Hitachi Integrated Report 2023
Year ended March 31, 2023

FounderNamihei OdairaFirst Factory

Origin of Hitachi

1910
Corporate philosophy

Contribute to society through the developmentof superior, original technology and products
Hitachi Founding Spirit

Harmony, Sincerity, Pioneering Spirit

Hitachi Group Identity

The mission that Hitachi aspires
to fulfill in society

The values crucial
to the Hitachi Groupin accomplishing its mission

Contribute to society through the development ofsuperior, original technology and products.

Hitachi Founding Spirit
Harmony, Sincerity, Pioneering Spirit

Hitachi Group Vision
What the Hitachi Groupaims to becomein the future

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

Transformation Journey of the Hitachi Group

2020 Acquisition of Hitachi Energyof high-speed trains
2017 Delivery
to the United Kingdom

2021 Acquisition of GlobalLogic
Production of ten thousand-1915 horsepower water wheel

Development of virtual

2004 storage technology
Development and supply

1975 of large-scale computers

Founded2019 Acquisition of JR Automationin 19102018

Development ofDevelopment of a five-horsepower
induction motor

1949 urban infrastructure

Announced endorsement of the TCFD recommendations
2024(Target)Environment

Contribution to CO2 avoided emissions:
100 million metric tons / year
Carbon neutrality
for business sites (factories and offices)2030(Target)2050(Target)2011

Introduced global HR management

2013

SocialLaunched Hitachi Group Human Rights Policy
2024(Target)Sustainability Management

Ratio of female executives*: 15%;
Ratio of non-Japanese executives*: 20%+2030

(Target)2003

Governance

Carbon neutrality
throughout the entire value chain

Ratio of female andnon-Japanese executives*: 30% each

Shifted to a company with a nominating committee, etc.
2012

Increased number of independent directors, including non-Japanese directors
2023

Amended the executive compensation system*executive and corporate officers

Contents

The Value Creation Process of Hitachi

Introduction

Hitachi achieves sustainable growth via its value creation cycle with four key elements.

4

Editorial Policy / Our Reporting Universe

5

Business of the Hitachi Group

Value Creation

Sustainable Growthin the Social Innovation Business

6

CEO Message

10

Executive Vice President Messages

13

The Value Creation Process

Transformation
Increasing
Corporate Value

Creating Economic Value,
Environmental Value, andSocial Value throughthe Social Innovation Business
Increases Corporate Value

Innovating
Technologies andBusiness Models

Leveraging Unique Strengths
in the Social Innovation Businessthrough Technology and Business
Model Innovations

Evolving
Governance
Evolving Governance for
the Growth of
the Social Innovation Business

Strengthening
the Portfolio

Continuously Strengthening
the Business Portfolio
to Be a Global Leader
in the Social Innovation Business

14

Business Transformation and Future Growth15

Evolving Governance(Independent Directors Messages)

Business Strategies
19

Materiality

21

Mid-term Management Plan 2024

23

Corporate Initiatives for Sustainability Growth23

Digital Strategy

24

Green Strategy

25

Innovation Strategy

26

Global Marketing & Sales Strategy

27

Human Resources Strategy

29

Financial Strategy

31

CFO Message

33

Sector Strategies (DSS, GEM, CI)

Governance37

Addressing Risks and Opportunities

39

Corporate Governance

Data
48

Past Mid-term Management Plans

49

10-year Financial Data50

5-year Non-financial Data

51

Corporate Data and Stock Information

Introduction

Value Creation

Editorial Policy / Our Reporting Universe

Transformation

Business Strategies

Governance

Hitachi Integrated Report 2023

Data

Business of the Hitachi Group

Editorial Policy / Our Reporting Universe
Editorial Policy

The Hitachi Integrated Report is compiled for the purposes of facilitating a deeper understanding among stakeholders of Hitachi’s business model, as well as a dialogue throughwhich we can further enhance corporate value and realize a virtuous cycle of value co-creation. In the 2023 edition, we focus on management strategies and measures to renew
Hitachi’s value creation process and create sustainable growth.
In editing this report, we referred to the IFRS Foundation’s International Integrated Reporting Framework and the Japanese Ministry of Economy, Trade, and Industry’s Guidance
for Collaborative Value Creation.

Our Reporting Universe

President & CEO

Evaluation/
Feedback

Information Disclosure Working Group
Supervisor: Yoshihiko Kawamura(Executive Vice President and Executive Officer, CFO)

Information Disclosure Report Planning Production Team
Integrated Report, Sustainability Report,
Annual Securities Report
Investor Relations Division,
Sustainability Promotion Division, Legal Division

Planning/
Content
Production

Hitachi publishes three corporate reports: theIntegrated Report, the Sustainability Report,
and the Annual Securities Report. We define
each report’s roles by content (from quantitative
information to Value Creation Strategy) and time
horizon (from results to the mid- to long-term
perspective).
In particular, the Integrated Report and theSustainability Report, which are released on
the same day, can be read together to confirm
ESG initiative progress and data in addition to
management strategies. We also invite you tovisit our websites for additional information.

Integrated Report• Corporate Strategy
Briefing Materials

Sustainability Report• Corporate Governance Report• Business Report

Annual Securities Report• Financial Results

Quantitative Information

Related Divisions
Executive Officers in ChargeGroup Corporate
Research &Development Group
Board of Directors OfficeBusiness Divisions•Digital Systems & Services•Green Energy & Mobility•Connective Industries

Content
Production/
SupportReporting Scope
Period: Fiscal 2022 (April 1, 2022–March 31, 2023)
Note: Includes activities and other information occurring after April 1, 2023.
Companies: Hitachi, Ltd., and its consolidated subsidiaries
Accounting Standard: Unless otherwise noted, this report is prepared in accordancewith U.S. GAAP through fiscal 2013 and with the International
Financial Reporting Standards (IFRS) from fiscal 2014.
Disclaimer Regarding Forward-looking Statements
Certain statements regarding the future of the company set forth in this Report might constitute“forward-looking statements,” such as “plan,” “forecast,” “target,” and “strategy.” Although forwardlooking statements contained in this report are based upon what the company has determined to bereasonable assumptions at the time of disclosure, actual performance and other results could differ
materially from those anticipated in such statements.

Integrated Report

Readership
Institutional investors and otherstakeholders

Sustainability Report

Readership
ESG investors and other stakeholders

Corporate Strategy

Readership
Shareholders and investors

Business Report

ESG Policies and Guidelines

Corporate Governance Report

Dialogue with Stakeholders

Financial Information

Information Security Report

About the Hitachi Group

Hitachi Investor Day

IT Performance Report(Mid-term Management Plan)

WebsiteAnnual Securities ReportMid- to long-term perspective

Board of Directors

Value Creation Strategy

Results

Production Structure

4Introduction

Value Creation

Editorial Policy / Our Reporting Universe

Transformation

Business Strategies

Governance

Hitachi Integrated Report 2023

Data

5

Business of the Hitachi Group

Business of the Hitachi GroupTo become a global leader in the Social Innovation Business, Hitachi has strengthened its business portfolio. The three global trends of “Digital,” “Green,” “Connective” present remarkable
opportunities for expansion. The core concept of Hitachi’s business sectors—Digital Systems & Services, Green Energy & Mobility and Connective Industries is to align assets with each trend’s
high affinity.
The three business sectors work as One Hitachi to solve social issues and achieve sustainable growth with Lumada’s Customer Co-creation Framework.

Business Composition*1
Digital Systems &Services

Others5%

Others29%

Connective
Industries

36%

Financial Results*1
Digital Systems &Services2%39%Connective
Industries

41%

Revenues

7,638.2

724.8

billion yen(FY2022)(FY2022)• Cloud Services Platforms BU• Digital Engineering BU• Financial Institutions BU• Social Infrastructure Systems BU• Hitachi Systems• Hitachi Solutions

30%

18%

• Nuclear Energy BU• Power Grids BU• Hitachi Power Solutions• Railway Systems BU

Connective
Industries (CI)• Building Systems BU• Hitachi Global Life Solutions• Hitachi High-Tech• Industrial Digital BU• Water & Environment BU• Hitachi Industrial Products• Hitachi Industrial Equipment
Systems*1 Figures are for the continuing consolidated business (three sectors), excluding Hitachi Metals and Hitachi Construction
Machinery, which were deconsolidated in FY2022, and Hitachi Astemo, which is scheduled to be deconsolidated in FY2023.
The figures on this page are FY2022 results.
BU: Business Unit
*2 Adj. EBITA for the Lumada business includes equity method profits of Hitachi Construction Machinery.
*3 The weighted average number of shares for calculating the (basic) earnings per share is 948,247,986 shares.

(attributable to Hitachi, Ltd. stockholders)

724.8

641.7

billion yen

billion yen/billion yen

Lumada Business
Revenues

Lumada Business
Adj. EBITA Margin*2

EPS*3

9.5%

Approx.

billion yen

Green Energy &Mobility

Green Energy &Mobility (GEM)

7,638.2

1,960.0

Green Energy &Mobility

Net income

Adj. EBITA / Margin

Adj. EBITA

billion yen

Digital Systems &Services (DSS)

Revenues

14%

676 yen

Revenues by Region*1■ Digital Systems & Services■ Connective Industries■ Green Energy & Mobility■ Others

North
America

EuropeChina

1,044.5

Revenues

1,252.9

Revenues

billion yen
Component ratio

billion yen
Component ratio

Revenues

billion yen
Component ratio

14%

953.8

16%

ASEAN・
India
Revenues

717.7

billion yen
Component ratio

9%

13%

Japan
Revenues

3,228.6

billion yen
Component ratio

42%

Other areas: revenues 440.7 billion yen, component ratio 6%

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

The Value Creation Process

CEO Message

Mode Change to Sustainable Growth
Hitachi Is Constantly Growing
Thanks to Our Employees and Technology

President & CEO

Keiji Kojima

Governance

Data

Hitachi Integrated Report 2023

6

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

The Value Creation Process

Progress of the Mid-term Management Plan 2024

Positioning of and Achievements in Fiscal 2022: Finishing Up Over a Decade-Long Structural Reforms
Fiscal 2022 marked a significant milestone for Hitachi. This pivotal year served as a crucial turning point, setting the foundation for growth in the next
decade by leveraging the global groundwork established through a decade of reforms.
To achieve a sustainable society through data and technology, Hitachi remains committed to reforming its business portfolio, with a focus on its
Social Innovation Business. In fiscal 2022, we streamlined our subsidiaries from over 20 to zero, aligning with our strategic objective of prioritizingcore businesses while fostering growth. In 2023, we are proceeding with planned deconsolidation of Hitachi Astemo, our automotive components
business.
In response to the three global trends of “Green,” “Digital” and “Connective” – which we believe are reshaping society – we have expanded andaligned our global assets. This includes acquiring ABB’s power grid business and GlobalLogic while converting Hitachi High-Tech into a wholly
owned subsidiary. As a result, overseas assets now constitute 70% of Hitachi’s total assets.
With essential assets in place, we can now drive the Social Innovation Business forward, unified under a One Hitachi umbrella. Our main objective
is to ensure that all our businesses can collaborate seamlessly, ushering in a new Hitachi culture. This transformation journey is an ongoing process,leading us towards a significant phase of substantial and sustainable growth.
As the CEO of Hitachi, I firmly believe that it is my responsibility to encourage this transformative mindset across the entire Hitachi Group.

The Next Decade: Achieving and Creating Sustainable Growth
To drive our expansion and achieve even higher growth rates, we have established a dynamic cycle with four key elements: evolving governance,
continuously strengthening the portfolio, innovating technologies and business models, and making tireless efforts to increase corporate value.
Evolving governance is at the heart of our Social Innovation Business and the shift towards sustainable growth. We prioritize maintaining a global
top-tier board and fostering Diversity, Equity & Inclusion (DEI) as crucial elements of our global human capital strategy, further strengthened by ourstrategic mergers and acquisitions. Transparent and effective governance, backed by the expertise of top executives from our board, has been
instrumental in driving Hitachi’s structural reforms and growth. Additionally, DEI plays a vital role in capitalizing on the wealth of global human capital
gained through the acquisition of ABB’s power grid business and GlobalLogic. We are committed to nurturing and acquiring digital talents, while
enhancing employee engagement.
To foster a sustainable growth mindset, we have implemented a progressive compensation system,
revising the executive officer compensation scheme in fiscal 2023 to align with our growth-oriented goals.
As we set our sights on growth for the next decade, I am once again reminded of the critical role governance plays in our journey.
To elevate the One Hitachi mindset, we strive for even higher levels of governance with our primary focus on strengthening the portfolio to accelerate
growth. The three global trends of “Green,” “Digital,” and “Connective,” which are attracting substantial capital, present remarkable opportunities
for expansion.

Investor Day (CEO Remarks)

7

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

The Value Creation Process

The core concept of Hitachi’s business segments is to align assets with each trend’s high affinity. This approach ensures abundant growth in theGreen Energy & Mobility,
Digital Systems & Services,
and Connective Industries
sectors. We strengthen these sectors through continuous
bolt-on investments enhancing each asset and maximizing synergies globally through mergers and acquisitions. Additionally, we optimize growthinvestments by routinely restructuring low-profit assets.
The next element is innovating technologies and business models. My focus is on creating a distinctive advantage in our Social Innovation Business,setting us apart from other companies. At the core of Hitachi’s Social Innovation Business is the concept of co-creation with our customers. To
deliver competitive solutions, we leverage the synergy of Hitachi’s diverse “IT x OT x Products” portfolio and implement a co-creation framework
through Lumada.
By combining the Lumada framework with our robust global businesses, Hitachi creates unique value that only we can provide,
all centered around our diverse human capital.
Furthermore, drawing on our back-cast corporate R&D function and start-up investments,
we proactively anticipate customer challenges aheadof other companies, enabling us to develop the next-generation Lumada solutions based on these insights.

Hitachi Is Powered by Our Employees and Technology
Hitachi possesses the unique ability to drive innovation through the synergy of our rich talents and innovation, making it a strength that sets us apartfrom other companies. Once again, I want to emphasize the significance of Hitachi’s technological excellence and innovation like never before.
My prior experience in research leads me to believe that we are witnessing a new era, particularly with the remarkable evolution of AI. Powered by theLumada framework, Hitachi has been at the forefront, providing control AI for robots; analytical AI handling of statistical data, including diagnosing
failure signs; and AI that recognizes and evaluates images. Additionally, the emergence of generative AI is a significant breakthrough. This type of AI
holds the potential to replace some human intellectual activities to a certain extent, and I strongly believe that the most promising fields for us lie inapplications related to system integration and digital engineering.
Records of actions and experiences that companies have accumulated through AI serve as tangible assets with learning attached. Since its founding,
Hitachi has maintained a culture of “Ochibo-Hiroi,” which means “gleaning” in English. This involves learning from failure to further development andimprovement. If an accident or malfunction occurs, we thoroughly investigate the cause, discuss measures to prevent a recurrence, and record it
so that a similar accident never happens again. In this way, we have over 100 years of documented data, including planned improvements, which
can be translated to AI language.
If we form a partnership with the Large Language Models (LLMs) created by the world’s leading IT companies and merge our unique content withthem, we will be able to refer to similar historical records to predict accidents and failures and alert us.
Labor productivity can be dramatically improved by utilizing accumulated tangible assets and creating and deploying more distinctive LLMs.
However, I believe that no matter how much AI evolves, human capital remains core. Humans, who have evolved through actions and experiences,
can now use generative AI to supplement their linguistic knowledge. People remain free to focus on new, more complex initiatives and tackle newchallenges.

Data

Hitachi Integrated Report 2023

8

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

The Value Creation Process

Making Tireless Efforts to Increase Corporate ValueFor Hitachi, which has entered a sustainable growth, “Powering Good” is a guideline statement, along with Hitachi’s slogan “Inspire the Next.” We
will continue to make tireless efforts to increase our corporate value by always questioning whether we are making good decisions to inspire society
no matter the challenge (Inspire the Next).
Expanding the Lumada business ratio is important for enhancing Hitachi’s corporate value. In this way, we will sustainably achieve top-line growthand increased profitability. Lumada should continue to grow revenue by 15-20%, accounting for more than half of all Hitachi’s future revenue. We
will also work on bottom-line stability and cash generation, with the aim of increasing EPS (earnings per share) to 600 yen or more and CFPS (corefree cash flow per share) to 500 yen or more in fiscal 2024.
As a response to climate change,
we have set a goal of contributing to the reduction of CO 2 emissions by 100 million tons per year. The average
reduction contribution during the Mid-term Management Plan 2024 is expected to reach 126.1 million tons per year (over three years). To achievecarbon neutrality in fiscal 2030, we expect to make gains at a pace far exceeding the target of reducing CO 2 emissions by 50% in the Mid-termManagement Plan 2024 and to achieve a 64% reduction in fiscal 2024.

Living Up to Stakeholders’ Expectations with Results
As we promote our Social Innovation Business, Hitachi values the dialogue and co-creation with our diverse stakeholders, including customers,
governments, municipalities, academic organizations, and research organizations.
We will live up to the expectations of our stakeholders with results, changing our business focus to sustainable growth. In fiscal 2022, we declareda shift to growth. That year required delicate navigation of a difficult management environment. In addition to the global uncertainty brought on bychallenging exchange rates and geopolitical risk, responding to the shortage of semiconductors and soaring component prices were also major
challenges. Even in this environment, Hitachi steadily expanded its business performance, especially in the areas of “Digital” and “Green,” andachieved an adjusted EBITA ratio of 9.5% in its three core business sectors and a record level of net income. We will continue to generate stable
cash through organic growth and allocate it as investment in sustainable growth and shareholder returns in the form of stable dividends and sharebuybacks.
Hitachi is now growing for the next decade. Many of our customers are taking on the challenge of solving social issues, and we are encouraged by
the accelerating pace of environmental change where our Social Innovation Business and co-creation models will thrive. We will continue to enhance
our corporate value by reviewing the content of these activities, reflecting them in our management, and engaging in dialogue with our shareholders
and other stakeholders. As One Hitachi, we will work to build a sustainable society and are excited to share the rewards of our success with you.
Fiscal 2023 will be a very important year for our growth. I believe this is the year that will test whether we can achieve the Mid-term Management
Plan 2024, whether we can utilize the technological innovation of generative AI for our growth, and whether we can firmly implement all measures.
Through the first step – fully executing the Mid-term Management Plan 2024 – I hope to gain the solid trust of our shareholders, who always lendvalued input and management guidance.

Data

Hitachi Integrated Report 2023

9

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

The Value Creation Process

Executive Vice President Messages

Investor Day (Digital Strategy)

Contribute to the Realization of a Sustainable Society with Digital Capabilities
Our Vision
The DSS sector, which drives Hitachi’s digital strategy, solves various issues facing customers’ businesses and society with digital
capabilities to contribute to the realization of a sustainable society. The DSS sector provides digital value on its own, and at the sametime, works together with The GEM and CI sectors to create Green x Digital and Connective x Digital synergies, aiming for the sustainable
development of society and the economy while improving people’s quality of life (QoL).

Business Strategy (Lumada Expansion)Toshiaki Tokunaga
Executive Vice President and Executive Officer,
General Manager of Digital Systems &Services Division

We will promote the Lumada business, which forms the core of the digital strategy, through both “Digital Centric,” in which the DSS sector directly
solves customer issues, and “One Hitachi,” in which DSS together with the OT sector solve customer issues. We will continue to support customers
in their transformation to achieve their business growth, by focusing on market domains where Hitachi can maximize its IT x OT x Products
advantages (energy, transport and logistics, finance, national and local governments, telecommunications and media, and manufacturing).
To continue the growth of the Lumada business, we will enhance our digital capabilities, including digital engineering and system integration andoperation on the cloud. For GlobalLogic as a growth engine, we will continue to increase digital talent and expand delivery bases through a robust
recruitment and training scheme and bolt-on acquisitions, in an attempt to maintain high business growth and expand regions and industriesof their business. In addition, we will expand our digital engineering capabilities and the customer co-creation schemes, in which GlobalLogic
has a proven track record, to the GEM and CI sectors. We will accelerate business operations under “One Hitachi” including the use of digitaltechnologies in the OT sector and the development of talent with knowledge of both OT and digital technologies.
We are also strengthening our service delivery infrastructure, which enables highly reliable and efficient data management and flexible datautilization, aiming for global business expansion.
We are also strengthening and enhancing cloud solutions that support global service provision, such as deploying the Hitachi Application Reliability
Centers (HARC) Service, which enables highly reliable and efficient cloud-native system operation, and expanding alliances with hyperscalers.
We will also be proactive in making investments to strengthen digital technologies supporting growth. In May 2023, we set up the “Generative AI
Center” , which promotes the safe, effective use of generative AI as a groundbreaking innovation. We are working to maximize the value we
provide to customers through the Lumada business and improve the productivity of all Hitachi Group companies by pioneering uses of generativeAI, which is evolving at an accelerated rate.

