Rinnai Report 2021 (Integrated Report)Corporate Message

Aiming for the Realization of Healthy
and Comfortable Lifestyles andSustainable Societies
Since its founding in 1920, the Rinnai Group has
contributed to comfortable lifestyles for people
around the world through the provision of gas stoves,water heaters and heating systems.

At present, the Rinnai Group has bases in 18
countries and regions, and deploys products in over
80 countries throughout the world. Rinnai offers
optimal solutions suitable for lifestyle cultures, climate
conditions and energy requirements in each countryof the world to contribute to the realization of healthy
and comfortable lifestyles and sustainable societies
for people throughout the world.

01

Rinnai Report 2021

02

Corporate Mission and Vision

Rinnai Report 2021 (Integrated Report)

Fundamental Concept

Quality is our destiny

Editorial Policy
Rinnai produced the Rinnal Report 2021 (Integrated Report) to convey tostakeholders management’s approach to the realization of a sustainable society,to describe the activities undertaken Groupwide, and to encourage a deeper
understanding of the Group’s operations to as many people as possible.

Rinnai’s Activities

Company Motto

We produce an abridged version of our Rinnal Report (Integrated Report) inbooklet form. Other examples of Company initiatives, detailed information, andrelated data are posted in the Company Information section of our website.

Highly important activities(stakeholder perspective)

和 Harmony:
Develop personal character of the highest caliber
氣 Spirit:
Base your efforts on a consistent philosophy
眞 Sincerity:
Know the fundamentals and consider issues with
precision and clarity

Rinnai Report 2021 (Integrated Report)

Rinnai Report(Integrated Report)

Comprehensive
coverage of Group’s
CSR activities

Scope
Rinnai Group (Rinnai Corporation and companies under the Rinnai Groupumbrella in Japan and overseas)

Reporting Period
This report focuses on events that occurred in fiscal 2021—April 1, 2020, to
March 31, 2021—but also touches upon measures implemented and recent
activities undertaken since fiscal 2021 as well as future business direction,
targets, and plans.

Schematic Diagram of Company Ideals

Spiritual support of Rinnai
Company
Motto

Referenced Guidelines
GRI Standards, ISO 26000, Environmental Reporting Guidelines, issued by
Japan’s Ministry of the Environment
Environmental Accounting Guidelines, issued by Japan’s Ministry of theEnvironment
IIRC, The International Integrated Reporting Framework

Publication Schedule
Brand Promise—Rinnai’s Corporate Mission—

Expectations and attractiveness that
we keep promising with our customers

August 2021 (Japanese version)
Previous: September 2020, Next: August 2022 (planned)

Important Points Regarding Future Outlook
Rinnai Code of Conduct

03

Specific rules of day-to-day corporate activities

01

Corporate Message

03

Corporate Mission and Vision05

100 Years of History

09

Rinnai Group Profile

11

Value Creation Process

13

Message from the President

19

Medium-term Management Plans

23

Message from the General Manager of Corporate
Planning Headquarters

25

Message from the President of a US Subsidiary27

Identifying Material Issues

Editorial Policy / Contents

Website(Company Information)

Highly important activities(Rinnai Group perspective)

Brand Promise —Rinnai’s Corporate Mission—

Creating a healthier way of living

Abridged version
booklet form

Contents

This report includes descriptions of earnings forecasts and outlooks for Rinnai
and Group companies.
These descriptions are based on currently available information andforecasts as determined by Rinnai. Actual results may differ from forecasts
depending on various external factors going forward.

Environment
29

Response to Global Environmental Problems

31

Responses to the Task Force on Climate-related Financial
Disclosures

33

Global Deployment of Rinnai Group Water Heaters

35

Environmental Impact within Rinnai’s Value Chain

Social37

Defining “Improved Quality of Life”

39

Reducing Stress through Improved Convenience40

Increasing the Safety of Living Spaces

41

Contributing to Health Promotion

43

Resilience

45

Fair and Diversified Employment

47

Industrial Relations and Human Rights

48

Occupational Health and Safety

Governance
49

Management Structure

51

Leadership

53

Message from an Outside Director

54

Compliance/Risk Management

55

Data Collection
Eleven-Year Financial Summary, Data-related Society,
Environmental Data

Rinnai Report 202104

100 Years of History (Part 1) 1920–2004
Rinnai commemorated the 100th anniversary of its founding on September 1, 2020.

Historical Overview

Phase 1

Phase 2Phase 3Phase 4Phase 5

Founding and Postwar Reconstruction

Establishing a Corporate Foundation

Promoting Business Activities Overseas

Becoming a Listed Company

Advancing as a Global Corporation[1920–1949][1950–1965][1966–1978][1979–1987][1988–2004]

Childhood friends Hidejiro Naito and Kanekichi Hayashi
were inspired by the blue flame of an oil stove outside a shop
selling Imagawa-yaki (sweet stuffed pancakes) and decided
to start a business. Taking a character from each of theirsurnames, they named it Rinnai & Co., launching thedevelopment and commercialization of oil and gas stovesand oil heaters.
After the start of the Sino-Japanese war, the market foroil and gas stoves was suspended due to oil consumption
regulations that prioritized military use, thus the Company
survived by manufacturing parts for aircraft and otherequipment. After the war ended, they relaunched theirbusiness with the manufacture of industrial and agriculturalequipment, and in 1949, they resumed production of gas
and oil stoves as originally intended.

In 1950, the Company was relaunched as acorporation with the establishment of Rinnai
Seisakusho. During the 1950s, sales offices wereopened in Tokyo, Osaka, Fukuoka and other urban
areas, creating a nationwide sales network.
A major turning point came when theyencountered Dr. Schwank, developer of the gas
infrared ceramic burner. The first major hit productwas a gas infrared stove using burners manufactured
by Schwank GmbH based on a technology tie-up
between the two companies. In the early 1960s, theInba Factory (later the Asahi Factory) and Oguchi
Factory were constructed in response to the strong
demand for these stoves.

The Company, which commemorated its 50th
anniversary in 1970, changed its name to its current
form, Rinnai Corporation, the following year.
A Technology Center was also constructed anda development division was launched toundertake product development, establishinga development-oriented company structure.
Overseas development began with theestablishment of Rinnai International in Ohio, USA(1967), expanding to Taiwan, Australia, Malaysia, South
Korea, New Zealand, Brazil, the United Kingdom anda variety of other locations, where local offices andsubsidiaries were established in an effort to improvethe culture of everyday life in those areas.

In 1979, the Company was listed on the Second Sectionof the Nagoya Stock Exchange, and in 1983, it was listedon the First Section of both the Tokyo Stock Exchange
and the Nagoya Stock Exchange. Around the same time,
the Company made progress in terms of quality costdelivery (QCD), aiming to develop molds and other criticalcomponents that up to that time had been outsourced.
In developing new technologies and products, theCompany brought new products to market meeting userneeds, including the Yukko compact gas water heater(1982) and the push-button gas tabletop cooker (1984).
Focusing efforts on enhancing its customer service
system, in 1986 the Company launched telephone
support available 24 hours a day, 365 days a year.

In fiscal 1989, for the first time the Company achieved its
long-sought after sales target of ¥100 billion, and incommemoration of its 70th anniversary a year later, plans
were made to construct a new Head Office building thatwas completed in 1994.
In terms of products, the Company promoted added
value through safety functions that included gas water
heaters equipped with carbon monoxide sensors andhobs (stovetops) equipped with a tempura oil fire
prevention function. In response to the rapid developmentof China and ASEAN countries, the Company establishedjoint manufacturing bases and acquired quality andenvironmental management certifications, including ISO
9000 and 14000 series in promotion of initiatives
undertaken as a global corporation.

2005¥202.0 billion
1989

1980

¥98.4 billion

1980–

1989–

¥48.3 billion

Performance
1967¥5.6 billion

1951

Rinnai & Co. founded.
1921●1920 The Rinnai-type kerosene gas stove registeredas a utility model is launched.
●1923 Gas tabletop stove, gas ranges, gas oven, gas
water heater and other product deliveries to gas
companies across Japan as overseas exports
begin.
●1937 Sales of oil and gas stoves across north China
market from base in Tianjin City are launched.

¥21 million
1951–
●1957

1967–

The company forms a technology tie-up withGerman company Schwank GmbH to
manufacture and sell gas infrared burners and todevelop heaters and cooking appliances that use
them.

●1967
●1971
●1972

Technology Development Center opens.
Development and sales of high-speed gas
convection range, Convec.
The company receives the Ota Award fromthe Japan Gas Association for its high-speed
gas convection range, Convec.

Technologies andProducts

Rinnai-type kerosene gas stove

Management andOrganization

05●1920 The company is incorporated as Rinnai & Co. byfounders Hidejiro Naito and Kanekichi Hayashi.
●1938 Manufacturing of aircraft parts takes place with thefactory coming under military supervision.
●1940 The company changes its name to Rinnai Aircraft
Parts Manufacturing.
●1947 Production of gas and kerosene appliances resumes
at the rebuilt Head Office factory.

Schwank gas infrared
heater produced
domestically in Japanfor the first timeHigh-speed gas
convection range,
Convec●1950 The company is reorganized as a joint stockcompany and renamed Rinnai Seisakusho.
●1954 The Tokyo Sales Office (now the Kanto Branch) opens.
●1956 The Osaka Sales Office (now the Kansai Branch) opens.
●1957 The Aichi Factory (now the Chubu Branch) opens.
●1960 The Inba Factory (later the Asahi Factory) opens.
●1961 The Fukuoka Sales Office (now the Kyushu
Branch) opens.
●1963 The Sendai Satellite Office (now the Tohoku
Branch) opens.
●1963 The Sapporo Satellite Office (now the Hokkaido
Sales Office) opens.

●1968 The Niigata Satellite Office (now the Niigata Sales
Office) opens.
●1969 The Nagoya Sales Office (now the Chubu Branch)opens.
●1970 Rinnai Taiwan Corporation is established.
●1970 Business partnership with Yanagisawa
Manufacturing Co., Ltd.
●1970 Investment in Yamauchi Yoko (now RT Engineering Co., Ltd.)●1971 The name changes to Rinnai Corporation.
●1971 RB Controls Co., Ltd. is established.
●1971 Rinnai Australia Pty. Ltd. is established.
●1973 Rinnai (Malaysia) Sdn. Bhd. is established.

●1980 Full-scale production of built-in equipment begins.
●1983 A gas instantaneous water heater, UT, equippedwith a safety mechanism to prevent incomplete
combustion launches.
●1985 The company receives the Ota Award from theJapan Gas Association for development of awater boiler equipped with a safety mechanism toprevent incomplete combustion.
●1986 The company receives the Excellent Technology
Prize from the Japan Gas Association as well as
the first Chunichi Industrial Technology Award forthe development of an ultracompact water heater,
Yukko.

Gas instantaneous water heater, UT●1979

The company is listed on
the Second Section of the Nagoya Stock Exchange.
●1979 Rinnai Precision Co., Ltd. is established.
●1979 The Seto Factory opens.
●1981 Japan Ceramics Co., Ltd. is established.
●1981 Business partnership with Isomura Kiki (now Rinnai
Technica Co., Ltd.)●1983 The Hiroshima Sales Office (now the Chugoku
Branch) opens.
●1983 The company is listed on the First Section of theTokyo Stock Exchange and the Nagoya Stock
Exchange.

2005 (FY)●1990 The Tsukuba Research Center (now Tsukuba
Training Center) opens.
●1998 Gas fan heater and air purifier are combined together.
●1999 A highly efficient condensing gas water heater
is launched.
●2000 The company receives the Ministry of international
Trade and Industry’s Energy Conservation Award for
its highly efficient condensing gas water heater.
●2003 The company receives the Energy Conservation
Grand Prize (Chairman’s Prize) from the Energy
Conservation Center for its glass-top stoves with
inner flame burners.

Highly efficient condensing gas water heater

●1988
●1988
●1990
●1990
●1991
●1993
●1994
●1995
●1996
●1997

P.T. Indonesia is established.
The Hong Kong Representative Office opens.
Rinnai (Thailand) Co., Ltd. is established.
Noto Tech Co., Ltd. is established.
Rinnai Singapore Pte. Ltd. is established.
Shanghai Rinnai Co., Ltd. is established.
The new Headquarters building is completed.
The company receives ISO9001 certification for all domestic factories.
Rinnai Holdings (Pacific) Pte. Ltd. is established in Singapore.
Technology Division acquires ISO14001 certification(sequentially acquired thereafter).
●2004 Guangzhou Rinnai Co., Ltd. is established.

Rinnai Report 202106

100 Years of History (Part 2) 2005–2020
Promoting Medium-term Business Plans Under a New Structure

Medium-term
Business Plans

Phase 6

Phase 7

Phase 8Phase 9Phase 10

V-Shift Plan

Reform & BreakthroughJump UP 2014

Evolution and Succession 2017

G-shift 2020[2006–2008][2009–2011][2012–2014][2015–2017][2018–2020]

In 2005, the current President Hiroyasu Naito was
appointed. His first policy was to “focus on a highvalue-added and differentiated product strategy
centered on new technologies.” This concept wasmade into concrete measures and incorporated into
the “V-shift Plan” medium-term business plan.
With “V” representing value, the plan, simply put,
aimed to transition from quantity to quality. In line withthe policies of switching from “a focus on sales andmarket share to added value and profits” and froman “omnidirectional strategy to selection andconcentration,” the Company revised its cost structure
and attempted to realize manufacturing innovations.

Under the medium-term business plan launched in 2009
entitled “Reform & Breakthrough,” the Company aimed
to become a comprehensive heat energy appliancemanufacturer contributing to people’s lifestyles
throughout the world, establishing a presence with aunique business model appealing to both people andbusiness partners.
While accelerating manufacturing that placed toppriority on the environment, the Company aimed for a leancorporate structure and the thorough elimination ofwasteful business activities. At the same time,cooperation and collaborations were strengthened
among Group companies in Japan and overseas,
sharing the same ideals in an effort to promote theconsolidation of a structure as a comprehensive heat
energy appliance Group.

Launched directly after the Great East Japan Earthquake,“Jump UP 2014” aimed to establish a corporate structureable to supply appliances optimized from anenvironmental standpoint to global markets in light ofsocial needs for the best energy mix.
The Company stepped up its pursuit of zero defects
in response to Rinnai fans who valued the brand for its safe
and trouble-free products. Innovations aimed at revisingdevelopment, manufacturing and sales processes
enhanced mobility. Organizational capabilities were taken
to a new level through Group coordination and strategic
human resource development in response to globalizationand increasing sophistication. While focusing efforts onthese initiatives, the Company engaged in the long-term
enhancement of its corporate value.

The Company views “succession” as indispensable forits business. With its origin in the concept “quality is ourdestiny,” Rinnai’s mission is to “utilize heating to provide
society with a comfortable way of life” in all global markets.
At the same time, with regard to “evolution,” in orderto respond to liberalization in the energy markets,
shrinking workforces and other rapid changes in thebusiness environment, this plan targeted business model
innovations through the promotion of productsophistication in Japan and, overseas, the smoothhorizontal deployment of technologies and products
created by Group companies. The plan also aimed toestablish the Rinnai brand as a comprehensive heat
energy appliance manufacturer.

