Pharmacy GroupSUGI Pharmacy Group Integrated Report 2023

Integrated Report

2023

SUGI Holdings Co., Ltd.
62-1 Shin’e, Yokone-machi, Obu-shi, Aichi, 474-0011
TEL: 0562-45-2700 FAX: 0562-45-2702
https://www.sugi-hd.co.jp/

Management Philosophy
Table of Contents

Management Philosophy
We contribute to
local communities throughour sincere, kind services.
We help many more people smile,
Hoping for the happiness of each employee,

1Management Philosophy

2

Table of Contents

3

SUGI Pharmacy Group’s Mission

Consolidation of the Value Creation
Foundation
Commitment to Issues of Materiality
53

SUGI Pharmacy Group’s Value
Creation Story
15

Growth Milestones

17

Figures Showing the SUGI

19

Figures Showing the SUGI
Pharmacy Group’s Sustainability

21

Value Creation Process

Market Environment

27

Message from the President

37

Ideal Vision

45

Financial/Non-financial Highlights

47

Message from Chairman

49

Message from Vice President

55

Five Themes and Priority Issues (Issues of Materiality)

57

Healthy Community

67

Sustainable Business Partnerships

73

Contribution to the Global Environment

81

Healthy Workplace Environment

91

Corporate GovernanceFact Data

SUGI Pharmacy Group’s Growth
Strategy
25

Priority Issues (Issues of Materiality) for Proceedingwith Sustainability Management

Pharmacy Group’s Strengths

Hoping for the happiness of each customer, andHoping for the happiness of everybody.

Integrated Report 2023

103

Financial Indices104

Non-financial Indices108

Consolidated Balance Sheet

109

Consolidated Statement of Income andConsolidated Statement of Comprehensive
IncomeBusiness Report on Sugi Pharmacy Co., Ltd.

110

Consolidated Statement of Cash Flows111

Stock Information and Corporate Profile

Closer to you and more reliable for you. Serving as the source of your smile.

SUGI Pharmacy Group
Corporate Watchwords and Management Philosophy
at the Time of Our Establishment

Corporate Watchwords

Management Philosophy

Kindness
Serve customers with sincerity
and kindness.

<For Society>
Strive to create a corporate framework
enabling us to contribute to local
communities by selling medical andpharmaceutical products, health foods,
cosmetics and daily items and bydispensing prescriptions.

HonestyWork with business partners
with humility and honesty.
Trust
Be trusted by both customers
and business partners.

1<For Employees>
Strive to create a corporate framework
enabling the company to grow together
with employees with the aim of ensuring
their happiness.

Drugstore operation

Home-visit nursing
and elderly home-care
support

Medical consulting

Support for commencement of medical practice

Staff agency service

Promotion of disabled
employment

Wholesale trade of
medical andpharmaceutical products

SWC

Domestic and international
wholesale trade

International wholesale
trade

渡 辺貿易

2

SUGI Pharmacy Group’s Mission

Focus on Each Individual
Enhanceemployees’
motivation

Develophuman
assetsHuman Resources
Are an Asset

Visualize roles, skills, and intentions
and place a focus on each individual

EnsurehumanassetsHuman Resources
Are an Asset

Ensurehealth andsafetyEnsure legal
compliance andchange thecorporate
cultureEnsurediversity

At the SUGI Pharmacy Group, we are striving todevelop human assets with a focus on each individual
and proceed with human capital management basedon the six principles of “Ensure employees’ motivation,”“Develop human assets,” “Ensure human assets,”“Ensure legal compliance and change the corporate
culture,” “Ensure diversity,” and “Ensure health andsafety.” We are working toward achieving sustainablegrowth by realizing the Total Healthcare Strategy andpracticing a management philosophy embracing “kindbehavior,” “contribution to local communities,” and“employees’ happiness and smiles.”Stimulate Each Employee’s Capability andEnhance Their Motivation

Respect for Each Customer
in Front of Our Eyes

Point Membership(Unit: 10,000 people)
2,000
1,500

1,515

1,645

1,804

1,941

2,083

1,000
500
0

3

2018

2019

2020

2021

2022 (FY)

Point Membership:

20.83

million People

The SUGI Pharmacy Group began in 1976 as a pharmacy
operating in an area of only 16 tsubo (1 tsubo = 3.3 m2) inNishio City, Aichi Prefecture. Since then, we have been
supported by local customers. In FY2022, the annual total
number of visitors to our pharmacies reached 340 million,
while our point membership increased to 20.83 million.
As a local “family pharmacy,” we are committed toenhancing citizens’ lifelong wellness.

4

SUGI Pharmacy Group’s Mission

Contribution to Community Healthcare
Experts *including partner employees■ Pharmacists

3,688■ Pharmacists registered as “family pharmacist”

618■B oard-certified Pharmacists of■A ccredited Pharmacists ofAmbulatory Cancer Chemotherapy
Ambulatory Cancer Chemotherapy

48■ Beauty advisors ■ N ationally certified ■ Nurses ■ R egistered pharmadieticians
ceutical distributors

1,268

501

105 9,019

A Wide Variety of Experts Accommodating
the Needs of Local Communities

Operating Prescription Dispensing Drugstores –Our Unwavering Focus Since Our Establishment

84.4%
5

Percentage of ourprescription dispensing stores

6

SUGI Pharmacy Group’s Mission

Dedication to Prescription Dispensing
Users of Home-Visit Prescription
Dispensing Service

Target:250,000

Planning to open such
stores step-by-step

40

200,000
150,000 146,794

160,411

176,037

30

28

20

100,000

10

50,0000(Unit: store)

250,000(Unit: people)

Imaike-Minami Store (specializing inhome-visit prescription dispensing)Stores Specializing in HomeVisit Prescription Dispensing

2020

2021

2022

2025 (FY)020222023 (FY)Home-Visit Prescription Dispensing toAddress the Super Aging Society

Prescription Dispensing Know-how
Accumulated since Our Establishment
No. of Prescriptions Filled by Us
No. of prescriptions filled
by SUGI Pharmacy

Up

Sales of prescription 7.3%
from theprevious FY
dispensing

142.4

billion yen

No. of medical institutions whose
prescriptions are filled by us

56,372
7

institutions(Unit: 10,000 prescriptions)
1,400

Up

10.1% 12.91

million prescriptions
from theprevious FY

1,200
1,000
800
600
400
200
0

2018

2019

2020

2021

2022 (FY)8

SUGI Pharmacy Group’s Mission

Total Healthcare Strategy
SUGI Pharmacy app

10.44

million downloads(FY2022)SUGI Smartphone
SUGIsapo Walk Medicine Service App

2.74

million downloads(FY2022)(Family Pharmacy app)

0.62

million downloads(FY2022)

No. of SUGI Digital App Downloads
Total:

13.81

million downloads (FY2022)

The membership of our digital apps comprises the base for avariety of our digitalized healthcare services and sales promotion
tailored to individual needs. In FY2022, we promoted the
downloading of each app and achieved 13.81 million downloads.
We will continue to provide digitalized services, including various
healthcare services designed for each customer to enjoy evenmore valuable experience, and proceed with digitalized sales
promotion tailored to individual needs.

DX to Enhance the Value of Each Individual’s
Customer Experience

Support for Each Individual’sLifelong Health

Medical Careand Medication

Contribute to Local Communities
through Total Health Support, Ranging
from Self-Care to Medical Care,

Self-Care
Elderly Nursing
Support andDaily Life
Support9

Medication, Elderly Nursing
Support, and Daily Life Support

10

SUGI Pharmacy Group’s Mission

Store Network Continuing to Expand
Atsumi Hospital Store(pharmacy located on the premisesof a medical institution)

Shinshu University Store (pharmacy locatedon the premises of a medical institution)

Nagoya University Hospital Store(pharmacy located on the premises of a
medical institution)

Minami-Senri Station Road Store(a medical mall)

Development of Multi-functional Stores for
the Expansion of the Healthcare Network

Network Consisting ofMore than 1,500 Stores
No. of Stores As of the end of February 2023

1,565

Hara-Minami Store(featuring a medical institution)

Uchiyama Store(featuring a medical institution)

Hokuriku andShinshu areas

stores in total
60 stores
Kansai area
530 stores

Kanto area

Chubu area

550 stores
11

425 stores

COSME CARAT
Omote-Sando Harajuku Store(specializing in beauty items)

12

SUGI Pharmacy Group’s
Value Creation Story

15 Growth Milestones
17 Figures Showing the SUGI Pharmacy Group’s Strengths- Six Kinds of Capital Underpinning the Business Foundation 19 Figures Showing the SUGI Pharmacy Group’s
Sustainability
21 Value Creation Process

1314Growth Milestones

SUGI Pharmacy Group’s Value Creation Story● Concluded a capital and business alliance with Great
Tree Pharmacy Co., Ltd. (Taiwan)● Concluded a business alliance with ALPRO Pharmacy(Malaysia)● Concluded a business alliance with Scroll Corp.

Great Tree Pharmacy Store
Nagoya University Hospital Store
Shinshu University Store(pharmacy located on the premises of a (pharmacy located on the
medical institution)
premises of a medical institution)● Transferred to the Tokyo Stock Exchange Prime Market
and the Nagoya Stock Exchange Premier Market● Concluded a business alliance with Omicare Joint
Stock Company (Vietnam)● Concluded a business alliance with PREVENT Co.,Ltd.
● Established S Trading Co., Ltd. to supply products toboth domestic and foreign markets● Concluded a capital and business alliance with
Inagora Holdings Co., Ltd.
● Established a pharmacy on the premises of anational university’s hospital, which was the firstcase in the drugstore industry● Launched a specific health guidance service bynationally certified dieticians● Established DCP Solution Co., Ltd. to provide support
for doctors to open clinics● Concluded a capital and business alliance with the
MedPeer Group● Relocated the headquarters to Obu City and added
our own logistics center to the headquarters● Established the first key store for strategic
dominance in Nishio City
● Achieved a corporate integration between SUGI
Medical Co., Ltd. and Japan Co., Ltd.

● Integrated with Iizuka-yakuhin Co., Ltd.

● Transferred to a holding-company system through anincorporation-type company split, with Sugi Pharmacy
Co., Ltd. and SUGI Medical Co., Ltd. newly established● Changed the trade name Sugi Pharmacy Co., Ltd. to
SUGI Holdings Co., Ltd.
● Acquired full ownership of Iizuka-yakuhin Co., Ltd.
● Acquired full ownership of Japan Co., Ltd.

● Established the first store in the Kanto area tomake inroads into the area
● Constructed our own building in front of MikawaAnjo Station and relocated the headquarters there toenhance the functions of the headquarters● Established the first store in the Kansai area tomake inroads into the area
● Listed on the first section of the Tokyo Stock Exchange● Introduced the SUGI point card system to all the stores● Launched as a “family pharmacy” in a small town inNishio City, Aichi Prefecture

Business Development● Established a human rights policy for the SUGI Pharmacy
Group● Received refugees from Ukraine at SUGI Pharmacy under a laborsupport program by Obu City
● Certified for four years in a row as an outstanding
enterprise in terms of health and productivity management● Concluded a comprehensive agreement on regional revitalization SDGs
with Aichi Prefecture● Awarded the grand prize of the Supply Chain Innovation Award 2021
● Established the ESG Promotion Office and the Sustainability Committee● Established a joint research course with Kanazawa
University● Launched sales of a lifestyle-related disease risk reportusing big data

● Concluded a comprehensive partnership agreementwith the Graduate School of Pharmacy, Kindai
University● Acquired Platinum Kurumin certification● Concluded a partnership contract with FC Kariya, anonprofessional soccer team

● Concluded comprehensive partnership agreementswith local governments toward the realization ofsustainable community development● Constructed a health promotion hub center on theformer site of SUGI Pharmacy’s first store andprovided the land and building to Nishio City
● Acquired certification of the general incorporated
foundation Sugiura Community Healthcare
Promotion Foundation as the public service
corporation The Sugiura Memorial Foundation● Launched the donation of medical wigs to breast cancer patients● Launched the donation of AEDs to facilities for senior citizens● Organized a donated course on comprehensive community caresystem, which was the first case in Japan, at Nagoya University● Established the Sugiura Community Healthcare
Promotion Foundation, with Hirokazu Sugiuraand Akiko Sugiura as its founders● Donated the SUGIURA Community Healthcare
Center, established on the premises of the
Graduate School of Medicine, Kyoto University,from our founders Hirokazu Sugiura and Akiko
Sugiura● Launched cosmetic therapy at facilities for seniorcitizens and hospitals● Established SUGI Smile Co., Ltd. to promote
disabled employment

Community Healthcare and Social Contribution● Launched a facility-visit prescription dispensing service for facilities forsenior citizens● Launched aseptic prescription dispensing in a clean room
● Launched a home-visit prescription dispensing service for individual patients● Launched home-visit nursing and elderly homecare support services

The Sugiura Memorial Foundation
certified as a public service corporation
SUGIURA Community
Healthcare Center donatedHome-visit nursing service launched
Clean room established

2023
2022
2007

16
15

Home-visit prescription
dispensing service launched

2021
2020
2019
2018
2017
2016
2015
2013
2012
2011
2010
2009
2008
2006

Headquarters
relocated to Obu

1,500
1976

Kumami Store opened as the first key
store
Listed on the first section of the Tokyo Former
Stock Exchange
headquarters in
Mikawa-Anjo
Store at the time of theestablishment

The number of drugstores exceeds

1,000
The number of drugstores exceeds
The number of drugstores exceeds

500
Establishment

Figures Showing the SUGI Pharmacy Group’s Strengths

A wide variety of experts accommodating needsfrom local communities

Human
CapitalIntellectual
CapitalPrescription dispensing know-how accumulated
since our establishment
Prescription
dispensing

No. of prescriptions filled by us
No. of full-time employees

Experts *including partner employees

7,727■ Pharmacists

3,688

Women

52.0%

Genderratio ofmanagers

Men

85.5%

4

1,268

501

■ Registered pharmaceutical distributors

105 9,019

650 million yen

1,565

1,446 stores(including 1,220 prescription dispensing stores)

Japan Co., Ltd.: 105 stores

Home-visit nursing stations: 14 bases

84.4%

Stores providing a home-visit service: 565 stores

Hokuriku & Shinshu

60

Kansai

530

Chubu

Kanto

425

550

Home-visit prescription dispensing centers: 28 bases

Financial
CapitalFinancial figures

Profitability

Sound financial foundation

667.6 billion yen* ■ Total assets: 351.8 billion yen■ Operating income on a consolidated basis: 31.6 billion yen■ Operating income ratio on a consolidated basis: 4.7％
■ Ordinary income ratio on a consolidated basis: 4.9％
■ Net sales on a consolidated basis:

Financial foundation/ safety / efficiency ■ Equity ratio:previous FY

million prescriptions

FY2022

1,200

Merchandising 76.8%

1,000

56,372

340

600
400
200

institutions

0

2018

2019

2020

2021

SUGI Point membership(FY)

Beauty items

million visitors

20.83

million members

Digital membership

t

poin

13.81

million members*Total number of downloads of SUGI Pharmacy app and
SUGIsapo app, as well as registrations of SUGI Pharmacy as
a “family pharmacy” through the Family Pharmacy app
developed by MedPeer

No. of agreementswith local governments

84

2022

20.9%
17.8%
Household ware 18.7%
Food
19.3%
Other
0.1%
Healthcare

Relationship of trust with customers and local communities

No. of annual visitors

107 stores
Percentage ofprescription
dispensing storesbillion yen

No. of medical institutions
whose prescriptions arefilled by us

SocialCapitalNo. of stores by area

Newly
established

142.4

7.3

%
from theprevious FY

23.2%

10.1
% 12.91
from the(Unit: 10,000 prescriptions)
1,400

800

Network of stores underpinning local communities

No. of stores *As of the end of February 2023

SGUI Pharmacy:8■ Beauty advisors ■ Nationally certified ■ Nurses
dieticians*Managers:■ Investment in human assets
Those in managerial positions and thosewith a certain level of in-house qualifications

Manufacturing
Capital■ Accredited Pharmacists ofAmbulatory Cancer Chemotherapy

Up

No. of prescriptions filled by
SUGI Pharmacy

Up

Breakdown

48.0%

Men

Genderratio

618■ Board-certified Pharmacists ofAmbulatory Cancer Chemotherapy

14.5%

Women

■ Pharmacists registered as “family pharmacist”

Sales ofprescription
dispensing

SUGI Pharmacy Group’s Value Creation Story- Six Kinds of Capital Underpinning the Business Foundation -agreements

NaturalCapitalNatural capital underpinning our business operations

Energy use

307,889

Water use*thousand kWh/year

755,045m3/year*An estimated figure obtained after dividing therelevant water charges by the unit price (setby Obu City, Aichi Prefecture)

61.5％ ■ Cash and deposits: 62.6 billion yen ■ EBITDA: 44.7 billion yen*The Accounting Standards for Revenue Recognition (Corporate Accounting Standards No. 28, March 31, 2020) have been in place for our accounting since the beginning of
the consolidated fiscal year 2023. The figures for FY2022 have been revised based on the accounting standards.

17

18

Figures Showing the SUGI Pharmacy Group’s Sustainability

Contribution to the Global Environment

➡P57

➡P73

Stores equipped with solar panels
130
No. of stores providing a home-visit
prescription dispensing service565

No. of local alliance pharmacies

46

storesNo. of pharmacies allied with specialized
medical institutions

3

No. of stores equippedwith solar panels

48

storesNo. of stores equipped with an AED:
Targetstores231

15.1

Target14.5%

30% (by the end of FY2029)

3.1

Target

100%

➡P91

%

30%

(By the end of FY2030)

9.6%

No. of attendees

421

Percentage of outside
directors

40%

Women:

100

%

Men:

100

% Women:

94.7

%

%

➡P67

Sustainability policy
information session
for business partners%

99

Corporate Governance

Percentage of private brandproduct sales

53

Percentage of employees returning to work
after taking parenting leave

3.5 (by the end of FY2023) 4.0 (long-term target)

Health checkup rate:

Percentage of employees taking parenting leave
Men:

Sustainable Business Partnerships

12.2

(FY)

Engagement index:

25 million patients (by the end of FY2025)

Percentage of eco-friendly
private brand products

19

2023

➡P81

TargetTarget2022

stores*PET bottles, medicine press-through-pack (PTP) sheets, and clothing

Healthy Workplace Environment

Targetmillion patients

No. of stores collecting resources*
for recycling

15

48

0

Ratio of female managers:

Annual total of users of our home-visit prescription
dispensing service

17.6

100

stores20% of all the stores (by the end of FY2025)%(Target)50

storesPercentage of stores sending prescriptions throughthe SUGI Smartphone Medicine Service app

150

SUGI Pharmacy Group’s Value Creation Story

Healthy Community

Percentage of female
directors

20%

No. of dialogue sessions
with investors

200

sessions

Percentage ofoutside auditors

100%

people20

Changesin society

Market Environment➡P25

Increasingly serious social problems Changes in values

Technology innovation● Aging population and lower birthrates● Diversification of values● Promotion of 5G and expansion of IoT● Increase in medical costs● Changes in consumption behavior ● Integration of the real and the digital● Global warming● Shift from ownership to sharing● Use of plastics

Business Model
Sources for Creating ValueBusiness Operations for Creating Value for Society➡P17

Healthimprovement
app

Human capital
A wide variety of experts

Shopping
truck service● SUGI Pharmacy Group’s employees:

Shopping
support

Provide products and services
for helping citizens enjoy richlifestyles, and operate one-stop
stores.

Home-visit
nursing

Beauty & wellness

Manufacturing capital
Network of communityoriented stores● No. of stores: 1,565● No. of stores providing a home-visit

service: 565● No. of home-visit nursing stations: 14

Financial capitalSound financial foundation

Healthcare

Shift to DX

Beauty items

Merchandising

Maximizing
customers’
lifetime value(LTV)

Home-visit
prescription
dispensing

Medication
instruction

Prescription
Shift to DX
dispensing
Medication
follow-up

Household
ware

Food

Medication
management● Capital investment: 21.5 billion yen

Total Healthcare Strategy➡P37Intellectual capital
Accumulated know-how

Priority Issues (Issues of Materiality) for Proceeding with
Sustainability Management● Expertise on prescription dispensing● Know-how of establishing andoperating stores● No. of medical institutions whose

prescriptions are filled by us:
41,127 institutions

HealthyCommunity

Social capital
Community-oriented
corporate activities● No. of agreements with local

governments: 84 agreements● Membership as the activity

Operate stores in which experts,
such as beauty advisors andnationally certified dieticians,
underpin beauty and health in
the local communities.

● Sustainability Basic Policy● Human Rights Policy● Corporate GovernanceCorporate
GovernanceContribution
to LocalCommunities

Solution of Social Problems● Net sales: 667.6 billion yen*
● Operating income: 31.6 billion yen

Address 16 Priority Issues● EBITDA: 44.7 billion yen● ROE: 8.8%

*The Accounting Standards for Revenue
Recognition (Corporate AccountingStandards No. 28, March 31, 2020)
have been in place for our accounting
since the beginning of the consolidated
fiscal year 2023. The figures for FY2022
have been revised based on theaccounting standards.

Insurance dispensing
Operate a wide variety of stores,
ranging from communityoriented stores to highly
specialized stores.

Non-Financial Indexes ➡P53、P104

Reducemedical costs

Extendhealthy life
expectancy

Contributeto the global
environment

Healthy Community➡P57

Elderly nursing care &nursing● Total assets: 351.8 billion yen● Equity ratio: 61.5%

Financial Indexes ➡P103● Net income per share: 311 yen

Product supply
for overseas e-commercemarkets andother companies

650 million yen

Value to Be Presented to Society

Various Services Provided byExperts at Physical Stores

Drugstore

Specific
healthguidance

Variousservices

34,619● Pharmacists: 3,688● Nationally certified dieticians: 501● Beauty advisors: 1,268● Nurses: 105● Investment in human assets:

Preventive
care
program

Outcomes to Be Achieved

SUGI Pharmacy Group’s Value Creation Story

Value Creation
Process

Operate in the fields of elderly
nursing care and nursing by, forexample, providing a home-visit
nursing service and leasing
welfare products.

Overseas operations
Provide high-quality products tooverseas markets by forming
alliances with pharmacies
operating in Taiwan, Vietnam,
and Malaysia.

Sustainable Business Partnership➡P67

Contribution to the Global Environment➡P73

Healthy Workplace Environment➡P81

Realize the Management
Philosophy

Accomplishing asociety where
everyone is happy
and full of smiles

Corporate Governance➡P91

Sustainable
Business
Partnership➡P53

Basic Policy

Healthy
Workplace
Environment

cornerstone: 20.83 million members

Contribution
to the Global
Environment

Natural capital

Energy resources necessary
for our operations● Energy use: 307,889 thousand kWh/year● Water use: 755,045 m3/year

21

Engagement Management
Place a focus on dialogue with each employee to enhance their motivation

Return value
22

SUGI Pharmacy Group’s Growth
Strategy

25 Market Environment
27 Message from the President
37 Ideal Vision
45 Financial/Non-financial Highlights
47 Message from Chairman
49 Message from Vice President
Business Report on Sugi Pharmacy Co., Ltd.

23

24

Market Environment
What is required in addressing challenges, such as the aging and declining population and the need to reduce medical
costs, is total healthcare covering self-care, elderly nursing support, and daily life support focused on each customer.
Drugstores are experiencing accelerated digitalization in a wide variety of forms in line with changes in society. In
addition, the Ministry of Health, Labour and Welfare is promoting policies to reorganize all pharmacies into “family
pharmacies” by 2025.

2.7 trillion yen in 2000

Size of thedrugstore market*1

Specific casescare● Better response to home-care support needs● Change in purchasing behavior of seniorcitizens

13 trillion yen in 2030 (estimate)22.04 million in 2000

Population aged
65+ in Japan*2

39.21 million in 2040 (estimate)● Rapid increase in self-care demand

Need to reduce
medical costs(Digitalization)● Integration of physical and digital assets● Promotion of 5G and enhancement of IoT● Unified and continued management of

medication information supported by ICT● Rapid expansion of the e-commerce market

Change in consumer
behavior

Trendevaluation of the operations of handling
drugs and communicating with customers)● Outcome evaluation (health promotion andprevention of aggravation)● Rise in health consciousness● Change in consumer behavior due to the

COVID-19 pandemic
Quick shopping in nearby areas

Prescription dispensing segment

Technologicalinnovation● Revision of dispensing fees (appropriate

Demand in the self-care category, such as maintenanceand promotion of good health and disease prevention,and demand in the life support category, such as meals
and product sales for senior citizens, are growing
rapidly in accordance with the increase in population
aging. The pharmacy industry is one of the few growing
sectors in the age of population decline.

39% (2.7 trillion yen) in 2000

External prescription
rate (Market size)

Online healthcounselingSize and share of theprescription
dispensing market
for drugstores*4

Trend

Product sales

Rental of
welfare products

Elderly nursing support anddaily life support category

Delivery of healthBehavior change
therapeutic meals
support and healthpromotion
programs
Health promotion
apps

63% (6.1 trillion yen) in 2010

Prescription dispensing amount:

Home-visit
nursing

Self-care category

Home-visit prescription
dispensing

Product sales anddelivery of
medical supplies

Preventive carefor senior citizens

Prescription dispensing

75% (7.7 trillion yen) in 2021*3

Medical care and medication category
High-level
pharmaceuticalmanagement

1.07 trillion yen in 2020 (+9.0% YoY)

Medication follow-up
Polypharmacy
prevention

Delivery ofdispensed drugs

Prescription dispensing market share:

13.8％ in 2019

Aggravation
prevention

Online medication
support/instruction

In the prescription dispensing market, a shift frompharmacies located near medical institutions toprescription dispensing drugstores located in suburban
areas is in progress following the Pharmacy Vision for
Patients, promoted by the Ministry of Health, Labourand Welfare. This is an important segment supporting
the growth of drugstores.

*1: Fact-finding Survey of Drugstores in Japan by the Japan Association of Chain Drug Stores*2: Press release by the Ministry of Internal Affairs and Communications*3: Progress of Separation of Dispensing and Prescribing Functions (Trend in Insurance Dispensing), theJapan Pharmaceutical Association*4: Dorabizu on-line (Drugstore Association) Prescription Dispensing at Drugstores Exceeds 1 trillion
Yen for the First Time (Released on April 16, 2021) https://www.dgs-on-line.com/articles/877

Business Organization’s Recommendation on Ideal Visions for Pharmacies and Pharmacists

Pharmacy Vision for Patients, Promoted by the National Government

The Japan Business Federation has presented a healthcare model and recommended the use of online features so that the industry
can accommodate health care needs, which are expected to diversify increasingly in line with technological innovation and changes
in consumer behavior.