The Story of Value Co-creation
We have already provided solutions, which support the sophistication of materials development byaccelerating Materials Informatics, for more than 50 companies and more than 100 projects. In cocreation with SEKISUI CHEMICAL, we are working on “laboratory automation,” which automatesthe experiment environment to speed up materials development, by combining Hitachi HighTech’s expertise, which is unique to a measurement and analysis equipment manufacturer, withthe digital engineering of GlobalLogic. We automate the process from data collection to analysis
by seamlessly connecting experiment/measuring equipment and analysis environments, aiming toshorten the R&D period.

Materials research and development

10

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

The Value Creation Process

Executive Vice President Messages
Ensure the Happiness of People around the Globe through Advancing a Sustainable “Greener” Future for All

Investor Day (Green Strategy)

Our Vision
The transition to “Green” is perhaps the greatest global shift since the industrial revolution. Hitachi is embracing this unparalleled challenge as
an opportunity. I believe that Hitachi’s portfolio is well positioned to contribute to the realization of a carbon-neutral society. This is evident by
the transformation of Hitachi’s portfolio and how it has accelerated in recent years like never before.
We have made major investments in Green, starting with the acquisition of the Ansaldo* companies. This was followed by large investmentsin the Power Grids business from ABB, whilst divesting non-core businesses and businesses with a less promising market outlook. The
acquisition of GlobalLogic further accelerates our Green strategy, materialising our DX x GX approach through embedded digital technologies.
For example, in the next few years we see unparalleled opportunity in the electrification of mobility. Electric vehicles are not only a greenermeans of transport, in the future, they will rapidly become a catalyst for carrying and storing energy. This could contribute to the stabilisation of
the grid with increased renewables further supported by second-life battery energy storage and energy management systems, expanding the
EV ecosystem to energy and industry. This is a great example of how the worlds of Mobility, Energy and Digital combine. In this regard, Hitachi
has unique insight, and through our far-reaching contributions, we will work to ensure the happiness of people worldwide by advancing asustainable and greener future for all.
*The Ansaldo companies are two rail systems companies that Hitachi acquired (100%) in 2015 and 2019.

Business Strategy (Lumada Expansion)
The Green transition remains a critical global challenge driving the transition to clean energy and the decarbonization of mobility and industry. Thisis being fuelled by enormous investments in both the public and private sectors worldwide, such as the Inflation Reduction Act in the United Statesor the REPowerEU funds in Europe. To support the transition, we are ready to deliver unique offerings.
Our shot-term strategy is very simple but robust. We will support customers’ demands by delivering products and systems (e.g., HVDC forinterconnections, Green rail systems). The growth of the Order Backlog has been at record highs over the last few years, and one of our key focuses
is to deliver it as planned. Through this execution, we will improve profitability of our key product businesses.
In addition, we are closely collaborating with Hitachi Digital to leverage our huge installed base worldwide. Hitachi’s uniqueness and strengths
include (1) Enormous domain knowledge and experience in many industrie such as “OT and Products;” (2) Cutting-edge IT capability and expertiseto resolve customers’ challenges, and (3) Offerings combining “IT x OT x Products” solutions to many different customers. Our business growthstrategy in Green is to deliver sustainable, digitally enabled solutions throughout the product/system life cycle – from design to decommissioning.

The Story of Value Co-creation
Digital is the great enabler for the Green Transition. One good example is the smart mobility in Genoa,
Italy. Here, Lumada Intelligent Mobility Management has digitally connected all transportation networks inthe city, while the “360Pass” mobile app offers hands-free payment for both public transportation and car
sharing. These solutions are founded in creating a digital twin of Genoa’s entire transport network, enabling
real-time understanding of people flow and operation data.
In further opportunities, we are building enhanced capability in multiple domains with Hitachi Digitaland GlobalLogic. By delivering Green solutions, we will contribute to invaluable social and industrial
transformation. The resulting positive cycle of change will give our portfolio a new level of depth and aptitude
for the future. The market is ready – the green light is on – and we’re prepared to drive continued success.

“360Pass” in Genoa, Italy

Alistair Dormer
Executive Vice President and Executive Officer,
General Manager of Green Energy &Mobility Strategy Planning Division

11

Introduction
CEO Message

Value Creation

Executive Vice President Messages

Transformation

Business Strategies

Governance

Hitachi Integrated Report 2023

Data

The Value Creation Process

Executive Vice President Messages

Investor Day (Connective Strategy)

Bringing Together Unrivaled Products and Providing Solutions That Seamlessly Connect Boundaries
Our Vision“We shall not be complacent in our traditional product business. We shall not fear change, we need to embrace it.” The CI sector was created based on thisstrong belief. We aim to create new value that is “connective.” Our purpose is “Connecting data, value, industry, and society.” Bringing together Hitachi’s unrivaled
products and solutions that seamlessly connect boundaries — between management and workplace, one company and another, people and industry — willtransform industries and society and generate sustainable value.
Social issues in recent years have become increasingly complex, and the number of issues that cannot be solved within a single field have been increasing. It
is thus important to solve interdisciplinary boundary issues. In this environment, the CI sector is striving to expand the Total Seamless Solution, which leverages
the strength that comes from having products, OT and IT, and “domain SI” gained through collaborative creation with customers and takes advantage of Hitachi’s
proprietary technologies and extensive empirical knowledge to solve boundary issues, from industry to urban and healthcare fields. The sector is also working tostrengthen recurring business. In doing so, it aims to achieve further global growth. To this end, we have been developing business primarily in the digital field with
the DSS sector. We will further expand our business into the “Green” field with the GEM sector.

Business Strategy (Lumada Expansion)

Masakazu Aoki
Executive Vice President and Executive Officer,
General Manager of Connective Industries
Division

We have three growth strategies. The first is the evolution and expansion of the Total Seamless Solution using the Lumada framework for collaborative creation
with customers. We have already produced several results using AI, which is attracting attention. At sales workplaces, we have optimized order placement using an
AI demand prediction solution
and thereby significantly reduced the time for placing orders and preventing stockouts, which were customers’ challenges. We
have built a track record in the food and apparel industries and then will expand business into many different fields. We will also optimize solutions according toissues and make contributions in the “Green” field. Looking at solutions for carbon neutrality, primarily solutions related to electric vehicles,
we are developing
solutions across the entire EV value chain, including EV chargers that have high-voltage power receiving, ultra-rapid, multi-point switching functions; a V2X*1
system that enhances the resilience of buildings; and an EV battery LCM*2 solution.
The second strategy is strengthening the recurring business. We continue to provide sustainable value to customers with the Total Seamless Solution andstrengthen the business foundations in the CI sector.
The third is accelerating global growth. We are strengthening businesses primarily in North America through an M&A strategy.
*1 V2X: Vehicle to X (a general term for technologies related to connections and links between automobiles and other items) *2 LCM: Life Cycle Management

The Story of Value Co-creation
As a recent topic, let’s look at an example of collaborative creation with Lion Electric, an EV manufacturer inNorth America. It manufactures EV school buses. An urgent challenge for Lion Electric is to quickly establish asystem for increasing EV battery production to meet the rapidly growing EV demand to achieve zero emissions
and reduce our environmental impact. For this reason, it selected JR Automation, an American subsidiary of
Hitachi that possesses advanced robotic SI technology, to be its main contractor. By supervising the overall
project and developing the prototyping and full production lines for EV batteries in parallel, the two companies
have succeeded in quickly establishing safe, highly efficient, high-performance production lines throughcollaborative creation, despite time constraints.

EV battery production lines

12Value Creation

Introduction
CEO Message

Executive Vice President Messages

Transformation

Business Strategies

Governance

Sustainable Growthin the Social Innovation Business

Creative Value
Support people’s quality of life
with data and technologythat fosters a sustainable society

Our Advantages andResources*1

11%

Global assets capturing technology trends

Innovating technologies

vic

Innovating
Technologies andBusiness Models

Back-cast corporate R&D
that develops the next Lumada solutions
start-up investments
R&D investments
Investments in start-ups

er

S

70%

DigitalInnovations&Overseas regional headquarters
capturing global markets

PeopleContribute to customers’
decarbonization

nn
Co

es

126.1 million metric tons/year*3

Strengthening
the Portfolio

Lumada drives growthby contributing to DX/GX

316.2 billion yen
300M$ in total

Lumada’s customer co-creation framework
One Hitachi framework that enables
approach to global customers

Materiality
1,330
202
15,00075
62

Revenue growth (YoY)*4+14%

Adj. EBITA margin*

9.5%

Lumada revenue ratio

26%

Adj. EBITA margin

Approx.14%

4Unique business model

Lumada use cases
Solutions
Lumada Innovation Hub Tokyo
Number of visitors
Collaborative creation
cases with customers
Alliance program partners

Wellbeing
A society where
every individual is
comfortable and active

ec
tiv
e

Four strategic cross-sector functions

Fourstrategic
cross-sector
functions

Green

te m

Three business segments matching trends

Society

Marketing &sales

D i g it a l S y s

20%83,00069.5

Protect the earth
while maintaining
social infrastructurestries59%

Global asset ratio*2

Planetary
Boundaries

InduGlobal top-tier board

Digital talent
Engagement score

Evolving
Governance

Energy & Mob
ilit
een
r
y
G

Compensation structure supporting growth mindset

Overseas employee ratio
Ratio of female executive
and corporate officers
Ratio of non-Japanese executive
and corporate officers

ess segmen
e busints
Thre

Increasing
Corporate Value

DEI promotion for diverse human resources

13

The Value Creation Process

The Value Creation Process

Global and diverse organizationand human capital

Hitachi Integrated Report 2023

Data

Environment

Resilience
Resilient organization

Mission

Safety &Security

Quality of Life

Corporate governanceBusiness
with Integrity
Risk management

Contribute to society through the development of superior,original technology and products.

DEI

EPS*4

676 yenCFPS

439 yenTotal shareholder return142.7%(past three years)*1 The figures described on this page are FY2022 performance*2 FY2021*3 Three-year average during the period of the Mid-termManagement Plan 2024 (forecast)*4 Continuing consolidated business (three sectors) excluding
listed subsidiaries and Hitachi Astemo

Introduction

Transformation

Value Creation

Business Transformation and Future GrowthBusiness Strategies

Governance

Evolving Governance (Independent Directors Messages)

Business Transformation and Future Growth

Past Mid-term Management Plans

Performance

Continuing Consolidated Business (Three Sectors)
Revenues

Revenues
Net income attributable to Hitachi, Ltd. stockholders
Cash flows margin from operating activities
Adj. operating income ratio(Billions of yen)

1997~
FinancialcrisisHitachi Integrated Report 2023

Data

2000~
IT bubble
implosion

2008
Globalfinancial crisis

2011
Great East
Japan Earthquake

2020~
COVID-19（%）

Sustainable Growth in
the Social Innovation
Business

Revenue growth rate

12%

5-9%

CAGR 5-7%*1

Adj. EBITA margin12
12,000

11,226.7

10,881.1
7.6
6.9

8,000

10

9.5%

8

7,638.2

Adj. EBITA ratio

Net income attributable to Hitachi, Ltd. stockholders

10.2%

≥12%

7,840.0

Bottom-line stability
Net income*2 / Adj. EBITA

6

≥60%

4

800

649.1
2

641.7

Cash generation
Core FCF / Net income

496.0

≥80%

0

0

1995

2000

2005

2010

2015

2020

2022

2022

2023

From FY2024

2024(327.6)(483.8)(787.3)Business Structural Reforms(FY2009–FY2022)

FY2009 Revenues

FY2022 Revenues*4
6%

17%

47%
Digital Systems & Services
Green Energy & Mobility

Core
Businesses 10%

53%

26%

36%

29%
Core
Businesses

94%

30%

Connective Industries
OthersNumber of listed subsidiaries: 22*3

Number of listed subsidiaries: 0

EPS Growth
MMP 2021*5(3-year average)

FY2024404 yen≥600 yen

CFPS Growth
MMP 2021*5(3-year average)

FY2024291 yen≥500 yen*1 FY2021-FY2024 CAGR
*2 Excluded impact of one-time factors*3 Number of listed subsidiaries as of March 2009
*4 Figures are for the continuing consolidated business (three sectors), excluding Hitachi Metals and Hitachi Construction Machinery, which were deconsolidated in FY2022, and Hitachi Astemo, which is scheduled to be deconsolidated in FY2023.
*5 FY2019-FY2021

(FY)

14

Introduction
Business Transformation and Future Growth

Value Creation

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

Evolving Governance (Independent Directors Messages)

Evolving Governance (Independent Directors Messages)
Board andNominating Committee

Maintain and improve the effectiveness of the global top-tier Board,and commit to future CEO succession planning

Roles of the Board
and Nominating Committee

Ensure diverse boards and develop
CEO succession

Hitachi is a company with a nominating committee, etc., and independent directors assume
heavy responsibilities, such as serving as the chairperson of the Board and chairing the threecommittees. The current board is well balanced in terms of diversity such as skills, geography(Japan, the United States, Europe, India), and gender, and is composed of world-class members.
The board is responsible for corporate governance and separates its functions from theexecutive officers responsible for managing Hitachi. Each board meeting begins with a report by
the CEO on the current status of the company, priority issues, and action to be taken, followedby an active discussion. In particular, the quality of management strategies is enhanced throughin-depth discussions of the Mid-term Management Plan, the one-year business plan, and largescale M&A projects. For example, some M&A projects proposed by executives are rejected after
discussion, and it is fair to say that the board functions effectively through an open exchange of
opinions.
The Nominating Committee, on the other hand, has three roles. The first is the selectionof director candidates, the second is the formulation and proposal of CEO succession
plans, and the third is the development of future CEO candidates. Hitachi’s Nominating
Committee is unique in that it devotes a great deal of energy not only to selection but
also to development. In addition to candidates for the next and subsequent CEO terms,
Nominating Committee members are involved in the training of even younger candidates
through interviews and lectures.

Initiatives and evaluations forfiscal 2022

Select the optimal members
for a more effective board

In fiscal 2022, COVID-19 subsided and directors became more active in their roles. Active
communication was achieved through visits to business sites and exchanges of opinions withexecutive officers outside of meetings. Each year, through questionnaires and interviews withdirectors, we evaluate and verify whether the board is functioning properly and producing
results, and how it is contributing to Hitachi’s growth. We have confirmed that a high level of
effectiveness has been ensured, and this has continued from fiscal 2021.
To maintain and improve the effectiveness of the board, it is essential to recruit the right people
to serve as directors. This is not an easy task. Hitachi regularly maintains and updates a listof potential board members worldwide. Given the diverse nature of Hitachi’s business and its
focus on the digital field, we are now prioritizing candidates with global corporate management

Katsumi Ihara
Chairman of the Board
and Nominating Committee

experience and expertise in the IT field.
In fiscal 2022, the members of the Nominating Committee continued to devote much time todeveloping the next generation of leaders. We conduct one-on-one interviews with the next andsubsequent CEO candidates to confirm their growth as leaders and discuss challenges that will
foster further growth. By conducting these activities on an ongoing basis, we are able to charteach candidate’s growth. We are also involved in the development of the Future50, younger
future leaders, honing their leadership skills, global perspective, and strategy through interviews
and lectures. We believe that it is very important for Hitachi to develop a pipeline of future CEOsand to improve the quality of this pipeline.

Challenges and prospects forfiscal 2023

A board that inherits Hitachi’s culture andcontributes to growth

The first priority this fiscal year is to continue to review the board and CEO succession plan.
We will select people with a robust process. The second is to ensure that the Mid-termManagement Plan 2024 delivers results to meet stakeholder expectations. In fiscal 2022, wewere able to achieve good financial results, and in fiscal 2023, we will continue to respond firmly
to various risk factors to achieve the Mid-term Management Plan 2024 and deliver shareholder
returns. Third, now that the major portfolio reforms have been completed, it is time to shift
to organic growth. To make this shift, we need to transform Hitachi’s business into a globallycompetitive business. We have a mix of businesses that can compete in the global market andbusinesses that are yet to come, but we recognize that this transformation is a key issue forfiscal 2023 and 2024.
As Hitachi moves toward sustainable growth, the evolution of transparent and effective
governance will continue to be required. Hitachi’s directors and executive officers havemaintained a relationship that combines a healthy tension and mutual support, and they havebeen able to function well, which has contributed greatly to Hitachi’s transformation and growth
to date. As Chairman of the Board and the Nominating Committee, I am committed to building
a board that will continue this culture, even as the members change in the future, and toachieving continuous improvement in Hitachi’s corporate value.

15

Introduction
Business Transformation and Future Growth

Value Creation

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

Evolving Governance (Independent Directors Messages)

Evolving Governance (Independent Directors Messages)
Compensation
Committee

Compensation is an engine for corporate growth, and a new compensation
structure will enhance corporate value and global competitivenessRoles of the Compensation
Committee

Ensuring objectivity, transparency,
and fairness is the key

The roles of the Compensation Committee are to consider, create, and implement a compensation
system for directors and executive officers that is desirable for Hitachi’s medium- to long-term
vision. Specifically, the Compensation Committee decides the policy for determining the detailsof compensation for directors and executive officers and the details of individual compensation
based on the policy. Of particular importance is ensuring objectivity, transparency, and fairness inthe compensation determination process. This enhances accountability and disclosure.
I was appointed chairperson in June 2022. I believe that one of the important roles of theCompensation Committee is to review the compensation system for Hitachi’s further growth asa global company and to make the necessary revisions. I am working hard every day with thecommittee members and the secretariat to ensure that we can properly fulfill this role.

Initiatives and evaluations forfiscal 2022

Thorough discussion and revision of newcompensation framework

Compensation is an important driver of a company’s growth. To achieve global growth as One Hitachi,
it is essential to secure and retain talented human resources, and to this end, we must increase thecompetitiveness of Hitachi’s compensation in the global market. Specifically, to realize the “ModeChange to Growth” stated in the Mid-term Management Plan 2024 and to continue to grow over the
next 10 years, we investigated and thoroughly discussed the following three perspectives as issues
regarding the future form of the executive compensation system: whether the current compensationlevel is appropriate, whether compensation is linked to the growth in corporate value, and whether
compensation is competitive compared to global companies in Europe and the United States.
Looking back, Hitachi’s CEO compensation has increased at a CAGR of 15% from 2016 when
Chairman Higashihara became CEO to the present. We believe that it is necessary to always
be aware of whether this compensation is commensurate with the company’s growth and themarket. In fact, Hitachi’s stock price continued to grow at a 16% CAGR with market capitalization
at a CAGR of 17% during this period, while the TOPIX growth was a 6% CAGR. Comparison withthe market and global competitors is very important.
Based on these findings, in fiscal 2022, we devoted more time to discussing the ideal compensation
system. In April 2023, we revised the compensation system to reflect that content.
In making the revision, we also placed emphasis on ensuring pay-for-performance that rewards
contributions to growth and innovation and measures that contribute to enhancing corporate
value by strengthening sustainable management. One of the goals of the revision was to design asystem that provides room for alignment with shareholders and other stakeholders, and to create

Takatoshi Yamamoto
Chairperson of
the Compensation Committee

a flexible budget system.
As a company committed to sustainable management, we have introduced sustainability targets
as evaluation items. I believe that a company that cannot endorse or practice sustainable
management will not be able to survive in the global market and enhance corporate value. To
have Hitachi’s growth evaluated by aligning with the capital market, we need to project corporate
value over three to five years, that is, over the medium to long term, based on sustainable
management. I would like to have the perspectives of linkage with corporate value growth andglobal competitiveness, which were formed through those discussions, take root as a basic
concept and culture so that present and future Compensation Committee members can share thesame mindset in approaching issues.
In Japan, I believe that there are still few companies that have a globally accepted compensation
system. I hope that the content of these revisions will be perceived as Hitachi leading the way incompensation structures as a global company.

Challenges and prospects forfiscal 2023

Deepening the design and operation of thecompensation system as a global company

In fiscal 2023, we will promote internal understanding of the revised compensation system andwork to permeate and implement it. When applying it to individual evaluations, such as companywide performance and divisional performance, we will organize and operate specific simulated
issues on how to implement the evaluations also taking into account changes in the external
environment. We will communicate thoroughly, including with non-Japanese executive officers.
Hitachi’s 12 directors also include nine independent directors. We believe it is necessary toalso discuss a review of the compensation system for independent directors, who play a role incorporate management as a supervisory function. To accelerate the growth of Hitachi as a global
company and respond to the changing times, I, as chairperson of the Compensation Committee,
will strive to design and operate the compensation system while maintaining a high level ofobjectivity, transparency, and fairness at all times. We believe that the compensation system,
which is a growth engine, should be an ideal form that supports further growth and serves as thebasis of Hitachi’s corporate value creation scenario not only for the Mid-term Management Plan
2024 but also beyond into the future.