Focused on the 100th anniversary of Rinnai’s founding, thisplan introduced the Group slogan “innovating technologies
for the next generation and strengthening overseas growthstrategies to leap forward as a global brand.”The “G-shift” medium-term business plan namerepresents three core policies aimed at promoting global
strategies leveraging the Group’s network, the shift to a newgeneration that passes on traditions accumulated overthe past 100 years and breaks common sense, andthe establishment of a corporate governance systemmeeting the demands of society and modern times. In 2019,
the Company formulated the brand promise “Creatinga healthier way of living” to further clarify its stance.

■Domestic sales¥40.6 billion■Overseas sales¥344.3 billion

Performance

49%
Operating income
Operating margin

2006

Technologies andProducts

Management andOrganization

07

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

(FY)

●2005 The company receives the Technology Prize fromthe Japan Gas Association for its Eco-Jozu
condensing dual water heater/space heaters.
●2006 The company receives the Technology Prize fromthe Japan Gas Association for its bathroom
heater/dryer with mist sauna function.
●2007 Built-in hob (stovetop) DELICIA series is launched.
●2008 Dishwasher with baking soda washing mode isreleased.
●2008 Rinnai Indonesia wins Best Brand Award.
●2008 Rinnai gas tankless water heater receives the Super
Nova Star Award (an energy-saving award) fromthe Alliance to Save Energy in the United States.

●2010 The Production and Technology Development
Center opens.
●2010 Commercialization of home-use hybrid water
heaters combining heat pumps and gas water
heaters.

●2014 The company receives the Ministry ofInternational Trade and Industry’s Energy
Conservation Award for ECO ONE, a hybrid
water heater with heating system.
●2014 The company’s hybrid water heater with heating
system for Hokkaido receives the Kitaguni
Energy conservation and New Energy Grand
Prize.

●2016 DELICIA dedicated app “DELICI APP” withcooking support function distribution is launched(“+ R RECIPE” from 2020 onward).
●2017 Third-generation “ECO ONE” hybrid water heaterand heating system wins Energy Conservation
Grand Prize Energy Conservation Center
Chairman's Award.
●2017 High-quality and luxury kitchen appliance series
G-LINE is launched.

●2018 Drop-in modular-type gas cooker “G:101” wins “iF
Design Award 2018.”●2020 Domino-style built-in stove G-LINE series wins “RedDot Design Award 2020” at the Red Dot DesignAwards.
●2020 Microbubble Bath Units are launched.

●2006 Shanghai Rinnai Thermo Energy Engineering Co., Ltd.
is established.
●2008 Rinnai Italia S.r.l. is established.
●2008 The Integrated Logistics Center opens.

●2009 Rinnai Canada Holdings Ltd. is established.
●2010 The Production and Technology Development
Center opens.
●2011 The West Japan Customer Center opens.
Great East Japan Earthquake service support is
implemented.

●2013 The Akatsuki Factory opens.
●2013 The Rinnai Parts Center opens following businessintegration.
●2014 Brivis Climate Systems Pty. Ltd. in Australia is
acquired.

●2015 The Dubai Representative Office opens.
●2016 Gastar Co., Ltd. becomes a consolidated subsidiary.

●2018 The East Japan Logistics Center opens.
●2019 Our brand promise is established and the Rinnai logo
is updated.
●2020 Information Security Management System (ISMS)
certification is acquired.
●2020 Rinnai wins the “Excellence Award” at theEnvironmental Persons Development Awards.

Rinnai Report 2021

08

Rinnai Group Profile● Manufacturing and sales companies

Corporate Data (As of March 31, 2021)◎ Sales companies

RinnaiWorldwide○ Other business□ Overseas representative office

Incorporated

September 1, 1920

Established

September 2, 1950

Paid-in capital(As of April 1, 2021)

SOUTH KOREA

Head office2-26, Fukuzumi-cho, Nakagawa-ku,
Nagoya 454-0802, Japan

Telephone(From outside Japan): +81-52-361-8211● Rinnai Korea Corporation● RB Korea Ltd.

CHINA

Rinnai UK Ltd.

◎● Mikuni RK Corporation● Shanghai Rinnai Co., Ltd.

Number of Group companies◎ Shanghai Rinnai Thermo Energy Engineering Co., Ltd.

Rinnai Italia s.r.l.

JAPAN◎ Hainan Rinnai Minsheng Kitchen Appliances Sales Co., Ltd.

●Rinnai Corporation
・Branches:

Rinnai Canada Holdings Ltd.

Rinnai Hong Kong Ltd.
◎

Dubai Representative Office●
Rinnai (Thailand) Co., Ltd.
◎●
Rinnai (Malaysia) Sdn. Bhd.

Hokkaido, Kita-Tohoku, Sendai, Niigata,
Tokyo, Kita-Kanto, Higashi-Kanto,

Rinnai Vietnam Co., Ltd.

Minami-Kanto, Tokai, Shizuoka,●
Rinnai Holdings (Pacific)
Pte Ltd.

◎

Rinnai Manufacturing Malaysia Sdn. Bhd.
P.T. Rinnai Indonesia

Hokuriku, Nagano, Osaka, Keiji, Hyogo,
Chugoku, Shikoku, Fukuoka
・Factories and related centers:
Technology Development Center
Production and Technology
Development Center●

Integrated Logistics Center

INDONESIA

East Japan Logistics Center
Rinnai Parts Center

AUSTRALIA● Yanagisawa Manufacturing Co., Ltd.

Seto Factory○ Gas Appliance Services Corporation

Akatsuki Factory

Net Salesby Region
Total● Rinnai Technica Co., Ltd.
● Gastar Co., Ltd.

China
¥41.1 billion● RB Controls Co., Ltd.

● Rinnai Precision Co., Ltd.

344.3

● RT Engineering Co., Ltd.

¥

● Noto Tech Co., Ltd.

● Techno Parts Co., Ltd.
◎ Rinnai Net Co., Ltd.
○ Rinnai Enterprises

Rinnai Brasil Heating Technology Ltd.

billionAustralia¥24.3 billion●

Oguchi Factory● Rinnai Australia Pty., Ltd.

Others ¥19.1 billion

South Korea¥28.3 billion

・Domestic sales offices:●Rinnai Taiwan Corporation

Indonesia¥11.2 billion

Rinnai America Corporation●

Tohoku, Kanto, Chubu, Kansai, Kyushu□

46 (domestic 12, overseas 34)◎

UNITED STATES◎ Guangzhou Rinnai Gas and Electric Appliance Co., Ltd.

◎

10,386 (consolidated), 3,722 (non-consolidated)◎ Rinnai Plus Corp.

● Shanghai RB Controls Co., Ltd.

◎ Rinnai Treading B.V.

Number of employees● RS Korea Ltd.

¥6,459,746,974

United States¥36.9 billion

Japan¥183.1 billion

Rinnai New Zealand Ltd.
●◎
Central Heating New Zealand Ltd.

Water Heaters and Heating Systems
Water heaters, water heater with bath-filling systems,
water heater with heating systems, hybrid water
heater with heating systems, bathroom heater/dryer,
floor heating systems, and others

Kitchen AppliancesHome Heaters

Tabletop cookers, built-in hobs (stovetops), ovens,dishwashers, range hoods, rice cookers, and others

Commercial-Use Equipment, Others

Fan heaters, fanned flue heaters, infrared heaters, andothersIndustrial ceramics machines, commercial-use ranges,commercial-use cookers, gas clothes dryers, components, and others
Gas clothes dryer(JAPAN)DELICIA built-in
gas hob (stovetop)(JAPAN)

Others ¥33.4 billion

Commercial-use equipment¥7.7 billion
Home heaters¥19.0 billion

Net Salesby Product
Total

Gas fun heater A-style(JAPAN)

344.3¥

Eco Jozu, gas water
heater with bath-fillingsystem(JAPAN)09

High-efficiency gas
tankless water heater(UNITED STATES)

Drop-in gas hob(stovetop)(INDONESIA)

Fanned flue heater(UNITED STATES)

Kitchen appliances¥88.4 billion
Commercial-use gas rice cookers(JAPAN)billionWater heaters andheating systems¥195.7 billion

Rinnai Report 2021

10

Value Creation Process
The Rinnai Group attempts to conduct corporate management with a focus on ESG indicators to ascertain theenvironmental impact of various social issues and business activities as well as the opinions and expectations ofrelated stakeholders. We strive to realize sustainable corporate growth and contribute to international initiatives
such as the SDGs through the implementation of a value creation process driven by strategic management focusedon ESG indicators.

Rinnai Group Value Creation Process

External Environment / Social Issues

Value Provided

Business Activities

Climate change /global warming

Rinnai handles water heaters and heating units that utilize a large
proportion of residential energy.

Product usage risks

Company-related product usage risks include fires caused bygas stoves and “heat shock” occurring in the bathroom.

Work style changes
cause decrease inquality of lifestyles

Demand for products that reduce time required for household chores
due to decrease in quality of lifestyles as a result of a rise in dual
income households, declining birthrates and an aging population

Main products and services

Creation of products
and services that are safe,
secure, andenvironmentally friendly

Environmental
contribution(local production / in-house production)

Providing lifestyles that
reduce consumption of
everyday lifestyle energy
usage and impact on
the environment

Invested Capital (Fiscal 2021)
Human capitalIntellectual capital

Employees*1:
Employed (Rinnai non-consolidated) *1:
Training and development expenses:(Rinnai non-consolidated) *1
Overseas trainees (Rinnai non-consolidated):
Development headquarters staff:(Rinnai non-consolidated) *1
R&D expenses (Rinnai non-consolidated):ISO 9001 certification acquisition:(number of companies) *1
ISO 14001 certification acquisition:(number of companies) *1

10,386 people
101 people¥99 million

Gas stoves, range hoods, water heaters,
hot water floor heaters, gas clothes
dryers, dish washers

Consolidated net sales¥343,364 million
Operating income¥40,690 million

0 people
499 people

Operating income ratio¥7,906 million
17 companies

11.8%

15 companies

Financial capital

ROE
ROIC
Equity ratio

Manufactured
capitalRinnai Group production bases:
25 companies(number of companies) *1
Production group staff (Rinnai non-consolidated) *1:
1,583 people
Capital expenditure (Rinnai non-consolidated):¥6,169 million

Natural capital

Input energy:
Water used: Ground water:
Public water:

Social andrelationship capital

Fiscal 2021 Achievements

8.4%
17.6%
68.8%

Promoting businessunder the slogans “Heat & Lifestyles”
and “Health & Lifestyles”

1,100,713 GJ
162,990 m3
595,343 m3

Safety andpeace of mind
Supporting lifestyles thatenable the prevention andavoidance of various
potential risks in the home

Net income attributable toowners of the parent company¥27,581 million
Net assets (equity ratio)¥371,318 million (68.8%)

Rinnai brand, external evaluations, stakeholder engagement,
Rinnai Group Code of Ethics

Dividend per share*1 As of March 31, 2021

Risks
[Domestic] Expansion of thermal energy
systems centered on electric power[Domestic] Price reduction of gas
appliances due to customer requests[Domestic] Declining birthrates, an aging
population, and a decreasing number ofhouseholds
Decreasing working hours and intensifying
competition for securing human resources(annual) ¥125
Opportunities
Growing demand for energy-saving
products by strengthening environmental
policies
Increasing needs for safety and accident
prevention as social issues[Overseas] Expansion of natural gas use[Overseas] Improving living standards
Progress in evaluation of corporate ESG
initiatives

Quality of life
Development of technologies
useful for people’s lives

Contribute to raising
standards of living globally(Combustion / heat utilization, electronic control,
fluid control, new technologies)

Social issue recognition

Proposing lifestyles that
reduce the burden andtime required to perform
household chores

Amount contributed toreducing CO2 emissions*4.50 million tons
Announcements of productrecalls due to defects:
0 case*Consolidated basis

11

Rinnai Report 2021

12

Message from the President

Cost Reductions and Expanding Demand Result in Record-high Performance
I would like to start by expressing my sincerest

loss since our public listing. However, we madecondolences to everyone who succumbed to COVID-19

exhaustive efforts to realize Groupwide cost reductions

and extend my deepest sympathies to those affected

and captured stay-at-home demand driven by theand their families. I would also like to convey my heartfelt

impact of stimulus payments and other benefits.

gratitude to all staff at medical institutions, government

In Japan, we saw extremely robust sales of high-value-

agencies and other organizations engaged in daily

added water heaters, gas clothes dryers contributing toefforts to prevent the further spread of infection.

shorter laundry times, and built-in hobs (stovetops) with

The global economy continues to be dramaticallyaffected by COVID-19, and despite growing signs of a

automatic cooking functions.
At the same time, overseas sales of tankless water

gradual resumption in economic activities, conditions

heaters were firm in the United States and Australia. In

remain serious. Amid these circumstances, the Rinnai

the United States, an increasing number of people

Group commemorated the 100th anniversary of its

migrated from city centers to suburban areas, and in line

founding in September 2020. This is wholly the result ofwith an increased demand for pre-owned homes, there

tireless efforts by our predecessors and the unwavering

was a growing trend in the purchase of tankless watersupport of our stakeholders.

heaters to replace conventional water heaters, evenIn fiscal 2021, the final year of the “G-shift 2020”

when products were on backorder status. In China,

medium-term business plan, under the slogan “heat andinternet sales in particular expanded, while in Indonesia,

lifestyles” and “health and lifestyles,” we provided existingsales of built-in hobs (stovetops) were strong, as

products and services while making an effort to create

operating income increased on vigorous worldwide

original products and services incorporating new

stay-at-home demand. As a result, net sales in fiscal 2021

technologies into Rinnai core technologies. At theamounted to ¥344,364 million (up 1.1% year on year), with

beginning of the fiscal year, in light of the impact ofoperating income of ¥40,690 million (up 18.2%), resulting

COVID-19, we anticipated recording the first operatingin record-high performance.

Creating a Healthier Way of Living
Toward a New ERA for Rinnai Creating Healthy

Kenji Hayashi, Representative Director and Chairman

and Comfortable Lifestyles

President

13

Hiroyasu Naito

The 100 Anniversary Commemoration Ceremony held on September 1, 2020, was streamed online to all Rinnai
workplaces due to COVID-19

Hiroyasu Naito, Representative Director, President andExecutive President

Rinnai Report 2021

14

Message from the President continued

In the 15 Years Since Being Appointed President, Rinnai Has Undergone Enormous
Changes Enabling the Company to Gain a Firm Footing
Since joining Rinnai, I have had the privilege of gaining

year amid the impact of harsh winter conditions amongexperience in sales, development, manufacturing, quality

other factors.

assurance and a variety of other divisions, and I feel

We have completed five medium-term businessblessed to have grasped a sense of each workplace.

plans during the past 15 years, changing direction in

After being appointed President in 2005, we transitioned

the initial “V-shift Plan” with a focus on profit structure.

from an initial focus on sales as the top priority to an

Next, under the “Reform & Breakthrough Plan,” we raisedemphasis on profits. This was the result of a strong shock

the operating margin into the 10% range. Under

I received upon visiting a retailer selling Rinnai products

the “Jump UP 2014” and “Evolution and Succession” plans,at giveaway prices with a mountain of products stacked

we increased the overseas sales ratio to approximately

up in the backroom. I decided “we must enhance added

50%. The “G-shift 2020” plan prepared for our 100thvalue and ensure profits,” which led to a significant

anniversary while simultaneously aiming to build thechange in policy. Despite this sudden change, we were

Rinnai brand. Overall, I think we have been able tofortunate not to have recorded an operating loss thatsteadily gain a firm footing during the past 15 years.

