Social & Environmental
Report 2011

Rinnai Social & Environmental Report 2011

Contents
About Social & Environmental Report 2011 ······················································ 1
Message from the Management ···································································· 3
Corporate Philosophy ·················································································· 5Management Vision ···················································································· 8Corporate Governance ·············································································· 10
Risk Management ····················································································· 12Compliance ····························································································· 13
CSR Special Contents ··············································································· 17
Social Report
With Our Customers ·············································································· 33
With Our Employees ·············································································· 49
With Our Shareholders and Investors ························································ 65
With Our Business Partners ···································································· 71
With Our Communities and Society ···························································· 76
Environmental Report
Environmental Policy ············································································· 83
Basic Environmental Activity ···································································· 85
Environmental Management System ························································· 86
Environmental Action Plan and Results ······················································ 91
Environmental Accounting ······································································· 95
Developing Environmentally Conscious Products ········································· 97
Environment-Conscious Monozukuri ························································109
Environment Education and Promotion of Awareness ···································· 118
Chronology of Environmental Activities at Rinnai ·········································120Awards and Prizes ···················································································121

Rinnai Social & Environmental Report 2011

Rinnai Social & Environmental Report 2011
Scope
Rinnai Group(Rinnai Corporation and companies under the Rinnai Group umbrella in Japan and overseas)

Reporting Period
This report focuses on events that occurred in fiscal 2011—April 1, 2010 to March 31, 2011—but also touches
upon measures implemented and recent activities undertaken prior to fiscal 2011 as well as future businessdirection, targets and plans.

Referenced Guidelines
Sustainability Reporting Guidelines (G3), the third-generation of guidelines by the Global
Reporting Initiative (GRI); Environmental Reporting Guidelines (fiscal 2007), issued by Japan’s Ministry of theEnvironment; Environmental Reporting Guidelines (fiscal 2005), issued by Japan’s Ministry of theEnvironment
Note: The GRI comparison table is available on the Corporation’s website.

Publication Schedule
October 2011
Previous: September 2010
Next: August 2012 (planned)
Last Social and Environmental Report online version uploaded September 2010

Contact
For information on social activities,
please contact the Corporate Communication Office at Administration Headquarters
2-26, Fukuzumi-cho, Nakagawa-ku, Nagoya, Aichi 454-0802, Japan
Telephone (from outside Japan): +81-52-361-8211
Fax (from outside Japan): +81-52-361-8529
For information on environmental activities, please contact the Environment Division
Aza-nishihacho, Oaza-akita, Oguchi-cho, Niwa-gun, Aichi 480-0132, Japan
Telephone (from outside Japan): +81-587-95-9560
Fax (from outside Japan): +81-587-95-8169

Editorial Policy
In 2000, Rinnai began publishing an environmental report, as an indispensible tool in communications
activities. In 2006, society-oriented content was added to the report, and in 2007, disclosure was further
expanded to create the current Social & Environmental Report format.
Social & Environmental Report 2011 spotlights Rinnai’s social and environmental activities. The report
reaches beyond the financial community to present the Corporation’s perspective on social responsibility to awider audience, promoting mutual trust with all stakeholders and fostering awareness of actual social andenvironmental activities.

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Rinnai Social & Environmental Report 2011

Booklet and Online Reports
This report contains a selection of pertinent themes that should provide readers with an easy-to-understand,overall picture of the social and environmental activities undertaken by the Rinnai Group.
Specific examples, details, related facts and supplementary content pertaining to certain topics may be foundon the Corporation’s website under CSR Information.
Look for text tagged with the icon shown below and visit the Rinnai website for expanded disclosure.

Rinnai Group and Its Stakeholders

Sustainability
We will contribute to the realization of a sustainable society and planet as acomprehensive heat-energy appliance manufacturer.

Government

Customers

RinnaiGroup

Employees

Shareholders
Investors

2

Regional
community

Business
partners

Rinnai Social & Environmental Report 2011

Message from the Management
As a comprehensive heat-energy appliance manufacturer, we
propose the ways to utilize new energy.

Susumu Naito
Chairman

Hiroyasu Naito
President

The Medium-term Business Plan, “Reform and Breakthrough”, Making Steady
Progress
Since its establishment, Rinnai Corporation has been operating its businesses under the Rinnai Spirit: "Heatand comfortable lifestyles", "Quality" and "Contributing to local communities." Starting as a kerosene cooking
stove manufacture, we have grown into a comprehensive heat-energy appliance manufacturer which handles
various products including gas kitchen appliances, heater and hot-water units as well as system products. We
established our Group companies in Japan and 16 overseas countries and areas to practice businessactivities based on the lives of local people.
Fiscal year 2010 marked the second year of our medium-term business plan, “Reform and Breakthrough”.
Among the focused policies, we relentlessly promoted waste-elimination activities, activated the developmentof manufacturing technologies and product planning through the cooperation between departments andGroup companies both in Japan and overseas. As the result, the Group operation was reinforced.

Full Support for the Recovery from the Great East Japan Earthquake Giving
the First Priority to the Manufacturing of Products for the Rehabilitation
Our Group considers the base for "corporate social responsibility" is compliance. Compliance is translated as"observance to laws and regulations" in Japanese. However, it is common sense to obey laws andregulations, so it shall include the abidance by ethics in addition to laws and regulations. Each management
members and employees shall enforce the compliance while they perform their duties and maintain the purityof workplace. By doing so, we believe we will gain the power to provide satisfaction to our employees throughtheir work and fulfill the expectations from communities as well as the trust from stakeholders.
On March 11, 2011, the Great East Japan Earthquake hit Japan. We would like to express our sincerest
sympathy to people affected by the disaster. Our Group companies suffered some building damage in someof sales offices; however, there were no casualties. In addition, the impact on the production wasn't

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Rinnai Social & Environmental Report 2011
significant.
We, at the early stages, decided to donate about 10,000 units of products (cooking stoves, rice cookers andstoves) and 50 million yen. Moreover, responding to the requests from gas companies, we secured the staff
for the gas facility recovery activities and dispatched them to affected areas. We also received orders for
products for temporary housings and gave priorities to the production of these products.

Development and Sales of Environmentally-friendly Products at Home andAbroad, Endeavoring to Improve the Technologies in Overseas Operations
In 2010, we celebrated our 90th anniversary and introduced the world's first gas/solar hybrid hot-water
system for home-use application. This hybrid hot-water system combines thermal energy of gas and air andachieved the first energy efficiency of 107%. Moreover, we participated in the promotional activity of"Eco-Jozu", the high-efficiency gas hot-water units, executed by the gas industry and related industries. We
also focus on the sales of Eco-Jozu E Series which achieve higher heat efficiency than that of conventional
hot-water units, smaller size, lighter weight and excellent design. Thus, we believe that is our mission todevelop and sell environmentally-friendly products as a comprehensive heat-energy appliance manufacturer.
We don't restrict such measures only to the Japan market. We also present products that satisfy laws andregulations of each country and area and needs of people in developed countries as well as emerging
countries with strong economic growth. Especially Australia which is regarded as one of environmentallyadvanced countries implements various environment-protection measures such as the regulations on thesales of electric storage-type (tank-based) hot-water units. On the other hand, emerging countries givepriority to gas, rather than electricity which requires massive construction investment. The popularization ofgas is expected to reduce the usage of fire woods and result in the conservation of forests.
Along with the expansion of overseas sales, we also focused on the manufacturing at our overseas facilities.
We set up a production line which will be used in our factory in Indonesia in Japan to invite staff at ourIndonesian factory for training. After our Indonesian staff acquired skills, we send the production line andsystem to Indonesia to start the local production. This aims to bring Japanese manufacturing quality as it is tothe local facility.

Information Disclosure and Thorough Reoccurrence Prevention for Our
Customers’ Safety and Peace of Mind
Although we have a basic policy for quality management as "Quality is our destiny", we created two recall
accidents in fiscal 2011. We deeply apologize to our customers and strive to prevent a reoccurrence.

Aiming to develop new thermal energy appliances assuming any kinds ofenergyOur Group considers that continuously tackling with environmental problems including global warming issue
is one of the main pillars for us to perform social responsibilities as a company. In particular, both in Japanand overseas, there is heated argument over the review of Japan's energy policy which heavily relies on
nuclear power plants triggered by the accident at a nuclear power plant occurred right after the outbreak of
the Great East Japan Earthquake. We regard it is one of our missions to develop thermal energy appliances
assuming all kinds of energy resources including natural resources, instead of selecting only from two
choices of "electricity" or "gas". As a comprehensive heat-energy appliance manufacturer, we will contributefor the diversification of energy recourses as required both in Japan and overseas.

August 2011

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Rinnai Social & Environmental Report 2011

Corporate philosophy
At Rinnai, social responsibility means respecting the rules of society,including laws, and fostering community development, while
conducting business in a responsible and highly ethical manner. Thisview takes precedence over all else in every aspect of routine
operations.
To realize this level of social responsibility, each and every employee
must weigh his or her actions against the intent of the Rinnai Spirit inexecuting assigned duties. The Rinnai Spirit comes through in the
Corporation’s long-standing motto “Harmony, Spirit, Sincerity,” amoral pillar, and the Rinnai Charter and Rinnai Code of Conduct,
which together set out concrete guidelines to be followed in
day-to-day activities.

Company Motto
Harmony

Develop personal character of the highest caliber

Sprit

Base your efforts on a consistent philosophy

Sincerity

Know the fundamentals and consider issues with precision and clarity

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Rinnai Social & Environmental Report 2011

Rinnai's Corporate Mission
Rinnai utilizes heating to provide society with a comfortable way of life.

Schematic diagram of company ideals

Company
Motto
Rinnai Corporate
MissionRinnai Charter

Rinnai Code of Conduct

The Philosophy that Rinnai positions as the summit

The Charter which Company Motto and Company Mission
were broken down into seven items

Detailed regulations that each Rinnai group executive andemployee shall follow

Rinnai Charter (Seven Commitments)
1.
2.
3.
4.
5.
6.
7.

6

We are committed to keeping our customers first and foremost in our minds with our policy of “Quality is
Our Destiny”.
We are committed to pursuing safety, comfort, and convenience and to providing products that arefriendly to the global environment.
We are committed to acquiring and utilizing expertise in heating to improve our customers’ quality of life.
We are committed to strengthening the relationship between Japanese and overseas Rinnai Group
members and to working for each other’s prosperity.
We are committed to enhancing the prosperity of the communities that we belong to and to building a
reputation as trustworthy and responsible members of society.
We are committed to operating under the principles of harmony, spirit and sincerity, and to growing ourcompany by ensuring the prosperity of society.
We are committed to acting in compliance with the law and to adhering to ethics as responsible membersof society.

Rinnai Social & Environmental Report 2011

Rinnai Code of Conduct
Rinnai Code of Conduct (Total contents)
1. General Provisions
2. Range of Application
3. Compliance with Laws
4. Safety of Product and Services
5. Environmental Protection
6. Contributing to the Local Society
7. Relationships with Shareholders and Investors
8. Relations with Customers
9. Relations with Politicians and Local Governments
10. Safety and Health
11. Respect for Human Rights and Beliefs
12. Protection of Company Assets
13. Dealing with Anti-Social Forces

Three Key Themes
Since its establishment, Rinnai has grown and developed through an unshakable focus on three themes. Partand parcel of the Rinnai Spirit, these themes are and always will be integral to our success.

■ Heat and comfortable lifestyles

Rinnai’s corporate mission hinges on the use of “heating” to provide society with “comfortable lifestyles”. Ourstrength is in sophisticated heating technologies, and we will utilize this capability to facilitate the creation ofpleasant living environments.

■ Quality

Rinnai’s catchphrase—“Quality is our destiny.”—epitomizes a corporate obsession with quality. So it is only
natural that we would keep production and other monozukuri efforts in-house to sustain high-level standards.
This enables us to deliver safety and peace of mind to our customers.

■ Contributing to local communities

At Rinnai, we firmly believe that contributing to a better lifestyle culture in local communities is vital to our role
as a good corporate citizen. Basic strategies for expanding our presence abroad require that sales andservices are executed with local conditions in mind and that manufacturing takes place in the markets where
the products will be sold.

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Rinnai Social & Environmental Report 2011

Management Vision
Our attitude toward CSR
As our corporate mission, Rinnai utilizes heating to provide society with a comfortable way of life. By
proposing thermal energy appliances which are high grade in terms of "safety and peace of mind”, “comfort”
and “the environment”, we would like to contribute to a better lifestyles culture of people in the world and forthe future of the earth.
Rinnai has been promoting CSR activities through our core businesses groupwide under the Three Key
Themes of "Heat and comfortable lifestyles", "Quality", and "Contributing to local communities", which wehave been focusing on since our establishment, as well as a newly added fourth theme, "Environment".

The medium-term business plan, “Reform and Breakthrough”
Amid a persistently gloomy outlook for the world economy, the Rinnai Group is focusing on measures to deal
with heightened management risks and spur medium- to long-term growth. Efforts are being directed into
“Reform and Breakthrough,” a three-year business plan launched in fiscal 2010. Through this plan, we willrebuild our operating platform. The heat-energy appliance segment, which supports comfortable lifestyles,
will remain our core business as we work toward our ultimate goal to be a comprehensive heat-energy
appliance maker delivering environment-friendly heating solutions perfectly suited to local requirements. The
pillar of “Reform and Breakthrough” is a three-point set of core policies.
Medium-Term Business Plan, “Reform and Breakthrough” (Fiscal 2010 to Fiscal 2012)

Fiscal 2010

Fiscal 2011

Reinforce operating
foundation through corereforms

Aims

Fiscal 2012

Make global breakthroughs as acomprehensive heat-energy
appliance manufacturer

Product vision

Comprehensive heating appliance manufacturer that delivers
environmentally responsible products

Regional vision

Global company that improves the lifestyles of people all over theworld

Business vision

Company with a unique business model that attracts people andbusiness partners

Inheriting the “Rinnai Way” (Sprit)“Heat and life” “Quality is our destiny” “Contributing to local communities”

8Rinnai Social & Environmental Report 2011

Three Core Policies

Consolidated targets (By March 31, 2012)

1

Relentlessly promote waste-elimination activities

Net sales¥248.0 billion yen

2

Reinforce Group operations

Operating income¥27.0 billion yen

3

Solidify our position as a comprehensive heating
appliance manufacturer

Operating margin

10.9%

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Rinnai Social & Environmental Report 2011

Corporate Governance
Toward Enhanced Transparency
From the perspective of a sharper competitive edge for the Group and sustained improvement in corporate
value, Rinnai has made efforts to augment practices and enrich the scope of corporate governance a top
management priority. We aim to reinforce the functions of corporate structures, such as the Board of
Directors and the Board of Auditors, and seek a higher level of management transparency, which will beachieved through quick and accurate disclosure of pertinent information to various stakeholder groups andthrough access to a wide range of information.

Basic Principles of the Internal Control System
To reinforce our management structure and fulfill our social responsibilities, we maintain an internal control
system with the following objectives and emphasize risk management, internal auditing and otheradministrative measures to underpin this system.
1. Effective and efficient operations.
2. Reliable financial reporting.
3. Adherence to laws and regulations affecting business activities
4. Safeguarding assets

Structure for Monitoring Management Performance
Rinnai has four corporate auditors, two of whom are outside auditors.
Corporate auditors attend important meetings, including those of the Board of Directors.
They also monitor internal control status—that is, progress on the establishment of internal controls andimplementation of associated practices—with a focus on the results achieved by directors and executive
bodies, and they check on the status of operations and asset management at the head office and principal
branches.
In addition, an external accounting firm undertakes accounting audits and verifies thesoundness of accounting-oriented internal controls from a third-party perspective.

Board of Directors
The Board of Directors has decision-making authority for important management issues affecting Rinnai andoversees the execution of duties by directors. The Board has six members and as a rule meets once a month.
Some directors below the rank of president hold concurrent positions as executive officers and are
responsible for conveying the content of Board decisions to the managers of divisions under their respective
supervision and for executing operations. In addition, general groupwide meetings as well as parent-only
meetings are held every three months so that directors can pinpoint the status of issues affecting operations
and share information on pertinent topics. Moreover, to clarify the management responsibilities of eachbusiness year and gain trust from shareholders, Rinnai regulates the term of director to be one year.

10Rinnai Social & Environmental Report 2011

Director Compensation
The limits of compensation for Directors and Auditors are determined in accordance with the resolution of thegeneral meeting of shareholders. Moreover, the Rinnai’s internal regulations stipulate fundamental mattersrelated to Directors’ compensations including the method of determination, revision and reduction. Based onthese, the amounts of compensation for Directors are resolved at the Board of Directors and the amounts ofcompensation for Auditors are determined through the deliberations by Auditors. Directors are paid a fixedamount commensurate with assigned duties. Please note that Rinnai terminated the retirement benefit
system for directors, following approval of a proposal put forward at the General Meeting of Shareholders on
June 27, 2008.

Information Disclosure
For timely and appropriate disclosure of important information on the Group, we facilitated the internal
regulations and established "Disclosure Policy", which is listed on our website, as the guidelines for
information disclosure.

Corporate Governance Structure
Shareholders’ Meeting
Election and dismissal
Audit

Accounting Auditor

Election and dismissal
Cooperation

Board of Auditors

Cooperation
Internal Control Office

Board of Directors

Election, dismissal
and administration
Direction
Report

Audit

Election and dismissal

Audit

Internal audit

Election, dismissal
and administration

ReportReportExecutive officers
ReportLegal Counsel
AdvicePresident

Management

AdviceDirection

Committees, including

Corporate Ethics Committee
Risk Management Committee
Information Disclosure Committee
Environment Management Committee
and others

Management

Business Divisions

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Rinnai Social & Environmental Report 2011

Risk Management
Risk Management Promotion System
As social structures become more complex, the risks faced by companies become more diverse. In thisoperating environment, the Rinnai Group strives to manage existing and emerging risks to support global
business development and ensure stable business activities that sustain the trust of customers and society
as a whole.
The Risk Management Committee, chaired by the president, meets regularly. The committee assigns adivision to oversee each risk with the potential to influence our corporate survival, credibility, businesspursuits and assets and is also tasked with risk-lowering duties, such as formulating preventative measures,
resolving issues before they turn into crises, minimizing losses and defining strategies to avert thereoccurrence of any risks that became a reality.
Methods for hedging risk are promoted laterally throughout the Group.

Information Securities Measures
While society becomes more demanding toward company’s security reinforcement issues, our Group as awhole promotes the adequate management of security systems by strengthening the awareness for proper
information handling through the establishment of the rules for confidential information management and thepersonal information management. User authentication technology was adopted company-wide to manage
accesses to IT system and an entry/withdrawal management system with ID cards has been introduced tovarious business locations including Technology Development Center one by one.
In addition, to avoid information leakage, we have been enforcing a strict management of the external use of
personal computers, encryption of data stored in media to be used outside of the office, unauthorized accessby outsiders and virus countermeasures.

Promotion of Businesses Continuity Plan
When companies have no sufficient measures for natural disasters such as earthquakes and storms and theprevalence of infectious diseases, the business operations may be suspended for a long time, result in asignificant damage and give a serious impact on stakeholders. As a company which produces thermal energy
appliance to support people's lifestyles, we believe it is our responsibility to maintain the stable supply of our
products even under such circumstances.
In anticipation of large-scale disasters with highly possibilities, we positioned the business continuity
management as one of our critical management issues to achieve early recovery of key businesses in a crisis
and are working on the establishment and review of business continuity plans mainly for domestic production
departments.

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Rinnai Social & Environmental Report 2011

Compliance
Compliance Promotion System
To remain a sound corporate group which wins the trust of society, it is inevitable to reinforce compliance. For
the prevalence of compliance as part of our corporate culture and the further infusion and reinforcement ofcorporate ethics in the entire Group, all employees strive to perform social responsibilities and promote thecreation of workplace that encourages people to actively engage in their work.

■ Corporate Ethics Committee

To enforce the compliance, Corporate Ethics
Committee headed by our President as its
chairman was established in April 2004. It isperiodically held to conduct activities asfollows:

1.
2.
3.

Establishment, revision, training andenforcement of "Code of Ethics"
Establishment
andoperationof"Corporate Ethics Helpline"
Investigation of violation of "Code of
Ethics"Corporate Ethics Committee
ChairmanCommittee members

Secretariat office(President)(Selected from each headquarters)(Legal department)• Establishment, revision, training and enforcement of "Codeof Ethics"
Measurements • Establishment and operation of "Corporate Ethics Helpline"• Investigation of violation of "Code of Ethics”

Deployment

Each department

Rinnai Group “Code of Ethics”"Code of Ethics" is a small booklet which combined"Corporate Philosophy" and "Rinnai Code of Conduct"
which is the detailed behavior standards that all executives
and employees shall obey.
The first edition was issued in 2004 and its scope of
application was extended to whole domestic Group
companies by 2007. In 2007, "Code of Ethics English
version" was issued and distributed among overseas Group
companies. Since 2009, the scope of application was
further enlarged covering non-English speaking overseas
Group companies issuing local language version in China,
Korea, Thailand, Vietnam, Brazil and Indonesia.
At Group companies in Japan, Compliance Committee
member allocated each workplace conduct "Code of
Ethics" training every year for its enforcement. In 17
overseas Group companies, staff in charge of training every
year implements education of employees. Furthermore, in
2011, "Rinnai Code of Conduct" was revised to meet withthe changes in the requests from society and the changes
in our businesses. Along with the changes, "Code of Ethics"
was amended and issued as version 3.

Booklets of "Code of Ethics" of various
countries

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Rinnai Social & Environmental Report 2011

Promotion of compliance activities■ Compliance education activities

In our company, president himself takes an initiative sending messages on corporate ethics to employees toimprove the employees' awareness towards compliance.
Moreover, regarding the laws that each department has deep relationship with, legal department is taking alead to provide legal education every year. For example, at Research and Development Headquarters, thetraining on "Unfair Competition Prevention Law (Management of Confidential Information)" and "NonDisclosure Agreement" which were requested one of the most at the questionnaires of last year were
provided. In fiscal 2011, total 1,229 people in our company took the training and deepened their knowledge inthe laws.
Other training courses include compliance committee member training for committee members of eachdepartment and ethics education for each layer.

Fiscal 2011, Actual of number of training attendants
Name of course

Number of attendants

Legal education

1,229 people

Compliance committee member training

41 people

Ethic education by layer

287 people

Legal education

14

Compliance committee member training

Rinnai Social & Environmental Report 2011

■ Information Distribution to All Employees

Every October is designated Corporate Ethics Month,and we promote activities to enhance awareness of
ethics in the workplace. A message on corporate ethics
from the president himself is uploaded to an intranet,and compliance-themed posters are displayed in all
offices.
We also run a series of legal compliance columns in
Rinnai Life, an in-house publication, and post alaw-oriented frequently-asked-questions corner to sendvarious kinds of information to the employees in ourdomestic Group companies.

The Intranet“Legal Matter FAQ Corner"

Compliance education poster■ Confirmation and Modification of Compliance Activities

In fiscal 2010, we sent out a questionnaire to employees on the Code of Ethics to determine how deeply
ingrained the corporate philosophy had become and to ascertain latent risk in all offices. We are
implementing measures, based on questionnaire results, to encourage greater awareness of complianceissues.
Breaking down the penetration rate for each component of our corporate philosophy, we found that 99.6%(last year: 99.6%) of respondents were familiar with the corporate motto and 97.0% (last year: 97.0%)
recognized our corporate mission. From a management perspective, these rates are rewarding. We willcontinue to actively promote compliance activities to maintain these high levels.

■ Facilitation of Internal Reporting System

If, in the course of business activities, an employee ata domestic company under the Group umbrellasuspects possible breach of laws or the internal rules
or unfair practices, and it is difficult to approach asuperior or the person responsible for the division withsuch suspicions, the employee may report theperceived infraction to the Corporate Ethics Helpline.
In this system, we stipulated that the person who
reported the incident will not receive any unfair
treatment by the fact that he/she consulted the matterand we also pay a full attention to the protection ofprivacy of the person who made the report.
In fiscal 2011, the helpline received 20 calls for
consultation and report. Appropriate measures havebeen taken, including investigation and confirmation of
the facts in these cases of alleged misconduct.