16

Introduction
Business Transformation and Future Growth

Value Creation

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

Evolving Governance (Independent Directors Messages)

Evolving Governance (Independent Directors Messages)
Audit Committee

Enhance corporate value through audits that contribute to achieving growthand overcoming management challenges

Roles of the Audit Committee

Constructive tension with management tomeet stakeholder expectations

The role of the Audit Committee is to fulfill the trust of stakeholders by auditing the legality andappropriateness of the execution of duties by directors and executive officers and conducting
accounting audits. Since Hitachi faced a major deficit in fiscal 2008, successive management
teams have worked to strengthen its governance. One of the hallmarks of this is Tone at theTop, which means that management is keenly aware of the importance of governance forsound growth. It facilitates frank and honest discussions. As a member of the Audit Committee,
I constantly consider how I can contribute to Hitachi’s goal of growth and overcoming
management challenges.
The “growth” that Hitachi is aiming for not only means short-term growth in sales and profits
but also very high-quality, healthy growth that can be sustained over the medium to longterm, including non-financial factors such as human resources, organizational culture, andenvironmental value. I believe that it is necessary for the Audit Committee to engage closelywith management while maintaining a constructive sense of tension and mutual understanding
and respect for each other’s roles in order to improve corporate value in a balanced manner. By
utilizing Hitachi’s “Tripartite Audit”*1 and triangular pyramidal monitoring system* 2, we strive toimprove transparency and the effectiveness of internal controls, and continue to evaluate eachother’s performance and make efforts to improve while ensuring appropriate tension.

Initiatives and evaluations forfiscal 2022

Perform global and effective audits
with high priority

In fiscal 2022, we visited Hitachi Energy in Switzerland and Hitachi Rail in Italy, which wererecent major acquisitions, and exchanged views directly with local management on theenvironmental business growth strategy and other issues to confirm the current concerns andfuture direction. We also conducted on-site assessment of global business risks by visiting threerecently acquired CI sector companies and their holding company in North America to checkthe progress of post-merger integration (PMI) and the One Hitachi initiatives.
In the past few years, major structural reforms at Hitachi have progressed successfully, but
structural reforms, including business portfolio transformation, are a process of achieving an
ideal that has no end in sight, one that evolves every moment with the operating environment,
and can be said to be an enduring proposition for the company. This is why our strong attention
on measures against low-profit businesses and strategies to achieve higher levels of cash flow
and ROIC, as well as our expected DX and GX investment returns, will continue to be important.

Hiroaki Yoshihara
Chairperson of
the Audit Committee

In particular, one of our important roles is to monitor the soundness of long-term large-scale
projects for Hitachi Energy and the railway systems business.
While we have these priorities, we will also pay constant attention to health and safety, quality
assurance, compliance, and fostering a culture of thoroughness in these areas. Hitachi iscommitted to earnestly addressing these issues, analyzing the causes, and making efforts in
the right direction, including reviewing and disseminating guidelines. The Audit Committee willcontinue to evaluate and assist with these issues.

Challenges and prospects forfiscal 2023

Prioritize AI risk assessment andoperational efficiency

In addition to further improving the audit items that we conduct every year, the Audit Committee
will contribute to maximizing synergies in Hitachi’s business portfolio as One Hitachi. As
Hitachi is a major company that is engaged in a variety of businesses, there are a wide range
of opportunities to improve through greater efficiency, and improving the efficiency of global
operations in particular is an urgent issue that we are addressing.
Regarding AI, which is an important theme today, Hitachi is utilizing generative AI to provide
newer solutions in addition to the current control and analytic AI systems. Risk management
related to AI systems provided by Hitachi within the company and for clients is becoming
increasingly important. The Audit Committee will also closely monitor the progress whileassessing the trends in AI-related global legislation.
For Hitachi to continue to grow soundly and become a global leader in the Social Innovation
Business, the Audit Committee will make earnest efforts to support and monitor the executionof duties by management.

*1 Audit system based on cooperation and close communication among the Audit Committee, the Internal Audit Office, and theaccounting auditor*2 To strengthen the auditing system and functions, in addition to the current Tripartite Audit system, there is an oversight system,
headed by the Audit Committee, that recognizes, assesses, and supervises and supports the resolution of material risks andissues in collaboration with the head office and business unit administration.

17

Business Strategies

We have introduced our Social Innovation and the latest technologies andbusiness trends on our “Social Innovation web site.”And “The People of Hitachi”
is a documentary series with inspiring
stories about how Hitachi Group employees are powering good aroundthe world to solve problems faced by today’s society.

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Materiality
Towards a Sustainable Society: Hitachi’s Materiality
Hitachi practices sustainable management, which positions sustainability as the core of its
business strategy, and is working toward realizing a sustainable society through the Social
Innovation Business.
In the Mid-term Management Plan 2024, we declared our aspiration of “supporting people’squality of life with data and technology that fosters a sustainable society.” While some of the nine
planetary boundaries
have already been exceeded, Hitachi is aware of each one and works toprotect the planet and maintain society. Hitachi aims to solve social challenges to realize a futurethat balances protection of the planet and people’s individual wellbeing.

The Materiality Analysis Process
With a comprehensive understanding of social issues, Hitachi has identified six material topics
and 15 sub-material topics based on an analysis of risks and opportunities from sustainability
perspectives as well as feedback from stakeholders.
Based on these material topics, Hitachi is monitoring measures as well as discussing the progress,
and new initiatives for each materiality at the Senior Executive Committee and the Board of Directors.
Comprehensive understanding of social issues
STEP

1

STEP

2

STEP

3

STEP

4

• Identifying social issues from the SDGs, GRI standards, SASB standards, ESG external
evaluation items, etc.

Ranking issues by priority from Hitachi’s point of view

Materiality

Environment
Contributing to decarbonization
and resource circulation

Resilience
Contributing to the maintenanceand rapid recovery of social
infrastructure

Safety & Security
Contributing to safe and securesociety-building

Quality of Life
Contributing to physicaland mental wellness and aprosperous life

• Identifying innovation areas where Hitachi should contribute based on backcasting from 2050
• Analyzing risks and opportunities

Ranking issues by priority from stakeholders’ point of view

Business with Integrity• Evaluating material topics based on assessments and comments from investors, NGOs,
and ESG evaluation organizations• Evaluating through dialogue with investors, NGOs, and sustainability experts

Adhering to ethical standards
as well as respect humanrightsIdentifying Materiality

Sustainability Strategy Promotion Structure
Under the leadership of Lorena Dellagiovanna, the Chief Sustainability Officer, Hitachi ispromoting its sustainability initiatives on a group-wide basis. For details, please refer to page 15of the Sustainability Report.

Diversity, Equity andInclusion (DEI)
Contributing to a society where
everyone can shine

Our aspirations
As a climate change innovator, Hitachi will contribute to therealization of a carbon neutral society with Hitachi’s superior green
technologies, by providing value to customers in all businesssegments. We will also promote resource efficiency toward thetransition to a circular economy.
Hitachi helps people live safely by contributing to the rapid recovery
of supply chains and the maintenance of social infrastructure byproviding system solutions that can respond immediately to risks,such as natural disasters, pandemics, and cyberattacks.
Hitachi contributes to the realization of comfortable and active
lifestyles for people by providing solutions in the building, mobility,
and security fields that support urban development for safe andsecure living.
Hitachi is harnessing our healthcare and digital technologies to help
more people develop bonds and enjoy healthier, more prosperous
lives. We will also continue to pursue the happiness and wellbeing of
our employees, as we believe that their happiness and wellbeing is
the ground on which Hitachi’s future will flourish even more fully.
As a Group responsible for social infrastructure around the world,
Hitachi will manage its business with honesty and integrity, trusted
by society, respect human rights, and provide a safe workplace. We
will reflect a system of ethical and responsible business conduct,
including respect for human rights, in our business activities anddecision-making standards, working together with our employees,
collaborative partners and communities throughout the supply chain.
Hitachi has a place for everyone, welcoming differences incolleagues’ background, age, gender, sexuality, family status,
disability, race, nationality, ethnicity, and religion.
At Hitachi, we treat everyone fairly, recognizing differences toallow everyone to perform at their full potential.
We respect and value these and other differences because only
through them we can understand our markets, create better
ideas and drive innovation.

19

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

15 Sub-Material Topics and Targets
Material topics

Sub-material topics
Decarbonization

Environment
Contributing todecarbonization andresource circulation

Resource circulation

Harmonize with nature

Resilience
Contributing to themaintenance and rapid
recovery of social
infrastructure

Safety & Security
Contributing to safe
and secure societybuilding

Quality of Life
Contributing to physicaland mental wellness
and a prosperous life

Business with
Integrity
Adhering to ethicalstandards
as well as respecthuman rights

Diversity, Equity
and Inclusion(DEI)
Contributing to asociety where everyone
can shine

Targets/KPIs

FY2022 Progress

Carbon neutrality throughthe value chain• FY2030: Achieve carbon neutrality in business sites (factories and offices) 40% of total CO2 reduction rate at factories
and offices (compared to FY2010)• FY2050: Achieve carbon neutrality through the value chain

Contributing to CO2 reduction
through business• FY2024: 100 million metric tons of CO2 avoided emissions per year of CO avoided emissions
2

Transition to a circular economy• FY2024: Full application Eco-Design for all newly developed products• FY2030: Zero*2 waste to landfill*3 from manufacturing sites

357 products identified as subject of
Eco-Design
199 sites (58%) achieved zero waste to landfill

Effective use of water• Reduction rate in water use per unit (compared to FY2010) FY2024: 24%, FY2050: 50%

27% reduction in water use per unit

126.1 million metric tons per year*1

Sustainability Report 2023 P.55-57

Minimize impact on natural capitalStrengthening supply chains Build flexible supply chains capable of responding to disasters and risks
Maintaining social
infrastructure

Resilience and sophisticationof maintenance through DX ofsocial infrastructure

Safe and secure urban
environments

Safe and comfortabletransportation

Ensuring cyber security

Secure cybersecurity for social infrastructure and business systems

Connected andprosperous society

Increase healthy life expectancy
and wellbeing

Business
Case

Business
Case

Business
Case• Contribute to stable energy supply through substation management toapprox. 1.9 billion people*4
Sustainability Report 2023
• Contributed a total of 15 billion people annually through railway services*4 P.22-24• Blood tests and other physical exams: 20 billion tests/year*4

Build a trustful relationshipwith others• Users of happiness service: 90 thousand in FY2024

10.0 thousand users of happinessservice

Employee happiness

More flexible working styles toincrease engagement• Employee engagement (positive response rate): FY2024 71.0%*5

69.5% employee engagement(positive response rate)

Business ethics andcompliance

Encourage employees to apply
ethical standards in day-to-day work

• Achieve a score of at least 60 (out of 100) in FY2023*6, the first year of resultsfrom Ethical Culture & Perceptions Assessment, improving it every year

Achieved a score of 76.5 (Conductedassessment in June 2023)

Respect for human rights

Promote human rights due diligence andstrengthen monitoring of procurement
partners for responsible procurement,
including human rights• FY2023: Conduct human rights risk assessments for all BUs (10 BUs) and majorGroup companies• FY2024: Respond to human rights risks

Conducted human rights risk
assessments for certain Group
companies

Occupational safety

Creating a safe working
environment without accidents• Zero fatal accidents

5 fatal accidents

Safe and secure products
and services

Ensure products and services safety while putting customers first

Sustainability Report 2023
P.115-117

Strengthen diversity inmanagement• Ratio of female and non-Japanese executive and corporate officers:
FY2030 30% respectively

11% of female and
20% of non-Japanese executive
and corporate officers*7

Acquiring and developing digital talent• FY2024: 97,000 persons*8

83,000 persons• Nurture and empower next-generation talentParticipants in Hitachi Young Leaders Initiative 30
people 405 people cumulative*9Participants in Hitachi High-Tech science education
support activities
62,487 people 367,362 people cumulative*10

Diverse organization that
fosters innovation

Contribution to a diverse
and equitable society

Empower DEI of society
through community relationshipprograms*1 Mid-term Management Plan 2024 three-year average *2 Less than 0.5% *3 Wherever this is compatible with local conditions and regulations *4 FY2022 results *5 Target has been raised since we achieved the initial target/KPI*6 Base year has been changed from FY2022 to FY2023 *7 Included assignment as of April 1, 2023 *8 Hitachi Astemo is excluded *9 Cumulative total since 1996 *10 Cumulative total since 1990

Relevant SDGs

20

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Hitachi Integrated Report 2023

Data

Sector Strategies

Mid-term Management Plan 2024

Progress of the Mid-term Management Plan 2024

The company stage is changing from the phase of business structural reforms to the phase of organic growth. The Mid-term Management Plan 2024 is a crucial turning point to increase
corporate value as One Hitachi.

Supporting people’s quality of life with data
and technology that foster a sustainable society

Ideal Positioning in the Mid-term Management Plan 2024

GrowthWith the three growth drivers of Digital, Green and Innovation, the Mid-termManagement Plan 2024 aims to achieve global growth. Under this management plan,
Hitachi will protect the global environment so as not to exceed planetary boundaries
and contribute to the realization of a sustainable society where wellbeing (humanhappiness) is maintained so that all members of society can be comfortable and active.

n for So
eatio
cie
-cr
ty
Co

Planetary
Boundaries
Protect the earth
while maintaining
social infrastructure

Green

Wellbeing

DigitalA society where
every individual is
comfortable and active

Innovation

PeopleSociety

Financial Targets (FY2024)*1

Financial Figures by Sector

Under the Mid-term Management Plan 2024, Hitachi is focusing on growth in boththe top line and the bottom line and on generating cash for growth and shareholder
returns. Hitachi will thereby achieve growth in EPS and CFPS.

Revenue growth rate
FY2021-FY2024 CAGR

5% – 7%
Core FCF*4*5(3-year cumulative)

1.2 trillion yen

Adj. EBITA margin*2

12 %
ROIC

10 %

EPS*3 growth
FY2021-FY2024 CAGR

10% –14%EPS

CFPS≥ 600 yen ≥ 500 yen

Shareholder returns:
0.8 - 0.9 trillion yen*1 Revenues, profit and cash flow of listed subsidiaries and Hitachi Astemo are subtracted, and equity in earnings of affiliates
are added to results and plans of FY2021-FY2024.
*2 Adjusted operating income plus Acquisition-related amortization and equity in earnings/losses of affiliates.
*3 The impact of one-time factors is excluded from net income in FY2021.
*4 Core FCF = Cash flows from operating activities – CAPEX.
*5 The target was updated in April 2023 as a result of deconsolidation of listed subsidiaries and Hitachi Astemo.

FY2021Results

FY2022
Results

FY2023
Forecast*6

Revenues

6,699.2

7,638.2

7,840.0

Adj. EBITA margin*8

9.9%

9.5%

10.2%

12%

Revenues

2,153.6

2,389.02,450.0

CAGR 7%(2,600.0)

Adj. EBITA margin

13.1%

12.3%

12.6%

14%

Revenues

2,051.0

2,469.9

2,580.0

CAGR 13%(2,900.0)

Adj. EBITA margin

4.5%

6.6%

6.7%

9%

Revenues

2,752.8

2,975.2

3,000.0

CAGR 4%(3,100.0)

Adj. EBITA margin

9.4%

10.5%

11.0%

12%

Billions of yen

Continuing
consolidated
business(three sectors)
Digital Systems &ServicesGreen Energy &Mobility

Connective
Industries

FY2024
Target*7
CAGR 5%-7%(7,800.0-8,200.0)*6 Assumed FX rate: 130 yen / US$, 140 yen / €. Impact of FX rate fluctuation by one-yen depreciation from assumed rate is as follows—
US$: Revenues +13.5 billion yen / Adj. EBITA +1.5 billion yen, €: +7.0 billion yen / Adj. EBITA +0.5 billion yen (as of April 2023)*7 In parentheses, revenues are calculated from CAGR.
*8 For an analysis of changes in adjusted EBITA (FY2022-FY2024), refer to page 4 of Investor Day CFO Session.

21

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Governance

Financial Strategy

CFO Message

Hitachi Integrated Report 2023

Data

Sector Strategies

Revenues and Profits Growth Driven by Lumada
The expansion of the Lumada business leads our revenues and profits growth. We aim toincrease the Lumada business to one-third of revenues and more than 40% of profits of Hitachi
overall in fiscal 2024 (fiscal 2022 Lumada business: Revenues 1,960.0 billion yen, Adj. EBITA
margin 14%. fiscal 2024 Lumada business: Revenues 2,650.0 billion yen, Adj. EBITA margin16%). Lumada’s customer co-creation framework has generated many customer cases andsolutions. We use the customer cases and solutions repeatedly to increase profitability. We
are also striving to increase the service business and recurring ratio with large-scale assets
acquired through M&A.
For details of the digital strategy, please refer to page 23.

Revenues (Trillions of yen)*1
LumadaNon-Lumada

21%

Adj. EBITA (Trillions of yen)*1

Lumada ratio*

26%

29%

7.6

7.8

2

LumadaNon-Lumada
41%

38%

33%

Lumada ratio*2

26%

0.96

8.0

6.7

1.38

1.96

2.28

2.65

FY2022

FY2023(forecast)

FY2024(MMP target)

0.80

0.72

0.66

FY2021

44%

0.17

0.27

0.33

0.42

FY2021

FY2022

FY2023(forecast)

FY2024(MMP target)*1 Revenues and profit of listed subsidiaries and Hitachi Astemo are subtracted, and equity in earnings of affiliates are added to results andplans of FY2021-FY2024.
*2 Equity in earnings of Hitachi Construction Machinery is classified into Lumada; that of Hitachi Astemo is classified into Non-Lumada.

Capital Allocation Policies
Hitachi will achieve sustainable growth by well-balanced allocation of generated cash to growthinvestments and shareholder returns. We will focus on Digital, Green and Innovation as areasfor growth investments, and we strictly apply our criteria for financial decisions. When we findgood growth investment opportunities, we apply financial leverage flexibly, combining both theexisting D/E ratio target of 0.5x and net debt/EBITDA 1-2x.
We consider both 50% of core FCF and 50% of net income for total shareholder returns.
For Hitachi, the executing of shareholder returns based on medium- and long-term businessplans and achieving growth in total shareholder return (TSR) through achieving appropriate
stock prices are important management issues. Under this policy, we examine the continuing
payment of dividends and share buybacks and returning earnings generated from businessgrowth to shareholders.
For details about our financial strategies, please refer to page 29.

Cash generation

Capital allocation

Apply financial leverage flexibly,
combining both the existing D/E ratio
target of 0.5x and net debt/EBITDA 1-2x.

2.3 trillion yen
Asset sales

1.1

trillion yen

Core FCF

1.2

trillion yen

Growthinvestments≥1.4
trillion yen

Shareholder
returns0.8-0.9
trillion yen

MMP 2024(3-year cumulative)

Investment criteria• Profitability: Adj. EBITA 12%+• Asset efficiency: ROIC 10%+Consider returning 50% of core FCF
and 50% of net income• Dividends: Stable dividends based on business growth• Share buybacks: Implement based on funding
demands and the business environment, etc.

22Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Corporate Initiatives for Sustainability Growth Digital Strategy
Hitachi is pushing forward with its Social Innovation Business, which solves social issues together with customers by leveraging IT x OT x Products. Lumada
is the name of methodologies, solutions
and use cases that promotes the Social Innovation Business by leveraging digital technology. Hitachi will create new value by quickly achieving DX for customers through Lumada. Aiming to expand
the Lumada business revenues to 2,650 billion yen during the Mid-term Management Plan 2024, Hitachi will work to expand the Lumada business while training and strengthening digital talent andacquiring assets in North America, a growth area.

Lumada’s Customer Co-creation Framework
To further accelerate the Lumada business, multiple sectors and business units in each global
region will work together as One Hitachi based on customers co-creation framework to enhance
our competitive advantages. Lumada’s customer co-creation framework is a method for therealization of circular businesses that increase the value provided to customers while continuously
executing a cycle that starts with understanding our customer management challenges (PLAN:
upper right quadrant), developing and implementing solutions with IT x OT x Products (BUILD:
lower right quadrant), operation (OPERATE: lower left quadrant), and maintenance (MAINTAIN:
upper left quadrant) by using data and technology. With the acquisition of GlobalLogic, which
possesses design thinking and digital engineering capabilities able to capture customer andsocial issues and incorporate them into agile solutions, we will continuously and rapidly executethe four-quadrant cycle within Hitachi’s business footprint to accelerate growth (click here forcases of Lumada co-creation).