Medium-term Business Plan Trends(Consolidated)
Net sales¥236.7 billion
Operating income¥15.0 billion
Operating margin
6.4%

Reform &Breakthrough(Consolidated)
Net sales¥246.6 billion
Operating income¥26.6 billion
Operating margin
10.8%

3rd
Jump Up2014(Consolidated)
Net sales¥295.0 billion
Operating income¥30.7 billion
Operating margin
10.4%

Evolution andSuccession

2017(Consolidated)
Net sales¥347.0 billion
Operating income¥32.8 billion
Operating margin
9.5%

Changes in business conditions
expected to accelerate in the futureG-shift 2020
(Consolidated)
Net sales¥344.3 billion+¥131.4 billion*
Operating income¥40.6 billion+¥30.4 billion*
Operating margin
11.8%+6.9 points*

100th anniversary

1stV-Shift
Plan

2nd

5th

4th

Overseas sales ratio
48.9%+16.0 points**Comparison to 2006

Fiscal 2007

Fiscal 2009

Fiscal 2012

Fiscal 2015

Fiscal 2018

Fiscal 2021

Strengthening corporate structure through the past five business plans (15 years)• Efforts to achieve carbon neutrality• Transformation of needs andentrenchment of “new normal”• Progressive digitalization

Expansion of Business Scale
In terms of business domain expansion, the United

e-commerce events, with plans to complete Phase 2

States and China will become important strategic

construction at the Fengxian Factory in February 2023.

markets going forward. In the United States, we

Rinnai products with a high market share inestablished an Innovation Center in 2020, and while

countries throughout the world incorporate advanced

aiming to enhance our local technological capabilities

technological capabilities backed by complex functions

and competitiveness, we have also begun to focus

no other company can easily replicate. Going forward,

attention on the Central and South America regions

we will also enhance our brand power overseas on thewhere we have yet to develop business. Construction ofbasis of outstanding product appeal.

the Griffin Factory is scheduled for completion in
October 2021, which will enable us to meet growing“heat and lifestyles,” we will also maintain a strong

demand for tankless water heaters.

awareness of “health and lifestyles.” In terms of the

In China, which has emerged as the world’s largest

revolution of our corporate structure, we will make efforts

market due to the expansion of its middle class, we will

to become more consumer-oriented, mainly through thestrengthen marketing efforts in particular, aiming toestablishment of new sections including a New Business

differentiate Rinnai from global competitors. In theStrategy Office and Marketing Office, as well as new

growing China e-commerce market, the internet sales

marketing approaches involving the ascertainment ofratio is also on the rise and we have captured the top

user needs and measures aimed at enhancing our brandshare of water heater sales proceeds at large

image through products.

Revolution of Corporate Structure
Positioning of new medium-termbusiness plan
Aiming to be the brand of choice in the
new rapidly changing era, we havepositioned the next five years as a period
for delivering growth and implementing
reforms from medium- and long-term
perspectives.
Fiscal 2022~Fiscal 2026
New Medium-Term Business Plan

Formulation of the New Medium-term Business Plan “New ERA 2025”

Amid an increasing focus on ESG, the SDGs andSince being appointed President, I have promoted thesustainability, the valuation of intangible assets such astransition to a Company that generates profits, and going

human resources, technologies and brands, collectively

forward, we will continue aiming to further enhance ourreferred to as “non-financials” is changing—this is theearning power through initiatives focused on high-value-essence of Rinnai’s strengths. I take pride in the fact that alladded product strategies and rigorous cost reductions.

Rinnai employees are facing the right direction, as seen in

We will also increase the return on invested capital (ROIC)

their commitment to compliance and the advanced

through the efficient investment of management capital.

technologies that underpin our product quality.

Going forward, we must optimally allocate capital while

Since our beginning, in the pursuit of quality, Rinnai has

steadily capturing risk premiums in line with an increasing

visualized various aspects of its business, promoting digitaloverseas sales ratio. Further, we will increase shareholder“New ERA 2025” is Rinnai’s first five-year medium- to long-term business plan. Starting in 2021, exactly 101 years sincetransformations (DX) in pursuit of a rationalized approach toreturns, aiming for a total return ratio over 40%.

our founding, we view this as a new medium-term business plan for a new ERA in which we aim to achieve:

business, including current efforts to reduce workloads using

Expansion of business scale andRevolution of corporate structure leading to
Advancements in addressing social challenges

IT, and incorporated this experience into everything we do.
Rather than focusing solely on manufacturing activities, welaunched the “Rinnai BiZ” platform as one example ofmarketing efforts directly linked to customers, and aredeveloping a new customer-oriented sales approach.

15

Within business domain expansion, in addition to

Rinnai BiZ display,part of Rinnai’s efforts to promote DX

Rinnai Report 2021

16

Message from the President continued

Having continually thought about areas in which toAdvancement in Addressing Social Challenges

At present, decarbonization movements are accelerating

All nations throughout the world are exploring

throughout the world. Up to now, Rinnai materiality has

methods for achieving future carbon neutrality, and to

focused on the environment and initiatives aimed at

this end, Rinnai will propose specific target indicators. In

resolving environmental issues through our core

the United States, the adoption of tankless water heaters,

businesses, including improving functionality, expanding

and in China and Mongolia, the transition from coal tolineups and promoting sales of environmentally friendly

gas as a primary energy source will suppress both CO2

products such as ECO-ONE and Eco Jozu. However,

emissions and PM2.5. In this way, we expect that asgoing forward, we must take even further steps.

Rinnai products spread to all corners of the globe, CO2

For example, major gas companies are launching
initiatives aimed at “methanation,” a process whereby

emissions will be reduced and air pollution issues will
be resolved.

Neither Kanta-Kun nor Micro Bubble Bath units

expand the potential for these products, in addition toare completely new products, but rather, they are“heat and lifestyles,” we came up with the slogan “healthimprovements on existing products. Even though theyand lifestyles.” For example, the Kanta-Kun gas clothes

incorporate only slight changes, they are perceived bydryer offers the advantage of strong antibacterial

consumers as being altogether different. In Japan, whereproperties that surpass those of electric clothes dryers,

reducing the number of hours worked is becoming

enabling people who suffer from hay fever to avoid

an acute problem, the value offered by Kanta-Kun has

line-drying their clothes outside. The Micro Bubble Bathincreased significantly. In other words, this indicates that

unit soothes both mind and body, leaving users feelingcustomers are not satisfied with their current lifestyles.

refreshed. Each of these products contributes to

In identifying potential issues such as these, we want toresolving issues related to modern human “healthdevelop products that enhance quality of life enabling

and lifestyles.”advancements in addressing social challenges.

CO2 and hydrogen are used to create methane. If these
efforts are successful, conventional gas appliances will
be able to utilize methane, which will reduce CO2
emissions. To realize zero CO2 emissions, we must
explore the potential of all types of energy equipment. To
this end, Rinnai established the Integrated Strategy
Division, a specialized unit promoting the verification ofvarious methods contributing to the realization of acarbon-free society.
ECO ONE hybrid water heater and heating system

Gas clothes dryer Kanta-kun

Microbubble bath unit

Targeting Sustainable Growth through the Ongoing Provision of Products Essential
for Society
Our challenge for the future is the need to create new

In one sense, Rinnai’s products are unglamorous,

products that will become pillars of our business. In the

but COVID-19 has reminded us that our products are

Japan market going forward, as sales of conventional

essential and needed by people throughout the world.

water heaters and kitchen appliances alone are

I want Rinnai employees to once again feel the joy of

expected to decline, we see a major opportunity to

being involved in work that is indispensable to society.

capitalize on products such as Kanta-Kun and Micro

Having expanded our business domain from “heatBubble Bath units that will become the next pillars of ourand lifestyles” to “health and lifestyles,” going forward,

business. In product development up to now, we have

we aim to realize our brand promise of creating asearched for areas completely different from those inhealthier way of living through dedication to our mission

which we have already found success, but rather thanof enriching people’s lives by creating even moreending this search when we create a hit product, we

appealing products.

want to thoroughly explore peripheral demand as well.

17

Rinnai Report 2021

18

Medium-term Management Plans

Review of Previous Medium-Term Business Plan (G-shift 2020)
Fiscal 2019
Sales up;income down

Fiscal 2020
Sales down;
income up

Fiscal 2021
Sales up;income up
Record-highearnings

Japan: Weak performance by main products due to industry shrinkage andprice competition
Overseas: Decline in income due to upfront investments despite ongoing growth in sales
Japan: Improved income amid changing conditions stemming fromconsumption tax hike
Overseas: Performance in some areas weakened by intensifying competitionand depreciation of local currencies
COVID-19 pandemic impacted the entire world
Japan: Performance driven by strong sales of growth items, stay-at-homedemand, and cold snap
Overseas: Sales growth in the United States; recovery in China and elsewhere
exceeded initial expectations

Consolidated net sales■ Initial targets ■ Actual(Billions of Yen)
450
348.0

344.3

FY2020

FY2021150
0FY2019Consolidated operating income■ Initial targets ■ Actual(Billions of Yen)
45.0
34.4
40.6
30.8
30.0
15.0
0

Looking back on Fiscal 2019–Fiscal 2021 (from Apr 1, 2018 to Mar. 31, 2021)• Failed to achieve plan’s initial targets for net sales and operating income
due to major changes in the business environment• Greater-than-expected improvement in profit structure, owing tocorporate efforts including cost reductions• Reached new record-high income, and reinforced the foundation for
the next 100 years

340.4

300

FY2019Operating margin
15.0%

FY20200.0%

New ERA 2025
New Expansion, Revolution and Advancement

FY2021● Initial targets ● Actual

10.1%

11.8%

FY2020

FY2021

10.0%
5.0%

New Medium-Term Business Plan (2021–2025)

We have positioned the year 2021 (101 years since our foundation) as the start of a New ERA.

We will achieve Advancement in addressing social challenges through Expansion of business scale

8.9%
FY2019and Revolution of corporate structure.

External Business Trends and Rinnai Group Strengths

Corporate Vision
Brand Promise

Global• Increase in world population and continuous economic growth in emerging countries• Accelerating movement to achieve carbon neutrality to combat global warming• Changes in lifestyles due to advances in digital technology• United States: Strong housing market; China: Expansion of gas infrastructure to regional cities

Creating a healthier way of living

Leverage our core technologies
to achieve business expansion n four business fields
Diversification, Hybrid

Gas
EnergySocial Challenges Rinnai should embraceJapan• Increase in double-income households due to the declining population and number of households• Gas appliance market expected to remain flat amid decreasing number of housing starts• Increases in frequency and magnitude of natural disasters• Changes in people’s values and behaviors◆ Improve quality of life
◆ Help resolve global environmental problems

19• Local production bases; strong
overseas network• Firmly established brand image forhigh-quality products• Solid financial baseFluid control

Ideas

Heat and Lifestyles
100 years ofaccumulated wisdom Business domains
Combustion
Heat exchange

Basic Policy
Quality is our destiny

Manufacturing

Technology-oriented Core technologies

Corporate Vision• In-house development and automation equipment of key units, andin-house production of molds• Hybrid technologies for energy saving and core technologies for heating• Superior manufacturing capabilities with state-of-the-art factories andunique manufacturing affiliates• Nationwide sales channels and spaces for experiential proposals

Health and lifestyles(Electricity, natural energy, hydrogen etc.)

We will utilize various kinds of energy resources andour own core technologies to address social
challenges in our business field “heat and lifestyles”“health and lifestyles” and achieve a sustainable,
steady, long term growth.

Consumer-oriented
Social challenge-oriented

Electronic
control, IoTManagement style

Focus on P/L androbust management

Focusing on B/S
Improve capital productivity
Strengthen strategic investments

Leverage expertise in Japan, United States, and China
to expand business scale worldwide
Revolutionize corporate structure to achieve sustainable growth

Rinnai Report 2021

20

Medium-term Management Plans

Key Strategies
We have formulated three key strategies: Help resolve social issues, expand business scale, and revolutionize
corporate structure.

Advancement in addressing
social challenges• Improve quality of life
• Help resolve global environmental problems

Expansion of business scale. Expand regional domains. Expand business domains

Revolution of corporate structure

Numerical Targets for Fiscal 2026 (Consolidated)
Expansion of business scale

Expand regional domains
Expand business domains

Net Sales, Operating Income, ROIC Plan (image)Consolidate Net Sales: ¥450 billion(Japan: ¥200 billion;
overseas: ¥250 billion)

Net sales

Operating income

ROIC(Billions of yen)

500

20.0%

450.0

Revolution of corporate
structure
Become more consumer-oriented
Make focused investments
in intangible assets
Enhance profitability

Advancement in addressing
social challenges

Operating Income: ¥50 billion
Return on invested capital (ROIC):
19.0%
Total return ratio (five-year average):
40.0%
Sales of products that improve quality of lifeand benefit the global environment(compared with fiscal 2021):

Improve quality of life
Help resolve global
environmental problems

400

300

16.0%

200

14.0%

100

12.0%

50% up40.6

Contribution to CO2 emission reduction:

7 million tons

18.0%

365.0
344.3

50.0

41.0

0

• Become more consumer-oriented

10.0%
Fiscal Fiscal Fiscal Fiscal Fiscal Fiscal
2021 2022 2023 2024 2025 2026
Targets• Make focused investments in intangible assets• Enhance profitability

21

2Expand R&D domains and build next-pillar businesses

3

Strengthen manufacturing system to support long-term profits

4

Strengthen global framework

5

Deploy digital transformation (DX) to achieve business restructuring and strengthen
cyber-security measures

6

Proliferate the Rinnai brand both internally and externally7

Improve the value of our human resources

8

Improve our ESG (environment, social, governance) evaluation

ESG
item

Main initiatives

Connection with Medium-TermBusiness Plan
(three key strategies)

Environment

Expand range of products that improve quality of life and benefit the environment

Popularize energy-saving water heaters to reduce
CO2 emissions
2025 target: 7 million tons
Develop and promote energy-saving equipment
Expand R&D investments targeting a carbon-free society

Advancement in addressing social challenges(help resolve global environmental problems)Expansion of business scale(regional expansion)
Revolution of corporate structure(focused investments in intangible assets)

Social1

Connection between Medium-Term Business Plan and ESG

Create products that improve quality of life
Make efforts to improve human resource value
Invest in human resource growth, review personnel
system, and promote health management
Create environments for diverse work styles

Advancement in addressing social challenges(improved quality of life)
Expansion of business scale(expansion of business domains)
Revolution of corporate structure(becoming more consumer-oriented)
Revolution of corporate structure(focused investments in intangible assets)

Governance

Eight Priority Measures

Instill compliance
Strengthen cybersecurity measures
Implement each principle of Corporate Governance CodeIntroduce performance-linked and stock-based
compensation
Establish Nomination Advisory Board and Compensation
Advisory Board

Revolution of corporate structure

Benefiting SDGs

Rinnai Report 2021

22

Message from the General Manager ofCorporate Planning Headquarters

We will continue striving for “advancementin addressing solving social challenges”
to continue to be a “company of choice”
in the world.
Takuya Ogawa“Become More Customer-oriented” and “Make Focused Investment in Intangible Assets”
One of the important themes of the new medium-term business plan is “revolution of corporate structure” and “become morecustomer-oriented” is a pillar of that theme.
While we feel that we have achieved a certain degree of success with recent hit products related to saving time and improving
health, we will promote value creation by strengthening our marketing capabilities and building new lines of communication withcustomers. While capturing the needs of the market through the establishment of a new marketing office, we will seek ways to provide
useful information and services in the entire process from product selection to use, inspection, trouble-shooting, and disposal within

Senior Executive Officer
General Manager of Corporate Planning Headquarters

the move toward digital transformation (DX).
With regard to “make focused investment in intangible assets,” up to now our investment has been concentrated in tangible
assets such as production

Previous G-Shift 2020 and New “New ERA 2025” Medium-term Business Plans

facilities and products, but we

Human Resources

Information Technology

believe we need to invest more

(Investment targets)
Formulate engagement improvement measures;
establish system for self-growth evaluations; build
education system; establish workplace environmentsthat welcome new work styles(Investment targets)
Develop information infrastructure for strengthening
global cooperation; develop technologies for digitaltransformation

Core Technology (Know-how)Branding(Investment targets)
Build advanced manufacturing system; enhance R&D
system focusing on “heat and lifestyles” and “health andlifestyles”(Investment targets)
Popularize global brand image externally;strengthen internal branding

Rinnai’s previous medium-term business plan, G-shift 2020 (fiscal 2019- fiscal 2021), had a rigorous start due to a shrinking domestic

intensively in intangible assets

market and resulting price competition, as well as the front-loaded burden overseas of investments. Yet we ultimately achieved record

such as human resources,

profits through thorough cost reduction efforts and by capturing stay-at-home demand in Japan and abroad. As the culmination of

information technology, core

the 100th anniversary of our founding, we made progress in improving our profit structure and strengthened our earning power overtechnology (know-how), andthe past three years.

branding as a means to

In formulating New ERA 2025, our new medium-term business plan, we considered the significant changes in the businessstrengthen our corporate

environment that should be expected in the future, such as the advent of carbon neutrality, the new normal society, and the advance ofstructure from here on.

digitalization. As a result of active discussions through Rinnai, we decided to set a five-year period (fiscal 2022- fiscal 2026) as the planhorizon because we believe there are many issues that cannot be addressed in a near-sighted manner and that must be tackled froma medium- to long-term perspective.

