Foundation for Growth

CSR Management

As a global company, we share society’s values and pursue sustainable growth by integrating management strategies and CSR. We align our CSR
activities with our Mid-term Management Plan to realize the Hitachi Group Vision, creating both social and economic value.

Management Strategies and CSR

Material Issues for Hitachi

Hitachi’s Vision

We use a materiality process based on dialogues with stakeholders to

In conjunction with the start of the 2015 Mid-term Management
Plan, which was announced in May 2013, the Hitachi Group Vision
was created as a guide to what the Hitachi Group intends to become.
The Vision embodies our firm commitment to help resolve the various

identify material issues. To integrate our management strategies and
CSR, we reflect, in our activities, material issues related to the key
management policies in our Mid-term Management Plan and we seek
to materialize CSR in line with our management strategy.

challenges facing society as well as to contribute to the realization of

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

For Hitachi, CSR is about realizing the world we envision in our

Importance for stakeholdersa sustainable society.

1. Products that Create a Sustainable
Society (Sustainable Business)
2. Caring for the Environment
3. Public Policy Initiatives
4. Respect for Human Rights
5. Supply Chain Management
6. Diversity Management

Group Vision.

Inﬂuence on business

Hitachi’s CSR Activities
To realize the Hitachi Group Vision, we have shared the CSR Policyof the Hitachi Group with all Group members. This policy, which was

Environmental Activities

formulated in fiscal 2005, is the basis for our CSR activities. Looking

Accompanying economic and social development around the world,

toward the next Mid-term Management Plan which will start froma range of environmental problems, such as climate change, resource

fiscal 2016, to further integrate management strategies and CSR,

depletion, and ecosystem destruction, are becoming increasingly severe.

we are revising our CSR Policy to a new framework using ISO26000.

As a company engaged in the Social Innovation Business,

From fiscal 2014, we will further improve communications with our

we aim to achieve the environmental management described in our

stakeholders to recognize and fulfill our social responsibilities. We will

Environmental Vision or achieving a sustainable society by employing

also reinforce the PDCA cycle to ensure execution of our activities andour company’s resources to reduce the burden of human activities

to improve the quality of our management.

on the environment.
We are committed to global warming prevention, resource
conservation, and ecosystems preservation as the three pillars of our

New CSR Management Framework

vision. Our goal is to achieve a more sustainable society by promoting
global production that reduces the environmental burden of a product

Recognize

throughout its lifecycle.

Properly recognize oursocial responsibility

Environmentally Conscious Products and Services

Review and
Improve
Review and improve
CSR activities
through proactive
communicationand stakeholder
engagement

1. Recognition of Social
Responsibility
2. Organizational Governance
3. Human Rights
4. Labor Practices
5. The Environment
6. Fair Operating Practices
7. Customers (Consumer Issues)
8. Community Involvement andDevelopment
9. Review and Improvement of
CSR Activities

We develop environmentally conscious products called Eco-Products
as part of our efforts to make the burden on the environment of our
products and services as small as possible. Eco-Products must meet
specific environmentally conscious criteria for the design and developIdentify, Prioritize
and Act
Identify relevant
issues, establish
priorities foraddressing issues,
and act

ment of products and services. These criteria are set in our
Assessment for DfE (Design for Environment), which is used forthe evaluation process. To advance the development of Eco-Products,
we have set targets for raising the Eco-Product sales ratio, which is
the ratio of Eco-Product sales to total product sales. In fiscal 2013, theEco-Product sales ratio has reached 89%, surpassing our target of 84%.

24

Hitachi, Ltd. | Annual Report 2014

The Hitachi Environmental Vision

Reduction in Energy Use per Unitd per unit
From base year

14%
reduction

Energyused
1,746 ML
Activity
amount*=Energyused
1,712 ML100%

Activity
amountFY 2005

Eco-Products that meet even more demanding requirements areucts qualifying under the Eco-Products Select program increased to 210.

