Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Mid-term Management Plan 2024

Business Strategies

Value CreationMateriality

The Value Creation Process

Sustainability

Mid-term Management Plan 2024

Data29Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

Green Strategy

Becoming a Climate Change Innovator
In recent years, many countries have set goals for carbon
neutrality and made investments toward that end amida growing awareness of the importance of international
efforts to protect the global environment. Aiming to becomea Climate Change Innovator, Hitachi is working to resolve
environmental issues and achieve a higher QoL (Quality ofLife) through its Social Innovation Business in collaborative
creation with stakeholders.

We are working to realize a “decarbonized society,” a “resource efficient society,” and a “harmonized society with nature,” asdefined in our “Environmental Vision” and in our long-term environmental targets, “Hitachi Environmental Innovation 2050.” Inparticular, we are accelerating our efforts to decarbonize. In addition to the targets for carbon neutrality at our business sites(factories and offices) by fiscal 2030, we set a target of achieving carbon neutrality throughout the value chain by fiscal 2050. Thistarget covers CO2 emissions from our procurement partners and from the use of Hitachi products and services by our customers.
By collaborating with customers, partners, and governments, Hitachi will lead the way toward a better world, with the aim ofrealizing a decarbonized society.
To realize Hitachi Environmental Innovation 2050, Hitachi establishes three-year indicators and targets, and conducts environmentalactivities. BUs and major group companies also set their own targets based on the Hitachi Group’s Environmental Action Plan andstrive to achieve their targets.

Environmental Vision
Hitachi will resolve environmental issues and achieve both a higher quality of life and a sustainable society
through its Social Innovation Business in collaborative creation with its stakeholders.

Long-term Environmental Targets: Hitachi Environmental Innovation 2050

Strengthen GX Promotion Organization
To uncover business opportunities centered on theenvironment and lead value creation throughout the HitachiGroup and across sectors, as well as realize sustainablegrowth through GX (Green Transformation),
the Global Environmental Division wasestablished in April 2022, with executive
officer Lorena Dellagiovanna as Headof Global Environment Division (former
Chief Environmental Officer). At thesame time, she was appointed tothe newly created position of Chief
Sustainability Officer.

Lorena Dellagiovanna
Vice President and Executive Ofﬁcer,
Chief Sustainability Ofﬁcer, Head ofGlobal Environment Division, and CDIO

For a Decarbonized Society

For a Resource-Efficient Society

Achieve carbon neutrality by FY2050
throughout the value chain,

Build a society that uses water andother resources efficientlywith customers and society

reduce CO2 emissions
by 50% by F Y2030(compared with FY2010)

Achieve carbon neutrality
by FY2030 at business sites(factories and offices)

For a Harmonized Society with Nature

Impacts on natural capital

Efficiency in use of water/resources
FY2050

Minimized

50% improvement(compared with FY2010 in the Hitachi Group)

Environmental Action Plan
To achieve its Long-term Environmental Targets, Hitachi sets indicators and targets every three years.
The “Environmental Action Plan for 2024,” covering the targets for FY2022 through FY2024, is in progress.
One of the decarbonization targets at Business Sites (Factories and Offices)
Reduction rate target in total CO2 emissions(compared with fiscal 2010)

Fiscal 2022

Fiscal 2023

Fiscal 2024

32%

35%

50%
Sustainability report

P.33

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Hitachi GX Strategy
GX for GROWTH
Enabling our customers to reduce CO2 emissions
through enhanced product offerings

GX for COREDecarbonizing Hitachi activities through Scope 1 & 2carbon neutrality commitments by FY2030 and Scope 3 by FY2050

Business Strategies

The Value Creation Process

SustainabilityMid-term Management Plan 2024

Data30Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

To accelerate and promote Hitachi’s long-term environmental targets as measures, Hitachi developed two business strategies, GX
for GROWTH (customer and society decarbonization) and GX for CORE (Hitachi decarbonization). Under GX for GROWTH, we will
support customers in reducing CO2 emissions by expanding Hitachi’s greener and more efficient product portfolio and providing
customers with E2E (End-to-End) solutions across sectors. By fiscal 2024, we aim to contribute to reduce CO2 emissions byapproximately 100 million metric tons per year, equivalent to 1.1 trillion yen in monetary terms. We will accelerate the developmentof various solutions realizing energy transition, the electrification of mobility and the conservation of energy. GX for CORE aims todecarbonize our own operations. We aim to achieve reductions in Scope 1 and 2 by investing approximately 37 billion yen over thenext three years in efforts to conserve energy and generate renewable energy, and also combining measures such as the purchaseof renewable energy, the acquisition of green power certificates and the purchase of credits for neutralization.