“Enhance Profitability” and “Capital Policy”“Advancement in Addressing Solving Social Challenges”

While the revised Corporate Governance Code also requires us to understand the cost of capital and disclose our basic policy on

Among the three strategic stories of the new medium-term business plan, “Advancement in addressing social challenges” is positioned

capital measures, we first defined the required cash level as ¥180 billion (working capital plus flexible funds for disaster response, etc.)

as the top priority, and in order to achieve it, I believe we must simultaneously work toward “Expansion of business scale” andbased on our business performance and financial position as of the end of fiscal 2021. And for the portion exceeding that, we have

“Revolution of corporate structure.”established a policy of capital allocation during the medium-term business plan period of up to ¥125 billion for investment in future

As for efforts to “improve the quality of life” in “Advancement in addressing solving social challenges,” we need to provide
the optimal products for each country as we expand our offerings around the world. We have set four criteria for quality-of-life
improvement: 1) reduced stress through improved convenience, 2) Increased safety of living spaces, 3) improved levels of hygiene andgrowth and strategic expenses, and more than ¥60 billion for shareholder returns. The total return ratio of over 40%, which is a measureof shareholder return, is double the ¥30 billion of the past five years.
We have been using financial indicators such as ROE and ROIC in the past, but in addition to the existing management policy ofhealth, and 4) enhanced resilience and clarified the specific applicable products for each region. This will lead to “Expansion of

focusing on sales and profits, the new medium-term business plan sets the basic policy of capital policy as “to secure a sound financial

business scale.” In addition, to enhance our contribution to “improve the quality of life,” we will also focus on “broadening our reach” tobase, invest for future growth and provide stable returns to shareholders.” With ROIC as the most important indicator, we will aim for

more countries by expanding into existing and new markets in addition to our key strategic markets in the United States and China.

well-balanced management looking out over the coming 10 and 20 years.

As the same time, we have worked to “help resolve global environmental problems” as a materiality item, but with the Japanese
government’s declaration of carbon neutrality for 2050, we are now undertaking even deeper discussions. In the future, residential

We will continue to be a company of choice by contributing to improving the quality of life for people around the world and toresolving various social issues, including carbon neutrality.

energy sources are expected to shift to hydrogen, renewable energy (electricity), and carbon-free gas (methanation). Rinnai, as an
Cash Flows for Past 5 Years

equipment manufacturer, must keep a close watch over trends in such energy infrastructure.
That said, to develop and provide

Present

regardless of which scenario
materializes, we will invest in what we
can do quickly, such as accumulatingknowledge in each field and enhancing

Infrastructure forhouseholds

more thermally efficient equipment

Low-carbon economy(Fiscal 2017–2021 results)

Decarbonized economy (Carbon neutral)

contribute to a decarbonized society.

23

Inflows

Investments

Fossil fuels

Carbon-free gas

Renewableenergy¥76.6 billion

Hydrogen

1. Popularize energy-efficient appliances( ECO ONE, Eco Jozu)
2. Discontinue non energy-efficient appliances
3. Develop new energy-efficient appliances

Develop electric
appliances, such as
IH equipment andheat pumps

Establish technology for
100% hydrogen
combustion equipment(for fuel cell back-up)

Operating cash flows¥200.0 billion

Shareholder return(Dividends, share buybacks)¥30.0 billion
Other ¥1.9 billion
Accumulated cash
and deposits¥77.5 billion

Outflows
Necessaryinvestments forbasic scenario¥80.0 billion

Outflows(Tangible/intangible fixed assets)

Operatingcash flows¥186.1 billion
Our Initiative

Rinnai will have a great opportunity to

Inflows

Future (~2050)

talent for research. By proactively
responding now, I am confident that

Cash Flows for Cash Flows for Fiscal 2022–2026

Appropriation of
cash carried forward¥65.0 billion

Growth investments
Strategic spending¥125.0 billion or less

Investments
based on capital
productivity

Shareholder return¥60.0 billion or more

Targeting a total return
ratio of more than 40%

Rinnai Report 2021

24

Message from the President of a US Subsidiary

We will develop our overseas businessand deliver the Rinnai brand promise topeople around the world.
Frank Windsor President, Rinnai America Corp

It is also worth noting that in many cases, sales agents and house builders have the decision-making power as towhich manufacturer’s water heater is installed. Rinnai has exclusive sales contracts with 12 of the top 14 house builders
in North America, so when a decision is made to install a tankless water heater, Rinnai’s models are always chosen.
Furthermore, Rinnai America is upgrading its headquarters to a state-of-the-art training and research and development(Innovation) center, where it will invite partners in sales and installation and provide a full slate of hands-on training.
At the newly established Innovation Center, we will work to differentiate ourselves from our peers by incorporating the
feedback and ideas we have gained through contact with these excellent installers, based on collaboration with our talented
development department in Japan. In particular, as skilled workers tend to be in short supply, it is becoming increasingly
important to develop products that reduce the time and effort needed for installation.

Rinnai America Going Forward
Strong Performance Amid the COVID-19 Pandemic
In recent years, the Rinnai Group’s overseas sales have comprised just under 50% of its total sales. Yet with the declining
birthrate, an aging population, and other issues in the Japanese market, it is difficult to hope for sustained high growth there.
In this respect, Rinnai America is well positioned to lead the Group’s overseas business, and we recognize that it plays a very
important role in terms of the Group’s growth strategy (namely the “Expansion of Business Scale” pillar in the new medium-term
management plan, New ERA 2025).
In fiscal 2020, the novel coronavirus (COVID-19) pandemic had a tremendous impact on the North American market.
First and foremost, we gave top priority to the health and safety of our employees, and also endeavored to support our business
partners in various ways so that they could continue their business. Although orders decreased significantly at the beginning of
the fiscal year, sales rebounded strongly thanks to stay-at-home demand from June onward, due partly to residential-use
products accounting for 80% of our business. And at the end of the year, we were able to substantially beat the previous year’s
results and ultimately increase our market share in all product categories.

Strengthening Functions as a Business BaseIn April 2018, we began production of the first tankless water heater (instantaneous water heater) in North America. The policyof “local production for local consumption,” where production is done close to the customer market, is aimed not only at
mitigating foreign exchange and supply chain risks, but also at demonstrating Rinnai’s commitment to its partners andconsumers in North America to be a company that contributes to the local community through employment, tax payments, andso forth. In North America, about 10 million water heaters are sold each year, of which about 86% are tank-based heaters that
store hot water in a tank for use. Since 2015, Rinnai America has been actively advertising its tankless models through televisioncommercials, printed materials and online media in an effort to raise consumer awareness of the advantages of tanklessmodels, which are highly environmentally friendly, save space, and never run out of hot water.
The “Try Rinnai Tour” installed a tanklesswater heater in a large van that embarked
on a promotional tour across North
America

Rinnai has a solid reputation for high quality backed by advanced technologies both in Japan and overseas. From 2018, Rinnai
America has introduced high-efficiency water heaters that are equipped with a condensing technology nicknamed Eco Jozu inJapan, which reduces CO2 emissions by recovering and reusing the heat from exhaust gas, to further add value to the tanklesswater heater market.
In North America, awareness of climate change and decarbonization is increasing, and some local governments are
moving to ban the installation of gas appliances in new homes. However, the thermal efficiency of our condensing water heaters
is an exceptionally high 96%, and with coal-fired power generation still prevalent, it is difficult to say unconditionally that using
gas is bad. For its part, Rinnai America will contribute to a decarbonized society through the Group’s comprehensive
capabilities, including the expansion of its product lineup using electrification and heat pumps.
Since fiscal 2020, Rinnai America has been responsible for the development of the Latin American market, which waspreviously the responsibility of the Overseas Business Headquarters at Rinnai in Japan. We will continue to work diligently tocontribute to the Group in its “Expansion of Business Scale: Regional Domains,” one of the pillars of New ERA 2025.
The Rinnai Group has formulated its brand promise, “Creating a healthier way of living,” with the goal of contributing topeople’s healthy and comfortable lives.
Our focus now is to improve people’s lives by changing the way water is heated in their homes through the widespread useof tankless water heaters.
To achieve this goal, Rinnai
America will contribute to the health
Rinnai America Sales: Results and Projections(Billions of yen)
and comfort of people’s lives, not only100
through collaboration with Rinnai’s
80
headquarters in Japan, but also with60
other overseas Group companies, aswell as through strategic alliances
40
with external organizations and20companies in North America.

0
2011

SENSEI high-efficiency gas tanklesswater heater

25

Installation of connected water heating system

2013

2015

2017

2019

2021

2025

Entrance of Rinnai America Headquarters

Rinnai Report 2021

26

Identifying Material Issues
We make every effort to identify social challenges relating to the Rinnai Group, through day-to-day communication

Material Issue Targets and Results
Deep Involvementwith SDGs

activities with stakeholders coupled with study and analysis of applicable guidelines and ESG indices. We also
identify CSR material issues through the Rinnai Group value creation process in relation to our management
strategies, revolving primarily around our Corporate Planning Division.

Identification Process● Conduct stakeholder questionnaire withthe aim of reviewing our Rinnai Report● Ascertain matters of interest to
stakeholders based on questionnaire
results and opinions expressed

Step 1

Step 2Outline existingengagement

Review CSR Report,(previous year s
version)● Outline communication activities withstakeholders● Ascertain opinions and matters of interest
to individual stakeholders● Analyze trends such as changing perspectives
on ESG and matters of public interest (Dow
Jones Sustainability Indices, FTSE4Good
Index Series, MSCI, etc.)

Step 3
Analyze international
standards andguidelines

Step 4
Analyze ESG indicesand questionnaires● Analyze sustainability-related
international standards andreporting guidelines (ISO 26000,
GRI G4 Guidelines, etc.)● Determine social challenges relating to the
Rinnai Group, and analyze their level ofimportance to stakeholders and Rinnai● Examine consistency with Rinnai management
strategy and identify CSR material issues

Step 5

Step 6

Study othercompanies

Determine social
challenges and identify
material issues● Study key stakeholders, and material
issues● Analyze methods of reporting
activities related to social contribution

We have determined social challenges relating to the Rinnai Group, analyzed their level of importance to stakeholders and the Group, and identified CSR
material issues.
As a change from the previous year, we have increased the importance level of the item “Work-life balance” to stakeholders and the Rinnai Group by one
level each.
○ Environmental issues

Very high<Importance to stakeholders>High
27◇ Customer issues

Energy consumption
CO2 emissions

Amount contributed toreducing CO2 emissions
by using the productWe intend to develop and encourage
households to use water heaters andheating units with an emphasis on energy
savings and environmental performance,
in an effort to reduce energy consumption
and reduce household CO2 emissions.

Target area: Global
Target stakeholders: All

Material Issues

Main Target Indicators

Consumer safety
Improving quality

Number of defects that have
led to product recall
announcements

2021 target

5.15

million tons

2025 target

7.00

CO2

million tons

2020 results: 4.50 million tons

Deep Involvementwith SDGs

0

We are working toward achieving zero defects
Target area: Global
by eliminating defects at every stage of theTarget stakeholders: Customers
product lifecycle—from development,
production, and sale through to
obsolescence—and pursue a range ofactivities to publicize information and raiseawareness of preventing accidents in the home.

cases2020 results: 0 cases◇ Health◇ Housework time reduction□ Work-life balance○ Waste○ Harmful chemicals○ Energy consumption○ CO2 emissions◇ Consumer safety◇ Improving quality○ Biodiversity□ Child labor / forced labor□ Stable procurement□ Support for cultural activities
and the arts

○ Conserving resources / waste○ Drainage□ Industrial relations□ Occupational health and safety□ Protecting privacy◇ Repair and inspection services□ Wages and welfare□ IR communication activities□ Fair trade□ Work style reforms□ Diversity□ Support for school education /vocational training□ Preventing corruption○ Transport and transfer◇ Enhancing Customer Center
services□ Training and education□ Dividend policy□ Surveying and evaluating suppliers<Importance to the Rinnai Group>

The Rinnai Group is participating in the Sustainable Development Goals (SDGs) set at the United Nations Summit in September 2015 and its actively
working to contribute to them. As Rinnai provides society with products that are closely related to the global environment and people’s lives, it recognizes
the importance of SDGs and will further develop its business with a focus on them.

The Sustainable Development Goals (SDGs)□ Other issues◇ Pandemic□ Communicating with suppliers□ Investing in local communities

High

Main Target Indicators

Toward the achievement of a sustainable society

Determining and Identifying Material Issues

Classification of Issues

Material Issues◇ Marketing communication

Very highSDGs items related to value provided in Rinnai’s value creation process
Environmental Providing lifestyles that reduce energy
consumption and impact on the global
contribution environment in daily life
Safety andsecurity

Supporting lifestyles by preventing andavoiding risks inherent in households

Quality of life

Proposing lifestyles in which the burden ofhousekeeping and time spent onhousehold chores are reduced.

Rinnai Report 2021

28

Environment

Response to Global Environmental Problems

The 2016 Paris Agreement has accelerated CO2 emissions reductions and zero CO2 emissions (carbon
neutral) movements in each country throughout the world. Rinnai, which mainly handles gas appliances, will
pursue the potential of various types of energy equipment bearing in mind the shift from a “low-carbon society”
at present to a “decarbonized society” in the future.