86%

FY 2013(base year)

designated as Eco-Products Select. In fiscal 2013, the number of prod-=* A value closely related to the emission factor numerators (environmental
burden) of energy use from business activities, etc. (for example, production
quantity, output, building floor space, and number of employees, etc.)
We reduce the energy use per unit as one way to use energy more efficiently.
In fiscal 2013, we reduced this by 14 percent, surpassing the 11 percent target(from the base year fiscal 2005). For more reductions, we installed high-efficiency
equipment, from LED lighting to inverter air conditioners, and are cuttingenergy by improving manufacturing processes.

Environmentally Conscious Production
We have set targets for efficient energy use, waste amounts, chemical
substance emissions, and water use to reduce the environmental
burden of our business activities.

Reduction in Waste and Valuables Generation per UnitpCreating Eco-Factories & Offices Select
The Eco-Factory & Office Select program certifies factories and officesthat show a high level of environmental consciousness as well as out-

From base year

standing results. In this way, the program promotes environmentally24%

conscious production and encourages environmental action. Factories

reductionand offices certified under the Eco-Factory & Office Select program arereevaluated every fiscal year to confirm that their performance continues
to meet the certification criteria. In fiscal 2013, 19 facilities obtained
new certification and 36 facilities had their certifications renewed.

Amountgenerated

782 kt =Activity100%

FY 2005(base year)

Amountgenerated

677 kt =Activity76%

FY 2013

All factories and offices are recycling waste materials onsite and, with customers,
are reducing transportation waste. Under the Zero Emission*1 initiative, which
minimizes landfill disposal, 121 facilities achieved zero emission goal as of fiscal 2013.
*1 Zero emission: A final disposal rate (landfill disposal/waste) of less than 0.5
percent in any given year.

25

Foundation for Growth

Corporate Governance

Hitachi, Ltd. and its seven listed subsidiaries have adopted the(2) Audit Committee

Committee System under the Companies Act of Japan (the “Companies

The Audit Committee has the authority to audit the execution ofAct”). By demarcating responsibilities for management oversight andduties of Directors and Executive Officers and to determine proposals

those for the execution of business operations, Hitachi is working tosubmitted to the general meeting of shareholders for the election andcreate a framework for quick business operation, while making manage-

dismissal of accounting auditors. The Audit Committee consists of fivement highly transparent with outside Directors on the Board of Directors.

Directors, including three outside Directors and two standing Audit

Some of Hitachi’s Directors and Executive Officers serve concurrently
as Directors and committee members at Group companies. In addition,

Committee members.
The Audit Committee meetings were held 15 days during the fiscal

Hitachi is strengthening its integrated management of the Group,

year ended March 31, 2014.

improving management oversight of Group companies, and executing(3) Compensation Committee

business strategies formulated to enable the Hitachi Group to demon-

The Compensation Committee has the authority to determine

strate its collective strengths. The goal is higher corporate value.

remuneration policies for Directors and Executive Officers and remuneration for individuals based on these policies. The Compensation

Board of Directors
The Board of Directors approves basic management policy for the
Hitachi Group and supervises the execution of the duties of Executive
Officers and Directors to sustainably enhance corporate value andCommittee consists of four Directors, three of whom are outside Directors.
The Compensation Committee meetings were held four days
during the fiscal year ended March 31, 2014.

shareholders’ common interests. The basic management policy

Executive Officers

includes the medium-term management plan and annual budget

Executive Officers decide on matters delegated to them by the Board

compilation. The Board of Directors focuses on strategic issues relatedof Directors and execute Hitachi’s business affairs within the scope ofto the basic management policy as well as other items to be resolved

assignments determined by the Board of Directors. As of June 20,

that are provided in laws, regulations, the Articles of Incorporation,

2014, Hitachi had 31 Executive Officers.

and Board of Directors Regulations. As of June 20, 2014, the Board of
Directors was made up of 12 Directors, and two of them concurrently

Senior Executive Committee

serve as Executive Officers. Hitachi aims to reinforce the supervisory

The Senior Executive Committee is a council to ensure that the President

function of the Board of Directors, of which seven outside Directors,

deliberately decides on important managerial matters, which may

including non-Japanese, account for the majority, reflecting theiraffect the business of Hitachi or the Hitachi Group, through discussing

global and diverse viewpoints. Furthermore, Hitachi formulated andthese matters from diverse viewpoints. This committee consists ofpublished Corporate Governance Guidelines outlining the framework

