We do not use child labor or forced labor.
We do not engage in harassment including sexual harassment and power abuse.
We identify the negative impact that we could have on human rights through our business activities and try to prevent or reduce suchimpact.
In the event of direct or indirect violation of human rights, we protect the victims through appropriate investigations and responses.
We promote education and enlightenment so that this policy is understood and implemented throughout our business activities.

Promotion system

We recommend “diversified work styles” in order to create an “organization comprised of passionate individuals working together” of NITTOKU
BX.
Promote comfortable remote work to employees Create an environment with a goal of a remote work rate of 70% or more.
Prepare tools that respond to change and create new value To that end, we will invest in digital solutions
And we want you to find the best for yourself from the many options and become a “self-disciplined human resource who can continue to add
value.”The NGK SPARK PLUG Group respects each person’s values and aspirations.

The Group has identified human rights as one of the issues to be addressed in its CSR and sustainability initiatives, and is taking action
to address this issue as part of its CSR and sustainability promotion system.
Labor and management work together to prevent harassment in the workplace. We offer consultation services to people facingharassment through the contact point jointly established by labor and management at each of our plants and via the Corporate Ethics
Helpline. The Anti-Harassment Committee promptly examines issues reported through the contacts and checks facts. It then takes
corrective action and gives instructions as needed. The results of the action taken are reported to the Compliance Committee. Other
matters related to human rights are handled by the Compliance Committee.
The effectiveness of the compliance system, including anti-harassment measures, is periodically reviewed and reported to the CSR
and Sustainability Committee for confirmation.

Efforts to maintain and improve employees’ health
NGK SPARK PLUG regards the health of employees as one of its important managerial resources for sustainable corporate
growth and is fostering the health of individual employees for “health and productivity management.” In December 2017,
we made a declaration on health and productivity management as the entire NGK SPARK PLUG Group and are
implementing preventive and other measures against lifestyle-related diseases, mental disorders and passive smoking toproactively support the health of employees.

Educational activities
The Compliance Guidebook is distributed to employees working for the Group. This guidebook also stipulates compliance with humanrights, including respect for human rights and prohibition of various types of harassment (such as harassment related to pregnancy,
childbirth, childcare leave and long-term care leave, bullying, and mobbing, as well as sexual harassment including that directed against
people of the same gender and in relation to sexual orientation or identity). The guidebook is also used in daily awareness-raising
activities, such as reading sessions at workplaces.
In addition, in 2016, we signed the UN Global Compact and since then we have been creating more opportunities to provide
education and information on human rights to our employees to raise their awareness. We have recently increased our focus on
enlightenment about gender equality and LGBT-related issues through our human rights-related training and internal e-mail newsletter,and are also monitoring the occurrence of racial problems around the world.

Declaration on health and productivity management
I. The NGK SPARK PLUG Group declares that we will support the health of each and every employee and promote Kenkokeiei (health andproductivity management) by viewing the health of our employees as one of the most important management resources in order to realize
sustainable growth.
II. We will respect the diversity and individuality of each employee and promote the creation of a workplace in which each employee can fully
demonstrate his or her abilities as well as work energetically.
III. We will work together with the labor and health insurance unions to actively engage in health promotion activities that include employees’
families from a long-term perspective.

Takeshi Kawai
Representative Director President
Chief Operating Officer

Human rights due diligence* Kenkokeiei is a registered trademark of NPO Kenkokeiei.

We recognize that the business activities of the Group affect a wide range of people, including employees of the Group, employees ofour suppliers, and local residents. Accordingly, with regard to human rights, we are working to identify and mitigate human rights risks
Selected under the Health & Productivity Stock Selection for the first time
Certified as one of the Excellent Enterprises of Health andProductivity Management (“White 500”) for the fifth time

related to the Group’s business activities.

We were recognized as one of the brands under the Health & Productivity
Stock Selection 2022 jointly selected by the Ministry of Economy, Trade andIndustry and the Tokyo Stock Exchange. This is the first time that we havebeen selected under the Health & Productivity Stock Selection. In addition,
this is the fifth time for us to be certified as one of the Excellent Enterprises
of Health and Productivity Management 2022 (“White 500”) by the Nippon
Kenko Kaigi.

Initiatives on the supply chain
We have issued CSR and Sustainability Procurement Guidelines to our suppliers to promote CSR and sustainability initiatives throughout our
supply chain. These guidelines also include compliance items related to human rights such as labor, health and safety.
We are requesting suppliers to survey the status of implementation with a checklist every two years, providing feedback on the evaluation
results. For suppliers that require follow-up, we confirm the situation by visiting them and other means. We provide support as appropriate if
improvements are necessary.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

40

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Outside Directors’ Roundtable Discussion

Outside Director

Outside Director

Outside Director

Outside Director

Miwako Doi

Kanemaru Yasui

Morihiko Otaki

Mackenzie Donald Clugston

Supporting challenge aimed at the transformation of business portfolio
What developments have you seen with regard to thechallenges in evaluating the effectiveness of the Boardof Directors in the previous year?
Otaki Regarding fulfillment of the supervisory function in light of
the introduction of the in-house company system, which wasstated as one of the issues, we are still in the process ofdelegating business-related decisions to each company, andduring the past year we have been discussing specifically about
defining the scope of authority and responsibility. Because we arestill in the process of accumulating information on theperformance and effects of activities based on the independentjudgment of each company, we have yet to fully confirm thefulfillment of the supervisory function. We will also be
implementing a framework in which the Board of Directors checks
to see if each company’s operations are in line with the directionthat the entire Group is aiming for.

Yasui With the introduction of the in-house company system,
we have delegated authority to each company. We are also
encouraging the Board of Directors to shift from a traditional
management style to a monitoring style. We transitioned to acompany with an Audit and Supervisory Committee in June of thisyear, and the ratio of outside directors on the Board of Directors
has increased to 7 out of 11, which is the result of discussions
regarding the transition. On the other hand, the transition to amonitoring system will make it more difficult for directors to get anunderstanding of the detailed activities of each company, so wewill have to be mindful of how we respond to this issue.

Doi As a common theme across companies, last year the Boardof Directors discussed issues related to the development of ICT
infrastructure and personnel systems. I feel that monitoring is stillinsufficient to ensure effective governance in these areas, and I
think that a unified decision-making process is required across all
the companies. I wonder how much DX will be adopted in
response to this opportunity. This could include a framework forsharing information between companies.

Clugston I believe that we have a heavier responsibility in termsof control through monitoring. As each company will become
more unique, and will proactively engage in M&As andcollaboration with other companies, it will be difficult for the Boardof Directors to oversee whether these activities are in line with theapproach of the Group as a whole, even in terms of expertise. I
think this is one of the challenges in monitoring.

and used to invest in renewable energy facilities, will be applied toeach company, and is expected to serve as a monitoring function
for CO2 emissions.

Otaki What will become an issue in the future is when there is a
conflict between management decisions made by each company
and management decisions made from the perspective ofcompany-wide optimization. It is necessary to hold robust
discussions while fostering a mindset in which each company
pursues the best with autonomy.

Yasui While non-financial indicators are of course indicators of
our sustainability efforts, I also believe that they should beconsidered and emphasized as indicators of how well we are
stepping into new business areas in the transformation of ourbusiness portfolio that the Group aims to achieve. How muchinvestment is being made in new business areas? The Board of
Directors has the role of checking whether or not we are working
on the transformation of our business portfolio through nonfinancial indicators.

Doi Regarding another issue in the effectiveness evaluation,enhancing the monitoring function on non-financial indicators, I
would like to commend the internal carbon tax that was

Doi The objective of the transformation of our business portfolio
is to improve the extremely high dependence of profits on the
Automotive Components Group and to realize a profit structure

NGK SPARK PLUG CO., LTD. Integrated Report 2022

41

introduced in April 2022. This system, in which funds arecollected according to the CO2 emissions of each department

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Outside Directors’ Roundtable Discussionthat leads to sustainable growth. On the other hand, as an

the eleven members of the Board of Directors are outside

Doi I feel that it is difficult to gain the understanding andoutside director, I would like to focus not only on immediate
profits, but also on what kind of technological solutions can bedirectors, which is a majority. However, outside directors have notacceptance of the entire Group regarding the need to transformthe business portfolio under the current favorable businessdeveloped to become carbon neutral and contribute to society. If

inside directors, and we have had free discussions, so I do not
expect any major changes from that standpoint.

conditions. We also need to understand and support the need forto global growth.

investment in growth areas and new fields. However, we should
not proceed with investments blindly. Under unstable external

Doi I think we are still in the process of securing diversity in

win in the global market. From this perspective, it will be

Doi To take an extreme example, the ratio of outside directors

circumstances, I think we should set conditions for withdrawal

human resources and promoting the active participation ofnecessary to emphasize carbon neutrality and encourage efforts

could be significant in an emergency situation, such as when thefrom business based on the assumption of risk in advance.

to achieve it.

management system is reformed in response to a significant

women. I would like to increase the ratio of female managers andproduce female corporate officers and internal female directors. I

Yasui For the Group, which has basically prioritized safety andalso believe that we should pay close attention to employee

soundness, the question of how much risk to take and how muchto invest in new areas in the future is a difficult theme to address.

engagement as a non-financial indicator. As we transform ourwe do not change our business portfolio assuming carbon
neutrality, we will not be able to survive as a company that canfound it difficult to speak up in the past because there are moredeterioration in business performance. Even in such a case,however, I do not believe that discussions should be conducted
solely from an outsider’s perspective, ignoring the unique culture
and values that the company has built up and the wishes of theemployees working on the front lines.

What actions are required to realize the 2040 Vision?

Yasui Among the members of this roundtable discussion, I am
now an outside director serving as an Audit and Supervisory
Committee Member. I believe that the roles and functions
assumed by outside directors will remain unchanged, but the
major change will be the addition to the Board of Directors ofexecutives whose function will be equivalent to that ofconventional Audit & Supervisory Board members. In other words,
the members involved in auditing will have the same voting rights
on proposals as other directors, will participate in discussions at
meetings of the Board of Directors as participants rather than as
observers, and will be responsible for making decisions.

capabilities through competition and other initiatives that will lead

We need to minimize investment and maximize profits in thebusiness portfolio going forward, we are introducing various
measures, including the introduction of the in-house company

Automotive Components Group, and invest in areas such assystem, and the Group is undergoing a major transformation. We

decarbonization and unknown areas that have never been
experienced before without fearing risks. Of course, it is notneed to follow up on how employee engagement will change as
the portfolio transformation progresses.

enough to invest in everything, but if we do not take risks while
making investments, we will not be able to transform our businessportfolio.