Outbreak of problems
in the course of routine
business activities* Breaches of laws, regulations, internal rules and ethics* Confirmation of illegal activities
Found it hard to consult
with a supervisor
Consult with a supervisor or the person
responsible for the division

SolvedNot solved
Corporate Ethics Helpline■ Reward and Disciplinary Committee

To maintain fair working environment, we apply strict measures to an employee who breached the internal
rules, Code of Ethics or committed unfair practices based on the working rules under the guidance of the
Reward and Disciplinary Committee.

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Rinnai Social & Environmental Report 2011

■ Protecting Personal Information

Rinnai applies internal rules based on the Act on the Protection of Personal Information. In addition, "Privacy
Policy" was stipulated as guidelines for the handling of personal information and posted on our website.
Utilizing these, we strive to ensure appropriate storage and handling of customer data and protection thereof.
Accordingly, we established the position of Chief Privacy Officer at the head office and require privacy officers
at all workplaces, including the offices of Group companies in Japan for the education of the internal rules for
employees who handle personal information, and the establishment of physical and technical system toinsure the safe management of personal information in each workplace.
We implement internal audits once a year on the handling of personal information to ascertain the level of
security achieved and strive to reinforce capabilities.
In fiscal 2011, there was no incidence of personal information leakage.

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Rinnai Social & Environmental Report 2011

CSR Special Contents
Environment
For the future of earth and better lifestyles of people, we promote
the development of efficient energy appliances.
Emphasizing “safety and peace of mind”, “comfort” and “environment”, Rinnai promotes
product development as a comprehensive heat-energy appliance manufacturer.
While global warming becomes a worldwide problem, aiming to reduce energy
consumption at home, we place our focus on the development of appliances that efficiently
utilize energy.
We would like to introduce how Rinnai views the environmental issues and the future
product development in the following section.

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Rinnai Social & Environmental Report 2011

■ While the industrial sector demonstrate substantial progress, the key is the households
sectorOur company has been manufacturing safe products, with"combustion technology" "heat exchange technology""electronic control technology" and "fluid-control technologies
used for gas and water" as the core technologies. We believethat our Group's mission is, based on our core technologies
which handle "heat" which we accumulated over the longtime, to contribute to the lives of people in the world and theenvironment of the earth as “a comprehensive heat-energy
appliance manufacturer”.
For Japan with scarce natural resources to realize asustainable society in the future, it is an imminent task to
pursue the most appropriate way to utilize energy.
About 40% of Japan's energy is consumed by the industrial
sector. The industrial sector already achieved a substantial
level of efficient energy usage due to companies' effort forcost reduction and the strengthened environmental
regulations by the central and local governments. It is
unlikely that the sector will further realize the drastic
reduction of CO2 emission by reducing energy usage.
On the other hand, the energy consumption of the household
sector is increasing every year due to the increase in thenumber of households and the changes in lifestyles pursuingabundance and comfort despite rising awareness of people
for the earth environment protection. (Figure 1) In addition,
50% of energy source of households is electricity. (Figure 2)
Since the outbreak of the Great East Earthquake, the power
generation at nuclear power plants decreased and thedependence on thermal power generation which emits alarge volume of CO2 increased more than ever. Under thesecircumstances, the increase in the demand of electricity is
estimated to further expand the emission of CO2.
For the prevention of global warming in the future, the key is"how to promote energy conservation at the household
sector".

(Fiscal year 1973=100)

Personal
consumption

Energy consumption
for household use
The number ofhouseholds(Fiscal year)

Trend of energy consumption at thehousehold sector (Figure 1)
Solar 1%
Kerosene 18%

LP gas 11%

Electricity 50%

City gas 20%

Energy source at the household
sector (Figure 2)
Hot water supply 30%

Others 48%

Heating 22%

Energy consumption by usage at thehousehold sector (Figure 3)
Source: “White Paper on Energy 2010” by
Agency for Natural Resources and Energy

18

Rinnai Social & Environmental Report 2011

■ Combination of Heat-pump Technology and Gas Combustion Technology Utilizing Each
Energy AttributeHybrid hot-water unit, “ECO ONE”

The breakdown of energy consumption by usage athouseholds shows 30% for hot water, 22% for room heatingand 48% for others. (Figure 3) It is important to reduce CO2
emission by conserving energy for hot water and heating.
Each energy source has its own attributes and there areappropriate and inappropriate areas in terms of the application.
For example, gas is suitable for "something to utilize heat".
What gas can do well is "instantly making hot water" and"heating up rooms". It is important to select the best source
through the comparison between a usage purpose andattributes of energy source.
So far, we have been selling highly efficient gas hot-water units
including "Eco-Jozu". Meanwhile, it is not an absolute
requirement for an appliance to use only one energy resource.
For some cases, it is effective to combine multiple energy
sources. Inspired by this idea, we developed, "ECO ONE", agas/solar hybrid hot-water system which combined
highly-efficient gas hot-water unit technology and heat-pumptechnology.

■ Highly efficient environmentally friendly products to enrich people’s lifestyles

Structure of hybrid hot-water unit
Heat of gas<Tank unit>

Floor
heatingHeating

Bathroom
clothes drying
systemECO JOZU<Heat-pump unit>
Heat exchanger

Hot
water

Circulatingpump

Automaticbath

ShowerSmall
tank
Aerothermalenergy exchanger

Compressor

Heat of air

Fan

Mixing valve

Supply of water

Expansion valve

Gas/solar hybrid hot-water system utilizes the heat of air infused with a heat pump unit while highly-efficiently
combusting gas. The first energy efficiency marked 107% showing tremendous improvement compared toconventional gas hot-water units and electric hot-water units.
The hybrid hot-water/heating system ensures an ample supply of hot water not only for use in the kitchen andbath but also for space heating, including heated floors and a bathroom with just one unit. It has a smallinternal tank to save hot water made with a heat pump. There is no anticipation for hot water shortage evenwhen a large volume of hot water is needed such as for a bath tab since the highly efficient gas hot-water unit
instantly makes hot water.
Moreover, the utilization of aerothermal energy enables to halve the running cost of hot water unit comparedto that for conventional gas hot-water units. The energy savings can be directed to hot-water heating for

19

Rinnai Social & Environmental Report 2011
heated floors and bathroom heating to create a comfortable living environment throughout the entire home ata cost that previously covered only hot water. Our hot-water unit with the gas/solar hybrid system wasaccredited for its efficiency by the top-runner standards managed by Institute for Building Environment andEnergy Conservation. (Please refer to the column below.)
The energy conservation at the household sector is not only an issue in Japan. In the households in the world,
more than half of energy consumption is for hot-water units and air-conditioners. We believe that the role ofour company in the area of energy conservation in the world households (the reduction of CO2 emission)
would be tremendous. We will continue promoting hot-water units with the gas/solar hybrid system byincreasing variety of the products such as those with a large hot water production capacity and a strong
heating capability and product sizes including that can be installed in apartment buildings, as well as
developing new products that respond to the needs of the world.

ColumnHybrid hot-water unit, "ECO ONE", accredited by the top-runner standards for its energy efficiency
In April 2011, a hot-water unit with the gas/solar
hybrid system, "ECO ONE" was accredited by the
top-runner standards (the evaluation standards forhousing constructors) managed by Institute for
Building Environment and Energy Conservation andrecognized as a hot-water unit with top-level energy
efficiency. This is the result of the evaluation for
decreased energy consumption, lower hot-waterrunning cost and drastically reduced CO2 emission
through optimal combination of gas andaerothermal energy.
A newly built house which facilitates equipment
accredited by the top-runner standards is certified
as a "top-runner standards quality housing" and isentitled to receive benefits such as "Flat 35S (20years reduced interest rates type)", which is a
low-rate housing loan.

Interview—About Rinnai Product development—
We are promoting product development which is environment-friendly andenriches people’s lifestyles.

The base for the development is "safety and peace of mind"
and newly added "environment".
The base for the development of Rinnai products is "safety
and peace of mind", however, we believe that "environment"
shall be newly added to the standard. Gas appliances
naturally emit CO2. The theme of development is how tocontain CO2 emission and increase heat efficiency.
Japan Industrial Association of Gas and Kerosene
Appliances is driving the promotion to switch all hot-water
units to be produced to highly efficient gas hot-water units,"Eco-Jozu", by the end of March 2013 and we are also
contributing for the promotion of the product. More advanced
product is hot-water unit that utilizes gas and other energy
source. Lately, renewable energy is receiving people's
attention and the hybrid hot-water unit that utilizes
aerothermal energy, one of renewable energy, is just a gas
appliance of the new age.
Yuji Kondo

20

Director, Managing Executive Officer, General
Manager of Research & Development Headquarters
and General Manager of Research & Development
Division

Rinnai Social & Environmental Report 2011

Develop products that meet the condition of local communities utilizing technologies accumulated in Japan
It is our policy to deploy Japanese technology which is safe, environment-friendly and convenient, in theoverseas markets as well.
The conditions of overseas markets vary depending on countries and areas: Australia has one of the moststrict environment policies and emerging countries are increasing their energy consumption. Therefore, it isimportant to understand how heating appliances are used at local markets. We develop products that fulfill
needs addressed by our sales departments and local markets.
While improving our combustion technology, we try to integrate technologies of other areas.
The core of our technology remains as "combustion". However, while improving our combustion technology,
we would also like to integrate technologies of other areas.
For example, one of the major characteristics of our company is the large number of electronics engineers.
Ahead of competitors, we could introduce potting to protect electronic components as widely used for
micro-computer control and washing machine because we had engineers who are strong in the area ofelectronics. Currently, many electricity smart grid operation tests are under progress in various locations and
we are also participating in such tests.
Through the integration with other areas and energy sources as seen in this case, we would like to promote
the development of products which are environment-friendly and enrich people's life.

Interview—About the birth of hybrid hot-water unit—
Best mix of gas and other energy sources; aiming to produce products that meet theneeds of society
The hot-water unit with the gas/solar hybrid system is a productcombined "a heat pump and a highly efficient gas hot-water unit"
which goes beyond the stereo-type ideas. Since engineers with
abundant experience in mass production design handled thedesign, the structure of the appliance itself is quite simple. Since it
is easy to manufacture and process, the burden on the
manufacturing department is relatively light. This is another major
characteristic of our hot-water unit with the gas/solar hybrid
system.

Hiroaki Sasaki
Manager Engineering Development Division,
Research & Development Headquarters

What we struggled during the development was to achieve ourtargeted heat efficiency. A hot-water unit with the gas/solar hybrid
system is supplemented with aerothermal energy for the amountlarger than lost calories due to gas emission, etc. However, one of
the major issues was that calculated efficiency didn't match withactual efficiency. Later, we modified the product and cleared thetarget at the end achieving a satisfactory value. After the
introduction of this product, a house maker commented, "We arelooking forward to the future of the gas/solar hybrid hot-water
system."To promote the hot-water unit with the gas/solar hybrid system, it
is inevitable to improve energy and cost efficiencies and increase
the choices that consumers can pick. We would like to further
improve heat efficiency and reduce cost while increasing thevariety of products. By seeking the best mix of gas and otherenergy sources, we would like to develop environment-friendly
products with excellent energy and cost efficiencies.

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Rinnai Social & Environmental Report 2011

Featured article 1: “Heat and Comfortable Lifestyles”
To achieve rich and comfortable lifestyles which are environmentallyfriendly- “Combustion” expert’s passion and dream For “the realization of rich lifestyles utilizing heat”,
we have been conducting a research on“combustion”, which is one of our core technology,
for a long time.
We requested our combustion experts who aretackling the issues such as “safe and efficient
combustion” and “the reduction of burden on
environment” to talk about their thought on theirresearch and development.

■ Developing products that match with the country and region considering the food culture
and climate
What is "Combustion Technology Development Office"?
Okamoto: It is the division to develop burners used in gas appliances
including hot-water units, kitchen appliances and heaters
and research combustion control. Not only the gas
appliances used in Japan, we also develop gas appliances
produced overseas and provide technical support tooverseas local development staff.

Hideo Okamoto
Head of Combustion Technology
Development OfficeElement Development Division
Research & Development Headquarters

Akagi:

What are the issues in the kitchen appliance area?
Takemoto: While safety, assurance and high efficiency are minimum
requirements, kitchen appliances are required to provide
usability being easy to cook and clean. What people seekfor "usability" can be significantly different in Japan andoverseas. For example, highly efficient small burners havehigh demand in Japan while big burners are populardepending on countries due to the difference in foodcultures. It is important to propose products that meet the
local food cultures.

Although there are difference in cultures, gas has a meritthat does not restrict users how to use. For example, IH
heaters limits the pots that can be used with, however,any pots can be utilized with a gas stove. It is moredesirable that appliances do not restrict tools to be usedwith.
Takemoto: Another merit of gas is that users can visually check thestrength of power. Moreover, a grill stove heats up aceramic plate to use radiant heat to grill fish, it will beclose to char-grilling due to its far-infrared radiation effect.
With electricity, it takes 20 minutes to grill fish, but 13
Far-infrared grill burner
minutes with gas. Gas is superior in terms of power andspeed as well.
Okamoto: In short, it is important to first understand the environment and food culture of a consumption area
and then propose a product that fits in the local market utilizing the merit of gas. It is crucial how tograsp the local needs.

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Rinnai Social & Environmental Report 2011

■ Coping with strict environment regulations pursuing economic efficiency
How about the hot-water unit area?
Akagi:
The challenges for hot-water units are high energy
efficiency and low nitrogen oxide (NOx). Since there areregulations for NOx emission in various areas of theworld, we have to clear such rules.
Okamoto: Particularly in California State, the U.S.A., has strict
regulations on NOx emission.
Akagi:We are developing a large capacity hot-water unit with aburner which uses different method to infuse air fromthat used in Japan. However, this hot-water unit makesa resonance sound during its operation, so we need to
first solve this issue. In addition, cost reduction isanother important theme. Users give a priority to cost
efficiency. So, even after achieving low NOx emission,
we shouldn't be increasing the price, but rather should
reduce the cost, which we found difficult.
Takemoto: Cost down is also crucial in the area of kitchen
appliances. However, it is easier for users to understandadded value such as "easy to clean". So, it tends to beable to gain users' understanding although the costgoes up. On the other hand, the hot-water unit area isdifficult to make people realize added value.

Kazuyuki Akagi
Chief in charge of hot-water units,
Combustion Technology Development
Office, Element Development Division,
Research & Development Headquarters■ Measures to reduce “the scope which is out of our imagination” for our products
How do you see the assurance of safety as a maker's responsibility?
Okamoto: It is important to develop environment-friendly energy
efficient products, however, our fundamental policy is toprovide "safe and secure gas appliances" to the world.
For our customers to safely use our products until thelast minute before the product breaks down, we practicetests assuming various usages.
Akagi:For example, there is a case that a hot-water unit iscovered by walls after the installation. This is out of our
expectation, however, even in such a case, I think it isimportant to fully assure the safety.
Takemoto: As for gas stoves, although gas stoves with Si sensors
are common nowadays, right after the introduction,
there were cases that users didn't notice that they had
installed burner caps upside down after removing themfor cleaning. Therefore, we changed the configuration ofburner caps and made them touch a pot if it is installed
upside down to give a sense of oddness. I think it isimportant to design products in the way that lets users
know when they were using the products with a wrong
method.
Okamoto: It is one of our advantages that the measures against
users' mishandling are addressed globally. By learning
various cultures and common sense of countries andareas, it is important to reduce the scope of "out of ourimagination" by executing various tests for the cases
including "the usages that cannot be imagined at all". By
implementing tests based on various scenarios andassumptions of abnormal uses which cannot be usually
thought of, we will make efforts to assure safety bymodifying our products or implementing measures, if
necessary.

Yasunobu Takemoto
Manager in charge of kitchen
appliances, Combustion Technology
Development Office, Element
Development Division, Research &Development Headquarters

SensorBurner cap

Si Sensor stove23

Rinnai Social & Environmental Report 2011

At the end, please tell us your dream and goals as a combustion specialist.
Takemoto: Japan's technology on kitchen appliances is at the top level of the world. Although there aredifferences in food culture, it is the same recognition that energy conservation is important. We
would like to promote Japan's high technology on combustion technology.
Akagi:The environmental regulations will likely become more severe in the future. We would like todevelop low priced and compact hot-water units with excellent functions such as low NOx
emission and play a part of role in the conservation of the environment of the earth.
Okamoto: In the world, there are countries of which gas price is low and/or water is precious. It must be
possible to come up with a various solutions to meet the local conditions of each country and area.
Utilizing its own technology, we would like to become No.1 and only one comprehensiveheat-energy appliance manufacturer in each country and area in the world.

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Rinnai Social & Environmental Report 2011

Featured article 2: “Quality”
Rinnai Group’s passion for manufacturing which cares about“quality”, “safety and peace of mind” and “comfort”
Since the establishment, Rinnai has been manufacturing high quality products.
We believe the measures for “quality” is the most important to insure that our customers use our product“safely and with peace of mind”.
We would like to introduce our passion for quality and activities.

■ In-house development and manufacturing of critical security components to provide safe
and satisfying products
Posing "Quality is our destiny (our livelihood depends on the quality of our
products)" as our basic policy for quality management, we are conducting
business activities with strong passion for quality.
Under the quality policy of "Providing safe and satisfying products to ourcustomers", we strive to arrange "the provision of safe and secure
products", "stable product supply" and "the establishment of high quality
service system". Considering that "not to release any defect products to amarket" leads "to provide safe and secure gas appliances" to customers,
we give importance to the achievement of Zero defect (ZD)* By
introducing an integrated manufacturing system, Rinnai (4 factories) andGroup companies (8 manufacturing related companies) process in-housedevelopment and manufacturing of critical security parts such as gas andwater control components and control board.

Combustion

Temperature
controlFluid control

Thermalexchange*Zero defect: No failure, no defect products and no fault
Our four factories

Material

Rinnai’s production system

Integrate production system

Eight manufacturing related companies
RB Controls Co., Ltd

Rinnai Precision Co., Ltd.

Techno Parts Co., Ltd.

Press

Aichi Factory Asahi Factory
In-house tool production
Production
Inspection
facilityequipment
Stamping
die

Information
systemSynchronized subsequent
withdrawal production system

Oguchi Factory Seto Factory

Electric
unit
Plate

Surfaceprocessing

Bulb
Sub unit
Sensor, etc

Yanagisawa Manufacturing Co., Ltd.

Japan Ceramics Co., Ltd

重要部品をリンIn-house production of
key components within
ナイグループでRinnai Group
内装
Rinnai Technica Co., Ltd.

Assembling
Noto Tech Co., Ltd.
RT Engineering Co., Ltd.

Shipment25

Rinnai Social & Environmental Report 2011

■ High quality, not only suggesting the quality of products, but also implying the influenceof our products
The "quality" that we think of is not only "no failure" "no defectproducts" and "good functionality". We believe "the creation of
comfortable life" is a part of "quality" There is no doubt that it isimportant to provide gas appliances with good durability andfunctionality. In addition, we need to manufacture goods that we
can offer "safety and peace of mind" and "comfort" to ourcustomers.
We care about the quality of product. Furthermore, we pay attention
to how our products can affect the lives of our customers as "thefinal results" of our production. We would like to improve the final
results as well and this is part of our passion for manufacturing.

■ Establishment of system which is defect product free due to the perfection of quality ineach process
To achieve zero defect day, it is necessary to establish a system. Therefore, in order "not to produce defective
products through each department's operations" and "to provide 100% good quality products to ourcustomers", we adopted "a self-completing production system", which each department uses to perfect thequality of products.
Moreover, we also focus on design quality improvement activity. We verify the design from planning phase toa trial-run of mass production, hold mass-production evaluation meetings and implement mass production
verification before allowing shipment. During the processes, the results are reflected to the design. By
repeating prototype production and testing, we conduct thorough verification and check to produce goodquality products.
Furthermore, when a defect product is found, the actual product and production site will be used to assure
identifying the cause. Then, we will solve the issue and conduct appropriate disclosure of information which iscentrally controlled. When the matter is serious, we will immediately report to concerned government
agencies. We will discover the cause, prevent the expansion of damage and implement preventative
measures for similar issues. In addition, we will identify risks in each product life cycle from planning,production, sales and maintenance to solve the issues.

<Self-completing Production System>
Design anddevelopment

Manufacturing
Sales(Including equipment, installation
and after-sales service)<Design quality improvement activities (Application of new design inspection system)>

Planning examinationboard

Planning study meeting(Original drawing study
meeting)
Product
planning

26

Original
drawing

Designexamination board

First design study
meeting

Final design study
meetingFirst
prototype

Finalprototype

Approval ofprocess

Final design
examination board

Prototype production
study meetingTechnical testing andproduction line testing

Mass production
evaluation meeting

Evaluationof shipment
Mass
production

Rinnai Social & Environmental Report 2011

Column1. Information disclosure and voluntary inspection for “safety and peace of mind”
We promptly disclose product safety information to our customers to call for their attention and
immediately provide measures such as fixing and checking products. In fiscal 2011, the following
information was disclosed and voluntary inspection and maintenance was conducted.
[Notification of the free parts replacement for a gas rice cooker]"α Kamado daki" which is a gas rice cooker with an electronic rice jar, observed accidents that part ofproduct is burnt and damaged due to the corrosion occurred with alkali cleaner penetrated into a gas
connecting area. While warning to our customers, we provided product check and component
replacement.
(July 13, 2010, a company notice was publicized.)[Implementation of voluntary inspection and maintenance for hot-water and heating units]
Rinnai discovered that there are cases that the temperature of hot water produced with some of our
hot-water and heating units abnormally increases from time to time due to the malfunction of its circuitcomponents. We disclosed the information and executed voluntary inspection and maintenance for the
products.
(February 3, 2011, a company notice was publicized.)

2. Environment conservation in manufacturing processes, as part of quality improvement measures
We are considering the reduction of the burden on environment
during our manufacturing processes is part of our measures forhigh quality. For example, Registration, Evaluation, Authorization
and Restriction of Chemicals (Reach)* requires to study andmeasure the chemical contents in advance. We allocated threechemical substance measuring instruments in three locations in
our Group companies and each location of Group companies isstrengthening environment conservation measures.
* Registration, Evaluation, Authorization and Restriction of Chemicals (Reach):European Union (EU)'s new chemical substance regulation which enforce theregistration, evaluation and permission for the chemical substances produced in
or import to EU. Enforced in June 2007

Measurement at Oguchi
Factory

Measurement at Shanghai
Rinnai27

Rinnai Social & Environmental Report 2011

Featured article 3: Contributing to Local Communities
Our fundamental policy is to locally produce the products to be soldin the local market.
As a global company, we aim to contribute to local communities.
The Rinnai Group, as a global company, strives to provide the products that satisfy the characteristics of eachmarket in the world.
Rinnai’s fundamental stance toward overseas development and the current status of Rinnai Australia Pty Ltd
which celebrated its 40th anniversary in 2011 are introduced in the following sections:■ Actively promoting “localization” providing products to support the lives of the countries
and regions

Our group company has a policy, through the production and sales of thermal energy appliances, tocontribute for the improvement of food culture and living culture of people who live there. Based on this policy,
we established Group companies in 16 countries and areas and started local production in 9 countries andareas among them to provide products and services that satisfy the local needs.
Our attitude toward manufacturing is something common in the world; however, in the countries and areas
with different culture and customs from those of Japan, our products and services which are sold in Japancannot be always supported if they were brought to the markets as they are.
Moreover, workers also have different ways of thinking from those of Japanese. Therefore, we actively assign
local staff to executive positions to promote the management structure headed by the people in the region. In
addition, through our operations, we are doing our best to conduct product development and provide services
that meet the climate, culture and energy policy of each country/area. Moreover, utilizing the Japan's
technology for gas appliances which is considered high in the world, we develop products that are suitable tothe country and area and promote the alliances with Research and Development Headquarters in Japan.
Having the development of lives and culture of the countries and areas as our mission, we deploy "Rinnai"brand and receive high reputation among overseas customers.