MAINTAINManaged services

Digital engineering

PLAN

Understand our customers’
management challenges
Design Thinking

Predictive MaintenanceOperate, maintain, andassess for the next step

AI tools / Methodologies /Customer cases / Solutions

Develop solutions
with IT/OT/Products
Digital Twin

Remote / Automation

Implement
solutions
OPERATE

Connected products

System integration

BUILD

Hitachi Digital—Driving the Lumada Business Globally
In April 2022, we established Hitachi Digital in Silicon Valley in the United States as a control
tower for the acceleration of the global development of Lumada. Hitachi Digital leads theformulation and execution of digital strategies to expand the Lumada business globally. In fiscal
2022, the first year of its establishment, Hitachi Digital crossed the boundaries between business
units and carried out various activities to accelerate the integration of IT x OT x Products. One
representative initiative was the establishment of the Decision & Advisory Board in June 2022.
The Board consists of the CEOs of Hitachi Energy, Hitachi Rail, GlobalLogic, and Hitachi
Vantara and the heads of the business units of the DSS sector, etc. It leads regular discussionof digital strategies to promote the development and execution of digital strategies across the
Hitachi Group, and approximately 20 projects had been launched as of February 2023. Anotherinitiative was “Hitachi Digital Summit 2022,” which was held for the first time in October 2022.
To accelerate customer co-creation as One Hitachi, 127 executives and leaders of the HitachiGroup from across the world gathered in the United States to energetically discuss issues andexchange opinions. In addition, Hitachi Digital CEO Jun Taniguchi led the team of Chief Lumada
Business Officers (CLBOs) who have been assigned in each business field and they took
responsibility for the expanding Lumada businessin each field and cooperated with each other. As aresult, we achieved Lumada business revenues ofapproximately 2 trillion yen in fiscal 2022, exceeding
the initial plan.
Thanks to its leadership creating synergies throughout
the group, Hitachi Digital launched 13 new businesses
in fiscal 2022 alone, and the expansion of the Lumada
business as One Hitachi is progressing steadily.
From left: Gajen Kandiah, CEO of Hitachi Vantara, Nitesh Banga,
CEO of GlobalLogic, Jun Taniguchi, CEO of Hitachi Digital

23

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Corporate Initiatives for Sustainability Growth Green Strategy

Green Strategy (Sustainability Report)

A Green Strategy for Sustainable Growth
Hitachi has developed a green strategy that comprises the two pillars of “GX for CORE” and “GX for GROWTH” as it aims to become a Climate Change Innovator.
Promoting GX for CORE and GX for GROWTH in tandem will accelerate the deepening of technology and know-how, allowing Hitachi to continuously improvethe environmental value that it offers. Steadily executing this green strategy will accelerate the Hitachi Group’s green transformation (GX) and help contribute to
the GX of customers across a range of sectors and to the GX of society as a whole.

GX for CORE

GX for GROWTH

Accelerating the Hitachi Group’s green transformation

Contributing to the green transformation of customers and society

Major KPIs for Green Strategy Implementation

Major KPIs for Green Strategy Implementation

Carbon neutrality

Business Sites (Factories and Offices) (by FY2030)
Whole value chains (by FY2050)

Eco-design

Full application for all newly developed products (by FY2024)

Resource circulation

Zero*1 waste to landfill*2 from manufacturing sites (by FY2030)*1 Less than 0.5%

*2 Wherever this is compatible with local conditions and regulations

Decarbonization• We will introduce energy-saving equipment in production lines as well as introduce and procure
renewable energy and other initiatives. We estimate that this will allow us to exceed the CO2
emission reduction target (50%) for the Mid-term Management Plan 2024 with a 64% reduction by
fiscal 2024 (fiscal 2010 baseline).
• Since fiscal 2022, we have introduced the third-party evaluation platform EcoVadis* toprocurement partners, strengthening our engagement with those partners.
* A comprehensive corporate social responsibility assessment service platform. We implement evaluations that cover environment,labor & human rights, ethics, and sustainable procurement.

Resource–efficient society and harmonizing society with nature
We are conducting activities to minimize our impact on the environment.
• 357 products were identified as subject of Eco-Design (fiscal 2022).
• We achieved zero waste to landfill at 199 business sites (fiscal 2022).

We use solar power generation at a Hitachi Rail factory (Tito Scalo site, Italy)
An annual 700 MWh or more of power, which makes
up 50-60% of the plant’s total energy use, comesfrom on-site solar panels. This has allowed us to cut
325 metric tons of CO2 emissions per year.

Amount of contribution toCO2 emission reductions

100 million metric tons/year (FY2024)

Decarbonization• We contribute to the reduction of CO2 emissions of customers and society through energy
transition, electrification and automation, as well as through the use of digital solutions. As ofnow, we expect to reach 126.1 million metric tons/year as a three-year average in FY2022-2024(Mid-term Management Plan period).

Resource–efficient society• Along with well-known examples like the remanufacturing of air compressors and vacuum
cleaners using recyclable plastic, we have recently joined the trial of SEVEN-ELEVEN JAPANand validate the utilization of used EV batteries.

Trial to reduce the environmental impact of a store with SEVEN-ELEVEN JAPAN(2-chome Hikonari, Misato store)
We developed a mobile storage battery (Battery Cube) with a used EV battery to make effective
use of power generation from solar panels installed at the store. We expect energy management
combined with in-store energy-saving equipment and air conditioning to reduce purchased powerby about 60% and CO2 emissions by about 70% compared with fiscal 2013.

24

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Hitachi Integrated Report 2023

Data

Sector Strategies

Corporate Initiatives for Sustainability Growth Innovation Strategy

R&D and IP Strategies Briefing

Achieving Sustainable Growth through the Development of Enabling Technology

Open innovation hub “Kyōsō-no-Mori”

Strengthening investment
in corporate venturing

Increasing investment to develop
enabling technologies (R&D expenditure)
Deconsolidated business(total of Hitachi Astemo,
Hitachi Construction Machinery, Hitachi Metals)
Continuing consolidated business316.2 billion yen

300.0 billion yen

256.0
% of
billion yen
221.0
revenuebillion yen
+0.4%
% of
revenue% of
3.3%
revenue
2.9%

FY2022

FY2023Cumulative fund size (Billions of yen)

Our goal is to achieve the sustainable growth of business by firmly supporting co-creation capabilities as
One Hitachi for each sector by developing enabling technologies that realize “innovation that addresses thereal issues facing society” and drives “innovation that transforms the customer experience.”
Concretely, we are developing future Lumada solutions by taking a backcasting approach in R&D focusing
on technology trends.
Furthermore, we are supporting co-creation with customers in each sector
through NEXPERIENCE, Hitachi’s original co-creation methodology. In addition, we are looking to solve
society’s and our customers’ challenges by incorporating leadingedge technologies such as generative AI and future technologies for
Hitachi’s growth through start-up investments by Hitachi Ventures.
We protect our enabling technology looking at technology trends andanalyses of the competitive IP landscape to strategically build “valuedriven” intellectual property portfolios based on customer benefit
that our customers seek. We also provide global support to expand
Lumada solutions in each sector by acquiring the patents needed todevelop Lumada solutions for customers and the relevant market.

80

HV
Fund 360

HVFund 2

40

20

0

HV
Fund 1FY2019FY2021

FY2023Innovation Addressing the Real Issues in Society

Innovation That Transforms Customer Experience

Intellectual Property Strategy Supporting Innovation

We are capturing the issues and changes in society tobackcast and drive innovation in the markets and businesses
that can benefit from Lumada solutions.
In relation to an “environmentally neutral society,” a “society
with a 100-year active life span,” and the “co-evolution ofdigital technologies, people and society” – challenges thatneed to be resolved by 2050—we will work toward solution
for our customers’ future challenges through start-up
investment and joint research with leading research institutes
and universities. For example, for “co-evolution of digitaltechnologies, people and society,” we are supporting human
intellectual activities with generative AI and driving innovation
to increase the efficiency of such activities, having also
created the third “HV Fund.”We are supporting business growth as we facilitate
innovative co-creation with customers in all sectors with theaim of solving customers’ management challenges. By using
NEXPERIENCE, which systematizes know-how cultivated by
Hitachi designers and researchers to solve societal issues,
we envision our customers’ future growth together bycatching “signs” of changes in society and in our customers.
Cooperating with each sector, we will develop digital
services that transform customer experience. Moreover, weare leveraging open innovation hubs such as the Lumada
Innovation Hub Tokyoand Kyōsō-no-Mori
to achieve
co-creation with customers globally and support the
expansion of Lumada businesses.

Our business growth strategies are supported by developing
and implementing global value-driven intellectual property
strategies and portfolios. Under the leadership of our Chief
Intellectual Property Officer, we are enhancing our global IP
activities to include acquired and overseas group companies,
to support and accelerate group innovation through, forexample, globally sharing insights from intellectual property
activities around the world. The expansion of Lumada
businesses is supported by facilitating the use of group IP
portfolios among the group businesses.
We are also strategically building intellectual property portfolios
in cooperation with business divisions under group strategies.
For example, for future Lumada solutions created throughbackcasting R&D, we develop the appropriate intellectual
property portfolio to strategically protect relevant IP including
applying for world wide patents and other measures to protect
confidential and proprietary technologies.

25

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Governance

Financial Strategy

CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Corporate Initiatives for Sustainability Growth Global Marketing & Sales Strategy
Global Marketing & Sales leads growth-driving activities to deliver Hitachi’s Social Innovation Business development in global markets by bringing
together the combined capabilities of the Hitachi Group for global customers. Collaborating closely with Hitachi regional headquarters and business
units so this approach is realized within the Mid-term Management Plan 2024, the function focuses on seven key areas of marketing and sales
development, six prioritized growth market segments and partnership development with strategic group customers. It prioritizes a customer-centric
approach to growth – responding to and anticipating future customer demand.
Co-creation Account Management

Regions

Global Marketing & Sales

Masahiko Hasegawa,
SVP, CMOJohn Fyfe,
CMO in charge of Global
M&S Transformation

Hitachi’s Two Growth Models Led
by Global Marketing & Sales
Model 1
• Selecting key global accounts presenting immediate
opportunity across the Hitachi Group and a strategic fit
to our social innovation goals.
• Planning and execution of group account management
for strategic partnership development and co-creation(Lumada) opportunities.
Model 2
• Identifying and pursuing new business opportunities throughgroup level market segment prioritization and developmentof segment-specific market solutions from Hitachi’s portfolio.
Six Prioritized Growth Market Segments

Tech

Financial and Insurance

Facility Management andSmart Spaces

Mobility(New) Energy

MiningJAPAN

Americas

EMEA

CHINA

APAC

Masahiko Hasegawa,
SVP, CMO

Hicham Abdessamad,
Chairman and CEO of
Hitachi America

Brice Koch,
Andrew Barr,
Chairman of the Board VP, President ofof Hitachi Europe
Hitachi Europe

Atsuhiko Aketa,
VP, Chairman of
Hitachi China

Kojin Nakakita,

Marketing and Sales Transformation –7 Priorities and Ambition
1

Segment strategy & domain expertise2

Solution / Product offering

3

Customer experience4

Account management

5

M&S people / Talent management

6

Performance management

7

CRM and tools

Case study

VP, Chairman of Hitachi Asia
and Chairman of Hitachi India

Helping Build a Sustainable Smart City

Hitachi is working in collaboration with NEOM, a giga-projectin Saudi Arabia and a key contributor to the Kingdom’s Vision
2030 plan, with the goal of delivering a world-first sustainablesmart city, fully powered by renewable energy. Hitachi recently
signed an agreement with NEOM’s energy and water company,
ENOWA and Saudi Electricity Company to provide three HVDC
projects for a total power capacity of nine gigawatts in supportof clean energy provision.
Ongoing engagements areunder way to expand the collaboration to meet NEOM’s vastsustainable development needs across mobility, manufacturing
and energy and deploy Hitachi’s digital capabilities to create
seamless links between applications and services.

26

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Financial Strategy

Human Resources Strategy

Governance
CFO Message

Hitachi Integrated Report 2023

Data

Sector Strategies

Human Resources Strategy

Human Resources Strategy (Sustainability Report)

Hitachi believes that human capital is the source of value and aims to provide customers and society with value and contribute to the realization of a sustainable society by harnessing the power of
employees. In the Mid-term Management Plan 2024, we have set KPIs linked to management strategy
and have implemented each initiative. Specifically, we have set three goals, namely, digitaltalent acquisition and development, the increased ratio of female and non-Japanese executives and corporate officers, and improvement of employee engagement, as the main human capital KPIs.

Digital talentJapan

Ratio of female and non-Japanese executives andcorporate officers (Hitachi, Ltd.)

Non-Japan

Female(Employees)

100,000

97,000*1

20.3

2067,00059,00041,000

16
12.9
11.4

38,0005

20,00029,00042,00038,000

FY2022

FY20240

Japan(Employees)

15

15

10
40,00020+

83,00080,00060,000Non-Japanese(%)

8*1 Excluding Hitachi Astemo

Digital Talent Acquisition and Development
The enhancement of digital talent is progressing well.
Outside Japan, we are increasing the ranks of digital talent,primarily at GlobalLogic and Hitachi Vantara. And at GlobalLogic
in particular, we are working to enhance the acquisition ofhuman capital through M&As and recruitment in India where
there are many digital talents, in addition to fostering young
talents through short-term intensive training.
At the same time, in Japan, we are enhancing digital talent mainly
by developing internal human capital. For example, the Hitachi
Academy is offering approximately 130 courses by skill and level,
including digital literacy e-learning to acquire basic knowledge
and digital transformation (DX) training to develop the basic
human capital able to play an active role as project membersof digital businesses. In addition to the reciprocal dispatch ofengineers with GlobalLogic, we have begun offering programs
that incorporate the company’s educational methods.

Non-Japan

9

FY2021

83.3

82.3

20

80

15

70

10

60

80.0
71.0

69.5
65.0
61.2

62.7

56.2

9

FY2022*2*2 Includes personnel changes effective April 1, 2023

Total

(%)

11.4

0
FY2021

Employee engagement (Positive response rate)

5

50

0

0

FY2024*3*3 Includes personnel changes effective April 1, 2025

FY2021

FY2022

FY2024*4*4 We raised our fiscal 2024 target as we achieved the previous target ahead of schedule in fiscal 2022.

Improvement of Employee Engagement
As of fiscal 2022, we were able to achieve our target for the positive response rate to questions about employee
engagement in employee surveys ahead of schedule.
By visualizing the survey results as numerical values, we areworking to make improvements at each workplace so that the opinions of employees can be reflected. We will aim for aneven higher engagement level by accelerating a growth mindset with One Hitachi, including promoting PMI with Hitachi
Energy and GlobalLogic.

Initiatives of the Power Grids Business Unit
To accelerate synergy generation between Hitachi Energy, which was acquired from ABB, and the existing domestic power grids
business, we are promoting exchanges of key personnel from both sides and holding roundtables among potential leaders ineach country and region and the CEO of each business unit in the energy sector for talent exchanges across businesses.
In Japan, we have established project teams to promote business reforms and create opportunities for proactive proposals andactivities.

Initiatives of the Railway Systems Business Unit
In the Railway Systems Business Unit, which has a diverse workforce of 15,000 employees of about 80 nationalities in about 40
countries around the world, we encourage employees, including those whose native language is English, to use simple English.
In addition, we offer programs such as a common global onboarding program and e-learning to foster an inclusive culture.

27

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability Growth

Global Infiltration of Hitachi Culture
As a result of promoting diversity, equity and inclusion(DEI), talent acquired through global M&As is progressively
becoming more active. Due to the inclusion of diverse
human capital, we understand the issues faced by our global
customers and this leads to stronger innovation.
By sharing Hitachi’s Mission and Values (founding spirit) withapproximately 100,000 employees who have been newly
added through multiple cases of M&A in recent years, we areworking to foster a culture of One Hitachi. To do this, in fiscal
2022, CEOs and other executives and corporate officers inJapan and overseas held 277 town hall meetings to talk with
employees.

In-house idea contest “Make a Difference!”
To strengthen the “I will!” mindset, we have been holding an
employee-suggested idea contest since fiscal 2015. Expanding
applicants from all group companies worldwide include many
participants from Hitachi Energy and GlobalLogic.
In fiscal 2022, members of Hitachi Energy received the Gold
Ticket, the highest award, for a new business proposal with a“green” theme.

Business Strategies

Human Resources Strategy

Financial Strategy

Collaboration with GlobalLogic

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Co-creation with Nojima

To accelerate the development of digital talent and introduce GlobalLogic’s design-led digitalengineering expertise, we are fostering talent exchanges between GlobalLogic employees
and Hitachi. In Japan, GlobalLogic Japan has established an office within Hitachi’s cocreation base, Lumada Innovation Hub Tokyo, to facilitate the integration of GlobalLogic andLumada’s capabilities. One such collaboration is with Nojima Corporation, aiming to further
enhance Nojima’s Consulting Sales by offering personalized product recommendations
Co-creation project with Nojima
tailored to individual customer preferences.
Teams were formed using a “two-in-a-box” model, pairing specialists from GlobalLogic and Lumada Innovation Hub Tokyo
with the same role, such as a designer and a strategist. The collaboration began with a storytelling session in which Japanese
team members shared anecdotes about Nojima’s customer service, using their own purchasing experiences at Nojima as
examples, to provide insights into the customer-centric approach cherished by Nojima.
Through store visits and interviews with Nojima employees, Japanese team members facilitated the understanding ofJapanese customs and characteristics of the stores and surrounding areas for their GlobalLogic counterparts, who in returnprovided essential insight and support. The involvement of project architects, responsible for creating digital business models
and processes, has enabled swift value creation. The project is currently undergoing validation in physical stores.
GlobalLogic employee interviews
Collaborating with Hitachi was a remarkable learning journey for our team. We faced initial challenges inunderstanding each other’s company culture and bridging the language gap, while the COVID-19 pandemic
further complicated communication.
Frequent discussions and exchanges with our Japanese colleagues were key to overcoming thesechallenges. It allowed us to immerse ourselves in their culture and understand their working style.
We learned the importance of detailed planning, even in Agile projects, to meet Japanese business practices.
Through extensive discussions, we developed a “hybrid Agile model” that blended fixed schedules with thenecessary flexibility to meet the customer’s needs. We believe that the success of these projects stemmed
from the strong foundation of trust built through our ongoing dialogues with Hitachi.
We look forward to working with Hitachi around the world to provide new added value to our customers and society.

Kathirvel Palaniswamy,
Senior Manager at
GlobalLogic

Employee reward system

Award presentation ceremony

As an evaluation system to ensure a link between the organizational and individual goals of the company and divisions, we
introduced Global Performance Management (GPM) in fiscal 2014. Performance is reflected in compensation by setting
bonus evaluation indicators for organizations and individuals based on the management goals set forth in the Mid-termManagement Plan 2024.

28

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Hitachi Integrated Report 2023

Data

Sector Strategies

Financial Strategy
In the Mid-term Management Plan 2024, we aim to achieve further advances in revenues and profitability and take additional steps to enhance our cash generation capability through organic
business growth, shifting into a sustainable growth mode. To achieve Hitachi’s growth through our financial capital strategy, we continue to work on three priority issues: (1) further strengthening
cash generation capability and deepening ROIC management, (2) reducing WACC by utilizing appropriate levels of leverage within the bounds of appropriate financial discipline, and (3) increasing
total shareholder return (TSR) by implementing shareholder return measures such as dividends and share buybacks.

Strengthening Cash Management

Progress on ROIC Management

In the Mid-term Management Plan 2024, we promote initiatives
to further strengthen cash generation capability. By reviewing
business processes, we aim to achieve further businessgrowth, improve profitability through cost reduction, and reduce
loss costs through risk management. We also implement
thorough cash management by strengthening the monitoring ofworking capital including early collection of accounts receivableand grasping the appropriate levels of inventories.
For cash generation, in addition to maximizing cash flows
from operating activities, it is important to strictly focus on
capital investment and cost reduction. With regard to capital
investment, we will carefully monitor each item. We also
promote the digitalization of cash management, including thevisualization of the entire supply chain through the use of IT
systems, etc.
By these measures, we aim to achieve a conversion rate (corefree cash flow*1 ÷ net income) of 70-80% and a core free
cash flow per share (CFPS) of 500 yen or more.