In 2015, the Ministry of Health, Labour and Welfare released the Pharmacy Vision for Patients in order to present the future vision offamily pharmacies toward realizing separation of the dispensing and prescribing functions with a focus on patients. Taking advantage of the revision of the Pharmaceutical and Medical Device Act, the Ministry has also presented the course of action to reorganize
current pharmacies into family pharmacies.

Specific details■ Using smartphone apps and other tools for presenting suggestions for appropriate health management■ Outsourcing prescription dispensing to highly automated prescription dispensing pharmacies■ Spreading last-mile delivery and delivery boxes■ Providing a full line of online services ranging from counseling to medication instruction and medication follow-up■ Spreading e-prescriptions*With reference to Healthcare in the Age of Society 5.0 Vol. III – Many More Healthcare Options Coming from the Use of Online
Features, Japan Business Federation

25

36.27 million in 2022

SUGI Pharmacy Group’s Growth Strategy● Promotion of comprehensive community

Aging and declining
population

Drugstore segment

Mega trend

8.7 trillion yen in 2022

2015:

The Ministry of Health, Labour and Welfare released
the Pharmacy Vision for Patients.
• Aiming to equip all pharmacies, including those locatednear medical institutions, with the functions of a family
pharmacy

2020:

It became mandatory to provide medication follow-up(revision of the Pharmaceutical and Medical Device
Act).
• P
 roviding patients with continuous medication follow-up

2021:

A pharmacy certification system was introduced(revision of the Pharmaceutical and Medical Device Act).
• Local alliance pharmacies and pharmacies allied withspecialized medical institutions

2025:

All pharmacies will be reorganized into “family pharmacies.”• Use of ICT• Family pharmacy + health support functions

2035:

Pharmacies will demonstrate the family pharmacy
function in daily living areas.
• Placing a high value on pharmacies relocated to a daily living area

26

Message from the President

Proceed with the Total Healthcare Strategy by
Leveraging the SUGI Pharmacy Group’s Strengthof Human Capital and DX and Contribute toExternal Environment Surrounding the SUGI
Pharmacy Group’s Business Operations and theGroup’s Response Policy
Amid the globalization of the economy and the advancement of the supply chain, the COVID-19 pandemic and the
Ukraine crisis are greatly affecting the SUGI Pharmacy Group.
In addition, the current combination of increases in prices ofcrude oil, wheat and other items and a rapid depreciation of
the yen is boosting commodity prices, and the electricity prices are also soaring. With the end of the peaks of the seventhand eighth pandemic waves caused by the omicron coronavirus variant, COVID-19 has been finally recategorized as a Category V Infectious Disease. Although things are returning tonormal, there is a delay in recovery of consumer spending,suggesting that the harsh situation will continue.
While consumer spending is stagnant, there is growth in“premium consumption,” in which consumers carefully selectfor what they will pay before spending lavishly for products
and services that will enable them to feel or experience highvalue. In addition, non-contact or non-face-to-face behaviors,
which spread during the pandemic period, have now takenroot as a new form of lifestyle. Another interesting phenomenon is the widespread use of the smartphone among seniorcitizens. As well as young consumers, senior citizens are obtaining information online or through apps. Now that the presence of the smartphone as a gateway to consumption is increasing, the healthcare market has no choice but to change.

Katsunori Sugiura
Representative Director & President
SUGI Holdings Co., Ltd.
Representative Director & President
Sugi Pharmacy Co., Ltd.

27

In these circumstances, we understand that we operate in
one of the few growing industries in Japan, a country experiencing an aging population and lower birthrate. In tandemwith an increase in aging population, the number of thosewith interest in their health and beauty is growing, making us
expect that the healthcare industry will further expand. The
overall drugstore industry has marked a growth of approximately 10%, but in the field of prescription dispending, theprofit rate is declining as a result of a revision of drug prices
and medical treatment fees. With much more focus being
placed on communication with customers, the industry’s situation is becoming even more severe, making us foresee thatthe industry will experience a full-scale reorganization andthat less competitive operators will go out of business in the
future. In this environment, we would like to explore a wide
variety of possibilities and actively cooperate with entities
sharing the same ambitions as ours.

SUGI Pharmacy Group’s Growth Strategy

Everybody’s Healthy, Rich Lifestyles

SUGI Pharmacy Group’s Commitment toCreating Value by Leveraging Its Features andAdvantages
The SUGI Pharmacy Group boasts a wide variety of experts as
our human capital, such as pharmacists, nationally certified
dieticians, beauty advisers, nurses, and registered pharmaceutical distributors. Of particular note are as many as 3,700
pharmacists. Affected by the continuing shortage of pharmacists, many conventional prescription dispensing pharmacies
and drugstores are being forced to ensure pharmacists urgently. In addition, supermarkets, convenience stores, and EC
businesses are making inroads into the field of prescription
dispensing, making it even more challenging to secure pharmacists. Despite this trend, we are steadily increasing thenumber of pharmacists, and this is one of our great advantages. We are confident that this has resulted from the fact that
we have been taking on the challenge, since the dawn of thedrugstore industry, in realizing our growth by developing a
chain of prescription dispensing drugstores. Our unwavering
dedication to prescription dispensing that we have continued
since our foundation presents a specific vision with local communities, and also with pharmacy students and pharmacists
working actively who would like to place a focus on each patient, and stirs empathy among them. This gives us a great
advantage in terms of recruitment.
Another advantage is our speed in establishing new stores28

We are also reinforcing our commitment to digitalization.
We provide app services for customers to enjoy even more
comfortable and healthier lives. These services are increasing
customer satisfaction and leading app users to visit physicalstores or use other services, resulting in the generation of avirtuous circle. In January 2023, we renovated the SUGI Pharmacy app, boasting more than 10 million downloads andleading our digitalization strategy. This renovation has enabled the app to provide information and coupons for individual customers according to the segment classified finely tofurther raise the quality of customer experiences and the levelof customer satisfaction. We will reinforce our ability to present proposals regarding products and services so that eachcustomer will become even more satisfied, thereby deepening our ties with them. We will strive to establish an environment in which customers can feel “SUGI Pharmacy on the29Palm Anytime and Anywhere” by ensuring that customers
can use their smartphones as checkout machines at physicalstores, as well as to check stores’ product lineup, prices, andinventory outside the stores and place an order on our EC
website. Meanwhile, the numbers of downloads of SUGIsapo
Walk, a platform for raising awareness of health trouble, andother health support apps are also growing remarkably.
These apps are increasing their presence as tools for enhancing customers’ lifetime value.
Not only do we provide online counseling services, but wealso use digital devices at stores to present proposals in thefield of beauty items and proposals regarding lifestyles,
thereby increasing customer satisfaction. By establishing anenvironment in which each in-store staff member can fully
demonstrate their capability, we can help them improve theirworking style and enable them to concentrate on communication with customers, which leads to even better customer
satisfaction. We will actively proceed with digital transformation (DX) in order to generate value for customers and all theother stakeholders.
At the SUGI Pharmacy Group, we will further consolidate
our strengths as sources for generating such value. To underpin community healthcare and contribute to local communities, we will continue to address the five themes and 16 priority issues that we have set, proceed with sustainability
management, and commit to realizing a sustainable society.

SUGI Pharmacy Group’s Total Healthcare
Strategy
Representing the entire vision of our various initiatives, theTotal Healthcare Strategy serves as our operating foundation.
Guided by the strategy, in which “health and medical care”
are set as the key phrase, we provide support for customers
and patients regardless of their health condition while addressing the aging population and lower birth rate confronting Japanese society and taking advantage of digital technology created one after another in its continuous evolution
process.
From birth until the end of life, human life is frequently
supported by medical care and medicine in various situations.
Using such medical care and medicine, people strive to treat
disease and injury, address changes caused by aging, andmaintain their good health. Under the Total Healthcare Strategy, we divide human life into the following three phases: the“self-care” period with a focus on primary prevention andsecondary prevention to maintain a healthy life; the “medicalcare and medication” period, when people develop diseases
and receive treatment for their symptoms in the acute phaseor the chronic phase; and the “elderly nursing support anddaily life support” period. This strategy shows our commitment to local residents’ lifetime efforts for disease prevention
and health management, thereby striving to contribute totheir good health through a full lineup of care.
With our prescription dispensing drugstores serving as thehub, we would like to establish a healthcare network byforming partnerships with physical facilities, such as healthcheckup centers, nursing facilities for senior citizens, and fitness centers, and ensuring cooperation with local governments while making full use of DX. Such a network will pro-

Total Healthcare Strategy
Medical care andmedication category

Self-care category

Elderly nursing support anddaily life support category

Prescription
dispensing

Health checkup

Online counseling, medical treatment,
and medication instruction
Fitness

Diagnosis
Healthcheckup

Health counselingand measurement

Treatment

Secondary
prevention

Primary
prevention(Healthy lifestyles)

Long-term elderly
nursing care

Chronic-phasemanagement
Elderly
nursing care

Personal
healthrecord(PHR)

Terminal care

Terminalstage

Showing a commitment to local residents’ lifetime efforts in disease prevention and health management,
and contributing to their good health through a full lineup of care
Healthcare network connecting approximately 1,500 physical stores and local communities

vide us with a platform for using the real and the digitalseamlessly with the focus on local communities. The platform
will enable us to ensure points of contact with customers regardless of their health condition and provide the most appropriate product and service for each customer.
Many citizens consult doctors after some health anxiety or
worry arises, but such a conventional approach will make it
impossible for them to fully enjoy their lives in the superaging society, which is experiencing the advent of the socalled “100-year life.” We need to continue to support eachcustomer’s healthy life by ensuring cooperation at each stage
with local governments, health insurance associations,medical care and elderly nursing care workers, and players inmany other fields. We urgently need to establish a network ofplayers mainly in the medical field and also other industries inorder to support communities, senior citizens, and theirfamilies. We have already received endorsement from somecompanies and local governments, leading to the expansionof a healthcare network in various communities. This strategy
is also highly regarded abroad, enabling us to cooperate withlocal companies in Asian countries and proceed with various
initiatives. We will continue to work with a wide variety ofcompanies, organizations, and local governments and further
accelerate the speed of our efforts toward realizing the Total
Healthcare Strategy.

SUGI Pharmacy Group’s Sustainability
Management
In 2021, to develop a framework for proceeding with sustainability management, we established the Sustainability Committee and the ESG Promotion Office (presently the ESG Promotion Section of the President Office) and set five themes

SUGI Pharmacy Group’s Growth Strategy– we annually set up more than 100 stores. By pushing forwardwith our strategic dominance of setting up new stores in specific areas, we are expanding our operating scale in the metropolitan areas of Kanto, Chubu and Kansai while reinforcing ourefforts to open new stores in the Hokuriku area. Last year, we
also opened our first store in Nagano Prefecture. As indicatedby the fact that we newly set up 107 stores in FY2022, we remain one of the industry’s leaders in terms of the number ofannual store openings. As of the end of February 2023, thenumber of stores of the entire SUGI Pharmacy Group reached1,565. The percentage of prescription dispensing stores, which
is one of our advantages, increased to 84.4%, one of the highest figures among major drugstore operators. This serves as asource for creating value when we implement the Total Healthcare Strategy. We would like to contribute as a reliable “family
pharmacy” that can underpin all the health stages of customers, ranging from daily health management to terminal care.
To that end, not only are we establishing new stores successively, but we are also actively renovating existing stores to enlarge their dispensing rooms or waiting rooms. We will continue to ensure that pharmacists and other in-store experts canfully demonstrate their capabilities in order to contribute to
the realization of sustainable comprehensive community carecentering on medical institutions.

and 16 priority issues (issues of materiality), hereby intensifying our efforts.
An increase in awareness of the SDGs is found in consumers of all generations, but this trend is evident particularly
among young Millennial consumers and Generation Z. A familiar example is ethical consumption, meaning a selection of
products produced with greater consciousness of the environment or human rights. The world is casting a stern eye on
how we address challenges that need to be handled throughout the entire supply chain, such as suppliers’ commitment tohuman rights. In FY2022, based on an increase in international awareness of the issue of human rights and also in view ofour corporate social responsibility, we formulated the SUGI
Pharmacy Group Human Rights Policy to establish a framework for us to fulfill our responsibility throughout our supply
chain. From now on, we need to ask our suppliers to use raw
materials procured in due consideration of human rights. In
addition, we will use a platform or other tools provided by
NPOs to evaluate ethical levels of suppliers around the world.
By doing so, we will reinforce our commitment to humanrights due diligence, especially in the field of in-house development of products.
We will also continue to focus on recycling resources. Embracing the concept “domestic recycling of domestic resources,” we will fulfill our responsibility as a distributor of many
products and make as much contribution as possible in cooperation with many partners. In FY2022, we began to commit
to Bottle-to-Bottle Horizontal Recycling, intended to recycle
used PET bottles into new PET bottles. Although this project isstill on a test-run, some stores serving as a collection point forrecycling PET bottles are experiencing win-win situations, as
indicated by evident increases in the frequency of customers’
visits to the stores and the number of items purchased by cus-30

tomers, and a good reputation among customers regarding
our collection of PET bottles. Meanwhile, to support the recycling of medicine press-through-pack (PTP) sheet waste generated in a large quantity mainly in the field of prescription
dispensing, we will serve as a collection point. Furthermore,
we will collect uniforms to be disposed of so that they can be
upcycled into resources for in-house equipment. We will also
work with food banks to address the problems of food loss
and poverty. We will, thus, continue to handle social problems step-by-step, which will lead us to contribute to local
communities and ultimately to establish a status as a company loved by local communities.

Views on Carbon-Free Management andProgress in Our Commitment

Solar power generation panels installed on a store roof

Meanwhile, our total CO2 emissions from Scope 3, which

31

Human Asset Strategy
As indicated by the rapid digitalization, the aging populationand lower birthrate, the advent of the so-called “100-year
life,” and changes in workers’ views on careers, the environment surrounding companies is changing greatly. Acknowledging employees not as a cost factor but as capital, we believe that human resources grow into key players for creating
value. We will make an active investment in our human assets
so that we can enhance our corporate value. Based on thisapproach, we will associate our human asset strategy with
our management strategy to promote personnel system reforms, ensure that the right staff members are assigned to
the right positions, proceed with health and productivity
management, and improve employee engagement.
In the last few years, we worked to establish an environment
in which our employees can work vigorously, by renovating
our personnel systems for full-time employees and partner employees, extending the mandatory retirement age, revising theretirement benefit programs, and improving the employee
benefits. In FY2023, we will further push forward with our personnel system reform to boost our growth. For managers, wewill introduce a job-based assessment, in which managers areassessed based on the significance and scope of their roles andthe demonstration of their capabilities. In addition, we will also
revise the personnel systems for pharmacists and medical office workers. We will make a full review of the regulations andworking area categories for prescription dispensing pharmacists and the assessment and payment systems for pharmacists

with specialized expertise. For digital experts and other humanresources from special fields, the existing assessment systems
cannot be adopted since such experts are required to generate
results in different working styles from those of conventional
employees. Accordingly, we are now considering detaching
the experts from the existing personnel systems.
From now on, we will place our focus on individuals. We
will visualize each employee’s personality aptitude, skills,
qualification levels, assessment results, targets, etc. as personnel data, based on which we will assign the right employees
to the right positions to ensure that each individual can fully
demonstrate their capability at work. While visualizing personnel data, we will prepare a human asset portfolio in order
to visualize how many employees with what types of skills areneeded by business units and departments and clarify thegaps between the ideal and the real. Afterwards, we will takemeasures to close the gaps, such as hiring new employees byother methods than employing new graduates simultaneously, relocating existing employees, obtaining external human resources, establishing alumni networks, and employing
experts and specialists even more actively.
Moreover, we will continue to pursue a work environment in which employees, who constitute our most important assets, can continue to work healthily and happily as
long as they like. The SUGI Pharmacy Group has been selected as an outstanding entity in terms of health and productivity management for the fourth straight year. However, wecannot boast ourselves yet as the health and productivity
management leader among the many companies applying
for the selection. Naturally, we need to ensure that all our
employees receive a health checkup. We will provide support for employees to quit smoking so that the current percentage of smokers at more than 12% will fall below 10%.
We will also make further efforts to increase the percentageof paid leave taken and the percentage of parenting leave
taken, establish an environment in which female employees
can fully demonstrate their capabilities, and improve employee engagement.

DX Strategy
Our DX strategy originates from our hope to make our customer services even more fulfilling by enhancing our productivity and improving customers’ lifetime value. It is safe to saythat person-to-person interactions, which cannot be digitalized, through counseling and other customer services represent our strongest point.
To what extent can we present new value by using digitaltechnology? To what extent can we realize not only the digitalization of operations but also the reforms of organizations,operating processes, and even our corporate culture? By addressing these questions, we will make us even more competitive and establish our superiority. Of particular note is competitive superiority. Various industries are experiencing thephenomenon of new players’ grabbing a considerable market share at once and reversing the market by taking full advantage of digital technology. In some industries, there is a
shift in purchasing behavior toward EC, accompanied by ashift in companies’ focus from physical stores to EC. Companies failing to keep up with this trend have been eliminatedfrom the market.
It will become even more important not only to improvesome operations through digitalization but also to enhancecustomers’ lifetime value by utilizing DX for establishingpoints of contact with customers and ensuring continuous
ties. Accordingly, in line with the principle “SUGI Pharmacy on
the Palm Anytime and Anywhere” to expand the scope of ourpoints of contact with customers and deepen the impact ofthe points of contact under our DX strategy, we endeavored
to renovate the SUGI Pharmacy app in FY2022. As a result, theapp can now distribute information on disease prevention
and health maintenance, unify management of customer information through ID integration, and provide coupons
based on customers’ purchase histories, thereby establishing“one-to-one” relationships that are stress-free for customers
and increasing the frequency of their purchases and the number of purchased items.

SUGI Pharmacy Group’s Growth Strategy

Setting the realization of a carbon-free society as one of ourpriority issues, we are accelerating our commitment. In thefirst year of our commitment, we visualized the emissions
from Scope 1 (direct GHG emissions), with our focus on the
consumption of gas for company cars, and the emissions
from Scope 2 (in proportion to the use of electricity) and set a
CO2 emissions reduction target to be achieved by 2030.
Although we had aimed to reduce CO2 emissions per store by
35% by FY2030 compared to FY 2014, we made an upwardrevision to 50% at an early phase. In December 2021, we
announced our endorsement of the Task Force on Climaterelated Financial Disclosures (TCFD) recommendations. In linewith the disclosures recommended by the TCFD, we havebeen proceeding with appropriate efforts through the
Sustainability Committee and the Board of Directors, such as
identifying our risks and opportunities and examining aroadmap toward the reduction of CO2 emissions.
Our recent specific efforts to reduce CO2 emissions include
installing solar power generation panels on the roofs of dozens of stores as part of the operation of an onsite PPA. While
doing so at both existing and newly opened stores, we havediscovered that it will be difficult to achieve our CO2 emissions reduction target simply by installing solar panels on theroofs of all our stores. We will not count simply on CO2 freemenu services, but rather will try various other schemes without hesitation, such as an off-site PPA, which features “additionality” (for an effect leading to investment in a new renewable energy facility), and self-consignment of renewableenergy, thereby striving to fulfill our social responsibility.

covers all the activities in all the phases of a supply chain,ranging from product procurement to manufacturing, sales,
logistics and disposal, mark approximately 1.7 million tons,
more than 10 times the emissions from Scope 1 and Scope 2.
However, it is difficult for us alone to reduce the emissions
from Scope 3. We need to ensure cooperation with various
companies, figure out ideas from scratch together with them,and carry out demonstrative experiments promptly in a trial
and error manner. While adding value to products with less
CO2 emissions by avoiding unnecessary packaging and using
vegetable oil ink, we need to demonstrate ingenuity andmake efforts in sales so that such products will appeal to customers. Needless to say, we must refrain from distributing
unnecessary sales campaign items or creating unnecessary
point of purchase advertising. We also need to work together
to improve the accuracy in forecasting the units of sales,
avoid unnecessary purchase, reduce returns and disposals,and ensure cooperation between the manufacturing, distribution, and sales functions. It is also important to accelerate
our commitment to recycling resources toward reducing
waste by, for example, collecting PET bottles and helping
them to be recycled into new PET bottles. When meetingwith suppliers, we are asking them to work together with us
toward reducing the emissions from Scope 3. We are callingon them to engage in mid- and long-term cooperation or figure out ideas while establishing a consortium or other frameworks. Although we have not set a specific path yet, we
would like to receive guidance from partners in a wide variety
of fields so that we can address environmental problems
through out-of-the-box alliances.

For customer services at physical stores, we will also reinforce digital communication. For example, we will keep a digital record of requests presented by customers and samples
provided to customers in the field of cosmetics and use therecord for sales promotion on the SUGI Pharmacy app. We
will also compile a record of counseling services provided by
our nationally certified dieticians. In the future, we would liketo create a ledger of digital communication with customers
to realize unified management of their health condition.
By realizing the concept “SUGI Pharmacy on the Palm
Anytime and Anywhere” and digital communication, we
can provide customers with opportunities to experience thereal and the digital seamlessly. For customer experiencethrough digital tools, the SUGI Pharmacy app, boasting 10
million downloads, will play a major role. Presently, the SUGI
Pharmacy app annually draws a total of approximately 300
million visitors to physical stores. Our future challenges include how our physical stores will handle an explosive increase in needs expected to be induced by the digital. We
will proceed with our commitment to digitalization to carefully address an explosive increase in the number of customer service opportunities, take an approach different from amere extension of our conventional measures, and further
raise the quality of services provided at physical stores. We
believe that no companies can survive the future if they cannot handle such challenges. Deeply appreciating our fortune to have opportunities to take care of our challenges,
we will ensure that FY2023 is a year when each management leader tackles the challenges based on the recognition
that they are their own challenges.

32Response to Changes in the Field of
Prescription Dispending
FY2023 will see the launch of the operation of electronic prescription, which is one of the main features of the institutional reform in the field of prescription dispending. In April, online qualification confirmation will become mandatory inprinciple. Since these changes are beneficial for all parties,
patients, medical institutions, and pharmacies, we are taking
full measures, such as establishing the necessary infrastructure and response schemes. Recently, we have completed theintroduction of an online qualification confirmation system,
which is now in operation at all our stores.

Electronic Prescription - Easy to Conclude the Process Online

Conventional Style

Home
Medical institution

Pharmacy

Paper prescription

Future – Conclude the Process Online

2023

2024

Launch of theoperation ofelectronicprescription

Revision of thedispensing fees andelderly nursing
support fees

Revision of drug prices

Jan. Apr.

Revision of drug prices

Apr.

Autumnnerships between players from a wide variety of industries,
we also need to simultaneously work on strengthening
training programs, including those for improving each
pharmacist’s skills, and enhancing operating efficiency
through DX.
The number of prescriptions filled by the SUGI Pharmacy
Group has been on a year-on-year rise. To earn trust frommany more patients, we are making efforts to reduce thewaiting time. By improving our operations, introducing
new equipment, and changing our conventional mindset,
we are striving to raise our efficiency in every aspect andincrease our operating speed. While ensuring the safety ofpatients, we are taking on the challenge of reducing their
waiting time. After taking some measures at one of ourlarge-scale prescription dispensing pharmacies, we founda drastic reduction in the waiting time, leading to an in-crease in the number of filled prescriptions. We will ensurethat these measures are shared with other stores so that
we can earn further trust from patients.

2025
Function as a “family
pharmacy” assigned
to all pharmacies

Pharmacy
Vision for
Patients

Reducing the Waiting Time by Achieving Greater Efficiency through New Equipment and Even Better Operations

Making Patients Feel as
If There Were No Waiting Time

Reducing the Waiting Time by
Improving Operating Efficiency

Online qualification
confirmation
becoming mandatory
in principle

Led by the national government, the institutional reform
is in steady progress in the field of prescription dispensing,which is the main business domain of the SUGI Pharmacy
Group, in accordance with the Pharmacy Vision for Patients, presented in 2015. This makes us feel once againthat our decision to serve local communities by responding
to a multiple number of medical institutions in the communities, rather than depend on specific medical institutions,is correct.
The drug price revision, enacted in April 2022, has not
had an insignificant impact on our sales from prescription
dispensing. For the revision of the technical fee, we haveshifted our focus on operations at pharmacies, from thehandling of drugs to communication with customers. We
ask individual pharmacists to provide even more support
for local patients than they have done so far. Since there isa call to provide home-visit medical care backed by part-Pick-up locker for medicine

Preliminary counseling

Medication history
voice input system

Prescription reader (OCR)

New Form of Prescription Dispensing Pharmacies – Conceptual ImageDX

Pick-up locker
for medicine

Patient

Prescription refill

Online medication instruction
and medicine delivery

Onlineexamination

SUGI Pharmacy Group’s Growth Strategy

For patients, electronic prescription is beneficial because it
enables them to receive medical examination, prescription,and dispensing services based on accurate and real-time information, which will enhance therapeutic effects, avoid
trouble caused by polypharmacy or problematic combinationof medicine, and reduce unnecessary medicine. For medical
institutions and pharmacies, electronic prescription makes it
possible to refer to not only recent but also older data accumulated over the past few years by different medical institutions, meaning that medical institutions and pharmacies can
respond accurately while ensuring safety for the relevant patients. It is also expected that they can reduce labor for data
entry and document filing for storage and save storage space.

In other words, electric prescription will lead to improved therapeutic effects, reinforced risk management,
and enhanced productivity, ultimately resulting in lower
total costs of all medical services. We are addressing data
health reform, which will enhance patients’ safety andconvenience and allow them access to higher-quality medical services, in a well-planned manner. The direction ofthis policy aligns precisely with the direction of the SUGI
Pharmacy Group’s Total Healthcare Strategy. We understand that great business opportunities are provided to us
as an entity that has set a management strategy and priority issues to underpin a sustainable society. Since the institutional reform is expected to generate great benefits inthe field of Japanese medical services, we would like tolead the entire industry in proceeding with the reform.

Delivery ofprescribed
medicine

Home

Medical institution

Electronicprescription

Pharmacy

Online prescription(Via a server)

Medical institution

33

Online qualification
confirmation

Patient

Online medication instruction34Mid-Term Management Plan

The mid-term plan consists of a “growth strategy” andthe “reinforcement of the management foundation.” The
growth strategy features the three themes of “Deepen
operations in the field of health care,” “Change customer
experience through DX,” and “Expand cooperation andco-creation efforts.” For each theme, we have set the direction that we should take from now.
The reinforcement of the management foundation has
the three themes of “Data-based management,” “Coststructure reform,” “HR and institutional development,”
each of which has been reflected in the strategy to be implemented by the director in charge. There is only a year
left for completing the consolidation of the foundation

The year 2026 will mark the 50th anniversary of the foundation of SUGI Pharmacy. Backcasting from the ideal future that we need to achieve by the memorial year, wehave formulated a mid-term plan. Starting from FY2022,
the plan consists of a part for the first two years and thatfor the second three years.
The first two years are for consolidating the foundation
for further growth, while the second three years are forgrowing into a corporate group with sales of 1 trillion yen,with our FY2026 sales target set at 1 trillion yen.