Otaki With an eye toward 2040, the executives will establish
action plans for the next one or two years, and we, the outside

What were the changes resulting from the transition to
a company with an Audit and Supervisory Committee?

engineers to create a foundation for innovation that differs fromthat of the headquarters, or to enhance mutual technologicalYasui As for internal organizations, the Human Resources
Strategy Dept. and the Sustainability Strategy Dept. are taking
the lead in implementing human capital measures. Regarding

directors, will be responsible for monitoring whether these actionplans are being properly implemented toward medium- to long-

diversity, looking at the status of female employees, foreign
nationals, and mid-career hires, a certain level of diversity has

term goals. We have been doing this for some time, but in orderto speed up the process of the transformation of our businessportfolio, it will be necessary to increase the incentives for andbeen secured up to the management level, but for higher levels,
there is still work to be done, and I look forward to theachievement of diversity in the future.

pressure on executives.
Otaki I would like to consider how to monitor employee
engagement. Satisfaction surveys through questionnaires, forexample, would be good feedback for employees and lead to

Clugston The current phase for the Group is one in which weshould take advantage of the free thinking. It is important tobroaden our perspective and look to the future of the company
as much as possible, and I think it is preferable to monitor
whether the direction is good or not rather than to control thecompany too tightly. Too large an investment at this time is risky,while too small an investment will have little effect, so it is the
responsibility of the management team to find the right balance
and make the decision to execute the investment.

increased engagement if the company can be improved basedon the data captured from these surveys. As Ms. Doi mentioned,
how employees perceive the portfolio transformation and what
each one of them feels will be an important indicator, and wemust respond to the thoughts of our employees.
Clugston I would say that our future depends on how muchrisk we take. In the past, we have avoided risk as much as
possible. However, I feel that the momentum to take on new
challenges is growing, and I would like to support them greatly
while encouraging executives with the incentives and pressurethat Mr. Otaki mentioned.

Otaki Audit and Supervisory Board Members can express theiropinions as a committee in addition to expressing their opinions
as individual directors, so it can be said that monitoring is doubly
strengthened in this sense. Another major point is to further
strengthen cooperation and information sharing with the Internal
Auditing Office, centered around full-time Audit and Supervisory
Board Members, in order to collect quality information more
efficiently.

What are your thoughts on human resource policies,
such as improving employee engagement?
Clugston As a corporate group that operates globally, we
should promote human resource policies that actively employ
more talented engineers overseas. For example, we could
establish R&D centers in Europe and the U.S. and bring in foreign

Clugston Another change is that, with this transition, seven of
NGK SPARK PLUG CO., LTD. Integrated Report 2022

42

Introduction

Strategies for
Value Creation

About Us

Foundation for
Value Creation

Financial/Corporate
Information

Corporate GovernanceIn line with the corporate philosophy expressed in the slogan, “With established trust and confidence inside and outside
the company, we aim to contribute to the peoples of the world by creating and putting at their proposal new values for the
future,” we are enhancing the corporate governance system that we built to foster business management that will increase
our corporate value on a medium- to long-term basis. Our basic philosophy on corporate governance is to promote fair

Corporate governance system
The Company has selected a company with an Audit andSupervisory Committee for the purpose of further enhancing
discussions on management policies and strategies at the Boardof Directors, strengthening the supervisory function, and further
speeding up management decision-making and execution ofbusiness. Each organization is set up within the framework of acompany with an Audit and Supervisory Committee.
1

Corporate Governance System Chart (As of July 1, 2022)

3 Nomination Committee

Advising/
reportingAppointment/
dismissal

Appointment/
dismissal

Audit and2 Supervisory Committee

Mutualcooperation

Independent auditor

Directors(Audit and Supervisory Committee members)

Audit and Supervisory
Committee OfficeAppointment/
dismissal/
supervision

Supervision

Mutualcooperation

ReportingPresident and CEO
Advising/reporting

5

Corporate Management Committee

StrategySpecial Committees

HR

Risk Management Committee

4Internal Auditing Office

Corporate Officers andCompany Presidents Meeting

Corporate Officers

Remuneration Committee

To ensure reasonableness and transparency with regard to director
nomination, a Remuneration Committee, in which a majority of themembers are independent outside directors, was established as anadvisory body to the Board of Directors. Based on the Board of
Directors’ request for opinions, the Remuneration Committee
deliberates on matters related to remuneration of directors (excluding
directors who are Audit and Supervisory Committee members) and
executive officers, including the appropriateness of policies,
procedures, and systems, as well as the appropriateness of the
proposed remuneration of each director (excluding directors who are
Audit and Supervisory Committee members) and executive officer, anddelivers its opinions to the Board of Directors. In addition, directors
who are Audit and Supervisory Committee members also attend a
Remuneration Committee as observers.

Reporting

6

Advisory body of the Board of Directors. Majority of its
members are independent outside directors so as to ensuretransparency and rationality for the nomination of director
candidates. Consulted by the Board of Directors, thiscommittee deliberates on the appointment of directors, which
will be proposed at the general meeting of shareholders, aswell as on the appointment and dismissal of executive officers,
the evaluation of corporate performance and the results-based
evaluation of directors (excluding directors who are Audit andSupervisory Committee members) and executive officers. The
deliberation results are reported to the Board of Directors. In
addition, directors who are Audit and Supervisory Committee
members also attend a Nomination Committee as observers.

Mutualcooperation

Investment
Instruction

Compliance Committee

Instruction

Nomination Committee

Accounting
audit

Audit

Business execution

The Audit and Supervisory Committee is composed of four Audit
and Supervisory Committee members, three of whom are outside
Audit and Supervisory Committee members. The Committee
audits and supervises the directors’ business execution as anindependent organization on the behalf of shareholders. Full-time
Audit and Supervisory Committee members are selected from theperspective of maintaining the audit environment, gathering
information from within the company, and monitoring and verifying
the development and operation of internal control systems on adaily basis and share such information with other members toensure the effectiveness of organizational audits. The Audit andSupervisory Committee also confirms the appropriateness andsuitability of the nominations and remuneration of directors(excluding directors who are Audit and Supervisory Committee
members) by attending Nomination Committee and Remuneration
Committee meetings and receiving explanations from therepresentative directors and forms opinions on these matters.

Audit

Quality Committee
Information Security Committee
Environment Committee

Instruction
Instruction

Basic information

Directors who are Audit and Supervisory Committee members

FY2022Name

Nomination Committee Remuneration Committee

Nomination Committee Remuneration Committee

5

Shinichi Odo

Mikihiko Kato

Attends the meeting

Attends the meeting

Takeshi Kawai

Kanemaru Yasui

Attends the meeting

Attends the meeting

Toru Matsui

Fumiko Nagatomi

Attends the meeting

Attends the meeting

Morihiko Otaki

Christina L. Ahmadjian

Attends the meeting

Attends the meeting

Organizational design
No. of directors
No. of directors who are Audit and Supervisory
Committee members among total no. of directors
Independent auditor

Mackenzie Donald Clugston
Miwako Doi
Chiharu Takakura

NGK SPARK PLUG CO., LTD. Integrated Report 2022

43

Corporate Management Committee

The Corporate Management Committee, comprising representative
directors and some executive officers, was established to makedecisions on and supervise important matters relating to businessexecution in accordance with the basic management policies
determined by the Board of Directors, to discuss and understand inadvance business challenges to be addressed and risks that theGroup is facing, and to promptly respond to changes in the
management environment. The Corporate Management Committee
addresses management strategy and other important mattersrelating to overall management and also focuses its deliberations onimportant human resource strategies and measures relating to theassignment and development of human resources as well as
significant investments including capital expenditures, equity
contributions, acquisitions, and capital tie-ups.

Business Operating Section (Corporate functions,Internal Companies, Divisions)/Group Companies

Safety and Health Committee

Members of the Nomination and Remuneration Committees
Name

Appointment/
dismissal

Audit
Supervision

1 Board of Directors

CSR andSustainability Committee

Audit and Supervisory Committee

FY2022

Outside3

Directors(excluding Audit and Supervisory Committee members)

4 Remuneration Committee

Board of Directors

Directors

Internal

General meeting of shareholders

The Board of Directors comprises eleven members (of which
seven are outside directors), which in principle meets regularly
once every month and holds ad hoc meetings when necessary.
The Board of Directors deliberates and makes decisions on
matters specified in laws and regulations or articles ofincorporation as well as other important management issues
specified in the regulation of the Board of Directors. The Board
delegates certain matters to the Representative Director
President, and receives reports from the Representative
Director and President or other directors and supervises thestatus of business execution. A majority of the Board consistsof independent outside directors to enhance its supervisory
function and ensure management transparency.

2and highly transparent management for our stakeholders, including shareholders, customers, suppliers, employees andlocal communities, and build relationships of trust with them, and to operate and further improve our management andinternal control systems to achieve sustainable growth through efficient and sound management.

As of July 1, 2022

Company with an Audit and Supervisory Committee
11 (7 independent outside directors)
4 (3 independent outside directors)
KPMG AZSA LLC

6

Corporate Officers, Corporate Officers andCompany Presidents Meeting

We adopt the corporate officer system to foster businessexecution based on the policies set by the Board of Directors
and clarify responsibility for the execution results. Corporate
officers are selected by the Board of Directors and report on
their business execution at the monthly Corporate Officers
and Company Presidents Meeting to share information andexchange opinions in a cross-sectional way.

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Corporate GovernanceDirectors (as of July 1, 2022)

Representative Director,
Chairman of the Board

Shinichi Odo

April 1977:

Joined our company

February 2003: General Manager of Overseas Aftermarket Sales & Marketing Dept.,
Sales and Marketing Div., Automotive Components Gr.

Executive Vice President, Assistant to President,
Assistant to President, Mirai Creation M&A Dept., R&D Div.,All Businesses, Global Strategy Div., and Global Group
Governance Div.

and Business Creation Company

Takeshi Kawai
April 1987:

Joined our company

President, NGK SPARK PLUGS (U.S.A.), INC.

April 2012:

Corporate Officer

June 2007:

Member of the Board

April 2015:

Managing Officer

June 2010:

Member of the Board (Managing Director)

June 2015:

Member of the Board, Managing Officer

June 2011:

President

April 2016:

Member of the Board, Senior Managing Officer

April 2012:

President & CEO

April 2019:

President & Chief Operating Officer (up to today)

April 2016:
April 2019:

Joined our company

April 2011:

President of NGK SPARK PLUG EUROPE GmbH

October 2013: General Manager of OEM Sales & Marketing Dept., Sales andMarketing Div., Automotive Components Gr.
December 2014: President of NGK SPARK PLUG (SHANGHAI) CO., LTD.
Corporate Officer

July 2016:

President of NGK SPARK PLUG (SHANGHAI) TRADING CO., LTD.

April 2018:

Managing Officer

Representative Director & Chairman of the Board President & Chief
Executive Officer

June 2018:

Member of the Board, Managing Officer

April 2019:

Member of the Board, Executive Vice President

Representative Director & Chairman of the Board (up to today)

April 2020:

Representative Director, Member of the Board, Executive Vice
President (up to today)

Mackenzie Donald
Clugston
Joined Department of Foreign Affairs and International Trade of theCanadian Government

Member of the Board (Outside Director)

Member of the Board (Outside Director)

Miwako Doi

Chiharu Takakura

April 1979:

Joined Tokyo Shibaura Electric Co., Ltd. (currently Toshiba Corporation)

July 2005:

Senior Fellow, Corporate Research & Development Center, Toshiba Corporation

August 2000: Canadian Consul General in Osaka

July 2008:

Chief Fellow, Corporate Research & Development Center, Toshiba Corporation

August 2003: Minister, Embassy of Canada in Japan

April 2014:

Auditor, National Institute of Information and Communications Technology,
an Incorporated Administrative Agency (currently, a National Researchand Development Agency) (up to today)

June 2015:

Outside Director, Nomura Research Institute, Ltd.