Hitachi introduced return on invested capital (ROIC) as a KPI for business management from fiscal 2019 to acceleratemanagement that emphasizes capital efficiency, with the aim of sustainably generating returns that exceed the weighted average
cost of capital (WACC), which is the cost of raising invested capital. ROIC was 7.6% in fiscal 2022.
To achieve the 10% ROIC targeted in the Mid-term Management Plan 2024, we will further deepen ROIC management by
utilizing the ROIC tree and taking concrete actions at the field level, such as the development of internal KPIs for each businessand the formulating and reviewing of business strategies. Hitachi aims to increase its enterprise value by promoting managementwith an awareness of the cost of capital throughout the group.
Improve profitability
Example of major action items(to be further broken down and assigned to each division)

ROIC increase drivers

Expand orders, determine
appropriate orders received

Optimize customer portfolio
Expand profitablerevenues

Expand overseas revenues
Expand Lumada revenues

Increase adjusted
operatingincome ratio

Reduce materials costs, outsourcing expenses
Improve production efficiency
Improve business efficiency
Reduce costs

Increase after-tax
business profit

Implement structural reforms
Strengthen project management
Reduce loss costs
Withdraw / Replace unprofitable business*1 Core free cash flow = Cash flows from operating activities - CAPEX

Cash flows trends
Cash flows from operating activities (Billions of yen)Core free cash flow (Billions of yen)

Cash flows margin from operating activities (%)

Reduce tax expenses

Implement appropriate tax management

Increase equity inearnings of affiliated companies

Realize joint venture alliance synergies

Improve asset efficiency (Improve invested capital

Increase ROIC*2

business asset efficiency)
Example of major action items(to be further broken down and assigned to each division)

ROIC increase drivers

9.1%
6.4%
610.0

6.4%

7.1%
793.1

Early collection of trade receivables

7.6%

Increase working
capital turnover

827.0

729.9

560.9

416.4

419.8
290.0
136.0

2018

135.4

2019

2020

2021

2022

(FY)

*2 ROIC = (NOPAT + Share of profits(losses) of investments accounted forusing the equity method) / “Invested
Capital” × 100
NOPAT (Net Operating Profit after Tax)
= Adjusted operating income × (1 –Effective income tax rate)
Invested Capital = Interest-bearing
debt + Total equity*3 CCC: Cash Conversion Cycle

CCC*3
improvement

Reduce inventories
Trade payables: set appropriate payment dates
Acquire advance payments

Improve businessasset efficiency(Increase asset
turnover ratio)

Increase fixed
asset
turnover ratio

Implement pre-investment checks and post-investment monitoring
Review held real estate, sell idle real estate assets
Manage goodwill
Review cross-shareholdings and equity-method investments

Reduce cash on hand andinterest-bearing debt

Improve accuracy of cash flow forecasts
Expand pooling29

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Financial Strategy

Financing and Capital Costs

450

Hitachi share price
TOPIX including dividends
TOPIX Electrical Equipment including dividends

250
200
150

Long-term

Short-term

S&P Global Ratings Japan Inc.

A

A–1

Moody’s Japan K.K. (Moody’s)

A3

P–2

Rating and Investment
Information, Inc. (R&I)

AA–

a–1+
As of August 2023

Hitachi’s basic policy is not to acquire or hold shares of other companies except in cases whereacquiring or holding such shares is necessary in terms of transactions or business relationships.
We will promote reducing shares already held unless the significance or economic rationality ofholding is confirmed.
The Board of Directors verifies the appropriateness of all stock holdings every year. In the verification,
each individual stock is reexamined as to the purpose of holding the shares and whether benefits
from holding shares are in line with capital efficiency targets. As the result of verification, we promote
the sales of shares for which the significance or economic rationality of holding is not confirmed. In
fiscal 2022, we reduced the number of shares held for nine listed stocks (total amount sold: 84,017
million yen). The ratio of policy regarding strategic shareholdings (total amount recorded on balance
sheet) to net assets (consolidated basis) is 4.4% as of the end of fiscal 2022.

Strategic shareholding status

100
50
0
2013/
03

Rating company

Policy regarding Strategic Shareholdings

The following illustrates Hitachi’s TSR, reflecting dividend and stock price fluctuations.
We will continue to improve profitability and pay stable dividends, consider management andfinancial strategies to achieve TSR that exceeds the cost of shareholders’ equity, and strive toincrease shareholder value by conducting management that is conscious of stock prices.

300

Sector Strategies

To ensure the stability of our financialbase, we aim to maintain an A ratingo n i s s u e d i n s t r u m e n t s t h ro u g happropriate financial discipline.
Our cash generation capability isenhancing steadily, and our ratings are
as shown in the table to the right.

Total Shareholder Return (TSR)350

CFO Message

Hitachi Integrated Report 2023

Data

Ensuring Financial Stability

Financing is carried out through the means deemed most appropriate (e.g., cash on hand,borrowings, and proceeds from the sale of assets), based on a variety of conditions, including
the timing and amounts required by the business. When financing through borrowing andother forms of debt, we consider a D/E ratio of 0.5 times and a net debt/EBITDA ratio of
1.0 – 2.0 times as financial discipline. Regarding the cost of capital (hurdle rate) used forindividual investment decisions, calculations and judgments are made on a case-by-casebasis considering interest rates, country risks, and expected returns in the country where theinvestment will be made.

400

Governance

2014/
03

2015/
03

2016/
03

2017/
03

2018/
03

2019/
03

2020/
03

2021/
03

2023/
03

2022/
03

(Number of stocks held)*
500
400

Past 1 Year
TSR

Past 3 Years
TSR

Annual TSR

Past 5 Years
TSR

Past 10 Years

Annual TSR

TSR

Annual TSR

375

300

Hitachi

20.0%

142.7%

34.4%

102.7%

15.2%

199.2%

11.6%

200

TOPIX
(including dividends)
TOPIX(electrical equipment)

5.8%

53.4%

15.3%

31.8%

5.7%

142.1%

9.2%

100

1.6%

77.6%

21.1%

56.4%

9.4%

254.5%

13.5%

0Note: The graph and table above show return on investment for investments made on March 31, 2013, taking into accountdividends and stock prices as of March 31, 2023. Hitachi, Ltd. investment performance, including stock prices anddividends, is indexed using 100 as the investment amount as of March 31, 2013. The TSE Stock Price Index (TOPIX),
which is a comparative indicator, is similarly indexed using data including dividends for electrical equipment.

401

2013

2014

332

2015

309

2016

288

2017

272

233

217

198

2018

2019

2020

2021

2022

179,668

141,859

201,055

274,470

234,785

177

Total amount recorded on balance sheet* (Millions of yen)
353,957

334,617239,993* Total of listed and unlisted shares

324,323

270,336(FY)

30

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability GrowthBusiness Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

CFO Message
The Solid Financial Foundation and Risk Management
That Support Sustainable Growth
Realize Increasing Shareholder Returns
by Optimal Cash Allocation
In fiscal 2022, I took the initiative as the Chief Financial Officer (CFO) and the Chief Risk Management
Officer (CRMO). This enabled comprehensive monitoring of financial and non-financial risk, and timely
decision-making during the year. We showed the progress in solid financial results.
To achieve growth during and beyond the Mid-term Management Plan 2024, I will continue to acceleratemanagement with a focus on cash flows and increase the ratio of Lumada as a driver of Hitachi’ssustainable growth.

Progress and challenges after finishing the firstfiscal year of the Mid-term Management Plan 2024
In fiscal 2022, the first fiscal year of the Mid-term Management
Plan 2024, we recorded revenues of 10,881.1 billion yen,adjusted EBITA of 884.6 billion yen, and net income attributable
to Hitachi, Ltd. shareholders of 649.1 billion yen, which is arecord-high figure. With supply chain issues and abrupt changes
in interest rates and foreign exchange rates, the businessenvironment remained difficult. Despite this, we managed toachieve results as planned throughout the year. I think that risk
management and other efforts supported these results.
Operating cash flows marked record highs and core free cash
flows (FCF) reached 416.4 billion yen. Steady progress wasmade toward the 1.2 trillion yen target for the three-year total
set in the Mid-term Management Plan 2024. On the basis of
the cash generated, we conducted share buybacks totaling
200 billion yen in fiscal 2022 and steadily increased shareholder
returns, paying an annual dividend of 145 yen per share.

For fiscal 2023, major changes in the business environment are
anticipated, such as continuing fluctuation of foreign exchange
rates, the increase of interest rates, increasing mediumand long-term geopolitical risks and the destabilization ofinternational circumstances. In these adverse businessconditions, achieving growth in four businesses with largescale assets, specifically Hitachi Energy, the railway systems
business, Hitachi High-Tech and GlobalLogic, is a big
challenge. Among them, Hitachi Energy and the railway
systems business have huge order backlogs. In fiscal 2023,
we will pave the way for the achievement of the targets in the
Mid-term Management Plan 2024 by recognizing revenues
at the appropriate timing, addressing temporary investment
costs, and implementing profitability improvement measures
such as price and cost control. Return on invested capital(ROIC) was 7.6% for fiscal 2022. We are aiming to increase
ROIC by optimizing invested capital in consideration of risk
factors, such as future interest rate increases, and improving
profitability to increase asset efficiency.

Yoshihiko Kawamura
Executive Vice President and Executive Officer, CFO, CRMO
Joined Hitachi in 2015 after serving as an executive officer at
Mitsubishi Corporation and as an economist at the World Bank.
Leveraging the experience he gained at Harvard Business School,
he has driven structural reforms as CSO (Chief Strategy Officer) since
2018 and as CFO (Chief Financial Officer) since April 2020. Current
position from April 2022.

31

Introduction
Materiality

Mid-term Management Plan 2024

Value Creation

Transformation

Corporate Initiatives for Sustainability Growth

Endeavoring to meet the targets in the
Mid-term Management Plan 2024
The Mid-term Management Plan 2024 set targets of 5-7%
for the revenues growth rate and 12% or more for adjusted
EBITA. The expansion of the Lumada business, which isa revenue growth driver, and the enlargement of greenrelated businesses including Hitachi Energy and the railway
systems business by capturing GX demand will lead to theimprovement of the top line.
From fiscal 2023, the focus of our management strategy has
shifted to a phase of stable growth from a phase of businessportfolio reform. Specifically, we aim for stable growth of
the bottom line. We continue to take steps to increase
profitability, such as the continuous review of low-profitability
businesses, aiming to achieve earnings per share (EPS) of
600 yen or more and core free cash flow per share (CFPS) of
500 yen or more in fiscal 2024. Another major challenge is tokeep the conversion rate, calculated by dividing net income
by adjusted EBITA, at 60% or above by making stricter
investment decisions and by minimizing loss costs to control
the bottom line.
The strengthening of cash management is another priority
issue. To increase our cash generation capabilities, we ensure
basic actions including profitability improvement throughcost reduction, reduction of loss costs by risk management,
reduction of working capital, and the careful selection ofcapital investments. To increase CFPS, we will work to boost
the conversion rate, calculated by dividing core FCF by net
income, to the over 80% level in and after fiscal 2024.

Business Strategies

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Capital allocation
The Mid-term Management Plan 2024 sets a target ofgenerating a three-year total core FCF of 1.2 trillion yen.
Based on total funds of 2.3 trillion yen, including 1.1 trillion
yen from gain on sale of assets, including the partial sale ofshares of Hitachi Astemo, we plan to allocate these funds
in a well-balanced manner, specifically, 0.8-0.9 trillion yen to
shareholder returns and at least 1.4 trillion yen to investments
for growth. Regarding shareholder returns, we aim toincrease dividends in fiscal 2023 as we did in fiscal 2022.
We are also working on share buybacks up to 100 billion
yen. As for total shareholder returns, consisting of dividends
and share buybacks, we plan to offer substantial returns toshareholders on the basis of our income gained from thegrowth of businesses, considering 50% of core FCF and
50% of net income for total shareholder return in accordancewith our medium- and long-term business plan.
Regarding investments for growth, we will consider the
possibility of flexibly using financial leverage if there are any
M&A opportunities that are matched to Hitachi’s strategy.
In the future, however, we will consider strategic bolt-on
acquisitions rather than large-scale acquisitions for which
the scale would be around 1 trillion yen. (The term “bolt-on”
was originally used in a factory meaning to use somethingthat can be attached without cutting or welding.) We makedecisions from the viewpoint that the net present value(NPV) of an investment is positive as well as the period forrecovering the invested capital and the contribution to ROIC.

Actions for non-financial capital andenvironmental targets
It is challenging to quantitatively evaluate human, intellectualand other non-financial capital, and activities for meeting
environmental targets in terms of enterprise value. Hitachi
investigated the financial impact of measures related tohuman capital and the environment in collaboration with
Kyoto University. This study found that social value andenvironmental value are correlated to the increase of ROIC
(Kyoto University-Hitachi joint project).
Possible approaches for enriching our disclosures in the
future include the presentation of how helpful Hitachi’s
products and technologies can contribute to the resolution of
specific social issues such as the reduction of CO2 emissions
and to the realization of a sustainable society. I believe that
we need to actively show how Hitachi is taking advantage ofhuman capital in consideration of DEI (diversity, equity andinclusion).

Endeavors after the Mid-term Management
Plan 2024 and message for stakeholders
After the Mid-term Management Plan 2024, Lumada willplay a greater role in leading the increase in the revenue
and income of the Hitachi Group as a whole. To increase
enterprise value after the Mid-term Management Plan
2024, in addition to expanding the Lumada business, wewill take six actions in parallel, which are realizing top-line
growth, increasing profitability, ensuring bottom-line stability,
strengthening cash generation capability, returning profits toshareholders and creating non-financial value.
I recognize that steady progress and disclosure on the Midterm Management Plan 2024 and shareholder returns areimportant for strengthening the trust that we enjoy from ourstakeholders. I always prioritize meeting shareholders andinvestors in person to frankly exchange opinions with them.
We will continue to seriously listen to the stakeholders in
the market and discuss Hitachi’s future and management
strategy together with you.

32

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Front Business
982.5 billion yen

Services & Platforms

2,389.0

Development of digital technologies
such as AI and analytics

Cloud Services Platform BU:
Cloud services, security,
IT products (storage, servers)

35%

FY2022
Revenues

Provision of digital engineeringand cloud-related services thatdrives Lumada●

IT Services
886.5 billion yen

billion yen

31%

IT Services

Front Business

Development and operation of IT and digital solutions

Building and operation of mission-critical IT and digital systems●

Hitachi Systems, Ltd: System operation, monitoring, andmaintenance and one-stop services covering the entire IT life cycle●

Financial Institutions BU: Development and operation of mission-critical systems
and financial solutions for banks, insurance companies, and securities companies●

Hitachi Solutions, Ltd: Solutions for productivity
improvement and new business creation through combination of
packages and services●

Social Infrastructure Systems BU: Government agencies, defense, local
governments, electric power, transportation sector, etc.
Systems for social infrastructure, building and operation of control systems, digital solutions

Business Performance (Billions of yen)
Adj. EBITA ratio

12.3%

12.6%

14%
CAGR 7%*2（2,600.0）*3

2,450.0
2,389.0

Revenues

1,200.0
Lumada revenues

ROIC*1 Announced on July 28, 2023

Hitachi Integrated Report 2023

Sector Strategies

Market Environment

Services & Platforms
950.0 billion yen 34%

Digital Engineering BU:
Experience design,
digital engineering

CFO Message

Data

Digital Systems & Services

Business Structure●

Financial Strategy

Governance859.0

1,000.0

FY2022 (result)

FY2023 (forecast)*1

8.3%

8.2%

*2 FY2021-FY2024 CAGR

FY2024 (target)*3 In parentheses, revenues are calculated from CAGR.

Aiming to solve increasingly complex management issues and create new business, demand for DX isexpected to continue to increase in the future. The global DX market
from 2022 to 2024 is projected to
expand at an average annual growth rate of 17%.
Moreover, DX initiatives aimed at business growth in Japan will also expand across various fields, with theutilization and spread of cloud and digital technologies expected to accelerate further.

Strengths
Over many years, the DSS sector has cultivated development and operating capabilities for highly reliable
mission-critical systems in the areas of finance, government, electric power and transportation. The
solutions, services and technologies that make DX possible, along with the numerous IT and digital talentin Japan and overseas, also serve as strengths of DSS.
To accelerate the expansion of the Lumada business, we have developed a global service delivery systemthat provides innovative digital solutions created with the design and digital engineering capabilities of
GlobalLogic in a highly reliable and efficient cloud environment. We will further strengthen the digital
resources and capabilities supporting the growth of the Lumada business while striving to further enhance
the profitability of our traditional core businesses, including our business foundations in the development
and operation of mission-critical systems, as well as the products business.

Growth Strategies
Based on Lumada’s customer co-creation framework , we will position digital engineering as our starting
point in an effort to provide end-to-end services from system integration to managed services, and solve theissues faced by customers and society. In addition to business streamlining and cost savings, we will deliver
new value that achieves business growth for customers, including enhancement of the customer experience(CX) and transformations of business models.
Aiming for further growth, we will continually reinforce our business foundations including enhanced talentthrough GlobalLogic’s excellent hiring and training schemes globally and bolt-on M&A, expansion of thealliances with hyperscalers, virtualization and automated operation of storage in which Hitachi excels and theprovision of highly reliable and efficient hybrid cloud solutions made possible by advanced data governance.
In our core business, we will address the needs to innovate and modernize mission-critical systems byleveraging our solid customer base and technological capabilities that enable us to handle large-scale andhighly complex projects. We will also strongly promote the shift to a service-oriented (recurring) businessmodel and achieve improved development efficiency through the use of low-code/no-code technologies
and generative AI , in an effort to further increase profitability.

33

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Nuclear Energy BU
171.5 billion yen

7%

Railway Systems BU
736.0 billion yen

Hitachi Power
Solutions110.8 billion yen

FY2022
Revenues30%

4%2,469.9billion yen
Nuclear Energy BUPower Grids BU
1,438.7 billion yen

Nuclear power plant ABWR
●Fuel debris removal technologies●Nuclear fuel cycle●

59%

Railway Systems BU
Rolling stock●Signalling & Control●Services and maintenance●Turnkey solutions

Power Grids BU

Hitachi Power Solutions

Automation systems●HVDC (High-voltage direct current)●GIS (Gas insulated switchgears)●Transformers●

Wind power solution●Distributed energy resources●Energy & Facility management as a Service●Engineering and services●

Business Performance (Billions of yen)
6.6%

6.7%

Adj. EBITA ratio

9%
CAGR 13%*2（2,900.0）*3

2,580.0
2,469.9

ROIC*1 Announced on July 28, 2023

Hitachi Integrated Report 2023

Sector Strategies

318.0

370.0

FY2022 (result)

FY2023 (forecast)*1

4.3%

3.6%

*2 FY2021-FY2024 CAGR

Market Environment
Net zero remains a critical global challenge with the drive for clean energy and mobility. Over the last two
years, demand was strong with several key drivers, for example, recovery from COVID-19 and energy
independence from geopolitical issues. In addition, the business model is now shifting toward long-term
engagement. For instance, Hitachi Energy was awarded a long-term framework contract with its partner
to enable the customer’s long-term capacity expansion to accelerate the energy transition.
It will also
allow Hitachi to make a timely decision on capital allocation. In the green mobility market, rethinking how
conventional transportation systems transform, the rise of DX and GX is generating and expanding newmarkets that is driven by data. In particular, cutting-edge and demand-side markets including smart mobility,
energy management services and energy storage solutions are expected to grow rapidly.
In terms of economic forecast, the conversion to green energy is expected to expand by up to 1.5 trillion
U.S.$, while the conversion to green mobility will increase by up to 2.7 trillion U.S.$ by 2030.
By continuing to invest in the “Green Energy and Mobility”, Hitachi is making major strides in a fluid anddynamic market environment.

Strengths
Through divestment and investment, Hitachi has been transforming its portfolio that is competitive in atargeted market and has a global footprint. Especially, rail systems and power grids are in a global leading
position in terms of technology and footprint. By leveraging shch a huge global footprint, Hitachi aims to
be a lifetime partner with our customers to address their issues and pain points throughout the product/system life cycle. We believe that digitalization by using Lumada is a key for the success, and we havethe greatest partner within Hitachi, that is, the DSS sector. Combining domain knowledge, experiencesand expertise with IT capability, driven by data, we believe that we can create business cases for ourcustomers that resolve customers’ challenges.

Growth Strategies

Revenues

Lumada revenues

CFO Message

Data

Green Energy & Mobility

Business Structure●

Financial Strategy

Governance

440.0
FY2024 (target)*3 In parentheses, revenues are calculated from CAGR.

The basis of our strategy is transformation and sustainability. With strong demand, we developed record
high order backlog. Although our main focus in the next couple of years will be delivering such orders, wewill start transformation of our business model to achieve sustainable growth. Key areas for transformation
are our services as well as digitally enabled solutions together with Hitachi Digital.
Internally, we will pursue green transformation in the Hitachi Group supported by the DSS sector. That
will enable the best use of energy, assets and resources. The internal effort will be our offerings for ourcustomers. Our “sell together” approach with GlobalLogic differentiates us from peers and that is our value
proposition. We can collaborate and create synergy within Hitachi and minimize interfaces for co-creation.
None of our peers can provide such a seamless approach and our strategic structure can deliver solutions
for customers.

34

Introduction
Materiality

Value Creation

Mid-term Management Plan 2024

SectorStrategies

Business Strategies

Transformation

Corporate Initiatives for Sustainability Growth

Human Resources Strategy

Financial Strategy

Governance
CFO Message

Data

Hitachi Integrated Report 2023

Sector Strategies

Connective Industries

Business Structure
Industrial Digital BU
361.5 billion yen 12%

Building Systems BU
891.0 billion yen 30%

FY2022
Revenues

Water & Environment BU
186.5 billion yen 6%

2,975.2

Industrial Products Business451.1 billion yen 15%

Hitachi Global Life Solutions
392.3 billion yen 13%

billion yen

Industry Group

Industry Group
Industry and distribution solutions, robotic SI● Water supply and sewerage, utility
solutions● Custom-made industrial equipment(process compressors, automated guided
robots, drive systems, etc.)● Mass-produced industrial equipment (aircompressors, marking systems, power
distribution equipment, etc.)

Advanced
Technology Group●●

Healthcare (clinical chemistry and immunochemistry analyzers,
automated cell culture equipment, particle therapy system, etc.)
Measurement and analysis (semiconductor metrology/inspection
equipment, electron microscopes, etc.)