Sales of1 trillion yen

FY2026: 50th anniversary year
Sales of1 trillion yen

Sales
602.8 billion yen

Growth toward a corporate groupwith sales of 1 trillion yen
Enhancement of our corporate
value by maximizing
customers’ lifetime value
2020

2021

Management with Awareness of Capital Costand Stock Price
After accurately quantifying our capital cost, we formulate management strategies and plans in view of ourmanagement philosophy and changes in the external
environment, and we disclose their overviews. As forthe formulated management strategies and plans, weannually check and analyze the progress, review thebusiness portfolio, and revise the management resource allocation plans, including those for investment
in new business, new store establishment, systems, andHR training.
While ensuring financial soundness, we will raise
shareholder value by increasing ROE on a mid- andlong-term basis, returning value to shareholders on acontinuous and stable basis, and making investment for
further growth. Setting ROE as an important index for
creating sustainable shareholder value, we will strive toalways improve productivity, total asset turnover ratio,etc. and raise ROE continuously on a mid- and longterm basis.

Significance of FY2023
2022

2023

2024

2025

2026

(FY)

To conclude the consolidation of the foundation for further growth, how should we behave now? What should
we follow as a guiding principle? What should we place
an emphasis on this fiscal year?

promotional team is now rallying all its forces for analyzing various data in order to break down customers
into subcategories. If we continue to subdivide such
subcategories, we can ultimately obtain data analysis
for “each individual” customer and patient. This approach will also work for prescription dispending patients. We can learn more about individual customers
by analyzing data on prescription dispensing, such as
antipyretic drugs for colds, therapeutic drugs for diabetes, anticancer agents, and in-home patient services.
If we make a full use of various data and place the“focus on each individual” customer and patient, we
can provide services well-tuned for that individual.
The third point is our focus on employees. One of ourstrengths resides in our differential advantages backed
by our human resources. We will place our focus oneach individual employee who practices our philosophy
and respects each individual customer and patient. This
year, we will visualize each employee’s skills, capability,
motivation, and future growth possibility and make afull launch of individual training programs so that ourpharmacists, medical office workers, registeredpharmaceutical distributors, nationally certified
dieticians, beauty advisers, and nurses can place theirfocus on individual customers and patients and obtainthe necessary skills. In addition, to allow experts invarious fields, such as sustainability, DX, and overseas
affairs, as well as attorneys and buyers, to be committed
to even more highly specialized assignments, we will
review the human resources system and establish anenvironment in which they can try further challenging
work. We will, thus, place our focus on employees thisyear.

SUGI Pharmacy Group’s Growth Strategy

FY2026
numerical
targets

for further growth. All our organizations will join together
toward completing the consolidation by the end of theyear.

Mid-Term Management Plan with the Final Year Set on FY2026 (Fiscal Year Ending in February 2027)● Set up stores with a focus on health care (store areas, store types,

alliance with medical institutions)

Deepen operations in the field ofhealth care

● Maximize synergy between merchandising and prescription

dispensing● Establish a SUGI Pharmacy-version of comprehensive community

Growth strategy

care model● Evolve customer experience through digital technology

Change customer experiencethrough DX● Develop one-to-one marketing● Enhance digital membership and increase the percentage of use ofprescription dispensing services● Optimize SCM* and develop products and categories byReinforcement of
the managementfoundation

Expand cooperation and co-creation
efforts

establishing information linkage between the manufacturing,
distribution and sales sectors● Establish healthcare networks both at home and abroad

Data-based management● Make the organizations and operations even more effective

Cost structure reform
HR and institutional development● Set up stores with high investment efficiency, and renovate

existing stores● Develop organizations and human resources toward the next

generation*SCM: supply chain management

35“Focus on Each Individual”
At the information session on our FY2023 policy, I
presented this simple, concise phrase to our employees
to show them our ideal vision for this year in view of oursituation and future strategy. We are now fortunate
enough to earn trust from many customers and patients, but we would like to continue to value our philosophy of “focusing on each customer in front of oureyes” as what we must never forget. Today, we operate
on a larger scale and in a wider range of fields than before in the age of the rapid progress of DX. All the more
for this, we look back to the basics and keenly realize
the importance of “focusing on each single customer
and patient.”
The second point regarding the importance of “focusing on each individual” concerns the use of the digital. In FY2023, the renovated SUGI Pharmacy app will
enable us to respond to “each individual” among ourcustomers and patients, the annual number of whom
totals more than 300 million. For example, our sales

36Ideal Vision
Total Healthcare Strategy through Integration of the Real and the Digital
Contribute to Local Communities through Total Health Support, Ranging from Self-Care to Medical
Care, Medication, Elderly Nursing Support, and Daily Life Support
In the Total Healthcare Strategy, people’s lives, from birth until the end of their life, are divided roughly into three stages,
covered by the self-care category, the medical care and medication category, and the elderly nursing support and daily life
support category. The strategy is intended to ensure contact points with customers, regardless of their health condition,and provide optimum products and services appropriate for the condition of customers in different stages by integrating
our physical advantages with digital technology.

Prescription
dispensing

Health checkup

Online counseling, medical treatment,
and medication instruction
Fitness

Diagnosis
Healthcheckup

Health counselingand measurement(Healthy lifestyles)

Long-term elderly
nursing care

Chronic-phasemanagement
Elderly
nursing care

Personal
healthrecord(PHR)

Terminalstage

Showing a commitment to local residents’ lifetime efforts in disease prevention and health management, andcontributing to their good health through a full lineup of care

Senior customers

Merchandising

Middle-aged customers

I am living alone for the first time, so I
bought daily use items conveniently ata store with a large selection of items.

Service
Young family customers

Prescription dispensing

Young customers
20s

Terminal care

I’m worried about my health checkup
results, so I consulted about the preventionof lifestyle-related diseases and dieting andbought supplements and health food.

I consulted a pharmacist about my childdeveloping a sudden fever; I’m happy that
the SUGI pharmacy in my neighborhood
was open until late at night.

Treatment

Secondary
prevention

Primary
prevention

We will underpin customers’
healthy, rich lifestyles andcommunity healthcare.

In addition to in-store prescription
dispensing, SUGI pharmacy provides
home-visit care; I enjoy services
provided at home, such as
home-visit prescription dispensing.

30s

40s

50s

60s

SUGI Pharmacy Group’s Growth Strategy

Elderly nursing support anddaily life support category

We provide support tailored to the health stage of each customer, from primary prevention and secondary prevention to
medical treatment, elderly nursing care and terminal care, thereby establishing a lifelong relationship of trust andunderpinning their healthy, rich lifestyles and community healthcare.

Trust from customers

Medical care andmedication category

Self-care category

Increasing Lifetime Value

70s Age group

Expansion of needs in the healthcare category – responding to healthcare needs and daily life support needs -Strategic Dominance of Setting Up New Branches around Key Stores
By proceeding with the development of solution-oriented “key stores,” which underpin our strategic dominance, we place
the emphasis of our store-opening strategy on the creation of hubs of healthcare networks evolving around our key stores.
Hospital

Fitness club

Healthcare network connecting approximately 1,500 physical stores and local communities
Research institute(university)

Pharmacy

Healthcare network

Increasing Lifetime Value

Expanding through our physical advantages,
mainly stores, and digital technology

Characteristic Initiatives for Implementing the Total Healthcare Strategy
Strategic dominance ofsetting up new branches
around key stores

Increasing regional shares by
opening stores aggressively,
and making our stores evenmore competitive

Strategic partnership

Key store
Health insurance
association

Home-care
support clinic

Elderly nursing
service provider

Health checkup
institution
Local government
Municipality and comprehensive community support center*Our key stores fulfill the enhanced function of health support expected to be provided by drugstores. The stores feature a self-service space forcustomers to take health measurements while providing a wide variety of services related to health care. They also have a community space where
events organized by nationally certified dieticians and other experts take place on a regular basis.

37

38

Increasing Regional Shares by Opening Stores Aggressively,
and Making Our Stores Even More Competitive
No. of Stores by the Area

High-Profile Stores Established in FY2022

No. of stores *As of the end of February 2023

1,565 stores in total
Hokuriku & Shinshu area

60 stores

Kansai area

530 stores
Kanto area

425 stores

550 stores

Advanced Medical Care Supported by Pharmacies Located on the Premises of Medical Institutions
Our pharmacies located on the premises of medical institutions are reinforcing support for advanced medical care as animportant base connecting core hospitals and local stores.

Shinshu University Store

Increasing Customer Convenience and Satisfaction by Renovating Stores and Improving the Product Lineup
Renovation of Stores to Enlarge Their Dispensing
Rooms and Waiting Rooms

Renovation of Salesfloors and Improvement of the
Product Lineup to Accommodate Inbound Demand

Our store renovation has led to the improvement in thewaiting environment for patients and the working
environment for pharmacists and medical office workers.

By analyzing our duty-free sales data, we have realized
salesfloors that can accommodate inbound demand.

Introduction and Enlargement of Perishable Food andMeat Corners in Cooperation with Concessionary
Chain Operators
Establishing an environment inwhich customers with children
can visit the stores without any
hesitation

Not only are we reinforcing the lineup of frozen foods byinstalling many more freezers and refrigerators, but we arealso cooperating with concessionary chain operators in orderto address customers’ one-stop needs.

No. of stores whose dispensing rooms andwaiting rooms were renovated (FY2022)

123 stores[Theme] S elf-Improvement: Discover Further

Beauty in Yourself

Sales corner of
products from a brandintroduced in Japan for
COSME CARAT Omote-Sando Harajuku Store the first time

39

Challenge of Developing Stores Specializing in
Beauty Items
We have established the first store specializing in beauty
items as a new business model. The store handles
products from a brand introduced in Japan for the firsttime and has introduced a special app. In addition, thestore actively disseminates information throughInstagram while ensuring photo spots in expectationthat customers themselves will serve as information
disseminators. Moreover, the store strives to catch
inbound demand in order to contribute to an increase in
the sales of duty-free items.

Increasing the productivity and reducing the waiting time by introducing cutting-edge equipment

SUGI Pharmacy Group’s Growth Strategy

Chubu area

We are pushing forward with strategic dominance in the
Kanto, Chubu, Kansai and Hokuriku regions. As of the endof FY2022, we had established 1,565 stores in total,featuring industry-leading regional market shares in the
Chubu and Kansai regions.
Many of the stores are prescription dispensing
drugstores in suburban areas with an excellent lineup of
health and beauty items. However, we have recently beenproactively promoting the establishment of stores focusedon foods with enhanced convenience for consumers,
stores in urban areas focused on beauty items, pharmacies
located on the premises of medical institutions, and storesfeaturing medical institutions.

(Left and middle)
A pharmacist and a nationallycertified dietician serving
each customer courteously
and politely(Right) Waiting time reduced
due to a trial introduction ofself-checkout machines forprescription dispensing

Support for the Commencement of Medical Practice

Atsumi Hospital StoreIf a medical institution is housed in a drugstore, the institution canbenefit from the drugstore’s ability to attract many customers. To
ensure that medical institutions can enjoy such benefit, we provide
support for the commencement of medical practices. We willdevelop our commitment to such support into one of our main
business mainstays, thereby striving to underpin local citizens’ daily
lives and health. In FY2022, we assigned full-time consultants forsupporting the commencement of medical practices not only to
Kanto, Kansai, and Chubu but also to Hokuriku and Nagano
Prefecture, which are our priority areas for setting up new drugstores.
We have provided support so far in approximately 140 cases.
Meanwhile, we have opened a total of seven medical malls. In the future, we will work together with those who wish to
hand down their businesses to the next generation, house manufacturers, and other partners toward establishing many
more medical malls so that we can underpin community healthcare.
Supportfor theCommencementof Medical Practices

Approx.

140

cases

40

Strategic Partnership for Proceeding with the Total Healthcare Strategy

Pharmacy ×

Acceleration of Our Efforts to Set up Stores in Taiwan and
the Creation of Social Value in Asia

Domestic and Overseas Partners
Great Tree Pharmacy Co., Ltd.
Business alliance concluded

In the SUGI Pharmacy Group, we work with companies featuring high-level expertise and advantages to realize mutualin November 2020

cooperation and joint creation, thereby promptly and organically connecting physical and digital contact points with

Capital alliance concluded

customers. We are proceeding with the Total Healthcare Strategy, designed to contribute to improving local residents’in September 2022

health through our commitment to their lifetime efforts toward disease prevention and health management.

https://www.greattree.com.tw

Great Tree Pharmacy Co., Ltd. is a drugstore chain operator running approximately
260 stores in Taiwan. In the SUGI Pharmacy Group, we provide the company with
our total healthcare business model, as well as some of our products and trademarks. In addition, both parties share each other’s management know-how. This
will enable both parties to further proceed with their business development andcreate new value in Asia.

Initiatives in FY2022

Supply of Products in Malaysia and Creation of Social
Value in Asia

ALPRO PHARMACY
SDN. BHD
Business alliance concludedin July 2022
https://www.alpropharmacy.com/

ALPRO PHARMACY SDN. BHD operates the pharmacy chain ALPRO PHARMACY,
consisting of more than 190 stores in Malaysia. Based on the management philosophy of improving local communities by providing specialized healthcare
products, services and advice, the company was established in 2002. Since
then, the company has provided not only medical and pharmaceutical products (prescription dispensing/OTC), health foods, elderly nursing support items,
and other healthcare items, but also physiotherapy, rehabilitation services, andprimary healthcare for diabetics, leading the company to establish its own position in the Malaysian pharmacy market.
According to ALPRO PHARMACY’s next five-year mid-term plan, they will accelerate the establishment of new stores in Malaysia and the expansion of theirbusiness into neighboring countries in Southeast Asia. By further reinforcing
their commitment to EC, digital services, and an online-to-offline (O2O) model,
they are striving to establish a framework for providing even more support for
local customers’ health.
This alliance expedites the evolution of the two parties. In the SUGI Pharmacy
Group, we provide ALPRO PHARMACY with our total healthcare business model, as well as some of our products and trademarks. In addition, both parties
share each other’s management know-how. This will enable both parties tofurther proceed with their business development. For a smooth implementation of the alliance, we plan to have HR interaction after consultation with
ALPRO PHARMACY.

Providing approximately 1,500 SKU
products through EC to customers in
Taiwan■Investment in Great Tree Pharmacy in Taiwan
In FY2022, we invested in Great Tree Pharmacy and upgraded our partnership froma business alliance to a capital and business alliance. As a strategic partner, we haveso far provided Great Tree Pharmacy with Japanese products, mainly healthcare
items. In addition, both parties have shared each other’s management know-how
by sending employees on a temporary basis and worked together for evolving into
global companies. Moreover, both parties have aimed for mutual growth by reinforcing their drugstore operations through joint business development backed by
the integrated capabilities of the SUGI Pharmacy Group. Our investment in Great
Tree Pharmacy will further consolidate the relationship and alliance between thetwo parties. We would like to take this opportunity to proceed with our businessdevelopment in Taiwan even more efficiently and powerfully and create new value
not only in terms of economy but also in terms of society in Asia.

SUGI Pharmacy Group’s Growth Strategy

We established sales corners for SUGI Pharmacy (for Japanese products) in stores ofGreat Tree Pharmacy in Taiwan, with which we concluded a business alliance in
FY2020. As a result of extensive exposure of the SUGI brand, the profile of the sales
corners for SUGI Pharmacy increased, attracting many more repeat customers.
In addition, we developed a flagship drugstore featuring a Japanese style different from the existing stores of Great Tree Pharmacy. We also sold our in-house development products as part of the joint development of EC business targeting consumers in Taiwan. By doing so, we further strengthened our efforts to sell products
throughout Taiwan.

FY2022 New Partners

Support for Preventive Care and Health and Productivity
Management in Vietnam
Omicare Joint Stock Company
Business alliance concludedin July 2021
https://omicare.vn/loi-chao-tu-ceo

Omicare Joint Stock Company operates Omi Pharma, a drugstore with a pharmacy
function, and an EC business in Vietnam. In the SUGI Pharmacy Group, we provide
the company with our business model, as well as some of our products and trademarks. In addition, both parties share each other’s management know-how andhave HR interaction. In so doing, both parties strive to reinforce the function as abase for offering healthcare counseling and disseminating related information andestablish a framework to support preventive care and health and productivity management in Vietnam.

Initiatives in FY2022
We provide our know-how and products to stores of Omi Pharma. In FY2022, wedeveloped stores in which an atmosphere of Japanese-stye drugstores was strongly
felt, leading to an active expansion of sales channels not only in the conventional
Vietnamese market, where Omi Pharma makes a strong showing, but also in atrend-conscious customer market. As a result of this positive effect, our in-housedevelopment products have been actively introduced to retailing stores other than
Omi Pharma.

41

42

FY2022 New Partners

Sakura Pharmacy
Group
KRAFT Inc.
Sakura Pharmacy Inc.
Business alliance concluded
in March 2023

Expansion of Networks of Experts and Information
Operating more than 850 prescription dispensing pharmacies nationwide, theSakura Pharmacy Group focuses on home-visit healthcare. By introducing aprescription dispensing system, they are actively improving the quality andefficiency of pharmacists’ operations. They are also striving to support advanced
pharmacotherapy by training board-certified pharmacists in their specialty.
Moreover, they are also focusing on a shift to DX, as indicated by their providing
the official app Health and Mediation Record Notebook and accepting electronicprescriptions for the first time in Japan. The alliance between the Sakura Pharmacy
Group and the SUGI Pharmacy Group will evolve the efforts and businessdevelopments by the two parties.

Capital and business allianceconcluded in January 2020
https://www.inagora.com

Inagora Holdings Co., Ltd. operates Wando, an EC app for inbound and cross-borderbusiness specializing in Japanese products. We gain from the company its expertiseon Chinese consumers’ needs and consumption behavior, as well as its marketingknow-how. At the same time, through Wando, we sell to trend-sensitive consumers
in China various products, mainly those privately developed by the SUGI Pharmacy
Group.

Initiatives in FY2022
In FY2022, we continuously reinforced the promotion of our in-house development
products through various social media, leading to increases in online reviews and followers.
We also collaborated with popular influencers for product development, introduced such products on social media, and sold them on the cross-border EC platform.
As shown by the development of beauty essence, of which 10,000 units were sold out
in a short period of time, such collaboration resulted in a great achievement.
A total of more than 150 SKUs of our in-house development products have been
adopted as standard items for the Chinese cross-border EC platform, showing asales expansion of our in-house development products in an overseas market.

MedPeer Inc.
Capital and business allianceconcluded in March 2018https://medpeer.co.jp

SUGIsapo Walk
A pedometer app thatallows users to earn miles
which can be exchanged
for SUGI Points

SUGI Smartphone
Medicine Service
AppElectronic medication record
notebook in which theholder’s “family pharmacy”
can be registered

MedPeer Inc. runs an online doctor community site, in which 150,000 doctors are registered, and develops an online medical business and preventive care business, using IT.
Together with the company, we operate SUGIsapo Walk as a joint project in the selfcare
business. By taking advantage of the app, we will continue to effectively provide services well-tuned to each customer’s lifestyle and health problems.

Initiatives in FY2022
SUGI Pharmacy and AstraZeneca implemented a verification program for potential
chronic obstructive pulmonary disease (COPD) patients and their families to encourage
an early medical examination, using the pedometer app SUGIsapo Walk.
Featuring a virtual walk rally, the program gave participants quizzes and informationthat would raise their awareness of the disease and lead them to change their behaviors. By doing so, the program encouraged COPD patients to receive an early medical
examination.
In FY2022, we adopted an OEM for the conventional Family Pharmacy app andrenovated the app to make it even more convenient by expanding its functions inaccordance with customer needs.

SUGI Pharmacy Group’s Growth Strategy

Approach to Customers in China through a Cross-border EC
App
Inagora Holdings Co., Ltd.

Joint Development of SUGIsapo App, Enabling Users toContinue Healthy Habits➡ Reducing the waiting time by sending a prescription in advance➡ Consulting with a pharmacist through the chatting function

Expansion of the Support Business for Preventing the
Aggravation of Lifestyle-related Diseases
PREVENT Inc.
Business alliance concludedin June 2020
https://prevent.co.jp

PREVENT Inc. provides health insurance associations with a program for preventing
lifestyle-related diseases from becoming serious in cooperation with doctors. In our
joint project with this company, we will strive to expand the support business forpreventing the aggravation of lifestyle-related diseases through the use of SUGI
Pharmacy’s nationally certified dieticians and the introduction of each other’s business partners. This alliance enables us to provide a full line of support, ranging from
disease prevention to treatment.

Initiatives in FY2022

Expansion of Sales Channels through Catalogue MailOrder and EC
Scroll Corporation
Business alliance concluded
in February 2022
https://www.scroll.jp/

Scroll Corporation operates based on the catalogue mail-order know-how that thecompany has long accumulated as a mail-order business. In the EC market, the company focuses on the B-to-C model, wherein it sells individual customers a rich lineup
of products, including items privately developed by its group companies. In linewith this alliance, the company and the SUGI Pharmacy Group will share a wide variety of products and distinctive know-how on mail-order business, thereby striving
to contribute to local communities.

Using a program provided by PREVENT Inc., we are striving to prevent the aggravation ofcustomers’ diseases. In the six-month program, the nationally certified dietician assigned
to each program user prepares a health promotion plan for the user. While ensuring
cooperation with the user’s doctor, the dietician provides individual guidance for healthpromotion, using monitoring equipment.

Full Picture of Mystar, Support Programto Improve Lifestyles
Monitoring
equipment

Six-month program in which

Initiatives in FY2022
In FY2022, we began to provide products through Scroll Corporation to membersof CO-OP DELI Consumers’ Co-operative Union and Tokai CO-OP Consumers’ Cooperative Union.
By increasing the percentage of our in-house development products posted on
product catalogues, we will strive to deliver even more economical, higher quality
products to many more CO-OP members.

43

specialized staff provide program
users with individual guidance forCare/treatment
advicehealth promotion in cooperation with
their doctors, using monitoring
equipment

User

Program user’s doctor

Data linkage/input

Smartphone app
Data linkage

Linkage through the user

Telephone counseling(Once per two weeks)

SUGI Pharmacy
The nationally certified
dietician assigned to eachprogram user prepares ahealth promotion plan for
the user.

44

Financial/Non-financial Highlights
Net sales

Financial index(Billion yen)
700
600
500

488.7

542.3

Financial index

602.8

625.4

667.6 *

Operating income(Billion yen)
40
30

400

26.0

34.0

30.1

Financial index
(Yen)
4,000

32.1

31.6

3,000

2,694

2,956

3,245

Financial index

3,460

3,590

Dividend per share/Payout ratio

Dividend per share
Payout ratio

80

24.3

2,000

23.8

80
23.4

25.7

25.5

10

1,000

20

100
2019

2020

2021

0

2022 (FY)

2018

2019

2020

2021

2022 (FY)

0

2018

2019

2020

2021

2022 (FY)

40
30

10

0

70

80

80

80

2018

2019

2020

2021

0
2022 (FY)*The Accounting Standards for Revenue Recognition (Corporate Accounting Standards No. 28, March 31, 2020) have been in place for our accounting since the beginning of the consolidated fiscal year 2023. The figures
for FY2022 have been revised based on the accounting standards.

Profit attributable to owners of parent
21.1
20.7
19.3
19.0

Financial index(Billion yen)
20

17.9

Financial index
（％）
12.0

15

9.0

10

6.0

5

3.0

0

2018

2019

2021

0

2022 (FY)ROA

Financial index
（％）
12

2020

10.9

10.5

10.9

11.9

9

9.4

300

Capital investment

Non-financial index Number of stores(Stores)
1,500(Billion yen)
30

11.0
9.4

8.8
18.0

20.3

21.5

23.3

21.5

2018

2019

265.4

2020

2021

2022 (FY)

Total assets

313.7

0

2018

2019

2020

2021

2022 (FY)Non-financial index Year-end total square meters of sales floor

345.9

334.7

351.8

1,190

1,287

1,391

1,483

1,565

1,000

500

10

(Billion yen)
400

9.7

Financial index

20

Financial index

10.7

ROE

SUGI Pharmacy Group’s Growth Strategy

2018

（％）
50

20

40

200

0

(Yen)
100

60

20

300

Net assets per share(10,000 m2)
100
80

72.2

78.1

84.7

91.5

96.3

0

2018

2019

2020

2021

2022 (FY)Non-financial index Number of point members(Million persons)
20
15

15.15

16.45

18.04

19.41

20.83

60
200

6

10
40

100

3
0

2018

2019

200
150

0

2022 (FY)216.5

Net assets
Equity ratio

62.7

58.2

58.0

63.9

61.5

（％）
100
80
60
40

50

20

166.5

182.7

200.6

213.8

2018

2019

2020

2021

2018

Financial index

100

0

45

2021

Net assets/Equity ratio

Financial index(Billion yen)
250

2020

0
2022 (FY)

(Yen)
400
300

5

20

287

2019

2020

2021

2022 (FY)Net income per share

336

341

0

2018

2019

2020

2021

2022 (FY)Non-financial index Number of employees(Persons)
20,000

313

311

Total

15,000 14,252
Partner
10,000 employees

200

16,464
10,282

18,177

19,078 19,419

0

5,000

2018

2019

2020

2021

2022 (FY)0

Full-time
employees

5,494(Persons)
2,500
2,000

11,467

11,77011,692

1,500
1,000

6,182

6,710

7,308

2018

2019

2020

2021

2022 (FY)Non-financial index No. of managers/Ratio of female managers

8,758

100

0

7,727

2018
2019
2020
2021
2022 (FY)*Number of partner employees converted into the number of 8-hour workers

5000No. of managers
Ratio of female managers 313

Female

178
11.6
Male

1，
358
2018

228
13.6

15.6

1，
451

1，
692

358
16.8
1，
768

315

（％）
25
20

14.5

15

1，
854

10
5

2019

2020

2021

0
2022 (FY)46

Message from Chairman

Dedication and Behavior based on“Respect for Each Customer
in Front of Our Eyes”– Source of the SUGIManagement Philosophy

Today, we are in a period of upheaval, when there arecalls for new reforms to break down conventional stereotypes and notions, as well as for speed in implementing
such reforms. All the more for this, it is important to become further aware of our “contribution to local communities” as our raison d'être. Guided by the management
philosophy, it is also important to always return to the basics when making decisions and taking action. Continuing
to share this importance with all 35,000 employees andimprove their decisions and action constitutes the largest
part of my assignments today.