April 2017:

Executive Director, Nara Institute of Science and Technology (up to today)

June 2019:

Outside Director, Isetan Mitsukoshi Holdings Ltd. (up to today)

April 2020:

Vice President, Tohoku University (up to today)

June 2020:

Outside Director, Subaru Co., Ltd. (up to today)

August 2009: Ambassador of Canada to Indonesia, Timor-Leste and the ASEAN
November 2012: Ambassador of Canada to Japan
June 2016:

April 1984:

April 2015:

Member of the Board (Outside Director)

Outside Director, KAMEDA SEIKA CO., LTD. (up to today)

September 2016: Specially Appointed Professor, Kwansei Gakuin University (up to today)
June 2017:

Outside Director, Idemitsu Kosan Co., Ltd.

March 2018:

Outside Director, Sapporo Holdings Limited (up to today)

June 2019:

Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(up to today)

Member of the Board (Outside Director)

Morihiko Otaki

Toru Matsui

February 2011: General Manager of Sensor Engineering Dept. II, Sensor Div.,
Automotive Components Gr.

July 2005:

June 1982:

Representative Director, Member of the Board,

Representative Director, President, Chief Operating Officer

August 1996: President & CEO, JOHNSON & JOHNSON K.K.
VISION CARE COMPANY
August 2011: Vice Chairman of the Board, PASONA INC.
June 2013:

Member of the Board (Outside Director),
NGK SPARK PLUG CO., LTD. (up to today)

June 2016:

Director, Henry Schein Japan K.K. (up to today)

August 2016: Vice Chairman, PASONA INC.
June 2018:

Outside Director, GIGA PRIZE CO., LTD. (up to today)

June 2020:

Outside Director, FP Corporation (up to today)

April 1983:
Joined the Ministry of Agriculture, Forestry and Fisheries
May 1992:
Obtained an MBA from Georgetown University (U.S.A)
August 1993: Consultant, Sanwa Research Institute Corp.
July 1999:
Planning Manager, Human Resources Division, Pfizer Japan Inc.
October 2006: General Manager of Human Resources Department, Human Resources
and Communication Division, Novartis Pharma K. K.

Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
(up to today)

July 2014:

Corporate Fellow, General Manager, Global Human Resources Dept.,
Ajinomoto Co., Inc.

April 2020:
June 2020:

HR Advisor, ROHTO Pharmaceutical Co., Ltd.
Director, Head of Well-being Management Promotion Division,
ROHTO Pharmaceutical Co., Ltd.

June 2021:
April 2022:
June 2022:

Outside Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.
Director, Chief Human Resource Officer, ROHTO Pharmaceutical Co., Ltd. (up to today)
Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD. (up to today)

Member of the Board,
Full-time Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Member of the Board (Outside Director),
Audit and Supervisory Committee Member

Mikihiko Kato

Kanemaru Yasui

Fumiko Nagatomi

Christina L. Ahmadjian

April 1985:

Joined our company

March 1981:

Registered as a Certified Public Accountant

April 1981:

Registered as an attorney and joined Hachisuka Law Firm

February 2012: General Manager, Corporate Planning Dept.

April 1999:

Representative Partner, Central Audit Corporation

March 1989:

Left Hachisuka Law Firm

August 2012: President of CERAMICA E VELAS DE IGNICAO NGK DO BRASIL LTDA.

September 2006: Partner, Misuzu Audit Corporation

April 1989:

Opened Nagatomi Law Firm (up to today)

October 2015: General Manager, Corporate Planning Dept.

August 2007: Representative Partner, AZSA & Co. (currently KPMG AZSA LLC.)

May 2006:

Outside Auditor, UCS CO., LTD.
Audit & Supervisory Board Member (Outside Corporate Auditor),
Chubu Electric Power Co., Inc. (up to today)

April 2016:

Corporate Officer

June 2017:

Member of the Board, Corporate Officer

April 2019:
April 2022:
June 2022:

June 2008:

Managing Partner, Director of Nagoya Branch, AZSA & Co. (currently
KPMG AZSA LLC.)

June 2016:

Member of the Board, Executive Officer

June 2013:

Retired from KPMG AZSA LLC.

June 2017:

Outside Audit & Supervisory Board Member, NGK SPARK PLUG CO., LTD.

Member of the Board

July 2013:

Director, Yasui Certified Public Accountant Office (up to today)

June 2022:

Member of the Board, Full-time Audit and Supervisory Committee
Member (up to today)

June 2014:

Outside Director, NICHIHA Corporation

Member of the Board (Outside Director), Audit and Supervisory
Committee Member (up to today)

Member of the Board (Outside Director), NGK SPARK PLUG CO., LTD.
June 2022:

Member of the Board (Outside Director), Audit and Supervisory
Committee Member (up to today)

January 1995: Assistant Professor, Columbia Business School
October 2001: Associate Professor, Graduate School of International Corporate
Strategy, Hitotsubashi University
January 2004: Professor, Graduate School of International Corporate Strategy,
Hitotsubashi University
June 2009:
Outside Director, Eisai Co., Ltd.
April 2010:
Dean, Graduate School of International Corporate Strategy, Hitotsubashi University
April 2012:
Professor, Graduate School of Commerce and Management, Hitotsubashi University
June 2012:
Outside Director, Mitsubishi Heavy Industries Ltd.
June 2014:
Outside Director, Japan Exchange Group, Inc.
April 2018:
Professor, School of Business Administration, Hitotsubashi University Business School
June 2018:
Outside Director, Sumitomo Electric Industries, Ltd. (up to today)
March 2019: Outside Director, Asahi Group Holdings, Ltd. (up to today)
June 2021:
Outside Director, NEC Corporation (up to today)
April 2022:
Emeritus Professor, Hitotsubashi University (up to today)
Specially Appointed Professor, Rikkyo University (up to today)
June 2022:

NGK SPARK PLUG CO., LTD. Integrated Report 2022

44

Member of the Board (Outside Director), Audit and Supervisory
Committee Member, NGK SPARK PLUG (up to today)Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Corporate Governance

Executive/Corporate Officers (As of July 1, 2022)

Skill Matrix of Directors
Considering the business and management system of the Group, the Board of Directors identified the knowledge and experience which
it should possess from “Basic areas from the perspective of important management decision-making and business execution supervision” and “Areas that need to be particularly promoted and supervised to realize the medium-term management plan.” According tothis, Directors are assigned in well-balanced manner with consideration for diversity.

Executive Officer

Executive Officer

Executive Officer

Noboru Ishida

Hiroyuki Tanabe

Yoshiyuki Takayanagi

Energy Conversion Business Development

Production Engineering Company,

Company President, Business Support Company

President of CECYLLS Co., Ltd.

Global Procurement Company
Plant Manager of Komaki

Skill Matrix of Directors* 1

Executive Officer

Kenji Isobe
Resources Strategy Depts., Global Strategy Div.
FP & A Company, Business Support Company, HR
Communication Company

SCM

IT/DX

HRD/HRNew Business/M&A

Sales/MarketingTechnology/R&D

Experience overseas

Governance/
Legal/Risk management

Finance/Accounting

Management

PositionIndependence

Name

Financial Strategy, Business Management, and Human

Executive Officer

Akiyoshi Kato

Kazunobu Hasegawa

IGNITE Company, Sensor Beyond Company

Regional President China

Plant Manager of Nagoya

President of NGK SPARK PLUG (SHANGHAI) CO., LTD.

Plant Manager of Satsuma

President of NGK SPARK PLUG (SHANGHAI) TRADING CO., LTD.

Company President FP & A Company, Secretarial Dept.
President of NGK SPARK PLUGS (U.S.A.) HOLDING, INC.

Executive Officer*2

Executive Officer

Hiroyuki Maeda*3

Executive Officer

Executive Officer

Koji Suzuki

Keiji Suzuki

Company President, Mobility Business Company

R&D Div.

Executive Officer

Executive Officer

Osamu Shinkai

Tomohiro Yamaguchi

Company President, Advanced Ceramics Company

Company President, HR Communication Company

President of NTK CERATEC CO., LTD.

General Manager, Tokyo Branch

Corporate Strategy and Sustainability Strategy Depts.,

Shinichi Odo

Representative Director andChairman of the Board

Takeshi Kawai

Representative Director andPresident,
Chief Operating Officer

Global Strategy Div.
Business Transformation Div., Machining Technology
Company
Overall management of all businesses

Executive Officer

Toru Matsui

Morihiko Otaki

Hiroyasu Ogura

Representative Director,
Executive Vice President

Digital Transformation Dept., Global Strategy Div.

Outside Director

IT Systems Company

Executive Officer

Executive Officer

Company President, SCM Solutions & Services Company

Masaki Sumiya

Yoshitaka Suzuki

Company President, Global Procurement Company

Business Transformation Div.

Corporate Officer

Corporate Officer

Corporate Officer

Michael Alan Schwab

Shingo Arimi

Hiroaki Masuda

Regional President PAMA

Company President, Production Engineering

General Manager, Corporate Strategy Dept.,

President of NGK SPARK PLUGS (U.S.A.), INC.

Company

Global Strategy Div.

Corporate Officer

Corporate Officer

Corporate Officer

Damien Germès

Yoshikuni Sato

Yuichi Yamada

Regional President EMEA

President of Morimura SOFC Technology Co., Ltd.

Company President, Sensor Beyond Company

Corporate Officer

Corporate Officer

Corporate Officer

Shigeki Mori

Kazuyuki Kimura

Akira Suzuki

Energy Conversion Business Development Dept.

General Manager, Digital Transformation Dept.,

Company President, IGNITE Company

Regional President ASEAN, India
President of NGK SPARK PLUGS (ASIA) CO., LTD.

Mackenzie
Donald Clugston
Miwako Doi

President of NTK CORPORATION ASIA CO., LTD.

Outside Director

Outside Director

Chiharu Takakura

Outside Director

Mikihiko Kato

Director
Full-time Audit andSupervisory Committee
MemberKanemaru Yasui

Outside Director
Audit and Supervisory
Committee Member

Fumiko Nagatomi

Outside Director
Audit and Supervisory
Committee Member

Christina L.
Ahmadjian

Plant Manager of Ise

President of NGK SPARK PLUGS CANADA LIMITED

President of NGK SPARK PLUG EUROPE GmbH

Global Strategy Div.