CO2

Rinnai Product Mix Image for Achieving a “Decarbonized Society”

Reduction in CO2 during
product usage

Our products: Composition of energy used (%)

100%

2021 Goals

5.15
7.00
million tons
2025 Goals

Low-carbon society

Carbon-free society (carbon neutrality)
Expansion of hydrogen
infrastructure

Hydrogen(Hydrogen combustion
appliances)

Proliferation ofrenewable energy
Expansion of cleaner
fossil fuels

Fossil fuelsGas appliances

Renewable energy(Hybrid and electric appliances)

Carbon-free gas(Gas appliances)

2020

2050

million tons

Regarding energy equipment that will realize a “decarbonized society” in the future, Rinnai quickly ascertains
changing conditions while promoting technological developments, and at the same time, under the current
medium-term business plan (fiscal 2022–2026), we will expand our product lineup and promote sales ofenvironmental products aimed at near-term efforts to realize a low-carbon society.

Products Corresponding to Medium-term Business Plan Initiatives
Goal

Main products(reflecting the energy situation in each country and region)

Details of environmental contribution

Eco Jozu , ECO ONE (Japan)
Tankless gas water heaters (United States, Australia)

1

2

29

Reduce CO2
emissions

Reduce PM2.5
emissions

Highly energy-efficient water heaters help reduce CO2 emissions

Gas water heaters (China)
Condensing boilers (South Korea)
Gas tabletop stoves (Indonesia)

Gas stoves with high combustion efficiency help reduce CO2 emissions

Solar hot water panels (Brazil)

Using solar heat to supply hot water helps reduce CO2 emissions

Boilers (China, Mongolia)

Switching from coal boilers to gas boilers helps reduce PM2.5 emissions

Rinnai Report 2021

30

Environment

Responses to the Task Force on Climate-related
Financial Disclosures

Strategy
Impact on Rinnai
Risk of procurement cost increases in line with raw
Raw materialmaterial costs that are passed on through carbon
procurement risks
pricing (carbon taxes and emissions trading) to
associated with climate
suppliers of materials that emit large amounts ofchangegreenhouse gases.

With the aim of creating a virtuous circle of the environment and the economy which assumes a sustainable company,
Rinnai expressed its support for the recommendations issued by the Task Force on Climate-related Financial Disclosures(TCFD), a taskforce established by the Financial Stability Board (FSB) in August 2020. We are promoting the disclosure of
the financial impact on the Company caused by climate change and our approaches to resolve these issues.

Transition
risks

Sharing of risks andopportunities related
to climate change

Leadership
Team
ReportCorporate Planning Headquarters
Environment Division

Environment Management
Committee

Opportunities

Rinnai’s response

Large

Low

• Convert to recyclable materials• Reduce procurement costs throughindependent efforts

Small

Low

Develop water heaters able to restrict
the amount of water used.

MediumAscertain changing conditions related toenergy while developing andestablishing technologies focused on
essential products.

Risk that the sale of water heaters potentiallyusing large amounts of water resources will be
restricted as a result of global water shortage
problems.

Gas water heater
regulations in line withfossil fuel regulations

Risk of impending necessity of measures for
replacing conventional products amid movements
toward requiring different methods than in the past
for consumers to realize the intended use of water
heaters using fossil fuels due to the transition fromthe conventional concept of a “low-carbon
society” focused on energy and resource
conservation to the long-term concept goal of a“decarbonized society.”

Physical risks fromnatural disasters

Risk of supply chain distribution disruptions due tothe impact of natural disasters (floods, torrential
rains, water shortages and other events).

Large

MediumEnhance response capabilities withbusiness continuity planning (BCP),
including decentralized materials
procurement sources and production
bases.

Risk of increased
operating costs

Risk that air conditioning and cooling equipment
operating costs will increase due to a rise inaverage temperatures.

MediumLow

Promote the introduction of residential
power generation through sustainableenergy and other measures.

Adoption of energysaving water heaters inline with tightening
environmental
regulations (CO2)

Current “low-carbon society” initiatives require
higher efficiency energy-saving water heaters.
Additionally, the advance of technologies such as
decarbonized gas for realizing a “decarbonizedsociety” will require more efficient energy-saving
water heaters than in the past.

Large

MediumPromote the expansion of productlineups and sales of more efficientenergy-saving water heaters.

MediumTarget areas where environmental
regulations have not yet tightened,
expanding the adoption of products
corresponding to usage environments in
those areas.

Physical risks

Risk Management
Committee

Degree ofurgency

Water heater
regulations as a resultof water resource
depletion

Governance
Rinnai’s Corporate Planning Headquarters and the Environment Division are taking the lead in compiling ESG-related
issues and allocating them to the relevant departments to undertake improvement initiatives. In addition, the Environment
Management Committee is the secretariat for ISO14001 operation and promotes initiatives related to risks andopportunities associated with climate change and reports such activities to the leadership team.

Financial
impactAdoption of gas boilers
In areas where coal boilers are used, gas boilers
in line with tighteningthat do not generate PM 2.5 will be required.
environmental
regulations (PM 2.5)

Large

MediumInitiatives to overcome climate change issues

ISO14001

Risk Management
Rinnai’s risk management is led by its Risk Management Committee. The committee periodically updates Rinnai’s risk
profile including risks associated with climate change and manages risks by classifying them by frequency of occurrence
and level of impact.

TCFD Recommended Disclosures and Content of Rinnai’s Disclosure

Recommended disclosures

Content of Rinnai’s disclosure

Governance

Environmental management
https://www.rinnai.co.jp/csr/manage_system/

Strategy

Value creation process
https://www.rinnai.co.jp/csr/value/

Risk management

Risk management
https://www.rinnai.co.jp/csr/risk_manage_system/

Metrics and targets

Value creation process
https://www.rinnai.co.jp/csr/value/
Approaches to preventing global warming through energy-saving
water heaters
https://www.rinnai.co.jp/csr/reduction/

Metrics and Targets
In its approach to climate change risks, Rinnai has prioritized “improving energy efficiency and developing popularizing
environmentally conscious products that achieve this.” Rinnai is working to manage climate change risk by setting“energy consumption and CO2 emissions” as material issues and the “amount contributed to reducing CO2 emissions byusing the product ”as a target indicator.

31

Rinnai Report 2021

32

Environment

Global Deployment of Rinnai Group Water Heaters
The Rinnai Group widely develops water heaters for use in Japan as well as overseas, engaging in business deeply
related to global warming and energy consumption. Viewed in another way, the development and adoption of more highly
efficient water heaters will enable the realization of substantial reductions in adverse environmental impacts.

Rinnai America Corporation Initiatives

Shanghai Rinnai (China) Initiatives

81

Thermal efficiency:%(high-efficiency model: 92%)

Thermal efficiency:

60%

Tank water
heaters

Tanklesswater heaters

are commonplacein the United States

Source: Statistics compiled by the
Air-Conditioning, Heating andRefrigeration Institute (AHRI) in
the United States

Water heater shipments in the Unites States

Water heater shipmentsin the Unites States

promoted by
Rinnai America

1,200

10%

1,000

8%

Tank water heaters

800

6%

600
4%

400
200

Tankless water heater ratio

Planned expansion of the Fengxian Factory

Experience centers where consumers handle products asthey consider purchases

2%

Tankless water heaters

02007 2008 2009 2010

2011

2012

The water heater market in North America is dominated by storagetank-type units that are not very energy efficient. Rinnai has beenpromoting the conversion to tankless water heaters that are highly
energy efficient. Efforts to boost awareness over many years arebearing fruit and sales volumes for tankless water heaters havebeen rising recently. Rinnai America will help ease the impact on the
global environment through the wide diffusion of highly efficienttankless water heaters.
To meet the rapidly growing demand for tankless water
heaters in the enormous US market, Rinnai opened an innovation
center to quickly develop products meeting consumer needs, andat present, we are engaged in the construction of a local Rinnaiowned factory to expand local production that, up to now, has been
conducted at a leased facility.

2013

2014

2017

2016

2017

2018

2019 2020

0%

Live sales event
streamed online
Innovation center environmental testing room

Scheduled construction of local production facility in Griffin

33

Rinnai owns a development and production base in Shanghai
and is expanding sales throughout China. Unlike in Japan, gas
pipe infrastructure in China is not widespread, thus the use of
convenient and efficient gas water heaters is not yet possible inunderdeveloped areas.
As gas pipeline development spreads and people’s living
standards improve, Rinnai will promote sales centered on gas
water heaters, the adoption of which will increase going forward.
In anticipation of growing demand, we are planning to expand
manufacturing facilities while continuing to increase businessscale through the establishment of experience centers in major
cities where consumers can actually handle products as they
consider purchases.

Retail store renovations

In terms of water heater sales, online purchases are onemeans of selling in this market, and Shanghai Rinnai is proactively
engaged in online sales efforts. In China, the unofficial holidays“Singles’ Day” and “618” are major sales events for general
consumables during which Shanghai Rinnai conducts sales
promotions streamed live online featuring famous influencers.
These efforts resulted in Rinnai products ranking first in water
heater sales. Online sales account for 30% of Shanghai Rinnai
sales overall, thus the Rinnai Group will establish e-commerce(EC), digital transformation (DX) and other online technologies tobuild on these business achievements.
Within business activities in China, promoting the sales of gas
water heaters and gas boilers is understood as contributing to theglobal environment as much as the expansion of energy-efficientequipment, thus we will promote various business developments
along these lines.

Rinnai Report 2021

34

Environment

Environmental Impact within Rinnai’s Value Chain

Rinnai promotes environmental impact reduction initiatives through the value chain (see Note 1) in consideration ofsocietal demands and impact on the environment.
Note 1: A series of business activities and value creation processes that companies conduct to provide customers value in the form of products and services.

Rinnai’s Value Chain

Demands and Expectations
from Society(Overseas / Japan)

INPUT
Main resources consumed(Raw materials and energy)

Procurement

Development and Manufacturing

Sales, Logistics, and Services

Product Usage

Disposal

Handling procurement risk
through the supply chain• Increased demand for heat-energy
appliances mainly in the Asia region• Support for international frameworks
such as the Paris Accord and otherenvironmental regulations

Provision of household appliancesthat contribute to energy-efficient
homes such as Net Zero Energy
HousesPromotion of energy efficiency in the“use stages” with the largest amountof CO2 emissions in the productlifecycle

Promotion of activities that
contribute to building recycling
societies, including compliancewith plastic regulations

Raw materials
Iron, copper, stainless steel, brass,aluminum, plastics, rubber, etc.

EnergyWater• Energy; 1,100,713 GJ• Ground water: 162,990 m3

EnergyWater

EnergyWater

EnergyWater• Public water: 595,343 m3

CO2 Emissions (Emissions Ratio)

OUTPUT

848,727 t(7.38%)

Rinnai’s environmental impact—

Initiatives Rinnai conducts
through business

35,161 t (0.31%)
Scope 2 68,606 t (0.6%)
Scope 1

Solid waste

Wastewater

29,726 t

741,609 m³(Includes valuable substances)

Supply chain management

Pursuit of environmental
performance and streamliningof manufacturing processes

Procurement: We work with suppliers topromote improvement activities
that make the flow of products,from parts procurement tocommercialization, better.

Development: Develop products with superior
environmental performancethat meet the climate andneeds of the region
Manufacturing: We are pursuing efficient processes,
minimizing invested resources andenergy, and promoting activities that
contribute to emission regulations
for CO2, waste products andchemical substances.

Rinnai’s estimates based on the “Basic Guidelines for Calculating Green House Emissions Through the Supply Chain”[Target scope]	Rinnai Corporation and consolidated subsidiaries (development / manufacturing), Rinnai Corporation (procurement / sales / logistics / services / product usage / disposal)[Target period] Domestic: Fiscal 2021 (April 2020–End of March 2021)
Overseas: January 2020-End of December 2020
[CO2 emissions (units)]: tCO2e, (%) represents the emissions ratio within each process.

35

9,384 t(0.08%)—
Spread of environmentallyfriendly products
Sales: Strive to spread products that
contribute to energy efficiency inthe water heater and heating fields
Logistics: We are promoting logisticalstreamlining.
Services: Elevate the Rinnai brand withsecurity activities through a wealthof service maintenance andinspections

Scope 3 (Category 11)

5,937 t10,497,104 t (91.31%)(Concerns emissions from Japanese water heaters)—(0.05%)—

Proposal of reasonably
achievable ecological lifestyles

Promotion of environmentallyconscious design

Product Usage: We are teaching customers the environmental
Disposal: Application of design for thefriendliness of our products and promoting theirenvironment, e. g., to makeecological use through Company-sponsored
products easy to disassemble
product events.
in accordance with product
Proposal of sustainable, comfortable, and green
assessment standards
lifestyles through use of energy-saving products
Through various events, we will appeal to all of
our end users the environmental performanceof our products and how to use them with theenvironment in mind.
The value chain is the chain of business activities and processes undertaken by acompany to generate and deliver value (products and services) to the customer.
Indicators marked with a check have received a third-party guarantee from,
Lloyd s Register Quality Assurance Ltd. (LRQA).

Rinnai Report 2021

36SocialDefining “Improved Quality of Life”

Rinnai’s Definition of “Improved Quality of Life”
Rinnai develops products closely related to people’s lives, including water
heaters for heating water, kitchen appliances for cooking andCriteria

air-conditioning appliances for heating rooms. In providing products witheven greater value, we support people’s lives as well as facilitate an

Gas tankless water heaters (USA)improved quality of life.
For example, in the United States, where tank water heaters areused, problems occur when all the hot water is used up and only cold

Main products

1

Reduced stress throughimproved convenience

Gas clothes dryers(Japan, China, South Korea)

water comes out. The advantage of Rinnai tankless water heaters is that

Endless supply of hot water thanks to gas water heaters

Reduced housework burden thanks to gas clothes
dryers and dishwasher/dryers

Gas dishwasher/dryers (Japan, China)

hot water is always available immediately when needed, which
contributes to reduced stress in everyday life.
Rinnai recognizes that making people’s lives more comfortable andenjoyable is the major mission of our brand promise “Creating a healthier

Details of improvement

2

Increased safety ofliving spaces

way of living.” To this end, we will expand sales to offer products that

Wireless LAN-compatible remote controls(Japan)Remote control and monitoring functions

Gas stoves with sensors (Japan, ASEAN)

Stoves equipped with sensors ensure prevention
against fires

Micro Bubble Bath units (Japan)

Micro Bubble Bath units have health improvement benefits

Air purifiers (China)

Increased hygiene levels thanks to better air quality

Gas and electric water heaters (ASEAN)

Water heaters installed in houses that previously did nothave them

ECO ONE (Japan)

Hot water supply even in times of disasterGas stoves (ASEAN)

Cooking possible even during electricity blackouts

improve people’s lives with health, quality and comfort while providing
enjoyment and excitement.
3

4

Improved levels of hygieneand healthEnhanced resilience

By broadly expanding products defined as “improving quality of life,” we envisage making people’s lives more comfortablethroughout the world, which we will manage as a business performance indicator. Our aim is to increase sales of productsthat improve quality of life by 50% in fiscal 2026 compared to fiscal 2021.

37

Rinnai Report 2021

38

SocialReducing Stress through Improved Convenience

Increasing the Safety of Living Spaces

Surveys on stress reveal that housework such as washing dishes and doing laundry are bothersome aspects of people’s
everyday lives. Rinnai recognizes that reducing the burden of housework will lead to improved quality of life.

In Japan, to prevent stove fires caused by tempura oil, laws* have been enacted mandating the installation of safety
sensors on all gas stove burners since 2008. With the spread of stoves equipped with safety sensors, the number of fires
caused by gas stoves is decreasing.