10 members as of June 20, 2014: the Chairman & CEO, the Presidentof corporate governance, such as the function and composition of theand COO, five Executive Vice Presidents and Executive Officers, andBoard of Directors, qualifications for outside Directors, and criteria forthree Senior Vice Presidents and Executive Officers.

assessing the independence of outside Directors.
Corporate Governance Guidelines of Hitachi, Ltd.
http://www.hitachi.com/IR-e/corporate/governance/guidelines.html
Within the Board of Directors, there are three statutory committees—
the Nominating Committee, the Audit Committee, and the Compensation
Committee—with outside Directors accounting for the majority ofmembers of each committee. The Board of Directors meetings were held
10 days during the fiscal year ended March 31, 2014, and the attendance rate of Directors at these meetings was 99%. To assist with theduties of the Board of Directors and each committee, staffs who are
not subject to orders and instructions of Executive Officers are assigned.
(1) Nominating Committee
The Nominating Committee has the authority to determine particular
proposals submitted to the general meeting of shareholders for theelection and dismissal of Directors. The Nominating Committee
consists of four Directors, three of whom are outside Directors.
The Nominating Committee meetings were held five days during
the fiscal year ended March 31, 2014.

26

Director and Executive Officer Compensation
Compensation for Directors and Executive Officers is commensuratewith the ability required of them as well as their responsibilities, while
compensation packages at other companies are also taken into
consideration.
The compensation for Directors consists of a monthly salary anda year-end allowance. The monthly salary is decided by making adjustments to the basic salary that reflects full-time or part-time status,
committee membership and position, and travel from place of residence,
among other factors. The year-end allowance is a pre-determinedamount equivalent to about 20% of the Director’s annual income
based on the monthly salary, although this amount may be reduced
depending on Hitachi’s performance. Directors concurrently serving as
Executive Officers are not paid compensation as Directors.
The compensation for Executive Officers consists of a monthly
salary and a performance-linked component. The monthly salary is
decided by adjusting a basic amount set in accordance with the relevant
position to reflect the results of an assessment. The performance-linked
component is set within a range equivalent to about 30% of theHitachi, Ltd. | Annual Report 2014

Executive Officer’s annual income and adjusted based on Hitachi andMarch 31, 2009, and the retirement allowance was abolished.
Compensation for Directors and Executive Officers for the fiscal

individual performance.

year ended March 31, 2014, is as follows:

The compensation structure for Directors and Executive Officers
was re-examined starting with compensation for the fiscal year ended

Compensation for Directors and Executive Officers
Total amount of each type (Millions of yen)
Total amount of compensation, etc.
(Millions of yen)

Category

Year-end allowance andperformance-linked component

Monthly salary

Number of persons

Directors (excluding outside Directors)

161

142

18

5

Outside Directors

215

201

13

9

Executive Officers

1,989

1,275

714

31

Total

2,366

1,619

746

45

Notes:
1. The number of Directors excludes one Director who concurrently serves as an Executive Officer.
2. The amount of compensation to outside Directors includes the monthly salary for one outside Director who retired due to the expiration of his term of office at the close of
the 144th Ordinary General Meeting of Shareholders held on June 21, 2013.

In addition, Directors or Executive Officers for whom compensation from Hitachi and its subsidiaries is not less than ¥100 million and the amountof their compensation are as follows:
Total amount of each type (Millions of yen)
Total amount of compensation, etc.
(Millions of yen)

Name

Company

Category

Hiroaki Nakanishi

Hitachi, Ltd.

Executive Officer*

Performance-linked
component

Monthly salary

173

122

51

* Although concurrently serving as Director, Mr. Hiroaki Nakanishi does not receive compensation as Director.