Outside Director
Audit and Supervisory
Committee Member

Company President, IT Systems Company*1: The above matrix represents the areas of expertise that we expect from each director and does not represent all of the knowledge and experience that they possess.
*2: Areas fundamental for critical decision-making in the management and supervision of business operations*3: Areas that require active promotion and supervision to realize the Medium-term Management Plan

Corporate Officer

Corporate Officer

Corporate Officer

Tsunejiro Tajima

Tetsuya Sugiura

Jun Chino

Vice President of NTK CERATEC CO., LTD.

Company President, Machining Technology

Company Vice President, Mobility Business Company

President of NTK Technologies, INC.

Company

General Manager, AM-GHQ

NGK SPARK PLUG CO., LTD. Integrated Report 2022

45

Executive Officers and Corporate Officers who are not directors

Introduction

Strategies for
Value Creation

About Us

Foundation for
Value Creation

Financial/Corporate
Information

Corporate GovernanceWith regard to “performance of supervisory functions in light of the introduction of a company system,” one of the issues
identified through the evaluation of effectiveness in FY2020, a company system was introduced in April 2021 for the purpose ofclarifying the responsibilities and authority of business execution divisions and facilitating flexible decision making, and based on
the opinions of the outside directors, the Board of Directors verified whether the expected effects have been achieved andconfirmed that it will continue to perform periodic verification. With regard to “reinforcement of monitoring functions for nonfinancial management indicators,” non-financial indicators as indicators for the performance linked stock compensation program
were introduced in FY2021, and the CSR and Sustainability Committee, which is attended by all directors and Audit &Supervisory Board members, reviewed the status of responses to group priority issues (materiality) and discussed theintroduction of an internal carbon tax and environmental fund.
Items for which further improvement of the effectiveness of the Board of Directors would be desirable based on the resultsof the current effectiveness evaluation include further enhancing deliberation within the Board of Directors regarding medium tolong term management strategies and monitoring of Medium-term Management Plan as well as improvement of the priordistribution of materials and provision of explanations to outside directors. Going forward, the company will continue to maintainand enhance the effectiveness of the Board of Directors by addressing these issues.

Basic Philosophy on Corporate Gover nanceIn line with the corporate philosophy expressed in the slogan, “With established trust and confidence inside and outside thecompany, we aim to contribute to the peoples of the world by creating and putting at their proposal new values for the future,”
we are enhancing the corporate governance system that we built to foster business management that will increase ourcorporate value on a medium- to long-term basis. Our basic philosophy on corporate governance is to promote fair and highly
transparent management for our stakeholders, including shareholders, customers, suppliers, employees and local
communities, and build relationships of trust with them, and to operate and further improve our management and internal
control systems to achieve sustainable growth through efficient and sound management.
Transition to a Company with an Audit and Supervisory Committee
Following the approval at the 122nd general meeting of shareholders held on June 24, 2022, the Company has transitioned to a
Company with an Audit and Supervisory Committee for the purpose of further enhancing discussions on management policies andstrategies at the Board of Directors, strengthening the supervisory function, and further speeding up management decision-making
and execution of business.

Roles and Independence of Outside Directors
To enhance the supervisory function of the Board of Directors and to ensure the transparency and objectivity of decision-making
through discussions from multifaceted viewpoints, outside directors make up the majority of the Board of Directors, which comprises
diverse talent who have abundant experience, tremendous insight and a high degree of professionalism. We appoint all the independent
outside directors as independent officers and notify the Tokyo Stock Exchange and the Nagoya Stock Exchange of their appointment.
In order to ensure that candidates have neither special relationships with the management team and major shareholders nor conflicts ofinterest with general shareholders, we designate those who meet all the followings as independent officers: our own criteria for theappointment of independent officers; the requirement of independent officers set by the Companies Act; and the rules and regulations
stipulated by the financial instruments exchanges.
Outside directors attend the Board of Directors meetings and non-statutory advisory bodies to demonstrate their supervisory
function by becoming involved in the important decision-making of the company from an independent standpoint, while providing
advice from an overall perspective based on their abundant experience and insight when formulating and confirming the progress of
medium- to long-term management policies at the Board of Directors meetings. Outside directors who are Audit and Supervisory
Committee members serve as a supervisory and auditing function based on their independence and expert knowledge.

Roles and structure of the Board of Directors
The Board of Directors plays the following roles to help the company achieve sustainable growth and increase its corporate value on a
medium- to long-term basis, thereby increasing its profitability, capital efficiency and others:
Deliberates and makes decisions on the basic management policies, medium- to long-term management strategies and other important managerial
issuesBuilds and improves the environment to help the management team take risks appropriately
Supervises the management team in a highly effective manner from an independent and objective standpoint

The Company’s Board of Directors believes that it is important for the Board to comprise diverse human resources with different
backgrounds, including specialized knowledge and experience, in order to achieve sustainable growth and increases in corporate value overthe medium to long term. The Board is made up of human resources with extensive experience, high levels of knowledge, and advanced
specialization, with consideration given to gender, nationality, work experience, and age, to achieve a good balance according to thebusiness environment at a given time. In addition, by making up the majority of the Board of Directors with outside directors who haveexperience and specialized knowledge gained under environments that differ from the company, the Board can strengthen its supervisory
function and engage in deliberations from various perspectives in an effort to ensure transparency and objectivity in decision making.
Director candidates are not excluded from consideration on the basis of their race, ethnicity, nationality, country of birth, cultural
background, etc.

Evaluation of the effectiveness of the Board of Directors

Name

Reason for appointment

Outsidedirector

Morihiko
Otaki

He has a wealth of experience in global companies and expertise as an executive. As an outside director,
he oversees business execution by the company’s management team and provides advice to the team,and we have selected him as an outside director with the expectation that he will continue to fulfill his role.

12/12

—

Outsidedirector

Mackenzie
DonaldClugston

As a diplomat, he has a great deal of global experience and expertise in international affairs and trade. Asan outside director, he oversees business execution by the Company’s management team and provides
advice to the team, and we have selected him as an outside director with the expectation that he willcontinue to fulfill his role.

12/12

—

Outsidedirector

MiwakoDoi

She has an abundance of experience and an outstanding record as a researcher in the field of informationand communication and has been engaging in advanced research both in academia and in the private
sector. As an outside director, she oversees business execution by the Company’s management team andprovides advice to the team, and we have selected her as an outside director with the expectation that
she will continue to fulfill her role.

12/12

—

Outsidedirector

Chiharu
Takakura

After obtaining her MBA at Georgetown University (U.S.A), she worked as a consultant in organization building and humanresources development before taking up successive important positions with several global companies, including international
pharmaceuticals companies. As such, she has a wealth of experience and knowledge concerning organizational
development and human resources development. We have selected her as an outside director with the expectation that she
will be able to oversee business execution by the Company’s management team and provide advice to the team.

10/10*

11/11*

Kanemaru
Yasui

He has expert knowledge and experience accumulated over many years as a certified public accountant.
We have selected him as an outside director who is an Audit and Supervisory Committee member withthe expectation that he will be able to serve as a supervisory and auditing function for the company’s
overall management based on the knowledge and experience.

12/12

—

FumikoNagatomi

She has expert knowledge and experience accumulated over many years as a lawyer. We have selected
her as an outside director who is an Audit and Supervisory Committee member with the expectation that
she will be able to serve as a supervisory and auditing function for the company’s overall management
based on the knowledge and experience.

11/12

14/14

Christina L.
Ahmadjian

She has extensive experience and deep insight as a researcher of corporate management, corporate
governance, and organizational culture. She has been involved in management as an outside director inmany companies. We have selected her as an outside director who is an Audit and Supervisory
Committee member with the expectation that she will be able to serve as a supervisory and auditing
function for the company’s overall management based on the knowledge and experience.

——

The company conducted an evaluation on the effectiveness of the Board of Directors. An overview of this evaluation for FY2021 is as follows.
1) Method of evaluation
Evaluation was conducted by the Board of Directors based on a survey of directors and Audit & Supervisory Board members.

2) Overview of evaluation results
We confirmed that the effectiveness of the Board of Directors has been sufficiently secured, and more specifically we have confirmed that the effective
measures are being taken in the following areas:
1) Skills that the Board of Directors should have in light of management strategies were identified, and we confirmed that the Board of Directors
comprises members who have the knowledge, skills, experience, and diversity necessary to fulfill their roles and responsibilities.
2) All the directors share how important it is to reinforce the supervisory function of the Board of Directors and how outside directors should act therein.
3) The Board of Directors has established suitable internal controls and risk management structures to ensure proper compliance and support risktaking and supervises the status of operations through the Internal Auditing Office, Compliance Committee, Risk Management Committee, andother bodies.
4) We confirmed that the Board of Directors is cognizant that responses to global environmental issues including climate change and responses
regarding sustainability including respect for human rights are crucial from the perspective of increasing corporate value over the medium to longterm and that the management team is actively engaged in responding to these issues.
5) To ensure that remuneration is set in a manner that provides appropriate incentives, the Remuneration Committee evaluates whether the
execution of duties by management is appropriate from the perspectives of sustainable growth and enhancement of corporate value.
6) The Board of Directors implements appropriate improvement measures regarding key issues identified through evaluation of the effectiveness of
the Board of Directors and strives to enhance its effectiveness.

FY2021 Frequency of attendance

Title

Outside director,
Audit andSupervisory
Committee
memberOutside director,
Audit andSupervisory
Committee
memberOutside director,
Audit andSupervisory
Committee
memberBoard of Directors Audit & Supervisory Board*After taking office as an outside Audit & Supervisory Board member on June 25, 2021.
NGK SPARK PLUG CO., LTD. Integrated Report 2022

46

About Us

Introduction

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Corporate Governance

Succession Plan

Example of remuneration payment

NGK SPARK PLUG’s Board of Directors engages in the formulation and implementation of the succession plan, which includes
programs such as that to develop global managerial human resources (“HAGI Program”), such as future CEOs and otherbusiness leaders. The members of the Board see to it that sufficient time and resources are committed to developing theirsuccessors in a planned manner.

In the case of 100% achievement of
key performance indicators (KPIs)

Specific involvement by the Board of Directors
Representative directors as well as outside directors proactively participate in the development of managerial human resources,
including serving as lecturers for the HAGI Program.

We provide the directors with sufficient assistance to fulfill their expected roles and responsibilities where applicable. For the internal
directors, we encourage them to take external seminars to acquire additional knowledge to meet their obligations, while the internal
directors and corporate officers are required to attend an executive training session to share the managerial issues and seek out thesolution. In order for the outside directors to deepen understanding of the Group, each department explains the businesses andoperations in addition to providing them with opportunities to visit major sites of the businesses.
Directors who are Audit and Supervisory Committee members periodically take external sessions to gain understanding of whatroles the Audit and Supervisory Committee members fulfill, the audit methods, the relevant laws and regulations, and financial
accounting knowledge required for the accounting audit.