“Which of the following types of housework are a source of stress?”(%)
50

Survey on perceptions related to stress from the Netsu to Kurashi Tsushin (Heat & Life Newsletter) in May 2018(Multiple responses, N = 4,879)

Note: Household gas stoves have become subject to government-designated regulations (indication of PSTG or PSLPG) by the Gas Business Act, and the Act on the Securing
Safety and the Optimization of Transaction of Liquefied Petroleum Gas. Accordingly, all burners are required to be fitted with an “oil overheating prevention device” and a“flame-failure device” since October 1, 2008.

36.4
6,000

21.3

20

19.9

18.3
12.4

11.5

11.3

10

10.0

Reducing the Stress of Washing Dishes

Rinnai provides dishwasher/dryers to reduce the stress of
washing the dishes. Dirty dishes are placed in the machine andwith the push of a button they are automatically washed, rinsed
and dried in 1–2 hours. Even in Japan, which has high living
standards, the penetration rate is less than half, thus we believe
there is still room to expand the provision of these appliances inJapan as well as the rest of the world.
Furthermore, these appliances use about 80–90% lesswater than handwashing, while reducing the cost of
dishwashing soap and water by approximately 50–60%,
contributing to resource conservation.

39

Housework is nota source of stress

Other

Putting clean dishes away

Shopping

Changing the sheets,
making the bed

Drying laundry

Folding andputting away laundry

Sorting anddisposal of garbage

Washing dishes

Cooking

Cleaning0

Tidying up andorganizing the house

2.0

Reducing the Stress of Drying Laundry

Rinnai offers gas clothes dryers to reduce the stress of drying
laundry. This appliance is able to dry five kilograms oflaundered clothing in approximately 50 minutes (drying clothes
in about one-third the time required when using an electric heatpump clothes dryer). This enables a reduction in the amount ofwork involved in washing and drying laundry, which in turn
reduces the burden of housework.
The powerful heated air generated by gas eliminates
unpleasant odors associated with line drying, while also making
each individual fiber stand up, resulting in laundry that is fluffierthan sun-dried laundry. In proposing optimal laundry drying
methods, Rinnai will contribute to improving quality of life.

5,000

4,000

3,000

2,000

1,000

Mandatory sensor installations

23.5

Number of fires caused by gas stoves

30

5,713

27.5

(Source: Ministry of Internal Affairs andCommunications Fire Prevention White Paper andMinistry of Economy, Trade and Industry materials)

80%

74.8%

70%
60%
50%

2,497

40%
30%
20%
10%

0

0%

‘05 ‘06 ‘07 ‘08 ‘09

‘10

‘11

‘12

‘13

‘14

‘15

‘16

‘17

‘18

Sensor-equipped gas stove penetration rate

39.9
40

‘19

Rinnai has been engaged for some time in thedevelopment of safety sensors, establishing a trackrecord of fire prevention activities through sales
promotion and promulgation efforts. Further, in South
Korea, mandatory safety sensor requirements similar
to those in Japan have been mandated since 2014,
achieving similar results. Rinnai is promoting efforts
encouraging the adoption of these products toprevent residential fire incidents, which have becomea social challenge.

As living standards improve throughout the world, and cookware is
expected to increase in line with demands for more abundant lifestyles,
Rinnai will leverage technological developments accumulated indeveloped countries to provide products with a high degree of safety inorder to meet growing demands.
Gas stoves with sensors in China

Rinnai Report 2021

40

SocialContributing to Health Promotion
In April 2019, Rinnai formulated its brand promise, “Creating a healthier way of living” and renewed its brand logo. The newlogo is symbolic of the new Rinnai and is intended to invoke a brand image of creating healthy and comfortable lifestyles.
We have added a new theme of “health and lifestyles” to the past theme of “heat and lifestyles.” In addition, as one
message in promoting the theme of “health,” in April 2020 we launched sales of the microbubble bath unit.

Generating the Industry’s Highest Level of Microbubbles
As a method for generating microbubbles, in addition to the pressurized dissolution method used in conventional
products*1, the incorporation of a method whereby hot water is swirled inside the dissolution tank enables the dissolutionof even more air. Nozzle components that generate bubbles have also been improved, increasing the number of bubbles
in microbubbles to approximately twice that of conventional products, generating 30,000 bubbles per cubic centimeter(cc) of water, resulting in double the whiteness. This generates approximately 2.7 times more ultrafine bubbles*2 thanconventional products, or 2.42 million bubbles per cc of water.
In developing the pressurization and rotation technologies used in this product, another achievement is therealization of a more compact dissolution tank. In shrinking the tank size to just 30% of conventional tanks, Rinnai wasable to develop a Microbubble Bath Unit with a built-in water heater (conventional products use external water heaters,
thus in addition to units with external water heaters, we also sell units with built-in water heaters).

What are microbubbles?
Microbubbles are ultrafine bubbles measuring 1-100μm in
diameter. They have low buoyance and spread out and gently rise
like a milky cloud. As time passes, they float to the surface andbecome even finer bubbles as they contract in water.
Microbubble bath unit
By affixing a microbubble bath unit between the bathtub and thewater heater with dedicated circulator fittings (a device to spray
hot water into the bathtub), microbubbles are generated andproduce a variety of health benefits for the bather.

Number of microbubbles 30,000 (per cc)

2.42 million ultrafine bubbles (per cc)

Change over time in average skin temperature based on pre-bathing values

Change in averageskin temperature (˚C)

+1.6
+1.4

<Amount of Bubbles>

Conventional
products

800
Turbidity / degrees(˚C)<White turbidity>
Microbubble Bath Units

30

2,500

25

600

More than double
the white turbidity

400
200

Thousands/cc

Effect and efficacy of microbubbles: Hot bath effect20

Number of microbubbles

15

Approximately

0

50

100

Elapsed time / seconds

+1.2

150

Number of ultrafine bubbles
1,500

10
5

0

2,000

two times more

1.6

3.0

About
1,000
500

2.7 times more

91

242

0

0

Conventional products

Microbubble Bath Units

Bubble effusion image

1. Conventional products: Rinnai Bihakuyu (UF-MBU2) released in 2007
2. Ultrafine bubbles: Fine bubbles with a diameter of 1 μm

+1.0±0Prebathing

Start of rest
(Third minute ofbathing)

Rest for10 minutes
Plain bathwaterRest for20 minutes

Rest for30 minutes

VOICE
Developing the Microbubble Bath Unit

Microbubble bathing
The previously developed microbubble generator Bihakuyu unit was a product based on an extremely

Experiment parameters Research by Toho Gas Co., Ltd. and Nihon Fukushi University in fiscal 2019.
		
Subjects: Seven healthy women in their 30s
		Bathroom environment: Room temperature 29˚C, humidity 97%
		Bathing method: Whole-body bathing for 10 minutes with bathwater at 40˚Cstrong concept, from which our desire to excite customers with the generation of even more bubbles
resulted in the development of the Microbubble Bath Unit.
To generate even more bubbles, we both confirmed our progress using computer-assisted
engineering (CAE) and created multiple prototypes with which we repeatedly engaged in product

Since the bubbles envelop themselves around the bather’s body, the transmission of heat from the bath water to the body
becomes gentler causing body temperature to rise gradually. As the body releases heat gradually after leaving thebathtub, there is a sustained sense of warmth.

41

Kazuyuki Amemiya
Element Development Division,
Appliance Technology
Development Officetesting. This enabled us to increase the number of bubbles in actual measurements, as well as produce
cloudy hot water making the effect clearly visible, which I think was a great achievement.
Going forward, I hope to continue daily development efforts to continue providing products
enabling as many people as possible to live comfortable, quality lifestyles.

Rinnai Report 2021

42SocialResilience
A hot water heater that is resilient to disasters,
ECO ONE is a hybrid hot water and heating
system that protects and supports people’s lives.

The ECO ONE Hybrid Water Heater andHeating System as a Disaster Countermeasurein the Event of an Emergency

Disasters strike unexpectedly. Consumers canprepare for emergencies by installing hot water
heaters that can work with both gas and electricity,and thus diversify risk so lifestyles can be sustainedeven when lifelines are limited.

Electricity

Gas(High-efficiency
water heaters)(Heat pumps)

Highly efficientand energy-saving

Powerful andspeedyIt boosts the efficiency ofelectrical energy by using
hot air.

It packs a punch andshows its power when lotsof hot water is used orwhen hot water is used forheating.

What ECO ONE can do during a disaster

When the power is cut off

When the water is cut off

If there is power generation from cars or solar panels,
gas can be used to heat waterElectricity

In recent years, several natural disasters have occurred in Japan, serving as an opportunity to think more deeply aboutrisk countermeasures in the event of a disaster and heightening the momentum to prepare for them on a daily basis.
June 2020	Earthquake on eastern coast of Chiba Prefecture (maximum
seismic intensity 5 lower)
July 2020	Torrential rains across various regions measuring the highest
amount of rain ever recorded
July 2020	Typhoon Haishen caused damage in Kyushu and Tohoku regions

Total (n =1,403)

47.6

Gas

ECO ONE

When both electricity and gas
are stopped

Hot water can be supplied with electricity alone

If there is a storage battery, water can be heated with electricity
Supplying
hot water
withelectricity

35.9
31.1
46.1

20%

36.5

21.4

34.9
23.5

11.8

35.1

16.0

13.6

16.7

19.8

Power outage
countermeasures
Propane gas equipment
facilitating gas storage

0%

ECO ONE

Gas

Electricity

Solar power
generation

Storagebattery

ECO ONE

Gas

45.1

40%

Water outage countermeasures
Gas outage countermeasures

Total (n =1,403)

Source: EnviroLife Research Institute, Inc., 2019

43

Have
experienced
water
outages43%

Cigarette sockets

When the gas is cut off

Electricity

Equipment incorporating a
rainwater tank that can also be used
as an emergency water supply

Have experienced
power outages
70%

Have notexperienced
water
outages57%

51.0

Water servers and otherequipment that can also
store drinking water

Have notexperienced
power outages
30%

Experience withwater outages

60%

Residential planner damage (n = 206)

All-electric equipment that
does not use gas

Experience withpower outages

Overall damage (n = 1,403)

Eco Cute and other equipmentthat can also be used as an
emergency water supply

According to a survey, 70% of all respondents have experienced power outages
during a disaster. 43% have experienced water outages, with the data indicatingthat situations where lifeline services are interrupted occur frequently. As
countermeasures in the event of a power outage, there are requests forequipment “using sunlight and storage batteries to ensure basic life needs aremet” (51.0%) as well as equipment that “can also be operated using gas without
relying solely on electricity” (47.6%).

Power outage
response units

Consideration of Requests for Residential “Equipment” in the Event of a Disaster

Ability to resume normal
daily life using large
capacity storage batteries

70% of People Have Experienced Power Outages and 40% Water
Outages When Lifelines are Cut During a Disaster

Equipment that can also be
operated using gas without
relying solely on electricity

March 2020	Earthquake in Noto region of Ishikawa Prefecture (maximum
seismic intensity 5 upper)
April 2020	Earthquake in Chubu region of Nagano Prefecture (maximum
seismic intensity 4)

Ability to meet basic life
needs using sunlight,
storage batteries, etc.

Major Natural Disasters in Recent Years

ECO ONE

Hot water in the tank can be used as domestic waterhttps://www.jkk-info.jp/publicity/deteil/id=107

Image of hybrid lifestyleduring power outages
During a disaster, by using solar power generationand ECO ONE, electricity can be used to preserve
foods and for nighttime lighting while gas is used
for heating water and cooking.

Solar power generation

Emergency powersource up to
1,500W

Gas water heating
possible
Cooking is also
possible

Night-time lighting Information
Food
preservation (rechargeable gathering
LED, etc.)
CookingHeating water

ECO ONE

Gas

Rinnai supports customers’ safety and endeavors to help them live comfortable lives with peace of mind by providing
products like ECO ONE and the functionality built into its various products.

Rinnai Report 2021

44

SocialFair and Diversified Employment

Development of Global Human Resources

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. The Rinnai Group Code of Ethics stipulates that “Anydiscriminatory 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 and recruitment needs.
In addition, we actively engage in mid-career hiring to capitalize on the accumulated experience and knowledge ofindividuals who showed they can make a contribution to our success. We hire approximately 10 skilled mid-career
employees every year.

In order to develop human resources who can play an active role across national borders and improve the capabilities of
employees around the world, the Group has developed a business practices program that assigns mutual training
programs to management divisions, product development divisions, and manufacturing divisions.
With regard to human resources in Japan, we give the opportunities for secondment to overseas group companies
from their 20s. The program is based on gaining actual experience through an overseas posting and aims to develop
participants’ adaptability to different cultures and international business sense.

VOICE
Transferred from the Production Engineering Division to an Overseas
Group Company
After nearly 25 years in the Production Engineering Division, where I was involved with in-houseequipment design, new product production design and other operational and managerial
responsibilities, I have been working at Rinnai America since January 2018.

Increase of Female Employment and Support for Their Active RoleAt Rinnai America, to promote the local production of tankless water heaters, I have been
involved as the local project leader in preparations for the new Rinnai-owned factory to further

Ideas and comments from women are absolutely crucial to our products, particularly as they use so many of our products
on a daily basis. We have female employees playing key roles and demonstrating their individual abilities across a wide
range of areas, especially in product planning and design departments, sales planning and promotion departments, fixedcustomer sales departments, and production departments. At Hot.Lab, our interactive facility, female employees called
Life Creators demonstrate and promote our products to customers. Life Creators across the country gather every year to
exchange their opinions. They share their opinions on product functions, designs, and methods of demonstration tocontribute to the development of new products and the improvement of product promotion.
In addition, the fixed customer sales department proactively engaged in sales promotions from a female perspective
targeting customers such as retail stores and house makers.

expand local production in addition to the management of a leased facility launched in
Rinnai America

Hidekatsu Naruse(Second from right in front row)

April 2018.
With a total investment of over ¥7.0 billion for the new factory, I find it rewarding to be
involved in such a big project, and at the same time, I am delighted to be able to ensure highly
convenient tankless gas water heaters spread across the United States. That being said, thislocal launch required my involvement in a variety of fields other than engineering with which
I had no previous experience, such as human resources, accounting, safety and theenvironment. Further, the approach to many aspects of this project were very different fromthe way things are done in Japan, so even after three years, I am still learning new things ona daily basis.
Going forward, I want to continue contributing to the further development of Rinnai
America, which has just commenced production.

From the Overseas Business Headquarters to the United States andHong Kong

VOICE

After joining Rinnai and working for four years in the Overseas Business Headquarters at theEngaging in Product Development Encouraged by Customer Feedback

Japan Head Office, where I was involved in export operations focused on East Asia and Europe
as well as product planning, I spent two years in the United States where my experience mainly
involved market trend research. I then returned to the Japan Head Office, where I spent two

I work in a division engaged in the development of kitchen appliance products.

years engaged in sales to distributors. At present, I am working in Hong Kong, where I am

Our work involves products in new fields, such as the design of the “Cocotte

engaged in general corporate management, market trend research and sales activities.

Plate,” a container that can be used in grill boxes or on stovetops, as well as the

Rinnai Hong Kong Ltd.

development of the “+R RECIPE” app linking stoves with smartphones toShunsuke Tsutsumi

facilitate automated cooking.