Urban Group●●

Growth Strategies(1) Evolution and expansion of the Total Seamless Solution using the Lumada
framework for collaborative creation with customers

Hitachi High-Tech
674.2 billion yen 23%

Advanced Technology Group●

Hitachi brings together its unrivaled, industry-leading products, including elevators,
escalators, home appliances, air-conditioning equipment, measurement and analysis
equipment, medical equipment and industrial equipment, and provides the Total
Seamless Solution in which it digitally connects its products and solves boundary issues that arise between workplaces
and management, the supply chain and different fields. In a society that is rapidly becoming more complex, it is more
important than ever to solve issues with “domain SI” gained through collaborative creation with customers, which connects
workplaces to management and takes advantage of Hitachi’s proprietary technologies and extensive empirical knowledge,in all layers. Hitachi connects things and makes a difference, thereby providing differentiated value.

Strengths

Urban GroupElevators, escalators andbuilding services
Home appliances andair-conditioning systems

We aim to evolve and expand the Total Seamless Solution using the Lumada framework for collaborative creation withtaking advantage of the strength that comes from having products, OT and IT. Expanding the scope ofcustomers,
applications of the Total Seamless Solution from industry to the urban and healthcare fields and to the green field, thesector plans to expand Lumada revenues at a CAGR of 28%*2 in fiscal 2024.
* Examples of the Total Seamless Solution: Reform and evolution of distribution and delivery operations

Business Performance (Billions of yen)
10.5%

11.0%

12%
CAGR 4%*2（3,100.0）*3

Adj. EBITA ratio

3,000.0
2,975.2

ROIC

783.0

910.0

FY2022 (result)

FY2023 (forecast)*1

10.8%

11.3%

1,100.0
FY2024 (target)*1 Announced on July 28, 2023 *2 FY2021-FY2024 CAGR *3 In parentheses, revenues are calculated from CAGR.

We develop businesses globally based on industry-leading competitive products andAs social issues become more andexpand them by capturing each growing market.
more complex and complicated and are being shared by different fields, investment inindustrial digital transformation and automation is accelerating in the area of industry. Meanwhile, the semiconductor
market is expected to grow in the medium to long term. In the healthcare field, markets for diagnosis and therapy
equipment in cutting-edge fields are growing steadily. In the urban field, the elevator and escalator market remains steady,while the smart building market is expected to expand significantly in the medium to long term.

MarketEnvironment

Initiatives in the healthcare field

Initiatives to build a hydrogen and ammonia supply chain(2) Strengthening recurring businessWe aim to strengthen recurring businessthrough horizontal deployment and sharing recurring business expertise
between businesses. We will evolve our its recurring business model from providing product services based on 0.9
million units of connected products to deepening solutions, where we will continue to develop and deepen solutions
according to customers’ new needs, to achieve recurring business revenues of 880 billion yen and a CAGR of 8%*2
in fiscal 2024.
* Examples of recurring business: Smart building solutions

Revenues
Lumada revenues

Making the retailing supply chain carbon-neutral

Medical solution service platform(3) Accelerating global growth
We plan to increase our overseas revenue ratio from 47% in fiscal 2021 to 52% in fiscal 2024. We aim to achieve a
CAGR of 15%*2 in North America by strengthening key businesses, including investment.
in the North American industry field, we have accelerated the development of the
To expand the global business,
Total Seamless Solution by using the air compressors of Hitachi Global Air Power (formerly Sullair), advancing the fusionof robotic SI and digital solutions at JR Automation, which have built the foundations of their business through M&A,
and leveraging the marking systems of Telesis Technologies and MES/SCADA*4, where Flexware Innovation, which was
acquired in 2022, is strong. In the semiconductor field, we will deepen collaborative creation with customers by utilizing
bases near global customers and will strengthen the fusion of semiconductor manufacturing equipment and measurement
equipment with digital. In the healthcare field, we will strengthen the molecular diagnosis business and particle therapy
systems, particularly in North America.
*4 MES: Manufacturing Execution System; SCADA: Supervisory Control And Data Acquisition35

Governance

We have introduced our Social Innovation and the latest technologies andbusiness trends on our “Social Innovation web site.”And “The People of Hitachi”
is a documentary series with inspiring
stories about how Hitachi Group employees are powering good aroundthe world to solve problems faced by today’s society.

Introduction

Value Creation

Addressing Risks and Opportunities

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

Corporate Governance

Addressing Risks and Opportunities
With the rapid advance of digitalization and complex developments in the political and economic landscape globally, the business environment is changing with each day. In the Risk Management
Meeting, which is chaired by the President with the Chief Risk Management Officer (CRMO) acting as vice-chairperson, Hitachi monitors and analyzes this business environment quantitatively andqualitatively and manages risks in terms of the response to risks that Hitachi should prepare as well as opportunities for further growth in light of, for example, social issues, competitive advantages
and management resources. We will create revenue opportunities while controlling risks. We will identify severe risks that could potentially have a significant impact on Hitachi’s operations in termsof the nature of risk events, the expected time period, the likelihood of their occurrence and their seriousness when they do occur, and we discuss and implement measures against the risks. By
identifying the various risks Hitachi faces while operating around the world, we are working to achieve a solid management foundation that is linked to our growth strategy.

CRMO (Kawamura holds both CRMO and CFO positions since fiscal 2022) Reflects on Activities in Fiscal 2022
In an ever-changing business environment, Hitachi has built a risk management structure in order to understand risks and opportunities that could affect its
business management, quickly identify potential upcoming risks and make decisions. Hitachi has strengthened this structure to create a risk management systemthat identifies and manages financial and non-financial matters in an integrated manner with the aim of comprehensively dealing with the various risks that Hitachi
faces in operating its business on a global scale.
In fiscal 2022, not only risk assets on the balance sheet but also risks related to the order backlog in large-scale, long-term projects, etc. , were quantified using
Value-at-Risk models and other statistical approaches. In the event that significant losses are incurred simultaneously, the top priority will be placed on absorbing
them on the balance sheet in our risk management. We have also held discussions on several issues, including exchange rates, interest rates, and other changes
in the macroeconomic environment, safety and BCP measures for times of disaster such as a major earthquake in Tokyo, and cyber security and compliance.
Moreover, to further accelerate the Social Innovation Business on a global scale, across the entire Hitachi Group, including acquired companies, Hitachi has
examined and developed a group governance policy. It commenced application of the policy in April 2023.
In fiscal 2023, Hitachi will further strengthen its risk management to respond robustly to foreign exchange and interest rate trends and rapid changes in themacroeconomic environment, aiming to achieve growth, particularly of large global assets, including Hitachi Energy, the railway systems business, Hitachi HighTech and GlobalLogic.

Hitachi’s Risk Management Structure
Board of Directors
Senior Executive Committee
Risk Management Meeting
CRMO

Businessrisks• Five working groups (WGs), formed inaccordance with the types of risk, reporting to
the Risk Management Meeting.
• The WGs utilize related group corporate
functions and manage their respective risks
appropriately.

Crisismanagement

Executive Vice President andExecutive Officer, CFO, CRMO

Group Governance Efforts

Risk categories / Working Groups
Investment
risks

Yoshihiko Kawamura

ComplianceGroupgovernance

Our new Group Governance Policy was established in April 2023. The policy aims to clarify how
the Hitachi Group’s governance should function and to explicitly state responsibilities and roles ofdifferent organizations given Hitachi’s presence as a global enterprise.
Achieving sustainable growth through the global expansion of the Social Innovation Business
requires group-wide optimal management, based on the group’s common aim, to reflect global
perspectives and diverse values in our business management and efficiently allocate management
resources. Based on this policy, the Hitachi Group integrates its management to formulate andexecute the group’s strategies in pursuit of synergies within the group, strengthen its managementfoundation through common discipline and rules, and streamline business management throughthe standardization of our global operations. In this way, we will accelerate our global growth byensuring the transparency and fairness of our business management, protecting the Hitachi brand’svalue and promoting our Social Innovation Business.

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Hitachi Integrated Report 2023

Corporate GovernanceFor crisis management, Hitachi strives to achieve
more sophisticated resilience. An example isquick action taken in the event that a crisis
occurs. Even in ordinary times, we are readyto take action against each of the serious risk
categories to enhance our preparedness forcontingencies and ensure appropriate action.
In fiscal 2022, our corporate measures in theareas of large-scale natural disasters in Japan,
as well as cybersecurity and other related
issues, were strengthened and reviewed. Our
aim was, for example, to facilitate the migrationof major systems to the cloud and duplicate
our information infrastructure. In fiscal 2023, theexpansion of our measures for business units
and the Hitachi Group companies as well as
Diagrammatic drill, among other initiatives, will bestrengthened to enhance the Group’s resilience
globally.

Efforts Against Investment Risks

Severity

Crisis Management Initiatives

Occurrenceof crisis

Potential risks
Management of serious risks

Various risks

Crisis Management WG
Response whena crisis occurs

Responding to
non-serious risks• Establishment of a task force• Consolidation andcentralization of information• Initial response, implementationof abatement measures• Ongoing monitoring• Consideration of
categorizing a
non-serious risk into
serious risks

Preparations under normal conditions• Preparation of response and operational steps based oncrisis scenarios• Conducting drills, revising procedures, responding toissues• Reconfirming business continuity plans

Compliance Initiatives
As a cross-sectoral compliance initiative, four related departments worked together and shared
information with one another in fiscal 2022 regarding the measures implemented by eachdepartment under regular conditions (e.g., development of regulations, training, monitoring,audits) and how to handle contingencies in the event that they arise (e.g., communication
with internal and external stakeholders including senior management when a major risk
manifests) to handle major compliance-related risks that concern corporate ethics and laws,
the environment, quality, and health and safety. These departments work to strengthen theircooperation in terms of management methods in different categories of risks. In this way, we
have sought to raise the level of our risk management in the different categories and reducerisks. In fiscal 2023, we will seek to establish an organizational climate for encouraging
employees to speak up and preventing violation of laws and internal rules with the aim to
reduce the Hitachi Group’s compliance-related risks.

Hitachi has a proper framework of decision making
in different phases of investment (e.g.,
M&A, sale of assets, orders for projects) to facilitate our response to risks and secure growth
opportunities. Hitachi has a framework for delegation of authority within a three-layer deliberation
structure—the Board of Directors, the Senior Executive Committee and the business units—in accordance with the size and details of the project to ensure appropriate and flexible decision
making when carrying out an investment or other activity. For important projects, the Investment
Strategy Committee, an advisory body consisting of members of our corporate divisions, examines
risks in a multifaceted manner to submit a report (including recommendations of approval ordisapproval) the Senior Executive Committee whose members include the President. After aninvestment is executed, we periodically monitor the status of the project. If the project fails toproceed as planned, we have a framework in place to decide whether to continue with theinvestment, which might lead to a decision to withdraw. The aim is to enhance our capital efficiency.
In response to changes in the economy finance, geopolitics, customers and other componentsof the management environment (risks and opportunities), the criteria for providing investment
and post-implementation monitoring (including PMI) are continuously strengthened in an effort toachieve the Mid-term Management Plan and capital allocation plans.

Quantitative Understanding of Risks
Hitachi calculates expected maximum risks (Value at Risk) by statistical methods according
to the type of assets held on the group’s consolidated balance sheet. Similarly, the risks ofincreasing the backlog of long-lead projects have been quantified since fiscal 2022.
We avoid missing out on growth opportunities by visualizing the capacity for growth investment,
etc., considering consolidated net assets and other factors. We also engage in monitoring andhold discussions through the Risk Management Meeting to ensure that risks are not excessively
unbalanced compared to Hitachi’s consolidated financial strength.
We also quantitatively analyze and understand the state of risks and profitability on a regional
and per-sector basis.

Responding to Climate Change Risks and Opportunities
In June 2018, Hitachi announced its endorsement of the recommendations by the Financial Stability
Board’s (FSB) Task Force on Climate-related Financial Disclosures (TCFD). See page 43 of thefor details on climate change-related, TCFD-based financial disclosures.
Sustainability Report
For details of the risk factors, please refer to page 34 of the Annual Securities Report (the 154th
business term).

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Hitachi Integrated Report 2023

Corporate GovernanceCorporate Governance
Hitachi views the expansion of long-term and overall returns to shareholders and investors as an important management objective. Hitachi, Ltd. and Hitachi Group companies maintain good
relationships with a wide range of stakeholders, and we recognize that these relationships make up an important portion of our overall corporate value. Accordingly, we are striving to establish asystem that will improve our corporate value primarily through the implementation of measures focused on promoting constructive dialogue. To advance these efforts effectively, we are working to
improve our corporate governance by ensuring thorough separation between the oversight and execution of management, establishing a swift business execution system, and striving to achieve
highly transparent management.
History of Hitachi’s Corporate Governance Reform

Hitachi’s Corporate Governance Framework and Features (As of June 2023)
POINT 1

General meeting of shareholders
Senior Executive Committee
Appointment

ReportAppointment/
oversight

2

Transitioned to a company with committees (currently acompany with a nominating committee, etc.) in 2003.

President & CEO

Hitachi established the Nominating Committee, the Compensation
Committee and the Audit Committee, with independent directors
comprising the majority of members and serving as chairpersons.
This system ensures transparency in management, separates theoversight and execution of management, facilitates the full exerciseof oversight functions, and enables discussions and reports to be
conducted appropriately within these three committees.

Board of Directors

2 executive members

Executive Vice Presidents
and Executive Officers/
Senior Vice Presidents andExecutive Officers/
Vice Presidents andExecutive Officers

members
10 non-executive(including two women)

1

1

1

Nominating
Committee

Compensation
Committee

Audit
Committee

4 directors

4 directors

5 directors*

3 Audit

3 Report

Internal
Auditing
Office3 Audit

Executive
Officer
Department
in charge

POINT 2

3

Department
in charge

Audit

Independence of the Board of
Directors

Increased the number of independent directors, including
non-Japanese directors, in 2012.

Executive
Officer
Department
in charge

Transparency in Management

Department
in charge

The Board of Directors, which is chaired by an independent
director, has 12 members, including nine independent directors,
two directors who are also serving as executive officers, and one
director who is not serving as an executive officer. In addition,
we have established a system that facilitates the full exerciseof oversight functions by maintaining a separation between
management oversight and execution.

3 Audit
3 Report
Non-independent

Independent*One standing Audit Committee member

Accounting Auditors

POINT 3

Enhanced Collaboration throughTripartite Auditing

Hitachi’s Audit Committee and internal audit sections collaborate
with third-party accounting auditors to strengthen Tripartite
Auditing aimed at increasing the effectiveness of internal controls.

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Transformation

GovernanceBusiness Strategies

Data

Hitachi Integrated Report 2023

Corporate Governance

Highly Experienced Directors (Sustainability Report)

Experience, Knowledge and Capabilities Required for Directors
Hitachi Directors need to have a wide range of experience and knowledge in global and diverse fields to be worthy of leading Hitachi’s management to expand the Social Innovation Businessglobally, and have the qualities of broad experience and expertise in management.
The experience, knowledge, capabilities and other qualities required for Hitachi directors are as follows.
Core Skills
Core qualities that ensure management oversight efficiency and decision-making
functions

Number ofapplicabledirectors

Professional Skills

Number ofapplicabledirectors

Expertise and experience that enhance discussions pertaining to the promotion of
the Social Innovation BusinessCorporate
management

Corporate management experience and knowledge

12peopleGovernments
and internationalorganizations

Leadership experience in government, governmental agencies, international organizations
or economic associations that facilitates an understanding of and response to regulations
and social issues, as well as practical experience at educational institutions

4
peopleGlobalbusiness

Business experience outside Japan or management experienceat a company that develops business globally

12peopleLegal affairs

Expertise and practical experience in legal affairs indispensablefor global business and the development of new business1
personRiskmanagement

Knowledge of risk assessment and management necessary tomaintain operations

12
peopleR&D andintellectual
property

Expertise and practical experience in R&D or intellectual property
facilitating the utilization of technology and the incorporation of
new technologies

2
peopleFinance andaccounting

Knowledge and management experience pertaining to financial
accounting necessary for medium- to long-term corporate value
creation from a financial perspective

12
peopleDigitalPractical experience in industrial fields vital for promoting digitaltransformation (DX) in the Social Innovation Business4
peopleBoard of Directors Composition (As of June 2023)
Independence(ratio of independent directors)

Diversity(ratio of non-Japanese and female directors)

Diversity(by country of origin)
Germany 1person
United Kingdom

Independent
directors
Nine people

75%

Non-Japanese
Directors
Five people

1person

41.7%

2 people

United States

2 female directors(16.7% of overall director total)India

1personIndustrial fieldJapan

7peopleFinance

RetailEnergy and resources

Materials andchemicals

Transportationand logistics
Machinery
Electricity and gas
IT and services

Electric andprecision instruments

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Hitachi Integrated Report 2023

Data

Corporate Governance

Activities of the Three Committees (Sustainability Report)

Administrative Performance of the Board of Directors

Internal controls (audit system, etc.)

Providing Information to Independent Directors

The Board of Directors approves the basic management policy for the Hitachi Group andoversees the execution of the duties of executive officers and directors in order to sustainably
enhance corporate value and shareholders’ common interests. The basic management
policy includes the Mid-term Management Plan and annual budget compilation. The Board of
Directors focuses on strategic issues related to the basic management policy, as well as otheritems to be resolved that are provided in laws, regulations, the Articles of Incorporation, and theBoard of Directors Regulations.
In fiscal 2022, CEO Keiji Kojima reported on the progress of the Mid-term Management Plan
2024, including overall priority items and progress in each sector, and confirmed consistency
with the plan. In promoting the execution of management strategies, more time is spent
discussing and deliberating than is used to explain quarterly financial reports and businessstrategies. In addition, at the Board meeting CEO Kojima reports and discusses important
topics for the executive side that were discussed at the Senior Executive Committee, facilitatinga shared understanding with the executive side.

The Board of Directors holds individual meetings and site visits to improve the effectivenessof the Board of Directors and increase opportunities for information sharing. In fiscal 2022,with the relaxation of border measures for COVID-19, we held a Board of Directors meetingoverseas for the first time in three years (in the United States), as well as lectures by local
experts and visits to local subsidiaries. Online participation in the Hitachi Social Innovation
Forum, and attendance at the Internal Business Conference and the Research Presentation
Meeting held at research institutes, including online, as well as visits to Hitachi Origin Park,
provided opportunities to deepen understanding of the business and engage in dialogue withsenior management and front line employees.

Board of Directors Meetings in FY2022
FY2022 Board of Directors Meeting Results
Nine days

Meetings held

7.6 per meeting

Average number of agenda items

3.1 hours (longest meeting 5.3 hours)

Average meeting length

December 13, 2022: Board of Directors meeting in the United States

Discussion of Major Themes
Explanations

Discussions /Deliberations

CEO REPORT
Mid-term
Management Plan
Settlementof accounts
Risk management
Business strategy
0

100

200

300

400

Total annual time (minutes)

January 18, 2023: Visit to Hitachi Energy (Switzerland)
by Audit Committee members

October 27, 2022: Visit to Hitachi Origin Park

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Corporate GovernanceAnalysis and Evaluation of the Effectiveness of the Board of Directors
Hitachi evaluates the effectiveness of its Board of Directors each year in a continuous effort to maintain and improve its functions.

Fiscal 2022 Evaluation Process

Evaluation Results and Future Initiatives
Points of evaluation

1. Questionnaire-based
self-assessment by
each director(February to March2023)• Composition: diversity on the Board, the number and proportion of Inside andOutside directors, etc.
• Visibility of responsibilities and roles of the Board• Meeting operation: meeting frequency, deliberation time, agenda setting,quality of deliberation, Chairman’s role, etc.
• Contribution: contribution to strategy building and change of company culture,contribution to constructive discussions, utilization of Director’s knowledge
and experience, discussions contribution to CEO succession plan, etc.
• Understanding of the company: Hitachi Group Identity, risk factors, potential
challenges and opportunities.
• Three committees: composition, responsibilities and roles, coordination with
the Board, etc.
• Supporting system for the Board: provision of necessary information such as
the Board materials, etc.

2. Discussions among
independent directors(March 2023)• Independent directors had a meeting and discussed the Board effectiveness there
referring to the Board’s activities in each evaluation items set out in the above 1.

3. Discussions at theBoard meeting(May 2023)• The Board analyzed and evaluated its effectiveness as a whole and confirmed thepolicy on approaches to further enhance the Board’s effectiveness based on the
results of the preceding process, considering comparison to the evaluation resultsfor previous year and measures taken for improving its effectiveness.

Evaluation results

Overall evaluation
in FY2022• The Board assessed that Board members are diverse and make use of
their knowledge and expertise to speak out, having vigorous discussions
especially on matters related to business strategies such as the Mid-termManagement Plan targeting the mid/long-term growth of corporate value.
The Board, therefore, concluded that the effectiveness of the Board as awhole is maintained.
Future initiatives

Further enhancement ofcorporate governance• Based on discussions at the Board meetings, set up meetings to provide
feedback and confirm future action items with executives to further
promote shared recognition between the Board members and theexecutives.
• The Board will respond to requests for dialogue from investors to theextent possible.