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Rinnai Social & Environmental Report 2011

■ Rinnai Australia Pty., Ltd. which Celebrated its 40th Anniversary in 2011

Rinnai Australia Pty., Ltd.

We have been actively promoting overseas
operations since the 1970s. Rinnai Australia Pty.,
Ltd. which celebrated its 40th anniversary in 2011
took over a local subsidiary of Perkinson Stove Co.,a British gas appliance maker which Rinnai used toform an alliance with. Its initial focus was the sales ofheater, however, in 1993, it started the sales of
instant-heating (tankless) gas hot-water heaters.
Electric storage-type (tank-based) hot-water units
used to be the major product in the hot-water unit
market, however, now instant-heating (tankless) gas
hot-water heaters consists of about 30% of themarket share.

Australia has strong awareness towards environmental issues and has been promoting advanced
environmental measures, and Rinnai Australia implements product development and sales which match with
the needs of the local market.

■ Various Climate Issues in Australia and its Advanced Environmental Measures
The climate of Australia, which has a vast land of about 7.7
million m2 in the Southern hemisphere, varies significantly
even within the country. The northern area belongs tosavanna climate recording over 30ºC of the highest
temperature of the day throughout a year and has relatively
abundant precipitation, however, the central area has little
rainfall and is dry of which temperature during summer may
exceed 45ºC. The eastern and southern areas where major
cities concentrate are hot during summer however theirclimates are overall mild. In addition, there are about 12,000
islands around the Australian continent demonstrating
various climates. In these years, the fluctuation of
precipitation is severe and Australia often suffers fromdroughts causing water shortage in some areas. In cities,
water consumption restriction is often imposed. Therefore, it
is said that citizens have very high awareness for water
conservation.
On the other hand, there are areas which are hit by flood.
Particularly, a record rain which started in the end of 2010
caused a large scale flood in the eastern part of Queensland
resulting in serious damages. Afterwards, while water started
withdrawing in Queensland, another flood was reported in
Victoria of southeast Australia.

Flood in Queensland

Flood in Queensland(t)Australia

Developed
country
averageWorld
averageAnnual amount of greenhouse effect gas emission
per capita (Converted into CO2)
Source: JETRO “Awareness of citizens and environment
related measures in Australia”

Moreover, the annual amount of greenhouse effect gas emission per capita is 28.3 tons as converted into
CO2, which is higher than the world average of 6.5 tons and the average of developed countries of 15.6 tons.
One of the main reasons is that the country's dependency on coal fired power generation for its electricity
production. Although the country has one of the highest uranium production levels in the world, there is no
nuclear power plant of which CO2 emission level is low. This is due to the strong resistance of people and thecondition that coal fired power generation can assure sufficient electricity without relying on nuclear power
plants.
Australia with abundant coal and natural gas used to have low interest in energy efficiency improvement andenergy resources with less CO2 emission. However, due to the fear for the climate change and risingawareness towards global environment protection, it has become one of the countries which adopted
advanced environmental policies in the world.

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Rinnai Social & Environmental Report 2011

■ Prohibition of the use of electric storage-type (tank-based) hot-water units expecting for
gas and/or solar system units
The examples of numerical goals of Australia's
environmental policy include; (1) To increase the ratioof renewable energy to 20% by 2020. (Currently it's
about 5%.), and (2) To reduce CO2 emission by 60%
by 2050.
To achieve the goals, various political measures are
implemented. With regards to Rinnai Australia's
business, there is promotion to restrict the sales ofelectric storage-type (tank-based) hot-water units.
Currently, both electric storage-type (tank-based)
hot-water units and gas hot-water units have about
40% of market share. This regulation is to reduce theelectric storage-type (tank-based) hot-water units
which are less environment-friendly. In Tasmania, all
the sales for newly built houses are already banned
and the replacement sales will be also completely
prohibited starting from 2012.

Banned for newly built houses and replacement use
Banned for newly built houses

Status of the restriction of electric storage-type(tank-based) hot-water units

On the other hand, as a renewable energy promotional measure, houses which employed solar hot-water
systems from February 2009 to June 2012 are granted 1,000 Australian dollar of subsidy. In addition, houses
which adopted electric heat pump hot-water systems also receive 600 Australian dollar of subsidy. To copewith the demand to replace electric storage-type (tank-based) hot-water units, Rinnai Australia is increasing
the product lineup for gas hot-water units and solar hot-water systems.
Rinnai Australia continue to develop and sell the products which meet the natural environment, politicalmeasures and needs of people in Australia and contribute for the improvement of lives and culture.

Column1. Instant-heating (tankless) gas hot-water heaters
Although instant-heating (tankless) gas hot-water heaters
are common in Japan, electric storage-type (tank-based)
Instant-heating (tankless)gas hot-water heaters
hot-water units used to be the standard products inAustralia because of its low electricity cost. However,electric storage-type (tank-based) hot-water units haveissues such as that the saved hot water cools down due toheat radiation loss and the amount of hot water becomesshort. Furthermore, coal fired power plants have been
receiving criticism as being harmful to environment
because they emit enormous amount of CO2 and there isloss in power transmission between power plants andconsumed places.
Rinnai Australia has been promoting the convenience (nohot water shortage) and the environment-friendly attribute(no heat radiation loss) of instant-heating (tankless) gas
hot-water heaters. Currently about 30% of its sales of total
hot-water units is from instant-heating (tankless) gas
Solar hot-water systems
hot-water heaters.
However, since gas including natural gas is also fossil fuel, people started paying attention to moreenvironment-friendly heating appliances- to be more specific, solar hot-water systems which utilize
solar heat (Please refer to the next section.) and aerothermal energy heat-pump system hot water
units.

30

Rinnai Social & Environmental Report 2011

2. Solar hot-water systems
Solar hot-water systems utilizes renewableenergy, solar heat, to produce hot water.
Rinnai Australia proposed a system combining
a solar panel and a gas hot-water unit and isreceiving strong support from many
consumers.
The fundamental structure of this system is to
run water in solar panels to heat up and saveheated water in a tank. When the temperatureof the hot water isn't high enough, a gas
hot-water unit is used to heat up the water.
There are a tank and panels combined typeand a tank and panels separate type.

Solar panels
3) Heat up
water
with solar
panels.

4) Collect heated water
into the tankGas hot water unit
(back-up)

2) Pump up
water tosolar
panels1) Put water into tank.

Pump

Tank

5) Reheat the water
which was heatedwith solar panels tothe sufficienttemperature usinga gas hot-waterunit6) Supply hotwater to theplacesrequired

3. Smartstart® Water Sever
Conventional gas hot-water units take some time toget hot water after a user turns on a faucet, sosome water becomes waste. Therefore, Rinnai
Australia sells "Smartstart®WaterSever" to reduce
the amount of water to be wasted. After turning on
the unit, hot water circulates through a loop of pipes.
So after turning on a faucet, hot water which wasrunning near the faucet comes out.
For the countries which are highly aware of water
conservation, we believe it is important to develop
and sell products to reduce the amount of water tobe wasted.

Gas hot-waterunits

Gas supply
Hot water
Smartstart®
Water Sever

Water

31

Rinnai Social & Environmental Report 2011

Interview

Rinnai Australia Pty., Ltd.
As a leading company in the industry, we would like to create a market by providing highly
efficient and environment-friendly products.

Rinnai Australia Pty., Ltd. is a company established in 1971 andcurrently grew into a company with about 250 employees and about 200
million Australian dollars of sales.
Australia relies on coal fired power generation and the reduction of CO2
is a huge issue. Therefore, Rinnai Australia would like to contribute forthe reduction of green house gas emission by promoting gas hot-water
units and heaters. Meanwhile, we would like to provide gas appliancesthat meet the geographical conditions and energy supply status of theregion. We present a wide range of hot-water units including highly
efficient gas appliances as well as water-conserving system, thecombination of solar water-heating system and electric heat pump
hot-water systems. Moreover, we have been focusing on the program toconvert heating systems of primary schools in Australia into Rinnai's gas
heating systems which have superior energy efficiency compared to theGreg Robert Ellis
conventional products.
CEO, Rinnai Australia Pty., Ltd.
The regulations on energy and environment conservation are expected
to become more rigorous. Coping with such changes, Rinnai Australia would like to introduce highly efficientenvironment-friendly products ahead of competitors. As a company which leads the industry, we would like tocreate a market and produce products that are closely linked to people's lives.
Furthermore, we are also active in community activities. We support sports promotion for young generations
and provide support for a large-scale bush fire and flood in the country.

Interview

Rinnai Australia Pty., Ltd.
Developing products which utilize renewable energy and products with high heatefficiency

Developing products which utilize renewable energy and products withhigh heat efficiency
As the head of Adelaide Factory, I conduct the management of factory
assuring the daily production of Rinnai products with high quality andenergy efficiency to be on schedule through the cooperation with staff ineach department.
Along with the rising awareness of people towards environment
conservation and the application of more strict environmental
regulations, it is expected that the environmental requirements on Rinnai
products will become more severe. In the future, we would like tocontinue developing new products which utilize renewable energy andproducts that realize higher heat efficiency.

Heinrich Hofer
General Manager of Adelaide Factory,
Rinnai Australia Pty., Ltd.

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Rinnai Social & Environmental Report 2011

With Our Customers
Measures for Quality■ Basic Stance on Quality

Since our establishment, at Rinnai, we have always been executing our business operations being
passionate about quality for our customers to safely use our products with peace of mind.
Indeed, our policy on quality-infused by the corporate philosophy "Quality is our destiny"-stresses efforts toprovide customers with highly safe and satisfactory products. This enduring commitment gives customers
complete peace of mind in selecting and using Rinnai products.

Basic Philosophy on Quality"Quality is our destiny"
Policy on Quality

We provide highly safe productsthat meet customers' requirements.
* Voluntary Action Plan for Product Safety

In June 2007, we formulated a voluntary action plan for product safety along with a promotion strategy thatwould give substance to activities based on the action plan. We encouraged divisions to embrace the action
plan and its associated promotion strategy, confirmed that divisions were on board, and wrapped up theprocess in February 2008. Currently, the Quality Assurance Headquarters oversee the voluntary action planfor product safety, verify implementation status as appropriate, and guide efforts to uphold our policy on
quality day in and day out.

■ Product Development in Pursuit of Safety and Peace of Mind

The nature of our business-making and marketing gas appliances-demands monozukuri (manufacturing)prioritizing safety. We deliver products developed and manufactured in accordance with industry
specifications and safety standards.
Safety is ensured through assessments specific to each stage of the commercialization process, including
design reviews that evaluate product performance and reliability.
Issues that crop up on a day-to-day basis are communicated to the relevant divisions and resolved. However,issues of a particularly serious nature are reported to the president and executive officers at the monthly
meeting of the Quality Committee along with associated updates on response measures and other actions
taken to address problems.
The Seven Key Elements of Quality
1. Good function and performance
2. Easy to use
3. Safe
4. Nice exterior features
5. Reliable
6. Environmentally compatible
7. Up to legal and self-imposed standards■ Monozukuri which assures high quality* In-house development of core technology
33

Rinnai Social & Environmental Report 2011
To assure our products to achieve high quality and safety, we pay considerable attention to our coretechnology including "combustion control technology", "heat exchange technology" and "fluid-control
technologies used for gas and water" and critical security components are developed and manufactured byour group companies. By achieving high-precision heat control using sensors and electronic units, we are
pursuing absolute safety and zero defects.**Zero defects: No failure, no defect products and no fault* Integrated production system

Critical security components which affect the quality of products are manufactured with an integrated
production system from a raw material processing phase to an assembling phase paying extra-attention to
manufacturing technique. Moreover, important production equipment, dies and IT system are all developed
within the Group. We have been manufacturing high quality products by arranging the production of bothcritical security components and manufacturing tools within our group companies.

■ Information disclosure on "Safety and Peace of Mind"

In the event, however remote, that a Rinnai product malfunctions during use or an accident results from a
defective Rinnai product or insufficient service thereof, we promptly report the details to the competentauthorities in accordance with prevailing laws and regulations. Even when it is unclear whether or not an
accident is attributable to one of our products, we still provide pertinent information on our website to alert
customers and appliance installation and repair providers to a potential safety issue.

■ Invigorating Quality Improvement Activities

Seeking to enhance the problem-solving skills of eachand every employee and invigorate the organization,
we began promoting small group quality control circles.
Involving our group companies, we are actively
promoting this QC program. We award to the best
circles at the company-wide QC circle conference in
September.
Company-wide QC circle conference

CS Policy
Based on our corporate philosophy "Quality is our destiny", we "sincerely, promptly and adequately handle
our customers' requests and offer consultation" and "provide satisfying, assuring and reliable services to ourcustomers" as our policy.

Fundamental Policy
1. We, any departments of our company, identify comments and requests from our customers as
our top priority.
2. We understand that customers' complaints are addressed to the entire Company and the wholeorganization shall be responsible for them until the cases are closed.
3. We take customers' comments seriously and share them within the Company to utilize as theprecious information to improve our products and services.
4. We always abide by laws and regulations and we don't give in to unreasonable demand.
5. We strictly protect the personal information of our customers by observing related laws,
regulations and Rinnai's Personal Information Protection Regulations.

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Rinnai Social & Environmental Report 2011

Inquiry Response and Support System■ Customer CenterWe established the Customer Center to receive any
inquiries, comments, requests and complaints by phone.
Valuable comments from our customers are shared with
our product development, sales and service departments
as feedback and utilized to further improve our customers'
satisfaction. In fiscal 2011, about 1 million calls were madeto our toll-free number and about 5,000 comments were
forwarded through our website.
In May 2011, "Rinnai West Japan Customer Center"
started its operation. Currently, we are shifting thefunctions from four customer centers in the Western Japan(Chubu, Kansai, Hiroshima and Kyushu) to the newly
opened center step by step targeting to complete theprocess by fiscal 2012. Our customer service capability will be reinforced by having two centralized customer
service centers including the "East Japan Customer Center" which started its operation in 2009.

* We strive to reflect upon our customers' feedback on our products and services day in
day out.
Applying customer comments to products and services

Customers* Repair/servicing request* Technical advice

Helpdesk* Product inquiries overall* Customer consultation

Customer center

EnrichservicingsystemDaily reports

Analysis Units

Analyze customer comments
Pinpoint and analyze key quality issues

Results of pinpointing and analysis

Corporate officers, andthe related divisions

Use feedback to enhance monozukuri.
Promote information-sharing

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Rinnai Social & Environmental Report 2011

■ Our Customers' Comments (Introduction of customers' comments and inquiries
forwarded through our website in fiscal 2011)
1. By customer
0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

4654

Individual

Corporate

1038

The breakdown of inquiries from customers is 82% from individuals and 18% from companies.
2. By content
0500

Parts & products

173

Information request

232

2500

2095

considering purchasing

Product in use

Other comments

2000

10

Product that a customer is

Questions for Sup-Ri-net

1500

582

Installation

Others

1000

2558

2

40

(1) Product in use: 45%(2) Product that a customer is considering purchasing: 37%(3) Parts & products: 10%
There are the three major topics.

36

3000

3500

4000

4500

5000

Rinnai Social & Environmental Report 2011
3. By model
0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

21

System hot-water units

Kitchen appliances

2379

Toilets, Laundries,

61

Changing Rooms

Bath

535

Living Areas

392

Hot-water units

1168

Left blank

1136(1) Kitchen appliances: 42%(2) Hot-water units: 21%
Many inquiries were kitchen appliances-related.

■ Strengthening our capability to respond to our customers

Responding to our customers' request who would like to solve their issues by themselves, "FAQ" is listed on
our website.
In fiscal 2011, we increased the number of FAQ information by product type to 323 this year from 253 of thelast year.
In addition, we listed more information on our new product, hot-water unit with the gas/solar hybrid system, tostrengthen our customer service.
*FAQ: Frequently Asked Questions

In fiscal 2011, 77% people gave a favorable evaluation on our FAQ section.
We continue adding the contents to the section to be more useful to our customers.
- Evaluation on our inquiry handling
0

1000

2000

Favorable

Not favorable

3000

4000

5000

6000

7000

8000

9000

10000

7714

2292

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Rinnai Social & Environmental Report 2011

■ Creating new relationship through online shopping

For our customers to use our products for a long time, we directly provide
parts that our customers can replace by themselves and cleaning products
through our online shopping site, "R.STYLE (RINNAI STYLE)".
In fiscal 2011, in addition to replacement parts and maintenance products,
we increased product lineup by adding option products such as somecooking appliances that are good to use with our products. We would liketo increase the number of option items to use with our products to propose
more convenient lifestyle to our customers.

■ Utilizing our customers' comments forwarded through website to improve the Company"R.STYLE" provides a questionnaire survey which covers extensive
matters including lifestyle and gas appliances to our customers who
registered at our website every month. In fiscal 2011, total 44,627 replies
were collected and utilized for the improvement of existing products andthe planning of new products. In addition, the comments on products andservices received through the website are posted on the Intranet to
improve products and services.

■ Supporting all kinds of online shopping customers

To fulfill the expectation of all online shopping customers, in fiscal 2011, "R.STYLE" started its services on theInternet shopping mall, "amazon" and "Rakuten". Increasing our online presence by partnering with external
services that our customers frequently use is a measure we have taken to cater for the growing number of
online consumers. This is to increase cater for a larger customers by expanding our services engaging
external services that many online users frequently use.

■ Provision of information at the time of emergencies

We provide product and service information to customers through our
website.
In addition to the warning and accident report during the ordinary time,
we believe that it is important to provide information that is needed bycustomers at the time of disasters.
In March 2011, we posted the information on "the use of gas
appliances at the time of power-out and rolling blackouts.
In addition, we posted "How to cook rice with a cooking stove" to use agas stove during power-out.

Example of article: "How to cook ricewith a cooking stove"38

Rinnai Social & Environmental Report 2011

Inspection and Repair Services■ For a long-term use without accidents- Inspections like a yearly medical check-up for appliances -In April 2009, Consumer Product Safety Act was revised and a safety inspection system for products inlong-term use went into effect.
Some accidents linked to the deterioration of our products over long-term use have been reported. To makecustomers realize that appliances, like most products, have a particular service life and to encouragecustomers to have their Rinnai products inspected regularly, we send out the necessary information andextend advice through the Product Inspection Center. These efforts are aimed at preventing unforeseen
accidents.
We enhance our maintenance inspection system with our qualified service specialists. In addition, we provide
our original services extending a warranty period to three years for the customers who purchased our
home-use hot-water unit and completed customer registration.

■ Fundamental stance toward inspection

Through inspections, we will enhance our customer support services.

Five focused points of our fundamental stance
1. Good inspection (Good inspector, good handling, legal knowledge, and inspector report)
2. Look through our customer's eyes (Usage of aged products, and reflection of customers'comments on products)
3. Customer satisfaction (Appropriate and caring information offering)
4. Proposal to assure peace of mind (Proposal to bring peace of mind before a product breaks,
not after it broke)
5. Trust building (On our appreciation for our customers' long patronage)■ Overview of our maintenance and inspection system
Maintenance and inspection
system for products inlong-term use"Legal inspection" in accordancewith a safety inspection system forproducts in long-term use(Consumer Product Safety Act)
Heat source appliance for hot-water unit and heater(Fan-forced system) was newly added in July 2011

To prevent the accidents due to thedeterioration of products in the long-term use,
we recommend users of products with Safety
Inspection Mark to arrange productregistration and inspection (at cost).

"Safety Inspection"in accordance with a safety
inspection system for products inlong-term use
We recommend user registration andinspection (at cost) for products with a"Safety Inspection Mark" in accordance withlaws and regulations to prevent accidents linkto the deterioration of products in longterm-use.

For the safe use of products, we recommend an inspection in 9 - 11* years after the production.
*For home-use appliances (Professional use: 2.5 to 4.5 years)

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Rinnai Social & Environmental Report 2011

■ What is the "safety inspection system for products in long-term use"?

The "safety inspection system for products in long-term use" started in April 2009 is a system to encourage
the registration of users and charged inspection for "Specified Maintenance Products" that may cause
problems due to the age-related deterioration and may damage and may give serious damage to the life or
health of consumers.

Rinnai products corresponding to safety inspection system
Indoor-type gas instant hot water
heaters (for city gas, and LP)

Indoor-type bath water heaters with gas
burners (for city gas, and LP)

Dishwashers (built-in)* Flow of Safety Inspection System for Products in Long-term Use

Suppliers

Owners

Always explain the systemat time of sale or delivery.

Listen to the explanation
about the system at thetime of purchase

Owners (and Suppliers)

Registration

Owner’s Card
(packed withproduct)

Rinnai
Mail

Online registration
Registrationof changes

By phone
By card enclosed with notification
By phone

Inspection
By card enclosed with notification

40

Information
Management

Inspection
reminders sent by
mail to registeredappliance owners

On-site inspection

Rinnai Social & Environmental Report 2011

■ Recommendation of "Safety Inspection"

In consideration of the safety inspection system for products in long-term use, we recommend "Safety
Inspection" for products that fall outside the scope of the system.

The scope of the safety inspection• Outdoor-type gas hot water

heaters and bath water heaters(Including hot-water and heating units,
and heat sources only for heaters)
Gas hot-water units
Gas bath heating systems
Gas heat source for hot-water units andheaters
Gas heat source only for heaters• Gas heaters• Built-in-stovesGas fan heaters
Gas fan-forced heaters
Gas stove
Gas dryer

Built-in-gas-stoves
Built-in-gas-oven* Some products are out of scope.

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Rinnai Social & Environmental Report 2011

■ First step is user registration

User registration is the important “first step” to connect customers with Rinnai. When there is a user
registration card attached to a product, please make sure to register.
Information regarding inspections is detailed in our catalogs and on our website. We also actively request that
customers register with us during maintenance visits and other such situations in which our staff have theopportunity for face-to-face interaction with customers.
[Activity to promote user registration]
Action items
Notification at retail location
Extension of warranty

StatusAt locations such as mass retailers, we post the informationof the safety inspection system for products in long-termuse.
For the user who registered, we extend a warranty period
to three years.
Subject: Home-use gas appliances (Excluding
business-use appliances and electronic appliances)

An example of POP at a store

Notification utilizing maintenance and installation
opportunities

The staffs provide user registration information to ourcustomers utilizing maintenance and installation
opportunities.

LeafletNotification of the completion of registration

42

To a customer who registered, we send a registration
completion notice to his/her registered address.

Rinnai Social & Environmental Report 2011

■ Flow after user registration until an inspection

Based on the user registration information, we mail notifications to designated addresses when an inspection
period approaches. Moreover, we provide inspections to our products which are already in use.
[Establishment of inspection period]
Designed standard service life*

Target productInspection period

10-year product

Home-use gas hot-water units
Electric dishwasher and dryer

9-11 years after
production

3-year productCommercial-use indoor-type
gas hot water heaters

2.5-4.5 years
after production

Production Purchase

Registration

1

0-6 months
in advance

Inspection period

Notification

Inspection2

Suspensionof useWhen you receive a notice, please apply for an inspection.
You can also request an inspection during the time of 1 and 2.

* "Designed standard service life" is a period that a product should be safely used without any problems under the normal circumstances with proper handling and maintenance.
This is defined for each appliance. Please note that this is not the same as free warranty period. In addition, products that fall outside the scope of legal inspection (specificmaintenance products) use the terminology, "Standard service life as designed".

