Rinnai Report 2020 (Integrated Report)Corporate Message

Aiming for the Realization of
Healthy and Comfortable Lifestyles
and Sustainable 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 2020 02

Corporate Mission and Vision

Rinnai Report 2020 (Integrated Report)

Fundamental Concept

Quality is our destiny

Company Motto

Contents

Editorial Policy
Rinnai produced this Rinnal Report 2020 (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.

0 1 Corporate Message

Rinnai’s Activities

03 Corporate Mission and Vision
Editorial Policy / Contents

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)

氣 Spirit:
Base your efforts on a consistent philosophy
眞 Sincerity:
Know the fundamentals and consider issues with
precision and clarity

Abridged version
booklet form
Rinnai Report 2020 (Integrated Report)

Rinnai Report(Integrated Report)
Website(Company Information)
Comprehensive
coverage of Group’s
CSR activities

Highly important activities(Rinnai Group perspective)

Brand Promise —Rinnai’s Corporate Mission——Rinnai’s Corporate Mission—

Rinnai Code of Conduct

Specific rules of day-to-day corporate activities

21

Rinnai Group CSR

23 Identifying CSR Material Issues

Special Issue 01 [Environment]
25 Approaches to Preventing Global Warming
through Energy-saving Water Heaters
27 Disclosure of Environment-related Financial Data
Expressing Support for Task Force

31

Referenced Guidelines

Spiritual support of Rinnai

Expectations and attractiveness that
we keep promising with our customers

17 Message from the General Manager ofCorporate Planning Headquarters

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

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

Brand Promise

13 History Viewed from Changes in
Medium-Term Business Plans

29 Global Development of Water Heaters in the
Rinnai Group

This report focuses on events that occurred in fiscal 2020—April 1, 2019, to March
31, 2020—but also touches upon measures implemented and recent activities
undertaken since fiscal 2020 as well as future business direction, targets, and plans.

Company
Motto

Rinnai Group Profile

Scope

Reporting Period

Schematic Diagram of Company Ideals

11

15 Value Creation Process

和 Harmony:
Develop personal character of the highest caliber

Creating a healthier way of living

05 Message from the President

Environmental Impact within Rinnai’s Value Chain

Special Issue 02 [Quality]
33 Taking Pride in Monozukuri (craftsmanship)

Special Issue 03[Safety and Peace of Mind for Consumers]

35 With the World’s Highest Standard forEnvironmental Performance, ECO ONE Takes
the Best of Gas and Electricity to Helpduring Disasters

Special Issue 04 [Health]Publication Schedule

37 Health Effect and Efficacy of Bathing with
the Microbubble Bath Unit

September 2020 (Japanese version)
Previous: September 2019, Next: August 2021 (planned)

39 GovernanceImportant Points Regarding Future Outlook
This report includes descriptions of earnings forecasts and outlooks for Rinnai andGroup companies.
These descriptions are based on currently available information and forecasts
as determined by Rinnai. Actual results may differ from forecasts depending on
various external factors going forward.

Management Structure, Leadership,Compliance, Risk Management

45 Communication with Stakeholders
Employees, Shareholders and Investors, Customers,
Business Partners, Local Regions and Communities,
CSR Activities Underway Across the World,
Stakeholder Engagement

53 Data Collection

03

Rinnai Report 2020 04

Message from the President

On Reaching the 100th Anniversary of Our Founding

Thank you for reading the Rinnai Report 2020, the Rinnai

products in more than 80 countries around the world. We

Group’s first integrated report. We have published anwould like to express our sincere gratitude for the efforts

Environmental Report since 2000, and in 2012 we beganof our predecessors and the ongoing support of ourpublishing a CSR Report. Now, in response to increasing

stakeholders, as we have continued to grow into a global

interest from stakeholders regarding our corporate

Company with an overseas sales ratio of approximately

sustainability and value creation, we have compiled this50%.

report focused on our efforts to create economic andUnder these circumstances, in fiscal 2020, which issocial value over the medium- to long-term. Upon

the interim year of our “G-shift 2020” medium-term

reading this report, we welcome and appreciate any andbusiness plan, clothes dryers and built-in hobs

all frank opinions and feedback.

(stovetops) with automatic cooking functions, which

The Rinnai Group began in 1920 with the founding

contribute to shortening the time required for housework,of Rinnai & Co., by Hidejiro Naito and Kanekichi Hayashi,

performed extremely well. Additionally, thorough cost

who manufactured and sold pressurized oil stoves. With

reduction efforts in which we have been engaged fora deep sense of appreciation for their efforts, wequite some time have steadily yielded results.

commemorated our 100th anniversary in September
2020.

At the same time, although overseas sales were flat
due to trade friction between the United States andAs a heating equipment manufacturer that

China among other factors, water heater sales were

contributes to enriching people’s lives, Rinnai provides

robust, especially in the United States and China, withvarious products, including water heaters, kitchen

operating income increasing to near record-high levels.

appliances and air conditioners, under the keywords of

As a result, net sales in fiscal 2020 amounted to“safety and peace of mind,” “comfort” and¥340,460 million (down 2.2% year on year), with“environmentally friendly.” At present, we have bases in 18

operating income of ¥34,422 million (up 11.5%).

countries and regions, including Japan, and provide

Upholding “Quality is Our Destiny” for a Century
With pride in our hearts, we will boldly take on
the challenge of transforming intoa “new Rinnai” for the next 100 years
President

05

Hiroyasu Naito

Pressurized oil stove

Rinnai Report 2020 06

Message from the President continued

Customers are unsatisfied with their current lifestyles. Thus, we must be moreaware of social value.

Delivering Fine Quality Products that Customers Want Because
Rinnai Makes Them

During our long, 100 years of history, Rinnai has alteredpromise to our customers and society, we formulated the“Quality is Our Destiny” is the foundational concept thatlives.” If Kanta-kun had reused the same design as in theits product mix moment by moment. However, my sensebrand promise “Creating a healthier way of living” and arepermeates all Rinnai production bases throughout thepast, it would probably not have sold as well as it has.

is that recent changes in the social structure areworking to cultivate a brand image that conveys theworld. When it comes to water heaters, which are part ofClearly, the appearance of the product is very important,occurring more rapidly and on a wider scale than evercreation of healthy and comfortable lifestyles. In addition

everyday life in Japan, our products have earned a strong

and we want to deliver more fine quality products that

before. Driving the aforementioned solid sales of theto our traditional “heat and lifestyles,” “health andreputation overseas for “reliability and good temperaturecustomers choose because Rinnai makes them.

Kanta-kun gas clothes dryer and the DELICIA built-in hob

lifestyles” will be our new theme as we pursue thecontrol performance.” In fact, last year in China, Rinnai(stovetop) is the increased value provided by making

development of proprietary products with the

products ranked number one in gas water heater sales

housework easier and quicker in our modern society,establishment of the “New Business Strategy Office,”revenue on “Singles Day.” In terms of units sold, we

where the number of dual-income households has

part of our Research & Development Headquarters. We

ranked fifth, which clearly demonstrates that ourgrown substantially. In addition, I think there is awill revisit the products we have developed up to now in

products have strong support even when they are priced

significant advertising effect when purchasers of ouran effort to create a fresh appeal.

higher than other products.
The word “quality” of course implies functionality,

products share their satisfaction and excitement on

In April 2020, we launched sales of the “micro-

social media, perhaps indicating that the influence of

bubble bath unit.” This adds an element of “beauty” todurability and safety, but recently, we have also been

so-called “word of mouth” publicity has become quite“health and lifestyles,” generating a tremendous

especially particular about design. The aforementioned

substantial due to the changing times. In fact, we

response, especially among women. Actually, I thought“microbubble bath unit” has been meticulously

proactively placed advertisements on television, in

we already offered every function possible in terms ofdeveloped with a focus on quality and “enriching peoples’

newspapers and in other media expressing the idea thatwater heaters, but the addition of “microbubbles” in thisKanta-kun is a good product, but not yet well known. The

way provides a fresh appeal. I fully realize that, as I

result was more substantial than anticipated, reminding

suspected, customers are not satisfied with their current

me once again of the importance of advertising.

lifestyles. For this reason, I want to consider new

In April 2019, we updated the basic design
expressing the Rinnai brand worldview. And, as abusinesses and products with a greater awareness ofsocial value.

Gas clothes dryer Kanta-kun
offers an updated design thatis both simple and refined

Taking on New Challenges at Overseas Bases, Sharing the Results with the
Entire Group
Overseas, we completed the construction of a new plant

challenges in each country, sharing the results with thein response to the expansion of the tankless water heater

entire Rinnai Group. We have a strong sense of urgency

market in the United States. In addition to enhancing

in terms of competition with other companies, thus welocal production capabilities, we opened a newwill reaffirm the strengths Rinnai has built up to now andinnovation center in July to work on local productenhance our competitiveness through further

development. At the same time, in China, we will focus on

differentiation.

marketing and enhancing our ability to respond to rapidlychanging markets. We have much work to do, including
differentiating our products from those of competitors byemphasizing water heater performance, increasing
branding efforts and expanding online sales.
We are also promoting personnel exchanges
among major overseas bases, mainly involving
engineers. We will maintain our basic policy of promoting
DELICIA built-in hob (stovetop) offers the increased convenience of automatic
cooking using a linked app

07

Microbubble bathing provides a high-quality bathing experience with gentle bubbles

local production and sales as we take on various new

The “Try Rinnai Tour” installed a tankless water heater in a large van that embarked
on a promotional tour across North America

Rinnai Report 2020 08

Message from the President continued

Supporting Employees Taking on Challenges to Continue Growing for the Next
100 Years

Contributing to the Realization of a Sustainable Society, becoming a Company
Always Needed by Society

For some time now, I have told employees in sales,

employees to submit papers on Rinnai’s future. We

Recently in Japan, there is a heavy emphasis on

development, manufacturing and other divisions that arereceived many outstanding proposals from eachkeywords such as SDGs and ESG. The term

positions “consumer safety and quality improvements”

involved indirectly that I want them to hone their skills todivision, which I want to realize if feasible. And, in order for“stakeholder capitalism” is heard frequently as an

as critical issues. Our Company has been in business forcompete not only with competitors, but also with other

our Company to continue to grow for the next 100 years,

approach to corporate management that, rather than

100 years because we have consistently upheld ourindustries. My sense is that employees have taken thiswe will create an atmosphere in which more employees

simply pursuing profit for the company, contributes to thefounding concept “Quality is Our Destiny.” Going forward,

message to heart and are working diligently toward

are able to take on various challenges.

happiness of employees, shareholders, customers,

it is of the utmost importance that we continue to build

In March, the Rinnai Corporation was selected forbusiness partners, local communities and a wide range

trust and elevate our reputation for “creating products

the fourth consecutive year for inclusion in the Healthof other stakeholders. The Rinnai Group will also engage

that can be used with peace of mind.” We must maintain

who will be responsible for Rinnai 10 to 20 years fromand Productivity Index 2020, (sponsored by the Ministryin an all-out effort to realize a sustainable andthe effort and sincere support we have provided up to

now that I want them to make an effort to acquire theof Economy, Trade and Industry and the Tokyo Stock“better” society.

now so that the business partners who handle ourskills necessary for their jobs as well as take on various

Exchange). While maintaining our dedication to an “atchallenges to improve themselves on a personal level.

home corporate culture” and “thorough compliance,” webecoming more active, climate problems are said to havewill promote diverse work styles and aim for further

reached a “now or never” situation. Environmentallyenhancements to productivity.

friendly Rinnai products, such as the ECO ONE hybrid

our founding in large part due to the long-term support ofwater heater and heating system, which offers theour shareholders. To show our appreciation, in fiscal

world’s highest level of heat efficiency, will become one

2020 we plan to add a commemorative dividend of ¥10of our major strengths going forward. In recognition of

per share, bringing the full-year dividend to ¥110

our contributions to the environment through ourper share.

this end.
In addition to that, I have told the young employees

As part of our 100th anniversary project, we held
the “Rinnai of Tomorrow Proposal Awards” inviting all

In Europe, as the zero-carbon movement is

products, as well as our internal commendation system

Furthermore, in addition to the environment, Rinnai

products will continue to rely on Rinnai to respondproperly in the unlikely event that trouble occurs.
Rinnai is able to celebrate the 100th anniversary of

We will continue to contribute to the realization of aand other efforts to develop environmentally conscious

sustainable society through the provision of products

employees, for the second year in a row, Rinnai received

that are safe, offer excellent quality and bring

the Award of Excellence at the 2019 Environmental

convenience and comfort to everyone’s life. I sincerely

Human Resources Development Corporate Awards. Up

appreciate your continued support of the Rinnai Groupto now, our main focus has been on the development

as we strive to meet yourand sales of gas appliances, and we will further promote

expectations.

reductions in CO2 emissions through our products,
including hybrid water heaters that also efficiently
incorporate electricity, while flexibly responding to
President Naito commemorates Rinnai’s 100th anniversary (January 2020)

energy diversification.