Remuneration for Officers
Basic policy
Remuneration for directors (excluding directors who are Audit and Supervisory Committee members and outside directors) andcorporate officers is paid based on the policy of providing them with additional motivation to contribute to improving the company’sbusiness performance on a medium- to long-term basis and growing the corporate value, while ensuring they have a shared interest
with shareholders by holding company shares themselves. The remuneration consists of fixed remuneration paid in the form of cash;
bonus, which is linked with the company’s single-year business performance, etc.; and performance-linked stock remuneration paid inaccordance with each person’s position and level of achievement against the performance targets set in the medium-term management
plan and others. Remuneration of directors who are Audit and Supervisory Committee members and outside directors comprises only
fixed remuneration.
Our Remuneration Committee acts as an advisory body to the Board of Directors. It deliberates on the remuneration policies,
procedures, and systems for directors (excluding directors who are Audit and Supervisory Committee members and outside directors)
and corporate officers as well as the appropriateness of the amount of remuneration planned to be paid to each director (excluding
directors who are Audit and Supervisory Committee members) and corporate officers, and submits the results to the Board of Directors
to ensure the rationality and transparency of the decisions made concerning the remuneration of directors (excluding directors who are
Audit and Supervisory Committee members and outside directors) and corporate officers. In FY2021, the committee met two times.

Total amount of remuneration, etc. paid to officers, total payment amount by remuneration type, and the number of recipients (for FY2021)
Total amount of
Category

Type and details of remuneration for officers

Details of
remuneration

Bonus

Performance-linked stock remuneration

Bonus is determined based on a comprehensive considerationof the base amount for each position, by taking into accountquantitative targets for the degree of achievement of Company
performance goals as well as qualitative evaluations ofindividual performance, and is paid at a certain time each year.

The Board Incentive Plan (BIP) is adopted, where the company sharesand money in the amount equivalent to the value of the shares of thecompany are given or granted to directors at the end of the period set
for the system, based on their positions and level of achievement
against the targets set in the Medium-term Management Plan, etc.

Indicators against
which theachievement of theperformancetargets is assessed—

Consolidated revenue, Consolidated
operating income ratio

How to determine
payment—

Payment is determined within the range of
0% to 175% based on the achievement of
the company performance target andassessment of individual performance.

Single-year performance goals: Consolidated revenue,
consolidated operating income
Medium-term performance goals: Consolidated revenue, consolidated
operating income, ROIC
Non-financial measures goals: Sales from non-ICE business, rateof reduction of CO2 emissions
The ratio of the fixed portion to the performance-linked portion is
set to be 3:7, in the case of 100% achievement of each indicator.
Performance-linked portion is determined within the range of 0%
to 200%, according to the achievement of each indicator.

Recipients

Directors, Corporate Officers

Directors (excluding directors who are Audit
and Supervisory Committee members andoutside directors), Corporate Officers

Directors (excluding directors who are Audit and Supervisory
Committee members and outside directors), Corporate
Officers (excluding employment-type corporate officers)*

Performance-linked
stock remuneration:
15％

Performance-linked stock remuneration system
We introduced the performance-linked stock remuneration for directors (excluding directors who are Audit and Supervisory Committee
members and outside directors) and corporate officers (excluding employment-type corporate officers) to further clarify the link between
the compensation of directors and the value of the Company’s stock, and to have them share interests with shareholders, so as toincentivize them to contribute to the improvement of the Company’s medium- to long-term performance and to increasing corporate
value. Under the system, the Board Incentive Plan (BIP) is adopted, where points are given to directors based on their position and thelevel of achievement against the targets set in the Medium-term Management Plan. Points are calculated according to the method
stipulated in share granting regulations, which were determined by the Board of Directors after the deliberation of the Remuneration
Committee. After the end of the period, shares of the company and money in the amount equivalent to the value of the shares are to begiven or granted based on granted points.
Indicators against which the achievement of the performance targets is assessed are set based on single-year performance goals,
medium-term performance goals, and non-financial measures goals. The single-year performance goals are based on consolidated
revenue and consolidated operating income, which reflect the results of sales activities. The medium-term performance goals are basedon the targets set in the Medium-term Management Plan, which are consolidated revenue, consolidated operating income, and ROIC,
an indicator of whether we have efficiently earned profits relative to invested capital. For non-financial measures goals, sales from nonICE business and rate of reduction of CO2 emissions are used as indicators to reflect the results of efforts for sustainable growth andcorporate value enhancement, and to facilitate the transformation of our business portfolio.

Training for officers

Fixed remuneration

Bonus:
25％

Policy on the payment of bonus
As for bonuses, in addition to the base amount set for each position, an amount to be decided as follows is paid to each person:
decided comprehensively in consideration of the quantitative targets set for corporate performance such as consolidated revenue andconsolidated operating income ratio, which reflect the results of sales activities, and based on the qualitative evaluation of the individual
performance of the person. For FY2021, the numerical targets for consolidated revenue and consolidated operating income ratio were492.0 billion yen and 10.2%, while the actual results were 491.7 billion yen and 15.4%.

Details of human resource development for CEO candidates
We are implementing the HAGI Program and a training program in which internal directors and corporate officers participate.
These programs are designed to develop future CEO candidates in a planned and strategic manner by devoting adequate timeand resources to the task.

Fixed remuneration is determined holisticallyaccording to the position and responsibilities,
by taking into account peers’ levels, thecompany performance, and the level of
employee salaries, and then paid monthly.

Fixed remuneration:
60％

Total payment amount by remuneration type (millions of yen)
Number of recipients

remuneration paid

Performance-linked(persons)(millions of yen)Fixed remuneration

Bonus

Directors (excluding outside directors)

594

365

152

76

7

Audit & Supervisory Board members(excluding outside members)

31

31

—

—

2

Outside directors

57

57

—

—

4

Outside Audit & Supervisory Board members

39

39

—

—

3

stock remuneration(Notes) 1. The following limits are set on the remuneration paid to directors, according to the resolution made at the 117th general meeting of shareholders held on June 29, 2017.
Total amount of remuneration (excluding bonus): 60 million yen or below per month
Total amount of bonus:
180 million yen or below per year
According to the resolution made at the 121st general meeting of shareholders (held on June 25, 2021), a performance-linked stock remuneration system is implemented
separately for four fiscal years from FY2021 to FY2024, targeting the company’s directors (excluding outside directors) and corporate officers (excluding employment-type
corporate officers), with the upper limit on the total payment amount set at 1,000 million yen.
2. The following limits are set on the remuneration paid to Audit & Supervisory Board members according to the resolution made at the 106th general meeting of shareholders (heldon June 29, 2006).
Total amount of remuneration (excluding bonus): 10 million yen or below per month
Total amount of bonus:
10 million yen or below per year
3. “Bonus” falls under “performance-linked remunerations” and “performance-linked stock remuneration” falls under “performance-linked remunerations” and “non-monetary
remunerations.” For the bonus and performance-linked stock remuneration shown in the table, they were recorded as expenses for FY2022.
4. Remuneration paid to one Audit & Supervisory Board member who retired at the conclusion of the 121st general meeting of shareholders is included.

*An Employee Stock Ownership Plan (ESOP) Trust has been adopted for employment-type corporate officers.
NGK SPARK PLUG CO., LTD. Integrated Report 2022

47

Introduction

Measures to Strengthen Functions of Audit and Supervisory Committee

Foundation for
Value Creation

Financial/Corporate
Information

Information Security Policy

Establishment of the Audit and Supervisory Committee Office
To support the execution of duties by the Audit and Supervisory Committee, the Audit and Supervisory Committee Office wasestablished, and four employees were assigned to the office full-time. These employees receive instruction from the Audit andSupervisory Committee members, liaise and coordinate internally, and gather and provide the necessary information. The Audit andSupervisory Committee Office works under the supervision and direction of the Audit and Supervisory Committee and their
independence in relation to supervision and direction from directors (excluding directors who are Audit and Supervisory Committee
members), corporate officers and employees is ensured. In addition, transfers, personnel evaluations, etc. require the prior consent of
the Audit and Supervisory Committee.

We regard all of our own information assets as one of our management resources. Through the proper protection andeffective use of our information assets, we pursue healthy maintenance and development of our business.
ActionGuidelines

Coordination with the Internal Auditing Office
The Audit and Supervisory Committee and Internal Audit Department meet regularly and as necessary to provide direct reports andexchange information on audit policies, audit plans, audit implementation status, and other matters and to work in close collaboration
with one another. In addition, Audit and Supervisory Committee members attend audits conducted by the Internal Audit Department
when necessary, and the Internal Audit Department conducts investigations and makes reports as requested by the Audit andSupervisory Committee.

Policy on the stocks held for reasons other than pureinvestment purposes
NGK SPARK PLUG holds the stocks of its suppliers and others
basically to maintain and enhance stable business relationships
with them, when the company decides that holding the stocks
will help increase its corporate value after verifying the economic
rationality from medium- to long-term viewpoints. The Board of
Directors annually checks whether it is rational and useful interms of enhancing its corporate value to keep the stocks
individually for each of the investee companies, in considerationof the capital cost and comparing the related risks and returns
on a medium- to long-term basis. When the Board decides thatthe company should not continue to hold any of the stocks, thecompany will sell them as appropriate, in consideration of themarket trend.

Strategies for
Value Creation

Information Security

Corporate Governance

Stocks Held for Reasons Other than Pure Investment Purposes

About Us

Promotion system

Stocks Held for Reasons Other than Pure Investment Purposes (listed stocks)
Reducing the stocks held for reasons other than pure investment purposes steadily,considering capital cost as well as risks and rewards for the medium- to long-term(Billions of yen)

80

With the growing importance of information security, we have established our Information Security Committee with an eye to increasing
the effectiveness of our information security management and reducing security risks regarding the NGK SPARK PLUG Group’s
information assets through the concerted effort of the management team and on-site workers.
We also have our Information Security Committee chaired by the Chief Administrator of DX Strategy Dept. appointed to Chief
Information Security Officer and the members are the information security manager of each department. We hold the Information
Security Committee meetings at least twice a year and we foster appropriate measures by checking how information security activities
are conducted across the Group.
In addition, the information security managers and information security members are assigned to each department to leadinformation security activities in each department.

(Number of issues)

100

50

40

40

33
29

60

30

27

20

40

16

20

20

10

0

0

FY2017FY2018FY2019AmountFY2020

FY2021

We establish rules that clearly define the system and responsibilities for the protection and management of all information
assets including the information we keep for our customers, the know-how and intellectual properties owned by our group, andpersonal information.
We comply with laws, ordinances, and regulations regarding information security.
We educate all executives and employees who handle information assets about the importance of information security, and about
specific items to be observed.
We continuously update the information infrastructure for the maintenance and improvement of the confidentiality, integrity, andavailability of all information assets.
We promote measures to prevent accidents in order to address the risks of information leakages associated with the continuous
advancement and sophistication of information technology. Should an accident occur, we will strive to minimize the damage and takepreventive measures against recurrence.

Information security management system

FY2022In order to continuously respond to information security risks that threaten companies and organizations, we have set information

Number of issues*The amount represents market capitalization.

security as a priority issue (materiality) and are building an information security management system.