(Left)

Many daily work activities are entrusted to me, and although theto be communicated in a language other than my own is good practice for grasping
the essence of things.

responsibility is great, I find my work to be very rewarding. At each step of the

Furthermore, thanks to my experience in multiple countries, I feel I have gained a higher

process, I feel that doing rewarding work leads to self-confidence and I am

perspective while discovering differences between countries and regions.

grateful to have been given an opportunity to play an active role. The

45

Working overseas in a different language and culture makes daily communicationsa challenge, but I feel that struggling to think about what and how to convey what needs

development of new products always involves some difficulties, but I will continue

Product Development Division II,
Kitchen Appliance Development Officestriving to deliver quality products through the encouragement of our customers.

Mayuko Umeda

Going forward, to play an even more active role globally, rather than being bound by one
set of values, I want to experience a variety of cultures and ways of thinking in order to become
an employee who is able to create new value.

Rinnai Report 2021

46

SocialIndustrial Relations and Human Rights

Occupational Health and Safety

Establishment of Good Labor Relations

Basic Policy on Safety and Hygiene

Employees of the Company are members of the Rinnai Employees’ Association, which functions as the organization torepresent the entirety of the Company’s employees. Based on mutual understanding and trust, the Company and the
Association establish healthy and sound labor relations, openly exchanging opinions on management issues, labor
conditions, workplace environments, and compensation and discussing improvement plans.
Moreover, the Company makes effort to provide a safe working environment without any concern to the employees
of our business partners, etc., in addition to our employees. We also actively arrange and offer welfare programs andvarious events and programs for our employees and their families.

An essential requirement in business is theassurance of the health and safety of
employees, via the provision of a hazard-freeand hygienic work environment. As Rinnai
constantly strives to protect the life and healthof all employees, we give top priority to thesanitary conditions and safety of the workplace.
This corporate mantra extends to ourcustomers, to whom we strive to provide “safety
and peace of mind.”Respect for Human Rights and Individuality
The Rinnai Group considers respect for human rights and individuality as one of its main pillars for performing its social
responsibilities as a company. We therefore strictly prohibit any form of discriminatory treatment based on gender, age,nationality, physical characteristics, or any other attributes of individuals. We also refer to the ideas of the United Nations
framework and ISO 26000 and reflect them in the Rinnai Group “Code of Ethics.”
To promote and enforce the contents of the Rinnai Group “Code of Ethics” among all Group employees, aCompliance Committee member is allocated to each workplace and materials are published on the Company intranet.
At rank-specific training programs, we also educate our employees based on their roles and job responsibilities.

Efforts to Prevent Child Labor and Forced Labor
As a measure to prevent child labor and forced labor, the “Rinnai Code of Conduct: 4.2 Prohibition of Child Labor andForced Labor” stipulates that “We will not use any inappropriate labor including child labor that subjects persons under
the legal working age to harmful labor or any form of unjust labor contrary to the intent of workers.” The entire Groupabides by and acts on this rule.

47

Fiscal 2022 Basic Policy on Safety and Hygiene

1. Create safe and reliable work environment
2. Maintain and improve work environment
3. Work style reforms and compliance with Article 36
Agreement
4. Promote measures to support for health improvement
5. Promote crisis management
6. Personnel training through safety education andworkshops
7. Promote traffic safety activities

Promoting Safety and Health Activities
Rinnai has established the Rinnai Companywide Safety and Health Committee as a governing body for domestic Group
companies and is working with safety, health, and disaster prevention officers at each business location to promote
occupational safety and health activities.
Within safety and health activities conducted at each business site, to prevent disasters, activities include thehorizontal deployment of examples informing employees about work-related injuries and corresponding recurrence
prevention measures, establishing safety and health committees that include members from both labor andmanagement, conducting safety and health patrols, and implementing the Company’s five fundamentals of safety andhealth (regulation, arrangement, cleaning, sanitation and training). Through these activities, we are working to create
workplace environments that are secure, safe and comfortable.

Measures to Prevent Harassment

Promotion of Traffic Safety

To maintain a working environment that our employees find comfortable, we take measures to prevent any infringementof human rights, including sexual harassment and power harassment. With regard to sexual harassment and power
harassment, we produced a checklist of detailed examples of harassment that is posted on the Companywide intranet
for self-assessment.
Furthermore, we also provide newly assigned department managers with harassment education to reinforce its
prevention.
We also revised our in-house rule to prevent any harassment related to pregnancy, childbirth, child care leave or
family care leave. We clearly determined the detailed act of prohibiting harassment and disciplinary action based on therules of employment if an employee violates any of these.

We carry out various educational activities with the aim of raising employee awareness of traffic safety and contributing to
the local community. As a “Zero Day” activity, employees themselves stand on the streets and call out to passers-by. We
hold lectures by police officers in collaboration with local police stations, and for new employees, we rent out a driving
school and hold practical training and risk prediction courses. Furthermore, through the periodic acquisition of driving
record certificates, we ascertain the status of employee safe driving behaviors and provide individual guidance assituations demand. We have also introduced the systematic installation of drive recorders on all Company-owned
vehicles in addition to introducing a safe driving eco-drive promotion system (telematics) to promote employee traffic
safety and eco-friendliness from practical as well as theoretical perspectives.

Rinnai Report 2021

48

GovernanceManagement Structure
Audit System for Monitoring and Supervising Management

Basic Principles

01

Rinnai views reinforcement and enhancement of corporate governance as important management priorities fromthe perspectives of strengthening competitiveness and continually improving corporate value of the Group.

02

Rinnai takes care to preserve equality of shareholders by ensuring that their rights are essentially protected andthat those rights can be exercised smoothly.

03

Rinnai views appropriate cooperation with all stakeholders as essential to improving corporate value and, throughits business activities, strives for its own growth together with social and economic prosperity.

04

Rinnai emphasizes highly transparent management through the swift and appropriate disclosure of wide-ranging
information while stepping up efforts to ensure that disclosure of Company information is based on legal
regulations.

05

Rinnai’s Board of Directors recognizes its fiduciary responsibilities to shareholders and strives to continually
improve corporate value though transparent, fair, swift, and resolute decision-making.

06

Rinnai encourages mutual communication through dialogue with shareholders and other stakeholders in order tobuild relationships of trust with those stakeholders.

Rinnai recognizes the reinforcement and enhancement of its corporate governance to be important management priorities
from the perspectives of strengthening competitiveness and continually improving corporate value of the Group. We aim to
conduct highly transparent management by providing swift and precise disclosure of wide-ranging information to all of ourdiverse stakeholders while endeavoring to enhance the functionality of internal bodies, such as our Board of Directors
and Audit & Supervisory Board.
The Audit & Supervisory Board is comprised of four members, two of whom are outside auditors. Audit & Supervisory
Board members attend Board of Directors’ meetings and other important meetings to monitor director and executive
organization execution of duties, the development and operation of the internal control system, and the status of operations andproperty management at the head office and major offices. In addition to these duties, external account auditors audit theCompany’s accounts and verifies from a third-party perspective the legality of the internal control system as it relates tofinancial accounts.

Board of Directors
Rinnai’s Board of Directors is comprised of seven members, two of whom are outside directors, and meets once a month inprinciple. The Board makes decisions regarding major management issues and also oversees business execution by Board
members. Some directors below the President serve concurrently as executive officers, whose role is to convey decisions by
the Board to executives in the relevant divisions responsible for business execution. The Board confirms business operations
and discusses issues at general business meetings and at other business meetings held on a quarterly basis. Moreover, theterm of Directors is fixed at one year in order to clarify management responsibilities and increase opportunities to enhanceshareholder confidence in the Board.

Nomination Advisory Board and Compensation Advisory Board
Corporate Governance Structure
General Shareholders’ Meeting
Election and dismissal

Election and dismissal

Cooperation

Audit & Supervisory Board

Accounting Auditor

Cooperation

Election and dismissal

Nomination/Compensation
Advisory Committee

AdviceAudit

Corporate Lawyer

Board of Directors

Election, dismissal,
and administration

Election, dismissal,
and administration

AdviceDirection

PresidentInternal Control Office

ReportReport

Audit

ReportManagement

ReportReportAudit

Internal
Audit

Related Committees
Corporate Ethics Committee
Risk Management Committee
Environment Management
Committee and other

Executive Officers
ReportBusiness Divisions

49

Consultation andrecommendation

Rinnai established a Nomination Advisory Board and Compensation Advisory Board comprising a majority of outside
independent directors as an advisory body to the Board of Directors to ensure a higher degree of objectivity and transparency
in the process of determining nominations and compensation for senior management and directors. In determining candidates
for directors, Audit & Supervisory Board members and executive officers, as well as compensation for directors and executive
officers, the Board of Directors will make the final decision based on discussions by both advisory boards.

Direction

Management

Director Compensation
Compensation limits for Directors and Auditors are determined inCompensation Amounts for Directors and Auditors(Fiscal 2021)
accordance with the resolution of the general meeting ofshareholders. Rinnai internal regulations also stipulate fundamental
Total amount of
Category
Persons
compensation paid
matters related to Directors’ compensations, including determination
Directors
7¥289 million
procedures, revisions, and reductions. Based on these, the amount(of which are(2)(14)
of compensation for Directors is resolved by the Board of Directors
outside directors)
and the amount of compensation for Auditors is determined through
Auditors
4¥41 million(of which aredeliberations by Auditors. Directors are paid a fixed amount(2)(10)
outside auditors)commensurate with assigned duties.
Total
11¥330 million
In light of changes in the business environment surrounding
Director salaries do not include employee salaries for directors who also serve
the Company and corporate governance requirements, the decision as employees. As of March 31, 2021, there were seven directors (including two
outside directors) and four auditors (including two outside auditors).
was made to implement an annual bonus plan and restricted stockcompensation plan starting in fiscal 2022 with the aim of promoting the steady creation of corporate value over the medium tolong term.

Rinnai Report 2021

50

Governance
Leadership (As of June 29, 2021)
Board of Directors

Audit & Supervisory Board Members

Kenji Hayashi

Haruhiko Ishikawa

Representative Director, Chairman of the Board

Career Summary and Current Position in the Corporation:
Apr. 1980 Joined Rinnai Corporation
Nov. 2005	General Manager of Administration Division, Administration
Headquarters
Apr. 2014	Executive Officer, General Manager of Administration Division,
Administration Headquarter
Jun. 2016 Audit & Supervisory Board member (current)

Career Summary and Current Position in the Corporation:
Apr. 1972 Joined Rinnai Corporation
Sep. 1978 Director
Feb. 1980 Director, and General Manager of Corporate Planning OfficeJun. 1983 Managing Director, and General Manager of Production Technology Division
Jul. 1992 Managing Director, and General Manager of Related Business DivisionJun. 2005 Director, Managing Executive Officer, and General Manager of Related Business DivisionJun. 2006 Representative Director, Vice Chairman of the Corporation
Apr. 2017 Representative Director, Chairman of the Board (current)

Hiroyasu Naito

Representative Director and President and Executive
President

Career Summary and Current Position in the Corporation:
Apr. 1983 Joined Rinnai Corporation
Jun. 1991	Director, Deputy General Manager of Technology Research
Headquarters, and concurrently General Manager of New Technology
Development Division
Jul. 1998 Director, General Manager of Technology Research Headquarters
Jul. 2001	Director, General Manager of Corporate Planning Division andconcurrently, General Manager of Administration DivisionJun. 2003	Managing Director, General Manager of Corporate Planning Divisionand concurrently General Manager of Administration DivisionJun. 2005	Director, Managing Executive Officer, General Manager of Corporate
Planning Division and concurrently General Manager of Administration
Division
Nov. 2005	Representative Director, President and Executive Officer of the
Corporation (current)

Nobuyuki Matsui

Outside director, Independent officer

Career Summary and Current Position in the Corporation:
Apr. 1985	Professor at Department of Electrical Engineering in Nagoya Instituteof Technology
Jan. 2004 President at Nagoya Institute of Technology
Apr. 2010	Auditor at Aichi University of Education, Adviser of Aichi Prefectural
Government Office (Industrial Labor Section)
Apr. 2012 Professor at Chubu University
Jun. 2014 Outside director, Rinnai Corporation (current)
Apr. 2021	President at International Professional University of Technology in
Nagoya (current)
Current Representation in Other Companies: Outside director at Aichi Tokei Denki
Co., Ltd., President at International Professional University of Technology in Nagoya

Tsunenori Narita

Representative Director and Executive Vice President,
President’s assistant

Career Summary and Current Position in the Corporation:
Apr. 1967 Joined Rinnai Corporation
Jun. 1988	Director, General Manager of Technology Research Headquarters andconcurrently General Manager of Quality Guarantee DivisionJun. 2001 Managing Director, General Manager of Production Headquarters
Jun. 2005	Director, Managing Executive Officer, and General Manager of
Production Headquarters
Nov. 2005	Director, Managing Executive Officer, in charge of domestic business,and concurrently General Manager of Marketing & Sales Headquarters
Apr. 2006	Director, Senior Executive Officer, in charge of domestic business, andconcurrently General Manager of Marketing & Sales Headquarters
Apr. 2009	Director, Executive Vice President; responsible for Research &Development Headquarters, Production Headquarters, Overseas
Business Headquarters and Customer Division, and General Manager
of Marketing & Sales Headquarters
Apr. 2010	Representative Director, Executive Vice President; responsible for
Research & Development Headquarters, Production Headquarters,
Overseas Business Headquarters and Customer Division, and General
Manager of Marketing & Sales Headquarters
Oct. 2010	Representative Director, Executive Vice President; responsible for
Research & Development Headquarters, Production Headquarters,
Overseas Business Headquarters, and General Manager of Marketing& Sales Headquarters
Apr. 2016	Representative Director, Executive Vice President, President’s
Assistant, in charge of Production Headquarters and Overseas
Business Headquarters
Apr. 2018	Representative Director, Executive Vice President, President’s
Assistant (current)

Takashi Kamio

Outside director, Independent officer

Career Summary and Current Position in the Corporation:
Apr. 1965 Joined Toyota Motor Co., Ltd.
Jun. 1996 Director at Toyota Motor Corporation
Jun. 1999 Managing Director at Toyota Motor Corporation
Jun. 2001 Senior Managing Director at Toyota Motor Corporation
Jun. 2005	Senior Advisor at Toyota Motor Corporation
President at Towa Real Estate Co., Ltd.
Jun. 2006 Director at Nakanihon Kogyo Co., Ltd.
May 2010	Advisor at Toyota Motor Corporation
Jun. 2010 Senior Advisor at Towa Real Estate Co., Ltd.
Jun. 2011	Audit & Supervisory Board Member at Central Nippon Expressway
Company Limited
Jun. 2016 Outside director, Rinnai Corporation (current)
Current Representation in Other Companies:
Chairman of Sasaeai, specified nonprofit corporation

51

Standing Audit & Supervisory Board Member

Masaaki Matsuoka

Outside Independent Audit & Supervisory Board
Member

Career Summary and Current Position in the Corporation:
Sep. 1976 Registration of a certified public accountant
Jul. 1988	Partner at Deloitte Tohmatsu LLC (Now, Deloitte Touche Tohmatsu
LLC)
Jun. 2014 Retired from Deloitte Touche Tohmatsu LLC
Jul. 2014 Established Masaaki Matsuoka CPA office (current)
Jun. 2016 Audit & Supervisory Board Member (current)
Current Representation in other companies
Audit & Supervisory Board Member at Kanemi Co., Ltd.
Outside Audit & Supervisory Board Member at Mitachi Co., Ltd.