Internal Control over Financial Reporting
To ensure the reliability of the financial reporting for the Group as areporting, Hitachi is advancing the establishment of systems for objective

whole, the Hitachi Group has documented control procedures, fromassessment at each in-house company and major Group company.

company-level controls to process-level controls, in accordance withThe J-SOX Committee’s Office summarizes the assessment results ofpolicies determined by the J-SOX Committee.

each company to confirm the effectiveness of internal control on
a Group-wide, consolidated basis.

In regard to assessment of the internal control over the financial
Hitachi Group Internal Control Assessment Framework(As of March 31, 2014)

Hitachi, Ltd. President
and CFO

Financial Services
AgencyInternal
ControlReportReportReportReportAudit Committee

J-SOX Committee
J-SOX Committee’s Office
ReportIn-house andmajor Group companies

Collaboration

Internal Auditing
OfficeIndependent
Auditors
External
Audit

ReportSubsidiary companies

27

Foundation for Growth

Risk Management

Hitachi conducts business activities in a wide range of fields in markets around the world. To prevent a variety of risk factors from having
adverse effects on business continuity, the Hitachi Group is taking steps to strengthen risk management, such as utilizing a system with overall
responsibility for compliance for the Hitachi Group.

Reinforcing the Risk Management System

Compliance Reporting System

The entire Hitachi Group is reinforcing management systems to

We instituted a Group-wide whistle-blowing system to prevent illegal

address increasingly global and complex risks. In fiscal 2009, weand unethical behavior, to promptly address infractions, and toformulated the Hitachi Global Compliance Program (HGCP), our basis

enhance our ability to self-regulate. People can report directly to thefor audits and educating employees. In fiscal 2013, we appointed

Compliance Department at Hitachi or to an outside attorney. Thisa Hitachi Group Chief Compliance Officer (CCO), with overall respon-system can be used not only by Hitachi employees but also by former

sibility for the Hitachi Group’s compliance system, and CCOs in each

employees, temporary staff, and business partners. Another system—

business unit.

the Channel to the Board of Directors—has been introduced to allow

Moreover, in October 2013 we established the Risk Management
Group, which consolidates a range of functions under the Head of
Risk Management, such as internal audits, compliance, and crisis

employees to report problems anonymously and directly to Hitachi’s
Board of Directors.
For all reports, an investigation is conducted and the facts aremanagement (BCP),*1 that had previously been managed by separate

confirmed. If the report is an onymous, then the results of the investi-

departments. Moving forward, in addition to compliance, we will

gation are communicated to the person who made the report. In

establish standards and systems for evaluating all risks related to our

addition, an appropriate response is implemented, such as corrective

business activities, including business risks, and a comprehensive risk

measures as needed.

management system for final consideration of countermeasures at
the management level.

Corruption Prevention Initiatives*1 BCP: Business Continuity Plan: A plan for the rapid restoration and continued
implementation of core operations in the event of an emergency.

To address the global risk of bribery, with reference to the U.S. Foreign
Corrupt Practices Act (USFCPA)*2 Resource Guide and other laws andregulations, in fiscal 2013, we formulated possible bribery risk scenarios

Risk Management Systemand conducted surveys related to bribery risk at Group companies
outside Japan. Based on the responses to those surveys, we identified
companies that had a specified risk corresponding to the risk scenarios.

Risk Management GroupMoving forward, we will take steps to reduce compliance risk on a

• Complianceglobal basis through such means as auditing and education, centered• Export Control

on the companies that were identified.

• Crisis Management (BCP / disaster response)• Internal Audits, etc.

*2 U.S. Foreign Corrupt Practices Act (USFCPA) has two main provisions. One prohibits
the bribery of foreign government officials, and the other requires accounting transparency in accordance with the Securities Exchange Act. The anti-bribery provisionprohibits bribery of foreign government officials and is under the jurisdiction of the U.S.
Department of Justice. The accounting provision requires that accounting records
accurately and fairly reflect transactions and that an appropriate system of internal
accounting controls is maintained. This provision is under the jurisdiction of the U.S.
Securities and Exchange Commission.