■ Efforts to coordinate an inspection system

To adequately implement inspection, Product Inspection Center keeps improving its inspection system.
In addition to the legally required check points of an inspection system, we also set up voluntary monitoring
items to facilitate a reliable inspection system.
[Legally required check points of an inspection system and the current status of our company]*In this context, the applicable law and ministerial ordinance are "Consumer Product Safety Act" and"Ordinance of Ministry of Economy, Trade and Industry for specific products that require maintenance",
respectively. (As of March 31, 2011)[Voluntary system action items and the current status]
Action items

Rinnai's current status

Enhancement of provision of information

We post the detailed information on maintenance andinspection system for our products for a long periodof time on our website. The information includes the
products that are out of scope of legally mandatory
products (specific products that require
maintenance).

Enhancement of items to be inspected

In addition to the items of which inspection is legallyrequired (specific products that require
maintenance), we set safety inspection products
including home-use outdoor gas hot-water units,
built-in-stoves and gas fan heaters.

Inspection quality improvement

The inspection results of all items are checked to see
if there is any judgment error to assure thetechnology standards. The inspection completion
rate is monitored all the time not to delay theinspection schedule.

Warning after the inspection

When an inspection result concluded the prohibitionof the use of a product, we will provide the follow-up
of the inspection by calling or writing to the user.

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Rinnai Social & Environmental Report 2011

■ Trend of users who arranged inspection

Through inspection, we try to improve our customer support.
Aiming at further improvement, we will keep searching the best way to execute inspection using
questionnaire results obtained from users during inspection as reference.
Source: Questionnaire survey for users who arranged inspection of small hot-water heaters (Researched from June 2009
to April 2011)• Users who arranged an inspection by generation
The ratio of young generation is low.

N = 3386
40s and over: 81%
30s or younger: 19%

Users in their 60s or older

19%
41%

Users in their 40s and 50s

40%
Users in their 30s or younger• Reason to arrange an inspection
While some people seek for peace of mind, many arrange an inspection after their product experienced a malfunction.

[Users in their 30s or younger]
The ratio of users who experienced a malfunction is relatively big.
N = 74013%

2%

For peace of mind
35%

21%

Due to a malfunction
Because it is risky
Based on recommendation29%

Because it is my duty

[Users in their 40s or over]
The ratio of users who seek for peace of mind increases while the ratio of users who experienced a malfunction is stillhigh.
N = 3199
2%

For peace of mind

14%
42%

19%

Due to a malfunction
Because it is risky
Based on recommendation

23%

44

Because it is my duty

Rinnai Social & Environmental Report 2011
• What users expect to an inspection
All generations expect for clear explanation.

[Users in their 30s or younger]
N = 745

1%
12%

Clear explanation
Polite handling

26%

61%

Nothing particular
Present & award[Users in their 40s or over]N = 3169
14%

0%

Clear explanation
Polite handling

18%
68%

Nothing particular
Present & award• The way of communication that users expect
Users are divided into two groups: one thinks mailing is sufficient and the other expects for periodical publication andphone calls.

[Users in their 30s or younger]
N = 736
Nothing particular

5%
13%
51%

31%

Mailing of periodical
publication
Information provided over thephone
Information sent by mail[Users in their 40s or over]N = 3100
Nothing particular

4%
22%
46%
28%

Mailing of periodical
publication
Information provided over thephone
Information sent by mailTo realize our customers' "comfortable lifestyle" we are doing our best to provide services that customers cantrust and use.

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Rinnai Social & Environmental Report 2011

■ Free inspection of small, open-type water heaters

In 2007, one of our small, open-type water heaters malfunctioned and caused an accident. To prevent areoccurrence of this kind of accident, we continue to offer free inspections to customers using small,
open-type water heaters, including the RUS-5RX, produced between July 1991 and January 1995, and theRUS-51BT, produced between May 1994 and January 1997.
<Example of information on our website>■ Immediate offering of after-sales service

About 700 service specialists provide repair service nationwide every day. To realize "comfortable lifestyle",
we are trying to complete an after-sales service inspection on the day or by the next day.
To improve operational skills of service specialists, we introduced a mobile information terminal which allows
them to confirm order status on site at the early stage and facilitate immediate service to our customers whorequested for repair services.

Service shop
R-TALK-A
Receipt of repair requests

Repair completion entry system

1. Repair request form (Fax)

Customer center system
The Internet
Repairrequestreceipt and2. Scheduling of service
specialist visit

Before a service specialist obtains repair
request data, register the repair scheduleof the service specialist using R-TALK-A.

completiondata

3. Repair request data acquisition

Repairrequest46

Service specialist 4. Repair* It is possible to obtain only customer dataof which visit is scheduled on the day.
(The data of customer who reserved arepair service can be viewed only by theservice specialist who will handle.)

5. Completion report data
* The repair data of which completion report
was filed will be erased from a mobile
terminal when the next request to receive
repair request data was made.

Customer

Repairrequestform

Repair slip
(1) Customer(2) Rinnai(3) Service shop

PDA terminal
Instruction for
print
Bluetooth(Wireless)Print

Bar codedata entry(Wireless)Rinnai Social & Environmental Report 2011

■ Training of service specialists* Annual training plan

We provide training to nationwide service specialists throughout year at Training Center in Nagoya area.
1
2
3

Explanation of specifications focusing on new products, cautions for installation and service points
Product development staff train area service managers or training managers first. Then, the employees
who received the training will provide training to service specialists in their area.
Each area will host a CS improvement training session inviting external instructors.

* Special training for focused productsFirst, we ask opinions from our service specialists for the service for focused products. Then, collecting andreflecting comments from onsite staff, staff in charge of development and manufacturing at factory perform as
instructors at a training session.
Moreover, after a training session, the confirmation test is provided to see the degree of understanding ofservice specialists, check and follow insufficient areas to nurture our service specialists.

■ Pursuing the higher customer satisfaction towards our services

We conduct "Voice of Customer Questionnaire" to our customers who received our repair service requestingthem to evaluate the satisfaction rate for our repair visit. Customers' evaluation results will be sharedinternally to efficiently utilize the questionnaire results.
In fiscal 2011, total 10,000 customers answered the questionnaire and gave high evaluation on our services.

Communication with Our Customers
We hold exhibitions all over Japan where the public can get acloser look at the excellent features of our products. For
customers, these exhibitions are opportunities to try out
top-of-the-line products to experience the safety of "Si"sensor-equipped tabletop gas stoves and other features thatmake cooking and cleanup less of a chore, and to realize theenergy savings afforded by hot-water/heating systems and the
comfort of floor heating. For us, these exhibitions open lines ofcommunication to customers wider. In addition to exhibitions of
our own, we participate in events that highlight regional
characteristics, such as joint fairs sponsored by retailers who
sell our products. Our presentations are interesting but also
provide customers with ideas on how gas appliances canmake life more comfortable.

Exhibition for users in
Kyoto

Exhibition for business
partners in Kitakyushu

47

Rinnai Social & Environmental Report 2011

Products Born with our Customers' Comments
To provide "The products needed by customers", our product planning staff directly visit the houses of ourcustomers to listen to their requests and complaints about our products.
By reflecting the voice of customers in the planning of new products, we're trying to develop new products
which satisfy the needs of customers.

■ Upgraded "DELICIA""DELICIA", a built-in-stove of which sales started in 2007, was further improved and reborn as a new productin 2010. The design, which has been popular, was further fine-tuned from the original model and various
modifications were made in the hidden parts.

Gathered our customers' comments• Glass-top made it easier to clean up, however, areas around burners get burned.
• I don't use a grill to cook fish because I don't want a mess and smell.
• I wish Dutch oven could be bigger.
• The letters on the control board are too small and dark to read.
• It is hard to clean the mesh for grill.

Advantage of new "DELICIA"• "Heat-off glass-top" that controls the increase in the temperature of glass-top and makes it hard toburn• "Smoke-off grill" that drastically reduces the smoke and smell while cooking fish
• A Dutch oven with 1.5 times larger capacity• A control panel with a back light• "Ra-Clean Grill" which is easy to clean partially due to a flat mesh48

Rinnai Social & Environmental Report 2011

With Our Employees
We strive to create an atmosphere in which employees can be happy and productive-a corporate climate that
motivates each and every employee to do well and enables individuals to demonstrate their full potential. We
also seek to maintain workplace environments that keep employees safe and healthy, both physically andmentally.
For our employees to be able to work with a sense of achievement and accomplishment, we provide support
through our personnel system as well as various welfare programs to take care of employees' health and caterfor their families. Moreover, for each employee to fully demonstrate his/her capability, we try to create afamily-like office culture, and improve and maintain our workplace to be safe, secure and healthy. We believethat the source of motivation for employees to grow and fully demonstrate their skills is "the provision of theopportunities to improve" and "the sense of achievement and accomplishment". To increase the satisfactionlevel of our employees, we are promoting the following four items as our foundation:(1) Provision of opportunities for our employees to grow [Rank-specific training programs, specialization
courses, On-the-Job Training (OJT) guidance, appropriate staff allocation and rotation](2) Evaluation and reward which is fair and convincing (Performance appraisal, interview system, salary
increase and benefit improvement)(3) Creation of family-like working environment (Improvement of office building, working environment andfacilities, annual events, club activity support, and interdepartmental cooperation)(4) Welfare program for employees and their families (Welfare program options, health support, corporate
pension and events with the Rinnai Employees' Association)

Personnel Training
We defined our fundamental human resources policy as "Nurture and encourage our employees to have ahigh level of morality and keep challenging their own goals continuously making effort." We guide and train
our employees to be able to demonstrate their initiative to drive the Company while giving priority to our
Corporate Philosophy embodied in our Company Motto, "Harmony, Spirit and Sincerity", which Rinnai has
been pursuing since its establishment in 1920, and our Corporate Mission, "Rinnai utilizes heating toprovide society with a comfortable way of life."
We provide our employees with numerous opportunities to grow as an individual such as rank-specifictraining programs, specialization courses, OJT trainings and a rotation training program, which covers
workplaces at home and abroad.

■ OJT Personnel Training

We position human resources as our most important management resource and we offer personnel training
to assist employees to fully demonstrate their capabilities. Our main training is "OJT (On-the-Job Training)"wherein a supervisor guides his/her team member through an actual job. In addition, we provide arank-specific training program, which supports the improvement of each employee as an individual bygrouping them according to job responsibility, and a specialization course, which promotes our employees tobe highly specialized in their area. These three programs form three pillars of Rinnai's training system.
Moreover, we are conducting a level-up training program for group leaders who have been promoting ourbusiness plan since fiscal 2011. We plan and provide high quality internal training programs.
Three Pillars of Rinnai's Training System

OJT

Rank-specific Training Program

Specialization Course

The Rinnai Spirit
49

Rinnai Social & Environmental Report 2011
* Personnel training and program system

Generalists

Growth as
individual

Training for executive candidates
Training for managers

Professional
staff

Training for performance reviewers

Specialists

Training for new leaders
Training for newly promoted Chiefs

Finance courses

Foreign language courses

Designer training

Production technology training

Sales training

New employee group training

Training on quality and cost

New employee follow-up training

Specialization Courses of each department<Major Rank-specific Training Programs in Fiscal 2011>
Training

Subject

Content

Number of trainees

New employee
training program

New employees

148 people

Follow-up training

Generalists in their 1st
or 2nd year

S4 training

S4 level qualified
employees

M6 training

M6 level qualified
employees

Performance
reviewer training

Managers who need toreview/interview theirteam members
Young employees(Research andDevelopment
Headquarters andProduction
Engineering Division)

Basic training for professionals (manners, awarenessas a professional), Fundamental training for Rinnai
employees (company overview, the Rinnai Spirit,
corporate ethics, personnel system, and policy on
quality and environment), IT skills, mental health andfactory onsite training
Identification of items for self-improvement and goal
setting through the review of previous year, mind-set
as senior employees and communication skills
Reconsolidation of fundamentals (corporate ethics
and management policy), Recognition of his/hercharacteristics (to improve the strength) and thereinforcement of awareness of management
Reconsolidation of fundamentals that M6 qualified
employees/managers should know (corporate ethics,
management policy, policy on quality andenvironment, labor management and working rules)
Reconsolidation of personnel system, objectives of
performance review and its method, and actualinterview sessions (coaching and listening)
Reconsolidation of the attractiveness of Rinnai andmotivation for work, and role-play of interview withstudents (candidates)

Recruiter training

50

69 people

98 people

53 people

68 people

18 people

Training within workplace and OJT

Executive training

Generalist training by Personnel Affairs Division

Training for Deputy General Managers

Rinnai Social & Environmental Report 2011

New employee training program

S4 training (President's speech)

Performance reviewer training■ Career Development Review

Evaluation through an Interview with a Supervisor: Feedback and Growth Navigation
For each training program to effectively function, it is essential to match the capability required by theorganization and the goals set by the employees.
Therefore, Rinnai prepares a "Skill Map" and a "Capability Evaluation Sheet" to define the skills andcapabilities required by each department and clarify the goals and capabilities the company expects to theemployees to achieve. Based on these, our employees understand their current roles and responsibilities.
Employees also have a one-on-one interview with their supervisor, wherein they receive the results of theirperformance evaluation and are informed of the company's future expectations of them. Then, they set up
their own goals to challenge every year.
Supervisors, to actively perform the responsibility to navigate the growth of their staff, carefully review eachstaff's progress and contribution (performance evaluation) and adequately inform the evaluation results to thestaff through "One-on-one interview" or "Performance appraisal feedback meeting".

■ Support for Self-Directed development

To support each employee to acquire higher specialist knowledge, skills and culture and support their growth
as an individual, we actively provide programs including foreign language education, correspondence
courses, external open seminars, technical proficiency examinations, license acquisition courses, andcommunication with people in different companies/industries.
In addition, for the young employees who have a strong desire to work overseas, we arrange and operate ashort-term overseas working and training program that is available for them via application. This is to develop
human resources that can globally demonstrate their capabilities working at our overseas locations.

■ Development of Global Human Resources

We believe that our success and development lies with how we empower all employees in the Rinnai Group,
not only locally but also in our offices abroad without being restricted by international borders. Based on thisbelief, the management divisions, the product development divisions and the manufacturing divisions aredeveloping their own training courses including overseas onsite programs.
(1) Management Department
To improve adjustment skills to foreign culture and international business sense through their actual overseas
working experience in their 20s, it is mandatory for employees assigned to Overseas Business Headquarters
to complete an OJT training program at an overseas Group company sometime during their third year of
employment at Rinnai. (Assignment period: 2-3 years)
Moreover, we invite executive candidates of overseas Group companies to Japan for training. Rinnai actively
passes Japanese/Rinnai-style management and planning method, accounting and sales know-how as wellas Rinnai's corporate DNA to overseas employees.
(2) Product Development Department
We arrange and operate "Short-term overseas working and training program" for young employees who havestrong desire to work overseas. This is to develop human resources who can globally demonstrate theircapabilities through working experience engaging in areas including product marketing and quality issue
handling.

51

Rinnai Social & Environmental Report 2011
We actively participate in international exhibitions for housing appliances in Europe and Asia to acquire thelatest information on housing environment, local situation and the cutting-edge technologies.
(3) Production Department
Production Engineering Division in Japan drives the development of high and latest technology andengineers, while International Technology Support Department executes bottom-up plans for global talents.
Production Technology Center in Japan invites total about 20 candidates for leaders to head their country
production site of our Group companies for a 6 to 12 month training program. They will thoroughly learn"Rinnai's Japanese way of production system" and quality control method and will be ingrained "our passion"
which is our corporate culture.
For particularly important overseas production Group companies, middle-ranked engineers are dispatchedfrom Japan to station at the local sites and act as a trainer's trainer giving guidance on Japanese-style
production and quality assurance know-how to local managers.

Comment from an Employee Stationed Overseas
It's been one and a half year since I was stationed in Rinnai America.
My primary job is to communicate the instructions and information from
Overseas Business Headquarters to local staff, gather and report the
feedback from local staff and support alliances to develop new
products.
I find every day exciting finding differences in the way that people
handle work and business customs which are impossible to learn inJapan. I am gradually getting used to American culture and started
acting based on deeper understanding situations including theirbackground. Just like Rinnai America, which has been rapidly
expanding in the large market of the United States, I would like to growfurther through my efforts and globally utilize my experience finding
new challenges.
Atsuki Taguchi, Rinnai America Corporation■ Succession of Monozukuri, the Spirit of Manufacturing* Training at Production Technology Center (Monozukuri Center)"Production Technology Center" established in March 2010 is a place to pursue leading-edge monozukuri,
and an emphasis is placed on delving into core technologies. It is also a hub for developing human resources
involved in monozukuri activities at Group companies at home and abroad.
To pass Rinnai's monozukuri to the next generation, over 30 booklets of "Visual manual" were produced as atalent developing support tool. Utilizing this tool, our staff qualified in various technical areas provides detailed
training on Rinnai's manufacturing technique accumulated from the past, for employees including trainees
from overseas Group companies.

Training

52

Visual manual

Rinnai Social & Environmental Report 2011

* Training at Each Location

Each location has set up a "monozukuri legacy station", which accumulates and maintains stored process
technologies and new techniques as well as intangible assets, essentially, the insights gained on-site byexperienced employees. This station is a place where newly assigned employees can acquire monozukuri
basics. It is also a place for sharing and conveying the essence of monozukuri and training employees insuch areas as improved efficiency and enhanced production management.

"Level-up Station" (Aichi Factory)"Coating training station" (Seto Factory)* New Engineer Training

New employees who are assigned technical jobs at the Technology Center and Production Technology
Center, before their actual allocation to each department, receive onsite training at the Research andDevelopment Headquarters and Production Engineering Division as well as practical manufacturing training
at factories and production Group companies to learn about the importance of monozukuri including productand technology development.

Studying the structure of dish washer

Studying the structure of plug of gas
appliances

Studying about gas combustion

53

Rinnai Social & Environmental Report 2011

Work-life Balance■ Support for Work-life Balance

For all Rinnai employees to perform well attaining the sense of accomplishment and fulfillment balancing
work and personal life for each lifestyle, we continue to enhance our personnel system to support all
employees of any gender and nationality through their lives.
< Major Programs and Measures in Fiscal 2011 >Program and measure

Content

Number of users

Childcare leave

An employee who lives with and is the caretaker of a child younger than 12
months of age can take leave until the child turns 1, or alternatively until thechild is aged 1 year and two months.
Maximum 5 days of leave may be granted per year.

31

In principle, total 93 days of leave may be granted per one family member
who falls in to the subject of the care.
The program offers an employment opportunity to our former employees
who had to leave the Company for unavoidable reasons such as marriage,
child-care and family-care, or on his/her discretion.
This is to support our employees' volunteer activities as a part of social
responsibility activities to contribute for communities as a good corporate
citizen.
The Company supports the employees to be engaged in sports and culturalactivities out of office hours to promote the sense of unity andcommunication among employees and in workplace.
This is to explore the employees who are highly motivated to improve theirwork challenging new areas. By allocating appropriate staff at a rightposition, it should promote the sense of satisfaction toward work andactivate workplace.
In the event that an employee is the caregiver of a child that hasn't beenenrolled in an elementary school, or is the caregiver of a family memberthat requires nursing, the employee in question will be exempt from working
late shifts (10:00PM - 5:00AM) with the exception of cases wherein theemployee's absence would preclude or inhibit the continuation of normal
business operations
Any employee who is responsible for a family member that requires
full-time or nursing care may shorten his/her daily working hours, provided
that a minimum of 6 hours are worked each day. This provision is possiblefor 93 days per such family member.
The longest duration of "Work from home program" shall be one year per
application. Utilizing IT equipment, an employee may work partially or
entirely at home.
Depending on work plan, working hours and work start/end time can be
negotiated.

1

Nursing leave and Family-careleave
Family-care long leave
Come Back program

Volunteering

support system

Club activity support system

In-house recruitment

Childcare shortened work
hours

Family-care shortened work
hours

Work from home program

Measure to reduce working
hours (Flexible working hours)
Measure to reduce working
hours (No overtime day)
Measure to increase the ratioof consumed paid-leave

54

Every Wednesday is set as "No overtime day" to encourage employees toleave early.
To promote the utilization of paid-leave, we encourage employees to take atleast one day per each half fiscal year, total 2 days a year, as "Refreshingpaid-leave"

2 (Nursing)3 registered

0

447

0

19

0

2

Applicable to certain
departments
Applicable to certain
departments
Applicable to all
departments

Rinnai Social & Environmental Report 2011

Comment from an Employee who Uses Work from Home Program
Each person has his/her view toward raising a child. I wanted to wait
until my child turned 3 before resuming full-time work. So, after taking
about one year of Childcare leave, I started working at home. Once I
began, I realized how hard it is to manage work, child-minding andhousehold chores all by myself. Lately, I ask my mother-in-law to lookafter my child. I am happy to utilize this program because I can spend
longer hours with my child rather than working full-time at an office, yet
I can maintain my job.
Keiko Makio,
Section Chief, Information System Division■ Measures to Enrich Our Employees' Family LivesThe Rinnai Employees' Association is the lead organizer of courses for employees on the themes "Education
for the Soul" and "Passion for Life." These courses are intended to prepare people for the different stages thatlife will take them through, with a focus on ethics, communication skills, life planning and money matters. Of
the firm belief that a positive perspective on work is essentially a reflection of a happy home life, we
encourage employees to take advantage of opportunities, such as barbecues and sports days, where they
can gather as families with families. These events foster a sense of harmony among colleagues.
<Major Programs in Fiscal 2011>
Item

Overview

Nationwide events inJapanTraining seminars by
age group
Employees' awarenesssurvey (New)

Various events to promote health of our employees and their family members andcommunication including bowling competition, barbecue picnic, and sports festivals
Training seminars focusing on the "Education for the soul" that supports employees todevelop attractive personalities as members of society
Awareness survey to grasp the employees' values that have been diversifying and continue
to realize the prosperity of the Company and employees' happiness* Nationwide Events- Chubu Sports Festival
Oguchi Sogo Ground ······························· Number of participants: 2,117- Walking Festival
Higashiyama Zoo and Botanical Gardens······· Number of participants:1,543-Kansai Festival
Expo '70 Commemorative Park ·················· Number of participants:143-Nationwide event (Barbecue)
Tohoku, Shizuoka, Hokuriku and Hiroshima ·· Number of participants:203

Kansai Festival, Expo '70 Commemorative Park

Nationwide event (Barbecue) (Hokuriku)

55

Rinnai Social & Environmental Report 2011

* Training seminars by age group- Personality design seminar ························· Number of participants: 70- Life design seminar ··································· Number of participants: 61- Self-finding seminar ·································· Number of participants: 44- New employee communication seminar········· Number of participants: 140

Personality design seminar56

New employee communication seminar

Rinnai Social & Environmental Report 2011

Industrial Relations and Human Rights
At the Rinnai Group, aiming to provide the work environment and culture that employees can feel as "I am
happy to work at Rinnai.", the Rinnai Employees' Association and Personnel Affairs Division regularly
convene the Labor-Management Council to confirm and share the information on management policy, actual
results, and comments from each workplace as a periodic improvement activity.
Moreover, our basic stance toward human rights, the respect for each other's personality and the preventionof harassment is compiled as "Rinnai Code of Ethics" to educate and enforce all employees in the Group. In
addition, we also established the Corporate Ethics Helpline to maintain the sound environment of theworkplaces.

■ Our Stance toward Human Rights and the Respect for Each Other's Personality

In principle, all employees in the Rinnai Group abide by "Rinnai Group Code of Ethics, Rinnai Code of
Conduct, Article 11 "The respect for human rights and each other's personality" and act on these rules.
(Abstract is inserted as below.)(1)

Basic human rights of all people shall be respected through our business operations. At workplaces,
employees have to respect each other's human rights and personalities and facilitate the sound working
environment respecting each other's uniqueness.
(2) The Company shall respect the privacy of employees, pay cautious and careful attention to the handling of
personal information and take the best measures for the adequate administration of the information.
(3) Any discriminating act toward an individual based on gender, age, nationality and physical characteristics, etc.
is prohibited. The employees should not commit an act which could be viewed as or would lead to sexual
harassment at workplace.