Achievement of Hitachi GX Strategy can bring New Value
Hitachi believes a strong commitment to sustainability will be the driving force for realizing enhanced corporate value. Specifically, Hitachi believes GX forGROWTH will enable further enhancement of corporate value through the provision of increased value through the new E2E service solutions for mobility
and energy as a service. In EV Value Chain as a Service, we are developing turnkey solutions and promoting the shift to EVs for bus fleets, light commercial
vehicles and private vehicles. Hitachi aims to increase value by providing more environmentally friendly products and solutions as a leader in carbon-freesocieties. We will proactively engage with our own management resources in addition to capital alliances with outside companies. To this end, we areconsidering investments in startups with the aim of developing green technologies.
We also believe we can create the value through efficiency gain with less energy consumption and further utilization of renewable energy based on GX for
CORE. As one example, we are considering the use of wide-area energy centers and the optimization of energy at multiple sites within facilities management.
We are also avoiding costs to facilitate future high-quality credit purchases for neutralization and considering the use of green finance to reduce capital costs.

Road Map for Realizing Hitachi’s Vision
1 reduce their footprint• Increase sale of green products (with higher efficiency)• Propose E2E green solutions (BTaaS*3, EVaaS*4)• Launch carbon management platform

2 Invest in new• Premier Technologies development (hydrogen, CCS*5, DAC*6, energy storage)

3 Build Circular Society• Waste reduction• Usage 3R materials

4 Lead Carbon Neutrality
1• Carbon Neutrality of Hitachi operations

5 External interaction• Launch green bonds• Improve ESG rating

Enable customers to

GX forGROWTHgreen technologies

GX for
CORE(Scope 1 & 2 + 3)*Enablers

2024•100 Mt-CO2e*2•Pilots completed

2027

HitachiEnterprise
Value 2021

Value-addedfrom GXfor CORE

Value-addedfrom GXfor GROWTH

2030

2050

Roll out to new customers/geographies•100 MW HV power-electrolyser/methanation•100 MW BESS*7•Artificial photosynthesis•Apply eco-design for new product development•Battery recycling•Renewable recycling•CN2030•CN2050(Scope 1 & 2 + Scope 3 50%)

•Green bond framework•ESG management system

HitachiEnterprise
Value 2030

(Continuous issue)•Highest rank in each assessment•(Expand eco-system)*1 SBTi certified on Scope 1 & 2 carbon neutrality by 2030, Scope 3 40% reduction by 2030 vs. 2010, aligned with 1.5°C commitment. Certification will be updated for new targets.
*2 CO2 equivalent*3 Battery as a Service*4 EV Value Chain as a Service*5 Carbon Capture and Storage*6 Direct Air Capture*7 Battery Energy Storage System(Scope 1 & 2 + 3)

Hitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

Business Strategies

Value Creation

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data31

Financial Strategies

CFO Message

Corporate GovernanceSpeciﬁc GX for GROWTH, CORE Initiatives
GX for GROWTHThrough GX for GROWTH, Hitachi Energy will lead group contributions to reducing the carbon footprintof customers throughout the world. Our goal is to contribute to an annual reduction in CO2 emissions ofapproximately 100 million metric tons by fiscal 2024, equivalent to about 1.1 trillion yen in monetary terms.
Sustainable products and systems, power electronics and digital solutions are being deployed to build thefoundation for a system of systems and enabling the energy transition. Technologies such as HVDC (HighVoltage Direct Current), FACTS (Flexible Alternating Current Transmission Systems) for power quality anddigital solutions play an important role in the integration of renewables, long-distance power transmission,
grid interconnections and ensuring flexibility, resilience, and efficiency. Additionally, Hitachi Rail successfully
tested a storage battery–powered tram on a section of track in Florence, Italy. Hitachi will contribute to lower
energy consumption in global urban transportation (railways). In the Green Energy & Mobility sector, withplans to invest 200 billion yen in R&D under the Mid-term Management Plan 2024, we will contribute toreducing CO2 emissions from customers globally through the creation of new technologies, products andsolutions that improve energy conversion efficiency. Hitachi Astemo is developing EV motors and inverters,
which are key components amid the shift toward electrification in the next-generation vehicles (xEV) field
and we plan to invest 300 billion yen in R&D under the Mid-term Management Plan 2024 for electrification.To
accelerate activities, we continue to invest in future technologies such as hydrogen, artificial photosynthesis
and carbon (or CO2) utilization. Further, in utilizing services that create an ecosystem through the collectionof vast amounts of data obtained in the real world (physical space) and analyzed in cyberspace, we willcontribute to energy conservation in the manufacturing and logistics fields, etc.