Immutability and Fluidity: Our Tenet
Embraced since Our Establishment
Continuous Fluidity as the Essence of
Immutability
Our Evolution Means Our Respect for Each
CustomerIn the field of business, “immutability and fluidity” is adopted as a universal concept and actually forms the cornerstone of our management philosophy. At each of the many
turning points we have encountered since our establishment, we have made management decisions from the aspects of “eternal invariability” and “change in pace with thetimes.” To respond to great changes in the external environment, our departments and business operations are
evolving very quickly and extensively. On the other hand,
we are not allowed to leave the importance of “immutability” behind as a result of an unreasonable pursuit of “fluidity.” We need to keep the best balance between “immutability” and “fluidity” so that we can develop into a corporategroup that will last from generation to generation.

Eiichi Sakakibara
Representative Director &Chairperson
SUGI Holdings Co., Ltd.
Representative Director &Chairperson, Sugi Pharmacy Co., Ltd.

47

Everything that we do begins with our commitment to“each individual,” as indicated by the “Respect for Each
Customer in Front of Our Eyes,” the basic view that wehave upheld since our establishment, and also by “Hoping
for the happiness of each employee, Hoping for the happiness of each customer,” declared in our management
philosophy.
We will further reinforce communication in order to ensure that various values, strategies, and policies and all theother information, including organizations and individuals’
views and feelings, are conveyed and understood accurately so that the information will result in proper behaviors
that will lead to respect for customers and patients.

Commitment to Strengthening Governance toDevelop into a Sustainable Company

SUGI Pharmacy Group’s Growth Strategy

Pharmacy Group’s

FY2022 was the second year of the scheme where President
Katsunori Sugiura and I worked closely together while rallying all the forces from the SUGI Pharmacy Group, including
inside and outside directors and auditors.

In addition to the penetration of the management philosophy, the pursuit of immutability, and the reinforcementof communication, the reinforcement of governance isanother major part of my responsibilities.
To make a sustainable contribution to local communities and society, we need to identify management risks
from a super-long-term perspective, reinforce our governance framework, and consolidate the foundation for
long-term growth. We have appointed external directors
for monitoring purposes, reinforced the Internal Audit
Department, and ensured flexibility backed by respect fordiversity, thereby striving to address a wide variety of priority issues that we have set, including climate change,
through the cooperation of all members of the SUGI
Pharmacy Group and to establish a framework whereby
we can respond to any type of change.

Commitment to Reinforcing Communication

In the SUGI Pharmacy Group, we intend to provide information and services tailored for each customer and patient based on the important information given by them.
To that end, we will take full measures, including training
programs, for information security management.

It is very challenging to continue doing what is supposed
to be done as a matter of course, and this has been a major challenge for the SUGI Pharmacy Group for many
years. To tackle this problem, we will further emphasize
the reinforcement of communication so that we can placea “focus on each individual.”

In accordance with our management philosophy, we
will continue to explore how to constantly present value
to customers and society and take on challenges so that
we can create a future toward the 50th anniversary, which
we will celebrate shortly, and even toward the 100th
anniversary.

48

Message from Vice President

Merchandising

Business Report on Sugi Pharmacy Co., Ltd.

Address Customers andPatients’ Anxieties andWorries at the Front Lineand Support Their Safeand Healthy Daily Lives
regardless of the Situation inSocietyRenovated sales floor with a richer product lineup to prepare
for a recovery of the inbound demand

Sales (Merchandizing of Sugi Pharmacy Co., Ltd.)(Billion yen)
500
400

394.8

433.5

480.9

488.3

2020

2021

521.1

300
200
100
0

2018

2019

2022 (FY)

discount coupons and additional point coupons. By doing
so, we aimed to increase the level of customer satisfaction,
the number of items purchased by each customer, andper-customer spending.
At the same time, we strived to increase our productivity.
We endeavored to reduce the store workload by expanding the scope of automated ordering, renovating the deadline management system, and introducing digital tools forin-house communication. We also strived to optimize
working hours by reviewing our staff assignment. In addition, we aimed to optimize our inventory and reduce returns and disposals by reinforcing our efforts under thelead of the new organization performing an inventory distribution function. As a result, we recorded net sales of
521.1 billion yen (106.7% of the previous fiscal year’s level)amidst the severe market environment.

SUGI Pharmacy Group’s Growth Strategy

in Local Communities

In FY2022, to accommodate local customers’ needs, werenovated sales floors to reflect local characteristics and accelerated various sales promotion schemes and other measures to increase the number of items purchased by eachcustomer. To strengthen our measures to fill customers’
one-stop needs, we installed many more freezing or cooling showcases at stores so that we could handle many
more frozen foods and ensured that many more stores carried perishable foods. In addition, we established the Urban
Sales Supervision Department to review our product lineup and shelf layout in anticipation for a recovery of the inbound demand, thereby building a structure enabling us toaccommodate customer needs even more flexibly.
We also renovated the SUGI Pharmacy app, boasting 10
million downloads, to expand the digital membership andprovide coupons tailored for individual customers, such as

Prescription Dispensing
While setting up new pharmacies and forming new alliances withmedical institutions to expand our operations in the field of prescription dispensing, we renovated some stores to enlarge theirdispensing rooms or waiting rooms and invigorated existing
stores. This led to the improvement of both the waiting environment for patients and the working environment for pharmacists
and medical office workers. In addition, the number of prescriptions filled at the renovated stores remarkably increased.
To boost the percentage of use of our prescription dispensing
service among those who have purchased our products, we increased the profile of the service and encouraged them to download our Family Pharmacy app. Moreover, we reinforced in-store
staff cooperation between the merchandising and prescription
dispensing sectors so that communication with and counseling

Shinya Sugiura
Representative Director andSenior Vice President
SUGI Holdings Co., Ltd.
Representative Director andSenior Vice President, Sugi Pharmacy Co., Ltd.

49

Drug Station, automated medicine picking equipment,
introduced to increase customers’ safety, improve our
productivity, and reduce the waiting time

Sales (Prescription Dispensing of Sugi Pharmacy Co., Ltd.)(Billion yen)
150
120
90

91.0

105.2

117.5

132.7

142.4

60
30
0

2018

2019

2020

2021

2022 (FY)for customers, from which the history of the SUGI Pharmacy
Group began, and other services could be fully offered. We also
proceeded with the automation of operations by introducing dispensing machinery to enable pharmacists to concentrate on communication with patients and medical institutes, which is a primary role of pharmacists. Such machinery includes automatedmedicine picking equipment, full-automated tablet packing
equipment, automated ointment mixers, and a one-dose packing
checking system.
We also began to establish a store network to handle electronic prescriptions, whose operation was launched in January 2023.
We ensured total optimization by assigning medical office workers and realizing the optimum staff assignment for each store. As
a result, we filled 12.91 million prescriptions (110.1% of the previous fiscal year’s level), with sales in prescription dispensing services
reaching 142.4 billion yen (107.3% of the previous year’s level).

50

Consolidation of
the Value Creation Foundation
Commitment to Issues ofMateriality

51

53 Priority Issues (Issues of Materiality) for Proceedingwith Sustainability Management
55 Five Themes and Priority Issues (Issues of Materiality)
57 Healthy Community
67 Sustainable Business Partnerships
73 Contribution to the Global Environment
81 Healthy Workplace Environment
91 Corporate Governance52

Priority Issues (Issues of Materiality) for Proceeding with Sustainability
Management
As a corporate group closely related to the lives of people in local communities, we believe that we can achieve sustainablecorporate growth by exercising our management philosophy to solve social issues and contribute to the establishmentof a sustainable society. In 2021, we reviewed our priority issues (issues of materiality) and specified five themes.

Process for Identifying Priority Issues (Issues of Materiality)
We have identified our priority issues (issues of materiality) through the process below. We will flexibly review them asnecessary, in accordance with changes in our business and the external environment.

Sustainability Basic Policy
The SUGI Pharmacy Group aims to contribute to the sustainable development of local communities throughcooperation with stakeholders in order to realize a vigorous society by seriously addressing a wide variety ofenvironmental and social issues and increasing the number of healthy and energetic people through corporate
activities.

Five Themes and 16 Priority Issues (Issues of Materiality)● Improvement of access to reasonable and quality
healthcare services● Ensuring safety in medical care and proper managementof medical and pharmaceutical products● Improvement of convenience in everyday life and support
for the community● Contribution to richlifestyles through products● Maintenance of productsafety and security● Establishment of a
responsible supply chain
management framework

HealthyCommunityHigh

P67−72Contribution to
Local Communities

P81−90● Human resources development● Reform to realize healthy and safe working
styles● Utilization of diverse human resources

After the board of
directors reviewed theorder of priority, we
finalized the five themes
and 16 priority issues(issues of materiality).

● Maintenance of product safety
and security● Health education and support
for patients in the community● Realization of a carbon-free society

Importance for society

Sustainable
Business Partnership

Healthy Workplace
Environment

We considered the orderof priority based on theopportunities, risks andmajor efforts for eachpriority issue from theperspectives of economic
value and social value,
and we created amateriality matrix.

● Reform to realize healthy andsafe working styles

Corporate
Governance

53

First, we clarified our challenges based on interviews
with the heads of departments and directors in charge,
as well as on opinions from external specialists. Then
we reviewed the priority issues while referring to theguidelines on sustainability (GRI, SASB), the SDGs, ESG
rankings, and the efforts by rival companies at home
and abroad. In the review process, we took into
consideration our management philosophy andSustainability Basic Policy.

P57−66

P91−100

Confirmation of
the feasibility

Contribution to
the Global
Environment● Establishment of arobust society in termsof disaster risk
reduction and crime
prevention● Improvement of access to reasonable
and quality healthcare services● Ensured safety in medical care andproper management of medical andpharmaceutical products● Improvement of convenience in everyday
life and support for the community● Reinforcement of corporate governanceConsolidation of the Value Creation Foundation
Commitment to Issues of Materiality● Personal information
protection and enhanced
information security● Reinforcement ofcorporate
governance● Health education and support for patients in thecommunity● Improvement of therapeutic effects for patients● Establishment of a robust society in terms of disaster risk
reduction and crime prevention

Consideration of
the order of priority

Selection of priority issues● Personal information protection andenhanced information security● Improvement of therapeutic effects
for patients● Contribution to rich lifestyles throughproducts● Establishment of a responsible
supply chain management
framework● Human resources development● Realization of a recycling-based society

P73−80● Utilization of diverse humanresources● Realization of a carbon-freesociety● Realization of a recyclingbased society

MiddleImportance for the SUGI Pharmacy Group

High

54

Five Themes and Priority Issues (Issues of Materiality)
Themes and issues of priority
Improvement of access to reasonable
and quality healthcare services

Opportunity
Risk

Acquisition of growing markets
Customer defection

Healthy community

Ensured safety in medical care andproper management of medical andpharmaceutical products

Opportunity
Risk

Decline of brand value / Decrease in the number of patients

Improvement of convenience ineveryday life and support for thecommunity

Opportunity

Acquisition of growing markets / Improvement in brand value

Health education and support forpatients in the community
Improvement of therapeutic effects forpatients
Establishment of a robust society interms of disaster risk reduction andcrime prevention
Contribution to rich lifestyles throughproducts
Maintenance of product safety andsecurity
Establishment of a responsible supply
chain management framework

Contribution to theglobal environment

Realization of a carbon-free society

Risk
Opportunity
Risk
Opportunity

Increase in customer satisfaction

Decline of brand value
Increase in customer satisfaction
Decline of brand value
Increase in customer satisfaction / Increase in dispensing
fees

Risk

Reduction in dispensing fees

Opportunity

Improvement in brand value

Risk
Opportunity
Risk
Opportunity
Risk
Opportunity

Acquisition of growing markets / Improvement in brand value

Customer defection
Cost reduction / Improvement in brand value
Customer defection

Risk

Cost increase due to carbon taxes / Decline of brandvalue
Improvement in brand value / Cost reduction

Realization of a recycling-based society
Risk

Decline of brand value

Opportunity

Inspired innovation

Healthy workplaceenvironment

Human resources development
Risk
Reform to realize healthy and safe
working styles

Opportunity
Risk

Decline of competitiveness
Enhanced recruiting capability / Inspired innovation
Employees leaving the company / Decline of brand value

Opportunity

Accelerated store launch / Inspired innovation

Risk

Slowing store launch / Decline of brand value

Utilization of diverse human resources

Corporate
governance

Personal information protection andenhanced information security
Reinforcement of corporate
governance

Opportunity
Risk
Opportunity
Risk● ollecting near-miss cases and sharing them fortraining and infrastructure development● Safely collecting medical and pharmaceuticalproducts and medical equipment● Providing information on medical andpharmaceutical products using digitaltools● Improving access to products and services● Enhancing medical and elderly nursing-careservices for in-home patients● Supporting activities by local communities
and organizations● Providing more information to promote● Supporting patients and their families
prevention and care
● Providing information to and raising awareness ofpatients and their families● Improving medication adherence by providing● Improving therapeutic effects bymedication follow-up
providing information to medical● Improving therapeutic effects by preventing
institutions
polypharmacy● Establishing robust stores and infrastructure● Supporting disaster-affected people inlocal communities● Providing health-conscious products● Focusing on the development of highvalue-added products● Establishing a product quality assurance
framework● Disclosing information appropriately● Focusing on the development of ethicalproducts● Managing supply chain appropriately● Promoting smooth communication with
suppliers● Shifting to renewable energy● Reducing greenhouse gas emissions● Reducing environmental impact throughthe entire life cycle

Rival companies acquiring growing markets
Improvement in brand value

Improvement in corporate value
Occurrence of risks in business continuity / Decline ofcorporate value

Improvement in corporate value
Occurrence of risks to business continuity / Decline ofcorporate value

Related SDGs

● Increasing the number of stores with a counseling ● Providing data-based healthcare services
function● Enhancing online services

Suspension of operation due to natural disasters, etc. /Decline of brand value

Risk

Opportunity

Major efforts

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Sustainable business
partnership

55

Opportunities and risks● Promoting store development aimed atconserving water resources● Promoting recycling through the cooperation of
the manufacturing, distribution and sales sectors● Improving capacity development training for● Actively providing opportunities for
employees
employees to fully demonstrate their● Shifting to a job-focused human resources system
abilities● Promoting health and productivity management● Promoting the establishment of a workplaceenvironment in consideration of employees’safety● Generating opportunities with a focus ondiversity● Promoting work-style reforms● Strengthening efforts for personal information
protection and providing thorough training● Strengthening the information security
framework and providing thoroughtraining● Improving board effectiveness● Providing thorough compliance training● Strengthening the risk management
framework● Developing a framework that supports
diverse working styles● Fostering a corporate culture that respects
diversity56

Since our establishment, we have developed the drugstore model of“pharmacies with the function of prescription dispensing,” aimed at contributing to local communities, ahead of our rivals. At present, we have
evolved it into a new business model covering self-care, elderly nursing
care, and terminal care based on our Total Healthcare Strategy.

Priority Issues (Issues of Materiality)

Healthy Community
Improvement of Access to Reasonable and Quality Healthcare Services
Increasing the number of stores with a counseling
functionIn this era of digitalization, the importance of counseling by
experts at physical stores is increasing. In the SUGI Pharmacy
Group, we are now working to integrate the records ofeach customer or patient, including their product purchase
information, counseling history, and information obtained
through our apps. Using such information, we are striving
to increase the number of stores that can provide
satisfactory counseling services, based on the needs andissues of each customer and patient.

Serving as “local alliance pharmacies” and “pharmacies
allied with specialized medical institutions”

Pharmacies allied withspecialized medical institutions:
Local alliance pharmacies:

3 stores

SUGI Pharmacy app

10.44 million
FY202213.81 million

downloads

In total

SUGIsapo Walk

2.74 million

15 million downloads

46 stores(FY2022)

downloads(FY2021)

FY2023 target
In total

downloads

8.33 million

SUGI Smartphone
Medicine Service app(Family Pharmacy app)

620,000
downloads(FY2022)

downloads

2.21 million
downloads(FY2021)(FY2022)360,000
downloads(FY2021)

Interview

Providing a data-based healthcare service
We have begun to issue Lifestyle-related Disease Risk
Reports for determining lifestyle-related disease risks
based on health checkup results. Analyzing the probability of developing a stroke, myocardial infarction or diabetes, such reports contain suggestions from a nationallycertified dietician to prevent such onset.

SUGI Pharmacy’s Lifestyle-related Disease Risk Report, adopted by AbikoCity, Chiba Prefecture, as part of its measures to increase the effect of
encouraging citizens to receive a specific health checkup

57

Digitalcontact point(Gateway to theservices)

SUGIsapo Walk
A pedometer app
that allows users toearn miles which
can be exchanged
for SUGI Points

Joint campaign with business partners

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

We have focused on serving as “local alliance pharmacies” and“pharmacies allied with specialized medical institutions,” both ofwhich are promoted under a national initiative. By utilizing ouraccumulated know-how, we have increased the number of storesproviding a home-visit prescription dispensing service. We haveproceeded with the development of local alliance pharmacies thatcan serve as local healthcare hubs by sharing patients’ detailed
information with the relevant medical institutions at the time of their
hospital admission and discharge and by providing comprehensive
support in the phases of elderly nursing care and terminal care.
We are also making efforts to serve as “pharmacies allied withspecialized medical institutions” with high-level pharmaceuticalmanagement functions that provide training for specialized
pharmacists in the field of oncology, and we work in close cooperation
with medical institutions providing specialized medical care.

Enhancing the digital membership base
The membership of our digital apps (SUGI
Pharmacy, SUGIsapo Walk, and SUGI Smartphone
Medicine Service (Family Pharmacy) comprises thebase for a variety of our digitalized healthcare
services and sales promotion tailored to individual
needs. In FY2022, we focused on promoting thedownloading of each app and achieved 13.81
million downloads. With the goal of a total of 15
million downloads of our digital apps (by the endof FY2023), we will enhance our digitalized
healthcare services and sales promotion tailored toindividual needs.

We gather and offer various kinds ofinformation based on the needs ofeach customer.

Shin-Kanaoka Store, Supervisor Pharmacist
Board-certified Pharmacist of Ambulatory
Cancer Chemotherapy
We have a framework in which Board-certified
Pharmacists of Ambulatory Cancer Chemotherapy provide support for outpatients who need to receive pharmacotherapy, while ensuring cooperation with their
medical institutions. Such pharmacists check whether
their patients are suffering any adverse event or not
and their medication adherence in cooperation with
their medical institutions appropriately through tracing
reports and other tools. In addition, not only have weestablished a system in which telephone counseling isavailable even outside business hours, but we also haveorganized information sessions together with nursing
facilities for senior citizens and other pharmacies, and
we also built a framework for sharing patients’ medication information. I’m really fulfilled at work.

Exchange for SUGI Points
Redemption of SUGI
Points for rewards isalso available on theapp.

SUGI Smartphone Medicine Service app(Family Pharmacy app)
An electronic
medication record
notebook app onwhich users canregister their family
pharmacy.

SUGI Pharmacy app

58

Priority Issues (Issues of Materiality)｜ Healthy Community

Renovating SUGI Pharmacy app – realizing the concept “SUGI Pharmacy on the Palm
Anytime and Anywhere”

Ensured Safety in Medical Care and Proper Management of Medical and Pharmaceutical Products

In January 2023, we renovated the SUGI Pharmacy app. In the SUGI Pharmacy Group, we
believe that it is important to deliver optimum information and services for each customer. To
accommodate customers’ demand to enjoy shopping more conveniently and receive services
suited for them, we automatically deliver information and services well-tuned for each customer.

Dissemination of discount and health information
Sugi Channel, where information on health, discounts, and many other topics is available, lets app users know
not only about on-going campaigns, sales, etc., but also about double-point days ahead of other customers.

Dissemination of coupons
optimum for each individual

Even more convenient app

Smooth checkout procedure

Customers can receive desired
coupons that would meet theirtastes.

Customers can set coupons fortheir desired products before
shopping.

A mere scan of a membershipcard reflects the coupon set in
the card into the checkoutmachine.

Introducing error prevention systems in prescription dispensing
We have installed a picking support system and a powder medicine checking system
at all of our stores that provide prescription dispensing services, and we will ensurethat all new stores have the same systems. Moreover, by proceeding with theintroduction of a one-dose package checking system and introducing many more
automated picking machines and automated one-dose packaging machines, we will
support pharmacists in concentrating on communication with customers and establish
an even safer pharmaceutical environment.

One-dose package checking system

Introducing Drug Station, automatedmedicine picking equipment
To pursue safety and efficiency, we haveintroduced Drug Station into large-scaleprescription dispensing pharmacies.

Features
Mother sufferingfrom irregularperiods after
delivering a baby

■ Accurate picking on the spot
■ No need to worry if there is any error

Bleep!
Father feeling
tired all the time

Shinshu University Store, Nagano Prefecture, opened in January 2023

Disseminating
optimum information

Reducing the waiting time forcheckout and the labor for customer support

Enhanced security through the log-in function
We have enhanced the app’s security level with our eyes on the evolution of the point program
and the linkage with various settlement functions.
Introducing the SUGI Shopping Ticket, using the
POSA card scheme
We have expanded the scope of the reward options forpoint card members, thereby accommodating customers’various needs and increasing the convenience.
In the future, we will conduct various trial operations
toward introducing a service in which customers canenjoy shopping with their points.

e timele all thilependaband deyour sm
Closerrce for
fo
a
g
in
Becom

ket

ing tic

Shopp

Closer and dep
endable all thetime
Becoming aforce for you
r smileShopping tic

ketOffering same-day delivery of OTC pharmaceuticals
At some stores, we have begun to provide customers who
have purchased OTC pharmaceuticals and other products
via the SUGI Smartphone Order app with same-day
delivery of the items to their homes. In addition, we
provide customers, whose lifestyles are diversifying, with
the Buy-Online-Pickup-In-Store (BOPIS) experience of
placing an order via the app in their spare time and picking
up the item in a store or a store’s parking area. Moreover,
to expand the scope of the shopping options in line withthe diversification of customers’ lifestyles, we havelaunched “last-mile delivery” (from the final retailing baseto the user’s home). By doing so, we will accommodate
customers’ needs of shopping anytime and anywhere.

Responding to specialty pharmaceuticals
Specialty pharmaceuticals require special temperature
management and side-effect monitoring. This means thatvalue-added logistics, such as specialized coolingwarehouses and special involvement of pharmacists, isnecessary. In the SUGI Pharmacy Group, we have set up a
specialized cooling warehouse and have begun to fillprescriptions for specialty pharmaceuticals at the Nagoya
University Hospital Store.

Safely collecting medical and pharmaceutical products and medical equipment
In line with the needs of customers and patients, we are
increasing the number of stores where infectious waste(e.g., used injection needles) is collected. To prevent suchcollection from leading to needle stick accidents, we havea framework for managing collected waste appropriately.

Ensuring accuracy of ID confirmation based on an
online qualification confirmation system

Providing information on
medical andpharmaceutical products
using digital tools

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality■ Safety ensured by the checking
function*We sell collection boxes to patients and collect the sold boxes.

Installing many more
medicine pick-up lockers

SUGI Smartphone Order
Receive even OTC pharmaceuticals at home59p

y Grouarmac

SUGI PhSUGI Pharma

cy Group

Last-mile delivery launched60

Priority Issues (Issues of Materiality)｜ Healthy Community

Improvement of Convenience in Everyday Life and Support for the Community

Establishment of A Framework Underpinning Local Citizens’ Health in Every Aspect

Providing home-visit prescription dispensing and nursing services as a framework underpinning thecomprehensive community care system“Helping local residents maintain their own lifestyles infamiliar surroundings” is the basic concept of thecomprehensive community care system. To achieve this,
we provide in-home patients with home-visit prescription
dispensing, home-visit nursing, and life support services(product sales and meal support).
Of particular notice is our home-visit prescription
dispensing service by pharmacists, which we launchedahead of our competitors in the industry. We strive toprovide the service to a yearly total of 250,000 people by
the end of FY2025, along with our home-visit nursing andlife support services.
Target number of home-visit
prescription dispensing service users
Yearly total of

250,000 people by the end of FY2025
Target250,000(Unit: person)
250,000
200,000
150,000

146,794

160,411

No. of service stores

Home-visit
prescription No. of users (monthly average)
dispensing
No. of users (yearly total)
No. of service stations
Home-visit
No. of users (monthly average)
nursing
No. of users (yearly total)

Home-visit rehabilitation

565
14,752
176,037
14
1,569
18,847

Opening stores specializing in home-visit prescription
dispensing
We have opened key-stores specializing in home-visit
prescription dispensing and pursuing efficiency and safety. At
the Imaike-Minami Store, they have a special space for homevisit prescription dispensing on the second floor. On top ofcommitting to home-visit prescription dispensing, they are also
engaged in the rental of welfare products that patients can use
while they are hospitalized and even after they are discharged
from the hospital, in cooperation with nearby hospitals.

Home-visit nursing station

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Home-visit Prescription
Dispensing Service Users

Rental of elderly nursing support items

Home-Visit Prescription Dispensing and Home-visit Nursing
Services (as of February 2023)

176,037

100,000
50,0000■ Reflecting customer feedback into management
2020

2021

2022

2025

(FY)

Imaike-Minami Store, Nagoya City, Aichi Prefecture

The Customer Support Office of SUGI Pharmacy receives praises, inquiries, complaints, and other feedback from customers
regarding our products, customer and other services through toll-free calls, online inquiry forms, letters, etc. Such feedback
from customers is shared with the relevant stores as needed, instantly, weekly, or monthly, depending on the case. The
feedback is discussed at store manager meetings attended by those in charge of store operations, sales meetings and board
meetings to identify problems, formulate measures, and incorporate findings into training programs. We, thus, reflect
customer feedback into our management. In addition, to enable customers to solve problems on their own 24 hours a day,
we have introduced an AI chat bot that provides customers with quick access to our frequently-asked-questions (FAQ)
section.
We also check social media posts on us, such as Twitter and Google Map reviews, to further improve our store operations.
Total Number of Inquiries, Praises
and Other Feedback

Number of Complaints

Number of Praises(Unit: case)
120,000(Unit: case)
10,000(Unit: case)
1,000

100,000
80,000106,226108,460

8,000

80,663

5,463

6,000

60,0004,000

40,000

61

4,437

2,000

20,000
0

800

7,229

2020

2021

2022 (FY)

0

600
400

414

387

2020

2021

487

200
2020

2021

2022 (FY)02022 (FY)62

Priority Issues (Issues of Materiality)｜ Healthy Community

Supporting activities by local communities andorganizations■ Donating AEDs to facilities for senior citizens
In the SUGI Pharmacy Group, we have annually donatedAEDs to facilities for senior citizens since FY2013. In
FY2022, we donated AEDs to 38 facilities located in the
Kanto area for the first time. We have so far donated AEDs
to a total of 255 facilities. We also organize seminars forfacility staff to learn how to use the device properly.