2019 Environmental Human Resources
Development Corporate Awards

09

ECO ONE hybrid water heater and heating system, offering the world’s highest level of heat efficiency

Rinnai Report 2020 10

Rinnai Group Profile

Corporate Data (As of March 31, 2020)● Manufacturing and sales companies◎ Sales companies

RinnaiWorldwide○ Other business□ Overseas representative office(As of April 1, 2020)

Incorporated

September 1, 1920

Established

September 2, 1950

Paid-in capital

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.

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

◎

●Rinnai Corporation
・Branches:◎

Rinnai Canada Holdings Ltd.
Rinnai America Corporation●

Indonesia¥10.6 billion

Tohoku, Kanto, Chubu, Kansai, Kyushu
Rinnai Hong Kong Ltd.
◎

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

・Domestic sales offices:●Rinnai Taiwan Corporation

Tokyo, Kita-Kanto, Higashi-Kanto,

Rinnai Vietnam Co., Ltd.

Minami-Kanto, Tokai, Shizuoka,

Rinnai Holdings (Pacific)
Pte Ltd.

◎

P.T. Rinnai Indonesia

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

INDONESIA

Integrated Logistics Center
East Japan Logistics Center

AUSTRALIA

Rinnai Parts Center● Rinnai Australia Pty., Ltd.

Seto Factory○ Gas Appliance Services Corporation

Akatsuki Factory

Oguchi Factory● Yanagisawa Manufacturing Co., Ltd.

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

Home Heaters

Tabletop cookers, built-in hobs (stovetops), ovens,dishwashers, range hoods, rice cookers, and others● Gastar Co., Ltd.

● RB Controls Co., Ltd.

China
¥44.2 billion● Rinnai Precision Co., Ltd.
● RT Engineering Co., Ltd.

● Japan Ceramics Co., Ltd.
● Noto Tech Co., Ltd.

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

Rinnai Brasil Heating Technology Ltd.
●○ Rinnai Enterprises

Industrial 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)

340.4¥

billionAustralia¥23.6 billion

Japan¥181.0 billion

United States¥33.1 billion

Commercial-Use Equipment, Others

Fan heaters, fanned flue heaters, infrared heaters, andothersNet Salesby Region
Total● Rinnai Technica Co., Ltd.

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

Kitchen Appliances

Others ¥19.9 billion

South Korea¥27.6 billion

Hokkaido, Kita-Tohoku, Sendai, Niigata,●

Rinnai Manufacturing Malaysia Sdn. Bhd.

Water Heaters and Heating Systems

48 (domestic 14, overseas 34)

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

□

10,451 (consolidated), 3,758 (non-consolidated)◎ Rinnai Plus Corp.

● Shanghai RB Controls Co., Ltd.

◎ Rinnai Treading B.V.

Number of employees● RS Korea Ltd.

¥6,459,746,974

Others ¥30.6 billion

Commercial-use equipment¥8.5 billion
Home heaters¥18.9 billion

Gas fun heater A-style(JAPAN)Net Salesby Product
Total

340.4

¥

Eco Jozu, gas water
heater with bath-fillingsystem(JAPAN)11

High-efficiency gas
tankless water heater(UNITED STATES)

Drop-in gas hob(stovetop)(INDONESIA)

Fanned flue heater(UNITED STATES)

Commercial-use connectedwater heating system(AUSTRALIA)

Kitchen appliances¥86.1 billion

billionWater heaters andheating systems¥196.1 billion

Rinnai Report 2020 12

History Viewed from Changes in Medium-Term Business Plans

4,000

Rinnai has contributed to the advancement of “heat and lifestyles” through a variety of technological innovation in40

the fields of water heating, heating and air conditioning, and commercial equipment.
Rinnai will continue to create thermal energy equipment that addresses the needs of the times while accurately
grasping diversifying life scenes.

30

300

Domestic Sales

Overseas Sales

Operating income

50.4%

49.0%
20

100

32.9%

Medium-term Business Plans(Billions of yen)(Billions of yen)

Net sales

Operating income

200

Overseas sales ratio

V-Shift Plan

Reform & BreakthroughJump UP 2014

Evolution and Succession 2017

G-shift 2020
0

0

2006

2007

2008

2009

Start of new leadership structure
Strategic shift to focus on added-value

Japan

2010

2011

2012

2013

2014

2015

2016

2018

Arrival of replacement demand after peak of new housing starts in 1990s

Launch of DELICIA

Australia / Market penetration of tankless water heaters

2019

2020

(FY)

Deregulation of electricity and gas retailing

Launch of eco-series E Series Preferences for energy-saving precipitated by the Fukushima nuclear power accident

Growth in original products, such as clothes dryers
GASTAR Co., Ltd. consolidated into Group

Shift to higher-end models from the penetration of systems (baths and kitchens)
Brand promise formulated and Rinnai logo updated

Start of sales of products over the Internet

Overseas

2017

Rush demand ahead of consumption tax hike (to 8% from 5%)

Launch of ECO ONE

Sensors added to all stovetop burners

United States / Execution of tax credits

Global / Impact of the Lehman collapse

United States / Market penetration of tankless water heaters due to economic recovery and robust housing market
Indonesia / Rinnai Indonesia consolidated into Group
China / Expansion in area for gas water heaters due to build-out of gas infrastructureSouth Korea / Improving business at Rinnai Korea
United States / Receipt of Super Power Award for tankless water heaters

13

10

Brazil / Expansion in gas water heaters due to severe shortage of electricity
South Korea /Sensors added to allstovetop burners

Australia / Brivis Climate Systems Pty Ltd consolidated into Group

Rinnai Report 2020 14

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

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 lifestyle

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

Value Provided

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 2020)
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

10,451 people
84 people¥165 million

Natural capital

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

10.1%

7.0%
4.9%
70.1%

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

1,106,557 GJ
191,996 m3
615,777 m3

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

15

¥21,561 million
Net assets (equity ratio)

Dividend per share*1 As of March 31, 2020

Decreasing working hours and intensifying
competition for securing human resources

Net income attributable toowners of the parent company¥340,959 million (70.1%)

Rinnai brand, external evaluations, stakeholder engagement,
Rinnai Group Code of Ethics[Domestic] Declining birthrates, an aging
population, and a decreasing in the numberof households

Operating income

Operating income ratio

15 companies

Rinnai Group production bases:
25 companies(number of companies) *1
Production group staff (Rinnai non-consolidated) *1:
1,979 people
Capital expenditure (Rinnai non-consolidated):¥5,330 million[Domestic] Price reduction of gas
appliances due to customer requests¥340,460 million¥7,292 million
17 companies

Manufactured
capital[Domestic] Expansion of thermal energy
systems centered on electric power

Consolidated net sales

10 people

ROE
ROA
Equity ratio

Risks

Gas stoves, range hoods, water heaters,
hot water floor heaters, gas clothes
dryers, dish washers¥34,422 million

480 people

Financial capitalSocial andrelationship capital

Fiscal 2020 Achievements(annual) ¥98
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
2.61 million tons
Announcements of productrecalls due to defects: 0 case

Rinnai Report 2020 16

Message from the General Manager of Corporate Planning Headquarters

Valuing the worldview that Rinnai is aiming forand pushing forward with the Rinnai way which
represents our passion as a manufacturer

View of the market environment: Risks and opportunities

Masao Kosugi
Director and Senior Managing Executive Officer,
General Manager of Corporate Planning
Headquarters

Sensing progress in achievement of the medium-term business plan(considering the impact of COVID-19)
We are carefully considering the impact of the novel coronavirus (COVID-19) pandemic on our business. However, Rinnai

From its first plan in 2006 to the current G-shift 2020 plan, we have implemented five medium-term business plans.

is a maker of daily necessities, so with the pandemic causing people to spend more time at home and be more

The past four medium-term business plans focused on creating a strong profit structure, but since President Naito’sconcerned about cleanliness, we view the current situation as a major opportunity. In our U.S. business, where the impact

appointment, we have aimed to create a stable financial foundation by actively introducing value-added products toof COVID-19 has been mild, tankless water heaters have driven earnings recently. In China, the stoppage of operation

the market.

from mid-February had somewhat of an impact but business is now back to normal. Rinnai’s thermal control technologies

I position our performance in fiscal 2020 as a challenge to strengthen our foundations. Moving forward, we arelead that of its global peers, and in particular the accuracy of the temperature control in our water heaters thanks to ourbuilding an innovation center in the United States to lead local product development and will invest the necessary funds inelectronic control technology has been highly regarded. Looking at the longer-term, although there is a risk that the shift

China to expand sales of gas stoves and commercial products as well as water heaters. In addition, a recent focus has

away from fossil fuels may accelerate, we believe our thermal exchange technologies can be applied as energy becomes

been an aggressive push to strengthen our branding. We are promoting product appeal and boosting awareness of themore diversified going forward, so this trend can be viewed as a growth opportunity.

Rinnai brand among consumers and trading partners from a global perspective. Such activities are clearly focused on

In Japan, we launched the microbubble bath unit to respond to demand from health-conscious consumers and will

global standardization, and I sense progress in the achievement of medium-term business plan as an overseas strategies
to secure our position as a truly global company.

continue to focus on product development while prioritizing marketing from the consumers’ viewpoint.

From here we will prioritize strengthening our touchpoints with consumers in Japan and overseas both real andonline and collaborate with external partners who are adept in this area.

Fiscal 2020 Performance of Overseas Subsidiaries

Positioning of Medium-Term Business Plan “G-shift 2020”(Millions of yen)

Net sales
Rinnai America

33,133

YoY
109%

OperatingincomeSales ratio

2,032

6.1%

Ordinary
incomeSales ratio

2,025

6.1%

Net income

Sales ratio

5th

Business Plan
(current plan)

4th

1,436

4.3%

Rinnai Australia

23,760

95%

593

2.5%

393

1.7%

262

1.1%

Business Plan

Shanghai Rinnai

43,628

92%

5,593

12.8%

5,868

13.5%

5,228

12.0%

Rinnai Korea

27,53584%(1,382)—(1,248)

—

(987)

—

Rinnai Indonesia

11,263

88%

1,600

14.2%

1,906

16.9%

1,504

13.4%

1st

Reform &BreakthroughV-Shift
Plan(Consolidated)
Net sales¥236.7 billion
Operating income¥15.0 billion
Operating margin
6.4%

2006
(FY)

Jump Up2014

Business Plan

Business Plan

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

2009

Business Plan

3rd

Medium-Term Business Plan

2nd

17

New challenge for sustainable growth

Strengthening corporate structure
through the past four business plans(Consolidated)
Net sales¥295.0 billion
Operating income¥30.7 billion
Operating margin
10.4%

2012

Evolution andSuccession

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

G-shift
2020(Consolidated targets)
Net sales¥325.0 billion
Operating income¥32.0 billion
Operating margin
9.8%

Next
MediumTerm
Business
Plan

100th

anniversary

Formulated roadmap
Branding control

2015

2018

2021

2024

2027

2031

Rinnai Report 2020 18

Thinking with regard to capital policies and capital investment plans
Rinnai’s investment strategy has been to sustain a relatively high level of capital investment. In particular we have invested

Until now, Rinnai has operated debt-free and has kept relatively stable reserves on the funding front in order to be

in expanding factories in the domestic business that manufacture products with growth potential, such as gas clothes

agile. However, to prepare for the current COVID-19 situation, natural disasters, and other unpredictable circumstances,

dryers and ECO ONE series. Our investment has thus focused on the rationality of production.

we are reviewing our policies while remaining cognizant of the need to build a strong financial foundation and to ensure

We are also investing intensively in expanding and adding equipment at overseas factories in markets where growth

our BCP measures function as intended. We have previously been strongly committed to consecutive dividend increases
and stable dividends but going forward we will rethink our capital policy as “management on offense” that considers an

is projected, which also contributes to local development.
In addition, we will invest aggressively in consumer-oriented marketing measures and promotion activities to directly

optimal balance of return to shareholders, return to employees, and investment in the future.

associate high value-added products with the Rinnai brand both in Japan and abroad.
Capital investment

Research and development costs

Capital investment[Millions of yen]
FY2020 Actual[Billions of yen]Amount ofinvestment

Depreciation
andamortization

Amount ofinvestment

Depreciation
andamortization

5,330

5,659

6,467

5,606

15

Rinnai Corporation
Domestic consolidated and affiliated companies
Overseas consolidated companies

1,965

2,073

3,271

1,999

3,284

4,402

11,750

4,372

10

Total

10,58012,134

21,48911,977Of the above total, the amount related to molds

2,831

3,260

4,141

3,134

25
20

5

Research and development costs

0

2018

2019

(FY)

2020

2021
Plan

(Millions of yen)

FY2021 Plan

FY2020 Actual

FY2021 Plan

Rinnai Corporation
Domestic consolidated and affiliated companies

7,292

8,000

2,015

2,845

Total

9,308

10,845Furthermore, to enhance awareness of the thinking behind capital policy, we have established a working group for
capital policy for internal deliberations using ROIC, ROE, and other financial metrics that are more precise and transparent

Forward-looking
investments

Capital investment
7,124

Operating cash flow
37,694

Shareholder returns, etc.
6,436

Operating cash flow

Capitalinvestment

Expand internal
reserves (cash flow)
24,004

Shareholder
returns, etc.