Enable customers to reduce their footprint
Contribution to CO2 reduction: Approx. 100 million metric tons/year

FY2024 TargetT&DCustomers(Equivalent monetary value: Approx. 1.1 trillion yen)*2
Non-fossil
fuel energy

Oil

Gas

Transport

Automobile(car/motorcycle)

BuildingIndustryLogistics

GX for GROWTH 1Life-cycle CO2
reduction in annualproducts shipped*1million metric tons
Approx.
(Approx. 980 billion yen)millionApprox.
metric tons
(Approx. 72 billion yen)

Approx.
million metric tons
(Approx. 80 billion yen)

Value Provided

Energy Transition

Electrification

Energy Savings(equivalent monetaryvalue breakdown)*2*1 Base year FY2013

6.5

89

7.2

*2 Estimated carbon price as 11,000 yen per metric ton-CO2 and converting CO2 reduction by decarbonization solutions into monetary value

Sector focus business

GX for GROWTH 2Green Energy & Mobility

Hitachi Astemo

Connective Industries Digital Systems &Services(Source: Aibel)

Carbon-free solution

Carbon-free mobilityxEV components

Logistics (Ecosystem(HVDC systems)(Battery-powered tram)(EV motor) (EV inverter)

services connected by CPS)

Visualization of energy
management (EcoAssist)

Omika Green Network
In 2020, Hitachi’s Omika Works (Hitachi City, Ibaraki Prefecture) was selected as aLighthouse advanced factory by WEF (World Economic Forum), a first for the factory of aJapanese company. As a factory implementing Hitachi’s Lumada solutions combining OT,
IT and products, the Omika Works is engaged in resolving various issues and creating new
businesses by mobilizing technologies and know-how in a variety of fields.
With this factory as a hub, Hitachi created the Omika Green Network to promotedecarbonization alongside stakeholders, conduct various demonstrations in the Omika
Works field and accumulate technologies and know-how related to decarbonization. These
efforts aim to achieve carbon neutrality across the entire value chain and support customer
business activities and environmental efforts through the provision of decarbonization
measures to customers. We set the goal of realizing carbon neutrality at the Omika Works in2024, returning the technology and knowledge gained to local communities and suppliers.

• Creating business opportunities• Accelerating commercialization
by experimental verification

Horizontal deployment to supply-chain
companies and local communities
Functions asa model factory
OT co-creation and experimental
verification environment
Showcase of solutions to issues

Origin Park

Sharing in the visionof the Hitachi GroupKyōsō-no-Mori,
Central ResearchLaboratory

LumadaInnovation HubTOKYO

Practice

Identifying issues,
OT co-creation,and experimental verification

Omika Works

Hitachi Integrated Report 2022CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Materiality

The Value Creation Process

GX for CORE
As a decarbonization initiative, Hitachi has set a goal for
fiscal 2024 of reducing CO2 emissions by 50% comparedwith fiscal 2010. The specific aim is to reduce emissions
33% by conserving energy and generating renewable energy.
At Hitachi Rail’s Tito Scalo plant (Italy), 50%–60% of all theenergy used onsite is generated from sunlight, supplying morethan 700 MWh of electricity per year through solar power andreducing 325 metric tons of CO2 annually. We are aiming toreduce CO2 emissions 33% by energy saving and renewableenergy generation, 31% by renewable energy purchases,
26% by green power certificate purchases and 10% by highquality credit purchases for neutralization. Combining variousinitiatives, we will reduce CO2 emissions by 50% across theentire value chain by fiscal 2030 (compared with fiscal 2010),
achieving carbon neutrality by fiscal 2050. To accelerate these
efforts, Hitachi will invest 37 billion yen in energy conservation
and renewable energy power generation over the next threeyears. To realize carbon neutrality by fiscal 2050, we areformulating plans to establish monitoring mechanisms andmeasurable KPIs for up and downstream CO2 emissions. Interms of downstream CO2 emissions, we are working toward
two goals: CO 2 emissions source transparency and thedevelopment of energy-saving products.