Improving access to products and services■ Providing a shopping truck service
Backed by cooperation between local governments andthe SUGI Pharmacy Group, SUGI Pharmacy operates
shopping trucks that go to community centers, including
those for senior citizens, to provide shopping support. By
offering this service, we also strive to contribute toencouraging senior citizens to go out and to help themacquire the habit of exercising.

Health promotion seminars by the Sugiura Memorial Foundation
In cooperation with the SUGI Pharmacy Group, the Sugiural Memorial Foundation annually holds seminars inoperating areas of SUGI Pharmacy nationwide in order to help local residents, including senior citizens and theirfamilies, understand about the latest medical treatment and disease prevention and feel more keenly theimportance of early detection and treatment of disease, as well as preventive care against dementia and othergeriatric diseases.

Health Education and Support for Patients in the Community
Providing specific health guidance at stores in local
communities

Health event by a nationally certified dietician■ Background of the establishment of the Sugiura Memorial Foundation
In September 2011, when the SUGI Pharmacy Group celebrated the 35th anniversary of its establishment, theSugiura Community Healthcare Promotion Foundation was established, with Hirokazu Sugiura and Akiko Sugiura,
who had commenced SUGI Pharmacy, as the organization’s founders, in the hope that they could reciprocate thesupport extended by local residents so far and be of use as much as possible by contributing to society. In July
2015, the foundation was certified as a public service corporation and renamed the Sugiura Memorial Foundation.
Not only does it continue to support individuals and organizations that work toward realizing a comprehensive
community care system, but the foundation also contributes to society extensively in the fields of dementia andpreventive care.

Providing support for breast cancer patients
As part of the Pink Ribbon Campaign for raising the publicawareness of early detection, early diagnosis and early
treatment of breast cancer, we donated medical hair wigs
to 100 breast cancer patients.

In-store health guidance service in which a nationallycertified dietician gives suggestions on the prevention
and improvement of metabolic syndrome

Event on women’s healthWigs donated to Total of 1,000

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality■H ospitality Service – shopping support service to ensure that everybody can enjoy shopping
even if they are old or sickThis service originates from a request of patients receiving medical treatment at home or nursing
facilities for senior citizens and their families who would like to have not only medicine but also daily
life items delivered. Covering a wide range of goods necessary for daily lives, from sanitary items tofood, this service contributes to an even better QOL for those who cannot visit physical stores.

■ Organizing wig sales events
We periodically organized wig sales events at our flagshipstores. By featuring counseling well-tuned for customers
from wig makers at the sales venues, the events helped
the customers feel close to wigs. While ensuring sales, we
contributed to increasing the QOL of patients sufferingfrom an adverse effect of anticancer drug treatment.

patients in the past 10 years

Specific health guidance
Provided in FY2022

2,880 people
Calling for applicants on our website

6364

Priority Issues (Issues of Materiality)｜ Healthy Community

Improvement of Therapeutic Effects for Patients
Improving medication adherence by providing
medication follow-up
We have adopted a preliminary counseling style in whichpharmacists provide medication instruction to patients
when they present prescriptions at the counter. This
enables pharmacists to concentrate on communication
with customers, which is their primary role. In addition todetailed medication instruction to patients at the store,
pharmacists also provide medication follow-up via asmartphone app after the patients return home and takethe drugs, thus allowing them to deal with their problems
anytime, anywhere. In FY2022, the number of medication
follow-up cases reached 760,000. By reinforcing theactivity, we would like to improve medication adherence
and therapeutic effects.

Establishing a framework for supporting patients byusing our Family Pharmacy support app
Based on the cooperation between our prescription
dispensing and merchandising sectors, we haveencouraged customers who have purchased merchandise
to download our Family Pharmacy support app, with thetotal number of downloads reaching 620,000.
Consequently, 160,000 prescriptions (approximately 15%of the total) are sent per month through the app, leading
to improved convenience for patients. We will continue toreinforce the support framework for patients through theapp.

Comprehensive Agreements Concluded in FY2022
Toyohashi City, Aichi Prefecture

February 2, 2022

Himeji City, Hyogo Prefecture

March 23, 2022

Togo Town, Aichi Prefecture

August 19, 2022

Kakamigahara City, Gifu Prefecture

October 6, 2022

Inuyama City, Aichi Prefecture

November 29, 2022

Mino City, Osaka Prefecture

December 13, 2022

Higashiura Town, Aichi Prefecture

January 6, 2023

Kuwana City, Mie Prefecture

February 15, 2023

*The list above includes agreements on health promotion.

BCP training to prepare for large-scale disasters
We will improve our framework to quickly establish aminimum level of environments for prescription
dispensing and merchandizing at the time of a large-scaledisaster. Recently, we have ensured that prefabricateddispensing rooms, temporary tents, and power generators
will be available at the time of a disaster. In the future, wewill implement drills at physical stores in cooperation withlocal governments.

Mobile battery rental service introduced at all stores
We have introduced
Charge Spot, a mobile
battery rental service, at
all stores. At the time ofpower failure due to an
earthquake or otherdisasters, we will allow
our batteries to be used
free of charge, thereby
contributing toestablishing a robust
society in areas aroundour stores.

Current and Target Percentages of Stores with AEDs

As of the end of February 2023

Approx. 14.7 of all the stores

Reinforcing alliance toward preventing polypharmacy
Polypharmacy (multiple medication use causing harmful effects) is a social issue primarily related to senior citizens. To
prevent this, we are undertaking joint research with the National Center for Geriatrics and Gerontology on an operation
model featuring a local alliance involving doctors and pharmacists at hospitals and pharmacists at pharmacies. Usually, it isdifficult to address polypharmacy in outpatients and in-home patients after their discharge from hospital. By reinforcing
cooperation between hospitals and pharmacies, however, we are striving to eliminate polypharmacy and consequently toincrease the effectiveness and safety of medical therapy.

Establishment of a Robust Society in Terms of Disaster Risk Reduction and Crime Prevention
Supporting local disaster countermeasures and disaster risk reduction efforts
We are reinforcing various initiatives to address challenges of local communities by concluding comprehensive agreementswith local governments. For local disaster countermeasures, we provide support by offering disaster relief goods andallowing our stores to be used as evacuation sites at times of emergency for evacuees and stranded commuters. For local
disaster risk reduction efforts, we cooperate with local communities in implementing disaster drills.
Contribution to the enhancement ofcommunity safety and security
Total number of agreements

65

By the end of FY2025

Approx. 20% of all the stores (target)

Local contribution by stockpiling disaster relief goods
Together with Fujita Academy, Sugi Pharmacy Co., Ltd.
has begun to stockpile disaster relief goods at the former
Futamura Child Center, Toyoake City, as part of theactivities of the joint research seminar of the community
healthcare cooperation.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Installing AEDs at many more stores
Mainly from among stores located in regions whose
governments request us to install AEDs, we select storeswith frequent visits of senior citizens and other customers.
The number of our stores equipped with AEDs is
increasing.
As of the end of February
2023, we had installed
AEDs at 231 stores (approx.
14.7% of the total), and wewill increase the rate to
20% by the end of FY2025.

Receiving refugees from Ukraine
Cooperating with Obu City, Aichi Prefecture, in supporting
refugees from Ukraine, we have begun to provide
employment support at the Obu Logistics Center of the
SUGI Pharmacy Group. Deeply distressed and concerned
about the current situation in Ukraine, we sincerely hopethat people in the country will regain safe and peaceful
lives as soon as possible. In the SUGI Pharmacy Group, we
will continue to commit to the health and safety of people
in Ukraine and those who have suffered damage.

Agreements by
FY202284

Comprehensive agreements

26

Watching-over agreements

11

Disaster risk reduction agreements

39

Agreements on the environment, etc.

866

We will develop systems and promote initiatives to fulfill our responsibilities for the entire supply chain. Moreover, through the procurementand development of safe and secure products, we will contribute to facilitating the rich lifestyles of people in local communities.

Priority Issues [Issues of Materiality]

Sustainable Business Partnerships
Contribution to Rich Lifestyles through Products
Focusing on the development of high-value-added products

Developing unique products in FY 2022: T3

The SUGI Pharmacy Group will strengthen the development ofhigh-quality, high-functionality, and high-value-added private brandproducts that are equivalent to national brand products in terms of efficacy, quality, ease of use, and price. We aim to resolve the worries andproblems of our customers through these products.

“User friendly”

TOP TO TOE“Safe to use”

“Reasonable price”“Convenience goods”“Can solve your problems”

Classification of private brand products

Loyal

Products that only SUGI Pharmacy can produce by utilizing
patented technologies in coordination with universities
and other companies

MiddleProducts that impress with new awareness and quality

Basic

Standard quality products for reasonable prices

To take care of me fromdown to my toes

“Have sufficient functions”

Prieclat is a skincare product series celebrating the third anniversary
since its launch. It embodies our desire to provide “skincare that makes
you truly feel the difference” under the concept of the “power of penetration derived to create shining skin.” With the power of penetration
enabled by SNDP® technology* that brings deep into the skin layers various ingredients that were previously difficult to absorb, Prieclat products help you develop moisturized, firm and shining skin. The latest
product in the series Prieclat U, which was launched in April 2022, arosefrom the concept and keyword of “gender neutrality.” By rejecting
broad categorization based solely on gender, we offer new value basedon a selection of products suited to the skin condition of each individual.
Through such products, we will work to promote diversity and help
achieve the SDGs.
* A technology developed in collaboration with universities and other organizations, which
can deliver water-soluble and high-molecular components to every corner of the stratum
corneum by nano-dispersing them over oil-based and water-soluble materials

The sales results since its launch in April 2022 of
the Prieclat U series, which was developed under
the theme of gender neutrality, show that approximately 20% of customers who have purchased the product are men. This tendency,
which is not observed in other basic cosmetics,
suggests that the purchasers have understoodthe development theme of the product quite
well.

Men account for
20% of sales!
Men

20%
Women

80%
Gender Composition of Customers
Who Purchased Prieclat U,
a Gender Neutral Product67

Based on SUGI Pharmacy’s proprietary SNDP® penetration technology, we have developed T3 brand products for all people
who want to become beautiful TOP TO TOE, from one strand of their hair down to their toes.
This is a brand to propose new beauty care focusing on all body parts, the hair, nails, eyelashes, heels, lips, hands, legs, etc.
The SUGI Pharmacy Group aims to contribute to rich lifestyles of customers in each local community through the sale ofunique products that it develops.

Resolution of food issues through collaboration between Nissin Food Products’ “Kanzen Meshi” series and
SUGI Pharmacy’s registered dietitians
Nissin Food Products’ “Kanzen Meshi (Complete Food)” series is a brand that aims to resolve modern food issues in pursuitof a perfect balance between deliciousness and 33 nutrients identified in the Dietary Reference Intakes for Japanese published by the Ministry of Health, Labour and Welfare with the appropriate amount of calories, salt, sugar, lipid, protein, etc.,
without changing the appearance and deliciousness of regular food.
SUGI Pharmacy, by positioning “Kanzen Meshi” as one of the important strategic products in its Total Healthcare Strategy, sells them nationwide at 1,150 stores while advertising them in specially designated spaces and digital signage and introducing them through customer services by registered dietitians at the stores.
We also provide information on “Kanzen Meshi” to 10 million
users of the SUGI Pharmacy App. In the future, we plan to maintain direct communication with customers with potential needs
for “Kanzen Meshi” based on the purchase history and action
history in the app. Going forward, SUGI Pharmacy will introduce“Kanzen Meshi” to health insurance associations and medical
institutions with which it maintains close relationship while introducing “Kanzen Meshi,” which is as delicious as regular food,to the company cafeteria at its head office to support the healthy
diet and improve the well-being of employees working for theCompany.
SUGI Pharmacy and Nissin Food Products will continue tostrengthen initiatives that utilize “Kanzen Meshi” in order tosupport the healthy lives of our customers going forward.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

A product developed under the theme of gender neutrality

Sales results suggestive of sympathy with the concept

one strand of hair

68

Priority Issues [Issues of Materiality]｜ Sustainable Business Partnerships

Maintenance of Product Safety and Security

Initiatives to Address Human Rights Issues

Establishing a product quality assurance system

Developing and promoting eco-friendly products

We strengthen our quality control systems in order to develop safe, high-quality private brand products. Specifically, we requested that all our business partners involved in
the development of private brand products perform selfchecks based on specification documents prepared by theGroup, and the results were converted to evaluation
scores. We request our business partners to improve on
problematic items and conduct on-site audits to ascertain
improvements. We will continue to maintain high quality
by building an appropriate arms-length relationship withour business partners.

Since FY 2021, we have been developing eco-friendly private brand products. For their materials, we have adopted
those that will help environmental preservation, such as
FSC certified paper, biomass plastic, and vegetableoil ink. Our target is to increase
the
ratio
of
eco-friendly products to all
private brand products to
30% by FY 2030 (from12.2% in FY 2022).
Developing products using
FSC certified paper

Actively collecting and utilizing customer feedback
In reference to customer feedback, such as “I wish there
was a product of this kind” and “I want this part of the
product to be improved,” we will endeavor to develop
products that satisfy customer needs.

Percentage of eco-friendly
private brand products
FY 2030 target:

30%

（％）
15
Collecting opinionsfrom customers
through the SUGI
Pharmacy App

Disclosing information
appropriately
In order to ensure that our private brand products are usedsafely and securely, we have increased the number of items weprovide with disclosure of ingredients, nutrients, allergens, andchemical-free status.

for human rights

Having understood the human rights as stipulated in theInternational Bill of Human Rights and the ILO Declaration
on Fundamental Principles and Rights at Work and having
endorsed the Guiding Principles on Business and Human
Rights adopted by the United Nations and other international norms, the SUGI Pharmacy Group will implement
initiatives to respect human rights in accordance withthese international norms. In addition, the SUGI Pharmacy
Group will comply with the laws and regulations of thecountries and regions in which it conducts business activities. If there is an inconsistency between internationallyrecognized principles of human rights and the laws andregulations of the countries and regions in which we conduct business activities, we will explore a means to respect
the internationally recognized principles of human rights
to the maximum extent.
2 Governance and promotion system

12.2

12

1 E
 ndorsement of international norms and respect

The SUGI Pharmacy Group will promote initiatives to respect human rights through the Sustainability Committee,
an advisory body to the Representative Director & President.

10.2

9

3 Human rights due diligence

Based on the Guiding Principles on Business and Human
Rights approved by the United Nations, the SUGI Pharmacy Group will conduct human rights due diligence in order
to identify, prevent, and mitigate any adverse impact onhuman rights and explain measures to address it.
Regarding the evaluation of the supply chain (business
partners), contract manufacturers of our internally developed products have conducted self-checks based onquestionnaire sheets in response to our request on a priority basis. We will also implement collaborative initiatives
for improvement in steps through site visits to the offices
and plants of our business partners and/or audits of them.

4 Engagement with stakeholders

The SUGI Pharmacy Group strives to understand, address,
and resolve human rights issues while maintaining ongoing dialogue with relevant stakeholders in order to address human rights issues from the perspective of stakeholders that have influence on them.

6

Human rights promotion system
30Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Percentage of eco-friendly private brand products*

The SUGI Pharmacy Group conducts business activities aiming to contribute to a society full of smiles by supporting healthy
and rich lifestyles of people in local communities.
In order to practice its management philosophy “We contribute to local communities through our sincere, kind services;We help many more people smile, hoping for the happiness of each employee, hoping for the happiness of each customer,
and hoping for the happiness of everybody,” the SUGI Pharmacy Group has established a human rights policy to promote
initiatives to address human rights issues. *An excerpt from the Human Rights Policy is shown below:

Person in Charge
Representative Director & President, SUGI Holdings Co., Ltd.

0
2020

2021

2022

(FY)

Secretariat* Percentage of eco-friendly products to all private brand products

Establishment of a Responsible Supply Chain Management System
Smooth communication with business partners
To achieve coexistence and co-prosperity with our business partners
and address various social challenges, we hold briefing sessions to explain the annual policies and plans of the SUGI Pharmacy Group to ourbusiness partners. By promoting their understanding and cooperation,
we expect to receive their support for our business, such as improvement of products and services and streamlining of operations, as well as
advancing environmental conservation and other initiatives to realize asustainable society.

President’s Office, Human Resources Department,
SUGI Holdings Co., Ltd.

Department

Roles

Human Resources
Department● Update and determine various operations in accordance with the Human Rights Policy

Legal Affairs
Office● Coordinate with lawyers and propose changes in policies and operations based on laws
● Draft, propose, and update on a timely basis the Group’s human rights policy

President’s
OfficeHuman
Resource
Development
Department

Product
Development
Department● Monitor the progress in and continuously promote the evaluation and operational

improvement of human rights actions● Manage relationships with various stakeholders● Provide regular human rights education to employees● Conduct contract manufacturer survey, aggregate and evaluate data, conduct corporate

audits, and request improvements

Recently held briefing sessions to explain our policies andplans to 421 attendees from 269 business partners

69

70

Priority Issues [Issues of Materiality]｜ Sustainable Business Partnerships

5 R eporting contact and complaints handling (development of a relief mechanism to address human rights

violations)

The SUGI Pharmacy Group will focus on addressing the following issues:

For the purpose of preventing and correcting systematic or individual violation of laws and regulations or misconduct, theSUGI Pharmacy Group has established an internal reporting system and operates it in accordance with applicable internal
regulations. The Group has established a compliance consultation channel as an internal reporting channel within theGroup and at an external law firm. Through this channel, employees can report their concerns anonymously or otherwise.
Any disadvantageous treatment of reporters is prohibited. Also for external stakeholders, the Group has established a customer consultation desk to secure their access to appropriate relief and will create a relief mechanism for any human rights
violations against all stakeholders.

SUGI Pharmacy Group’s internal reporting system
In order to increase the recognition and understanding of the abovementioned
system, we have ensured that contact information for the system is displayed at ourstores and offices, and we have also distributed the Compliance and Disaster
Countermeasure Pocket Book. By such promotional activities, we endeavor to establish a sound reporting system. The Internal Reporting System was renamed“Anything Consultation Call Service for All Workplace Concerns” in FY 2021 to create an environment where employees feel able to use it more freely.

SUGI Pharmacy Group

Compliance and Disaster
Countermeasure
Pocket Book
Closer and dependable all the time
Becoming a force for your smile

Number of calls to “Anything Consultation Call
Service for All Workplace Concerns”(Number of calls)

Number of calls to “Anything Consultation Call Service
for All Workplace Concerns” (breakdown)

2,000

1,585

1,500

1,254
1,000

0

1.4%
Total numberof reports

1585

Lack of communication
2018

2019

2020

2021

2022

(FY)

61.6%

6 Education and enlightenment

8 Cooperation with internal and external experts

The SUGI Pharmacy Group provides all employees witheducation and enlightenment opportunities that are necessary for the implementation of the Policy.

The SUGI Pharmacy Group will implement the Policy, including human rights due diligence and the creation of arelief mechanism, in cooperation with internal and external experts and based on their expert insights.

7 Monitoring and information disclosure③ Provision of a safe, hygienic, and healthy working●
environment
The Group will strive to provide a safe, hygienic, andhealthy working environment to ensure that employees
can work actively in a safe and rewarding workplace.
④ Respect for the right to social security●
The Group respects the right to social security
provided under health insurance, pension, and social
welfare programs.
⑤ Prohibition of inhumane treatment●
The Group will not engage in and prohibits any
inhumane treatment of people at the workplace,including harassment (sexual harassment, power
harassment, maternity harassment, moral harassment,etc.) that gives mental distress to and offends others,
producing negative impact on the work environment.
⑥ Prohibition of forced labor and human trafficking●
The Group prohibits forced labor and human trafficking.

⑧ Respect for freedom of association●
The Group will not violate the freedom of associationof employees.

430* Power harassment, sexual harassment,
and other harassment② Proper management of working hours●
The Group will manage working hours and rest
periods properly and work to establish a work
schedule that does not rely on overtime hours.

⑦ Prohibition of child labor●
The Group will not employ anyone under the legal
minimum working age.

33.9%

The SUGI Pharmacy Group will monitor the initiatives toaddress human rights issues on an ongoing basis and correct them as necessary. The Group will also regularly disclose information on its initiatives to address human rights
both internally and externally.

71

Fraud

3.1%
Consultation
requests andother matters

832

269

Harassment*① Securing adequate wages●
The Group will comply with statutory minimum
wages and will not unfairly reduce wages.

⑨ Prohibition of discrimination against foreign workers●
The Group prohibits discrimination against foreign
workers in terms of wages, working hours, and otherworking conditions on the grounds of their nationality.
⑩ Prevention of defamation and invasion of privacy●
relating to AI and other technologies
The Group will prevent defamation, invasion of privacy,
and discrimination that go with the widespread use of
the Internet, ICT, and AI.
⑪ Protection of privacy and personal information●
The Group will not arbitrary, unduly, or illegally intervenein the private life, family, residence, or communicationof people or disclose factual information about theirprivate lives, non-public information, or any otherinformation that an ordinary person would not desire
to be disclosed. In particular, the Group will not acquire,
store, publish, or provide to a third party any personal
information without obtaining its owner’s consent.

⑫ Securing quality and safety of products and●services and consumers’ safety and right to know
The Group will strive to improve the quality and safetyof products and services and prevent any accident inorder to secure true customer satisfaction.
In the event of any accident or problem relating
to its products and services, the Group will collectaccurate facts and act promptly regardless of thesignificance of the matter. In addition, the Group
does not tolerate any misrepresentation in productlabeling and respects consumers’ right to know.
⑬ Prohibition of discrimination●
The Group will not in any event engage in and does
not tolerate any discrimination based on race, gender,
religion, creed, nationality, bodily features, disease,educational background, age, or other unreasonablegrounds.
⑭ Prohibition of gender discrimination●
The Group prohibits discrimination against minorities
in terms of sexual orientation or gender identity, suchas LGBT.
⑮ Respect for freedom of expression●
The Group will not violate people’s rights to have,seek, receive, and communicate an opinion without
being interfered with by others.
⑯ Respect for the rights of indigenous peoples and●local residents
In conducting business activities, the Group will not
violate the rights of indigenous peoples and local
residents.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Creating an open work environment in which
employees can seek consultation appropriately
for any workplace concerns!

500

9 Initiatives to address human rights issues⑰ Consideration for the environment and climate●changeIn conducting business activities, the Group will beconsiderate to the environment and climate change
so as not to destroy the environment or cause air, soil,
or water pollution.
⑱ Respect for intellectual property rights●
The Group will not violate the intellectual property
rights of individuals or other companies.
⑲ Prohibition of bribery and corruption●
The Group prohibits its officers and employees fromproviding or receiving gifts, loans, rewards, remuneration,or other benefits as an incentive to induce acts of others
that fall under a fraud, illegal act, or a breach of trust, andfrom using delegated authority for their own personal
benefits, in the course of business activities.
⑳ Respect for human rights in the supply chain●
The Group does not tolerate and will strive to prevent
any human rights violations arising in its supply chain.

72

Priority Issues [Issues of Materiality]

Contribution to the Global Environment

Participation in the demand response verification project undertaken by SB Energy Corp.:
We distributed coupons that can be used at some of the SUGI Pharmacy stores in response to tight power
supply and demand balance

Realization of a Decarbonized Society
Shifting to renewable energy

Reducing the consumption of fossil fuels

We will promote the introduction of a solar panel-based
power generation system into stores to realize the shift torenewable energy. In FY 2022, we planned to introduce
renewable energy by using on-site corporate PPAs (third
party ownership), and the introduction is already underway in a phased manner. In order to achieve the CO2 reduction target for FY 2030, we will actively use not only
on-site PPAs but also off-site PPAs and self-consignment
arrangements.

In order to reduce the consumption of fossil fuels by company cars, we have started to introduce electronic vehicles(EVs). We will continue to expand the introduction of EVs,
as well as hybrid vehicles. We have also introduced amechanism to monitor the driving status of vehicles, suchas sudden braking and starting, to seek safe driving andthe reduction of fossil fuel consumption at the same time.

Number of stores thathave installed solar panels48(As of March 31, 2023)

1,000

72

1,004

97

98

81

1,126

SUGI Pharmacy
RetailersCompression
processing

Recycling

Beverage
manufacturers

99% (%)
100

Collection of used
PET bottles at shops

Volume reductionResinregeneration

Used as bottlesof new products

80

Deliver them to
distribution centers

1,353

1,454

1,552 60
40

500
0

Flow
Flowfrom
fromcollection
collectionto
torecycling
recycling

Product sales

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

1,500

Resource recycling initiatives for plastics■ Start of bottle-to-bottle, horizontal recycling of PET bottles

Customers

Stores with LED lighting(No. of stores)
2,000

In order to reduce household power consumption at the time of tight power supply and demand balance, the SUGI Pharmacy Group has participated in the demand response verification project undertaken by SB Energy Corp. (hereinafter, “SBEnergy”), which is based on behavior modification of people and utilizes yOUR, a web application program to facilitate ashift to a low-carbon lifestyle.
Through coordination with SB Energy, users are guided to some of the SUGI Pharmacy stores as destinations for goingout campaigns of yOUR. In addition, we cooperated with SB Energy to reduce household power consumption through the
distribution of coupons that can be used at stores that users participating in yOUR have checked in.

Realization of a Recycling-based Society

Introducing energy saving equipment andreducing power consumption (energy saving)
We are working to reduce power consumption by closely
monitoring temperatures and regularly clearing AC equipment at stores as well as the headquarters and other offices. We have also been working to replace conventional
lighting with LEDs at all our stores since FY 2013. We will
also replace old LEDs in due course in order to reduce
power consumption and CO2 emissions further.

Solar power generation panels installed on the rooftop of Fujimi Store in
Kariya City, Aichi Prefecture

A sustainable global environment is essential for us to continue our business and store operations. Therefore, we have been promoting environmental and other measures to realize a recycling-based society and adecarbonized society.

20
2018

2019

2020

2021

0
2022 (FY)

Sold nationwide

Submission of a declaration of voluntary action for the white logistics promotion campaign
We have endorsed the purport of the “white logistics” promotion campaign advocated by the Ministry of Land, Infrastructure,
Transport and Tourism, the Ministry of Economy, Trade and Industry, and the Ministry of Agriculture, Forestry and Fisheries,
and we submitted a voluntary action declaration on August 1, 2021 to work toward the realization of sustainable logistics.

Specific actions set forth in SUGI Pharmacy’s voluntary action declaration
Action items

Details of efforts

Logistics improvement
proposals and cooperation

If there are any requests from business partners or logistics companies regarding manual unloading by truck
drivers, the rationalization of ancillary work, etc., we will diligently discuss the matters with them and actively
propose solutions.

Introduction of reservation
reception system

The Company will reduce truck drivers’ waiting time by introducing a truck reservation reception system.

Use of pallets, etc.

The Company will reduce cargo handling time by using such items as pallets, folding containers, and returnable
boxes.