Internal reserves(cash flow)
116,133

Emergency
response
expenses

Fiscal 2020 ActualCompany we aim to be in thenext medium-term business planfrom a finance perspective. To increase awareness of asset turnover, we are using ROIC as an indicator not only at thecompanywide level, but also to evaluate each business unit.

The Rinnai way is to be keenly aware of social contributions through its
core business
Consolidated ROE

Consolidated ROIC

ROE=Net income ÷{(Shareholders’ equity at current fiscal year +shareholders’ equity at previous fiscal year) ÷ 2}

ROIC=NOPAT ÷ {Invested capital at current fiscal year +Invested capital at previous fiscal year)÷ 2}

15.0%

30.0%

With society’s interest in ESG and SDGs on the rise, I believe Rinnai’s employees are very fortunate in that Rinnai’s
products can help reduce CO2 from the usage stage (Scope 3) and therefore they can take pride in the fact their work in
Rinnai’s core business is contributing to the environment.

10.0%

9.0%

8.4%

7.6%

20.0%

7.0%

In the past, Rinnai was very particular about things (products), but going forward as we provide experiences (value),

18.3%
15.7%

7.0%

5.0%

13.8%

15.1%

we will gain consumers’ empathy while we create that value. At the same time, we will value the worldview that Rinnai isaiming for and push forward with the Rinnai way which represents our passion as a manufacturer.

10.0%

0.0%

0.0%

2016
(FY)

19

20.1%

2017

2018

2019

2020

2016
(FY)

2017

2018

2019

2020

Rinnai Report 2020 20

Rinnai Group CSRManagement Policy

Quality Policy

We will help improve the living
standards of people around theworld with the keywords of “heatand living” and “health and living.”
In addition to providing existingproducts and services, we will
create unique offerings byincorporating new technologies
into our own core technologies and Rinnai Group
companies shallshare and closely
advancing their applications. In
coordinate
information
addition, we will shift and optimally
allocate managerial resources to a
new organizational structure, which
will lead to sustained growth overthe next 10 and 20 years.

Based on our fundamental concept, “Quality is our destiny,” under our Quality Policy, our Group employees strive toimprove design quality, manufacturing quality, and sales quality with a customer-oriented approach.

Global Markets“Heat and Lifestyles”“Health and Lifestyles”~ We shall help improve people’s living standards ~Contribute to the environment through our corebusiness activities (products and services)

Develop and provide original products and services

Combustion andheat utilization
technologies

Electronic
control
technologies

Fluid control
technologies

New
technologies

Rinnai Group
companies shallshare and closely
coordinate
information~ Recognize core technologies that represent our strengths ~Renewable Electricity
energyGas

Air

Quality Policy

Customer Orientation

To provide products with satisfaction anda high level of safety to customers

To offer products with safety and peace of mind; To
disseminate safe usage; An enriched service body

Environmental Policy
For our environmental initiatives, we promote all-hands environmental activities with full participation based on anenvironmental action plan (”7E Strategic Initiatives”) aiming for its accomplishment in 2020, under the following basic
environmental philosophy.

Water

Approach to CSRWith the creation of healthy and comfortable lifestyles as its corporate mission, Rinnai promotes CSR activities throughbusiness focused on ESG throughout the entire Group.

Basic Philosophy on the Environment

Environmental Slogan

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

Our actions are imbued by the wisdom of many andundertaken with due consideration to thesustainability of a people- and earth-friendly
environment.

7E Strategic Initiatives
Quality
We adhere to the fundamental
concept that “Quality is our destiny.”
To this end, we pursue a “zerodefects” objective when designing,making, and selling our products,
to ensure they remain fault-free until
they are no longer used byHeat and Lifestyles
We deploy our advanced heatrelated technologies and know-how
to develop products that people canuse in a safe, comfortable, andefficient manner. In this way, we help
people lead abundant lifestyles.

Approach to CSR
Contributing to Local
Communities
In principle, we focus on local
production and local sales inadvancing our overseas business.
Our aim is to help improve the livesof local people around the world by
delivering products and services
that meet the climates, lifestylecultures, and customs of various
nations and regions.

21

The Group pursues CSR activities based on the threecommitments it has emphasized since its foundation—“heat and lifestyles,” “quality,” and “contributing tolocal communities”—complemented by “theenvironment,” for a total of four key themes.

Green Activities Involving All
Employees in All Business Areas

1

5 Emphasize
2 Promote green procurement

E-Service
E-Procurement (Installation(Procurement) and repair)

3 Promote activities

with reduced
environmental
impactE-Factory(Factories)

E-Office(Offices)
E-Marketing(Sales)4 Sell environmentallyconscious products;
Encourage customers
to be moreenvironmentally aware

environmentallyconscious installation
and repair services

E-Products(Products)

the customer.
The Environment
We reduce greenhouse gas
emissions by developing,
manufacturing, and selling
residential appliances, which are
kitchen appliances, water heaters
and heating appliances, withexceptional energy efficiency.

Develop and provide environmentallyconscious productsacE-Mind (Employees)tartivi B usinaltie s
e s s a n d e n v i ro n m e n t r a t e c
as whoe e l s of s a m e c o r p

6 Promote activities with

reduced environmental
impact at our offices

7

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

Rinnai Report 2020 22

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

CSR 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 CSR 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, Toyo Keizai Corporate Social
Responsibility Survey, etc.)

Step 3
Analyze international
standards andguidelines

Step 4
Analyze ESG indicesand questionnaires● Analyze CSR-related international
standards and sustainability
reporting 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 CSR management practices,
key stakeholders, and material issues● Analyze methods of reporting CSR
activities

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.

Very high<Importance to stakeholders>High
23○ Environmental issues◇ 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(Main focus of initiatives: Japan)
Target stakeholders: All

Material Issues

Main Target Indicators

Consumer safety
Improving quality

Number of defects that have
led to product recall
announcements

2020 target

3.32

million tons

2030 target

6.04

million tons

CO22019 results: 2.61 million tons

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.

Deep Involvementwith SDGs

0case2019 results: 0 cases○ Waste○ Harmful chemicals◇ Health□ Work-life balance◇ Housework time reduction○ Energy consumption○ CO2 emissions◇ Consumer safety◇ Improving quality○ Biodiversity□ Child labor / forced labor□ Stable procurement□ Support for cultural activities
and the arts

○ Conserving resources○ 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 products that are closely related to the global environment and people’s lives, it recognizes theimportance 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 CSR Material Issues

Classification of CSR Issues

Material Issues◇ Marketing communication

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

Supporting living by preventing and avoiding
risks inherent in households
Proposing lifestyles in which the burden of

Quality of life housekeeping and time spent on household chores
Very highare reduced.

Rinnai Report 2020 24

Special Issue

01 [Environment]
Linkage with SDGs

Approaches to Preventing Global Warming
through Energy-saving Water Heaters
Aiming to contribute to a 6.04 million ton
reduction in CO2 by 2030

CO2
Reduction in CO2 during
product usage2020 Goals

3.32
million tons
2030 Goals

6.04
million tons

Power & lighting, etc.
34%

Looking at the breakdown of energy consumption by Japanesehouseholds, water heating and heating account of over 50%, andwater heating alone accounts for the largest percentage at 28%. In
addition, CO2 emissions of water heaters throughout their lifecycles
are highest at their usage stage. As a result, to contribute topreventing global warming through its business activities, Rinnai
believes it is important to boost energy efficiency and develop andpromote the adoption of environmentally conscious products that
help accomplish this through improving the combustion efficiency of
its hot water heaters and the like. Rinnai is working toward theprevention of global warming by setting “energy consumption andCO2 emissions” as CSR material issues and the “amount contributed
to reducing CO2 emissions by using the product” as a target indicator *.
* Note 1: Reduction in CO2 emissions (estimated) resulting from improvements to performance in Rinnai’s
water heaters compared with products sold in 2005. (sales in Japan and the United States).

Heating
water
28%

Percentage ofhousehold energy
consumption by usage(2018)
Cooling3%

Cooking9%

Heating
25%

Source: “Energy White Paper 2019,” Agency for
Natural Resources and Energy

CSR materiality targets
Reduction in CO2 during
product usage

3.32 million tons
2030 Goals
6.04 million tons
Fiscal 2020
2.61 million tons
(actual)2020 Goals

CO2 reduction volumes are linked to the Rinnai Group’s corporate growth
Since our business is closely related to energy consumption, the amount of our contribution to CO2 reduction iscorrelated with improvement in our sales and profits. In fact, as our company grows, we contribute more to CO2
reduction.
Rinnai earnings (parent sales) and contribution to CO2 reduction

Volume contributed to CO2 reduction

190,000
180,000
170,000

1.2(*Impact of consumption tax hike)

200,000

Net sales

Rinnai parent sales

210,000

1.0
0.8
0.6
0.4
0.2

160,000
150,000

Volume contributed to CO2 reduction(million tons-CO2)
1.4(Millions of yen)
220,000

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

0

* Volume contributed to CO2 reduction: Japan sales portion, simple calculation

25

Rinnai Report 2020 26

Special Issue

01 [Environment]

Disclosure of Environment-related Financial Data
Expressing Support for Task Force
3 Risk Management
With the aim of creating a virtuous circle of the environment and the economy which assumes a sustainable company,
Rinnai has 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). We are promoting the disclosure of
the financial impact on the Company caused by climate change and our approaches to resolve these issues.

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.

4 Metrics and Targets
1 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.

Risk Management
Committee

TCFD recommended disclosures and content of Rinnai’s disclosure
Sharing of risks andopportunities related
to climate change

Leadership
Team
ReportIn 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 CSR material issues and the “amount contributed to reducing CO2
emissions by using the product ”as a target indicator.

Corporate Planning Headquarters
Environment Division

Environment Management
Committee

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/

Initiatives to overcome climate change issues

ISO14001
2 Strategy
In the flow to specify key CSR issues (materiality) in Rinnai’s value creation process, we identify risks and opportunities
associated with climate change. We also work to enhance the accuracy of our estimates of the impact of climate change
on Rinnai by performing scenario analyses in accordance with the Representative Concentration Pathway (RCP)
scenarios of the Intergovernmental Panel on Climate Change (IPCC) and calculating the financial impact. The impact ofclimate change is also checked against our management strategy and reflect in our medium-term business plans.
Rinnai’s risks and opportunities associated with climate change
Risks
1. Restrictions on water heaters due to depletion of water resources (Financial impact: Large)
2. Raw material procurement risk associate with climate change (Financial impact: Large)
3. Restrictions on gas water heaters due to restrictions on fossil fuel (Financial impact: Large)
Opportunities
1. Diffusion of energy-saving hot water heaters resulting from tighter environmental restrictions (CO2)
2. Diffusion of gas boilers resulting from tighter environmental restrictions (PM2.5)

27

Rinnai Report 2020 28

Special Issue

01 [Environment]

Global Development of Water Heaters in
the Rinnai GroupThe Rinnai Group manufactures and sells water heaters broadly not only in Japan but overseas which makes its businessclosely linked to energy consumption and CO2 emissions. Viewed from a different perspective, this means thedevelopment and widespread use of highly efficient water heaters may significantly reduce the burden on theenvironment.