To promote and enforce the items above to all employees in the Group, a compliance committee member isallocated to each workplace to implement regularly corporate ethic education. In addition, at a rank-specifictraining program, we educate our employees based on their roles and job responsibilities.

■ Establishment of Good Labor Relations

The Employees of the Company are "members of the Rinnai Employees' Association" which functions as theorganization to represent entire employees.
Based on mutual understanding and trust, the Company and the Association establish healthy and soundlabor relations openly exchanging opinions on management issues, labor condition, workplace environmentand compensations and discussing improvement plans.
Moreover, the Company makes effort to provide safe working environment without any concern to theemployees of our business partners, etc. in addition to our employees. We also actively arrange and offer
welfare programs and various events and programs for our employees and their families.

■ Measure to Prevent Child and Forced Labor

As a measure to prevent child and forced labor, "Rinnai Group Code of Ethics, Rinnai Code of Conduct,
Article 11 "The respect for human rights and each other's personality (4)" stipulates as "The Company should
not allow any inappropriate labor including harmful and exploitative child labor which lets under-aged children
to work, and slavery against the will of employees.". Entire Group abides by and acts on this rule.

■ Measures to Prevent Harassment

To maintain working environment that our employee find comfortable, we take measures to prevent any
infringement of human rights including sexual harassment and power harassment.
To avoid our employee to commit any harassment without any intention and knowledge, we produced acheck list of detailed examples of harassment case that is posted on the company-wide intranet for
self-assessment.
Moreover, the intranet also provides actual examples of harassment cases involving legal disputes topromote the awareness toward the prevention of harassment by our employees.
In fiscal 2011, all employees ranked as Section Chief or higher (640 employees), conducted self-assessment
on power harassment. In addition, we provided 53 of newly assigned Section Chief with harassment

57

Rinnai Social & Environmental Report 2011
prevention education to reinforce the prevention.

■ Increase in the Allocation/Promotion of Female Employees(1) Current status of positions held by female employees
The ideas and comments from women are very important to our products. Many women aredemonstrating their capabilities in various job descriptions utilizing their characteristics mainly in productplanning department, sales planning promotional department, fixed customer sales department andproduction department. Moreover, the ratio of women in total generalists (core job positions) is also
increasing every year and the Company actively assigns women for managing positions.
In Japan, as of April 2011, the Company had 44 female managers (2.0% of total managing positions),
doubling the number in 2006. As an entire Group, we have 47 female workers in management roles.
(2) Enhancement of Support Programs for Working Women
For women to keep working for the Company after getting married, we provide various working styles andsupport programs.
<Major Programs>- Career track conversion system
A system which allows employees to convert from generalist to administrative positions when theemployees who don't wish to relocate for job assignment or request for the shortened working hours- Come Back program
A program that allows a former employee to come back to the Company as a full-time employee- Childcare leave and Family care long leave
Programs to support employees to raise children- Shortened work hour system
A program to support employees to raise children and care their family members- Flexible working hours system
A program to support employees to raise children, care their family members and work within restricted
time- Work from home program
A program to support employees to raise children, care their family members and recover from diseases

Comment from Female Manager
My job responsibility includes area management and marketing andcommunications in Sardinia. Although we are in a male-dominantindustry, people always take time to listen to my opinions. Through thisposition, I was able to broaden my views by accumulating technicalknowledge and skills. I've had the opportunity to engage in various
activities beyond my assigned role and all of these experiences are
now my valuable assets.
From now, I would like to communicate not only the innovative aspectof our products but also the reliability of our products, with a special
focus on the communication methods that highly utilize IT.
Sala Sartini,
Manager, Rinnai Italia S.r.l.

58

Rinnai Social & Environmental Report 2011

Fair and Diversified Employment■ Fair and Diversified Employment* View toward Employment

We respect the diversity of individuals and provide employees with various job opportunities and a working
environment where they can demonstrate their various capabilities.
Rinnai Group Code of Ethics stipulates that "Any discriminatory act toward an individual based on gender,
age, nationality or physical characteristics, etc. is prohibited".
Based on this, we maintain fair and equitable hiring practices, in line with prevailing business plans andrecruitment needs.
In addition, we actively engage in mid-career hiring to capitalize on the accumulated experience andknowledge of individuals who showed they can make a contribution to our success.

* Promotion of re-employment of aged employees

Rinnai promotes the re-employment program for the employees who retired due to age-limit to continuously
utilize technology and skills that skilled employees have and smoothly pass on the skills and "the Rinnai
Spirit" to following generations.
This reemployment program presents the employees a purpose and motivation in life and maintains andimproves the capabilities of the workplace.

* Promotion of recruitment of handicapped employees and support programs

In fiscal 2011, the handicapped employee recruitment ratio of the Company was 1.45%
whilst the statutory ratio was 1.8%. Our continued employment of handicapped people
is not only aimed at fulfilling the statutory requirement stipulated by the government,
but is also a reflection of our commitment to corporate social responsibility. Here at
Rinnai, we strive to create an environment where all employees including handicappedpeople are able to passionately commit to work.

Onsite operations

59

Rinnai Social & Environmental Report 2011

Occupational Health and Safety
The Group gives priority to the assurance of the health and safety of our employees and stakeholders andabides by the laws related to health and safety. In addition, all the employees in the Group strive to create,
maintain and manage a working environment which is safe and sanitary and develop an active organizational
culture which encourages our employees to be physically and mentally healthy.

■ Basic Policy on Safety and Hygiene

An essential requirement in business is the assurance of the health and safety of employees, via theprovision of a hazard-free and hygienic work environment. As Rinnai constantly strives to protect the lifeand health of all employees we give top priority to the sanitary condition and safety of the workplace. This
corporate mantra extends to our customers, to whom we strive to provide "safety and peace of mind".

Fiscal 2012 Basic Policy on Safety and Hygiene(1) Promote the preventative measures against fire and explosions without fail: Daily check of related facilities andthe observance of management rules(2) Create a workplace with "Zero accidents" obtaining participation and cooperation of all employees in theGroup: KYT(Note) Periodical execution of Education and Health and Safety Sessions(3) Warning and improvement activities with top-down style: Risk Management Committee, Company-wide Healthand Safety Committee(4) Care for working environment and health: Support of the physical and mental health of our employees andtheir families to achieve "safety and peace of mind"(Note) KYT: Crisis Detection Training* Status of On-the-Job Accidents and Injuries

In fiscal 2011, despite our efforts to achieve "zero accidents", unfortunately we recorded a total 31 on-the-job
accidents, although we would like to note that this number is 10 less than the total accidents from theprevious year.
We share the information regarding on the occurrence of on-the-job accidents among domestic Group
companies to prevent the reoccurrence of similar accidents. Furthermore, aiming to achieve the goal andimprove safety awareness among employees, we are promoting measures to realize the goal of creating aworkplace "with zero hazardous factors".

* Accident Prevention Measures

To give our No.1 priority to work safety and peace of mind, the Group promotes various accident prevention
measures under the guidance of the "Risk Management Committee" headed by the President.
(1)

(2)
(3)
(4)

Activities to prevent fire and explosion: Enforcement of safety inspection of environmental safety equipment(gas feeders and furnaces, etc.) and test and evaluation equipment, and the improvement and renewal ofequipment as our top priority
Production site onsite guidance: Horizontal development of the production sites under the guidance of the
Safety and Health Committee of Production Group
Training for clerical work staff and new employees: KYT training for new employees including a monthly
information sharing session regarding on-the-job accidents, designed to promote work-safety awareness.
Implementation of emergency drill: "Earthquake and fire drill" more than once a year

With the rising frequency of large-scale disasters at home and abroad, the Rinnai
Group, aiming to build a strong corporate structure to withstand crisis situations,establishes business continue plans for a quick recovery at the time of disaster.

60

Emergency drill

Rinnai Social & Environmental Report 2011

* Promotion of Traffic Safety

To minimize traffic accidents involving employees, various measures and education programs are provided.
Every year, we obtain a certificate of driving record from each employee who was granted permission to drive
a company car or commute by car. This is to accurately grasp employees' traffic accidents and violation of
traffic rules to improve the self-awareness and management of the employees.
In particular, it is mandatory for employees in sales divisions to report accidents and violation of rules.
Depending on the details, an employee may receive a suspension of the permission to drive a company car
or may require taking a safety seminar provided by an external agent.
Moreover, new employees receive an actual driving lesson using a company car receiving cooperation from adriving school, a program which encompasses risk anticipation training using video, education of traffic rules
and regulations and an aptitude test to improve their awareness of safe driving.

Driving training at a driving school

Risk anticipation training using video

Education by employees who commute by car

61

Rinnai Social & Environmental Report 2011

Care for Health
To promote the creation of a vibrant corporate environment wherein people can work healthily -bothphysically and mentally, it is a precondition that each employee to be health conscious and promote soundself-management and health enhancement.
To maintain and improve the employees' health, through collaboration with the Rinnai Health InsuranceSociety, the Company has been encouraging 100% of employees to undergo a medical checkup and receive
a consultation from an industrial doctor, if an employee requires further examination. In addition, various
measures including mental health care workshops, medical checkup support and introduction of financiallysubsidized sporting events are being actively implemented.

* Support for Health Promotion

Through the alliance with the Rinnai Health Insurance Society, we provide a range of medical support
services to our employees and their dependent families which include regular checkups as well as detection
examinations for various types of cancer (including prostate, intestinal and breast cancer checks). Thoroughphysical examinations are also available.
In addition, should an employee require further examination, we will organize additional consultation with oneof our industrial doctors.
For patients with lifestyle diseases, specific health guidance and an individual follow-up are provided to makesure the employee is fully recovered.
Moreover, we are also keen on financially supporting sporting events and club activities (such as soccer,
baseball, golf, cycling, etc.) to promote the employees' health.

* Mental Health Care

We strive to cultivate a positive atmosphere in the workplace by caring for the mental
health of employees as well as their physical wellbeing. This effort focuses on earlystress detection and preventative measures.
In fiscal 2011, we held two courses, "a mental health care workshop" and "a mental
health care workshop for manager". The key objectives were to help employees
recognize the stressors in their daily routines and become familiar with effective
approaches to de-stress. The number of attendance was about 550.

62

Mental health careworkshopRinnai Social & Environmental Report 2011

Human Resource and Personnel Related Data
We disclose human resource and personnel related data including the number of employees and the statusof fulltime employees.

Number of employees (Consolidated)*As of March 31, 2011
Full-time employees (Number)
Temporary employees
MaleFemaleTotal

Rinnai Corporation

2,449

1,116

3,565

503

Domestic Group Companies

1,061

590

1,651

1,016

Overseas Group Companies

2,170

1,008

3,178

308

Total

5,680

2,714

8,394

1,827

Status of full-time employees (Non-consolidated)*As of March 31, 2011

Rinnai
Corporation

Average age

Average working Years

Paid leave utilization ratio

Separation rate

35.2 years old

13.4 years

5.2/20 days

2.00%

Number of employees by area (Consolidated)* Number of employees
MaleFemale

Total

(%)

Japan

3,510

1,706

5,216

62.1

Asia

1,756

828

2,584

30.8

Europe and the U.S.

100

36

136

1.6

314

144

458

5.5

5,680

2,714

8,394

100

Others(Oceania and Latin America)
Total

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Rinnai Social & Environmental Report 2011
Number of newly recruited employees (Non-consolidated)<Recruitment of newly graduated students>
Fiscal 2009

Fiscal 2010

Fiscal 2011

Male

130

137

107

Female

127

107

42

Total (Number)

257

244

149

Fiscal 2009

Fiscal 2010

Fiscal 2011

Male

17

33

12

Female19

18

24

Total (Number)

36

51

36

<Mid-career recruitment>*The figure for fiscal 2009 is from September 2008 to March 2009.

Number of resignees and reemployment of retired employees (Non-consolidated)
Number of resignees
Number of reemployment
Age retirement and part-time employee

Discretionary

Fiscal 2009

100

150

61

Fiscal 2010

93

100

58

Fiscal 2011

137

101

49

Number of handicapped employees (Non-consolidated)

64

Fiscal 2009

Fiscal 2010

Fiscal 2011

Number of handicapped employees

46

55

54

Employment ratio (%)

1.32

1.49

1.45

Rinnai Social & Environmental Report 2011

With Our Shareholders and Investors
We disclose fair and impartial information in a timely and appropriate manner, and through open channels toshareholders and investors we pursue investor relations (IR) activities that foster greater trust.

Information Disclosure, Dividend and General Shareholders’ Meetings■ Concept for Information Disclosure
In accordance with the “Rinnai Code of Ethics” and our “Disclosure Policy”, Rinnai has a basic policy to accurately andimpartially disclose the corporate information related to the Group's business description and activities without delay.
Our announcement of financial results are posted on “TDnet” in compliance with the disclosure standards set by the
Tokyo Stock Exchange, and our securities report is publicized on “EDINET” operated by the Financial Services Agency.
This information is posted on "IR Information” page on our corporate website. In addition, Rinnai has started posting thepresentation material for information meeting to announce the financial results beginning with the presentation of financial
results at the end of fiscal 2011. Our English website also posts the material and IR information for fair and timely
disclosure.

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Rinnai Social & Environmental Report 2011

■ Our Policy on Dividend
One of our top management priorities is to sustain a stable return of profits to shareholders. Several factors play into thecalculation of dividends, such as consolidated performance, return on equity and financial status.
Seeking to enhance corporate value, management looks at retained earnings with a view to the long term, effectively
applying this source of capital toward R&D, capital spending and investments accompanying the expansion of sales athome and abroad.
The annual dividend for fiscal 2011 was ¥48 per share, up ¥6 per share from fiscal 2010.
This marked the ninth consecutive year of higher dividends.
0

10

20

30

40

50

2004

2005

2006

2007

2008

2009

2010

48

2011

(FY)

Dividend

66

60

(JPY)

Rinnai Social & Environmental Report 2011

■ General Shareholders’ Meetings

To encourage more shareholders to get fully involved in discussions about agenda items put before thegeneral shareholders’ meeting and to draw more shareholders to the meetings, we send out the convocation
notice three weeks in advance of each annual meeting.
In addition, we upload an English language translation of the convocation notice to our website on the same
day that the Japanese original is released to ensure that all shareholders have equitable and expeditious
access to pertinent information. Resolutions achieved at the general meeting of shareholders are alsoavailable on our website, in both English and Japanese.
* Shares by shareholder (As of March 31, 2011)
Share Information
Number of authorized shares: ······ 200,000,000 shares
Number of outstanding shares: ····· 54,216,463 (Including treasury stock)
Number of shareholders: ············· 3,750

9.5%
0.3%
18.1%
20.4%

Financial institutions
Corporations

23.5%
28.2%

Individuals and others

Foreign investors
Securities companies
Own shares

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Rinnai Social & Environmental Report 2011

IR and Communication Programs■ Policy on IR Activities

Rinnai believes that it is important to gain a deep understanding of our stakeholders including shareholders
and investors toward our business activities and strategies to establish a good relation based on the sharedrecognition. To do so, we will do our best to arrange timely, fair and immediate disclosure of our company
information to build a bidirectional relationship. We believe that this will eventually increase our corporate
value.

■ Communication with Institutional Investors and Analysts

In addition to the biannual information meetings that explain businessresults and other small meetings, Rinnai visits each institutional investor
and receives interview over the phone. These activities are to provide
clarification of our business results to institutional investors and analysts
and actively exchange views with them. In fiscal 2011, the Company
arranged factory tours and a presentation session for overseas investors.
Furthermore, we have begun implementing a questionnaire survey
regarding our IR activities starting from the fiscal 2011 year-end businessresults presentation held on May 2011. The survey was distributed among
institutional investors and analysts who participated in the meeting. We
utilize the collected comments to improve our IR activities.
Factory tour

Principal IR activities in Fiscal 2011
IR activities

Number of activities held

Total number of attendance

Information meeting

2 (2) times

205 persons

Individual meeting

85

148

Interview

38

42

Telephone meeting

13

13

Small meeting

17 (1)

99

Factory tour

2

11

Presentation for overseas investors

1(1)

21

Total

158

539

* Numbers in parentheses ( ) are the number of IR meetings that the President participated.

Evaluation on the fiscal 2011 year-end business results presentation

2%
10%

Very good
Good

20%
68%

Average
No response68Rinnai Social & Environmental Report 2011

■ Communication with Individual Investors

In fiscal 2011, we held individual investor seminars to deepen eachindividual investor’s understanding toward our business in two cities, Tokyo
and Nagoya, and received the attendance of 363 investors. During theseminars, we gave a concise explanation of our corporate philosophy,
management policies, business strategies and overseas operations forindividual investors to understand our extensive activities. A questionnaire
survey for attendants was again implemented to improve ourcommunication measures.
Individual investor seminar

The area of interest of institutional investors(From the Institutional Investor Seminar held on December, 2010)

2% 6%
4%

6%
32%

11%
19%

20%

Prospect
Return to shareholders
Industry trend
Business results
Business activities
OthersNothing specificNo answer

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Rinnai Social & Environmental Report 2011

External Evaluation■ Selection as a SRI Index Constituent ShareIn the operation of funds, such as investment trusts, “socially responsible investment (SRI)” has recently
attracted considerable attention. SRI doesn’t only assess a target company’s financial conditions such as its
business results but also its environment protection activities and social programs.
Rinnai has been receiving high evaluation from external assessment bodies as a company which has been
actively promoting CSR for sustainable development and has been selected as one of the constituent sharesof “FTSE4 Good Index Series” for the seventh consecutive year since 2004. Moreover, in fiscal 2011, it was
newly selected as a constituent share of “Dow Jones Sustainability Indexes (DJSI) 2010 Asia Pacific”.

* FTSE4 Good Index: It is a SRI index operated by FTSE group, which is a limited partnership jointly invested by The Financial
Times and London Stock Exchange Group in the U.K.
* DJSI is one of the most globally recognized social responsibility indices operated by Dow Jones & Company, Inc. in the U.S.
and Sustainable Asset Management (SAM) in Switzerland. The scope of DJSI Asia Pacific is restricted to the Asia-Pacificregion.

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Rinnai Social & Environmental Report 2011

With Our Business Partners
Guided by a principle emphasizing fair-and-square transactions with all our suppliers, we undertake various
activities to reinforce the existing structure of trust and cooperation and promote stable, long-term growth on
both sides of the business table.

Coexistence and Prosperity with Business Partners■ Rinnai Group Purchasing Policy

To grow along with our suppliers, we emphasize transactions based on a fair and impartial assessment andselection process and respect for laws and regulations and corporate principles, in accordance with the
Rinnai Group Purchasing Policy.

Rinnai Group Purchasing Policy“We will give equal opportunity to all companies at home and abroad and undertake fairevaluations to procure excellent parts that meet our requirements.”■ Rinnai's Stance on the Relationship with Our Business Partners

Our suppliers provide us with the raw materials and many of the components that go into the products wemake. They are business partners indispensible to the creation of products that attract consumers to the
Rinnai name. At Rinnai, we believe that building stable, long-term relationships with our suppliers andgrowing with them as they grow with us is vital to the creation of better products.
RinnaiCo-existence,
co-prosperity(Win-Win)

Provide appropriate
information
Monozukuri support
Results

Createattractive
products

Cooperation

Improve quality,
reduce costs

Products, monozukuri
proposals

Suppliers

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Rinnai Social & Environmental Report 2011

■ Realization of Fair-and-Square Transactions

In accordance with “Rinnai Group Code of Ethics, Rinnai Code of Conduct, Article 8 Relations with
Customers”, our supplier acceptance process is applied uniformly, whether the company is an old-time
supplier or seeking to become a supplier. Our evaluations are fair, giving equal opportunity to any and allcompanies with the right stuff, whether at home or abroad. Essentially, the divisions involved in
procurement—that is, divisions responsible for technology, quality and purchasing—consider all factors,
including quality, price and delivery as well as the potential supplier’s technological capabilities and its
environment-oriented activities, in reaching an impartial, well-considered decision.

■ Communication with Our Business Partners

We request our business partners to independently establish a quality assurance system and assure theimplementation of the system to help us achieve our policy on quality, “We provide highly safe products thatmeet customers’ requirements.”
We provide opportunities for suppliers to learn more about our perspective on quality and the basis ofmonozukuri at Rinnai through annual events including a get-together at the beginning of the year and policy
information meetings and regular meetings of the Supplier Liaison Group. These meetings are also ideal forgathering information through suggestions from suppliers and promoting dialogues based on submitted
questions. Indeed, these meetings promote a stronger commitment to teamwork.

■ Improvement Activities with Our Business Partners

In 2007, Rinnai started a “Level-Up Workshop” toprovide our business partners with guidance on how
to improve onsite operations and to help themnurture the company heads of the next generation.
Under the guidance of Rinnai, the workshop is held
to discuss ideas to improve actual operations andmanagement methodologies a few times a month.
For the improvement of processes, suppliers form
groups to improve the level of manufacturing,monozukuri, by visiting each other’s production site,
identifying the issues for the site and deliveringsolutions. For the education of the executive
candidates, each attendant is requested to produce
a management plan to understand the strengths andweaknesses of his/her company. When there is any
issue, Rinnai’s staff in charge of this project
individually provides consultation to the supplier.

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Working with Logistics Partners to Improve Logistics■ Integrated Logistics Center

In April 2008, we newly opened the Integrated Logistics Center that
centralizes the products of four principal factories to establish streamlined
logistics system which is closely linked to the production and sales. Throughthis center, we aim to improve the quality of logistics and services.
We are receiving more orders for system products and there is a greater
demand for a wider variety of products with smaller lot sizes. Moreover, weneed to cope with more diversified requests from our customers such as
shortened lead time before the delivery, and a delivery to locations where
the product must be actually installed. Before the center was opened, ouroperations in Aichi, where our production are mainly based, had to besupported by up to 14 logistics centers to store the products. However, in
fiscal 2011, due to the results of company-wide effort to reduce inventories,
we were able to successfully centralize our logistics bases into two. This
successfully achieved high efficiency in logistics and contributed for the
reduction of the environmental burden.
The Integral Logistics Center has introduced item-by-item control with QR
code and an inspection system. QR codes, which identify each product, areaffixed to all products and utilized in many processes in the logistics centerssuch as when products are brought in and out. By reading the data of QR
code, we have drastically improved the quality of logistics by preventing
errors and improving the traceability of each item. In addition, the combined
use of wireless terminals, real-time operation instruction and actual resultcollection resulted in a significant improvement of the operations.

Integral Logistics Center

Product Label
Information includes productcode, gas type, production
number, production date,
production line, etc.

■ Communication with Logistics Partners

Every April, we hold a logistics policy information meeting to help service providers gain deeper insight into
the logistics policy, targets and measures of our company and logistics department. In addition, we arrange
a quarterly quality conference to reduce environmental burden related to the transportation and storage of
products, and to improve the quality. In fiscal 2011, followed by our logistics partners’ presentation, we
discussed actual issues and confirmed countermeasures. Furthermore, we support our logistics partners to
improve their quality by visiting their working sites and discussing the issues.

■ Our Logistics Partners' Measures to Improve their Logistics Quality

In May 2010, eight mixed consignment carriers* of our logistics partners voluntarily established a “Logistics
Working Group” for quality improvement. To promote the improvement of logistics quality and safe
transportation, the Working Group is tackling the issues that are common with mixed consignment carriers
through information exchange and improvement activities with the leadership of onsite staff. The Working
Group started delivering tangible results such as the modified consignment label design, which was arranged
based on its proposal. It is contributing to the improvement of the logistics services of our company as well as
the performance level of each carrier.
* Mixed consignment carrier: Services to transport consignment collected from any number of consigners, or an operator
that offers the services.