Provision of receiving/shipping We will secure adequate work hours for on-site workers and truck drivers to allow them to complete their work
information from businessand delivery without undue time constraints in order to promote the rationalization of logistics by requesting
partners in advancebusiness partners to share quantity information and data with the distribution center in advance.

73

Leveling order quantity

To reduce cargo waiting time and improve operation efficiency, the Company will level out the difference inbusyness, such as by equalizing the quantity of cargo per day and month.

Promotion of documented
transportation contracts

When selecting a logistics company to contract with, the Company will promote legal compliance by mutuallyconfirming relevant laws and regulations.

The SUGI Pharmacy Group, in collaboration with its supply
chain companies, started a bottle-to-bottle, horizontal recycling initiative in which used PET bottles are collected
and recycled as new PET bottles. In FY 2022, more than 10
stores in Aichi and Saitama Prefectures served as bases for
PET bottle collection. In and after FY 2023, stores all overJapan will participate in this initiative.
In this initiative, we install new recycling boxes at SUGI
Pharmacy stores and aim to collect used PET bottles ofgood quality, meaning that the labeling and the cap havebeen removed and the bottle has been washed. The bottles collected at a store are transported to a SUGI Pharmacy distribution center by a truck on the way back from thedelivery of merchandise to the SUGI Pharmacy store. The
bottles are then processed for volume reduction by a company contracted for compression processing and for resin

A person using a“Bottle Squash”
volume reduction
machine
The machine grants
SUGI Pharmacy points
according to the volume
of collected bottles andautomatically screens
only those PET bottles
that do not contain any
residue.
Customers canparticipate in resource
recycling enjoyably. (Themachine has been
introduced to limited
stores.)74

Priority Issues [Issues of Materiality]｜ Contribution to the Global Environment

regeneration by a recycler. After that, ourpartner beverage manufacturers manufacture beverage products using the recycled
PET bottles as their containers.
Going forward, we will work to improvethe efficiency of the collection scheme andreduce the cost of recycled PET resins by encouraging more supply chain companies toparticipate in collection.

Strengthening resource recycling initiatives for clothing and textile goods■ Recycling of used uniforms as display fixtures■ Roles as a collection base for textiles and clothing

The SUGI Pharmacy Group has introduced PANEKO@, asustainable board made from discarded clothing. Used
uniforms of store employees are collected and recycled as
display fixtures made of PANEKO@.

In collaboration with Suzuroku Co., Ltd. based in Okazaki
City, Aichi Prefecture, we have started the collection ofclothing at a SUGI Pharmacy store in Okazaki City.

Bottle-to-bottle enlightenment poster■P articipation in the verification tests for a medicine sheet
recycling program

Two stores of the SUGI Pharmacy Group in Yokohama City
have participated as collection bases in Japan’s first consumer participation type used medicine sheet (PTP sheet)
recycling program organized by Daiichi Sankyo Healthcare Co., Ltd. and started jointly with TerraCycle Japan LLC
in Yokohama City.
In Japan, approximately between 10,000 to 20,000 tonsof medicine sheets are produced a year. As they are indispensable packaging materials for pharmaceuticals, it isdifficult to reduce their consumption, and the consumption is expected to increase going forward with the ad-vancement of the aging society. However, few consumers
recognize them as a recyclable recourse, and the collection volume is small. Therefore, unlike PET bottles, recycling mechanisms for medicine sheets have not been established.
By serving as collection bases for medicine sheets ofprescription drugs and OTC pharmaceuticals sold and/or
used by the SUGI Pharmacy Group, we will increase theawareness of them as a recyclable resource among customers and patients and contribute to the creation of amechanism to recycle them as a resource.

■ Promoting temaedori (taking from the one infront)■ Strengthening the promotion of selling out offoods whose best-before date is approaching

Since FY 2021, we have been implementing the “temaedori” (taking from the one in front) initiative together
with the government agencies concerned and JACDS
member companies.
This initiative is aimed at reducing food waste by encouraging customers who plan to eat food right away tochoose from and purchase products in the front.
At the same time, we will promote the initiative to reduce the food-loss-and-waste ratio through the promotion of selling out by revising food disposal standards, thereduction of excess inventory by revising inventory standards for bread, and the optimization of inventory by introducing automatic order placement for food.

By introducing a closeout sticker issuing machine, we haveincreased productivity by reducing the burden of in-store
work to sell out of foods whose best-before date is approaching. Through this effort, we have strengthened thepromotion of selling out of foods whose best-before dateis approaching.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Strengthening resource recycling initiatives for food (food loss reduction)■ Donation to food banks
We have started the donation, to food banks, of foods
that cannot be sold due to an approaching best-before
date or damaged packaging although it is safe to eat
them. As these foods are provided free of charge to facilities, groups, and needy households that need them, we
can reduce food loss and waste while solving social issues.

Reducing the use of plastic
We continue to charge for plastic checkout bags to reduce their use.

No. and weight of used checkout bags
FY 2019
No. of used bags (unit: 1 million bags)
Weight of used bags (unit: ton)

FY 2020

FY 2021

262

144

43

65

2,000

1,100

328

507

A reduction of about 75%

75

FY 2022

Start of the donation of rice to Second Harvest Nagoya

76

Priority Issues [Issues of Materiality]｜ Contribution to the Global Environment

Establishment of an internal organization aimed atinventory optimization
In FY 2022, aiming at optimizing inventories and reducing
returns and related waste, we established an organizationin charge of distributing inventories (Inventory Distribution
Section, Product Management Department) and bolstered efforts. As a result, inventory turnover improved byabout four days to secure profits while helping to resolve
social issues.
Specific actions■ Meticulously adjusted the settings for automatic order placement to ensure that inventory levels match sales volume■ Investigated and analyzed the uneven distribution of inventories and requested stores tomove them appropriately

Health × Biodiversity × Digital
We held a “SUGI Green
Walk Challenge” event,which
featured
SUGIsapo Walk, a pedometer app. We areworking on the popularization and enlightenment of biodiversity
through donations toenvironmental groups
in proportion to thenumber of people whohave achieved certain
step counts in walking
rallies and the provisionof information on endangered species of animals.

Reducing marine plastic waste by installing
water stations

Responses to TCFD recommendations
The SUGI Pharmacy Group endorsed the recommendations in
the TCFD’s final report in December 2021. From now on, we will
disclose information in accordance with the framework recommended by the TCFD (governance, strategy, risk management,
and metrics and targets) and promote initiatives on climatechange issues to contribute to the realization of a sustainable
society.

Governance and risk management
Responding to climate-related risks and opportunities is
one of the key ESG issues we should tackle with concerted group-wide efforts. Based on this recognition, we
have established a Sustainability Committee (whichmeets at least twice a year) as an advisory body to theRepresentative Director & President for the purpose ofpromoting sustainability management, including the deliberation and determination of basic policies and necessary matters relating to such responses.
The Sustainability Committee holds meetings attended
by directors in charge of the main divisions and conducts
the planning of measures to address climate-related is-sues, management of progress toward targets, materiality
assessment of risks, priority setting, and the determination of response measures to be taken before making reports and recommendations to the Representative
Director & President. We have also established a Risk
Committee within the Sustainability Committee as a bodyto manage relevant risks and execute tasks in accordancewith the instructions of the Sustainability Committee.
The Sustainability Committee is supervised by the Boardof Directors, which receives reports and issues instructions
as necessary on important matters deliberated by theCommittee to ensure that its decisions are free from errors.

Strategy
Scenario analysis
Visualization of water consumption aimed atconserving water resources
In FY 2022, we started the visualization of water consumption as part of efforts to conserve water resourcesin our business activities. We will implement effective
measures to conserve water resources going forward by
analyzing changes in water consumption over time andcomparing and analyzing water consumption among
different store types (in terms of size and services).

Water consumption*

755,045 m3 per year
* Calculated as an estimate by dividing the amount of water
charge by unit charge rate (Obu City, Aichi).

We have assessed risks and opportunities that may have an impact on the Group in reference to, among others, the 1.5℃
and 4℃ scenarios identified in the IPCC’s Fifth Assessment Report, the IEA WEO NZE scenario, etc., after collecting various
parameters based on future forecasts.

■ CO2 emissions (t-CO2) under the assumption of
no positive action and when targets are met
Item

2030

CO2 emissions under theassumption of no positive
action225,689

Emissions when 50% reduction
in CO2 emissions per store fromFY 2014 has been achieved

141,890* An emission factor of 0.000433 (t-CO2/kWh; national average factor for
FY 2022) was used.
* A net increase of 100 per year in the number of stores is assumed.
*E lectric power consumption at most recently opened stores was used.
(Electric power consumption is higher at these stores.)■ Scope of analysis
Business: Drugstore business in Japan
Scope: Stores, procurement, logistics, and consumer
behavior
Period: Present through 2030

■ Adopted scenarios■■

77* T CFD stands for the Task Force on Climate-related Financial
Disclosures. The TCFD was established by the Financial Stability
Board at the request of the G20 to discuss how climate-related information disclosures and financial institutions’ responses shouldbe.

IEA WEO2022 NZE (1.5℃)
IPCC 5th Assessment Report, etc.

Assessment results■ 1.5℃ scenario

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

We have endorsed the “work together to install water
stations” challenge of the Sutehaji Project, which will be
carried out by co-creation partners of TEAM EXPO 2025
(Expo 2025 Osaka, Kansai), and participated in the project as a co-creation partner. Through the installation ofwater stations, we aim to contribute to the reduction of
PET bottle use and marine plastic waste.

Information Disclosure Based on TCFD Recommendations

We expect that various transition risks will increase. In this
scenario, we expect that countermeasures against climate-related issues will be strengthened and decarbonization will progress. As a result, we expect increases in expenditure due to the introduction and higher rates of carbon
taxes and the widespread use of renewable energy.

■ 4℃ scenario
We expect that physical risks, such as extreme weather, will
increase. We expect damage to store operations due to thefrequency and intensification of natural disasters caused byclimate change. As a result, we expect increases in expenditure for repairs and decreases in sales due to temporary
store closures.

■ Common scenario (1.5℃ and 4℃)
We expect that changes in consumer preferences and behavior will be influenced by temperature rises. If we are unable to develop and display products that meet customer
needs or effectively market services that meet customer
needs, opportunity losses may arise. On the other hand, we
could take advantage of increases in opportunities if we
can capture such needs.
78Priority Issues [Issues of Materiality]｜ Contribution to the Global Environment

Assessment of risks and opportunities
Category

Metrics and targets

Assessment
Assessment in the world of +1.5℃

Assessment in the world of +4℃

Risk: Expenditure will increase following the introduction of carbon pricing.
Transition risks and opportunities

Policies andregulations

Carbon pricing

Risk: Expenditure will increase due to increases in production and procurement
costs of products and services throughout the supply chain.

Control of CFCs

Risk: Expenditure will increase due to the introduction of CFC-free equipment atstores.

Technology

Logistics
efficiency

Opportunity: Expenditure will decrease as a result of more efficient logistics.

MarketElectricity prices Risk: Expenditure will increase due to rises in electricity prices.

Reputation

Chronic

Current status of the GroupYearー

Risk: Sales will decrease due to a delay in the provision of eco-friendly products
and services.
Opportunity: S ales will increase as we develop private brand products that meetthe needs for sustainable consumption.

EV charging

Opportunity: T he frequency of visits to stores will increase as we enhance thecharging environment.

ー

Risk: Sales will decrease to a limited extent due to temporary store closures andlower customer traffic.

Risk: Sales will decrease significantly due to increases in
temporary store closures and lower customer trafficcaused by physical damage to stores.

ー

Risk: Expenditure will increase as insurance premiums
increase in response to increases in natural disasters.

Averagetemperature
Production andprocurement

Opportunity: Sales will increase as we develop private
brand products that meet the needs forsustainable consumption.

Opportunity: S ales of disaster prevention and stockpiling-related products will
increase.

Opportunity: Sales of disaster prevention and stockpilingrelated products will increase.
Risk: Repair expenses will increase due to physical damage
to stores.

Risk: AC-related expenditure will increase as the temperature rises.

Risk: AC-related expenditure will increase as thetemperature rises.
Risk: Expenditure will increase as purchase costs increase
due to lower production of raw materials.

ー■E xcerpt from business impact assessment
based on scenario analysis
Trial calculation of expenditure arising fromtransition risk (carbon taxes)
Trial calculation of the impact when 50% reduction in
CO2 emission from FY 2014 is achieved in FY 2030. The
amount of carbon taxes in 2030 is expected to be approximately 2.7 billion yen.

Item

Business impact

Amount of carbon
taxes in FY 2030 Approx.

2.7 billion yen

The Group will implement the following measures to be able to create a sustainable society not only for society but also
for the Group itself.

Energy saving measures■ Daily operational improvements and enlightenment
for power saving■ Introduction and replacement of energy saving
equipment■ Introduction of energy management systems
Energy creation measures■ Installation of solar power generation panels ownedby the Company■ Installation of on-site and off-site solar power generation panels on a PPA basis
Other measures to reduce CO2 emissions■ Purchase of non-fossil certificates and green power
certificates■ Purchase of CO -free menu services from electric2
power companies■ Use of EVs as company cars

79

FY 2015

FY 2016

FY 2017

FY 2018

FY 2019

FY 2020

FY 2021

947

996

1,048

1,105

1,190

1,283

1,391

1,483

112,773

123,377

129,392

119,826

120,826

117,611

126,160

135,149 To be calculated

119.1

123.9

123.5

108.4

101.5

91.7

90.7

91.1 To be calculated

Average per store (t-CO2)

1,565■ CO2 emissions Scope 3
FY 2021 Scope 3 breakdown
Category 4
Transportation anddelivery (upstream)

Category 8
Leased asset (upstream)

32,642Category 2
Capital goods

70,41865

Category 7
Employee commutation 9,208

Category 3
Fuel- and energy-related activities
not included in Scope
1 and Scope 2
21,480Category 6
Business trip

FY 2021CO2 emissions(t-CO2)
Scope 3 total
1,700,421 t-CO2

Category 1
Purchased products and services

2,887

Category 5
Waste generated frombusiness activities
1,660* Categories 9 through 15 are not applicableor items that have not been calculated.
* Category 4 is an estimate calculated basedon monthly data for a 12-month period.
* Figures and calculation logics of all categories
are currently under close examination.

1,562,062■ Response measures toward the realization of arecycling-based society epair and reuse of foldable containers and transR
portation and delivery equipment■ Reuse of furniture, fixtures and equipment following
store renovation or closure■ Monitoring of any abnormal quantity of supplies orinventories at each store and providing guidance■ Development of private brand products with
eco-friendly packaging■ Promotion of the “temaedori” (taking from the one
in front) campaign to prevent food waste■ Reducing waste by sharing information with ourbusiness partners■ Charging for plastic bags

FY 2022* A location-based emission factor (national average emission factor by electric power company) is used.
* CO2 emissions based on the use of gasoline by company cars are calculated on a trial basis based on the pro rata allocation of FY 2020 results using thenumber of stores (in and before FY 2020).
* CO2 emissions shown in the table above are Scope 1 and 2 emissions (emissions from the Group).
* Calculation logics for tenant shops and some offices are currently under close examination.

* I n reference to IEA WEO2022 NZE (1.5℃) P465 Table B.2, the amount ofcarbon taxes in FY 2030 was set at 140 dollars/t-CO2.
* The trial calculation is based on the USD/JPY exchange rate as of March
1, 2023.

Future initiatives■R esponse measures toward the realization of adecarbonized society

FY 2014

No. of stores
Emissions (t-CO2)

Customerpreferences

Drastic
increases inextremeweather■ CO2 emissions Scope 1 and 2

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Physical risks and opportunities

Acute

Risk: The impact of carbon pricing will be limited.

■

Metrics and targets
CO2 emission per store reduction targets
FY 2030

FY 2050

50% reduction
from FY 2014

Net zero■ Metrics to measure progress toward therealization of a decarbonized society atio of reduction in CO2 emissions (Scope 1 and 2)
R
per store■ Ratio of reduction in CO emissions from our supply
2
chain (Scope 3)■ Percentage of renewable energy■■ Metrics to measure progress toward therealization of a recycling-based society atio of eco-friendly private brand products
RFood-loss-and-waste ratio■ Volume of plastic bags used■■80

Considering employees as an important asset that enhances corporate value,
we are creating an environment in which employees can work energetically,
supported by a mechanism to realize diversity in their careers and work styles
and an environment in which each employee can work in good health andwith a smile. Furthermore, we are promoting the development of an organizational culture that embraces human resources with diverse backgrounds.

Priority Issues [Issues of Materiality]

Healthy Workplace Environment
Human Resource Development
Improving capacity development training for employees

Promoting motivational management by visualizing performance and evaluation

Having clarified required skills of employees necessary for themto acquire internal qualification or perform their duties and roles,
we provide employees with education to learn such skills and develop human resources who can demonstrate such skills in theirrespective workplaces at high levels.

■ Group award program
Employees who have delivered excellent performance byactions based on the Company’s management philosophy are recognized at the year-end award ceremony. In
addition, based on thank you messages received from
customers on a daily basis, employees of relevant storesare recognized as appropriate. In FY 2022, 81 individuals
were so recognized.

Training hours per full-time employee (annual)(Hours)300

National competition(award) for beauty
advisors to compete intheir customer service
skills253.2

250

Number of thank you messages received by stores andemployees from customers

200

136.0

150
100

88.3

50
0

(Number of messages)
500

68.3

400
300

2020

2021

2022

(FY)

338

355

2020

2021

450

200
100

SUGI Pharmacy education system

0

2022

(FY)

❸
● Improve skills through the integration of programs, evaluation, and education and education that is tailored to each individual
Functional
qualification

Education by job position
Officers

Officers

Technical education

Management education

Managers

Education by job duty

SVs/PSVsStore managers

Registereddietitians

General office
workers

Pharmacists

Medical office
workers

General (SC)❶● From omnidirectional education to education tailored to each individual’s ability

Officertraining

Supervising
pharmacist
training

Medicaloffice worker
training

Onboarding
training

New medical
office worker
training

Interview

New staff training

Onboarding training

Basic training for new employees

Medical office worker training

BA operation training

Basic seminar

BA seminar

Beauty knowledge /skill master training

Applied trainingStoremanagercandidatetraining

New operation training

New store
manager training

Wellness advisor
development
・Advanced
・Basic・Standard
Basic training

Model store
manager training

New SV/PSV training

Expert training
Advanced seminars

SV/PSV
training

Supervising pharmacist training
Supervising pharmacist candidate training

M1 promotion
trainingNew
department
GM
training

Advanced store
manager training

Managertraining(Select
individuals /internal
development)

Store manager training

Internal qualifications for full-time employees

Businessleadertraining(Select
individuals /external
dispatch)

Store managers: Improve skills effectively through level-specific educational
programs
Pharmacists: Provide education for early development of managers andeducation specific to each store type
Medical office workers: Accelerate the participation of new recruits in workforce
and develop medical office workers who are registered dietitians
BAs: Develop BAs trusted by customers for their total beauty knowledge
Wellness advisors: Retain customers by differentiating customer service levels❷● Addition and enhancement of education
on expected roles

Partner
employees

Foundation

Basic matters, basic operations, compliance Acquisition of registered pharmaceutical distributor qualification Caravan mate / dementia supporter development

Beautyknowledge /skill mastertraining

Partnertraining
focusing on
cosmetics

New
employeetraining

E-learning

Management philosophy, corporate watchwords (kindness), and founder message

2nd year with theCompany
Muro Store(Toyohashi City, Aichi)

December 2022 pharmacist category awardee
Awardee’s comment

・Enhancement of technical education on job positions (GM andsection manager) and job duties (roles)
・Enhancement of programs to correct individuals’ weaknesses
and lack of skills

Correspondence education

81

BAs

■ Company award for young employees
We have a company award program for new graduates who have been with the Company for up to three years.
Awards are given to employees who work on themes for each job and have achieved particularly good results. This
program is used not only to make their own work more rewarding but also to learn about the work of their seniors, co-workers, and juniors, which leads to further skill development and improved engagement.

Instillation of six principles for making good impressions

The Muro Store to which I belong has many patients
who come to visit the store and also focuses on home
medical care. In cooperation with prescription dispensing staff and store staff, I work hard every day inorder to provide maximum value to patients.
I am very pleased with the award given to me as a re-Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

2019■ Provision of opportunities for growth throughachievement presentation

sult of my hard work on medication instructions andmanagement for patients. Having a company-wideaward program helps me understand the hard work ofpharmacists of the same generation, which helps me
to increase my motivation. I will continue to devote
myself to becoming a pharmacist who is indispensable
to patients.

Supervising pharmacist’s comment
Mr. Zenyoji is a pharmacist who can always think about
what is necessary for patients and put them into action. His work has a positive effect on the whole store,
and we are able to pursue high-value services for patients. With a goal to aim for, such as an award program, employees can make efforts based on a clearer
goal, which not only helps individuals improve theirskills but also produces positive effects on the wholestore. We will continue to aim to become a store thatcan provide maximum value to patients.

82

Priority Issues [Issues of Materiality]｜ Healthy Workplace Environment

Reform to Realize Healthy and Safe Working Styles
Promoting health management■ Health management strategic map

The SUGI Pharmacy Group considers the promotion of
employee health from a management perspective and is
strategically working on health management. The Grouphas developed a promotion system to work on healthmanagement, made a health management declaration,and created a health management strategic map. We
have been certified as an Excellent Health Management
Company, the accreditation of which is given jointly by
the Ministry of Economy, Trade and Industry and Nippon
Kenko Kaigi, for four consecutive years.
We are strengthening our efforts toward White 500
certification as the next step.

Based on the idea that employees can feel happiness when they can work in a healthy, motivating, and lively manner, wehave formulated a health management strategic map that clarifies health management promotion activities and their indicators in order to realize the happiness of our employees.
We believe that employees’ job satisfaction and motivation will improve further through company-wide promotion ofphysical and mental health.

Health management strategic map
Healthinvestment

Lifestyle-relateddiseasecountermeasures■ Health management declaration
Wishing for the happiness of each and every employee and customer
and the happiness of all people,
we are committed to increase their smiles.

Mentalhealth■H ealth management
promotion structure
In order to further promote healthmanagement, we have adopted astructure that can make more agile
and flexible responses by appointing the President as the Chief HealthManagement Officer and having
the president of each subsidiary assume execution responsibility forpromotion.

Katsunori Sugiura

Health Management Promotion Officer
GM of Human Resources Department
Occupational health physician

Health insurance society

Safety and Health Committee

Department in charge of promoting
health management
Human Resources Department

Execution responsibility
President of each group company

Enhancement ofhealth literacy
training

Raising the percentageof persons maintaining
desirable body weight

Holdingcompany
walking events

Increasing thepercentage of persons
with exercise habits

Provision ofmental healthtraining

Percentage oftraining classattendees

Thoroughmanagement ofworking hours

Number of persons who work
long hours among persons
entitled to overtime pay

Encouraging employees
to take leave for four
consecutive days

Percentage of
employees who took
paid leave

Medical checkup
assistance

Percentage of employees
who took medical
checkup in gynecology

Enhancement ofchildcare and elderly
nursing support

Percentage of employees who
work while providing childcare
and elderly nursing care at home

Maintenance of physicaland mental health

Productivity
improvement

Reduction in the number of
persons with observed
abnormality potentiallyrelated to a lifestyle-relateddiseaseNumber of absent days /leave of absence days due
to injury or illness(Reduction in absenteeism)

Goals
Reduction in thepercentage of highly
stressed persons

Increase in productivity atwork(Reduction in presenteeism)

Realization ofhappiness for
employees

Improvement ofjob satisfaction
Increase in vigor,
dedication, andabsorption in
work

Percentage of women
returning to work after leave
Percentage of female managers■ Health management initiatives

Chief Health Management Officer
Representative Director & President

Execution responsibility
President of each group company

Promotion ofwork-life
balance

Promotion of
women’s
empowerment

Health management promotion structure chart

Labor union

83

SUGI Holdings Co., Ltd.
Representative Director &President

Awareness andbehavior modification

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

The origin of this management philosophy is to realize the happiness of our employees.
In other words, this is the idea that when employees can work in a healthy, motivating, andlively manner, they can feel happiness and can also make customers in our local communities
happy.
Based on this idea, we are promoting health management. As we are about to enter an eraof the 100-year life, working to help our employees and all other people maintain and promotehealth is the mission of the SUGI Pharmacy Group, which prides itself on being a family pharmacy in local communities.
I myself tend to lead an irregular life. Therefore, I pay attention to the three meals and theirmenus every day and try to make time for weight training and walking at least once a week.
Health invites a smile. For this reason, it is essential to work to create a company whose employees are full of smiles.
Based on the understanding above, we declare that we will review the health management
promotion structure from the ground up and promote the creation of a healthy work environment in which employees strive to maintain and promote health on their own initiative andtheir smiles invite the smiles of people in local communities.

Health measures

Execution responsibility
President of each group company

We are implementing the following initiatives for the maintenance and promotion of employee health:● Regular seminars on women’s health for both internal andexternal audiences● Specified health guidance provided by registered dietitians of theCompany● Walking events in which our SUGIsapo Walk app is used
● Health questionnaire● Stress checks (annual)● Establishment of the Anything Consultation Call Service for All
Workplace Concerns to promote the early detection andprevention of issues related to mental and physical health and the
reduction of employee turnover● Encouraging employees to take leave for four consecutive days
(twice a year)● Expense assistance for cancer screening and gynecology checkup84

Priority Issues [Issues of Materiality]｜ Healthy Workplace Environment

Mechanisms to support the physical and mental
health of employees
The Company established the “Mental Health Promotion
Office” for employees in March 2007 for the first time in
the industry, and the Office started its activities. By now,
we have introduced various mechanisms in this area.
■ Establishment of a health consultation channel
This is a channel for consultation by email or telephonewith external counselors. Employees can directly accessthis channel at any time without going through theCompany, so they can use it with peace of mind.
■ Conducting stress checks
In order to prevent and detect any mental health problems at an early stage, we conduct stress checks annually. Employees can also conduct these checks from theirsmartphones, allowing them to easily monitor their own
stress conditions. Stress checks are conducted to provide
employees with the opportunity to notice their own
stress and prevent any mental health problems and to
improve a workplace environment that is causing themstress, thereby creating a comfortable workplace.

FY 2024 target

FY 2022Work engagement*1
survey started*1 We have adopted the Utrecht Work Engagement Scale.
*2 Average (of vigor, dedication, and absorption measures)

High

832
430
269
2019

2020

2021

2022

(FY)

For example, an analysis of supervising pharmacists has revealed that openness to proposals for business operation
improvement, whether your boss cares for your needs, andwork-life balance are highly correlated with engagement(see the graph to the left). As for the correlation with work
performance, at stores to which supervising pharmacists
and beauty advisors with high work engagement belong,work performance (number of customer service-related
additions and cosmetics sales) was approximately 10%
higher (see the graph to the right).
In view of the analysis results indicating that subordinates’ engagement is affected by encouragement fromthe boss to subordinates, motivation, and the competency
level of the boss’s management, we are implementing
measures to help improve engagement.