Initiatives at Rinnai America Corporation

The water heater market in North America is dominated by storage tank-type units that are not very energy efficient.
Rinnai has been promoting the conversion to tankless water heaters that are highly energy efficient. Efforts to boost
awareness over many years are bearing fruit and sales volumes for tankless water heaters have been rising recently.
Rinnai America will help ease the impact on the global environment through the wide diffusion of highly efficient tanklesswater heaters.
Rinnai America is focused on aggressive product PR using mass media and on expanding its sales and installation
network to encourage widespread use of tankless water heaters. Rinnai has outfitted vans as mobile mini-showrooms
which provided the opportunity to install and outfit tankless water heaters in a tour covering over 700 locations in the
United States and Canada. Rinnai’s water heaters were very well received in North America where storage tank-type
units are the mainstream, as participants were able to experience firsthand the performance of tankless water heatersthat offer the convenience of and endless supply of hot water.
Rinnai previously sold compact gas boilers used in heating applications on an OEM basis (procured productmanufactured by another company) but subsequently built a manufacturing structure at its domestic
plants and began selling the I-Series of high-efficiency boilers as a strategic model in July 2019.
The boiler heats water while also being used to heat rooms and offers detailed temperature control,features which are being promoted to further expand demand.
In 2018, Rinnai America expanded its headquarters, which is now equipped with facilities toprovide training on installation to the employees of sales distributors and certified service agents.
We also expanded testing equipment tailored to the local usage environment as we endeavor
to build out and strengthen our network in North America.

29

Europe

China
Japan

Middle East
AfricaInitiatives at
Shanghai Rinnai Co., Ltd. (China)

South Korea

Taiwan

North America* Graphical depiction of theapproximate sales volume of
Rinnai’s water heaters in thearea over 10 years (unitdiffusion over 10 years)
indexed with Japan at 100.

South America

Oceania

The gas infrastructure in inland China is not developed and compact electric units hold a certain share of the water heater
market. However, as living standards rise, there is growing demand for high-capacity and highly efficient gas water
heaters, which has supported a gradual expansion in sales of Shanghai Rinnai’s main business.
Shanghai Rinnai has traditionally sold its products in Tier 1 and Tier 2 cities along coastal regions, such as Shanghai
and Beijing. However, recently the installation of gas pipelines have expanded gas usage in Tier 3 and Tier 4 cities in theinland areas, and Shanghai Rinnai has been working to expand its gas water heater sales in those markets as well.
Gas water heaters overcome the shortfall of electric models, namely the supply of hot water cutting off (using hot
water continuously causes the stored hot water to be depleted) and are notably more convenient. Yet they also have thedisadvantage of emitting cold water stored in equipment and pipes when the water heaters are first used. Gas water
heaters that instantly dispense hot water overcome this and are enjoying brisk diffusion. In 2019 Shanghai Rinnai
launched a new model that instantly produces hot water and has been working to expand its market share.
In China, Internet sales of gas equipment have been rising in tandem with the general trend in consumption toward
online sales. Rinnai Shanghai’s Internet sales ratio also rose by about 3 percentage points comparedwith 2018. We will work to enhance awareness of Rinnai by selling hot water heaters that are only
available through the Internet and by promoting Rinnai’s strengths in quality and performance.

Rinnai Report 2020 30

Special Issue

01 [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 andExpectations 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; 1,106,557 GJ• Ground water: 191,996 m3

EnergyWater

EnergyWater

EnergyWater• Public water: 615,777 m3

CO2 Emissions (Emissions Ratio)

OUTPUT
Rinnai’s environmental
impactInitiatives Rinnai
conducts throughbusiness

821,979 t(7.16%)—

36,723 t (0.32%)
Scope 2 66,239 t (0.58%)
Scope 1

Solid waste

Wastewater

30,591 t

778,125 m³(Includes valuable substances)(0.07%)

5,942 t10,511,507 t (91.53%)(Concerns emissions from Japanese water heaters)(0.05%)——

Proposal of reasonably
achievable ecological lifestyles

Promotion of environmentallyconscious design

Pursuit of environmental
performance and streamliningof manufacturing processes

Spread of environmentallyfriendly products

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

Sales: Strive to spread products that
contribute to energy efficiency inthe water heater and heating fields

Manufacturing: We are pursuing efficient processes,
minimizing invested resources andenergy, and promoting activities that
contribute to emission regulations
for CO2, waste products andchemical substances.

Scope 3 (Category 11)—

Supply chain management

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 2020 (April 2019–End of March 2020)
Overseas: January 2019-End of December 2019
[CO2 emissions (units)]: tCO2e, (%) represents the emissions ratio within each process.

31

8,377 tLogistics: We are promoting logisticalstreamlining.
Services: Elevate the Rinnai brand withsecurity activities through a wealthof service maintenance andinspections

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 2020 32

Special Issue

02 [Quality]

Linkage with SDGs

Taking Pride in Monozukuri (craftsmanship)
Rinnai Group products for sale in Japan and a portion those for export markets are manufactured primarily at its Oguchi
Factory in Oguchi-cho, Aichi Prefecture, and its Seto and Akatsuki factories, both in Seto City. Among the products Rinnai
provides, heating equipment requires particularly careful quality control and therefore burner units and other key parts are
manufactured within the Group.
Furthermore, our product development and design departments are located primarily in our Technology
Development Center (Oguchi-cho), where products are not only designed but tested with a robust array of testing
facilities. Daily innovations occur on the production side as well at our Production and Technology Development Center(Komaki City). This organization researches how to reduce the costs and improve the quality of items such as dyes,
production equipment, and parts.

Seven points of pride
1. In-house design and insourcing
Key components are designed and manufactured in house. In addition,
the dyes, facilities, and software required for insourcing are also made by
Rinnai, depending on the status of production. Doing things
independently ensures that technology and skills are accumulated andpassed on and leads to the birth of even better products.
2. Modular design
We are promoting modular design by concentrating elements andfunctions and standardizing them along set units. Simplifying assembly
improves the quality of assembly and processing, while standardizing
supports cost reductions.
3. Painstaking inspection systems
Every product we make is inspected by automated equipment and bycertified inspectors who have passed rigorous internal standards. In
addition, each process includes error-prevention equipment thatprevents the flow of defective products down lines.
4. Local production
We are proactively promoting local production and local sales. This
reflects our ongoing efforts to provide products that address local
needs; create employment opportunities; mitigate risks by enablingsustained production during pandemics, natural disasters, and othercrises; while also contributing to society and improving Rinnai’ssustainability and growth potential.

5. Fully integrated production
Handling all steps from processing to assembly, packaging, andshipment at our own factories enables us to realize high-quality productmanufacturing in all processes. In addition, Rinnai is capable of multiitem, mixed-line production and can respond to market needs withagility by flexibility producing only the required amounts when they areneeded.
6. Automation that can handle a variety of products
Rinnai handles a wide variety of products, for example, with gas
equipment there are various types of gases used, heat settings forstoves, and variations in exhaust for hot water heaters. Since these are
made in mixed-line production facilities, we have highly advanced
automation technologies to handle this production.
7. Skill management (talent development)
In our view, quality is created by superior technology and skill but above
all at a well-equipped and organized work environment. With a focus on
3S (Sorted, Straight, and Sanitary) and 5 Sets (set position, set form, setquantity, set product, and set time), each employee strives to create asafe and high-quality workplace.

We are providing high-quality products by keeping faithful our pride in monozukuri.
When customers use our high-quality products, we are supporting peace of mind andsafety in their lives.

Enhancing monozukuri and quality by strengthening touchpoints with customers
Planning and development of products,
business models, and services
Business Planning Division

Planning
Department Business model planning

Functionality
improvement

New Business Strategy Office

Development
Department Advanced development andresearch into elemental technologies

Customer Division

QualityGathering opinions on products
Department and services and information
on equipment

Communication Design Office

Sales
Department Enhancing touchpoints
with customers

33

Touchpoints with customers

and development

Nationwide
customers

Quality
improvement

Proposingnew products
and services(Achievement of CSR materiality
target indicators)
We are able to achieve our goal of zero
defects by fully integrating processes
from product planning and design
through to manufacturing within the
Rinnai Group. In fiscal 2020 Rinnai wasonce again had zero cases of defects that
led to recall notices, which is an importantmateriality issue for companies.

Rinnai Report 2020 34

Special Issue

03 [Safety and Peace of Mind for Consumers]

Linkage with SDGs

With the World’s Highest Standard forEnvironmental Performance,
ECO ONE Takes the Best of Gas andElectricity to Help during Disasters

A hot water heater that is resilient todisasters, ECO ONE is a hybrid hot waterand heating system that protects andsupports people’s lives.

Electricity

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.

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 water

Hot water in the tank can be used as domestic waterElectricity

The year 2019 was marked by many natural disasters. This gave consumers the opportunity to think more deeply aboutrisk management for disasters and heightened momentum to prepare for them on a daily basis.
January 3: Earthquake in Kumamoto region of Kumamoto Prefecture
February 21: Earthquake in middle east Iburi region in Hokkaido Prefecture
May 10:Earthquake in Hyuganada, Miyazaki Prefecture
May 25:
Earthquake in southern Chiba Prefecture
June 18:
Earthquake of the coast of Yamagata Prefecture

Have notexperienced
power outages
30%
Have experienced
power outages
70%
Total (n =1,403)

Have experienced
power outages

Have not experienced
power outages

85%

15%

Earthquake
damage(n933)
Water
damage(n117)
Typhoondamage(n353)
0%

20%

69%

31%

69%

31%

40%

60%

80%

100%

Experience withwater outages

Have notHaveexperienced experienced
water
water
outagesoutages
57%
43%

Total (n =1,403)

Source: EnviroLife Research Institute, Inc., 201935

Experience with water outages (by type of disaster)Have experienced
water outages
Earthquake
damage(n933)
Water
damage(n117)
Typhoondamage(n353)

36%

43%

20%

Gas

ECO ONE

When the gas is cut off

When both electricity and gas
are stopped

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

Electricity

ECO ONE

Gas

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.

Electricity

Solar power
generation

Storagebattery

ECO ONE

Gas

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

57%

29%
0%

Have not experienced
water outages

64%

Cigarette sockets

Supplying
hot water
withelectricity

According to a survey, 70% of respondents have experienced power outages during disasters. By type of disaster, 85% were due toearthquake damage, 69% to water damage, and 69% to typhoon damage. In addition, 43% of respondents have experienced water
outages during disasters. By type of disaster, 64% were due to earthquake damage, 43% to water damage, and 29% to typhoon
damage. It is apparent from this data that situations where lifeline services are interrupted occur frequently.
Experience with power outages (by type of disaster)Power outage
response units

Hot water can be supplied with electricity alone

August 4: 		
Earthquake of the coast of Fukushima Prefecture
Around August 26-28: Torrential rains in Kyushu
Around September 5-9: Typhoon Faxai
Around October 11-12: Typhoon Hagibis

70% of people have experienced power outages and 40% have experienced water outages when lifelines are
stopped during disasters

Experience withpower outages

ECO ONE

71%
40%

60%

80%

100%

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 2020 36

Special Issue

04 [Health]Linkage with SDGs

Health Effect and Efficacy ofBathing with the Microbubble
Bath Unit
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.

Effect and efficacy of microbubbles (4): Relaxation effectSubjective comparison of relaxing effect (VAS score)

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 and become even finer bubbles as they contract in water.
Microbubble bath unit
By affixing a microbubble bath unit between the bathtub and the water heater withdedicated circulator fittings (a device to spray hot water into the bathtub),microbubbles are generated and produce a variety of health benefits for the bather.
We have successfully gathered a variety of verification data on the benefits ofbathing with a microbubble bath unit from research by Toho Gas Co., Ltd. and
Nihon Fukushi University as well as joint verification studies conducted by Rinnai
and Professor Shinya Hayasaka of Tokyo City University, a leading medical
researcher in the field of bathing.