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■ Working with Logistics Partners to Improve Logistics

Rinnai and our logistic partners strive to improve work efficiency
together through close communication. Rinnai used to issue
invoices (shipment reports) using its original format. However, in
fiscal 2008, we started sending electric data to our logistics partners
so that they can use their own format to print-out. Consequently, thenumber of missing invoices in transit and the burden of assortment
have been reduced. In addition, we started printing bar codes usedby our logistics partners on our shipment labels (shipping tags).
This contributed for the simplification of processes such as in-transit
confirmation and assortment and improved the logistics quality by
preventing errors.
We used to ship small products such as remote controllers one by
one to the destination. However, in April 2011, we started apackaged shipping system combining such small items with otherproducts to deliver to the same destination. This change reduced
the work load of shipping process, handling errors, and customers’burden to receive multiple consignments.

Shipping Label(also functions as
shipping tag)
Information includes
product code, gas
type, shipping
information, etc.

■ Support of areas affected by disaster through the cooperation with logistics partners

Rinnai decided to donate total 10,000 units of our products to support the victims of Great East Japan
Earthquake to assist the restoration efforts in the affected area. In addition, by responding to our calls, manyof our logistics partners and NPOs provided donations including water, food and daily necessities. Despite
the chaotic situation with disrupted traffic and communication networks, we were able to safely deliver the aid
supplies thanks to the cooperation of our logistics partners.

Donated aid supplies

A track of our logistics partner■ Measures to reduce shipping amountThe company is designated as a specified shipper under the revised Rationalization in Energy Use Law. To
reduce shipping volume and CO2 emission, we implement measures such as the integration of logistic
centers and the improvement of logistics efficiency.
In fiscal 2011, we consolidated our logistics bases into two in Aichi, where our four factories are located andstreamlined warehouses spread around Japan. This eliminated redundant inventory at logistic centers, theproduction that is neither urgent nor important, and so called “horizontal transportation"*. Moreover, improved
logistics efficiency contributed to cost reduction and minimization of environmental burden. Our next
measures include the following two: to increase combined shipments grouping products shipped to the same
destination; and to reduce the transportation routes that are not directly heading to the final destination.

Trend of shipping volume and CO2 emission
Fiscal

2007

2008

2009

2010

2011

Shipping volume (ton x km)

7,888

7,042

6,519

6,483

6,333

CO2 emission volume (TCO2 )11,747

11,22810,013

9,901

9,837

* Horizontal transportation: transportation that doesn’t include final destination (customer site), such as the route
between Rinnai factory and its warehouse74

Rinnai Social & Environmental Report 2011

■ Environment-friendly Logistics

To tackle environmental issues in the area of logistics, we cooperate with our logistics partners to reduce CO2
emissions, improve energy efficiency and increase the productivity of track transportation. From the end of
fiscal 2011 to fiscal 2012, we reviewed the delivery routes to mass merchandisers. Consequently, we reduced
the number of routes that didn’t directly head to the final destination and lowered environmental burden. For
continuous improvement, we are encouraging our partners to obtain third-party environment certifications
including “ISO14001” and “Green Management Certificate”.

■ Utilization of Environment-Friendly Cars

We have employed environment-friendly cars including compressed natural gas cars, liquid natural gas carsand hybrid cars as low-toxic options. In fiscal 2011, we aimed to switch 30% of our cars used to collectproducts and actually converted 24.8%.
In fiscal 2012, we set our target of conversion to be 50% to promote the activity.

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With Our Communities and Society
The Rinnai Group has been actively and independently promoting social action programs without intermission.
Our programs are extended to worldwide and deeply rooted to the local communities.

In Touch with the Community■ Donation of Rice Cake to Celebrate the Harvest Festival of the Ooagata Shrine

In March 2011, the harvest festival took place at the Ooagata Shrine in Inuyama, Aichi.
The harvest festival is famous as an event to pray for an abundant crop and invite spring to the Owari region.
Every year, a local company donates a large round rice cake to the shrine. This year, Rinnai employees took
the honorable role to produce and donate the rice cake.
The date of the celebration was blessed with a good weather and about 50,000 people enjoyed the event.

Donation of the rice cake

Employees’ rice cake production■ Support for the Restoration of the Nakagawa Canal

The Nakagawa Canal that runs near our headquarters used
to be alive as a transportation route connecting the Port ofNagoya and the center of Nagoya city for foreign ships toproceed. With the development of transportation by railroads
and automobiles, the utilization of canal transportation
diminished greatly. In 2010, the Nakagawa Canal celebrated
the 80th anniversary of its creation. To commemorate, an art
event, “The Nakagawa Canal Art”, was held in October 2010
based on a plan to restore the Nakagawa Canal as the newcore of the Nagoya-city.
Rinnai’s Chairman Naito was appointed as an Honorable
Chairman of the Nakagawa Canal Art Planning Committee.
The committee arranged various events to add a new value
to the water area of the Nakagawa canal. The events
included a fantastic digital light art show, “Digital Hanging
Scroll” projected onto the walls of warehouses and a live
performance combining Japanese traditional performance,
Noh, and modern music.
In this way, we continue to promote and encouragecommunity members to come together to utilize andcontribute to the restoration of the Nakagawa Canal.

“Digital Hanging Scroll” Projected on the Wallof Warehouses Produced by Akira Hasegawa(Photo: by Yoshiyuki Hata)■ Hosting a Cooking Contest

In April 2011, P.T. Rinnai Indonesia conducted a cooking
contest in Semarang, which is the capital of the province ofCentral Java. The contest was the largest of its kind in history
receiving 1,610 contestants and presence of the State
governor and his wife. The contestants competed using oursingle cooktop burner gas stove.
We have presented our gas stove to participants as a prize
for participation.

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Cooking competition

Prize presentation

Rinnai Social & Environmental Report 2011

■ Support for fund raising for cystic fibrosis patients

Cystic fibrosis is a hereditary disease and there are many patients who are
suffering from this disease in the United States. Rinnai America Corporation is
supporting the fund-raising for cystic fibrosis patients through walking events andauctions.

■ Participation in the program of “Habitat for Humanity” and “Happiness-sharing ‘N’Campaign”

Since 1994, Rinnai Korea Corporation has been participated in Habitat’s homebuilding program for humanity offering gas stoves to families that live in the houses
every year.
Moreover, Rinnai Korea accumulates a part of its profit to donate for“Happiness-sharing ‘N’ Campaign”, a housing environment improvement program
for low-income single senior citizens. In fiscal 2011, we have donated 25 million
won.

■ Activities to support single senior citizens and minors without guardians

On February 4, 2010, Rinnai Korea participated in a program conducted by
Incheon Bupyeong Fire Station (the fire department which is responsible over thearea) to assure the safety for the people who are alienated from society such as
single senior citizens and minors without guardians and achieve widespread use
of fire extinguishers to prevent residential fires. We have donated 50 fire
extinguishers to contribute for the fire prevention program.

■ Free dental checkup for disabled people

Rinnai Korea arranged free dental checkup and oral hygiene education for 60
physically disabled people (October 2010) and about 70 multicultural families thatfind it difficult to use medical facilities due to the difficulties in communication(November 2010).

■ Participation in “Kanazawa Hyakumangoku Festival, Odorinagashi (Dancing program)”

About 80 employees of RB Controls Co., Ltd in Kanazawa, Japan, our partnercompany, participated in Odorinagashi (Dancing program) of Kanazawa
Hyakumangoku Festival in 2010.

■ Disaster-prevention activities for local communities

Each location conducts various activities to support disaster-prevention
activities for local communities in cooperation with fire stations.

Participation in Fire Department’s
Ceremonial Demonstration Eventin New Year77

Rinnai Social & Environmental Report 2011

Communicating with Students■ Factory Tours for Students

To encourage interaction with the local community, each factory provides cooperation for a factory tour
program for local elementary school students. Schools utilize this program as an opportunity for students tolearn about society and monozukuri through the presentation of facilities in production lines, assembly
method and products.

Seto Factory

Oguchi Factory

Aichi Factory

RT Engineering Co., Ltd.

Asahi Factory■ Vocational Training at High School

Employees of Rinnai America Corporation visited a high school in the local
community and provided a lesson on a system of tankless hot-water unit and its
advantages (energy-saving etc.) as a part of vocational training.

■ Acceptance of high-school student trainee

P.T. Rinnai Indonesia provides access to a practical training program at factories
and offices, which is a part of curriculum of high school, and accepts high school
students every year. In fiscal 2011, we accepted 20 students from 4 schools in thepractical training course at our workplace.
Training

Number of students

Workshop6

Production Technology Division

4

Assembly Division

4

Administration Division

6

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Commemorative Gift
Presented by a HighSchoolRinnai Social & Environmental Report 2011

Support for Victims of Disaster■ Support for the Victims of Great East Japan Earthquake

Hoping to support the victims of Great East Japan Earthquake and the restoration of the affected areas,
Rinnai made a donation of 50 million yen through the Japanese Red Cross Society. In addition, we decided topresent a total of 10,000 units of our products including cooking stoves, rice cookers, and heaters. Moreover,Rinnai Korea Corporation provided about 2.8 million yen through the Korean Red Cross Society and Rinnai(Thailand) Co., Ltd. and its local partners offered about 1.1 million yen. We sincerely hope for the earliest
restoration of the affected areas.
As a comprehensive heat-energy appliance maker, which contributes to people’s lifestyles, we continue tosupport the restoration of the affected areas for the earliest recovery of people’s comfortable and safe lives
and their peace of mind, working with others in the related industry including gas operators.

Delivery of aid supplies at the affected area

Loading aid supplies

Repair at the affected area

■ Support for the Victims at Christchurch earthquake

Rinnai New Zealand Ltd., the company and its employees, donated about 1.8
million yen for the restoration from Christchurch earthquake occurred in February
2011 through disaster fund. In addition, we offered barbeque grills as aid supplies
for the victims.

Shipment of aid supply■ Free maintenance services for products damaged with water disaster during rainyseason and summer

Since the beginning of 1980, Rinnai Korea Corporation has been dispatching its
service group to the areas affected by water disaster to provide free inspection
and repairs for gas cooking stoves and gas boilers covered by water. In 2010, thegroup conducted the aid activity for 45 households in Daegu in July, 200
households in Ikusan in August, and 1,600 households in Soul and Incheon in
September.

Free service reception desk

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Rinnai Social & Environmental Report 2011

■ Support for elementary schools affected by Sichuan Earthquake

Guangzhou Rinnai Gas and Electric Appliance Co., Ltd. donated 50,000 yuan(about 630,000 yen) to the educational fund Hongyu Enterprise Group to support
elementary schools affected by Sichuan Earthquake.

■ Other Support Programs

As aid for the restoration project related to a large scale flood caused by a cyclone that occurred in January
2011, Rinnai Australia Pty., Ltd., as a company and its employees, donated about 1.7 million yen to thevictims in Queensland and Victoria, where the damage was severe.
Employees of Rinnai Korea Corporation and its agencies in Korea donated 36.5 million won to the families ofthe victims of Cheonan, which sank in April 2010.
Rinnai (Thailand) Co., Ltd. and its partner companies jointly donated 400,000 baht as a recovery aid to theareas affected by a large-scale flood in the southern area of Thailand in March 2011.

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Support for Sports and Culture
The Group supports events that foster international exchange in the arts and culture
as well as sporting events.

Toyota International
Youth FootballChampionship

Rinnai Corporation, Actual Results in Fiscal 2011
Major financial contribution

Major sponsorship* The tenth meeting of the Conference of the Parties
to the Convention on Biological Diversity (COP 10)* Foundation for the Arts, Nagoya* Chubu High-tech Center (CHC)* Institute for International Policy Studies* Japan Academy of Chamber Music* Japan Virtuoso Symphony Orchestra Concert* Nagoya Philharmonic Orchestra* Nagoya School of Music, The Music Competition ofJapan, Award-winning Celebration Concert* Campus Venture Grand Prix, Chubu Area
* Nagoya Shonen Shojo Hatsumei Club (Invention
and Innovation Youth Club)* Toyota International Youth Football Championship* Nippon Domannaka Festival

Rinnai America Corporation: Actual Results in Fiscal 2011

Rinnai America Corporation supported Ragnar Relay, the longest relay in the worldthat takes up to 12 runners to finish the course of about 300km in the U.S, byinstalling shower rooms in several locations.

Rinnai Italia S.r.l.: Actual Results in Fiscal 2011

The Rinnai Italia S.r.l. participated in the event, “National Heat Technology Contest” held for high school
students in Italy in May 2011 as a sponsor.

■ Rinnai POPS Orchestra Program“Rinnai POPS Orchestra” operated by Rinnai Korea Corporation, isthe only one private orchestra in Korea. It was established in 1986 forthe emotional development in the youth, the contribution for thegrowth of culture in the local community and the improvement of thelevel of culture of the nation. The orchestra annually provides morethan 25 charity concerts including a regular concert and concert trip
visiting various sites based on requests and invitation.

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Promotion of Greenery Activities■ “Home Greenery Project”

In 2008, we started “Home Greenery Project” to contribute to the prevention of
global warming and provide the sense of enjoyment to participants of the project.
We present young blueberry trees, which are easy to grow and absorb CO2 well. So
far, we have offered about 18,000 of young trees trying to reduce CO2 with thecooperation of the project participants. In 2011, we selected 1,000 people from theapplicants to the project by lottery, and presented total 2,000 trees bundling two kinds of trees as a set. We
used the young blueberry trees that were planted and grown in the areas affected by the earthquake in the
Tohoku region.

Our Employee’s Voluntary Activities■ Participation in Environmental Beautification Activities

Each location of the Rinnai Group promotes local environmental beautification activities such as the cleaningof the company vicinity and commuting routes of the employees. Our activities are deeply rooted in each
community.

Cleaning of Kamaishi Coast(With about 100 attendants)

Cleaning of Asahi Factory Area
(With about 130 attendants)

Nurturing the environment near Notojima
Recreation Facility (With 22 attendants)“Clean Walk” (With about 120 attendants)■ Participation in Blood Donation Program

Rinnai Korea Corporation participated in a blood donation program as a social action
program in August 2010. With the help of Incheon Blood Center of Korean Red
Cross Society, 26 employees participated in a group blood donation program. This
program will be continued every year.

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Environmental Policy
Environmental problems including global warming are emerging in various locations around the world. In
modern times the raw materials required for monozukuri (manufacturing) are limited and measures forsustainable growth must be considered. In pursing the development of business activities that will concurrently
contribute to environmental conservation and generate profits, the Rinnai Group would like to become abusiness entity that society hopes for its continuous operations. Toward this end, we have set specific goals tocarry out “Basic Environmental Policy” to strengthen and expand the environment protection activities.

Basic Philosophy on the Environment
Rinnai’s basic philosophy is to embrace environmental protection on a global scale and contribute to society
through the pursuit of excellent, people- and planet-friendly technology, and product development, production,
sales and service infused with a sense of humanity.

Environmental Slogan
Environmental Slogan“Our actions are imbued by the wisdom of many and undertaken with due
consideration to the sustainability of a people- and earth-friendly environment.”

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Rinnai Social & Environmental Report 2011

Basic Environmental Policy
1. Provide environmentally conscious products that have minimal impact on the environment.
Through the diligent pursuit of product development stressing reduced consumption of resources and energy andhigher recycling rates as well as eco-minded materials procurement (E-Procurement), we will provide
environmentally conscious products (E-Products) that have minimal impact on the environment and contribute toa healthier planet.
2. Create green factories and offices with the environment in mind.
We will emphasize activities that save energy, reduce waste and limit or eliminate hazardous chemical
substances, and we will work toward the establishment of environmentally sustainable factories andoffices—E-Factory and E-Office—that fit in with the natural surroundings.
3. Consider how sales and service activities might affect the environment.
We will reduce the impact that sales (E-Marketing), services (E-Service) and other business activities in general
might have on the environment.
4. Formulate an environmental management system and continuously improve it.
We will formulate an environmental management system and continuously enhance its scope through theestablishment and management of appropriate environmental objectives and targets.
5. Ensure activities are in compliance with regulations and restrictions, including laws, andself-established standards.
Obviously, we will abide by laws, ordinances, agreements and other regulations and restrictions, but we will also
set and adhere to self-established standards corresponding to social demands. We will always strive to enhance
our response to meet revised regulations and evolving standards.
6. Raise environmental awareness among employees and work with communities to contribute tosociety.
We will raise environmental awareness among all employees through environment-themed training, and we will
promote activities undertaken jointly with regional communities and other groups to achieve public good. This
perspective is called e-mind.
7. Disclose information to employees and the communities in which we work.
We will disclose environment-related information, such as policies and strategies, to keep employees and society
at large in the loop about our perspectives and actions on environmental issues.

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Basic Environmental Activity“7E” Strategic Initiatives: Green Activities Involving All Employees
in All Business Areas
Based on our goal to achieve a sustainable operation, we have been promoting the “7E” Strategic Initiatives.
The employees with a high sense of environmental awareness create environmentally conscious products atgreen factories to provide these products to customers with our confidence. As a monozukuri-driven company,
we pay considerable care to the entire lifecycle of our products—from product development to procurement ofmaterials and components and on through production and then sales, use and disposal. Our consideration
goes to each element including “procurement” of materials and components, “factories” as the base of ourmonozukuri, “sales” of our products, “services” related to the products used by our customers, "offices”,
where administration activities take place and “employee”, the foundation of our activities.
Develop and provide environmentallyconscious products.

E-Products(Products)
Promote activities with reduced environmental
impact at the offices.

Promote green procurement
Promote activities with reduced
environmental impact.

E-Office(Offices)

E-Service(Installation andrepair)

E-Procurement(Procurement)

E-Marketing(Sales)Emphasize environmentally conscious
installation and repair services.
Sell environmentally conscious products.
Encourage customers to be moreenvironmentally aware.

E-Factory(Factories)

E-Mind(Employees)

Improvement of our employees’
environmental awareness and promotion ofsocial action programs throughenvironmental education

7E Strategic Initiatives

7E (Primary promotional items)
1

E-Products (Products)

Develop and provide environmentally conscious products.

2

E-Procurement (Procurement)

Promote green procurement

3

E-Factory (Factories)

Promote activities with reduced environmental impact.

4

E-Marketing (Sales)

Sell environmentally conscious products. Encourage customers to be
more environmentally aware.

5

E-Service (Installation and repair)

Emphasize environmentally conscious installation and repair services.

6

E-Office (Offices)

Promote activities with reduced environmental impact at the offices.

7

E-Mind (Employees)

Improvement of our employees’ environmental awareness andpromotion of social action programs through environmental education

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Environmental Management System
Rinnai maintains an environmental management system based on ISO 14001. We effectively utilize thismanagement system and constantly strive to promote environment management practices aimed atenvironmentally conscious monozukuri and to raise environmental performance. Our goal is to contribute to theformation of a society capable of sustainable development.

Actual Results of Fiscal 2011
To underpin the systematic and continuous development of environment-oriented activities in line with ourstated basic environmental policy, we encourage all members of the Rinnai Group to embrace efforts toacquire and maintain ISO 14001 certification. In May of fiscal 2011, three departments including the Kanto
Branch and Chugoku Branch, the marketing and sale divisions, and the Components Center responsible forthe management of functional components needed for repairs, obtained ISO14001:2004 certification. In
addition, a domestic group company, Techno Parts Co., Ltd., was certified Eco Action 21 in August 2011. To
enhance environment activity further, we will promote the certification acquisition by domestic sales
operations and overseas group companies.

■ Locations that newly acquired ISO14001

Kanto Branch

Chugoku Branch

Components Center* Certification acquisition status

ISO 14001 Environmental management system certification acquisition status (1/2)
Location

Rinnai86

Research and Development Headquarters
Production Engineering Division
Oguchi Factory
Seto Factory
Environment Division
Aichi Factory
Asahi Factory
Quality Assurance Division
Head OfficeKansai Branch
Logistic Unify Office
Kanto Branch
Chugoku BranchParts Center

Certified year/month
October 1997
October 1997
October 1997
December 2000
December 2000
November 2003
November 2003
November 2003
December 2008
May 2010
May 2010
May 2011
May 2011
May 2011

Rinnai Social & Environmental Report 2011
ISO 14001 Environmental management system certification acquisition status (2/2)
Location Name

DomesticGroup
Company

Overseas
Group
Company

Certified year/month

Rinnai Technica Co., Ltd.
Yanagisawa Manufacturing Co., Ltd.
Rinnai Precision Co., Ltd.
Japan Ceramics Co., Ltd.
RT Engineering Co., Ltd.
RB Controls Co., Ltd.
Noto Tech Co., Ltd.
Rinnai Korea Corporation
RB Korea Ltd.
Shanghai Rinnai Co., Ltd.

December 2003
June 2004
December 2005
January 2006
March 2006
March 2006
January 2007
July1997
October 2006
December 2008

Environment Management System "Eco Action21"
Location Name
Domestic Group Company

Certified year/monthTechno Parts Co., Ltd.

August 2011

* Topic: Techno Parts Co., Ltd.

Four locations of Techno Parts Co., Ltd, a domestic Group company which manufactures components, werecertified Eco Action 21 in August 2011.

Ichinomiya Facility

Sango Facility

Ida Facility

Komaki Facility* Eco Action 21: Certification and registration system that effectively and efficiently conducts environmental activities tocreate sustainable society in accordance with the guidelines established by the Ministry of the Environment.

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Rinnai Social & Environmental Report 2011

Environmental Activities Structure
The Environment Management Committee guides corporate efforts to achieve targets based on
environmental policy. This committee is chaired by the executive officer responsible for the environment andhas the participation of representatives from all divisions. Its mandate is to promote environment-oriented
activities from a big-picture view.

President

Environment Management Committee

Environment Division

Chairman of the Committee: Executive Officer in charge of environmental issue
Execution and improvement of environment management.

Planning and administration ofenvironment activities

Research &Development
Headquarters

Production
Engineering
Division

Factories

Head Office

Other offices

Environment Management Activities
The Environment Management Committee discusses and decides
important items including the basic environmental basic policy, thegoal and a medium to long-term plan. The committee thoroughly
informs all Rinnai employees about decisions of the committee
and promotes concrete activities in line with annual plans. We
review our objectives as necessary and diligently strive to meet
our targets. Each division has a liaison group and holds routine
meetings to make issues known to everyone in the respective
division and continue improvement activities.

Review meeting byexecutives

Liaison group

Environmental Audits■ External Audits

The ISO 14001 Certification Division undergoes a routine audit,
once a year, by an external screening/registration body to verify
that the environmental management system is being properly
applied. The routine audit in fiscal 2011 did not turn up any major
non-conformances.
External audit

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Rinnai Social & Environmental Report 2011

■ Internal Audits

Auditing team, comprising impartial internal auditors chosen fromwithin the Corporation who have no direct connection to thedivision under audit, assesses conformity to the establishedenvironmental management system and reviews division activities.
Auditors visit worksites of divisions tapped for an audit andperform detailed inspections. Direct contact between auditors anddivisions facilitates greater understanding of division activities andauditor concerns. Internal audits in fiscal 2011 found no major
non-conformances. There were 12 opportunities for improvement
and 59 observations. We swiftly addressed these areas to ensurethat they would not develop into problems later on.

Internal audit

Environmental Training■ Internal Auditor Training

Internal auditors play a significant role over and above their efforts
to continuously improve the environmental management system.
The execution of audit requires highly specialized knowledge andcommunication skill. To upgrade the skills of internal auditors, we
conduct regular training by in-house instructors on such topics aslaws and ordinances, internal regulations, internal audit
observations and improvement measures, and environmentoriented trends. In fiscal 2011, the courses drew 61 participants.

Internal auditor training■ Eco-Leader Course

In every division, we offer an eco-leader course aimed atdeveloping the skills of environment managers who independently
and energetically promote environmental activities. The one-day
course is presented by in-house and guest instructors and covers
a wide range of points, from environmental management basics toconcrete examples. In fiscal 2010, the course was attended by 20
people.