Employeeswith higher engagement haveachieved about 10% higher work
performance!

Low
Low

Engagement index

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality■ Engagement analysis
In order to raise work engagement, we have asked an external expert organization to analyze the correlation between work engagement and various elements (working environment, etc.) and the correlation between work
engagement and work performance.

Others

1,000

85

*2

*2

Work-life balance

1,254

2018

4.0

3.5

Age

1,585

1,500

0

Long-term target

Correlation between Work Engagement and Various Elements(Working Conditions, etc.) for Supervising Pharmacists(Number of calls)
2,000

500

Vigor, dedication, and absorption,
which are the three elements thatcomprise work engagement, were incorporated in the questions and were
measured using a question format.

Communication
with boss

Creating an open work environment inwhich employees can seek consultation
appropriately for any workplace concerns!

■ FY 2022 work engagement measurement results

Work performance

Annual number of calls to “Anything Consultation Call
Service for All Workplace Concerns”

In FY 2022, the SUGI Pharmacy Group started to measure work engagement covering all employees in order toraise labor productivity, reduce employee turnover, revitalize the organization, and promote employee health.

Open workplace

Strengthening employee engagement■ Holding events for employees’ families
During the pre-opening of a new store, we invite family
members of our employees to an event to support their
shopping. We hold these events so that families can learn
about the environment in which each employee works every day and so that they become fans of SUGI Pharmacy.

■E stablishment of a consultation channel to provide
support for any kinds of workplace concerns that
employees may have
We have established an external reporting channel to respond to any concerns, such as “I have a problem at thestore”; “I have something I want to talk about”; “I havesomething I want the Company to address”; “This iswrong”; “I have something I cannot report to my boss andI want the Company to address”; “I want the Company toimprove the work environment”; or “I am worried about
my relationships with others.” This is aimed at fostering
peace of mind in employees as well as risk awareness thatany harassment will be subject to admonition, in order toeliminate harassment and create good human relationships and a pleasant work environment. Any reports from
employees to the Company are promptly addressed.

Improving the work environment based on employee work engagement

Correlation between engagement
and various elements■ Consultation with doctors via chat or video callThis mechanism allows employees to easily consult doctors on technical matters anytime and anywhere, free ofcharge.

■ Self-declaration system
This system provides employees with opportunities to review their current career status and develop a future career development plan to clarify their future challenges. In
addition, employees can communicate through this system to the Company any issues in the organization orstore to which they belong as well as their personal concerns and worries. Based on the answers of each employee, we use it for the implementation of measures of theCompany as well as for career development of employees,
such as their personnel changes and training requirements. In FY 2022, we also started to measure work engagement by using the self-declaration system.

High

Correlation between Work Engagement and Work Performance(Customer Service-related Additions and Cosmetics Sales)

Response measures
Personnel system reform● Linking roles to evaluation and remuneration● Including engagement indicators in evaluation items

Human resource development● Clarifying skills and improving skills through training,

OJT, personnel changes, and self-learning

Compliance and corporate culture reform●Eradicating long working hours, unpaid overtime,and harassment● Implementing officers’ patrols around all stores andintroducing an employee proposal system

On-site subordinate management● Thorough training of subordinate management tech-niques86

Priority Issues [Issues of Materiality]｜ Healthy Workplace Environment

Utilization of Diverse Human Resources
Preparing fields and opportunities with a focus ondiversity
The SUGI Pharmacy Group will make serious efforts toenhance diversity and inclusion (mutual acceptanceand recognition of differences as strengths).

■ Introduction of a program to allow employees tochoose to live and work away from home
In FY 2022, we introduced a program to allow employees
who can work remotely to choose either to combine business trips with remote working or to live and work awayfrom home (CHOISE). This program helps employees realize diverse work styles that are not constrained by timeand place or their family relationships, which have previously been restricted by living and working away from
home, promoting the retention and development of excellent human resources.

■ Enhancement of maternity leave, parenting leave,and reduced working hours program
We have introduced various support programs concerning pregnancy, childbirth, and childcare, aiming to createa work environment in which employees can balance
work and childcare.
In addition to enhancing maternity leave and parenting
leave, we have introduced a reduced working hours program for childcare in order to make it easier for employees
to work after returning from such leave. This program canbe used until the child completes the sixth grade of elementary school, which creates a work environment inwhich it is easier for employees to return to work fromparenting leave and continue to work. In order to support
further empowerment of women, we also focus on raising
the percentage of male employees who take parenting
leave. It has already exceeded the previous target of 30%,
and we aim to raise it further going forward.

Percentage of female managers (%)■ Certified as a Platinum Kurumin company
SUGI Pharmacy has been certified as a Platinum Kurumin
business operator. This certification is granted to generalemployers who conform to the designated standards regarding parenting support.
In FY 2022, 448 employees (369
women and 79 men) took parenting
leave, with the percentage of those
returning to work after their leave
reaching 95.2% (94.7% of womenand 100% of men).

(%)
30

Target
30%

25
20
15

13.6

15.6

16.8

14.5

10

■ SUGI Smile’s efforts
Ten in-house job coaches and 32 career counselors provide operational guidance and daily support to 248 employees with disabilities working at nine offices nationwide. At stores, these employees perform cleaning andarrange products on shelves, while at our headquarters,
they sort articles to be sent, perform cleaning, and ship
products to support logistics.

Future initiatives toward women’s empowerment

Percentage of disabled employees(FY 2022 SUGI Pharmacy Group)● Strengthen activities to recruit women● Correct the gender gap in wages● Expand the scope of employment for women● Provide awareness training for managerial

2.58%

5
0

2019

2020

2021

2022

2029

(FY)

Percentage of male employees who took parenting
leave (%)
（%）
60

53.0

50

43.6

40

27.9

30

18.2

20
10

5.5

0

2018

2019

2020

2021

2022 （FY）

Percentage of those returning to work after parenting
leave (%)
Women

(%)
100

Men

100
100
100 97.9100
100
94.7
92.6
92.5
89.6

80
60
40
20
0

2018

2019

2020

2021

2022

(FY)

Support programs that accommodate diversity
Six weeks
before birthChildbirth

Until April 30
immediately following
the second birthday

Eight weeks
after birth

Prenatal and postnatal leave
Special leave for spouse’s childbirthtake parenting leave

Parenting leave

Surpassing
legalrequirements!

Until the end of thesixth grade ofelementary school

Until theday immediately
before the firstbirthdaypromotion● Strengthen promotion to full-time employee● Create an environment that makes it easier to

Until the end of thethird grade ofelementary school

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality■W ork arrangements in anticipation of the era of a
100-year life
We have extended the mandatory retirement age to 65
for full-time employees and 70 for contract employees
and partner employees. In addition, we have made it possible for those who are 70 to 75 years old to work as senior
partner employees on reduced working hours.

■ Increasing the ratio of female managers
Developing services to address the needs of diverse customers and patients based on the ideas and perspectivesof diverse people, including female employees, is indispensable for the sustainable growth of the Group. Therefore, we are strengthening our efforts for human resource
development and improvement of the workplace environment so as to increase the ratio of female managers to
30% by the end of FY 2029. Regarding human resource
development, we train employees to obtain and practicethe skills needed to discover and resolve essential challenges, communication and leadership skills, knowledgeof products, specialized and managerial knowledge, andtechnical skills. Regarding the improvement of the workplace environment, we focus on improving the benefits
package and encouraging each employee to present theiropinions to the Company, thereby reinforcing support for
employees.

Extension ofparenting leave

Reduced work program for childcare
Reduced working hours program for childcare
Sick / injured childcare leave (seven days per year or 14 days per year for two or more children)

Secure substitute staff from among employees

It is possible to work on the basis of mutual support across stores due to our dominant store opening(close distance between each store) strategy.

87

88

Priority Issues [Issues of Materiality]｜ Healthy Workplace Environment

Interview

By implementing a human resource strategy that faces each employee on
an individual basis, we aim to realize the Total Healthcare Strategy.

General Manager, Human Resources Department
and General Manager, Legal Affairs Office,
SUGI Holdings Co., Ltd.
Director and General Manager,
Administration Division, Sugi Pharmacy Co., Ltd.
Representative Director & President,
SUGI Smile Co., Ltd.
Representative Director & President, MCS Co., Ltd.

Shigeki Mori
the six pillars of “employee satisfaction,” “human resource development,” “recruitment and retention,”“compliance and corporate culture reform,” “diversity,”and “health and safety.” We work to achieve sustainable growth by realizing the Total Healthcare Strategy,
which is our group vision, and through “kind behavior,”“contribution to local communities,” and “happinessand smiles of employees,” which are the tenets of theGroup’s management philosophy.

FY 2023 Human Resource Strategy

Management philosophy
Kind behavior

Contribution to local communities

Happiness and smiles of employees

Group Vision
Employeesatisfaction

Total Healthcare Strategy□ Personnel system reform□ Job-based personnel system□ Expert personnel system

Human resource
development□ Philosophy education□ Executive and work site

education□ Right person in the rightplace

Company (White 500)

Peopleare assets□ Workstyle reform□ Risk management (disastercountermeasures)

Visualize roles, skills,
and intention and faceeach individual

Recruitment
and retention□ Pharmacists and registeredpharmaceutical distributors□ Expert employees□ Retention improvement

89

Health and safety□ Excellent Health Management

Compliance andcorporate culture reform□ Harassment prevention□ Officers’ patrol aroundall stores□ Proposal system

Diversity□ Development of female

managers□ Encourage employees totake paid leave□ Correct long working
hours

In FY 2022, we enhanced our health and employee healthand welfare benefits, including the extension of mandatory
retirement ages, retirement benefits, and the introduction ofgroup life insurance. Partly due to these system revisions, employee awareness survey results show a significant increase inmotivation for promotion from before. Among other achievements that we are steadily making, job satisfaction among
managers as measured by the engagement score has exceeded the levels of other companies, and employee turnover has
been declining every year.
On the other hand, awareness survey results included
many voices calling for improvements, such as performance-linked bonuses and fair evaluation of performance
separately for individual roles, such as store managers andpharmacists, rather than sweeping evaluation according toqualification grades. In view of these results, recognizing theneed for further personnel system revisions, we will push forward with personnel system reform under the concept of“facing each employee on an individual basis.”

Human resource development that cares for theneeds of each employee
In order to ensure that each employee is assigned to a position where they can demonstrate their abilities, we place theright persons in the right positions after visualizing their skills
gained through education. To this end, our current education
programs, which are uniform and stratified programs, will be
replaced with education programs that are tailored to each
employee by measuring the current level of each employee
through external assessment, in-house manual tests, etc., andteaching specific skills that are lacking. In addition, we will
work to evolve the education programs into those throughwhich each employee can feel their growth by combining development through learning toward the acquisition of official
qualifications, which is aimed at developing a culture ofself-improvement, with development through personnel
changes for employees to gain experience at various stores interms of size and location (suburbs / urban center).

Securing human resources through recruitment
and retention
We formulate human resource strategies by focusing mainly
on strengthening the recruitment of new graduates andmid-career hires with relevant experience and preventing employee turnover. For the recruitment of new graduates, we
strengthen the recruitment of pharmacists, registered pharmaceutical distributors, and medical office workers, in particular to correct company-wide uneven distribution of humanresources across areas by strengthening the recruitment inareas where there is a shortage of human resources. For the
recruitment of mid-career hires with relevant experience, we
strengthen the recruitment of pharmacists and registeredpharmaceutical distributors and strategically hire persons
with strong expertise, particularly in such technical fields as
medical care, development, products, international business,

and administration to promote the Group’s growth strategy.
Also for the recruitment of partner employees, we strive tosecure excellent human resources by setting hourly wages atappropriate levels and changing recruitment advertising media. As for the prevention of employee turnover, we havemade a significant achievement over the last five years as aresult of company-wide retention activities.

Developing an open corporate culture
In FY 2022, the number of consultation requests concerning
harassment received through the consultation call service decreased by two thirds from the previous fiscal year. In FY 2023,
we will continue to strictly deal with any harassment and respond to all reports to the consultation call service without
exception. In order to further improve our working environment, we have strengthened measures to address long overtime hours. In addition, as part of corporate culture reform,
we have been conducting rounds of all stores by all officers
and an anonymous questionnaire with all employees since FY
2021. We are working to develop an open corporate culture
in which management diligently listens to the opinions of employees and the voice of each employee reaches management.

Promotion of diversity management
Employee questionnaire survey results show that more than
90% of store employees answered that they prioritize not
only work but also life, and more than 70% of managers answered that work-life balance is important for them. Many
employees, whether they are general office workers or managers, answered that they would like to work in their local
communities rather than work on nationwide assignment
and would like to take holidays and paid leave and work systematically within their regular working hours. This showsthat our challenge for the future is to strengthen sales capability and increase productivity at the same time while maintaining and improving subordinates’ motivation and engagement.
Women’s empowerment is essential for us to develop services to meet the needs of customers and patients based ondiverse ideas and from diverse perspectives. We will create awork environment in which it is easier for women to demonstrate their abilities by enhancing employee health and welfare benefits and promoting work style reform, and we aim toraise the percentage of female managers to 30% by the endof FY 2029.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Having identified “employees are the most important
assets,” “working to improve the job satisfaction ofeach employee,” and “aiming to achieve the management philosophy, growth strategy, and budget
by drawing out the strengths of each employee” asimportant perspectives of human resource management, the SUGI Pharmacy Group aims to become acompany that is needed for the long term by integrating them into management strategy. And theGroup promotes human capital management under

Improving job satisfaction through personnel
system reform

Promotion of healthy and safe management
We have been certified as an Excellent Health Management
Company for three consecutive years and will further promote health management, aiming to receive White 500 certification as the next step.
Based on the basic understanding that “people are assets,”the SUGI Pharmacy Group will work hard to achieve its groupvision and realize its management philosophy while implementing its human resource strategy by facing each employee on an individual basis.

90

To become a company needed by society, the Company has been working on
achieving sustainable growth and the improvement of its medium- to long-term
corporate value in collaboration with its stakeholders. To that end, we continue
to strengthen our corporate governance by improving the soundness and transparency of our management.

Priority Issues [Issues of Materiality]

Corporate Governance
Basic Views on Corporate Governance

Board of Directors / Board of Auditors

Based on our management philosophy, we believe that
we should contribute to society by effectively utilizing theassets and resources we have borrowed from society, suchas people, products, stores, money and information, andreturning profits to society. To that end, we regard the enhancement of corporate governance as one of the highest
priorities of our management. We have also established abasic policy for the purpose of being a sound and highly
transparent listed company that provides accurate infor-

mation to all stakeholders and of promoting profitableand effective management. We also endeavor to improveand further develop our corporate governance by continuously examining the content of the basic policy.
Click the website below for the SUGI Pharmacy
Group Corporate Governance Basic Policy.
URL: https://www.sugi-hd.co.jp/ir/ir_english/pdf/cg_basicE.pdf

Corporate Governance System

Diagram of the Corporate Governance System

Number of Directors

5

Number of Directors who are External Directors

2

Number of External Directors designated as
independent officers

2

General Meeting of Shareholders
Appointment / dismissal

ReportNomination andRemuneration Committee

Audit

ReportAdviseAudit Department
Direction
Audit

Risk Committee

Participation /reportCoordination

Composition of the Board of Auditors
The number of Auditors is as provided for in the Articles ofIncorporation, and a majority of Auditors shall be External
Auditors. Persons with the insight, high ethical standards,
objectivity and integrity required of Auditors will be appointed. In particular, at least one person with expertise in finance,accounting and legal matters will be selected.
Number of Auditors

3

Number of Auditors who are External Auditors

3

Number of External Auditors appointed as
independent officers

3(As of May 30, 2023)

ReportReportInformation Security
Committee

91

Coordination

Accounting
audit

ReportSustainability Committee
Direction

Board of Auditors

Coordination

Representative Director
Consultation

Appointment / dismissal

Consultation

Board of Directors
Supervision

ReportAccounting Auditor

AdviseAppointment / dismissal(As of May 30, 2023)

Each Department and Group Company[Internal control system]

Roles of the Board of Directors
The Board of Directors performs its supervisory functions byrealizing highly effective corporate governance. In addition,
it pursues the sustainable growth of corporate value by making the best decisions, using objective judgment and appropriately exercising its authority.
(1) The Board of Directors makes important managerial decisions in accordance with laws, ordinances, the Articles ofIncorporation and internal rules, and it supervises business execution.
(2) After precisely understanding the cost of capital of theCompany, the Board of Directors formulates manage-

ment strategies and management plans, taking into consideration the management philosophy and changes inthe external environment, and discloses their outline. As
for the formulated management strategies and management plans, the Board of Directors annually checks andanalyzes the progress status, reviews the business portfolio, and revises, as needed, the management resource
distribution plans, including new investments, the establishment of new stores, system investments, and investments in human resource development.
(3) The Board of Directors is proactively involved in the formulation and operation of educational programs aimed
at finding and developing capable Directors and top
management for the Group, including its operating subsidiaries. Furthermore, based on the management philosophy and management strategies, the Board of Directors
appropriately supervises the content of the programs
and subsequent development through post-program assignment and promotion of the participants in the programs.
(4) The Board of Directors delegates its decision-making to
the Representative Directors in terms of business execution of matters other than those matters that should be
decided by the Board of Directors, in accordance withlaws and regulations, the Articles of Incorporation, andinternal rules.
(5) A s for the meetings of the Board of Directors, each Director and Auditor shall secure an attendance rate of at least
80%.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

The Company has chosen to adopt a corporate structure as a company with a Board of Auditors. In addition to the Board of
Directors, comprising five Directors (including two External Directors),* and the Board of Auditors, we have also establisheda Nomination and Remuneration Committee as an advisory organization to the Board of Directors concerning the nomination of and remuneration for Directors and Auditors. We have also separated the functions of decision-making and supervision of management from business execution, thus enhancing flexibility in our business execution by delegating authority to the management team except in matters to be determined by the Board of Directors, in accordance with laws andregulations, the Articles of Incorporation, and internal rules. *As of May 30, 2023

Composition of the Board of Directors
The Board of Directors consists of diverse directors in termsof background, such as expertise, experience and gender.
The number of Directors is maintained at an appropriate level in accordance with the provisions of the Articles of Incorporation in order to ensure that the Board of Directors functions most effectively and efficiently from the following
viewpoints:(1) Sufficient diversity should be secured to conduct decision-making and supervision of management.
(2) The Board of Directors Discussions should engage in active discussion on relevant matters, including concerns
raised by the Independent External Directors.
In principle, at least one-third of the Directors are required
to be Independent External Directors in order to make use of
their abundant experience and expertise outside the Company for the management of the Company and, at the sametime, to strengthen the supervisory function of the Board of
Directors and improve the transparency of management.

Roles of the Board of Auditors
As an organization independent from the management
team, the Board of Auditors performs audits concerning the
Directors’ business execution, the internal control system, accounting, and other matters.
(1) The Board of Auditors prepares a standard for appropriate evaluation of the Accounting Auditor. On an annual
basis, the Board of Auditors evaluates the independence
and expertise of the Accounting Auditor, based on thestandard, and decides the details of the proposal for the
General Meeting of Shareholders concerning the appointment or dismissal of the Accounting Auditor.
(2) The Board of Auditors secures sufficient cooperation ofExternal Directors so that they can smoothly collect information while maintaining their independence.
(3) The Board of Auditors collects necessary and sufficient
information to perform appropriate audits by securing
the cooperation of the Internal Audit Department, theFinance and Accounting Department, the Legal Department, and other departments concerned.

92

Priority Issues [Issues of Materiality]｜ Corporate Governance

Career Summary and Reasons for Appointment of Directors (As of May 30, 2023)

Eiichi Sakakibara

September 1986: Joined the Company
September 2008: Managing Director, Sugi Pharmacy Co., Ltd.
March 2011:
Representative Director & President, Sugi Pharmacy Co.,Ltd.
March 2017:
Representative Director & Chairman, Sugi Pharmacy
Co., Ltd. (to date)
May 2017:
Representative Director & President, SUGI Holdings Co.,Ltd.
May 2021:
Representative Director & Chairman, SUGI Holdings Co.,
Ltd. (to date)Representative Director &Chairman
Date of birth: August 14, 1956
March 2006:
March 2011:
March 2014:
March 2017:
May 2018:
May 2021:

Katsunori Sugiura

Joined the Company
Managing Director, Sugi Pharmacy Co., Ltd.
Representative Director & President, SUGI Smile Co.,
Ltd.
Representative Director & President, Sugi Pharmacy Co.,
Ltd. (to date)Representative Director & Senior Vice President, SUGI
Holdings Co., Ltd.
Representative Director & President, SUGI Holdings Co.,
Ltd. (to date)Representative Director &President
Date of birth: October 14, 1978

Joined the Company
Director, Sugi Pharmacy Co., Ltd.
Director, SUGI Medical Co., Ltd.
Managing Director, Sugi Pharmacy Co., Ltd.
Director, SUGI Holdings Co., Ltd.
Representative Director & President, SUGI Medical Co., Ltd.
(to date)
December 2021: Representative Director & President, SUGI Nursing Care
Co., Ltd.
Director & Senior Vice President, Sugi Pharmacy Co.,
Shinya Sugiura March 2023:
Ltd. (to date)Director & Senior Vice President
Director & Senior Vice President, SUGI Holdings Co., Ltd.
Date of birth: November 30, 1979 May 2023:(to date)
April 1970:
May 2007:June 2008:
April 2009:

Shigeyuki Kamino

April 1983:
March 1994:
January 2015:
May 2016:
August 2016:

Yoshiko Hayama
External Director
Date of birth: October 7, 1959

93

June 2017:
May 2018:
March 2020:
June 2020:
May 2023:

Joined The Fuji Bank, Limited (currently, Mizuho Bank,
Ltd.)
Registered as a Certified Public Accountant
Representative, Yoshiko Hayama Certified Public
Accountant Office (to date)Director, SUGI Holdings Co., Ltd. (to date)
Fellow Member, The Japanese Institute of Certified
Public Accountants (to date)
External Director, COCO’S JAPAN CO., LTD.
External Auditor, Adastria Co., Ltd. (to date)
External Director, Dynac Holdings Corporation(Member of the Audit and Supervisory Committee)
External Director, Zensho Holdings Co., Ltd. (to date)
External Auditor, BELLSYSTEM24 Holdings, Inc. (to date)

Mr. Shigeyuki Kamino has been involved in the management of other companies for many years. Based on his
abundant experience in and knowledge of management, he has actively made remarks and recommendations during deliberations of the Board of Directors’
meetings, and he has also served as Chair of the Nomination and Remuneration Committee. Based on the
judgment that his appropriate supervision and advice
from a high-level, independent standpoint supported
by his profound insights and supervisory capability inthe areas of corporate management, business strategies, and organizational and human resource management will significantly contribute to the further development and expansion of the Group, we reappointed
him as External Director.

Ms. Yoshiko Hayama has abundant experience andprofessional knowledge developed by serving as acertified public accountant and an external director
and external auditor of listed companies. She has
also actively made remarks and recommendations
during deliberations of the Board of Directors’
meetings. We expect from Ms. Hayama appropriate
supervision and advice based on her strong expertise in finance and accounting and profound insights in the areas of legal affairs, compliance, andrisk management, from the viewpoint of an independent officer, and thus reappointed her as External Director.

May 2012:
March 2017:
May 2017:

General Manager, Finance and General Affairs Division, Nagoya
Branch, ITOCHU Corporation
Representative Director & President, C&S Co., Ltd.
Senior Managing Director in charge of human resources, finance andaccounting and information systems, ITOCHU Sugar Co., Ltd.
Auditor, SUGI Holdings Co., Ltd.
Auditor, Sugi Pharmacy Co., Ltd. (to date)
Full-time Auditor, SUGI Holdings Co., Ltd. (to date)Toshihiko
Sakamoto
External Full-time Auditor
Date of birth: October 25, 1946

Kana Yasuda
External Auditor
Date of birth: April 10, 1969

Ms. Kana Yasuda has engaged in a wide
range of business fields, including accounting audits for business corporations,as a certified public accountant and a certified public tax accountant, also serving
as an external auditor and an external director for listed companies. We have appointed Ms. Yasuda as External Auditor,
expecting her to conduct strict audits
from an independent standpoint, supported by her strong expertise in the areasof accounting and tax and abundant experience in the areas of legal affairs, compliance, and risk management.

August 1988:
March 1993:
May 2002:
April 2004:

Mr. Makoto Kamiya has professional
knowledge and abundant experiencedeveloped as a certified public accountant and certified public tax accountant. We have judged that he is capableof appropriately fulfilling the duties ofExternal Auditor by applying a high level of expertise from his independent
standpoint, and thus we appointed
him as External Auditor.

October 2005:
July 2007:

Makoto Kamiya

Mr. Toshihiko Sakamoto has been involvedin business management at other companies and has abundant experience in andknowledge of management. Furthermore,
he took office as an Auditor of the Company in May 2012 and is familiar with thebusiness of the Company. We have judgedthat he is capable of conducting strict audits of the Company’s business from an
objective viewpoint by applying his profound insights concerning corporate management and knowledge of the overallmanagement of the Company, and thus
we appointed him as External Auditor.

Joined KPMG Century Audit Corporation (currently, Ernst & Young
ShinNihon LLC)
April 1997:
Registered as a Certified Public Accountant
March 2000:
Established Yasuda Tax & Accountant Office, Director (to date)
March 2004:
Registered as a Certified Public Tax Accountant
September 2009: External Auditor, Shinpo Co., Ltd.
May 2010:
Auditor, SUGI Holdings Co., Ltd. (to date)June 2016:
External Director, GEO HOLDINGS CORPORATION (to date)June 2019:
External Director, Chuo Spring Co., Ltd. (to date)June 2020:
External Director (Member of Audit and Supervisory Committee),
KONDOTEC INC. (to date)
September 2021: External Director, Monogatari Corporation (to date)

October 1993:

May 2020:

External Auditor
Date of birth: January 7, 1964
June 2020:
June 2022:

Joined Tohmatsu & Co. (currently, Deloitte Touche Tohmatsu LLC)
Registered as a Certified Public Accountant
Partner, Tohmatsu & Co. (currently, Deloitte Touche Tohmatsu LLC)
Registered as a Certified Public Tax Accountant
Partner, Tohmatsu Tax Co. (currently, Deloitte Tohmatsu Tax Co.)
Representative Partner, Tohmatsu Tax Co. (currently, Deloitte Tohmatsu
Tax Co.)Managing Partner of Nagoya Office, Tohmatsu Tax Co. (currently,
Deloitte Tohmatsu Tax Co.)
Director, Kamiya Makoto Certified Public Accountant, Certified Public
Tax Accountant Office (to date)
Auditor, SUGI Holdings Co., Ltd. (to date)
Auditor, Mizkan Asset Co., Ltd. (to date)
Auditor, Yamazaki Mazak Capital Co., Ltd. (to date)
Auditor, Amano Enzyme Inc. (to date)

Skills Matrix

AuditorExternal Director
Date of birth: May 23, 1947

Mr. Shinya Sugiura, as Director & Senior Vice Presidentof Sugi Pharmacy Co., Ltd., supervises the sales division
while fulfilling his responsibilities by actively working, as
Representative Director of SUGI Medical Co., Ltd., on theformulation of a medium- to long-term strategy for thehealthcare business and leading various related collaborative initiatives with companies in other industries andthe improvement of value-added of the pharmacies
with the function of prescription dispensing, leveraging
his experience and knowledge in the area of healthcare
business. Based on the judgment that his knowledge
and experience will significantly contribute to development of the core business of the Group, we reappointed
him as Director.