Effect and efficacy of microbubbles (1): Hot bath effectChange in averageskin temperature (˚C)

Change over time in average skin temperature based on pre-bathing values
+1.6
+1.4
+1.2
+1.0

High temperature sustained compared with plain bathwater±0

Prebathing

Start of rest
(Third minute ofbathing)

Rest for10 minutes

Rest for20 minutes

Plain bathwater

Microbubble
bath unit

Sense ofrelaxation+16%

Sense ofcomfort+21%

Sense ofhappiness

+22%
0

20

Removal rates for solid dirt (%)

10

Bathtub

Gas waterheaterSince the bubbles envelop themselves around the bather’s body, thetransmission of heat from the bath water to the body becomes gentler
causing body temperature to rise gradually. As the body releases heatgradually after leaving the bathtub, there is a sustained sense of warmth.
Experiment parameters
Research by Toho Gas Co., Ltd. and Nihon Fukushi University
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˚C

8We received many comments that bathing in the cloudy hot water felt like
excitement and joy bathing in a hot spring. Association with the milky waters of a hot springis believed to lead to the psychological perception of high-quality, luxury,
Subjective comparison of excitement and joy (VAS score)
anticipation, and excitement.

Sense of highquality and class+47%

Sense ofluxurySense ofanticipation

+36%
+35%

Sense ofexcitement

+40%
0

20

0

Plain bathwater

Effect and efficacy of microbubbles (3): Moisturization
Subjective comparison of moisturizing effect (VAS score)+24%

Skin feels moist

Softness ofbath water(does not irritate)

+34%
0

20

40

60

Plain bathwater

3780

People experiencing microbubble bathing offered a lot of positive
feedback including that the bathwater felt softer, the skin became moist,
the skin did not feel as tight, and moisturizing cream was no longer
needed.
Experiment parameters
Measurement: Analysis using the VAS (visual analogue scale) method
Paper: Mental and Physical Subjective Evaluation of Microbubble Bathing, 2020.
(Shinya Hayasaka: Japan Health Development Journal 2020)
Subjects: 11 adult women+15%

Skin feels fresh

100 (%)

Microbubble bathing

60

80

Experiment parameters
Measurement: Analysis using the VAS (visual analogue scale) method
Paper: Mental and Physical Subjective Evaluation of Microbubble Bathing, 2020.
(Shinya Hayasaka: Japan Health Development Journal 2020)
Subjects: 11 adult women

100 (%)

Microbubble bathing

We will continue to plan and develop products and services on the theme of “health and lifestyles” and take on thechallenge of creating healthy and comfortable ways to living.

Effects of bathing with microbubble baths
Soaking in hot water has a major impact on physical and psychological health, and there is evenresearch that found “people who take a bath everyday tend to be happier”. *1

Experiment parameters
Fiscal 2019 data from Rinnai. Stimulated dirt (a 10% blend of beef fat and carbon black) was rubbed
on the subjects’ midsections and color-difference meter measures were taken before and after
bathing. The dirt removal ratio was calculated using brightness levels before and after bathing.
Subjects: Six healthy adult men
Bathing method: Whole-body bathing for 10 minutes with bathwater at 38˚C / *Significanceprobability of less than 5% indicated a statistically significant difference.

Microbubble bathing

40

Plain bathwater

to dirty sebum clogged in pores and remove it to keep the skin clean. In
verification testing, microbubble bathing was shown to be more effectivethat ordinary bathing in removing dirt.

6

100 (%)

Microbubble bathing

VOICE

Microbubble bathing

Approximately
1.5 times

80

Experiment parameters
Measurement: Analysis using the VAS (visual analogue scale) method
Paper: Mental and Physical Subjective Evaluation of Microbubble Bathing, 2020.
(Shinya Hayasaka: Japan Health Development Journal 2020)
Subjects: 11 adult women

Effect and efficacy of microbubbles (5): Sense of

Rest for30 minutes

Removal rates for solid dirt

60

Plain bathwater

Effect and efficacy of microbubbles (2): Cleansing effect Fine bubbles affix to and remove dirt on the skin. The bubbles also stick

12

40

Even ordinary bathing has been reported to lower mental stress due tothe hot bath effect. Microbubble bathing was found to offer a greater
sense of relaxation, sense of comfort, and sense of happiness thanordinary bathing. It is also hoped to lead to better sleep as well.

When microbubbles are added to the heating effect of bathing, heat transfer is further promoted tothe body, which prevents feeling chilly after leaving the bath. The bubbles also have the cleansing effectof lifting dirt from the skin’s surface. Microbubble bathing is therefore expected to produce even better

Shinya Hayasaka
MD, PhD
Tokyo City University, Japaneffects than ordinary bathing in terms of recovery from fatigue, sleep promotion, deodorization, andother benefits. In addition, microbubbles have been found to have a positive subjective impact on themind and body *2 and also produce a softer feel in the water as well as improved moisture in the skinand a better sense of relaxation. I believe this is due in large part to the visual impact of the whitebathwater created by the microbubbles. I think the ability to experience microbubble baths in your own
home will create high-quality and healthy lifestyle.
*1 A survey of 6,000 residents of Shizuoka Prefecture by Professor Shinya Hayasaka’s research team
*2 Paper: Mental and Physical Subjective Evaluation of Microbubble Bathing, 2020. (Shinya Hayasaka: Japan Health Development Journal
2020)
Subjects: 11 adult women

Rinnai Report 2020 38

Management Structure
Audit System for Monitoring and Supervising Management

Basic Principles

01

Rinnai views reinforcement and enhancement of corporate governance as important management
priorities from the 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 and that those rights can be exercised smoothly.

03

Rinnai views appropriate cooperation with all stakeholders as essential to improving corporate value
and, through its 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 ofwide-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 tocontinually 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 to build relationships of trust with those stakeholders.

General Shareholders’ Meeting
Election and dismissal

Cooperation

Audit & Supervisory Board

Accounting Auditor

Cooperation

Election and dismissal

Audit

Director Compensation

AdviceCorporate Lawyer

Board of Directors

Election, dismissal,
and administration

Election, dismissal,
and administration

AdviceDirection

PresidentInternal Control Office

ReportManagement

Audit

Internal
Audit

Related Committees

ReportReport

Audit

ReportReportCorporate Ethics Committee
Risk Management Committee
Disclosure Committee
Environment Management
Committee and other

Executive Officers
ReportBusiness Divisions

Board of Directors
Rinnai’s Board of Directors is comprised of seven members, two of whom are outside directors, and meets once a monthin principle. 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 aquarterly basis. Moreover, the term of Directors is fixed at one year in order to clarify management responsibilities andincrease opportunities to enhance shareholder confidence in the Board.

Corporate Governance Structure

Election and dismissal

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 our diverse 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 andexecutive organization execution of duties, the development and operation of the internal control system, and the statusof operations and property management at the head office and major offices. In addition to these duties, external accountauditors audit the Company’s accounts and verifies from a third-party perspective the legality of the internal control
system as it relates to financial accounts.

Direction

Management

Compensation limits for Directors and Auditors are
determined in accordance with the resolution of the general
meeting of shareholders. Rinnai internal regulations also
stipulate fundamental matters related to Directors’compensations, including determination procedures,
revisions, and reductions. Based on these, the amount ofcompensation for Directors is resolved by the Board of
Directors and the amount of compensation for Auditors isdetermined through deliberations by Auditors. Directors arepaid a fixed amount commensurate with assigned duties.

Compensation amounts for Directors and Auditors(Fiscal 2020)

Category

Persons

Total amount ofcompensation paid

Directors

7(2)¥286 million(14)(of which areoutside auditors)

5(2)¥45 million
(10)

Total

12

¥331 million(of which areoutside directors)

Auditors

Director salaries do not include employee salaries for directors who also serve as
employees. As of March 31, 2019, there were seven directors (including two outside
directors) and four auditors (including two outside auditors). There is a variance fromthe number of auditors shown above which is due to the inclusion of one auditor who
resigned as of the end of the 69th Ordinary General Meeting of Shareholders
convened on June 26, 2019.

39

Rinnai Report 2020 40

Leadership (As of June 26, 2020)
Board of Directors

Nobuyuki Matsui

Kenji Hayashi

Career Summary and Current Position in the Corporation:
Apr. 1985	Professor at Department of Electrical Engineering in Nagoya Institute ofTechnology
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)

Representative Director, Chairman of the Board

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)

Outside director, Independent officer

Current Representation in Other Companies:
Outside director at Aichi Tokei Denki Co., Ltd.

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

Representative Director and President and Executive

Tsunenori Narita

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

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, andconcurrently General Manager of Marketing & Sales Headquarters
Apr. 2006	Director, Senior Executive Officer, in charge of domestic business, and concurrently
General Manager of Marketing & Sales Headquarters
Apr. 2009	Director, Executive Vice President; responsible for Research & Development
Headquarters, Production Headquarters, Overseas Business Headquarters andCustomer 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 chargeof Production Headquarters and Overseas Business Headquarters
Apr. 2018	Representative Director, Executive Vice President, President’s Assistant (current)

Masao Kosugi

Director and Senior Managing Executive Officer, General
Manager of Corporate Planning Headquarters

Career Summary and Current Position in the Corporation:
Apr. 1979 Joined Rinnai Corporation
Jun. 1999 General Manager of Information System DivisionJun. 2005	Executive Officer, General Manager of Information System Division and Distribution
Control DivisionNov. 2005	Executive Officer, Deputy General Manager of Administration Headquarters andconcurrently, General Manager of Corporate Planning Division, Information System
Division, and Distribution Control Division
Apr. 2007	Executive Officer, General Manager of Administration Headquarters andconcurrently General Manager of Corporate Planning DivisionJun. 2007	Director, Executive Officer, General Manager of Administration Headquarters, andconcurrently, General Manager of Corporate Planning Division
Apr. 2010	Director, Managing Executive Officer, General Manager of Administration
Headquarters, and concurrently General Manager of Corporate Planning Division
and Information System Division
Apr. 2016	Director, Senior Managing Executive Officer, General Manager of Corporate
Planning Headquarters, and concurrently, General Manager of Corporate Planning
Division, Information System Division, In charge of Administration Headquarters
Jul. 2016	Director, Senior Managing Executive Officer, General Manager of Corporate
Planning Headquarters, and concurrently, General Manager of Corporate Planning
Division. In charge of Administration Headquarters
Apr. 2018	Director, Senior Managing Executive Officer, General Manager of Corporate
Planning Headquarters (current)

41

Representative Director and Executive Vice President,
President’s assistant

Hiroyasu Naito President

Yuji Kondo

Director and Senior Managing Executive Officer, General Manager ofOverseas Business Headquarters, and in charge of Business
Planning Division

Career Summary and Current Position in the Corporation:
Apr. 1979 Joined Rinnai Corporation
Jul. 2001	Deputy General Manager of Research & Development Headquarters, andconcurrently General Manager of Electronic Research & Development DivisionNov. 2005	Executive Officer, General Manager of Research & Development Headquarters
and concurrently, General Manager of Technology Development Division
Jul. 2007	Executive Officer, General Manager in charge of Research & Development
Headquarters
Apr. 2008	Executive Officer, General Manager of Research & Development Headquarters
and concurrently, General Manager of Technology Administration DivisionJun. 2009	Director, Executive Officer, General Manager of Research & Development
Headquarters and concurrently General Manager of Technology Administration
Division
Apr. 2010	Director, Managing Executive Officer, General Manager of Research &Development Headquarters and concurrently General Manager of Technology
Administration Division
May 2011	Director, Managing Executive Officer, General Manager of Research &Development Headquarters and concurrently General Manager of Electronics
Development Division
Apr. 2013	Director, Managing Executive Officer, General Manager of Research &Development Headquarters
Apr. 2016	Director, Senior Managing Executive Officer, General Manager of Marketing &Sales Headquarters, in charge of Research & Development Headquarters
Apr. 2018	Director, Senior Managing Executive Officer, General Manager of Overseas
Business Headquarters, and concurrently, General Manager of Group 3 Sales &Marketing Division, and in charge of Business Planning Division
Apr. 2019	Director, Senior Managing Executive Officer, General Manager of Overseas
Business Headquarters, and concurrently General Manager of Group 1 and 3 Sales& Marketing Divisions, and in charge of Business Planning Division
Apr. 2020	Director, Senior Managing Executive Officer, General Manager of Overseas
Business Headquarters, and in charge of Business Planning Division (current)

Audit & Supervisory Board Members
Haruhiko Ishikawa Standing Audit & Supervisory Board Member

Katsuhiko Shinji Standing Audit & Supervisory Board Member

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. 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)

Outside Independent Audit & Supervisory Board

Masaaki Matsuoka Member

Ippei Watanabe

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)

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 & TRUST Law 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.