Criteria for the exercise of voting rights
For the exercise of voting rights for the stocks owned by our company, we will decide whether to exercise the rights for each item of theagenda, considering whether it will contribute to increasing the corporate value of the investee company and of our own company. In
particular for the selection of directors, appropriation of retained earnings and other items that have a large impact on shareholder value,
we will exercise the voting rights according to the criteria set for the rights.

As one of them, in 2020, we obtained accreditation for the Trusted Information Security Assessment Exchange (TISAX), theassessment standard of information security for the supply chain of the automobile industry in Germany. In FY2021, group companies in
the United States and China also completed the acquisition of TISAX certification.

Responding to information security incidents
Enhancement of Group Governance

We have established a Computer Security Incident Response Team (CSIRT).
When an incident occurs, the CSIRT promptly organizes and confirms the facts, determines the level of the incident, and thenresponds. We also accumulate and share knowledge as a measure to prevent recurrence.
In addition to responding after an incident occurs, we are also striving to defend in advance, and we are trying to improve the leveland maturity.
In FY2021, in response to the increase in damage caused by cyber attacks around the world, we conducted a comprehensive
inspection of the servers used by our company and group companies. The servers with security concerns were identified andcountermeasures were taken.

NGK SPARK PLUG has corporate officers who were locally recruited at its regional headquarters (RHQs) for the Americas and EMEA
in order to ensure that speedy and accurate managerial decisions are made at bases closer to the markets they serve in view of thecompany’s globally expanding business environment. We have also formed unique governance teams at the RHQs to build an
optimal decentralized system on a group-wide basis and enhance corporate governance as the entire Group.
Moreover, the Global Group Governance Division is in place as an organization that audits the effectiveness of the Group’s
governance as an entity that is separate from its business execution. This organization formulates and implements measures to carryout audits on the management of Group companies and RHQs and on the core business operations of each department. It also
formulates and implements measures to enhance internal control across the Group and thus plays an important role for theenhancement of the Group’s governance.

Protection of personal information
As exemplified by the General Data Protection Regulation (GDPR) enforced in Europe, measures to protect personal information havebeen enhanced globally. In response, the NGK SPARK PLUG Group has set a range of internal rules to protect, manage and handle thepersonal information of its customers and employees.
In addition, as a response to the revised Act on the Protection of Personal Information that came into effect in April 2022, we preassess risks based on the type and the number of personal information and take measures to reduce the risks.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

48

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Risk management

Business Continuity Management (BCM)

Risk Management Policy

In preparation against possible earthquakes and other large-scale disasters, we are conducting BCM activities. Specifically,
we are making business continuity plans and working on disaster control and reduction in a group-wide basis to minimize
damage in the event of a large-scale disaster and resume production as soon as possible if operation is suspended, thereby
helping customers maintain their supply chains.
We are also implementing measures against infectious diseases. To deal with COVID-19, we expanded our work at homesystem and reviewed work shifts in line, thereby continuing to operate our business while preventing infection. In addition, we
will revise the business continuity guidelines for infectious disease threat and establish a system to prepare for future
emergencies.

We adapt from a global viewpoint to changes in the management environment surrounding our group and to thediversification of risks and will foster risk management to reduce or avoid the loss of managerial resources, thereby
improving our corporate value.
ActionGuidelines

We identify the risks that might hamper the achievement of our management targets from a global and long-term viewpoint and strive toprevent the actualization of these risks in a planned and organization-based manner.
In the event that such a risk materializes, we strive to minimize the impact on our stakeholders, maintain their trust and prevent therecurrence of similar incidents.

Promotion system
Major initiatives related to business continuity plans (BCPs)

For risk management, we have appointed the President as “Chief Administrator” and the Director in charge of the Business
Management Dept. as “Promotion Manager,” and are making efforts to improve and operate our risk management system that
integrates the risk management to prevent risks and the crisis management to handle risks when they become obvious.
Moreover, we have established the Risk Management Committee, which is chaired by the corporate officer appointed by the Chief
Administrator. This committee regularly makes improvements on the risk management system and monitors its operation. The
effectiveness of the system has been also regularly reviewed and reported to the CSR and Sustainability Committee for its
confirmation.

We have made a BCP for each of our departments. Each plan defines the initial response to be made and recovery
procedures to be followed in case of emergency.
IT departments
To ensure our business continuity, we are continuously working tominimize the damage that might be caused to our IT systems in theevent of a disaster and speed up the time required for recovery.
Specifically, we aim to minimize the damage by moving thesystem to a highly robust data center. Also, to shorten the recovery
time, we are shifting to cloud backups so that we can recover andrestart the systems by using undamaged backups, including
domestic group companies. In the future, we will continue to movethe system to the cloud and further strengthen our business
continuity.
Moreover, we are regularly providing more specific and practicaleducation and training so that employees can make better responses
in case of a disaster.

Company-wide risk management
In order to identify and limit those risks that could have serious impacts on our business continuity and on the achievement of ourtargets, we follow the risk management process as described below. We also evaluate the ESG-related risks including those concerning
climate change and human rights.

Risk recognition

Risk evaluation

Selection ofpriority risks

Planning,
implementing andmonitoring of
measures

List the related risks for each operational process

Analyze the impact of risks, probability of theirmaterialization and how measures are taken against themMake analysis based on the evaluation results provided by
the Business Management Dept. and other departments incharge of the risks

Business departments
In the BCP made for each department, we set a limit for the recovery
time required for our major products. We also formulate action plans
for the recovery teams to achieve early recovery.

Evaluate and prioritize the risks based on the analysis
results
Based on the risk analysis results, select the candidates forpriority risks

Probability of risk materialization

BCP training
We conduct BCP training every December for the purpose ofresuming business as soon as possible in the event of a disaster.
BCP training is designed to improve the effectiveness of BCPs byformulating recovery plans for the major businesses, organizing
recovery teams and implementing recovery activities. To prepare for asituation where our internal network is unavailable, we conduct
training on communicating with the emergency headquarters using IP
wireless equipment and sharing information via the Internet.

Information transmission training between
sales offices and the emergency headquarters

Report session at the emergency
headquarters

Select particularly significant risks (priority risks) anddepartments in charge of the risks
The Risk Management Committee selects the priority risks and thedepartments in charge of the risks.

Major disaster control and disaster reduction activities

Countermeasures

Implementation of the joint disaster prevention drill
In anticipation of a Nankai Trough Megathrust Earthquake, we are
implementing the company-wide Disaster Prevention Drill as a joint
drill for domestic Group companies. The drill includes training forevacuation, confirmation of employees’ safety, incipient stage
firefighting, and inspection of damage caused to facilities andequipment and is designed for early recovery in the event of an
emergency.

Plan, implement and monitor priority risk reduction activities
The departments in charge of the risks plan and conduct
risk reduction activities and the Business Management
Dept. monitors the activities.

Evaluate the risk reduction activities to give
instructions for improvement as needed

Review

Procurement departments
We are fostering BCP measures for key procurement items such as
materials and parts, including purchasing from multiple suppliers. Inview of the fact that we need a range of materials and parts to
manufacture our products, we have built up a system to implement
BCP measures across the supply chain in cooperation with suppliers.

Level of impact

Risk analysis

Identify risks

Buildings and facilities departments
We conduct earthquake countermeasures for our buildings andfacilities, in anticipation of a Nankai Trough Megathrust Earthquake.
We are promoting training for diagnose of buildings at each site, with
developing a checklist for swift diagnosis of buildings on the spot incase of earthquakes. After the diagnosis, recovery teams implement
recovery activities according to the set priorities, after inspecting
infrastructure, supplemental facilities of buildings, and other facilities.

AnalysisPriority risks

The results of the risk reduction activities are reported to the
Risk Management Committee, which evaluates the level ofachievement and gives instructions for improvement as needed.

Measures against storm and flood damage
Recently, climate change has been causing more extensive storm
and flood damage. In response, we will work to minimize damage bymaking disaster-specific timelines for each of our business locations
and checking local hazard maps annually, etc.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

49

Raising employees’ awareness of disaster prevention
In order to enhance the disaster response capabilities of our employees
and foster our business continuity, we distribute to employees copiesof the booklet titled “NGK Spark Plug Disaster Prevention,” whichshows the action guidelines to be followed in the event of a disaster.

Evacuation training (Komaki Plant)

Evacuation training (Nagoya Plant)

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

CompliancePrevention of corruption

Compliance Policy

We are striving to prevent corruption in line with the statement made in our Corporate Code of Conduct: “We shall promote fair,transparent, free competition and sound trade. We shall also ensure that our relationships and contacts with government
agencies and political bodies are of a sound and proper nature.”
We issued the Compliance Guidebook in 2012, in which we set the rules concerning the prevention of corruption, including
the prohibition of involvement in political contributions or bribery, and made employees aware of these rules. Subsequently, in
2013, we issued the Conduct Guidelines Concerning the Giving and Receiving of Gifts and Entertainment to raise employees’
awareness of the issues and prevent them from becoming involved in misconduct.
Further, in 2016, we signed the UN Global Compact, openly reaffirming our commitment to preventing corruption. We also
confirm that the content and use of charitable donations do not violate the law.
We are thus working to prevent corruption in line with the guidelines and others. We respond to any violations of the anticorruption rules mainly through the Compliance Committee. Our overseas Group companies are also taking action to prevent
corruption, especially to prohibit and prevent bribery of civil servants, including providing employees with related education andconducting surveys on local laws. We also request that suppliers refrain from acts of bribery through our CSR and Sustainability
Procurement Guidelines. In FY2021, there were no violations of related laws and regulations across the Group.

With recognition that our company is a member of society, we enhance corporate ethics and understand the spirit andmeaning of laws, company regulations, international rules, and social norms in order to appropriately meet social demand andbecome a company trusted by the international community.
We not only comply with laws and regulations, but also act in good faith with common sense and responsibility as a member of society.
We regularly educate and raise the awareness of all our employees to impart a high level of ethics and correct knowledge, with which
they can act voluntarily to prevent a violation.
Should a violation occur, we will promptly investigate the causes and take remedial actions. We will strive to take appropriate
countermeasures to prevent recurrence and fulfill our accountability.

ActionGuidelines

Promotion system
In order to enhance compliance, we established the Compliance Committee chaired by the Representative Director.
This committee conducts activities to prevent noncompliance issues. It will also give instructions about the measures to be taken in
the event of a noncompliance incident and monitor the implementation of the measures. Moreover, it provides compliance educationand conducts awareness-raising activities targeting both executives and employees while also providing related information and raising
employees’ compliance awareness through designated compliance facilitators at each department.

Activities concerning competition laws

Compliance promotion system

Board of Directors
CSR and Sustainability Committee

Taking seriously our violation of the Anti-Monopoly Act of Japan, as uncovered in FY2014, we have established a system to promotecompliance with competition laws and to ensure legal compliance both within and outside the country.
In Japan, we formulated the Anti-Monopoly Act Compliance Manual and distributed copies to employees while holding a range ofrelated seminars internally for both executives and employees. Moreover, we have introduced an in-house e-mail inspection system tomonitor and prevent recurring violations of the competition law.
Our overseas Group companies are required to report the activity status regarding compliance with competition laws to NGKSPARK PLUG on a regular basis. In addition, the company’s teams in charge of affairs concerning competition laws and compliancevisit the Group companies, where they audit the companies’ compliance systems and implementation status and check whether local
employees are sufficiently aware of the related rules. Seminars featuring guest speakers are also held.
We will continue our education and auditing activities to ensure compliance with competition laws both in Japan and abroad.