Business Strategies

Value Creation

Sustainability

Mid-term Management Plan 2024

Data32Financial Strategies

CFO Message

Corporate Governance
Human Resources Strategies

On track to achieve carbon neutrality for Scope 1 & 2 by FY2030,
strengthen commitment for CN by FY2050 and Circular Economy
Lead on Carbon Neutrality (Scope 1 & 2 + 3)
Scope 1 & 2: 50%* reduction of CO2 emissions in FY2024 (37 billion yen investment for energy saving and an RE facility in three years)
Scope 3: 50%*1 reduction by FY2030, carbon neutrality throughout value chain by FY2050
1

Scope 1 & 2 decarbonization levers

Scope 3

Levers to abate CO2 emissions
Energy saving + RE generation

RE purchase

33%

31%

RE certificateNeutralization

26%

10%

Upstream

Downstream

Establishing monitoring
scheme andsetting visible KPIs

Accelerating reductions
to promote CO2 visualizationand energy-saving products*1 50% reduction: base year FY2010

Completed/Ongoing projects
Mass-consumption type
• Energy saving/improve HVAC
• RE self-consumption

Area intensive type
3 areas in Ibaraki

Aiming for a 100% fossil-free factory(Hitachi Rail)• Use as energy center• Generating 50%–60% of energy
from solar panels• Asset share• Facility management BPO*2

HitachiYokohama OfficeHitachinaka

Rinkai Factory• Expecting to reachmore than 700 MWh• Reducing carbon emissions by 		325t annuallyTsuchiura
Omika WorksOkayama Data Center*2 Business Process Outsourcing

Mito WorksNaka Site

Tito Scalo Site, ItalyHitachi Integrated Report 2022

CEO Message

Introduction

Whatʼs Hitachi

The Story of Collaborative Value Creation with Stakeholders

Value Creation

Materiality

Business Strategies

The Value Creation Process

Sustainability

Human Resources Strategies

Mid-term Management Plan 2024

Data33Financial Strategies

CFO Message

Corporate GovernanceInitiatives for Realizing a Circular Economy
Hitachi will promote the transition from a conventional
linear economy to a circular economy with the aim ofcreating a resource recycling–based society. Defining
KPIs that establish target values to be achieved bybusiness units and major group companies, we set
goals such as reducing the volume of manufacturingsite waste disposed in landfills. In the procurement,
development and design divisions, we promoteresource conservation through the introduction ofdesign methods that are easily dismantled and use
recyclable materials. We will also promote ecodesigns, including increased use of recycled andeco-friendly materials. Further, we will work on
long-term product usage, including the reuse, repair,
improvement and remaking of products that are nolonger needed. To support customer needs as theyshift from goods to experiences, and society as it
shifts from ownership to usage, Hitachi will provide
services utilizing leasing, pay-per-use systems
and subscriptions to promote the effective use ofresources and assets. In the field of technology
developments supporting resource recycling, wewill accelerate decarbonization efforts through thedevelopment of raw materials, products, tools,applications and services.

Recycling 99% of Transformers
Hitachi Energy is promoting efforts in cooperation with Sweden’s Stena Recycling to reuse approximately
99% of materials generated from the disposal of old transformers. At the end of their life, old transformers
are dismantled and recycled to minimize their impact on the environment. About 64% of materials arerecycled; 35%, including oil, is either recycled or incinerated for conversion to energy; and the remaining
1% is used as scrap. The provision of services has already been launched in northern Europe, with plans
to expand in the future.

Transformer at the substation

Remanufacturing of Air Compressors (Hitachi Industrial Equipment Systems, Sullair)
Hitachi Industrial Equipment Systems and Sullair(US) promote rebuilding and remanufacturing of aircompressors that have been in operation at customer
sites for a long time. Air compressors received
from customers are disassembled and inspected,
and reusable parts are repaired and adjusted.
They are then reassembled and performance
inspected, and through other numerous steps,
the air compressors finally restore their original
performance and functionality. This allows fewer
parts to be manufactured, and significantly reduces
the energy required for processing raw materials
relative to manufacturing new products.

Work steps
Disassembly,
cleaning, andinspection

Casingregeneration

Disassembly work

Rotor coating

Block decomposition line

Measurement
anddistribution ofgap betweenrotors

Gap measurement
between rotors

Assemblyandadjustment

Block assembly

Note: Photos are from Hitachi Industrial Equipment Systems

Participation in Public Forums

CDP Evaluations

Hitachi proactively participates in numerous global public forums focused on global sustainability challenges.

Achieved CDP’s Highest Score of “Grade A”
in Climate Change and Water Security

COP26 (2021 Glasgow)

World Economic Forum (WEF, 2022 Davos)• Supported as Principle Partner• Held the Hitachi European Innovation Forum• Hosted Towards Net Zero—GreeningCities Through Low Carbon ConnectedUrban Transport• Participated in the mainstream climate leadership
panel with the Alliance ofCEO Climate Leaders

Comprehensive
test