Standards and systems for evaluating business and other risks

Preventing Violations of the Antimonopoly Law
The Hitachi Group operates on the principles of “conformance withthe law and business ethics” and “fair and disciplined competition.”Comprehensive risk management system

However, Hitachi, Ltd. was penalized for impairing the fairness ofat the management levela public bid in fiscal 2002, and we received administrative orders in
September 2006, October 2008, and March 2009 for violating Japan’s
Antimonopoly Law.

28

Hitachi, Ltd. | Annual Report 2014

In November 2012, a subsidiary dealing in automotive components

When the Great East Japan Earthquake hit Japan in March 2011,

received administrative orders from the Japan Fair Trade Commission

our BCP helped us to make immediate response and decision . On thefor violating the Antimonopoly Law. In September 2013, the sameother hand, a number of problems became clear, such as tracking

company was prosecuted by the U.S. Department of Justice for violating

secondary suppliers and beyond, using the cloud and redundant

U.S. antitrust laws, resulting in a plea bargain. The company concluded

systems for production information, and securing alternative meansa plea agreement and paid a fine of 195 million U.S. dollars (¥19.0

of transportation and stock of fuel. Based on the lessons that webillion) in November 2013.

learned from the disaster, in October 2011, we issued new Hitachi

As part of measures to prevent recurrence, we are publicizing

Group BCP guidelines for departmental implementation to further

messages from top executives, developing internal regulations,enhance our business continuity planning. By the end of fiscal 2011,

conducting regular audits, and providing education and training to

49 business divisions of Hitachi, Ltd. and 96 Hitachi Group companies

employees based on a compliance manual.

in Japan completed developing and revising BCPs for earthquakes andnew strains of influenza. Overseas, 303 companies took steps on to

Export Control

formulate BCPs, with the objective of completing the BCPs by the end

Hitachi’s basic policy for export control is a provision of the Hitachi

of fiscal 2013. In this way, Hitachi Group is strengthening its ability toStandards of Corporate Conduct,*3 which states that we “shall help

respond to business risks, such as large-scale disasters, new strains ofmaintain international peace and security through compliance with

influenza, political disturbances, rioting, and terrorism.

trade laws and regulations.” We adopted rules for controlling security
intended for export, we screen for destination countries and regions,

Strengthening Safety Measures for Employees
Working in Dangerous Regions

end users, and end uses, and we conduct strict export control in

Following the hostage incident in Algeria*4 in January 2013, theaccordance with laws and regulations. We provide guidance to promote

President instituted a policy in February 2013 for ensuring the safety

the implementation of export controls by Hitachi Group companies inof employees dispatched to regions with high risks of war, conflicts

Japan and overseas in accordance with this policy. We also implement

and terrorism. Under this policy, security assessment is conducted bytraining support and other measures. In fiscal 2013, we held workshops

in-house and outside experts before employees are dispatched to ain the United States and implemented working-level training forhigh-risk region. In addition, after deployment, additional surveys are

Hitachi Group companies in the United States. In addition, we

conducted every half year to confirm effectiveness of safety measures.

continue to implement e-learning related to export controls for all

In fiscal 2013, we made such an assessment in several countries in theemployees. In fiscal 2013, this e-learning was provided for about

Middle East and Africa and secured the safety of employees who

20,000 people at 111 Group companies in Japan and overseas.

work all around the world.

*3 Hitachi Standards of Corporate Conduct: Created by Hitachi, Ltd. to ensure fullawareness of Hitachi’s mission and role and to enable Hitachi to continue to grow asa truly global enterprise.

*4 Algerian hostage crisis: Incident in January 2013 in which an armed terrorist groupattacked a natural gas refining plant in Algeria. There were more than 30 victims,
including 10 Japanese.

exports based on this policy in 1987. For all goods and technologies

BCP Formulation
Being deeply committed to the social infrastructure, we are enhancing
our BCPs to guard against risks that could cause disruption to business
operations that severely impact society. In December 2006, we createdthe Hitachi Group Guidelines for Developing Business Continuity
Plans, and in fiscal 2010 we translated them into English and Chinesefor distribution to all Hitachi Group companies worldwide to prepare
for large-scale disasters and other risks.

29