Disciplinary Committee Internal Auditing Office
Recommendation

Audit

Compliance Committee
Corporate Ethics Helpline(Inside and outside the company)
Consultation
andreportingConsultation
andreporting

ReportingCompliance Committee Secretariat(Anti-Harassment Committee)
ReportingLabor union
Consultation

Suppliers

NGK SPARK PLUG CO., LTD.

Cooperation

ReportingPlant liaison staff and division in
charge of laws and regulations
Consultation

Educational tools
Education andtraining
Awareness survey

Expert Committee

Compliance
checkGroup companies

Export control
Corporate Ethics Helpline

We comply with domestic laws and regulations based on the Foreign Exchange and Foreign Trade Act in accordance with themultilateral export control regime (MECR) established for international peace and safety. In addition, we have established related internal
rules and an in-house export control organization.
We also conduct awareness-raising and inspection activities targeting departments engaged in export control, thereby ensuring
and enhancing our export control in compliance with the related laws and regulations. We are working to prevent the destabilization ofinternational affairs by focusing on preventing the outflow of sensitive technology as well as cargo that can be diverted to military use.

We have established the Corporate Ethics Helpline as an internal reporting system available to employees and suppliers seeking consultation andmaking reports regarding compliance. We have worked to improve user convenience by establishing channels not only inside the company but
also via an external expert service provider and enabling employees and suppliers to seek consultation and make reports also outside work hours
and on holidays. This service can be used anonymously.
Regarding consultations and reports received, facts are investigated with discretion so that the reporting employee or supplier is neither
identified nor feels uncomfortable, and if problems are confirmed, they are dealt with promptly.
In FY2021, there were 41 consultations and reports, including those from employees of Group companies and those related to labor affairs
and internal regulations, and we promptly took corrective actions for the identified problems.
We are continuously working to make the helpline service widely known by measures such as introducing it in training, putting up related
posters and distributing carrying cards describing the service.
We have also created a system for consultations and reports at Group companies outside Japan, establishing channels at respective
companies.

Compliance education and awareness raising
To raise employees’ awareness and knowledge regarding compliance, we are continuing to educate them by using the Compliance
Guidebook, which summarizes the rules concerning companies and society, and the Compliance Newsletter, which provides specificexamples of compliance issues that could arise in our daily operations, in addition to holding level-specific and theme-specific training.

Anti-Harassment Committee

Moreover, in order to check employees’ level of understanding about the corporate rules and systems and to examine thecorporate culture and identify compliance risks, we conduct a questionnaire survey on compliance targeting employees. In FY2021, weLabor and management work together to prevent harassment in the workplace. We offer consultation services to people facing harassment
through the contact point jointly established by labor and management at each of our plants and via the Corporate Ethics Helpline. The AntiHarassment Committee promptly examines issues reported through the contacts and checks facts. It then takes corrective action and gives
instructions as needed. The results of the action taken are reported to the Compliance Committee. Other matters related to human rights arehandled by the Compliance Committee.
The effectiveness of the compliance system, including measures against harassment, is periodically reviewed and reported to the CSR and
Sustainability Committee for confirmation.

conducted a questionnaire targeting about 8,800 employees in the domestic group companies, with a response rate of 83%. In order topromote improvement, the survey results are fed back to each workplace with the interviews to the departments having tasks.

P.40 Respect for Human Rights
NGK SPARK PLUG CO., LTD. Integrated Report 202250

4Financial/
Corporate
Information
page

51

CONTENTS

52 Financial Results Highlights for the Past 11 Years
53 Global Network
54 Corporate Profile and Stock Information
55 Initiatives/External Evaluation

NGK SPARK PLUG CO., LTD. Integrated Report 2022

51

About Us

Introduction

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Financial Results Highlights for the Past 11 Years

J-GAAPIFRS(Millions of yen)

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

Revenue

284,746

302,798

329,758

347,636

383,272

372,919

409,912425,013426,073427,546

491,733

Operating income (loss)

24,47823,754

51,661

62,196

66,28453,59567,27958,38548,44747,38975,512

Ordinary income (loss)

23,74027,67454,96067,90764,48355,55969,09459,258———

Profit (loss) attributable to owners of the parent

25,52420,90932,70436,75330,81525,60244,33542,63833,69838,36760,200Capital expenditures

14,00424,012

41,03436,37245,33936,32837,591

56,58751,00433,44429,589Depreciation

15,438

12,798

11,567

13,337

16,834

19,601

20,92023,97931,952

34,70037,940R&D expenses

16,036

17,10019,40021,337

23,123

23,41625,28328,072

28,315

26,11523,685

Cash flows from operating activities

21,07926,19454,69736,59356,46549,76465,70743,70459,78763,397

71,910Cash flows from investing activities(15,850)(15,442)(61,148)(12,865)(82,331)(53,410)(26,422)(48,380)(52,926)(42,523)

10,234

Free cash flows

8,507

8,456

3,541

13,995(25,866)

6,335

29,636(21,356)

4,627

41,39869,713

Dividend payout

4,789

4,788

5,223

7,181

8,487

9,055

10,823

14,601

14,435

12,23020,792

Total equity

235,613

268,309302,793343,380

341,044354,710388,115

401,505

399,737

451,626

517,988

Total assets

340,295

366,489

458,148

485,497

526,103563,801

599,972

629,417663,374

771,293823,181Interest bearing debt

37,39927,41857,33946,15380,212

99,275

98,115

110,755

152,946

197,194

165,268(Fiscal year)(Yen)

117.2596.06

150.26168.88141.60119.44209.37204.74163.06188.59296.04

1,075.24

1,223.41

1,381.38

1,566.80

1,557.16

1,660.06

1,837.46

1,917.04

1,946.10

2,206.18

2,530.01

Cash dividends per share

22.00

22.00

28.00

36.00

42.00

42.00

60.00

70.00

70.00

60.00

102.00Operating income ratio (%)

8.6

7.8

15.7

17.9

17.3

14.4

16.4

13.7

11.4

11.1

15.4

Return on Sales revenue (%)

9.0

6.9

9.9

10.6

8.0

6.9

10.8

10.0

7.9

9.0

12.2

Gross profit on sales (%)

25.1

24.2

32.6

35.8

35.6

33.0

34.6

33.8

31.4

30.5

31.8

ROE (Return on equity) (%)

11.3

8.4

11.5

11.4

9.1

7.4

12.0

10.9

8.4

9.1

12.5

ROA (Return on assets) (%)

7.5

5.9

7.9

7.8

6.1

4.7

7.6

6.8

5.1

5.0

7.3

ROIC (Return on invested capital) (%)

6.5

5.8

11.0

11.6

11.4

8.5

10.0

8.2

6.3

5.5

7.9

Equity ratio (%)

68.8

72.7

65.6

70.2

64.4

62.5

64.3

63.4

59.7

58.2

62.5

Total asset turnover (%)

0.8

0.9

0.8

0.7

0.8

0.7

0.7

0.7

0.8

0.6

0.6

Dividend payout ratio (%)

18.8

22.9

18.6

21.3

29.7

35.2

28.7

34.2

42.9

31.8

34.5

Earnings (losses) per share
Equity attributable to owners of the parent per share

NGK SPARK PLUG CO., LTD. Integrated Report 2022

52

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Global Network

Global Network

Global Network (As of July 1, 2022)

NGK SPARK PLUGS (THAILAND) CO., LTD.
SIAM NGK SPARK PLUG CO., LTD.

NGK SPARK PLUGS (UK) LTD.

NGK SPARK PLUG EUROPE GmbHNGK SPARK PLUGS (ASIA) CO., LTD.

EUROPE TECHNICAL CENTERNTK CORPORATION ASIA CO., LTD.

Wells Vehicle Electronics, L.P.

CHANGSHU NGK SPARK PLUG CO., LTD.

NGK SPARK PLUGS(FRANCE) S.A.S.
(Headquarters)
NGK SPARK PLUGS(FRANCE) S.A.S.
(France Factory)

LLC NGK SPARK PLUGS(EURASIA)NGK SPARK PLUGS (U.S.A.), INC.
(Headquarters)
U.S.A. TECHNICAL CENTERNTK TECHNICAL CERAMICS KOREA CO., LTD.
WOOJIN INDUSTRY CO., LTD.
WOOJIN TECHNICAL CENTERNGK SPARK PLUG
MIDDLE EAST FZENGK SPARK PLUGSCANADA LIMITEDNTK TECHNOLOGIES, INC.

NGK SPARK PLUGS(INDIA) PVT. LTD.

HEADQUARTERS
NGK SPARK PLUG (SHANGHAI)
TRADING CO., LTD.
TAIWAN NGKNGK SPARK PLUGSPARK PLUG
(SHANGHAI) CO., LTD.
CO., LTD.

NGK SPARK PLUGS (U.S.A.)
HOLDING, INC.
NGK SPARK PLUGS (U.S.A.), INC.
(WEST VIRGINIA FACTORY)CAIRE Inc.

BUJIAS NGK DE MEXICO S.A. DE C.V.

NGK SPARK PLUGS MALAYSIA BERHAD

Headquarters
Manufacturing &sales organization

PT NGK BUSI INDONESIANGK SPARK PLUGS(PHILIPPINES), INC.

Sales organization
Technical center

NGK SPARK PLUGS (VIETNAM) CO., LTD.

Holding company
OthersNGK SPARK PLUGS SA (PTY) LTD

CERAMICA E VELAS DE
IGNICAO NGK DO BRASILLTDA.

NGK SPARK PLUG (AUSTRALIA) PTY. LTD.

BRASIL TECHNICAL CENTER

Domestic Network

SAPPORO SALES OFFICE
KAMIOKA CERAMIC CO., LTD.
NTK CERATEC CO., LTD.

Domestic Network (As of July 1, 2022)

NAGANO LIAISONOFFICESENDAI SALES OFFICE

Komaki Plant
CERAMIC SENSOR CO., LTD.
Spark Tec WKS CO., LTD.
UTSUNOMIYA LIAISON OFFICENTK CERAMIC CO., LTD.
MORIMURA SOFC TECHNOLOGY Co., Ltd.

SAITAMA LIAISON OFFICECECYLLS Co., Ltd.
NTK Medical CO., LTD.
NTK Cutting Tools CO., LTD.

TOKYO BRANCHHIROSHIMA SALES OFFICEHAMAMATSU LIAISON OFFICEATSUGI LIAISON OFFICE

Headquarters & Nagoya Plant

FUKUOKA SALES OFFICENICHIWA KIKI CO., LTD.
Satsuma Plant

Ise Plant
NANSEI CERAMIC CO., LTD.
OSAKA SALES OFFICENITTOKU DENSHI CO., LTD.