Enhancement of theBoard support system andimprovement of practicalissues in operations• Increase opportunities to have meetings with BU CEOs, etc. and expand
to provide Independent Directors with information on opportunities ofvisiting sites and events of Hitachi Group.
• Further improve structure and content of materials for the Board meetingand operation of provision of materials well in advance of the Board
meeting.

CEO Appointment, Dismissal, and Succession Plan
After a preliminary report to the Nominating Committee, Hitachi’s Board of Directors decides
upon the appointment and dismissal of executive officers with the goal of constructing an
optimal business execution system for management. As stipulated in our Corporate Governance
Guidelines, our basic policy concerning the CEO requires that individuals serving in the positionof CEO have extensive experience and achievements in the field of company management.
They must also be considered optimally suited for conducting management aimed at achieving
Hitachi’s goals of continuously raising its corporate value and further serving the common
interests of its shareholders. Decisions regarding the appointment or dismissal of the CEO shallbe made based on prior deliberations and proposals by the Nominating Committee.

Regarding our CEO Succession Plan, as the speed of change in the management
environment accelerates, we are striving to build a system that enables us to appropriately
and promptly secure and develop (both internally and globally) necessary management
personnel who will provide leadership that will allow us to realize our growth strategies.
Accordingly, we are also concentrating on providing training for selected employees whiletargeting the early development of candidates for future management positions. Through this,participants discuss what is necessary for Hitachi’s future growth, and by providing a forum
for making recommendations to management, we foster next-generation leaders capable ofacting authoritatively and resolutely.

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Corporate Governance

Reflecting Sustainability Targets in Executive Compensation Evaluation (Sustainability Report)

Director and Executive Officer Compensation
Compensation structure
Fiscal 2023 Revision of Executive Compensation System
At a meeting of the Compensation Committee, Hitachi discussed the executive compensation
system to enable continued growth over the next ten years, through a modal change toward
growth in MMP 2024. A decision was made to amend the executive compensation system
to establish a system that can secure competitive superiority over global companies, ensure
effective Pay-for-Performance that rewards contributions to growth and innovation, andincrease corporate value by strengthening sustainable management. For specific details, please
see the following page.
With regard to employee compensation as well, Hitachi has introduced a framework in which
individual targets are linked to the company’s targets, and compensation is determinedaccording to the achievement of those targets. The management targets put forward in MMP
2024 are applied as evaluation indexes when deciding compensation for individual employees.
Hitachi will cultivate a growth mindset among both executives and employees and strive toachieve global growth as One Hitachi.

(1) Directors
Compensation for Directors is Basic compensation as fixed pay. The amount of Basic compensation is decided byadjusting a basic amount to reflect full-time or part-time status, committee membership and position, and travel from placeof residence, etc. A Director concurrently serving as an Executive Officer is not paid compensation as a Director.
(2) Executive Officers
Compensation for Executive Officers consists of Basic compensation as fixed pay and short-term incentive compensation andmedium- and long-term incentive compensation as variable pay. The basic amount of Basic compensation, short-term incentive
compensation and medium- and long-term incentive compensation is set based on the ratio of compensation for the President& CEO, which in the past was 1:1:1, but has been changed to 1:1.2:2, increasing the ratio of variable pay with a focus on LTI,
which takes the form of stock compensation, and the compensation ratios for other executives have also been set based on
this ratio. This takes into account the composition of executive compensation for major global companies including European
and the United States companies, in order to increase corporate value through the growth of global businesses.
If it is found that an executive officer has engaged in misconduct during their term of office, any compensation already paid shallbe returned to the company (clawback provision).
For details of Compensation to Directors and Executive Officers, please refer to page 108 of the Annual Securities Report (the154th business term).

Basic Policy of the New Executive Compensation System
Aiming for growth, profitability,
and cash generation

Key Principles: New Incentive Plan

Accelerate sustainable
management

Emphasize alignment
with shareholder value

Ensure global competitivenessin business and compensation

1 Alignment with the Mid-term Management Plan 2024●

Aligned with mid or long-term growth ofcorporate value and business performance●

Corp. value growth throughPay-for-Performance●

2 Establishment of compensation program and corporate performance program that foster a growth mindset●●

Linkage with the+
Mid-term
Management Plan 2024

Mid- or long-term
growth beyond
the mid-term plan

In the Short-term incentive compensation and Medium- and long-term incentive compensation, set performance metrics toward the Mid-term Management Plan as Key
Performance Indicator (‘KPI’) to encourage executives to achieve them.
Pursue an optimal balance between short and medium- to long-term performance about “growth,” “improving profitability” and “cash generation”, aiming for improvement ofshort-term performance and medium- to long-term growth in corporate value.
Establish a compensation program that significantly rewards performance by setting stretched goals and commensurate compensation levels.

3 Setting indicators to promote sustainable management●

Develop specific indicators and goals related to “Environments,” “Business with Integrity” and “Quality of life” under its sustainability strategy, and encourage their implementation.

4 Expansion of stock compensation that rewards growth in corporate value over the medium to long term●

Expand stock compensation to better align with medium-to long-term corporate value.

5 Competitive compensation levels with a global perspective●

Attract and retain key talent

Ensure competitive compensation levels to attract and retain key executives in the global market, regardless of their residence or origin, who lead global management of a
global organization.

6 Compensation benchmarking with objectivity and transparency●

Transparency, objectivity and fairness

Reference the benchmarks in the US and European markets in addition to the benchmarks in the Japanese market for analysis and level-setting from multiple perspectives.

7 Transparency and objectivity through enhanced compensation disclosure and shareholder engagement●

Endeavor to gain investors’ understanding and support through sufficient disclosure of the compensation program with a global perspective and ongoing shareholder
engagement, and continuously improve the program based on the insights gained through the engagement.

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GovernanceBusiness Strategies

Hitachi Integrated Report 2023

Data

Corporate GovernanceCompensation to Executive Officers (Fiscal 2023)
Before amendment

After amendment

Basic compensation: short-term incentive:
medium- and long-term incentive = 1:1:1 ratio

Basic compensation: short-term incentive:
medium- and long-term incentive = 1:1.2:2 * ratio

Fixed pay

Variable pay

Basic compensation

Short-term incentive
compensation

Fixed pay

Medium- and long-term
incentive compensation

Variable pay

1

2

3

Basic compensation

Short-term incentive
compensation

Medium- andlong-term incentive compensation*For President & CEO

Basic compensation

1

Set according to the relevant position by adjusting that amount to reflect financial results and individual performance.

Short-term incentive compensation

2

3

Medium- and long-term incentive compensation

Short-term incentives (STI)

Executive officers
in charge ofbusiness

Individual
evaluation:
10%

Company-wide performance:
70%

President
Executive officers
in charge ofcorporate affairs

Medium- and long-term incentives (LTI)

Company-wide performance:
40%
Company-wide performance:
30%

1• Revenues• Lumada business• Adj. EBITA Margin revenues• EPS• Core FCF

Individual evaluation:
40%

Divisional performance:
30%

Sustainability:
20%
Sustainability:
20%

3
3

Compensation withincumbency condition:
30%

Individual evaluation: Sustainability:
3
20%
20%

1

3

• Revenues• Lumada business• Adj. EBITA Margin revenues• Core FCF• Materiality— “Environment,”“Business with Integrity” and“Quality of Life” —based on thesustainability strategy

Compensation with stock price condition:
70%

When the Mid-termManagement Plan
targets are achieved
Max. +20%

2

1

TSR growth rate
TOPIX comparison

Global competitive
comparison

2

ROIC
+10%

Sustainability:+10%

Points of amendment
1 Strengthening the link with the Mid-term Management
Plan 2024• Adopt the key indicators set forth in the Mid-term Management
Plan 2024 adopted as KPIs (STI)• Introduce incentives for achieving the Mid-term Management Plan (LTI)

2 Strengthening the link with Corporate Value
Enhancement• Increase the stock price condition compensation ratio (LTI)• Establish a global competitive comparison (LTI)

3 Further evolving of Sustainable Management• Separate sustainability evaluations and set at 20% (STI)• Create new evaluations regarding our Materiality—“Environment,” “Business with Integrity” and “Quality ofLife” —based on the sustainability strategy (STI)

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Data

Hitachi Integrated Report 2023

Corporate Governance

Leadership (As of June 21, 2023)
Independent Directors*

Katsumi Ihara (72)

Ravi Venkatesan (60)Cynthia Carroll (66)

Ikuro Sugawara (66)

Joe Harlan (64)Louise Pentland (51)

Share ownership: 1,300 shares
Term of office as Independent Director: 5 years

Share ownership: 500 shares
Term of office as Independent Director: 3 years

Share ownership: 1,600 shares
Term of office as Independent Director: 10 years

Share ownership: 400 shares
Term of office as Independent Director: 1 year

Share ownership: 1,300 shares
Term of office as Independent Director: 5 years

Share ownership: 1,200 shares
Term of office as Independent Director: 8 years

2005 Executive Deputy President, Representative
Corporate Executive Officer, Member of the Board,Sony Corporation

1999 Chairman of the Board of Directors, Cummins India
Ltd. (Retired in March 2004)

1991 General Manager,
Foil Products, Alcan Inc.

1999 Vice President and Chief Financial Officer,
Lighting Business, General Electric Company

1997 Admitted as a Solicitor (UK)2009 Executive Deputy President, Corporate Executive,
Sony Corporation
Executive Vice President, Representative Director,
Sony Financial Holdings Inc.

2004 Chairman, Microsoft India Pvt. Ltd.
(Retired in September 2011)1996 Managing Director,
Aughinish Alumina Ltd., Alcan Inc.

2010 Director-General of the Industrial Science andTechnology Policy and Environment Bureau,
Ministry of Economy, Trade and Industry of Japan(“METI”)

2011 Independent Director, Infosys Ltd.
(Retired in May 2018, served as Co-Chairman from
April 2017 to August 2017)

1998 President, Bauxite,
Alumina and Specialty Chemicals, Alcan Inc.

2012 Director-General of the Manufacturing Industries
Bureau, METI

2002 President and Chief Executive Officer,
Sumitomo 3M Ltd.

2007 Vice President
Acting Chief Legal Officer
and Head of IP Legal, Nokia Corporation2010 President, Representative Director, Sony Financial
Holdings Inc.

2013 Venture Partner, Unitus Ventures LLC.
(Currently in office)2002 President & CEO,Primary Metal Group, Alcan Inc.

2013 Director-General of the Economic and Industrial
Policy Bureau, METI

2004 Executive Vice President, Electro andCommunications Business, 3M Company

2008 Senior Vice President and Chief Legal Officer, Nokia
Corporation2011 President, Representative Director, Sony Life
Insurance Co., Ltd.

2007 CEO, Anglo American plc.
(Retired in April 2013)2009 Executive Vice President,
Consumer and Office Business, 3M Company

2009 Admitted to New York State Bar Association

2015 Chairman (Non-Executive), Bank of Baroda(Retired in August 2018)2015 Vice-Minister of Economy, Trade and Industry ofJapan2015 Chairman, Director, Sony Life Insurance Co., Ltd.
(Retired in June 2017)2013 Director, Hitachi, Ltd.

2018 Special Representative for Young People &Innovation, UNICEF (Retired in September 2022)

2017 Special Advisor to the Cabinet of Japan(Retired in June 2018)2011 Executive Vice President, Performance Materials,
The Dow Chemical Company

2022 Director, Hitachi, Ltd.

2016 Chairman, Director, Sony Financial Holdings Inc.
(Retired in June 2017)2020 Director, Hitachi, Ltd.

2012 Executive Vice President, Chemicals, Energy and
Performance Materials, The Dow Chemical
Company

2018 Director, Hitachi, Ltd.

2001 Vice President, Corporate Financial,
Planning and Analysis, 3M Company

2014 Chief Commercial Officer and Vice Chairman,
Market Business, The Dow Chemical Company
2015 Vice Chairman and Chief Commercial Officer, The
Dow Chemical Company(Retired in August 2017)2018 Director, Hitachi, Ltd.

Nominating Committee

Audit Committee

2001 Senior Legal Counsel,
Nokia Networks, Nokia Corporation2011 Executive Vice President andChief Legal Officer, Nokia Corporation(Retired in May 2014)2015 General Counsel, PayPal, eBay Inc.
Director, Hitachi, Ltd.
Senior Vice President andChief Legal Officer, PayPal Holdings, Inc.
2016 Executive Vice President,
Chief Business Affairs & Legal Officer, PayPal
Holdings, Inc.
2022 Executive Vice President andSenior Advisor, PayPal Holdings, Inc.
(Retired in July 2022)

Compensation Committee

Each Committee is composed of the following members (chair names underlined)
Nominating Committee: Katsumi Ihara, Cynthia Carroll, Hiroaki Yoshihara, Toshiaki Higashihara

Audit Committee: Hiroaki Yoshihara, Katsumi Ihara, Ikuro Sugawara, Helmuth Ludwig, Mitsuaki Nishiyama

Compensation Committee : Takatoshi Yamamoto, Katsumi Ihara, Joe Harlan, Keiji Kojima* Independent directors are directors who fulfill the qualification requirements to be outside directors
as stipulated in the Companies Act and also meet independence criteria defined by Hitachi andstipulated by Japanese stock exchanges where Hitachi is listed.

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Corporate GovernanceDirectors

Takatoshi Yamamoto (70)

Hiroaki Yoshihara (66)

Helmuth Ludwig (60)

Keiji Kojima (66)

Mitsuaki Nishiyama (66)

Toshiaki Higashihara (68)

Share ownership: 14,100 shares
Term of office as Independent Director: 7 years

Share ownership: 3,400 shares
Term of office as Independent Director: 9 years

Share ownership: 4,400 shares
Term of office as Independent Director: 3 years

Share ownership: 113,600 shares

Share ownership: 26,660 shares

Share ownership: 207,900 shares

1995 Managing Director,
Morgan Stanley Japan Limited

1978 Joined Peat Marwick Mitchell & Co.

2001 President, Software and System House Division,
Siemens AG

1982 Joined Hitachi, Ltd.

1979 Joined Hitachi, Ltd.

1977 Joined Hitachi, Ltd.

2011 General Manager, Hitachi Research Laboratory2008 General Manager, Finance DepartmentⅠ

2002 President, Systems Engineering Division,
Automation and Drives Group, Siemens AG

2012 Vice President and Executive Officer

2011 Executive Officer, Hitachi Cable, Ltd.

2007 Vice President and Executive Officer(Retired in March 2008)2016 Senior Vice President and Executive Officer

2012 Executive Officer, Board Director, Hitachi Cable, Ltd.

2008 President, Hitachi Power Europe GmbH2018 Representative Executive Officer,
Executive Vice President
2021 Representative Executive Officer,
President & COO and Director, Hitachi, Ltd.

2013 Vice President and Executive Officer, Board Director,
Hitachi Cable, Ltd.
Vice President and Managing Officer,
Hitachi Metals, Ltd. (Currently Proterial, Ltd.)

2022 Representative Executive Officer, President & CEO
and Director, Hitachi, Ltd.

2014 Vice President and Executive Officer,
Hitachi Metals, Ltd. (Retired in March 2015)2010 Representative Executive Officer, President andChief Executive Officer,
Hitachi Plant Technologies, Ltd.
President and Representative Director,
Hitachi Plant Technologies, Ltd.

1996 National Managing Partner,
the Pacific Rim Practice, KPMG LLP

1999 Managing Director and Vice Chairman,
Tokyo Branch, Morgan Stanley Japan Limited

1997 The Board Member, KPMG LLP

2005 Managing Director and Vice Chairman,
UBS Securities Japan Co., Ltd.

2003 Vice Chairman and Global Managing Partner,
KPMG International (Retired in April 2007)2009 Managing Director, CASIO COMPUTER CO., LTD.

2014 Director, Hitachi, Ltd.

2007 President, Siemens PLM Software, Inc.
2010 Global Head of Communications,
Industry Automation, Siemens Corp.

2011 Advisor, CASIO COMPUTER CO., LTD.
(Retired in June 2012)2011 President and CEO, Industry Sector,
North America, Siemens Industry, Inc.

2016 Director, Hitachi, Ltd.

2014 Executive Vice President andChief Digital Officer, Digital Factory Division,
Product Lifecycle Management, Siemens Corp.
2016 Chief Information Officer,
Siemens AG (Retired in December 2019)2020 Professor of Practicein Strategy and Entrepreneurship,
Cox School of Business, Southern Methodist
University (Currently in office)Director, Hitachi, Ltd.

2015 Vice President and Executive Officer, Hitachi, Ltd.
2016 Representative Executive Officer, Senior Vice
President and Executive Officer, Hitachi, Ltd.
2020 Representative Executive
Officer, Chairperson and CEO, Hitachi Metals, Ltd.
Representative Executive Officer, Chairperson,
President and CEO, Hitachi Metals, Ltd.
Representative Executive Officer, Chairperson,
President and CEO, and Director, Hitachi Metals,
Ltd.
2023 Representative Director, Executive Chairman,
Proterial, Ltd. (Retired in March 2023)
Associate, Hitachi, Ltd.
Director, Hitachi, Ltd.

2011 Vice President and Executive Officer, Hitachi, Ltd.
2013 Senior Vice President and Executive Officer, Hitachi,Ltd.
2014 Representative Executive Officer and President &COO, Hitachi, Ltd.
Representative Executive Officer, President & COO
and Director, Hitachi, Ltd.
2016 Representative Executive Officer, President & CEO
and Director, Hitachi, Ltd.
2021 Representative Executive Officer, Executive
Chairman, President & CEO and Director, Hitachi,
Ltd.
Representative Executive Officer, Executive
Chairman & CEO and Director, Hitachi, Ltd.
2022 Executive Chairman, Representative Executive
Officer and Director, Hitachi, Ltd.

46

Introduction
Addressing Risks and Opportunities

Value Creation

Transformation

Business Strategies

Governance

Data

Hitachi Integrated Report 2023

Corporate Governance

Executive Officers
President & CEO

Executive Vice Presidents and Executive Officers

Vice Presidents and Executive Officers

Keiji Kojima*

Masakazu Aoki*

Yoshihiko Kawamura* Alistair Dormer*

Toshiaki Tokunaga*

Overall management

Assistant to the President (business for industrial
digital, water & environment business, industrial
products business, industrial equipment systems
business, building systems business, smart life &
ecofriendly systems business, measurement andanalytical systems business, and healthcare
business)

Assistant to the President (finance strategies,
corporate pension system, investment strategies,
investor relations strategies, cost structurereform, risk management, corporate auditing andcorporate export regulation)

Assistant to the President (cloud services
platforms business, digital engineering business,business for financial institutions, business forgovernment, public corporation and social
infrastructure systems, defense systems
business, social innovation business promotion
and digital strategies)

Assistant to the President (railway systems
business, nuclear energy business, energy
business, power grids business)

Senior Vice Presidents and Executive Officers

Jun AbeLorena Dellagiovanna

Katsuya Nagano

Hidenobu Nakahata*

Masahiko Hasegawa*

Cloud services platforms business

Sustainability strategies, environmental strategies
and diversity, equity & inclusion strategies

Business for government, public corporation andsocial infrastructure systems and defense
systems business

Human capital strategies, diversity, equity &inclusion strategies, corporate communications
strategies and safety and health management

Marketing & sales and regional strategies

Executive Officer

Claudio Facchin

Giuseppe Marino

Mamoru Morita

Toshiaki Higashihara*

Power grids business

Railway systems business

Management strategies

GeneralAtsuhiro Aketa

Noriharu Amiya

Regional strategies (China)

Railway systems businessTakashi Iizumi

Hitoshi Ito

Healthcare business and measurement and analyticalsystems businessGovernment & external relations

Yasunori Inada

Tatsuro Ueda

Nuclear energy businessBusiness for financial institutions

Kenji Urase

Tomomi Kato

Energy business

Finance strategies and corporate pension system

Tadashi Kume

Kohei Kodama

Supply chain management (manufacturing strategies andquality assurance), environmental strategies and safety andhealth management

Legal matters, risk management and corporate auditing

Takashi Saito

Kenichi Tanaka

Marketing & sales strategies (business for connective
industries)

Human capital strategies

Jun Taniguchi

Kojin Nakakita

Digital strategies and digital engineering business

Regional strategies (APAC)

Hideshi Nakatsu

Itaru Nishizawa

Water & environment businessResearch & development

Seiichiro Nukui

Andrew Barr

Information technology strategies

Regional strategies (EMEA)

Yoshinori Hosoya

Chie Mashima

Cloud services platform business

Marketing & sales strategies (business for digital systems& services) and social innovation business promotion

Shinya Mitsudomi

Masashi Murayama

Urban business strategies and building systems business

Cost structure reform and information security
management

Kazunobu Morita

Takashi Yoda

Business for industrial digitalMarketing & sales strategies (business for energy)

Note: Executive officers are listed by position and in Japanese alphabetical order within each grouping.
The asterisk (*) denotes executive officers who are representative executive officers.