Eco-Leader Course

89Rinnai Social & Environmental Report 2011

Enhancing Global Environment Management: Creating anenvironmental management system with our business partners■ Reinforcement of Chemical Management

All over the world, governments are implementing tougher restrictions on chemicals, and manufacturers are
increasingly required to monitor their use of chemicals used during production processes and the chemical
content in finished products. Chemical substances are known to present certain risks, depending on the harmthey could inflict. It is important to identify such information.
In Europe, especially, manufacturers must adhere to strict regulations, such as the Restriction of Hazardous
Substances (RoHS) Directive and Registration, Evaluation, Authorization and Restriction of Chemicals(REACH). As a collection of companies, the Rinnai Group must assume a unified approach in managing
information on the chemicals contained in its products. We must properly address laws and regulations athome and abroad and respond accurately to requests from customers on the chemicals found in our products.
Chemical substances are a critical key component of quality control. They are unseen yet require monitoring.
Members of the Chemical Management Project promote activities to establish and further strengthen theplatform for chemical management.
* RoHS Directive: "DIRECTIVE 2002/95/EC OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 27 January
2003 on the restriction of the use of certain hazardous substances in electrical and electronic equipment" Since July 1,
2006, the EU market has been restricting the use of lead, mercury, cadmium, hexavalent chromium, polybrominatedbiphenyls (PBB) and Polybrominated diphenyl ethers (PBDE) in electrical and electronic equipment.
* The Registration, Evaluation, Authorization and Restriction of Chemicals (REACH): It is a new regulation on chemical
substances in EU that mandates registration, evaluation and authorization of chemical substances manufactured in or
imported to EU.

Rinnai's Procurement Management Standards

E-Procurement Standards

Policy on Chemical Substance Management■ Support to Establish Environment Management System

To promote environmentally conscious monozukuri working with our business partners, we encourage ourbusiness partners to obtain certifications for environment management system including ISO14001, Eco
Action 21 and KES.

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Rinnai Social & Environmental Report 2011

Environmental Action Plan and Results
Fiscal 2011 Environmental Action Plan and Results
Rinnai lists herewith the targets for key activities-environment management and the 7Es (E-Products,
E-Procurement, E-Factory, E-Marketing, E-Service, E-Office and E-Mind)-and the results achieved, as wellas an assessment of progress toward respective goals.
*Progress rating ○: Achieved △: Not achieved ×: Not implemented
Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Progress

Environmental
management
system• ISO 14001 certification for threedivisions - a marketing and sales office,a branch and Components Center.

• ISO 14001 certification obtained forthree divisions - Kanto Branch, Chugoku
Branch and Components Center○

Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Progress

Prevent global
warming• Develop high-efficiency appliances• Develop condensing heat source
products for the domestic and overseas
markets• Develop remote controls withenergy-saving display function• Reduce stand-by power consumption
Eco-Jozu hot-water units, full-scale
Eco-Jozu hot-water and heating system• Develop high-efficiency appliances
Eco-Jozu hot-water units,
Eco-Jozu heat source for hot water andheating system• Reduce stand-by power consumption
Eco-Jozu hot-water units,
Eco-Jozu heat source for hot water andheating system○

E-Products

Prevent air pollution• Develop low-NOx condensing
hot-water heater for overseas markets.

Reduce resource
consumption,
promote recycling• Implement product assessments.
• Develop lightweight condensing
products.
full-scale Eco-Jozu hot-water andheating system, Yukko Eco-Jozu• Develop products that conserve waterand cut running costs.

• Develop low-NOx condensing
hot-water heater
Eco-Jozu hot-water units,
Eco-Jozu heat source for hot water andheating system• Implement product assessments.
• Develop lightweight condensing
products.
Eco-Jozu hot-water units,
Eco-Jozu heat source for hot water andheating system• Develop products that conserve waterand cut running costs.
Eco-Jozu heat source for hot water andheating system,
remote controls with energy-saving
display function○○

E-Procurement
Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Progress

Green procurement• Green product development.
(Promote use of materials conforming to
E-Procurement Standards)• Enhance green procurement
management (chemical management).

• Procure and use materials based on
E-Procurement Standards• Establish Chemical SubstanceManagement Office under Environment
Division to strengthen chemical
substance management activities○

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Rinnai Social & Environmental Report 2011

E-Factory
Activity
Prevent global
warming

Reduce waste

Reduce hazardous
chemical
substances

Fiscal 2011 Target

Fiscal 2011 Achievement• Push total CO2 emissions below 90%
of fiscal 1999 level• Push total CO2 emissions below
90.3%of fiscal 1999 level(Total CO2 emissions 4.4% increase fromthe previous year)• Average recycling rate 100% for zero
emission locations• Reduce waste by 18.2% from fiscal
2003 level• Reduce by 55.3% from fiscal 2002 level(The amount of hazardous chemical
substances used: 3.7 tons increase fromthe previous year.)• Sustain/improve zero emission status
to boost recycling rate above 99.5%.
• Promote strategies in line with waste
reduction plans at each location.
• Reduce volume of hazardous
chemical substances-as listed on the
Pollutant Release and Transfer
Register-by 50%, based on the fiscal
2002 level.

Progress△○○

E-Marketing, E-Service
Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Progress

Expand sales ofhigh-efficiency
products• Cut CO2 emissions fromhigh-efficiency hot-water units by
31,000t-CO2/year.
• Introduce and promote awareness ofenvironmentally conscious products at
trade shows.
• Create and distribute catalogs, flyers
and pamphlets.

• Cut CO2 emissions from high-efficiency
hot-water units by 30,000t-CO2/year.

△• Introduce and promote awareness ofenvironmentally conscious products at
trade shows.
• Create and distribute catalogs, flyers
and pamphlets.

○

Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Progress

Green purchasing• Sustain green purchasing rate above
95% for office supplies and officeautomation equipment.

Provide information
on environmentallyconscious products

E-Office• Green purchasing rate: 95.3％○

E-Mind, Other
Activity

Fiscal 2011 Target

Fiscal 2011 Achievement

Environmental
information
disclosure• Issue Social & Environmental Reportfor fiscal 2011.
• Upload environment-oriented
information to the Rinnai website.

• Issue Social & Environmental Reportfor fiscal 2011. (September)• Upload environment-oriented
information to the Rinnai website.
(September)• Execute new employee training,rank-specific training program, internal
auditor training and internal chief auditor
training

Environmental
education andawareness

92

Promote various educational activities
in line with fiscal 2011 plans for the
Corporation and all its places ofbusiness.

Progress○○Rinnai Social & Environmental Report 2011

Fiscal 2012 Environmental Action Plan
We always assume a new perspective in working toward new targets.
In fiscal 2012, the first year to launch the new medium-to long-term plan, we will promote environmental
activities designed to take us further ahead on the environmental road. We aim to expand our environmental
management system and enhance our environmental performance.
Activity
Environmental
management
systemBasic Action Plan
• Build a groupwide environmental
management system and improve
environmental performance throughcooperative activities.

Fiscal 2012 Target• ISO 14001 certification for three divisions- a
marketing and sales office and two branches

E-Products
Activity

Prevent global
warmingPrevent air pollution

Reduce resource
consumption,
promote recycling

Basic Action Plan

Fiscal 2012 Target• Push Eco-Jozu as the de facto standard,develop remote controls with energy-saving
display function and high-efficiency appliances,emphasize measures to reduce stand-by andin-use power consumption, and constantly
develop energy-saving, industry-leading
products.

• Develop high-efficiency appliances• Develop condensing heat source for thedomestic and overseas markets• Develop remote controls with energy-saving
display function• Reduce stand-by power consumption,condensing combi boiler, condensing heatsource for hot water and heating system,
Fan-forced heaters for the domestic market• Develop low-NOx condensing hot-water
heater• Implement product assessments.
• Develop lightweight condensing heat source.
Develop condensing hot-water units foroverseas markets.
• Develop products that conserve water andcut running costs.

• Develop low-NOx products.
• Save resources by making products andcomponents smaller and more lightweight, andstrive to develop products conducive toresource recycling.

E-Procurement
Activity

Basic Action Plan

Fiscal 2012 Target

Green procurement• Work with suppliers and Group companies
and promote procurement of parts with anenvironmental perspective highlighting
resource-saving, energy saving and recycling
potential.

• Green product development.
(Promote use of materials conforming to
E-Procurement Standard)• Enhance green procurement management(chemical management).

E-Factory*From fiscal 2012, not only the production divisions, but also all divisions share Basic Action Plan and Target, "Prevent
global warming" and "Reduce waste".
Activity

Basic Action Plan

Fiscal 2012 Target

Prevent global
warming• Reduce total CO2 emissions more than 4%,
based on fiscal 2010 level, by fiscal 2014
• Sustain zero emission status (Recycling rate
above 99.5%)• Reduce total waste output by more than 3%,
based on fiscal 2011 level by fiscal 2014
• Reduce volume of hazardous chemical
substances—as listed on the Pollutant Release
and Transfer Register-by more than 53%,
based on the fiscal 2002 level by fiscal year
2014.

• Reduce total CO2 emissions more than 2%,
based on fiscal 2010 level• Sustain/improve zero emission status• Reduce total waste output by more than 1%,
based on fiscal 2011 level

Reduce waste

Reduce hazardous
chemical
substances• Reduce volume of hazardous chemical
substances-as listed on the Pollutant Release
and Transfer Register-by more than 51%,
based on fiscal 2002 level.

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Rinnai Social & Environmental Report 2011

E-Marketing, E-Service
Activity

Basic Action Plan

Fiscal 2012 Target

Expand sales ofhigh-efficiency
products• Expand sales of high-efficiency products
Hot-water units (Eco-Jozu gas/solar hybrid
hot-water system)• Provide information on environmentallyconscious products at trade shows and in
printed materials, such as catalogs, flyers andpamphlets.

• Cut CO2 emissions from hot-water units by
37,000t-CO2/year.

Activity

Basic Action Plan

Fiscal 2012 Target

Green purchasing• Increase green purchasing rate to be above
91% for items including those newly addedfrom fiscal 2012, by fiscal 2014.

Provide information
on Environmentallyconscious products• Introduce and promote awareness ofenvironmentally conscious products at tradeshows.
• Create and distribute catalogs, flyers andpamphlets.

E-Office• Set green purchasing rate above 90% foritems including those newly added.

E-Mind, Other
Activity
Environmental
information
disclosure
Environmental
education andawareness

94

Basic Action Plan

Fiscal 2012 Target• Utilize Social & Environmental Report and
Rinnai website to spotlight environmental
activities and present environment-oriented
information.
• Enthusiastically promote environmental
education and awareness activities to
employees and continuously enhanceenvironmental consciousness.

• Issue Social & Environmental Report for
fiscal 2012.
• Upload environment-oriented information to
the Rinnai website.
• Promote various educational activities in linewith fiscal 2012 plans for the Corporation andall its places of business.

Rinnai Social & Environmental Report 2011

Environmental Accounting
To realize continuous growth while promoting environmental management, we must accurately quantify thecost of environmental protection and the results achieved. We must also ensure that our approaches are
effective through appropriate allocation of management resources. We utilize guidelines set by Japan's
Ministry of the Environment as the tools in executing these tasks.
Scope of accounting Rinnai Corporation
Period of accounting April 1, 2010 to March 31, 2011

Cost of Environmental Protection(Unit: Ten thousand yen)
Breakdown of Costs forEnvironmental Protection
Pollution prevention
Environmental
In the scope ofprotection
operations
Resource recycling
Upstream/downstream
Management activities
Research and development
Community efforts

Key Activities

Costs

Mainly efforts to prevent air and water pollution
Mainly efforts to save energy

3,568
1,835

Recycling as well as treatment and disposal of industrial
waste
Collection/recycling and volume/weight reduction ofmaterials such as product packaging
Mainly monitoring and surveillance of environmental impact
R&D on environmentally conscious products addressing
energy- and resource-saving features and reduction and/or
elimination of hazardous chemical substances
Mainly community activities and beautification/greening at
places of business and surrounding areas

Total

Item

Upstream/downstream
results

Environmental impact
reduction through use of
products

2,965
8,218
54,893242

74,533

Content

On-site results

2,812

Saving energy reduced
greenhouse gases
Reduction of NOx withproducts with low NOx
emissions
High-efficiency products
reduced CO2(Unit: Ten thousand yen)
Environmental Impact
Reduction
584tCO2/year
60t/year
79,592tCO2/year(Unit: Ten thousand yen)
Economic Effects
Accompanying Environmental
Protection Measures

Item

Economic Effect

Costs cut through energy-savings andwaste reduction

2,245■ About environmental protection costs• R&D costs are associated with the development of environment-related, leading-edge technologies andproducts for the gas appliance market as well as products that, based on Rinnai's standards, mark an
improvement over existing products.
• Costs covering other applications, which include non-environment-oriented activities, are apportioned
according to internal rules.
• The calculations above exclude depreciation and amortization expense.

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Rinnai Social & Environmental Report 2011

■ About success of environmental protection efforts• The success of environmental protection efforts through energy-saving efforts and waste reduction is not achange in overall volume but rather the assumed effect achieved through associated activities.
• The success of environmental protection efforts through the use of products with the capacity to reduce
environmental impact is not an industry result but rather a year-on-year comparison based on Rinnai's
sales of such products. We determined these estimates based on annual volume over normal usage.

■ Economic effect• The economic effects achieved through energy-savings and waste reduction are not increases ordecreases in overall costs but rather an effective amount regarded for its economic benefit through theassociated activities.
• Deemed effects, such as avoiding risks and enhanced product sales, fall outside the scope of economic
effects because the standard for evaluation is too vague.
• External economic effects, derived mainly through products that reduce environmental impact, also falloutside the scope of economic effects because the results are too difficult to pinpoint.

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Rinnai Social & Environmental Report 2011

Developing Environmentally Conscious Products
Environmentally conscious design addresses such issues as measures to prevent global warming, to facilitate
resource recycling, and to reduce the use of substances that have a negative impact on the environment.
Based on this perspective and guided by the keywords safety, peace of mind, comfort and convenience, we
pursue the development and design of products that contribute to comfortable lifestyles for our customers.

Efforts to Save Energy and Resources■ Optimum energy mix of electricity and gas

We developed energy saving products by combining high-efficiency gas hot-water units, Eco-Jozu, and theheat pump technology, which utilizes air-source heat.

Gas/solar hybrid hot-water system* The system attained a primary energy efficiency ratio of 107%, improving by 20% compared to conventional
high-efficiency gas hot-water units.
* The system reduces about 42% of CO2 emission compared to conventional gas combi boiler.
"Standards of Judgment for Residential Construction Clients", which defines the energy-saving capability of housing,certified our product as a hot-water unit with top level energy-saving capability in April 2011.

Gas/solar hybrid hot-water system
ECO ONE

Heat-pump unit
RHP-R50(W)

Tank built-in unit
RTU50-E240A2-1 (W)A97

Rinnai Social & Environmental Report 2011
• Configuration of Hybrid Hot-Water Unit
EcoJozu

Small
tank

Hot water
supplyWhen a small amount of hot water is used:
Operate a heat pumpWater
supplyShowerHot
watersupplyEcoJozu

Small
tank

Bath

When a large amount of water is used:
Operate a heat pump and a high-efficiency hot-water unit,
ECO-JOZU.

Water
supplySmall
tank

EcoJozuHomeheating
appliances

When a hot-water heater is used:
Operate a high-efficiency hot-water unit, ECO-JOZU.
The product exceeds the housing energy-saving standards of fiscal
2014 although it adopted the function to provide floor heating.

• Comparison of annual CO2 emissions (All power sources)0

Gas/solar hybrid
hot-water system
Conventional gas
combi boiler

500

1000

1500

2000

(kg-CO2)

875

1510

Researched by Rinnai Corporation in November 2010
4.48GcalAnnual hot water
Based on Standards of Judgment for Residential Construction Clients, Institute forsupply load
Building Environment and Energy Conservation
CO2 emission
coefficientElectricity(All power source)

LP gas 6.00kg-CO2/m3(Act on Promotion of Global Warming Countermeasures, Article 3)
0.43kg-CO2/kWh(Ministry of Economy, Trade and Industry: Average emission coefficient for all powersource from 2004 to 2008 based on a medium-to long-term evaluation.)* Primary energy efficiency: "Primary energy" is the energy which can be obtained without changing its form of the way
it exists in nature such as coal, oil and natural gas. "Primary energy efficiency" is the efficiency ratio which converted
the amount of final energy consumption to its equivalent in the amount of primary energy needed to produce theenergy. Higher primary energy efficiency means a lower energy conversion loss rate, better utilization of energy
resource and effective energy-saving.
* Standards of Judgment for Residential Construction Clients: These energy-saving standards for housing for sales
were newly established for residential construction clients who design and build houses to reinforce energy-saving
measures.

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Rinnai Social & Environmental Report 2011

Gas/solar hybrid hot-water system for cold regions* To improve the heating performance, the heat from the heat pump is utilized not only for hot water supply
but also for a hot-water heating system.
When heating load is low, only a heat pump is operated.
When heating load is high, a heat pump and ECO-JOZU, a high-efficiency hot-water unit, are jointly
operated.
* It reduces about 13% of CO2 emissions compared to conventional gas hot-water heaters.
* Heating performance: A panel heater allows the connection of a maximum of 10 units.
The heater employs a closed heating circuit, which seals the air in a heating circuit to inhibit rust. It can be connected toiron panel radiators including panel heaters, which are widely used as a heating facility in cold regions.

Gas/solar hybrid hot-water unit
ECO ONE

Heat pump unit
RHP-C60

Heat source
RHB-CM6240AFF2-1

Tank unit
RTU-C500

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Rinnai Social & Environmental Report 2011
• Comparison of annual CO2 emissions from the combined use of hot-water supply and heaters
0

1000

2000

3000

Hybrid hot-waterand heating units

4000

5000

6000

(kg-CO2)

4029

Conventional gas
hot-water andheating units

4619

Energy-saving mode
No heat pump water supply setting
No heat pump heating setting

-7°C
2°C
Electricity charges by time zone

Contract type for power usage("Dream 8" by Hokkaido Electric Power Co., Inc.)

4,508,636kcal

Annual hot-water supply load

By operation mode defined by Japan Industrial Association of Gas and Kerosene
Appliances

9,153,040kcal

Annual heating load

By Rinnai Hokkaido monitor data

■ Aiming to realize a low-carbon society with earth-friendly hot-water units

Switch to Eco Jozu by 2013 Campaign
Aiming to convert all gas hot-water units to Eco Jozu products by 2013

As a measure to realize a low carbon society, Rinnai supports the "Switch to Eco Jozu by 2013 Campaign"declared by the Japan Industrial Association of Gas and Kerosene Appliances and the Japan Gas Energy
Promotion Association. We are promoting our product development to convert all gas hot-water units tohigh-efficiency hot-water units, "Eco Jozu", which is energy-saving and environment-friendly with a thermal
efficiency rate of about 95%, by March 2013.
To cope with various installation requirements and needs, after 2009, Rinnai developed Eco Jozu E-series
products including "RVD • RUFH (hot-water, bath and heating systems)", "RUF (hot-water and bathsystems)" and "RUX (a dedicated hot-water system)".
Configuration of Hot-Water Unit
[Conventional hot-water unit]
Reutilize heatreleased fromthe first heatexchanger(about 200°C) at
the second heatexchanger.

Heat the firstheat exchanger
with a burner.

100[Eco Jozu]
The second heatexchanger
pre-heats thewater which wassent to theexchanger first.

The first heatexchanger
reheats the water
heated with thesecond heatexchanger again.
In this way, thesystem produces
hot water withless energy.

Rinnai Social & Environmental Report 2011
Main Eco Jozu Products which were newly developed
Gas heat source for hot-water andheating unit Eco Jozu
(Hot-water, bath and heater system)

Remote controller for
kitchen-use
MC-200V

Remote controller forbathroom-use
BC-200V

RUFH-E series

Gas combi boiler Eco Jozu
(Hot-water, and bath system)

Remote controller for
kitchen-use
MC-123V

Remote controller forbathroom-use
BC-123V

RUF-E series

Gas hot-water unit Eco Jozu
(Dedicated hot-water system)

Remote controller for
kitchen-use
MC-140V

Remote controller forbathroom-use
BC-140V

RUX-E series■ Utilization of natural energy"SOLAMO", a balcony-fence embedded solar water-heating system[Chairperson's Award, The Seventh Eco Products Awards Steering Committee]* About 29% of reduction in CO2 emissions compared to conventional hot-water units
A solar water-heating system, "SOLAMO" consists of heat collection panels, a tank to store the water heatedwith solar energy and sub-heat source. Its remote controller has an energy consumption status display
function and a switch that allows using only the hot water heated with solar energy. Thus, the product is not amerely an energy-saving product but also facilitates functions to promote users to be conscious about
conserving energy.

* Jointly developed by 5 companies including Rinnai Corporation, Gastar Co., Ltd, Yazaki Corporation,
Sangyo Tateyama Aluminum, Inc. and Tokyo Gas., Co., Ltd.

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Rinnai Social & Environmental Report 2011

Safety and Peace of Mind, Comfort and Convenience■ Kitchen appliances"DELICIA", a built-in stove with waterless grill with double-burner

RRB71W10G7V-S

A winner of Fiscal 2011 GOOD DESIGN Award• Heat-off glass top
It has a structure to disperse/release the heat and inhibit the increase of glass surface temperature, so food spill will be
unlikely to get burnt on the gas stove.

Surface temperature dropped about 66°C
compared to conventional products.

• Smoke-off function
Special burner drastically eliminates the issues related to smoke and smell for cooking fish.
Special burner
Comparison test <Amount of smoke generated when cooking fish>
Conventional
DELICIANew
DELICIA

Smoke: 81% down
Smell: More than 99% down(Compared to our conventional products)• Making it easy to clean the inside of the grill
We increased the size of a lower burner cover in the grill to prevent it to get dirty.
Conventional
products

New
products

Lower burner cover102

Rinnai Social & Environmental Report 2011

Compact (56cm) fluorine-coated gas stove with one-side burner grill (Water required)

RTS-338NFTS (SL)• Making it easier to clean the top plate
It is the first fluorine-coated flat and clean stove without drip pans.
Stove top grates and burner-rings can be removed.

■ Air-conditioners
Fan heaters

RC-K4002E-WH• Improvement of energy-efficiency
They employ "Eco Operation Function" which efficiently warms up a room while providing comfort.
• Operability Enhancement
Control panel is easy to use.

Morning timer
set-up switch

Digital display to indicate current time,
set temperature and current
temperature

Sleep timer switch(With four options: Automatic turn off after 60, 45, 30 and 15 minutes.)

Eco manner switch

On/off switch

Room temperature and timer setting switches

Timer switch to set clock
and morning timer

If you press these switches together, they'll be locked.

* This photo is a control panel for RC-K4002E.

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Rinnai Social & Environmental Report 2011

■ Professional Appliances
Professional-use single cooktop gas stove with temperature control function

Set temperature light

Temperature control function for frying

Timer function

RSB-10T• Operability Enhancement
It has a temperature control function and a timer that facilitate cooking at the same temperature for the same duration.
Temperature control function for frying: Temperature can be set from 160 to 220°C with an interval of 5°C.
Timer function: Timer can be set for 1-99 minutes with an interval of 1 minute.

Let us make a kitchen cooler and more comfortable by reducing radiant heat fromappliances.
Low radiant heat-type gas rice cooker for professional-use

RR-S15SF

RR-S20SF

RR-S15VNS• Improved thermal insulation capability
The surface temperature of the outside layer was reduced to lower than a half by making the body of the rice cooker intoa three-layer structure.

Conventional rice cooker

104

SUZUCHU rice cooker

Rinnai Social & Environmental Report 2011

High-speed benchtop gas oven for professional-use

RCK-S10AS• Improved thermal insulation capability
Surface temperature on upper area of open door and door glass was reduced to about a half by employing "SUZUCHUOven door (with door glass)".
• Easier cleaning
The design allows the user to remove the outer layer of the oven door.

105

Rinnai Social & Environmental Report 2011

Packing
We promote packages which only use corrugated board to reduce the use of styrene foam and waste-related
issues. In addition, we are also expanding our use of returnable packing to reuse packing materials andreduce the amount of packing used.