Headquarters/Plant

NITTOKU ALPHA SERVICE CO., LTD.

Sales office

NITTOKU SMILE CO., LTD.
Sharing FACTORY Co., Ltd.
ignArt CO., LTD.

NGK SPARK PLUG CO., LTD. Integrated Report 2022

53

Group company

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Corporate Profile and Stock Information

Corporate data (As of March 31, 2022)

Number of employees at work (consolidated) (As of March 31, 2022)

Number of shares and shareholders (As of March 31, 2022)

NGK SPARK PLUG CO., LTD.

(Number of employee)

Paid-in capital

47,869 million yen

Total number ofauthorized shares
Total number of issued
sharesListed market

390,000,000

1-1-1 Higashisakura, Higashi-ku, Nagoya

Headquarters

461-0005, Japan

15,000URBANNET NAGOYA NEXTA Bldg.
October 1936

Established
Number of employees

20,00015,322

15,994

16,43016,391

16,145

10,000Non-consolidated: 3,668

Number ofName of shareholder

The Master Trust Bank of Japan, Ltd.

2017

2018

2019

2020

2021

(FY)

Organization chart (As of June 24, 2022)

14.68

Meiji Yasuda Life Insurance Company

16,794

8.23

Shareholder registryadministrator
Accounting auditor

Mitsubishi UFJ Trust and Banking
Corporation
KPMG AZSA LLC

The Dai-ichi Life Insurance Company, Limited

16,752

8.21

Custody Bank of Japan, Ltd. (trust account)

9,098

4.46

Number of shareholders

44,810

7,404

3.63

Nippon Life Insurance Company

3,563

1.74

National Mutual Insurance Federation ofAgriculture Cooperatives

Board of Directors
President

Corporate Management Committee

Breakdown of shareholders by type (As of March 31, 2022)

Corporate Officer and Company President Meeting

Audit and Supervisory Committee

Treasury Stock
0.16%(325 Thousand Shares)

Audit and Supervisory Committee Office<Corporate Domain><BP Company>

Individuals and Others
in Japan
14.74%(30,094 Thousand Shares)<Business Domain>
Energy Conversion Business Development Dept.

Secretarial Dept.

Accounting & Finance Dept.

Internal Auditing Dept.
Global Strategy Div.

HR Communication Company

OEM Sales GHQ

HR Development Dept.

Sales Engineering Dept.

Corporate Communication Dept.

Human Resources Strategy Dept.

General Administration Dept.

Business Management Dept.

Environment & Safety Management Dept.

Digital Transformation Dept.

Intellectual Property Dept.

Sustainability Strategy Dept.

Corporate Quality Control Dept.

Mirai Creation M&A Dept.
IT Systems Company
Information Systems Dept.
Business Transformation Div.
Implant Dept.

SCM Solutions & Services Company
Strategic Planning Dept.

R&D Div.

Logistics Dept.

Planning Control Dept.
Strategic Engineering Planning Dept.
R&D Dept.

Strategic Planning Dept.
Production Engineering Development Dept.
Production Engineering Control Dept.

Business Creation Company

Production Engineering Dept. 1

Operation Dept.

Production Engineering Dept. 2

Venture Investment Dept.

Equipment Maintenance Dept.

Business Strategy Dept.
R&D Collaboration Dept.
Utility Business Dept.
Medical Business Dept.
Mobility Business Dept.

3,433

1.68

JP MORGAN CHASE BANK 385632

3,349

1.64

Trust Services
22.25%(45,426 Thousand
Shares)

JPMorgan Securities Japan Co., Ltd.

3,158

1.54

MUFG Bank, Ltd.

2,920

1.43

Note: Ownership ratio above is calculated excluding treasury stock.

Securities Companies
4.44%(9,067 Thousand Shares)

Stock price and trading volume (As of June 30, 2022)

Strategic Procurement Dept.
Stock price of NGK SPARK PLUG

The Nikkei 225(Yen)

IGNITE Company
Strategic Planning Dept.
Product Engineering Dept.
Process Engineering Dept.
Quality Assurance Dept.
Related Products Dept.
Business Management Dept.

(Yen)

4,000

30,0003,200

24,0002,400

18,0001,600

12,000

800

6,000

0

0

Sensor Beyond Company
Strategic Planning Dept.
Sensor Engineering Div.
Product Design Dept.

Production Engineering Company

by type

TOTO Ltd.
Financial Institutions
26.00%(53,083 Thousand
Shares)

AM-GHQ
Japan Sales RHQ

Business Support Company

shareholders

Other Corporations in Japan
6.64%(13,561 Thousand Shares)

Marketing & Strategy Dept.

Personnel Labor Dept.

Corporate Strategy Dept.
Financial Strategy Dept.

Mobility Business Company
Operation Control Dept.

Global Group Governance Div.
Management Auditing Dept.

Foreign Corporations
and Individuals
25.77%(52,614 Thousand
Shares)FP & A Company

Breakdown ofOwnership ratio (%)

29,935(trust account)

Tokyo Stock Exchange and Nagoya
Stock Exchange (First Section)*Transitioned to Tokyo (Prime Market) and Nagoya(Premier Market) from April 2022.

0

shares held
(thousand)

204,175,320

5,000

Consolidated: 16,145

Major shareholders (As of March 31, 2022)

Trading volume

Process Development Dept.

(Million shares)

Design Development Dept.

60

Operation Control Dept.
50

Quality Assurance Dept.
PKG Solution Dept.

40

Machining Technology Company

30

Planning Dept.
Global Procurement Company
Procurement Dept.

Sales and Marketing Dept.

20

Engineering Dept.

10

Quality Control Dept.

0

Advanced Ceramics Company

7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6
2022
2018
2019
2020
2021
2016
2017

Planning Dept.

(Year)

Sales and Marketing Dept.

Note: Trading volume above does not include data for trading via the ToSTNet system.

Engineering Dept.
Quality Assurance Dept.
NGK SPARK PLUG CO., LTD. Integrated Report 2022

54

Introduction

About Us

Strategies for
Value Creation

Foundation for
Value Creation

Financial/Corporate
Information

Initiatives

Major awards and evaluations (FY2021)

NGK SPARK PLUG Group participated in the UN Global Compact in November 2016.
The Global Compact sets out the voluntary action principles to be followed by companies. Thisinitiative was proposed by Kofi Annan, the then secretary-general of the United Nations, in 1999 toaddress various issues facing the world, such as global warming, environmental problems and disparities
in society. It was officially launched at the UN Headquarters in July 2000. In order to contribute tocreating a sustainable society, the Group will conduct a range of activities as a good corporate citizen,
supporting the Global Compact’s 10 principles set in the four areas of “human rights,” “labor,”“environment” and “anti-corruption.”
Representative Director President
Chief Operating Officer
Takeshi Kawai· PRIDE Index 2021
Silver Rating· 2022 the Health &Productivity Stock
Selection· Nadeshiko Brand

For other awards, evaluations, and past track record, please visit our website.

· Sustainable Development
Goals(SDGs)· Women’s Empowerment
Principles(WEPs)· Task Force on Climate-related
Financial Disclosures(TCFD)

Corporate evaluation of ESG investment (FY2021)· CDP· Science Based Targets initiative(SBTi)· Dow Jones Sustainability
Asia Pacific Index· S&P/JPX Carbon
Efficient Index· SOMPO
Sustainability Index· FTSE4Good
Index Series· FTSE Blossom Japan
Index· FTSE Blossom Japan
Sector Relative Index· MSCI JAPANESG SELECT LEADERS INDEX· MSCI EMPOWERINGWOMEN INDEX· Declaration of Partnership Building

SASB Content Index and GRI Content Index
In disclosures in the Integrated Report and on the website, we are working to enhance the content by referring tointernational disclosure frameworks.
We have posted on our website a table comparing our disclosure framework with the industry-specific standards(As of July 31, 2022)

provided by the U.S. Sustainability Accounting Standards Board (SASB) and the GRI standards provided by the Global
Reporting Initiative (GRI). Please visit our website indicated below.

*The inclusion of NGK SPARK PLUG CO., LTD. in any MSCI index, and the use of MSCI logos, trademarks, service marks or index names herein, do not constitute a sponsorship, endorsement or

https://ngkntk.disclosure.site/en/

service marks of MSCI or its affiliates.

promotion of NGK SPARK PLUG CO., LTD. by MSCI or any of its affiliates. The MSCI indexes are the exclusive property of MSCI. MSCI and the MSCI index names and logos are trademarks or

NGK SPARK PLUG CO., LTD. Integrated Report 2022

55

Editorial Note
Thank you for taking the time to read our Integrated Report 2022.
We have explained our business strategy and initiatives for sustainability to our shareholders, investors, and all otherstakeholders through integrated reports since the first issue in FY2017. During this period, the business environment
surrounding us has changed with the speed beyond our imagination, and furthermore, we are being asked to strengthen
our responses to Environmental (E) and Social (S) issues due to the impact of the COVID-19 infection and Russia’s
military invasion of Ukraine. We have prepared this report, focusing on more clearly communicating to stakeholders how
we will tackle these environmental changes through our business activities.
We are promoting sustainability activities based on the eight priority issues (materiality). In the environment field, we
made efforts to launch the internal carbon pricing system and the internal environmental fund, under the SX(Sustainability Transformation) Project launched last fiscal year, as well as start the environment-friendly productcertification system. Additionally, in light of the increasing importance of human capital in recent years, we arestrengthening our various training seminars and programs to develop “self-disciplined creative human resources” under
the new personnel system.
Also, in 2020, we announced our long-term vision to break away from the business portfolio in which the ICE
business accounts for 80% of our total revenue. In 2021, we formulated the Medium-term Management Plan (fromFY2021 to FY2024) as the specific strategy to achieve the long-term vision. In this report, we have explained specificplans and progress to materialize the vision of what we want to be, including an improvement in efficiency and speed ofmanagement by the introduction of an in-house company system.
The ICE business is still our main business today, and we sometimes receive critical comments from investors forour repeated trial and error in developing new businesses. On the other hand, as the company holding the top share inspark plugs and sensors market in the world, we believe in the value only we can offer, such as the contribution tosolving social issues through the dissemination and expansion of environmentally friendly products. Through this report,
we hope you will understand our attitude to continuously promote activities toward realization of a sustainable society,while pursuing to transform our business portfolio in the long run.
We would sincerely appreciate your continued support for the NGK SPARK PLUG Group.
September 2022
Kenji Isobe
Executive Officer
Financial Strategy, Business Management, and Human Resources Strategy Depts., Global Strategy Div.

NGK SPARK PLUG CO., LTD.

FP & A Company, Business Support Company, and HR Communication Company
URBANNET NAGOYA NEXTA Bldg. 1-1-1 Higashisakura, Higashi-ku, Nagoya 461-0005

Administrative Office of Integrated Report 2022 Project

https://www.ngkntk.co.jp/english/
Corporate Communication Dept. HR Communication Company
Phone: 81-52-218-6248