Katsuhiko Shinji

Standing Audit & Supervisory Board Member

Career Summary and Current Position in the Corporation:
Apr. 1981 Joined Rinnai Corporation
Dec. 2000 President of Shanghai Rinnai Co. Ltd.
Jun. 2004 Director of Rinnai Corporation; President of Shanghai Rinnai Co. Ltd.
Jun. 2005	Executive Officer of Rinnai Corporation; President of Shanghai Rinnai
Co. Ltd.
Apr. 2009	Executive Officer, Deputy General Manager of Overseas Business
Headquarters in Charge of Asia, Rinnai Corporation; President of
Shanghai Rinnai Co. Ltd.
Apr. 2011	Executive Officer of Rinnai Corporation; President of Shanghai Rinnai
Co. Ltd.
Apr. 2019	Assistant to General Manager of Overseas Business Headquarters,
Rinnai Corporation
Jun. 2019 Audit & Supervisory Board member (current)

Ippei Watanabe

Outside Independent Audit & Supervisory Board Member

Career Summary and Current Position in the Corporation:
Apr. 1978	Registration of attorneys
Joined Saji & Ohta Law firm
Jun. 1991	Established Ohta & Watanabe Law firm (currently, TRUTH & TRUSTLaw Office) (current)
Jun. 2016 Audit & Supervisory Board Member (current)
Current Representation in other companies
Outside director at Howa Machinery, Ltd. (Audit and supervisory committee
member)Executive Officers

Kinji Mori

Hideyuki Shiraki

Chuji Nakashima(excluding concurrent directors)

Managing Executive Officer
General Manager of Quality Assurance
Headquarters, and General Manager ofEnvironment Division

Managing Executive Officer
General Manager of Marketing & Sales
Headquarters

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

Kazuto Inoue

Hirohisa Ooi

Takuya Ogawa

Managing Executive Officer
General Manager of Production Engineering
Headquarters

Senior Executive Officer
General Manager of Production
Headquarters

Senior Executive Officer
General Manager of Corporate Planning
Headquarters

Yoshihiko Takasu

Kazuhiko Matsumoto

Masanori Shimizu

Senior Executive Officer
General Manager of Overseas Business
Headquarters

Executive Officer
General Manager of Seto Factory, Production
Headquarters

Executive Officer
Deputy General Manager of Quality
Assurance Headquarters, and General
Manager of Quality Assurance Division

Kenichi Ebata

Katsunori Tanioka

Hiroyuki Hoyano

Executive Officer
General Manager of General Affairs Division

Executive Officer
General Manager of Chubu Branch,Marketing & Sales Headquarters

Executive Officer
General Manager of Kanto Branch, Marketing& Sales Headquarters

Atsuo Kashima

Kenji Endo

Hayao Nishizawa

Executive Officer
General Manager of Accounting Division

Executive Officer
President of RB Controls Co., Ltd. andPresident of Noto Tech Co., Ltd.

Executive Officer
President of Shanghai Rinnai Co., Ltd.

Rinnai Report 2021

52

Governance

Message from an Outside Director

Compliance
Rinnai thoroughly instills compliance in all its executives and employees to ensure it is a sound corporate group that istrusted by society. We are enhancing our corporate culture of compliance and creating an environment in which all
executives and employees can fulfill their social responsibilities and approach their work in a forward-looking manner.

Rinnai Group Code of Ethics

Nobuyuki Matsui
Outside director, Independent officer

Contributing to a New Era of Change as an Outside Director

The Rinnai Group has compiled behavioral standards that all executives and employees
must obey in the “Code of Ethics,” a small booklet that includes the “Rinnai Code of
Conduct” as a guideline for specific daily activities.
In addition, an English-language version of the “Code of Ethics” is issued to Group
companies, and in countries where the official language is not English, the manual istranslated into the local language of that country.

Code of Ethics

Rinnai Group Code of Ethics(English and Chinese versions)

Since its founding, Rinnai has developed its gas appliance manufacturing business based on the fundamental concept,“Quality is our destiny.”
Within a free and open atmosphere, the Board of Directors discusses important matters related to corporate
activities as well as receiving monthly reports on domestic and overseas businesses. When necessary, the relevant

Risk Managementbusiness units hold advance briefings and site tours for outside directors in an effort to ensure ideal information sharing
on a daily basis.

Risk Management Policy

In particular, I applaud the fact that the content of the new medium-term business plan has been fully communicatedto senior management and front-line managers alike through advance briefings, and that the results can be clearlytracked through concrete performance metrics.
In the four business segments of water heaters and heating systems, kitchen appliances, home heaters, andAs society becomes increasingly complex, companies face a variety of risks. Against this backdrop, the Rinnai Group is
promoting its business on a global scale and is implementing risk management to ensure it remains trusted by its
customers and society and conducts business activities in a stable fashion.

commercial-use equipment, Rinnai is continuing to make efforts to increase added value in both manufacturing and sales
from the perspective of profitability. I find it encouraging that the results of new product development to meet market
needs, which are linked to the medium-term business plan, are materializing in terms of both volume and value.
I am impressed by management’s stance of addressing the needs of the market head-on, rather than simply selling
products at low prices in response to the slump brought by the coronavirus disaster. As the background to this, I feel that
we should not overlook the fact that Rinnai’s management philosophy, including the company motto, brand statement,
and code of conduct, has become embedded throughout the Rinnai Group Code of Ethics, which is distributed to all
Rinnai employees, including not only manufacturing and technical staff but also administrative and sales staff.
Going forward, it will be important to develop human resources to respond to the increase in headcount required
to handle the growing ratio of overseas business as Rinnai’s business expands. It is also vital to explore more detailed
market needs and develop products that meet those needs in line with the actual living conditions of each overseas
region. Rinnai must also urgently identify new market needs caused by lifestyle changes in Japan and overseas ina post-coronavirus world and by DX, and to develop technologies to address them. The latter will require not only

Promotion Structure
Rinnai’s Risk Management Committee is comprised mainly of executive
officers and divisional heads with the President serving as Chairman. The
Committee meets regularly to identify key risks having the potential toimpact the Company as an ongoing concern, its credibility, businessactivities, and assets. The Committee also determines which businessdivisions have a primary responsibility for each type of risk. It also develops
mechanisms to prevent risks from materializing, rapidly resolves crises,
minimizes any damage that may occur as a result, and preventsrecurrences. The Committee works with all divisions and Group companies
to mitigate risks and enhance risk response capabilities.

Risk ofnon-compliance ormanagement inviolation of applicablelaws

Risk of fire, explosion
accidents, andnatural disasters

Important Identified
Risks (Partial)

Risk of suspension ordelays affecting raw
material procurement
activities

Risks related tothe environment

Risks related tooverseassubsidiaries
Risk of damage to
mission-critical systems

Risks related to
information leaks

technological expertise, but also talent from outside of Rinnai’s traditional business domains, such as those withskills in psychology, design, and game sense. It will be a great pleasure to contribute to this new era of change as
an outside director.

53

Rinnai Report 2021

54

Data Collection
Eleven-Year Financial Summary

FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

Net sales(Millions of yen)

239,436

246,636

251,832

286,981

295,022

319,935

330,256

347,071

348,022

340,460

344,364

Operating income(Millions of yen)

25,23826,63426,35134,01830,787

34,59334,05632,84930,87934,422

40,690

(%)

10.5%

10.8%

10.5%

11.9%

10.4%

10.8%

10.3%

9.5%

8.9%

10.1%

11.8%

Ordinary income(Millions of yen)

26,82428,90729,06436,91032,93835,80735,28034,28633,31835,67942,400Net income attributable to owners of theparent company(Millions of yen)

15,51016,807

19,371

23,254

20,64722,71022,322

21,194

20,48021,561

27,581

Total net assets(Millions of yen)

141,110

154,737

178,007

232,635

261,414271,709290,638

307,965

320,696

340,959

371,318

Total assets(Millions of yen)

221,495

238,853

262,590334,382355,140

368,084

402,107422,422430,885

450,486

497,291

Net assets per share(Yen)

2,798.07

3,070.14

3,516.11

4,245.48

4,742.42

4,924.24

5,245.62

5,589.17

5,819.80

6,140.52

6,660.40

Net income per share(Yen)

311.52342.60394.86454.74397.03436.71429.27410.41398.45419.49536.62Equity ratio

(%)

62.0%

63.1%

65.7%

66.0%

69.4%

69.6%

67.8%

68.0%

69.4%

70.1%

68.8%

Return on equity

(%)

11.2%

11.7%

12.0%

11.8%

8.8%

9.0%

8.4%

7.6%

7.0%

7.0%

8.4%

Cash flows from operating activities(Millions of yen)

27,536

23,07422,87236,45325,671

36,06639,55429,91429,47937,69449,491

Cash flows from investing activities(Millions of yen)

(10,634)(16,222)(12,607)(32,908)(23,649)(17,770)(17,732)(12,190)(7,288)(7,124)(15,820)

Cash flows from financing activities(Millions of yen)

(16,958)(3,937)(5,002)

13,183(8,659)(6,554)(5,217)(11,725)(6,150)(6,436)(7,269)Cash and cash equivalents at end of year

(Millions of yen)

46,14548,64855,03074,27969,34079,60095,297

101,697

116,133

140,138

166,524

Capital expenditures(Millions of yen)

7,590

9,378

8,222

12,43913,774

16,93820,664

16,105

13,481

10,58013,301

Research and development expenses(Millions of yen)

6,934

7,665

8,060

8,380

8,895

9,113

9,340

9,918

9,503

9,308

11,802

Operating income margin

Dividends

(Yen)

48

56

60

68

76

82

86

90

94

98

125

Payout ratio

(%)

15.4%

16.3%

15.2%

15.0%

19.1%

18.8%

20.0%

21.9%

23.6%

23.4%

23.3%

Number of outstanding shares(Shares)

54,216,463

54,216,463

54,216,463

52,216,463

52,216,463

52,216,463

52,216,463

51,616,463

51,616,463

51,616,463

51,616,463

Closing price at the end of the period

(Yen)

5,520

5,960

6,770

9,070

8,910

9,940

9,230

10,100

7,830

7,650

12,390(Millions of yen)

299,275

323,130

367,045473,603465,249

519,032

481,958

521,326

404,157

394,866

639,528

Market capitalization* We apply the Partial Revisions to Accounting Standards for Tax Effect Accounting (Corporate Accounting Standards No. 28, February 16, 2018) as of fiscal 2019. As such, figures for fiscal
2015–fiscal 2018 have been adjusted to retroactively apply said accounting standards.

55

Rinnai Report 2021

56

Data Collection
Human Resource- and Personnel-Related Data

Environmental Data

Number of Employees (Non-consolidated)
Newly recruited employees

Mid-career recruitment
Mid-career recruitment ratio (%)
Temporary staff
Average working years

Average age (Years old)Male
FemaleSubtotal
Male
FemaleSubtotal
Subtotal
Subtotal
Male
FemaleSubtotal
Male
FemaleSubtotal

Fiscal 2019
81
50
131
3
6
9
6
283
16.6
12.7
15.5
39.3
34.0
37.7

Fiscal 2020
62
22
84
2
6
8
9
189
17.3
13.3
16.1
39.7
34.5
38.2

Fiscal 2021
66
35
101
0
1
1
1
194
17.9
14.2
16.8
40.1
35.3
38.7

Total energy used
(TJ)
1,200

Paid leave* Rinnai parent Based on the status of leave taken by permanent employees

Employment of persons withdisabilities
Number of OJT accidents*Includes domestic consolidated subsidiaries

Number of days added with paid leave
Number of days taken with paid leave
Utilization ratio (%)
Number of persons with disabilities
Employment rate (%)
Number of accidents
Number of disasters(%)(LTIFR)

Number of employees on mental health leave
Number of employees who used childcare leave
Number of employees who took childcare leave of absence
Proportion of employees who return to work after taking
parental leave (%)
Number of employees who used shortened work hours

Number of employees who used family care leave

Number of employees who used nursing leave

Number of employees who took nursing leave of absence
Number of employees who used our reemployment (ComeBack) system
Number of employees who used the work from home
program

Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal

Working Hours
Annual total actual working hours per employee (Hours)*1
Annual non-scheduled working hours per employee (Hours)*1
Average overtime per month (Hours)*1

Others (Social Contribution and Compliance)
Number of whistleblower incidents *Includes domestic consolidated subsidiaries
Criminal charges for compliance related accidents and incidents (Number of cases)*2
Total expenditure on social contribution activities (Millions of yen)
Political contributions and lobbying activities expenditures (Millions of yen)

Fiscal 2020

20.0
10.5
57.1
66
2.05
26
0.70
13
82
0
117
117
100
100
100
0
109
109
1
53
54
1
3
4
0
2
2
0
0
0
1
2
3

20.0
12.1
58.0
74
2.23
37
0.23
21
57
0
123
123
—
100
100
0
131
131
1
48
49
1
4
5
1
4
5
1
2
3
59
14
73

Fiscal 2019
2,097.0
217.0
18.7

Fiscal 2020
2,007.9
199.2
16.6

1,107

Fiscal 2021
1,952.0
176.7
14.7

Fiscal 2019
5
0
14
1.0

Fiscal 2020
6
0
14
1.0

Fiscal 2021
2
0
13
0.7

1,101

Eco-friendly products(contribute to reduction of CO2 emissions)(1,000 tCO2e)
8,000

850,000 t

7,000(7.38%)

1,000
6,000

5,150

800
Total of Scope 1, 2, 3
600

4,300

4,500

4,000

11,500,000 t

400
2,000
200
0

0
Fiscal 2020

Fiscal 2021

Fiscal 2020 Fiscal 2021

Scope 3 Category 11
Use of sold products

10,500,000 t (91.31%)

Solid waste

Water used

(kg)
400

(1,000 m3)
1,000
859

30

31

Fiscal2026(Target)(Weight of exterminating specified invasive species)(1,000 t)
40
31

Fiscal2022(Target)Biodiversity protection(includes valuable substances)

808

800

30

758

360

300
230

600
20

200

180

400
10

100

200

0
Fiscal 2019

Fiscal 2020

0

Fiscal 2021

Fiscal 2019

Fiscal 2020

Fiscal 2021

0

Fiscal 2019

CO2 emissions reductions

Waste curtailment*2

Water saving*2(1,000 tCO2e)10(1,000 t)
1(1,000 m3)
40

Fiscal 2020

Fiscal 2021

31.8
30
6.0
0.5

5
3.5

0.5
0.3

10

Fiscal 2020

Fiscal 2021

17.0

6.7

0

0

0

20

0.4

2.0

Fiscal 2019

* 1. Excluding managers* 2. In fiscal 2019, subsidiary Noto Tech Co., Ltd., exceeded the standards for wastewater and submitted an improvement report to the local government.
The results of water quality analysis after countermeasures were implemented confirm that the standards have been maintained without any problems.

57

Fiscal 2021
20.0
12.2
63.0
79
2.22
28
0.56
20
62
5
95
100
100
98
99
0
161
161
1
27
28
2
3
5
0
5
5
0
0
0
835
247
1,082

Scope 3 Category 1
Purchased goods / services

1,192

Fiscal 2019

Fiscal 2019

Total amount ratio of the entire value chain(CO2 emissions) * 1

Fiscal 2019

Fiscal 2020

Fiscal 2021

Fiscal 2019

Fiscal 2020

Fiscal 2021

[Target scope] Rinnai Corporation and consolidated subsidiaries*1 [Target scope] Scope 1, 2: Rinnai Corporation and consolidated subsidiaries
Scope 3: Rinnai Corporation*2 Not an increase or decrease in the total amount, only the effect size evaluated by the
improvement activities of each site is recorded.

Rinnai Report 2021

58

2021.10