■ Reduce Use of Containers and Packaging
Returnable Packing• Hot-Water and Heating Units

Corrugated board packing

Returnable packing

Collection style of packing material

Utilization of Plastic Boxes to Transport Goods between Our Locations• Container boxes for remote controllers

Corrugated cartons

Plastic containers* Reduction of corrugated cartons: About 900kg/month■ Styrene Foam Use Trend (Volume)

Fiscal 1999

106

2007

2008

2009

2010

2011

Rinnai Social & Environmental Report 2011

Topic: Received "Japan Packaging Contest 2010: Electric Equipment Packaging CategoryAward"

Downsizing of built-in gas stove packaging
The packaging successfully reduced the use of package materials and improved the logistic efficiency bydownsizing the corrugated carton size compared to those for conventional system stove products.
Used corrugated cartons

6.0kg → 5.4kg

Loading efficiency

Up 12.5%

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Recycling■ Recycle Household Electrical Appliances

Japan's Home Appliance Recycling Law went into effect April 2001 with the goals to reduce the amount ofwaste going to landfills and incinerators and to promote more effective use of resources. Since then,appliances that consumers no longer want to use have been recycled into new products. Rinnai now has two
products—a unit-style air-conditioner and a clothes dryer—that can be redirected from the waste pile.

Unit-style air-conditioner

Clothes dryer

Rinnai Products Subject to the Home Appliance Recycling Law and Guideline Values
Product

Recycling Rate Statutory Guideline Value

Unit-style air-conditioner

70%

Clothes dryer

65%
Product

Unit-style air-conditioner

Clothes dryer

5,724 units

902units

5,634units

889units

231.8 tons

30.4tons

210.2tons

27.3tons

90%

89%

Number of units brought todesignated collection points
Number of units processed forrecycling
Weight of units processed forrecycling
Weight of recycled materials
Recycling rate

* Rinnai's bathroom and kitchen televisions are incorporated into the building architecture. Consequently, they falloutside the liquid-crystal television receiver category added to the national recycling law in April 2009.

■ Recycle Containers and Packaging

The Containers and Packaging Recycling Law obligates manufacturers and user businesses to recycle
product containers and packaging discarded by households in an effort to make more effective use ofresources. In accordance with the law, Rinnai has contracted a designated corporation that recycles
containers and packaging on the Corporation's behalf.

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Environment-Conscious Monozukuri
Since its establishment, Rinnai has been accumulating its outstanding Monozukuri technology and work
methodology that shall be followed. By sharing and passing this culture over generations, we have beenrealizing a wide range of technology innovation that fundamentally supports our vigorous environment-friendly
business activities.

Environmental Footprint in Monozukuri
Energy and natural resources (electricity, gas, oil, raw materials)
InputsParts and Raw Material
Procurement

Mainly iron, stainless steel, copper, brass, aluminum, resin and rubber
Contributes to global warming, air pollution, ozone layer
depletion, water pollution, soil contamination, noise and odor

Distribution

INPUT

OUTPUT

Water

Released into water
systemWell water 170,000m3
Clean water 210,000m3

Technology Development Center
Production Technology Center

Released into the air

EnergyElectricity
Gas

220,000m3

Four Rinnai factories

CO2
NOx

50,970,000kWh

42,621 t CO2
51 t

3

City gas 13A
4,450,000m
Liquefied petroleum gas
1,899 tons

Other fuels

Waste output

3,356 kl(oil equivalent basis)

Eight domestic production
Head office, Integrated Logistics Center,companies under Group umbrella Components Center, Branches and offices,
and Training Center

16,111t

Distribution

Customers’ use of products

Contributes to global warming, air pollution
Distribution

Recycling (processing)Distribution

Contributes to global warming, air pollution, ozone layer
depletion, water pollution, soil contamination, noise and odor

Distribution

Waste (landfill)

Contributes to air pollution, water pollution, soil
contamination, noise

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Pursuit of Monozukuri Reforms
Since its establishment, Rinnai has been accumulating its outstanding
Monozukuri technology and work methodology that shall be followed. By
sharing and passing this culture over generations, we have been realizing awide range of technology innovation that fundamentally supports our vigorous
environment-friendly business activities.

Production Technology Center■ Reduction of Environmental Burden through the Optimization of Production

Production Division is working on its improvement project, setting"Number of processes per hour" as a key performance indicator, KPI.
To increase our productivity, we target to reduce the number ofprocesses rather than increasing production output. We started
displaying the operating ratios of our production facilities and load
ratio information utilizing IT system. By shortening processes andreviewing the components supply methodology, we strive to
optimize our production, utilize resources and reduce environmental
burden.

■ Topic"Modification of Sales Activity Processes from the Viewpoint of Production Division"
Stagnant communication flow from Sales Division could harm productivity disturbing the regular production
plan and creating extra-urgent requests. For Environment-Conscious Monozukuri, it is crucial to immediately
pass order information to production sites. To do so, it was inevitable for the Sales Division to increase thefrequency of visits to our customers. Thus, Production Engineering Division dispatched its process
improvement team staff to sales locations to analyze the business activities of our sales staff for a certain
period. Based on the analysis, measures were taken to improve the efficiency of sales activities. This resulted
in a substantial reduction of urgent orders. The process innovation of Sales Division and the improvement
activities of Production Division contributed to the enhancement of business efficiency by reducing
inventories by 30% and shortening production lead-time of our major production from three days to two days.

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Efforts to Prevent Global Warming■ Observance of Energy-saving Laws

Energy-saving Laws used to demand companies submit an energy consumption report on a factory/businesslocation basis. However, the revised laws, which went into effect in April 2010, demand them to present thedata for an entire company. Rinnai was designated as "a specified business operator", which has an
obligation to select staff in charge of energy management and promote company-wide energy control
measures. To improve energy efficiency more than 1% every year, we are promoting various global warming
prevention measures including energy conservation activities.

■ "Challenge 25 Campaign"

The Rinnai Group was one of the first members that joined the Challenge 25 Campaign that started in
January 2010 as a national program to prevent global warming by cutting CO2 emissions. We are actively
promoting a global warming prevention program. Moreover, after the outbreak of the East Japan Great
Earthquake on March 11, 2011, to cope with the power shortage issue, Rinnai strengthened its measures tosave energy through our daily operations. The measures include the change of room temperature setting of
air-conditioners, the review of the implementation period of "cool-biz" and "warm-biz" programs that allow
employees to wear less formal attire as an energy-saving measure, reduction in the use of elevators,
immediate power-off of personal computers which are not in use, and the enforcement of practice to turn off
lights of facilities during lunch break. Through such measures, we strive to reduce our energy consumption
and CO2 emissions little by little. We promote the provision of the information on energy conservation.

Voluntary reduction of elevator use"Two up Three Down" campaign

Suspension of elevator use based on a schedule

Heating temperature guideline
Enforcement of air-conditioner temperature control

Green Curtain

We produce green curtains out of morning glories and goya (bitter gourd) over portions of exterior wall
surfaces at factories and offices. The plants not only absorb CO2 through photosynthesis but also prevent
direct sunlight from pouring in through the windows during the hot summer months. This keeps insidetemperatures down and reduces the need for air-conditioning, which in turn decreases energy consumption.
In addition, the morning glories and goya of the Green Curtain were grown out of seeds collected in theprevious year. (Implemented at Yanagisawa Manufacturing Co., Ltd. and Japan Ceramics Co., Ltd., etc.)

Green Curtain

Growing seedlings

Seeds of morning glories
and balloon vine(heart pea)

Seeds of goya (bitter gourd)

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Green Roof

We planted plants on the balcony of the fourth and fifth floors of the Kanto Branch
to inhibit the transfer of solar radiation heat to the air.

Balcony of Kanto Branch

Utilization of Natural Energy Sources

A small-sized wind and solar generator is installed at a parking space at theheadquarters to reduce power consumption.
Electric Power Generation
Solar power rated output

168W

Wind power rated output

About 30W
Parking space at the headquarters

Optimization of Facilities

To reduce the power consumption of a palletizing robot, which loads final
products sent from an assembly line on pallets, we took advantage of theend of product replacement period and converted to a smaller model thathas sufficient capability to handle our process volume. The model change
has given a wider space for processing as well. (Aichi Factory)
Reduction of power consumption

7,600kWh/year

CO2 emission reduction result

About 2.9t-CO2/year

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Improving Logistics■ Working with Logistics Partners

Responding to new requirements associated with the amended energy conservation law, which went into
force in April 2006, Rinnai has promoted improvements based on a rationalization plan for energy used inlogistics activities that was formulated from the perspective of an owner of goods. We properly monitor the
status of energy used in procurement and product shipment activities, and work with our logistics partners to
reduce the amount of energy consumed reviewing our operations from various viewpoints and ideas such as
the loading efficiency.

Major Activities• Change of pallet sizes• Change of number of stack layers (Observance of Product Handling Warning Sticker)• When there are a small quantity of products on a pallet, they shall be piled for the shipment.
*CO2 emission reduction achievement: 112.4t-CO2/year■ Other Examples of Logistics Improvement
Shared Transportation for Procured Components

To reduce energy consumption related to regular and special deliveries of procured parts, we arranged forshared transportation. Instead of our supplier's own transportation, we use a shared delivery service for thetransportation of parts to reduce CO2 emissions. (Aichi Factory)*CO2 emission reduction achievement: 0.4t-CO2/year

Improvement of consignment style

To reduce the number of shipping processes, weabolished a system to use stretch film to prevent
loads from collapsing. Instead, we employed a
new method to put products on a cart covered witha net. Thus, we successfully reduce the number ofprocesses and eliminate the use of stretch film thatneeds to be disposed of at the end. (Components
Center)Place products on a pallet
and wrap with stretch film

Load on a cart holding
with a net

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Efforts to Reduce Waste■ Reduced Waste Output and Recycle
Zero Emissions

We strive to maintain zero emissions and reduce waste output.
Waste Output
Fiscal 2011 actual results

100% of previous year (No change in volume)* Definition of zero emissions: More than 99.5% of waste is recycled, leaving just 0.5% or less in waste
destined for the landfill.

Efforts to Curb Generation of Waste

Measures to reduce waste generated from production activities and promote recycling
Reduce Waste

Process Waste EconomicallyDon't buy something that will end up as garbage.
Don't make waste.
Return reusable items to respective point of purchase.
Reuse.
Recycle.

Reduce volume.
Cut unit cost of processing fees.
Turn waste into a valuable commodity.
Boost the value of valuable commodities.

Example of Preventing Waste—Utilization of Stamped Out Material
To promote the utilization of materials recycled from the process to produce a stamping die, we register andmanage the material, size (thickness, width, depth and weight) and number of recycled material from thestamping process to make it easier to recycle to produce another die. (Production Engineering Division)
Stamping material recycle results

About 1.5t/year

Improvement of "quality" of recycling

To recycle the waste that is currently used as fuel, we review the separation and collection method to improvethe "quality" of recycling from thermal to material recycle.
—Material Recycle of ABS Resin by Separation
We extracted ABS resin from mixed resin waste*, which used to be thermal-recycled,
treating as valuables and recycled as material. (Asahi Factory)* Under Japan's Manifest System of Industrial Waste, we issue a manifest for this waste.
ABS resin recycle volume

About 3t/year■ Industrial Waste Disposal

Before outsourcing waste to a business specializing waste
processing, we run meticulous backchecks, including businessstatus, and make on-site visits to confirm conditions. To ensure thatwaste is being properly disposed of by contracted providers, wesend representatives annually to the sites for visual confirmationand to exchange information with service providers. In fiscal 2011,
we verified that 42 providers were performing waste management
operations in an appropriate manner.

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■ Polychlorinated Biphenyl Waste Management

Polychlorinated biphenyls (PCB), used primarily in the insulating oils ofelectrical transformers, capacitors and ballasts, are subject to the Law
Concerning Special Measures for Promotion of Proper Treatment of PCB
Waste (PCB Special Measures Law), which makes rules on the storage of
PCB-containing equipment tougher and gives companies until July 2016 tosafely dispose of PCB waste or consign the duty to a certified service
provider.
Rinnai is moving to address its responsibilities as quickly as possible.
PCB-containing equipment in storage is kept under lock-and-key to prevent
loss or damage, and equipment still in use is carefully monitored, mainly
through tagging, so that we can respond appropriately in the event ofequipment failure, however remote that may be. As for disposed electric
appliances in which traces of PCB were confirmed, we will also properly store
and process them at facilities which are running certified by Minister for theEnvironment from fiscal 2011.
* Treatment of high-concentration PCB waste stored at Rinnai and RT Engineering
Co., Ltd., was completed as of March 2009.
Oguchi Factory
Storage for electric appliances in which a trace of
PCB was foundChemical Substances■ Reduce/Eliminate Hazardous Chemical Substances

Laws and regulations to restrict the use and manufacturing of chemical substances are enforced to avoid theadverse effects that such substances have on people's health and the environment. We are working to
reduce, or eliminate altogether, hazardous chemical substances used in our production processes so as tominimize the impact of our operations on the environment. We place the chemicals we use into three
categories-eliminate, reduce and monitor-and formulate strategies to limit our use of hazardous chemical
substances. We have achieved good results through such approaches as a review of materials containing
chemicals subject to restrictions and enhancements to processing equipment.

Example of Reduction in Hazardous Chemicals—Reduced use of paint thinner for cleaning use
To paint various kinds of components, the color of paint has to be frequently changed, and painting
equipment including a spray painter gun and a pump needs to be cleaned for each use. Paint thinner for
cleaning use is utilized to clean such devices. To reduce the consumption of thinner, we improved theprocesses and partially converted the use of thinner during the painting and cleaning processes ofinternal-surface of pipes into air. (Asahi Factory)
Cleaning thinner reduced consumption

About 10t/year

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Efforts to Prevent Pollution■ Preparing for Emergencies

Assuming the occurrence of accidents that would be likely to have an adverse effect on the environment, wehave implemented a number of preventative measures. All offices run annual drills premised on adverse
events, such as environmental accidents. To minimize environmental risk, we have also reviewed procedures
setting out actions to take in the event of a crisis and have prepared emergency provisions.

Emergency response drill

Storage of supplies for emergency use

Environment-Focused Equipment Inspection

To prevent accidents that would impact the environment, we
identify equipment with the potential to adversely affect theenvironment and run concerted environment-focused inspections
on these pieces of equipment on an annual basis. We strive toprevent the occurrence of serious accidents with environmental
repercussions through such approaches as independent
inspections of equipment, operating tests for measuring
instruments, and emergency simulations.

Leak inspection ofunderground tankRound-check ofhigh-priority facilities(Yanagisawa ManufacturingCo., Ltd.)(Noto Tech Co., Ltd.)

Utilization of Water■ Consideration for Water

Recognizing water as our valuable resource, we strive to reduce the consumption of both clean water andwell water. In addition, while we try to minimize the use of water drawn from a well in the factory, we purify
used water before disposal and also implement rigorous drain management with drain control equipment
preparing for abnormal conditions.

Utilization of Rain Water

We collect rain water to reuse for watering plants.

Rain water tank
(Yanagisawa Manufacturing Co., Ltd.)

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Underground tank placed in Design Building,Research & Development Headquarters

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Drain management

We monitor pH with a water pollution preventative facility for the real-time detectionof accidents that cause any adverse effect on the environment. (Seto Factory)

Biodiversity
Besides the implementation of environmental activities for the realization of a low-carbon and recycle-basedsociety, companies are requested to be responsible for risk management regarding the impact on biodiversity
by studying the relationship and interdependence between the actual business activities and the ecosystem.
Rinnai supports the Declaration of Biodiversity by Nippon Keidanren (Japan Business Federation). We
recognize that biodiversity provides essential benefits so that society can continue to exist. Thus, we promote
activities to reduce the burden on the environment including biodiversity derived from our business
operations. Furthermore, we implement measures to maintain and protect biodiversity.

Status of Legal Compliance
Naturally, we comply with laws and regulations, but we seek to do better than the minimum required and haveset our own benchmarks as targets to achieve. We also perform checks, mainly daily monitoring, routine
evaluations and environmental audits, and strive to reduce the release of hazardous chemicals and otherpollutants into the air and local water systems. We reinforce equipment operation and maintenance practices
and take preemptive action if facility status looks as though it may exceed the level we deem permissible. If
we can meet our own tough standards, we will surely meet the levels required by government.

Water quality examination

Air assessment■ Legal Compliance Status

In fiscal 2011, there is no violation of environment laws and regulations concerning pollution prevention.

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Environment Education and Promotion of Awareness
Activities during Environment MonthWe set every June as "Environment Month" to increase awareness of the environment for each employee andimplement and enhance various environmental protection and conservation activities at the factories andoffices.

■ Rinnai Group Environment Awards Programs

Seeking to invigorate employees' environmental activities and promote access to excellent approaches within
the Group, we established "Environment Awards Programs", effective from fiscal 2011. These awards
programs recognize activities undertaken by domestic companies under the Rinnai umbrella to protect theenvironment and conserve resources over a one year period. The first prize-giving ceremony took place at"Company-wide QC Circle Competition".
Environment Prize

Development of gas/solar hybrid hot-water system

Environment Contribution Prize"Home Greenery Project"

Other prizes

13 prizes

Award presentation

Posting of award-winning cases■ Other Factory Visit

We visit other companies' factories to learn about
their advanced environment-conscious measures.

Factory tour

Environment measures seminar■ Environment Policy Card

We distribute an "Environment Card" that lists selected Environmental Policy toemployees to promote their awareness toward environment conservation activities. The
back of the card is for them to fill in "My Environment Challenge Declaration".

Environment Card

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■ Issuance of Environment Company NewsWe periodically issue "Environment Company News" to share internal
environmental measures and introduce domestic and international trends onenvironment activities. This is to promote the communication among employees
and encourage them to be more environment-conscious.

Environment Company News■ "Safe and Eco-Friendly Drive Seminar"

For the prevention of car accidents and global warming, we invited a guest
instructor and held a "Safe and Eco-Friendly Drive Seminar" for employees insales and management divisions who use a company car. It is on the guidanceand explanation on "the basics of traffic safety" and "actual training of eco-friendly
training" and 50 employees attended the seminar.

Safe and Eco-Friendly Drive Seminar■ Green purchasing

For the purchase of office supplies and office automation equipment, we encourage employees to givepriority to purchasing environment-friendly products that are qualified under the Law Concerning thePromotion of Procurement of Eco-Friendly Goods and Services by the State and Other Entities.
* "Green procurement" and "Green purchasing": "Green procurement" is to acquire goods directly related to our
production activity, and "Green purchasing" means purchase of office-related supplies and facilities.

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Chronology of Environmental Activities at Rinnai
1993

March

Drafted Environmental Preservation Action Plan; established Environment Committee

DecemberWon prize at 4th Energy Conservation Vanguard 21 for gas-blast type high heat griller RGM-4, 6, 8.

1994

July

Market debut: low-NOx burner built-in hot-water unit (NOx at less than 60ppm)

1996

March

1997

March

Won top prize at 1st Eco-Design Awards, sponsored by Tokyo Gas, Osaka Gas and Toho Gas for hot-water unit,
fan heater and small hot-water heater.
Won special prize at 2nd Eco Design Awards for tabletop cooking stove.

June

Market debut: absorption-type gas air-conditioner (non-CFC)

OctoberOguchi site acquired ISO 14001 certification covering Oguchi factory, Production Engineering Division andResearch & Development Headquarters.
Won prize at 8th Energy Conservation Vanguard 21 for tabletop oven RSBN-096.

December
1998

April
September
October

1999

2000

2001

2003

Won grand prize for gas clothes dryer and special awards for small hot-water heater and for absorption-type gas
air-condition at 3rd Eco-Design Awards.
Market debut: fan heater with air-purifier that traps dust and removes odors.

JulyMarket debut: Yukko V Series, featuring no styrene packing, low stand-by power consumption and low NOx
emissions.
Oguchi Factory (approved facility under revised Energy Conservation Law) registered as type 2 designatedenergy management factory.
Established Environment Division.

SeptemberMarket debut: Ecomax burner and Eco burner-equipped gas cooking stove.

OctoberMarket debut: condensing hot-water unit boasting 95% heat efficiency and NOx emissions under 30ppm.

FebruaryMay

Won Minister of Economy, Trade and Industry award for condensing hot-water unit at ministry's 10th Energy
Conservation Awards.
Drafted Rinnai Environmental Action Principles.

AugustPublished inaugural issue of Environmental Report.

December

Seto Factory and Environment Division acquired ISO 14001 certification

January

Won Chunichi Newspaper Prize portion of Chunichi Industrial Technology Awards for condensing hot-water unit.

June

Won top technology prize from Japan Gas Association for condensing hot-water unit.

June

Won technology award from Japan Gas Association for condensing hot-water unit.

October

Won Electric Equipment Packaging Category Award in Good Packaging division at 2003 Japan Packaging
Contest for built-in 75cm-wide glass-top gas cooking stove.
Quality Assurance Divisions, Aichi Factory and Asahi Factory acquired ISO 14001 certification.

April

November
2004

October

Won Logistics Award at Japan Packaging Contest 2004 for bathroom heater/dryer.

2005

June

Won top technology prize from Japan Gas Association for development of latent heat recovery high-efficiency hotwater/heating unit.
Got involved in Team Minus 6%, a national movement to prevent global warming.

September
2006

October

December

Won Electric Equipment Packaging Category Award in Good Packaging division at Japan Packaging Contest
2006 for gas fan heater.
Gas tankless water heater sold in the United States captured 2008
Super Nova Star Award (Stars of Energy Efficiency) in the United States from the Alliance to Save Energy.
Won Electric Equipment Packaging Category Award in Good Packaging division at Japan Packaging Contest
2008 for gas fan heater.
Head Office acquires ISO 14001 certification.

2008

September

2009

February

Market debut: Eco-Jozu condensing hot-water/heating unit RVD-E Series.

2010

January

April

Market debut: Eco-Jozu condensing combi boiler RUF-E Series boasting bathwater heating efficiency rate of92%.
Took silver at Aichi Environment Awards, sponsored by Aichi Prefecture, for global promotion of high-efficiency
combustion appliances and systems, including latent heat recovery hot-water units.
Market debut: high-efficiency Hybrid Hot-Water Unit ECO ONE.

DecemberMarket debut: Light-weight and compact Eco-Jozu hot-water unit "RUX-E Series" (Hot-water unit exclusive use)

January

Market debut: Eco-Jozu hot-water/heating unit RUFH-E2402 Series

October

February

2011

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Awards and Prizes
Major Award Winning History
Rinnai received following awards from April 1, 2010 to June 30, 2011.

Awards for Rinnai Corporation
2010

October
SeptemberAugustJuly
June
February

Japan Packaging Contest 2010, Electric Equipment Packaging Category AwardGood Design Award 2010
Japan Manual Awards, Paper Manuals Division, Operations Manuals, No.1 Category, Most Outstanding Manualin Category
Kids Design Award 2010
Technology Grand Prize and Technology Prize by The Japan Gas Association
Aichi Environmental Award, Silver Award

Awards and Prizes for the Group Companies—Rinnai Korea Corporation
2011

2010

February
andMarch
October

2011 Brand Survey by Korean Management Association Consulting (KMAC)
Korea's most respected company <Home-use boiler section> No.1 - Home-use boiler
Korea Best Brand Award <Gas stove section> No.1 - Gas stove
Korean Industry Customer Satisfaction Index Survey (KCSI) by KMAC
<Home-use boiler section> No.1 - Home-use boiler—Rinnai America Corporation
2010

AugustThe 2010 MVP AWARD
by BUILDING PRODUCTS (Housing equipment magazine)
MVP AWARD Winner - Condensing Tankless Water Heater—P.T. Rinnai Indonesia
2010

July

Indonesia Best Brand Award by SWA (Economic magazine)<Table stove section> Gold Award - Table Stove—Rinnai UK Ltd.
2010

April

H&V News Award 2010 by Thermal Energy Appliance Industry Association<Commercial appliance section>
Best Product Award - Condensing hot water units121