47

Introduction
Past Mid-term Management Plans

Value Creation
10-year Financial Data

Transformation

5-year Non-financial Data

Business Strategies

Data

GovernanceCorporate Data and Stock Information

Past Mid-term Management Plans
Mid-term Management Plan 2012 (FY2010–2012)
Rebuilding Management

Recovery

1. Created a product-based company systemclarifying responsibilities and authority• Clarified responsibility and authority through		 introduction of an in-house company system•	Consolidated business into six groups, focusedon growth fields under an integrated system ofoperations, and accelerated management
2. Rebuilt/Withdrew from low-profit businesses• Automotive systems business:
		 Rebuilt through structural reform• Flat-panel TV business:
		 Withdrew from in-house production• HDD business: Divestiture
3. Strengthened cost competitiveness•	Started “Hitachi Smart Transformation Project”
for cost structure reform• Expanded centralized purchasing and global
		procurement• Optimized and consolidated manufacturing sites

Corporate Strategy

Mid-term Management Plan 2015 (FY2013–2015)
Building a Foundation for Growth

The Swapping Out of Businesses

Achievements

Hitachi Integrated Report 2023

Mid-term Management Plan 2018 (FY2016–2018)
Strengthened the Social Innovation Business

Leveraging Digital Technologies

Challenges

Challenges• Realizing further improvements to business profitability• Enhancing business with social innovation as a core
• Developing business globally• Speeding up management to rapidly respond to changes in market environments• Launching a platform for digital growth• Addressing low-profit businesses to improve profitability

Achievements

Achievements

1. Promoted the Social Innovation Business on a global
basis by strengthening frontline functions• Expanded service businesses through the use of digitalization• Strengthened digital capabilities through the acquisition		of Pentaho
2. Reviewed non-core businesses• Thermal power business: Established joint-venture
		 firm with Mitsubishi Heavy Industries• Air-conditioning business: Established joint-venture
		 firm with Johnson Controls• Batteries business: Relisted Hitachi Maxell, drew		 down HItachi’s stake in the company
3. Promoted globalization• Relocated the railway systems business headquarters
		 to the United Kingdom• Introduced Global Performance Management aimed
		at enhancing the use of global human capital

1. Transitioned away from a product-based company
system to a three-level structure comprising 		
frontline, platform, and product tiers• Accelerated decision-making with the introduction		of a business unit system
2. Strengthened the global front line
• Bolstered global frontline operations through 				acquisitions (Ansaldo STS, Sullair)
3. Expanded the digital solutions business with Lumada• Launched Lumada• Established Hitachi Vantara to deliver digital solutions• Lumada business revenue grew to 1 trillion yen

4. Executed ongoing business reviews• Divestiture and deconsolidation of listed		subsidiaries
		 Divestiture of Hitachi Koki and Clarion
		 Sold a part of shares in Hitachi Transport
		 System, Hitachi Capital, and Hitachi Kokusai		Electric• Reduced/Withdrew from low-profit businesses		 such as the information and telecommunications
		 equipment business and the overseas EPC
		business

Mid-term Management Plan 2021 (FY2019–2021)
Realized Social Innovation with Digitalization,(Billions of yen)

Challenges•	Business growth through expansion ofco-creation with Lumada as a core
• Completing business portfolio revisions• Improving capital efficiency

Performance targets and results
Although targets at the start of fiscal
2019 were revised due to the COVID-19
pandemic in 2020, revenue expanded,
profitability was maintained, operating cash
flows were generated, and net income
attributable to Hitachi, Ltd. stockholders
reached an all-time high.

Built a Platform for Global Growth

Mid-term Management
Plan 2021 targets(as announced in April 2021)

FY2021
results

9,500.0

10,264.6

Adjusted operating
income/ratio

740.0 / 7.8%

738.2 / 7.2%

Net income attributable to
Hitachi, Ltd. stockholders

550.0

583.4

Over 2,100

Approx. 2,100

8.3%

7.7%

Revenue

Operating cash flows(FY2019–2021 cumulative total)

ROIC

Achievements
1. Launched the digital business platform and achieved growth•	Launched the Lumada Solution Hub and Lumada
Alliance Program•	Expanded Lumada business revenue from 1.1 trillion
yen to 1.6 trillion yen
2. Enhanced efforts toward digital and environmental growth•	2019: Acquired JR Automation• 2020: Made Hitachi High-Tech a wholly owned
			subsidiary			Established Hitachi ABB Power Grids			(now Hitachi Energy)• 2021: Established Hitachi Astemo
			
Acquired GlobalLogic			Transferred the diagnostic imaging–related business			
Participated in COP26 as a principal partner

3. Reinforced and improved the business foundation
by resolving management issues• Made progress in reviewing the capital policies
		 of listed subsidiaries		• Divestiture of Hitachi Chemical and Hitachi Metals*
		• Sale of a part of shares in Hitachi Construction
		 Machinery and Hitachi Transport System*• Responded to management issues
		• Settled with Mitsubishi Heavy Industries on
		 South Africa projects
		• Withdrew business operations on the U.K.
nuclear power stations construction project•	Promoted diversity, increased digital talent, andenhanced risk management* Completed in FY2022

48

Introduction
Past Mid-term Management Plans

Value Creation
10-year Financial Data

Transformation

5-year Non-financial Data

Business Strategies

Hitachi Integrated Report 2023

Data

GovernanceCorporate Data and Stock Information

10-year Financial Data

Annual Securities Report

Information for Shareholders and Investors (Financial Information)
Millions of yen

FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

8,729,196

10,264,602

10,881,150

For the year:

U.S. GAAP (through FY2013)

Revenues

9,563,791

9,774,930

10,034,305

9,162,264

9,368,614

9,480,619

8,767,263

538,288641,325

634,869

587,309714,630

754,976

661,883

495,180738,236

748,144

ー

ー

ー

ー

ー

ー

ー

609,107855,380

884,606

585,662534,059

531,003475,182644,257

513,906

183,614850,287

850,951845,632

ー

ー

ー

ー

ー

885,318

619,001

1,343,067

1,392,840

1,373,468

264,975

217,482

172,155

231,261

362,988

222,546

87,596501,613583,470649,124

54.86

45.04

35.65

47.90

375.93230.4790.71

519.29603.75684.55

Net cash provided by operating activities

439,406

451,825

812,226

629,582

727,168

610,025

560,920

793,128

729,943827,045

Net cash used in investing activities(491,363)(612,545)(730,799)(337,955)(474,328)(162,872)(525,826)(458,840)(1,048,866)

151,063

Adjusted operating income
Adjusted EBITAEBIT
EBITDANet income attributable to Hitachi, Ltd. stockholders
Earnings per share attributable to Hitachi, Ltd. stockholders, basic (yen)IFRS (from FY2014)

32,968233,206(26,467)(209,536)(321,454)(320,426)

2,837(184,838)

202,739(1,142,966)(186,042)(176,448)

113,371

100,215

283,593

136,079

135,441

419,848

290,082

416,460(38.52)(36.54)

23.48

20.76

293.70140.92140.25434.64300.16439.19849,877

431,201

528,551

377,545374,901

414,798

399,643

359,897388,747

349,756

Depreciation (Tangible fixed assets and investment property)

329,833

350,783

366,547

302,757

265,413271,682

342,450

345,201

382,922

358,412

R&D expenditures

351,426

334,814

333,730

323,963

332,920

323,145

293,799

293,571

317,383

316,280

Total assets

11,016,899

12,433,727

12,551,005

9,663,917

10,106,603

9,626,592

9,930,081

11,852,853

13,887,502

12,501,414

Property, plant and equipment

2,342,091

2,472,497

2,500,226

1,998,411

2,124,827

1,956,685

2,165,311

2,408,887

2,478,901

1,700,471

Net cash provided by (used in) financing activities
Core free cash flows
Core free cash flows per share, basic (yen)Capital investment (Tangible fixed assets and investment property)

Total Hitachi, Ltd. stockholders’ equity

2,651,241

2,942,281

2,735,078

2,967,085

3,278,024

3,262,603

3,159,986

3,525,502

4,341,836

4,942,854

Interest-bearing debt

2,823,049

3,557,356

3,604,455

1,176,603

1,050,294

1,004,771

1,485,042

2,397,356

3,126,712

2,213,348%

Adjusted EBITA ratio

ー

ー

ー

ー

―

―

―

7.0

8.3

8.1

Return on invested capital (ROIC)

ー

ー

ー

ー

―

8.5

9.4

6.4

7.7

7.6

Return on equity (ROE)

11.2

7.8

6.1

8.1

11.6

6.8

2.7

15.0

14.8

14.0

Return on assets (ROA)

3.5

2.9

2.4

3.0

5.0

3.3

1.3

4.8

5.2

5.3

D/E ratio (Including non-controlling interests) (times)

0.73

0.83

0.87

0.29

0.23

0.23

0.35

0.54

0.58

0.41

Total Hitachi, Ltd. stockholders’ equity ratio

24.1

23.7

21.8

30.7

32.4

33.9

31.8

29.7

31.3

39.5

50,71057,94457,93962,76472,41686,90591,792

101,517

120,905

336,593

0

0

0

0

0

0

0

0

0

199,999

Total shareholder return (millions of yen)including Share buybacks (millions of yen)
Dividend per share (yen)

10.5

12.0

12.0

13.0

75.0

90.0

95.0

105

125

145

Dividend payout ratio

19.1

26.6

33.7

27.1

20.0

39.1

104.8

20.2

20.7

21.0

Notes 1 Terminology differs under U.S. GAAP and IFRS for the following line items (U.S. GAAP/IFRS)• Sales/Revenues • Operating income/Adjusted operating income• Net income attributable to shareholders/Net income attributable to Hitachi, Ltd. stockholders• Net income per share attributable to Hitachi, Ltd. stockholders, basic/Earnings per share attributable to Hitachi, Ltd. stockholders, basic• Stockholders’ equity/Total Hitachi, Ltd. stockholders’ equity
2 Adjusted operating income is presented as revenues less selling, general and administrative expenses, as well as cost of sales.

3 Adjusted EBITA = Adjusted operating income + Acquisition–related amortization + Share of profits (losses) of investments accounted for using the equity method
4 “Core free cash flows” are net cash provided by operating activities minus capital expenditures.
5 On October 1, 2018, the company completed the share consolidation of every five shares into one share for its common stock. Basic earnings per share attributable
to Hitachi, Ltd. stockholders, basic core free cash flows per share and dividend per share are calculated on the assumption that the company conducted thisconsolidation at the beginning of the previous fiscal year.
6 ROA (Return on assets) = Net income / Total Assets (Average between the end of current fiscal year and the end of previous fiscal year) X 100

49

Introduction

Value Creation

Past Mid-term Management Plans

10-year Financial Data

Transformation

Business Strategies

Hitachi Integrated Report 2023

Data

GovernanceCorporate Data and Stock Information

5-year Non-financial Data

5-year Non-financial Data
Human Capital
Number of employees

Sustainability Report

FY2018FY2019FY2020

FY2021

FY2022

Hitachi Group

295,941

301,056

350,864

368,247

322,525

Occurrence Rate (TRIFR*9*10)(Hitachi Group)

CY2018CY2019CY2020CY2021

FY2021

FY2022
0.26

Hitachi, Ltd.

33,49031,442

29,85029,48528,672Global total

̶

0.37

0.29

0.28

0.27

Average service (years)*1

Hitachi Group

15.1

15.0

13.6

13.5

12.6

Japan

̶

0.17

0.14

0.12

0.12

0.14

Turnover ratio (%)*1*2*3

Hitachi Group

6.3

5.2

4.3

7.5

8.5

Asia (excluding Japan)

̶

0.30

0.17

0.12

0.11

0.09

The Americas

̶

1.66

1.54

1.36

1.20

1.10

Europe

̶

0.53

0.45

0.38

0.45

0.39

5

3

2

2

5

Percentage of Positive Responses to Employee Engagement Questions*4 (Hitachi Group)
60

60

62

65

69.5

Japan

̶

̶

̶

56

61.2

Overseas

̶

̶

̶

80

82.3

Global average (%)
By region (%)

Digital Talent*5 (Hitachi Group)

Number of fatal accidents*100[Scope of Data]̶

30,00035,00067,00083,000Japan̶

19,00023,00029,00042,000Overseas̶

11,00012,00038,00041,000

18.8

19.4

19.1

20.2

22.3

8.9
(4,302)

9.5(4,641)

9.8(4,762)13.0(8,461)

Global (persons)
By region

Occupational Health and Safety (Hitachi Group*11)*9 TRIFR: Total Recordable Injury Frequency Rate (number of deaths and injuries per 200,000 working hours)*10	The number for each year is the number from January to December up to fiscal 2020. The counting period for the total recordable injury frequency
rate (TRIFR) and the number of fatal accidents changed to numbers from April to March from fiscal 2021, after safety targets in the Mid-termManagement Plan 2024 were set.
*11 Includes contractors

Diversity, Equity and Inclusion
Ratio of female employees (%)*1*2 Hitachi Group
Ratio of female managers(%/persons)*1*2*6*7

Hitachi Group

8.3(3,975)

Ratio of female managers(%/persons)*6*8

Hitachi, Ltd.

4.8
(635)

5.5
(700)

6.5
(768)

6.8
(785)

7.4
(826)

June 2019

July 2020

June 2021

June 2022

June 2023

Number of female executives

4

5

7

9

9

Ratio of female executives (%)

11.4

Ratios of Female and Non-Japanese
Executives* (Hitachi, Ltd.)

5.0

7.1

10.1

12.2

Number of non-Japanese executives

7

6

8

13

16

Ratio of non-Japanese executives (%)

8.8

8.6

11.6

17.6

20.3

* Executive Officers and Corporate Officers[Scope of Data]*1 Approximately 20,000 manufacturing workers not registered in the employee database and approximately 8,000 employees of some newly
consolidated companies are not included.
*2 The figures are based on enrolled employees with employment contracts including those seconded from the Hitachi Group to other companies andthose taking leave, and excluding those seconded from other companies to the Hitachi Group (as of March 31).
*3 Figures include only voluntary resignations.
*4 Questions change slightly each year. Above figures are not adjusted for changes in questions. In fiscal 2022, the composition of questions measuring
employee engagement was revised. The percentage was calculated from the average of the percentage of positive responses to the following
four questions: pride in working for Hitachi; whether it is a great place to work that one would recommend to others; job satisfaction and sense ofaccomplishment; and desire to continue working for Hitachi for the foreseeable future.
*5 Disclosure initiated in fiscal 2019. We define digital talent as those who possess any of the 12 capabilities required for digital business, including
design thinking, data science, and security. The number of digital talent is the total number of persons under each capability (total number of people,
in thousands).
*6 The increase in the number and percentage of female managers over time reflects improved coverage of our human capital databases and changes
in the number of consolidated companies.
*7 Figure does not include subsidiaries with unregistered employees at certain grades (positions).
*8 The figures are based on the number of employees including those seconded from Hitachi Group to other companies, those taking leave, and thoseseconded from other companies to Hitachi Group (as of March 31). Figures for fiscal 2021 exclude those seconded from other companies to Hitachi Group.

Sustainable Procurement Activities(Hitachi Group)

FY2018FY2019FY2020

FY2021

FY2022
1,374*13

Sustainability monitoring (companies)

345

291

271

[Human rights]
2,524*12[Environment]
708*12

Sustainability audits (companies)

24

19

27

25

128*14

Sustainability procurement seminars (companies)

126

59

450

359

520

*12 Sustainability monitoring in fiscal 2021 was focused on human rights and environmental risk assessment.
*13 Sustainability monitoring in fiscal 2022 was focused on environment, labor and human rights, sustainable procurement, and ethics.
*14 Including the number of companies audited by Hitachi Energy beginning fiscal 2022.

Environment (Hitachi Group)
CO2 emissions at business sites(factories and offices) (kt-CO2)

4,973

4,374

3,296

3,384

Waste and valuables generation (kt)

1,384

1,302

1,061

1,111

356

Water Usage (million m3)

37.02

36.41

26.35

26.03

14.56

Atmospheric emissions of chemical
substances (kt)

4.35

3.88

2.37

2.50

1.09

CO2 Avoided Emissions through Products and Services: Target
Forecast

1,538

100 million metric tons / year (FY2024)
126.1 million metric tons / year** 3-year average during the Mid-term Management Plan 2024
[Scope of Data]
Data on the “Environment (Hitachi Group)” applies to business sites with a large environmental load that are classified as category A.** All Group business sites are classified into one of three categories: A, B, or C, based on the Criteria for Classification of Environmental Management
established by Hitachi, and the most suitable management is then conducted for each in accordance with the respective level of environmental risk. (See)
page 2 of Hitachi Sustainability Report 2023.

50

Introduction
Past Mid-term Management Plans

Value Creation
10-year Financial Data

Transformation

5-year Non-financial Data

Business Strategies

Hitachi Integrated Report 2023

Data

GovernanceCorporate Data and Stock Information

Corporate Data and Stock Information (As of March 31, 2023)
Corporate Name

URL
https://www.hitachi.com/

Head Office
6-6, Marunouchi 1-chome, Chiyoda-ku,
Tokyo 100-8280, JapanFounded1910 (Incorporated in 1920)

Capital Stock462,817 million yen

Number of Employees (consolidated)322,525

Number of Shares Issued

Shareholder Composition

10 Largest Shareholders

Hitachi, Ltd.
(Kabushiki Kaisha Hitachi Seisakusho)

Name

Share ownership Shareholding ratio(shares)(%)*2

Number of Shareholders
276,429A dministrator of Shareholders’ Register
Tokyo Securities Transfer Agent Co., Ltd.
3-11, Kanda Nishiki-cho, Chiyoda-ku,
Tokyo 101-0054, Japan

Stock Exchange Listings
Tokyo, Nagoya

Accounting Auditor
Ernst & Young ShinNihon LLC

Contact

Share ownership(units)3

110

170,613,800

18.20

Governments and municipalities

Custody Bank of Japan, Ltd. (Trust Account)

62,533,350

6.67

Financial institutions

179

3,186,976

State Street Bank and Trust Company 505223

24,766,482

2.64

 inancial instruments businessF
operators

66

250,814

GOVERNMENT OF NORWAY

24,582,891

2.62

Other institutions

2,234

117,951

Nippon Life Insurance Company

20,000,099

2.13

1,139

4,324,784

Hitachi Employees’ Shareholding Association

19,674,086

2.10

151

1,570

SSBTC CLIENT OMNIBUS ACCOUNT

19,566,283

2.09

213,906

1,476,105

NATS CUMCO*1

17,331,942

1.85

217,678

9,358,310

State Street Bank West Client - Treaty 505234

17,147,487

1.83

Number of shares less than one unit (shares)―

2,252,077

JP Morgan Chase Bank 385632

14,748,517

1.57* Of 510,830 shares of treasury stock, 5,108 units are included in the “Individuals
and others” row, while 30 shares are included in the “Number of shares less than
one unit” row.

*1 NATS CUMCO is the nominee name of the depositary bank, Citibank, N.A., for the aggregate of the company’s
American Depositary Receipts (ADRs) holders.
*2 Treasury stock (510,830 shares) is not included in the shareholding ratio calculation.

Ratings(As of August 2023)
Rating Company

Foreigncorporations,etc.

Non-individuals
Individuals

Individuals and others
Total

Individuals and others

15.77%

Governments and municipalities

0.00%

Foreign corporations,etc. (individuals)

Long-term

Short-termStandard & Poor’s (S&P)

A

A–1

Moody’s Japan K.K. (Moody’s)

A3

P–2

Share ownership

Rating and Investment Information, Inc. (R&I)

AA–

a –1+

9,358,310 units

Assurance
To enhance the reliability of the information it discloses, Hitachi uses a combined assurance model that
includes assurance obtained from executives and from external assurance providers. The supervisor is
Yoshihiko Kawamura, Executive Vice President and Executive Officer, CFO. Please refer to production
structure.
Some of the environmental, social, and governance data in the Hitachi Sustainability
Report 2023 has undergone third-party verification by KPMG AZSA Sustainability Co., Ltd.
Indicators Subject to Independent Assurance

Hitachi, Ltd.
TEL: +81-3-3258-1111

Number ofshareholders

The Master Trust Bank of Japan, Ltd. (Trust Account)(common stock, including treasury stock)938,083,077

Class of shareholders

Hitachi Group	Ratio and number of female managers and CO2 emissions at business sites
Hitachi, Ltd.	Ratio of non-Japanese executives, female executives, and ratio and number offemale managers

Financial
institutions

0.02%

34.06%
Financial instruments
business operators

Foreign corporations
etc. (non-individuals)

2.68%

46.21%

Other institutions

1.26%

Integrated Reports Inquiries
Investor Relations Division+81-3-3258-1111

51

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