Current Representation in other companies
Outside director at Howa Machinery, Ltd. (Audit and supervisory committee member)

Outside Independent Audit & Supervisory Board Member

Executive Officers

Kinji Mori

Hideyuki Shiraki(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

Chuji Nakashima

Hirohisa Ooi

Terumasa Kaneko

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

Executive Officer
General Manager of Production Headquarters

Executive Officer
General Manager of Customer Service
Supervisory Division, Marketing & Sales
Headquarters

Kazuhiko Matsumoto

Masanori Shimizu

Kazuto Inoue

Executive Officer
General Manager of Seto Factory, Production
Headquarters

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

Executive Officer
General Manager of Production Engineering
Division

Kenichi Ebata

Katsunori Tanioka

Takuya Ogawa

Executive Officer
General Manager of General Affairs Division

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

Executive Officer
Deputy General Manager of Corporate
Planning Headquarters

Hiroyuki Hoyano

Fuminobu Ishikawa

Kenji Endo

Executive Officer
General Manager of Kanto Branch, Marketing& Sales Headquarters, and General Manager
of Living Room Sales Office

Executive Officer
President of GASTAR Co., Ltd.

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

Rinnai Report 2020 42

Compliance

Risk Management

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.

Risk Management Policy

Rinnai Group Code of Ethics

Promotion of Business Continuity

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 is translated into the local language of that country.
Each year, Rinnai conducts Code of Conduct awareness activities for all employees.
Furthermore, in Japan we have created the “Rinnai Code of Conduct Guidebook” as a tool to deepen understandingof the content in the “Rinnai Code of Conduct” and we also implement tests using e-learning to confirm the level ofunderstanding.

As 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.

When companies do not have sufficient measures for natural disasters such as earthquakes and storms and theprevalence and spread of infectious diseases, business operations may be suspended for a long time, resulting insignificant losses and having a serious impact on stakeholders. As a company which produces thermal energy appliances
to support people’s lifestyles, we believe it is our responsibility to maintain the stable supply of our products. We position
cases where there is a risk of interruption in the manufacture or supply of products vital to customers as important issues
for business continuity management and are formulating and reviewing business continuing plans (BCPs).

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.

Rinnai Group Code of Ethics(Japanese and English versions)

Scenes where the Rinnai Group Code of Ethics is being entrenched (left: Brazil, right: Malaysia)

Risk ofnon-compliance ormanagement inviolation of applicablelaws

Risk of fire, explosion
accidents, andnatural disasters

Risk of suspension ordelays affecting raw
material procurement
activities

Important Identified
Risks (Partial)

Risks related tothe environment

Risks related tooverseassubsidiaries
Risk of damage to
mission-critical systems

Risks related to
information leaks

Rinnai’s Approaches to Preventing the Spread of Novel Coronavirus (COVID-19)
Compliance Education Activities

In January 2020, when COVID-19 infections were confirmed in the Wuhan area of China, Rinnai set up a Crisis Response
Headquarters and sent an internal communication titled “Requests related to Novel Coronavirus (COVID-19)
Countermeasures” (restrictions on overseas travel, etc.) to encourage awareness.
After that, the situation evolved with such events as the declaration of a state of emergency, but we endeavored toprevent the spread of infections by holding response meetings as needed and issuing rules while maintaining strong
internal controls.

Rinnai’s Legal Division conducts legal education every year with regard to laws
closely related to operations conducted by business divisions. Rinnai also
conducts compliance education every year during employee training for new
recruits and by rank, with 251 employees attending in fiscal 2020.
In addition, we share a variety of information with domestic Group
employees via our in-house intranet, where we post data such as information
regarding legal reforms, legal commentary concerning our operations, andexamples of violations that occurred at other companies.

Main countermeasures• Thorough handwashing, gargling, mask wearing, use of disinfectants, and ventilation of workplaces.
• Daily temperature checks and reporting of the number of those with abnormal readings (employees with temperatures of
37.0˚C or higher or with cold symptoms are prohibited from coming to work, etc.)• Review of cafeteria layout (avoiding face-to-face seating), encouraging self-restraint regarding conversations while eating• Self-restraint regarding internal meetings, encouragement of web meetings, in principle a ban on visiting customers• Encouraging working from home and off-peak commuting, switching to commuting by personal cars, etc.

New recruit training

43

Rinnai Report 2020 44

Communication with Stakeholders

Communication with Employees

Development of Global Human Resources

Selected as a “2020 Health & Productivity Stock”

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
Coming to Japan from Indonesia for Training
I joined Rinnai Indonesia in 1994 and have been involved in machining dyes for parts withmachining devices, assembly, and design. I am currently working on dye design, so I am able toapply my experience on the front lines in parts machining and assembly. This experience has
motivated me to machine, assemble, and confirm the parts I have designed in the downtime
I have between design jobs.
Rinnai Indonesia

MulyadiRinnai was selected as a “2020 Health & Productivity Stock” under a program sponsored by the Ministry of Economy,
Trade and Industry (METI) and the Tokyo Stock Exchange (TSE). “Health & Productivity Stock” selections have been
made since 2015 from among outstanding companies listed on the TSE that are engaging in a health and productivity
management program. In addition, Rinnai was also selected as an “Outstanding Health and Productivity Management
Organization (large enterprise category) 2020 (White 500)” (sponsored by METI). Not limited to listed companies, thiscertification also recognizes organizations that implement excellent health and productivity management practices.

Measures Against Metabolic Syndrome
We aim for a 5 percentage-point year on year increase in those who are no longer
diagnosed with metabolic syndrome and are implementing specific health guidance for
employees aged 35 and older.

45

did not understand Japanese and must have been a bother to the Rinnai staff looking after me.
My second Rinnai training was in 2019. I learned design for an important component to bepress equipment (line spacer) that was already in operation at Rinnai Indonesia, and I learned a
lot by overcoming many design criteria that I had not experienced before.
I would like to work to build high-quality and cost-competitive dyes by adopting Rinnai’s
standardized dye design, parts machining, and assembly in Rinnai Indonesia.

Secondment to Overseas Group Company

Rinnai’s policies for promoting and maintaining employee health are stipulated in the
Rinnai Group Code of Ethics and the business plan for the Human Resources Division.
The Human Resources Division has established dedicated departments (a health andwelfare team and a health support office) as part of Rinnai’s three-pronged approach tosupporting employee health involving the health insurance union, the employee union,
and the Company.

Measures to Prevent Lifestyle-related Diseases
We provide guidance to prevent the onset and progression of diabetes andhypertension to those who are insured but not currently receiving treatment. We also
hold such events as sports festivals and walking festivals.

machining. I spent a year experiencing precision parts machining and assembly. At the time, I

used in a new tabletop stove being planned for Rinnai Indonesia. It was a dye for automatedRinnai’s Initiatives

Mental Health Measures
We conduct mental health seminars according to occupational level, including self-care
employees for all employees and line care seminars for managers and supervisors.
In addition, we aim to have over 95% of employees undergo stress checks.

My first experience with training at Rinnai was in 2007 when I was doing dye partI was in charge of Latin American sales for one and a half years in the Overseas Business
Headquarters. Since June 2019, I have been posted in the United States to be closer to ourcustomers and to work with them without a major time difference. I conduct sales in countries
other than Brazil, which is covered by Rinnai Brazil. My sales coverage is a market
encompassing 32 Latin American countries with a population of 400 million, including Chile,
Mexico, Argentina, Peru, Bolivia, and Colombia. Our direct business partners are the
Rinnai America (third from left)*U nder the Health & Productivity Stock Selection
program, METI and the TSE have jointly been
selecting companies that strategically carry out
efforts regarding their employees’ health from amanagement perspective as “Health & Productivity
Stocks”. The program selects outstanding listedcompanies engaging in a health and productivity
management program and introduces them as
attractive companies for investors who prioritize theimprovement of corporate value from a long-term
perspective. Through this effort, the aim is to raisesocial recognition of enterprises engaging in healthand productivity management and to thereby
encourage enterprises to further engage in healthand productivity management.

Akinori Ando

distributors who will import and sell our products. I try my best to expand sales by getting as
many people as possible to understand the appeal of Rinnai’s products and to introduce
products that fit each market. In addition, I am actively looking to create new business partners
in countries where we do not have distributors yet.
I basically travel alone on business trips. Admittedly, there are some challenges as somecountries are different from Japan in areas like public, but I find my work truly rewarding as I canspread Rinnai’s products and brand while interacting with the customs and cultures of various
countries. It’s always an effort to communicate in Spanish or English. Yet language is only a tool;
what is important is how you plan your business and the value-added that your services
provide. I am working daily to quickly build Rinnai into the number one brand in Latin America.

Rinnai Report 2020 46

Communication with Stakeholders

Communication with Shareholders and Investors

Communication with Customers

Aiming for Longer-Term Business Growth and Stable
Shareholder Returns

Improving Products and Services Based on
Customer Surveys

We disclose information in an appropriate, timely, fair, and impartial manner, and engage in IR activities with an emphasison two-way communication in order to earn the trust of shareholders and investors. In an effort to provide ourshareholders and investors with direct updates on our business activities, and to ensure that information is disclosed
quickly and fairly, we provide information via channels such as results briefings for analysts and institutional investors(twice a year), biannual shareholder reports, press releases and presentation materials for results briefings on our website,and our IR calendar. Through various opportunities to meet with them, shareholders and investors are able to understandour business growth strategies from a longer-term perspective and to hold expectations for stable shareholder returns.

Launched in April 2019, ILO is a series of built-in hobs (stovetops) sold exclusively over the Internet with customized color
combinations featuring 10 top plate colors, three front panel colors, and two stovetop colors.
During the planning for this product, Rinnai surveyed current stovetop users regarding their preferences for colors.
When ask about why color preferences were selected, many respondents noted, “I want to be able to select the colors I

Dividend Increases for 18
Consecutive Fiscal Years
One of our top management priorities is to sustain astable return of profits to shareholders. When deciding
on dividends we consider consolidated performance,
return on equity, financial status, but we haveincreased our annual dividend for 18 consecutive
fiscal years since fiscal 2003. Furthermore, we plan to
pay a commemorative dividend of ¥10 (¥5 in the firsthalf and ¥5 at year-end) in honor of the 100th
anniversary of Rinnai’s founding in September 2020 inaddition to the ordinary dividends for the fiscal year.

47

Dividend per sharelike” and “I want the color to match the atmosphere of my kitchen.” From such customer feedback, we created a stovetop

(Yen)
100
76

80

82

86

90

94

98

68
56

60

Interim
40
20

20

24

26

Year-end
28

30

36

40

42

60

48

is not “a stovetop selected from an abundance of choices”, but rather, “a stovetop that offers combinations to realize theideal kitchen space” and implemented product planning and sales from that viewpoint. We also conducted a survey ofcustomers who purchased after ILO was launched.
From interactions with customers in the sales process and responses to the survey of customers who purchased
the model, we were able to gather specific information on queries about ILO’s functions and on questions customers had
before purchasing, such as regarding removal of the old stovetop. The questions we received from customers are posted
on our sales site, and we will continue showing ingenuity in valuing our ties with customers after sales so they can make0(FY) 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

purchases with peace of mind.

Rinnai Report 2020 48

Communication with Stakeholders

Communication with Business Partners

Communication with Local Communities and Society

Quality Improvement Activities Undertaken Together with
Business Partners

Activities to Disseminate and Support the Parasport Boccia*

Rinnai’s fundamental concept is “Quality is our destiny”
and its business partners also understand theimportance of quality as we work together to improve it ineverything we do. We cannot manufacture high-quality
products without parts of good quality.
Rinnai is not only enhancing the inspection of theparts its purchases, but also focusing on enhancing themonozukuri and quality improvement of its business
partners.
In fiscal 2020 six business partners participated inintensive quality improvement activities. Each company
selected a theme related to an issue they faced andworked to improve it according to an annual plan. We
were able to deepen mutual understanding and enhanceeach other’s capabilities through periodic site visits andmeetings to report on quality improvement.
In addition, we are enhancing quality management
to respond rising market demands for quality. In fiscal
2020, we completely updated our quality assurance
manual for business partners.
Going forward, Rinnai will continue working to build
an environment under which we can grow together withour business partners under a spirit of co-existence andco-prosperity.

A scene from a boccia match

President & Representative Director
TECHNOMISUGI Co., Ltd.

49

Group photo with Office de Boccia participants

Scene from meeting to report on quality improvement

The Rinnai team participated in the inter-company boccia tournament “Office de Boccia in Nagoya: Winter 2020 Battle”
held on February 7, 2020. This tournament is sponsored by the All Japan Business Committee for the Tokyo 2020
Olympic and Paralympic Games and is held in numerous venues with the aim of allowing participants to experience thedepth and fun of boccia and to spread the appeal of parasports. Eighty-two companies and organizations entered the“Office de Boccia in Nagoya: Winter 2020 Battle” and only the 32 teams that made it through qualifying rounds competedin the main draw.
Rinnai’s team successfully made it through the qualifiers to reach the main draw. It lost its first match in the main draw
but won three in a row after earning a repechage position to reach the finals. The Rinnai team faced off against the twotime champion KEI team, but was unable to overcome them and finished a strong second. Through boccia, we were able
to deepen our understanding of disabilities and parasports. And given Rinnai’s ambition to create healthy andcomfortable lifestyles for all people regardless of disability, we intend to participate in future tournaments.

Reporting on examples of improvement through site visits* Boccia: Boccia is a sport created in Europe designed for people with severe cerebral palsy or similar severe limb dysfunction and is an official Paralympic sport. Players compete bythrowing, rolling, or striking other balls with six red and blue balls toward a target white ball called the jack to see who can place the most balls closest to it.

VOICE

Tadashi Mishina

Competing against KEI in the finals of the main draw

VOICE
Enhancing Trust Through Better Purchasing

Seeking to Create Excitement for Parasports Together Through Boccia

I participated in Rinnai’s quality improvement activities aimed at improving quality. I selected “how to

I believe the “Office de Boccia in Nagoya: Winter 2020 Battle” held this February created a lot of

eliminate human errors from preconceptions” as our theme. We approached this from employee

excitement and was enjoyable for all participants beyond the bounds of parasports. Our team’s goal

training and built a check structure at equipment changeovers and other transition points. As a result,

was to win the tournament for a third consecutive year. We met Rinnai in the finals, and I was

we had zero quality issues with parts to be delivered. As a supplier, I believe delivery good products will

anticipating a close match, so we aimed to stick to the fundamentals. As expected, Rinnai’s teamlead to building trust. From here on, I would like to further raise our awareness of monozukuri and haveshowed good control and strategy which had us on edge. Yet we were a little better on the strategy side

this lead to the tirelessly pursuit of better quality.

Keita Kato
President & Representative Director
KEI Co., Ltd.

and therefore able to win our third consecutive championship.
As the representative of KEI Co, Ltd. and as a Paralympian, it is my sincere wish to work withcompanies to create excitement for boccia and other parasports even after the Tokyo Paralympics.

Rinnai Report 2020 50

CSR Activities Underway Across the World

Stakeholder Engagement

United States

Rinnai places great importance on daily
communication with customers,
employees, shareholders, investors,
business partners, local communities,
and the general public in an effort tofurther evolve our business activities andimprove levels of satisfaction. Comments
and requests from customers throughchannels such as exhibitions and ouronline shopping site are used to help
improve our products and services. We
exchange information with our business
partners on subjects such as
management policies and products andwork together to mutually improve
quality through our Level-Up activities.

Rinnai America donated 1,251 sanitary items to the Bloom Closet
organization. Bloom Closet is a foster child support organization that sells
sanitary items and clothing at low prices for foster children. Rinnai America isalso engaged in a variety of other charitable activities.

Donation of sanitary items to a foster child support organization

ThailandEach year, Rinnai Thailand employees hold an environmental
protection event. In August 2019, 50 employees planted 150
mangrove trees in Samut Sonkhram province.

Planting mangrove trees

BrazilEmployees

Communication with
Our Stakeholders
Shareholders
Investors

Business
Partners

Donation of hot water heater to a temporary hospital

Community, Society(Including government)

South Korea
Together with the 2020 social welfare corporation “Warm Accompaniment”,
Rinnai Korea donated gas clothes dryers at 44 locations where families livewith disabled persons who are preparing to live independently. Housing inwhich disabled persons can live independently are constantly short of spacesince various household items must be placed as needed for life in awheelchair. Gas dryers are highly appreciated for drying clothes quickly andeliminating the need to hang clothes to dry.
Donation of gas clothes dryers to a social welfare facility

TaiwanRinnai Taiwan’s health promotion activities in 2019 included a contest to lose weight and reduce fat called“Together, Health, Beauty, Summer” aimed at reducing the health metrics of body mass index (BMI) andtotal cholesterol of its employees. Health checks showed a major improvement in these metrics, and in
January 2020, Rinnai Taiwan was awarded the “Health Start Mark Certification for Healthy Workplaces”
by the Health Promotion Administration of the Ministry of Health and Welfare of Taiwan.
Award related to health presented by the Ministry of Health and Welfare of Taiwan

51

Opinions and Issues Raised and Our Responses• Customer Center• Exhibitions / Other
events• After-sales services(inspection and repairs)• Official online shoppingsite “R.STYLE”• New Year meetings(policy presentations)• New product workshops
utilizing internal facilities• Corporate site
• Product information site

• We conscientiously answer a range of inquiries from customers concerning products and parts, and post frequently asked
questions (FAQ) on our website.
• Customers who have had repairs done are surveyed to gauge their satisfaction with elements of service such as “ease ofgetting through by phone” and “politeness of operators.” Details of responses are then fed back to operators so that they
can remedy unsatisfactory areas.
• The Maintenance Check Call Center was established to handle inquiries regarding inspection notifications, inspection
notice functions, and schedule inspections. A simple explanation of the inspection system is provided to customers who are
not registered owners and guidance is provided to receive inspections for safety.
• We provide guidance on legal compliance inspections for customers who registered their products in accordance with the“long-term use product safety inspection system” as they reach their 9th year of use. For products not applicable underlegal compliance inspection regulations, we strive to improve customer safety by sending safety inspection notifications
based on the “long-term use product safety inspection system.”• Rinnai conducts web-based questionnaires (customer satisfaction surveys) with customers who make purchases on our
website. These questionnaires concern purchased products, service window support, the sales site itself, and productdelivery and packaging. The Company provides all related offices with feedback regarding questionnaire results andconducts initiatives to improve issues related to responses that indicate low customer satisfaction.
• We are expanding Hot.Lab, our hands-on product induction facility, and working to increase customer knowledge andunderstanding regarding our merchandise.

• Individual discussions• Workplace meetings• Training / Events• Corporate ethics
advisory service• In-house intranet /In-house newsletter• Information exchangewith employee unions• In addition to regular interviews targeting all employees, we conduct feedback interviews regarding personnel evaluations,pre-partum and postpartum childcare leave, and interviews when returning to work. By creating rules for interviews with
employees in Japan and those transferred overseas, we are strengthening our support for individual growth and workplacecommunication to create a better work environment.
• To collect and accurately respond to requests from employees in all departments, the Company regularly holds
conferences between its Personnel Department and employee unions, the results of which are used to revise internal
systems and improve work environments.
• Rinnai conducts nursing care seminars and provides nursing care-related information based on nursing care questionnaire
results. The Health Support Office plays a central role in promoting employee health through health campaigns that checkblood vessel age, bone density, iron content, and skin age as well as walking seminars for weight loss and physical fitness.
• Since 2005, we have been operating a corporate ethics advisory service. This internal reporting system enables employees
to report fraudulent activity and violations of laws, ordinances, or internal regulations in cases when consulting with theirsuperiors is problematic.

Customers(Users) (Distributors)

In May 2020, Rinnai Brazil donated hot water heaters for a temporary hospital(Campo Grande University Hospital) established to treat COVID-19 patientsin Campo Grande City. Working in cooperation with Copagaz, a major
supplier of LPG, Rinnai Brazil installed a gas hot water supply system in thetemporary hospital.

Means ofCommunication• General shareholders’meetings• Results briefings• Factory tours• Investor relations (IR)meetings• Questionnaires• We carefully explain our “Evolution and Succession 2017” medium-term business plan at results briefings and individual IR
meetings, and endeavor to improve understanding of the Group’s management policy and strategy.

• New Year meetings• Policy presentations for
suppliers• Level-Up Workshop• Online communication
tool, “R-LINE”• Rinnai responds to inquiries from suppliers regarding its production system and trends as needed, informing them ofimportant information, such as changes in production plans, through the communication tool R-LINE. We also explain thisinformation through our Supplier Liaison Group meetings.

• We regularly organize facility and factory tours for institutional investors to give them a better understanding of our strengths
and competitive advantages, and to outline our approach to manufacturing and technical capabilities.
• We hold results briefings and individual IR meetings to answer inquiries and explain our underlying thinking on dividend
policy.

• Responding to requests from suppliers for advice on, e.g., improving quality and productivity, we organize Level-Upworkshops and help suppliers to make improvements in the workplace.

• We are asked by people living near our plants and offices to assist with events and festivals aimed at enlivening their• Participation in local /communities, and we actively assist and take part in such events as a member of these communities.
community development
activities• Rinnai continues to support exchanges with citizens and creative activities by collaborating with cultural and artistic• Support for cultural activities activities conducted in the area surrounding the Nakagawa canal, where our head office is located.
and the arts
• In response to requests for assistance with community learning and school education, we organize events such as• Employee volunteer activities seminars on the history of manufacturing at Rinnai and factory tours for schoolchildren.
• Support for extracurricularschool activities (factory
tours, etc.)

Results of Questionnaire Regarding “CSR Report 2019” n=275
We sent a questionnaire to readers of our 2019 CSR Report and asked them to vote on topics they found interesting.
We intend to incorporate the results of this questionnaire in our next edition.
CSR Report 2019

Response rate

Aiming for the Realization of Healthy and Comfortable Lifestyles and Sustainable Societies
Corporate Mission and Vision
Top Message
Rinnai Group Profile
Rinnai Group CSR
Environmental Impact within Rinnai’s Value Chain
Stakeholder Engagement
Value Creation Process
Contributing to healthy and comfortable lifestyles through the diffusion of gas clothes dryers
Approaches to providing customers with safety and peace of mind by improving the safety functions of our gas stoves
Initiatives to prevent global warning through energy-saving water heaters
Communication with Employees
Communication with Stakeholders
Management Structure
Data Collection

0

10

20

30

40

50 (%)

Rinnai Report 2020 52

Data Collection
Eleven-Year Financial Summary

FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020Net sales(Millions of yen)

226,117

239,436

246,636

251,832

286,981

295,022

319,935

330,256

347,071

348,022

340,460

Operating income(Millions of yen)

20,392

25,23826,63426,35134,01830,787

34,59334,05632,84930,87934,422

(%)

9.0%

10.5%

10.8%

10.5%

11.9%

10.4%

10.8%

10.3%

9.5%

8.9%

10.1%

Ordinary income(Millions of yen)

21,481

26,82428,90729,06436,91032,93835,80735,28034,28633,31835,679Net income attributable to owners of theparent company(Millions of yen)

11,642

15,51016,807

19,371

23,254

20,64722,71022,322

21,194

20,48021,561

Total net assets(Millions of yen)

142,502

141,110

154,737

178,007

232,635

261,414271,709290,638

307,965

320,696

340,959

Total assets(Millions of yen)

222,324

221,495

238,853

262,590334,382355,140

368,084

402,107422,422430,885

450,486

Net assets per share(Yen)

2,684.46

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

Net income per share(Yen)

219.83311.52342.60394.86454.74397.03436.71429.27410.41398.45419.49Equity ratio

(%)

62.5%

62.0%

63.1%

65.7%

66.0%

69.4%

69.6%

67.8%

68.0%

69.4%

70.1%

Return on equity

(%)

8.5%

11.2%

11.7%

12.0%

11.8%

8.8%

9.0%

8.4%

7.6%

7.0%

7.0%

Cash flows from operating activities(Millions of yen)

29,687

27,536

23,07422,87236,45325,671

36,06639,55429,91429,47937,694

Cash flows from investing activities(Millions of yen)

(15,865)(10,634)(16,222)(12,607)(32,908)(23,649)(17,770)(17,732)(12,190)(7,288)(7,124)

Cash flows from financing activities(Millions of yen)

(12,203)(16,958)(3,937)(5,002)

13,183(8,659)(6,554)(5,217)(11,725)(6,150)(6,436)

Cash and cash equivalents at end of year

(Millions of yen)

46,57046,14548,64855,03074,27969,34079,60095,297

101,697

116,133

140,138

Capital expenditures(Millions of yen)

9,380

7,590

9,378

8,222

12,43913,774

16,93820,664

16,105

13,481

10,580Research and development expenses(Millions of yen)

6,764

6,934

7,665

8,060

8,380

8,895

9,113

9,340

9,918

9,503

9,308

Operating income margin

Dividends

(Yen)

42

48

56

60

68

76

82

86

90

94

98

Payout ratio

(%)

19.1%

15.4%

16.3%

15.2%

15.0%

19.1%

18.8%

20.0%

21.9%

23.6%

23.4%

Number of outstanding shares(Shares)

54,216,463

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

Closing price at the end of the period

(Yen)

4,910

5,520

5,960

6,770

9,070

8,910

9,940

9,230

10,100

7,830

7,650

(Millions of yen)

266,203299,275

323,130

367,045473,603465,249

519,032

481,958

521,326

404,157

394,866

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.

53

Rinnai Report 2020 54

Data Collection
Financial Data

Consolidated

Rinnai Corporation

Results of profit
and loss

Domestic
consolidated andaffiliated companies
Overseas
consolidated
companies

Total

Consolidated

Rinnai Corporation

Sales by product

Domestic
consolidated andaffiliated companies

Overseas
consolidated
companies

Total

Rinnai America

Rinnai Australia
Results of profit andloss by overseas
consolidated
Shanghai Rinnai
subsidiaries(Before eliminationof consolidation)
Rinnai Korea

Rinnai Indonesia*(Millions of yen)

FY2010FY2011FY2012FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Water heaters
Kitchen appliances
Conditioning appliances
Commercial-use appliances
OthersWater heaters
Kitchen appliances
Conditioning appliances
Commercial-use appliances
OthersWater heaters
Kitchen appliances
Conditioning appliances
Commercial-use appliances
OthersWater heaters
Kitchen appliances
Conditioning appliances
Commercial-use appliances
OthersWater heaters
Kitchen appliances
Conditioning appliances
Commercial-use appliances
Others
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income
Net sales
Operating income
Ordinary income
Net income

226,117
20,392
21,481
11,642
169,277
13,455
15,5158,654
85,884
1,835
2,030
1,127
71,023
4,832
4,647
3,307
326,185
20,122
22,19313,088105,906
78,66914,635
6,268
20,63678,08665,523
10,873
2,756
12,037
19,164
26,511
1,213
1,718
37,27538,585
12,129
6,118
5,357
8,832
135,837
104,165
18,205
9,832
58,145
12,799553
535
290
12,618
1,595
1,836
1,277
12,207
1,500
1,537
1,255
20,318
516
150
53
-

239,436
25,23826,824
15,510175,045
16,131
17,647
10,46791,097
1,821
2,029
545
79,872
6,884
7,085
5,338
346,015
24,837
26,762
16,351
114,534
79,60015,754
6,739
22,806
81,614
66,91011,0672,630
12,822
21,39527,332
1,149
1,614
39,605
43,626
11,781
7,889
5,665
10,909146,636
106,024
20,106
9,910
63,337
13,041796
803
519
15,367
2,719
3,011
2,095
12,953
1,258
1,350
1,124
21,107
733
442
545
-

246,636
26,63428,907
16,807183,091
18,04522,573
13,86997,082
2,071
2,270
1,238
76,806
6,179
7,077
5,345
356,979
26,29731,921
20,452
121,028
78,792
16,681
6,846
23,28688,00566,34812,296
2,638
13,803
24,412
26,0481,308
1,605
43,70744,058
11,661
7,244
4,570
9,271
156,476
104,058
20,8498,813
66,782
11,584242
243
174
14,996
3,137
3,877
2,704
12,907556
650
549
20,574
717
598
643
-

251,832
26,351
29,064
19,371
188,559
18,066
19,911
12,80496,824
2,403
2,571
1,573
77,083
5,963
6,584
6,224
362,467
26,432
29,067
20,603
127,125
78,782
15,666
6,912
23,346
92,60866,62912,0292,748
14,54325,513
24,955
1,147
1,618
43,58845,218
11,465
6,227
4,624
9,548
163,340
103,050
19,404
8,991
67,67911,333315
317
200
13,752
2,186
2,611
1,818
14,207
1,175
1,300
1,082
19,720
725
638
1,818
-

286,981
34,01836,91023,254
205,598
24,27827,13818,176105,111
2,775
2,881
1,889
99,152
7,255
8,260
6,006
409,862
34,30838,28026,071
146,883
88,031
16,716
7,552
27,797
103,942
71,953
12,0692,692
14,941
27,19928,435
1,051
1,474
46,94957,906
15,828
7,631
5,311
12,474
189,048
116,217
20,753
9,477
74,364
15,487845
849
536
15,272
2,337
2,776
1,939
20,652
1,650
1,817
1,461
25,054
407
519
301
-

295,02230,78732,93820,647
190,475
18,67522,073
15,33999,967
2,086
2,199
1,426
126,880
9,921
11,026
8,497
417,323
30,68235,29925,262
153,697
90,838
14,972
9,227
26,287
99,636
62,236
10,725
2,673
15,203
26,71424,006786
1,620
46,83870,902
29,246
7,309
7,114
12,307
197,253
115,489
18,822
11,40874,34917,754
1,020
1,036
667
15,360
1,456
1,634
1,130
27,202
2,174
2,472
1,972
31,215
1,371
1,236
1,184
11,733
1,366
1,879
1,456

319,935
34,59335,80722,710
197,592
20,191
21,946
15,602
99,599
2,552
2,735
1,902
149,987
11,636
12,542
9,236
447,178
34,38037,224
26,741
169,623
93,34019,463
10,041
27,466
105,999
62,849
9,965
2,675
16,10328,25922,260628
1,590
46,85984,33531,346
12,8288,010
13,465
218,594
116,457
23,422
12,27676,42722,602
1,817
1,841
1,145
23,137
1,366
1,522
1,049
33,958
2,727
3,016
2,378
33,594
1,356
1,551
1,144
11,640
1,486
1,707
1,334

330,256
34,05635,28022,322
198,870
18,814
21,512
16,215
124,806
3,626
3,837
2,029
149,917
12,45313,0609,411
473,595
34,89438,40927,655
188,20288,456
17,952
9,122
26,521
109,258
61,3598,945
2,629
16,677
51,822
21,139669
1,609
49,56488,08228,368
12,212
7,206
14,047249,163
110,868
21,827
11,44580,29023,504
1,661
1,644
1,037
21,515
1,461
1,447
998
37,448
3,136
3,268
2,519
32,254
1,233
1,306
1,043
11,327
2,052
2,295
1,776

347,071
32,84934,286
21,194201,936
15,37818,466
13,850125,536
2,749
2,924
2,069
169,125
14,765
15,555
11,673
496,597
32,89336,946
27,593202,387
88,36419,084
9,499
27,735112,561
59,5099,535
2,308
18,021
52,28019,128678
1,501
51,946104,149
29,80913,116
7,689
14,360268,992
108,448
23,32911,49884,32827,738
2,207
2,219
1,254
23,585
1,803
1,847
1,208
45,969
5,133
5,223
4,283
34,905727
802
499
12,041
1,952
2,209
1,720

348,02230,87933,31820,480206,015
14,602
19,026
14,175
122,181
2,748
3,014
2,087
175,756
13,64014,932
11,510503,953
30,991
36,973
27,773
202,630
88,322
19,642
8,452
28,974
116,81058,8529,139
2,226
18,98649,21018,934714
1,337
51,985
110,131
30,746
13,791
6,708
14,379276,151
108,533
23,645
10,27285,35130,390
1,491
1,481
1,100
25,033
1,720
2,065
1,459
47,511
5,088
5,319
4,378
32,803102
269
242
12,840
1,828
2,076
1,620

340,460
34,42235,67921,561
207,805
17,35920,295
15,058
101,938
3,248
3,476
2,475
171,40912,242
13,182
10,604
481,153
32,85036,95428,138196,122
86,19318,901
8,556
30,685
115,908
59,934
8,658
2,225
21,07933,583
15,611704
1,363
50,676
107,979
29,736
13,294
6,943
13,454257,471
105,282
22,657
10,532
85,21033,133
2,032
2,025
1,436
23,760593
393
262
43,628
5,593
5,868
5,228
27,535(1,382)(1,248)(987)
11,263
1,600
1,906
1,504

* Rinnai Indonesia has been included into Rinnai’s consolidated financial statements from the fiscal year ended March 2015 (it has been included in the consolidated balance sheets as of the
fiscal year ended March 2014).

55

Rinnai Report 2020 56

Data Collection
Data related Society

Newly recruited employees

Mid-career recruitment
Temporary employees
Average working years

Average age (Years old)

Environmental Data

Men
Women
Total
Men
Women
Total
Total
Men
Women
Total
Men
Women
Total

FY2018FY2019FY2020

80
59
139
4
10
14
379
16.8
12.1
15.4
38.8
33.3
37.1

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

62
22
84
2
6
8
376
17.3
13.3
16.1
39.7
34.5
38.2

FY2018FY2019FY2020

20.0
9.7
53.3
60
1.90
25
1.99
17
90
1
106
107
100.0
100.0
100.0
0
96
96
0
36
36
2
2
4
0
1
1
0
0
0
0
3
3

20.0
10.5
57.1
66
2.05
26
2.01
13
82
0
117
117
100.0
100.0
100.0
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
2.82
21
57
0
123
123
100.0
100.0
0
131
131
1
48
49
1
4
5
1
4
5
1
2
3
59
14
73

Total energy used
(TJ)
1,200

1,171

Total amount ratio of the entire value chain(CO2 emissions) * 1
Scope 3 Category 1
1,192

Purchased goods / services

1,107

Employment of persons with disabilities
Number of occupational accidents*Includes domestic consolidated subsidiaries

Number of days granted
Number of days taken
Paid leave utilization ratio (%)
Number of employees with disabilities
Employment rate of persons with disabilities (%)
Number of OJT accidents
Lost time injury frequency rates (LTIFR)

Mental health leave
Number of employees who took childcare leaves of absence
Number of employees who used childcare leave
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 leaves of absence

Number of employees who used reemployment system
Number of employees who used the work from home
program

Men
Women
Total
Men
Women
Total
Men
Women
Total
Men
Women
Total
Men
Women
Total
Men
Women
Total
Men
Women
Total
Men
Women
Total

FY2018FY2019FY2020

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

2,123.0229.0
19.4

2,097.0
217.0
18.7

2,007.9
199.2
16.6

Other (Social contributions, Compliance)

FY2018FY2019FY2020

9
0
15.0
1.0

5
0
14.0
1.0

6
0
14.0
1.0

Whistleblowing incidents *Includes domestic consolidated subsidiaries
Criminal charges (Number of cases) for compliance-related accidents and incidents (see Note 3)
Total amount of social contribution activities (Millions of yen)
Expenditures for political contributions and lobbying activities (Millions of yen)57

(1,000 tCO2e)
6,000

6,040

(7.16%)

1,000
800

4,000

3,320

Total of Scope 1, 2, 3

11,480,000 t

600

2,540

400

2,610

2,000

200
0
Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2019 Fiscal 2020

Scope 3 Category 11
Use of sold products

10,510,000 t (91.53%)

Solid waste(includes valuable substances)

Biodiversity protection(1,000 m3)
1,000

(kg)
400

935
859

29

30

Fiscal2031(Target)(invasive species eliminated)(1,000 t)
40
31

Fiscal2021(Target)

Water used

31

800

360

808
300

600
20

200

180

400
10

100

200

30
0
Fiscal 2018

Fiscal 20190

Fiscal 2020

Fiscal 2018

Fiscal 2019

Fiscal 2020

0

Fiscal 2018

Fiscal 2019

Fiscal 2020

CO2 reduction results

Solid waste reduction results*2

Water conservation results*2(1,000 tCO2e)10(1,000 t)
4(1,000 m3)
20
17.0

3.3
15
6.0

11.0
10

2

5

Working hours *Excluding managers and supervisors(contribute to reduction of CO2 emissions)

820,000 t

0

Days of paid leave taken

Eco-friendly products

6.7
5

2.0
0.8

0.4

0.3

Fiscal 2019

Fiscal 2020

0

0

0
Fiscal 2018

Fiscal 2019

Fiscal 2020

Fiscal 2018

Fiscal 2018

Fiscal 2019

Fiscal 2020

[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 2020 58

2020.10