June 2006:
June 2009:

Director

May 2012:
May 2015:

Joined Nagoya Railroad Co., Ltd.
Representative Director, Mie Sangyo Co., Ltd. (to date)Representative Director & Senior Vice President,
Nagoya Railroad Co., Ltd.
Representative Director & President, MEITETSU
Department Store Co., Ltd.
Chairperson, Chubu Department Store Association
Director, SUGI Holdings Co., Ltd. (to date)

Mr. Katsunori Sugiura, as Representative Director of theCompany and Sugi Pharmacy Co., Ltd., has been involved in management while fulfilling his responsibilities by actively working on, for example, the formulation of a business strategy to realize the “Total
Healthcare Strategy” designed to provide comprehensive support to customers, from the maintenance of
health and prevention of disease to nursing care andterminal care, a DX (digital transformation) strategy,
new businesses both in Japan and overseas, and corporate value improvement through the promotion of the
SDGs. Based on the judgment that his business knowledge and leadership for sustainable improvement ofcorporate value will significantly contribute to the further development and expansion of the Group, we reappointed him as Director.

October 2001:

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

April 2004:
March 2010:
March 2011:
March 2017:
May 2017:
May 2021:

Mr. Eiichi Sakakibara, as Representative Director of theCompany and Sugi Pharmacy Co., Ltd., has led theGroup and carried on its management philosophy,
while fulfilling his responsibilities with his profound insights and extensive experience in the drugstore industry, by actively working on, for example, the selection of
items and the creation of stores that suit the changing
lifestyle of consumers and the improvement of customer services. Based on the judgment that his management track record, broad business knowledge, andleadership for sustainable improvement of corporate
value will significantly contribute to the further development and expansion of the Group, we reappointed
him as Director.

Career Summary and Reasons for Appointment of Auditors (As of May 30, 2023)

Legal Affairs / Compliance
Finance / Accounting/ Risk Management

Name

Corporate
Management

Business Strategy

Eiichi Sakakibara

●

●

●

Katsunori Sugiura

●

●

●

Shinya Sugiura●●

Shigeyuki Kamino●●

Organization /Human Resources●●

Yoshiko Hayama●●

Toshihiko Sakamoto●●

Kana Yasuda●●

Makoto Kamiya●●

Training program (for officers, including those ofmajor subsidiaries)
We continuously provide opportunities for External Directors
and External Auditors to share our management philosophy, management plan, business overview, finance, organization, etc. We offer training programs for Directors,
Auditors and Directors of the major subsidiaries concerning
relevant laws, finances, corporate governance, risk management, etc. when they newly take office. After they takeoffice, we continuously provide or mediate training opportunities according to their duty, capability and experience,
and we offer them financial support for the cost.

Healthcare

Content of the training programs (FY 2022)
Domestic and overseas
economic status

MarketingTrend of capital markets

Legal affairs and corporate governance

Trend of medical systems

Corporate Governance Code

Sustainability management

Compliance training

ESG

Risk management

Management strategy

Organization and HR management andleadershipManagement and financeDigital transformation

94

Priority Issues [Issues of Materiality]｜ Corporate Governance

Effectiveness Evaluation of the Board of Directors
Effectiveness evaluation of the Board of Directors
For the purpose of securing further effectiveness and improving the functions of the Board of Directors, we implement an effectiveness evaluation of the Board of
Directors. We conduct a written questionnaire survey
and hold interviews on the self-evaluation with all the
Directors and Auditors concerning the effectiveness of
the Board of Directors in terms of its structure, operation
and agenda, as well as the systems to support the Boardof Directors, management strategy, and challenges.
Based on the results of the questionnaire survey, we
implement constructive discussions for future initiatives
by sharing the evaluation results of the current status
and challenges within the Board of Directors.

Future initiatives
In order to secure higher effectiveness, we will take suchmeasures as the formulation of response measures inview of changes in the external environment, such as the
economy, environment, and healthcare system, enhancement of training for Directors and candidates for
Directors, and timely sharing of the latest information onchanges in laws and government programs.

Policy for determining the contents of remunerations of individual Directors
After a draft proposal was deliberated by the Nomination and Remuneration Committee, the majority of which consists of independent External Directors and Auditors, a policy for determining the contents of remunerations of individual Directors wasapproved by the Board of Directors. The Board of Directors has also determined that the remuneration of individual Directors for
FY 2022 was in line with the determination policy mentioned above because the policy for determining the contents of remuneration and the contents of remuneration determined were based on the determination policy approved by the Board of Directors
and were determined after they were deliberated by the Nomination and Remuneration Committee.

■ Basic policy

view of their roles and independence.
The remuneration of Auditors consists only of fixed remuneration (monthly fixed remuneration), which is deliberated by the Nomination and Remuneration Committee
and determined through consultation within the Board ofAuditors within the limit on their remuneration approvedby the General Meeting of Shareholders.

In order to determine the remuneration of Directors, theCompany has established basic amounts for each position,
based on a design that has been developed by using data
provided by specialized external organizations as well as
publicly available data and taking into consideration the
remuneration levels of industry peers and companies inother industries. More specifically, our basic policy is toensure that the remuneration of Directors other thanExternal Directors functions as an incentive for them topursue sustainable improvement of the Company’s corporate value by adopting a remuneration package that includes performance-based remuneration based on the financial results of the Company for each fiscal year andnon-monetary remuneration (restricted stock), as well as
fixed remuneration. On the other hand, the remunerationof External Directors consists only of fixed remuneration in■ Policy for determining the amount of fixed
remuneration (monetary remuneration) ofindividual Directors

sion on such topics as the opening and closing of stores,
investment in human capital, and risk management basedon various perspectives and objective evidence, such as numerical data that are relevant to each topic.
While the external environment surrounding corporate
management is changing more rapidly than before, theCompany will promote management that is sustainable
over the long term in order to conform to its management philosophy that should not change while at thesame time adapting to changes in the times under the
spirit of “immutability and fluidity.” To this end, I will endeavor to fulfill my responsibilities as External Director bysupervising and supporting the steering of management
while monitoring the actual conditions of theCompany by site visits
and other means.
Hayama: Meeting materials are shared more inadvance than before, anddetailed explanations areprovided by the Secretariat in advance throughweb meetings, etc. As aresult, board members
can understand eachagenda sufficiently.
We have increasing
opportunities to discuss high-level strategies. Although there
are issues, such as
TCFD and human capital initiatives, I appreciate that the Company
is making great efforts
to improve governance every fiscal year.
As the Company has many female customers and store
employees, I expect the Company to put more effort
into the development of female internal officers andmanagers and the Board of Directors to have active
discussions also from the perspectives of women’s empowerment.
Each External Director and Auditor has a different skill
set and perspective. Through active exchange of information and discussions among external officers, wewould like to provide appropriate advice and makebetter proposals to the Company going forward.

The fixed remuneration of the Directors of the Company
shall be fixed monthly remuneration and shall be determined in accordance with each individual’s position, contribution, etc., and in comprehensive consideration of thelevels of salaries and other remuneration of the employees of the Company as well as public standards.

Interview
External Director, SUGI Holdings Co., Ltd.

Shigeyuki Kamino × Yoshiko Hayama

It has been eight years since Mr. Kamino assumed officeas Director and seven years since Ms. Hayama assumed
office as Director. Please tell us about the progress in effectiveness improvement of the Board of Directors
during that period.

Kamino: The Board of Directors, which includes External
Directors, consists of members with diverse expertise, andits composition is appropriate from the perspectives of sizeand diversity.
In recent years, reports and proposals on medium- to longterm group strategies, healthcare strategies, digital transformation, and ESG are put on the agenda of the meetings of theBoard of Directors on a timely basis for its lively discussions. As
it is important for the Board of Directors to pass resolutions
after having discussions from multiple perspectives based on
the diverse experience and insights of each Director, I makesure to actively state my opinions while sometimes encouraging internal members to speak up. We also had much discus-

95

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

Outline of evaluation results
The effectiveness evaluation conducted in the fiscal year
ended February 28, 2023 indicated that effectiveness ofthe entire Board of Directors was secured at a high level,
and corporate strategies and medium- to long-termplans, including digital transformation, were properly
shared among board members. The evaluation results
also indicated that discussions on medium- to long-term
strategies, digital transformation, and ESG initiatives in
the fiscal year ended February 2023 were even livelier

than in the prior year.
In addition, constructive opinions were submitted toand discussed by the Board of Directors in order to securehigher effectiveness on such topics as further enhancement of discussion on management opportunities andrisks, improvement of training programs for Directors
and candidates for Directors, and enhancement of information sharing to facilitate monitoring by the Board of
Directors.

Remuneration of Directors and Auditors

96

Priority Issues [Issues of Materiality]｜ Corporate Governance■ Policy for determining the percentages of the amountsof monetary remuneration, performance-based
remuneration, and non-monetary remuneration to theamount of remuneration of individual Directors■ Policy for determining the contents and the amountor quantity or the calculation method thereof of
non-monetary remuneration
Non-monetary remuneration shall be provided in the formof restricted stock to the Directors of the Company otherthan External Directors for the purpose of providing themwith an incentive for sustainable improvement in the
Company’s corporate value and to promote further value
sharing with shareholders. Restricted stock shall be granted
in exchange for contribution in kind of monetary remuneration claims determined based on the basic amount established for each position within the upper limit on such remuneration approved by the General Meeting of Shareholders.
The timing of the grant shall be determined as necessary by
the Board of Directors in comprehensive consideration of thecomposition of the Board of Directors, the purpose as an incentive, the management conditions of the Company, andany other relevant matters.
In principle, the restricted period of the restricted stock
shall be the period until such Directors resign or retire fromall of those positions as an officer or employee of theCompany or its subsidiary that are specified in advance by
the Board of Directors of the Company.

The determination of the specific amount of remuneration of each
Director shall be left to the discretion of Representative Director &President Katsunori Sugiura by resolution of the Board of Directors.
Under the delegation, the Representative Director & President shalldetermine the amounts of fixed remuneration and performance-based remuneration within the limit on such remuneration
approved by the General Meeting of Shareholders.
In order to ensure that the authority delegated as describedabove is exercised properly, the Company requires the Representative
Director & President to respect the deliberation results of theNomination and Remuneration Committee, the majority of which
consists of independent External Directors and Auditors, in determining the specific amount of remuneration of each Director.
The authority mentioned above is delegated to the Representative
Director & President because the Company has determined that heis able to determine the specific amount of remuneration of each
Director in a comprehensive manner as he is familiar with the management conditions of the Company more than anybody else and is
the most suitable person to evaluate the areas of responsibility andjob responsibilities of each Director, while examining the environment surrounding the Company and the overall financial results of
the Company from a high-level viewpoint.
Regarding restricted stock as non-monetary remuneration, thespecific number of shares allotted to each Director and other necessary matters are determined by the Board of Directors based on
the deliberation results of the Nomination and Remuneration
Committee.

The Company has voluntarily established the Nomination andRemuneration Committee as an advisory body to ensure objectivity and transparency for the remuneration of Directors. The
percentage of each component of the remuneration of Directors
is determined by the Nomination and Remuneration Committee
after examining the remuneration of companies of a similar
scale in the same industry and considering the Company’s financial results each time such remuneration is paid.

■ Matters concerning the delegation of determinationof the remuneration of individual Directors

Total amount of remunerations for the current fiscal year
Total amount by type (millions of yen)

Securing shareholders’ rights
We are determined to act appropriately to treat all shareholders, including minority shareholders and foreign shareholders, substantially equally according to the number ofshares they hold and secure shareholders’ rights as represented by the exercise of voting rights at the General Meetingof Shareholders.
In the case where we are to implement a capital policythat may result in a change of control or a large-scale dilution, we will resolve the matter by fully discussing the necessity and rationality at the Board of Directors before providing
sufficient explanation to shareholders from the perspectivesof fulfilling fiduciary duties for shareholders.
Constructive dialogues with shareholders and investors
We endeavor to improve medium- to long-term corporate
value through constructive dialogues with shareholders andinvestors.
(1) We will focus on the improvement of IR activities to gain
understanding concerning our management philosophy,
management strategy, financial strategy, management
plan, business results, and concept of sustainability.
(2) The Representative Director & President will supervise all
aspects of dialogue, and consultation will be provided by
the relevant departments, if necessary.
(3) As for individual face-to-face meetings with shareholders
and investors, the IR department will serve as the contact
point, and the matter will be appropriately handledwithin a reasonable scope based on the requests of andthe purpose of the meeting with the shareholders andinvestors.
(4) In order to promote constructive dialogues with shareholders and investors, the IR department and other related departments will periodically exchange opinions andshare information based on their professional viewpoints
and respond to matters in cooperation with each other.
(5) Useful opinions and requests expressed in dialogues withshareholders and investors will be provided to the Boardof Directors, etc. as necessary.
(6) The composition of shareholders will be checked periodically, based on which communication will be improved in
an appropriate manner suited to the shareholders andinvestors.

Total amount(millions of yen)Fixed remuneration

Performance-based
remuneration

Non-monetary
remuneration

Number of persons

Directors(of which, External Directors)

151
(14)

108
(14)

38
(−)

4
(−)

6
(3)

Auditors(of which, External Auditors)

16
(16)

16
(16)

−
(−)

−
(−)

3
(3)

Status of dialogues
with investors

Total(of which, External Directors
and External Auditors)

168
(30)

125
(30)

38
(−)

4
(−)

9
(6)

Category

Notes: 1. T he total amount of remuneration paid to Directors excludes the portion of employees’ salaries of Directors who concurrently serve as employees.
2. The upper limit on remuneration of Directors was resolved at 400 million yen per year (not including salaries received as employees) at the 25th Ordinary General Meeting of Shareholders held on May 24, 2007. At the time of the resolution, the number of Directors was 12.
3. The upper limit on remuneration of Auditors was resolved at 30 million yen per year at the 25th Ordinary General Meeting of Shareholders held on
May 24, 2007. At the time of the resolution, the number of Auditors was 3.
4. T
 he above-mentioned figures include the remuneration paid to one External Director who resigned at the end of the 40th Ordinary General Meetingof Shareholders held on May 20, 2022.
5. The non-monetary remuneration consists of the shares of the Company, and the terms and conditions of allotment are as stated in “Policy for determining the contents of remunerations of individual Directors” above.

97

Relationships with Shareholders

FY 2020

FY 2021

FY 2022

Financial briefings for institutional
investors and analysts (1H andfull-year)

2

2

2

Financial briefing small meetings
for institutional investors andanalysts

25

34

27

Conference hosted by securities
companies

6

8

5

133

168

166

Individual meetings for
institutional investors (face-to-facemeetings and interviews by phone)(7) In carrying out dialogues with shareholders and investors,
we will comply with laws and regulations and other related rules and manage insider information properly.
Cross-shareholdings■ Policy on acquisition and shareholding(1) In principle, we will not hold shares under a cross-shareholding policy toward the improvement of corporate
value except in the case of strategically important collaboration and the case where the maintenance and development of trading relationships are confirmed.
(2) As for shares held, we will periodically verify the rationality of holding the shares, and the Board of Directors will
check this on an annual basis, the details of which will be
disclosed. We will gradually sell any shares whose holding
purpose is no longer significant, in a manner taking into
consideration the status of the relevant issuer.
(3) As for the exercise of voting rights of the shares held, we
make comprehensive judgment by confirming whether
each agendum will contribute to the enhancement ofcorporate value from medium- to long-term perspectives
while respecting the management policy of the relevant
issuer.
(4) We will not carry out any transaction with a company
that holds the Company’s shares if the transaction is not
economically rational. When such a company expresses
the intention to sell the Company’s shares, we will not try
to prevent it from doing so.
■ Verification results by the Board of Directors
As for the cross-shareholdings of the Company as of February
28, 2023, the Board of Directors has examined each stock to
confirm the significance of its holding purpose.

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality■ Policy for determining the contents and thecalculation method of the amount or the quantity of
performance-based remuneration
Performance-based remuneration shall be paid in cash. Itsamount shall be determined in accordance with the degreeof achievement of the consolidated operating income
budget for each fiscal year and based on the basic amountestablished for each position after adjusting the amount foreach Director’s contribution in the fiscal year. Any performance-based remuneration shall be paid at the same timeeach year. We have chosen consolidated operating income
as an indicator for performance-based remuneration because we recognize the importance of improving motivation
to pursue profit in our core business.

Disclosure
We appropriately disclose information on a timely basis incompliance with laws, regulations and related rules toward
the realization of fair and highly transparent management.
(1) We will proactively disclose both financial and non-financial information if such information is considered usefulfor shareholders and other stakeholders to deepen theirunderstanding of the Company.
(2) Disclosure will be made in such a manner that our shareholders and other stakeholders can easily access it.
(3) From the viewpoint of information disclosure particularly
to overseas investors, we will prepare materials in English
concerning the Company profile, management strategy,
medium-term management plan, budget, trend of business results, notice of convocation of the General Meetingof Shareholders, corporate governance basic policy, and
ESG. These materials will be posted on the website of
SUGI Holdings Co., Ltd.

98

Priority Issues [Issues of Materiality]｜ Corporate Governance

Establishment of the Sustainability Committee
With the aim of promoting sustainability management, we have established the Sustainability Committee as an advisory
body to the Representative Director & President.
❶T he Sustainability Committee discusses the sustainability strategy and initiatives for the entire Group and reports
and makes recommendations to the Representative Director & President.
❷T he Sustainability Committee consists of members appointed by the Representative Director & President as
appropriate in light of the purpose of the committee.
❸T he Risk Committee and the Information Security Committee have been established inside the Sustainability
Committee as the bodies that manage relevant risks and perform tasks assigned by the Sustainability Committee.

Risk Management
has established the Risk Committee and the Information
Security Committee inside the Sustainability Committee tocontrol high-risk fields in management, thus improving therelevant business operations and preventing accidents at
an early stage.
The Risk Committee prevents risks from occurring by
evaluating and identifying serious risks concerning corporate management, such as business strategy, natural disasters, and infectious diseases, and by taking actions inadvance. In the event of a crisis, we are prepared to immediately establish a separate “emergency task force” to act
quickly and appropriately.

Personal information protection and enhanced information security
The SUGI Pharmacy Group works to strengthen the protection of personal information and information security in order toprotect and prevent the leakage of personal information, customer information, and confidential information. By establishing the Information Security Basic Policy, the Group is taking various measures to prevent any unauthorized access fromoutside, virus infection, or data leakage. At the same time, we work to strengthen information security systems and educate
employees appropriately.
Reinforcement of information security systems and education● Establish the Information Security
Basic Policy● Inform employees of the Information
Security Basic Policy and provide
relevant education● Obtain certification from an externalorganization (ISMS)

Prevention of virus infection● Introduce anti-virus software

Examples of the major risks to be managed
Risks
1-1
1.
Risks concerning 1-2
business strategy
1-3

2-1
2.
Risks relating tonatural disasters,
2-2
infectious
diseases, etc.
2-3

3-1

3.
Risks relating tocorporate
management

99

Business
environment
Applicable laws,
regulations, etc.
Investments
Large-scaledisasters
Climate change
Infectious diseases
Wrongdoing andaccidents

3-2

Information
security

3-3

Human rights

3-4

Human resources

3-5

Supply chain

Examples of the major risks● Intensified competition with industry peers and different industries● Industrial reorganization and oligopoly through large-scale M&A● Drastic reductions of drug prices and dispensing fees
● Revisions of applicable tax rules and accounting standards● Failure in investments in new stores● Failure in M&A investments● Stagnant economic activities● Suspension of business activities due to damage to stores, offices, systems andemployees● Damage to properties held and repair costs arising therefrom● Damage to stores and facilities due to typhoons, heavy rains, etc.
● Introduction of a carbon tax, etc. due to the tightening of regulations● Stagnant economic activities● Self-restraint and suspension of business activities at stores● Suspension of business activities due to infection of employees● Occurrence of serious mistakes in prescription dispensing● Fraudulent activities by officers or employees● Defective products, foreign substance mixing, and inappropriate labeling● System failures caused by accidents, defects, etc.
● Unauthorized invasion and/or access and virus infection from external networks● Leakage of customer information● Worsening of work environments and safety and health● Acts of human rights violation (harassment and discriminatory practices)● Shortage of managerial human resources● Intensified competition for hiring capable human resources● Human rights and environmental issues concerning the supply chain● Changes in purchase prices

Prevention of unauthorized access from outside● Install firewalls● Implement defense against
unauthorized intrusion from websites● Prevent the receipt of virus-infectedemailsPrevention of data leakage● Apply security patches● Prohibit the connection of PCs withexternal devices● Restrict communications with andbrowsing of websites● Install security rooms and security cameras●R estrict access to customer information● Preserve logs of PC operations andemail sending to strengthen theability to investigate in the case ofleakage and secure tracking trails

Consolidation of the Value Creation Foundation
Commitment to Issues of Materiality

For the purpose of promoting sound, highly transparent
and efficient management, the Board of Directors will improve the systems concerning compliance, appropriatenessof financial reporting, risk management and other matters,
seeking more effective functions in the internal control system from the perspectives of group management, and supervise their operation status by utilizing the Internal Audit
Department. In order to enhance the accuracy of internal
control, we endeavor to minimize managerial risks by documenting and monitoring the details of the business operations of each group company, the assumed risks, and theircountermeasures. The Representative Director & PresidentInternal Reporting System
For the purpose of preventing and correcting violation of laws and regulations or misconduct by systems or individuals,
SUGI Pharmacy Group has established a compliance consultation channel, enabling employees to seek consultation anonymously. The Internal Reporting System is operated in accordance with the internal rules, and reporting channels are established within the Group and in external law offices. In order to prohibit disadvantageous treatment of informants and increase the recognition and understanding of the abovementioned system, we have ensured that contact information forthe system is displayed at our stores and offices and have also distributed the Compliance and Disaster Countermeasure
Pocket Book. By such promotional activities, we endeavor to establish a sound reporting system.
The Internal Reporting System was renamed “Anything Consultation Call Service for All Workplace Concerns” in FY 2021
to create an environment where employees feel able to use it more freely.

Information Security Basic Policy
The SUGI Pharmacy Group has been engaging in management tocontribute to society by effectively utilizing assets and resourcesborrowed from society (people, things, money, information, etc.)
and continuing to provide profits to society. To realize this, we understand that it is our top priority management issue to strengthen the information security of the entire Group by protecting ourcustomers’ personal information and other information assets
owned by us from various threats, including unauthorized accessand cyberattacks. Based on this concept, the Group establishedthe “Information Security Basic Policy.”

Going forward, we will endeavor to maintain and improve information security through compliance with and proper handling of
the aforementioned policy and the “Handling of Personal Information (Privacy Policy)” by our officers and employees.

Click the website below for the Information
Security Basic Policy (set forth in Attachment
2 of the Corporate Governance Basic Policy).
URL: https://www.sugi-hd.co.jp/ir/ir_english/pdf/cg_basicE.pdf

Conformance of information security management systems to standard requirements
Certain operations at the SUGI Pharmacy Group, including registration of information ofpoint card members, maintenance of incoming call records, provision of specified healthguidance, customer information analysis, and sales promotion and advertising, conform to
the standard requirements of ISO27001. The Group will endeavor to strengthen and upgrade its responses in the areas of personal information protection and information security by receiving examinations by external organizations appropriately.

JQA-IM1863

Scope of registration
activities• Responding toincoming calls andmaintaining
incoming call records• Managing theregistration of andchanges in point
card members

100Fact Data

103 Financial Indices
104 Non-financial Indices
108 Consolidated Balance Sheet
109 Consolidated Statement of Income and Consolidated
Statement of Comprehensive Income
110 Consolidated Statement of Cash Flows
111 Stock Information and Corporate Profile

101

102

Financial IndicesNon-financial Indices(Millions of yen)

FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

FY 2019488,701

542,361

602,850

625,477

667,647*1

Operating income

26,05330,15934,041

32,13731,658

Number of stores

Ordinary income

27,23731,47335,33333,08232,391

Number of new stores

Profit attributable to owners of parent

17,94020,782

21,12019,38919,007Year-end total square meters of sales floor (m2)

Depreciation

7,389

8,412

9,940

11,26812,362

Numbers relating to customer base

Net cash provided by (used in) operating activities

22,89445,35334,027

7,174

38,279Net cash provided by (used in) investing activities-22,362-18,422-29,254-23,892-23,256

Net cash provided by (used in) financing activities-13,897-4,895-5,274-5,295-14,209

Cash and cash equivalents at end of period

34,311

56,34755,84533,831

34,622

Net assets

166,563

182,750

200,629

213,890

216,538

Total assets

265,481313,757

345,933

334,758

351,895

FY 2020

FY 2021

FY 2022

Numbers representing the Company

Net sales

End of consolidated fiscal year

1,287

1,391

1,483

1,565

116

121

112

107

781,303

847,543915,322963,270

Number of visitors per year

269,803,126

316,850,068

339,909,390

345,818,315

Number of visitors per year: Merchandising262,235,053

308,854,178

330,838,009

335,822,636

Number of visitors per year: Prescription dispensing

7,568,073

7,995,890

9,071,381

9,887,529

Number of SUGI Pharmacy point members

16,459,486

18,042,809

19,414,675

20,838,945

Number of SUGI Pharmacy app downloads*1

3,506,481

6,018,926

8,331,741

10,442,740

592,422

1,518,152

2,218,912

2,748,828-

161,060

368,644622,034

Number of prescription dispensing pharmacies

930

1,050

1,166

1,220

Percentage of prescription dispensing stores (%)

80.0

82.9

85.5

84.4

Number of SUGIsapo app downloads (SUGIsapo Walk)
Number of Family Pharmacy app downloads
Numbers relating to prescription dispensing

Per share information
Net income (yen)

287

336

341

313

311

Net asset (yen)

2,694

2,956

3,245

3,460

3,590

Dividend (yen)

70

80

80

80

80

Equity ratio

62.7

58.2

58.0

63.9

61.5

Return on equity (ROE)

10.9

11.9

11.0

9.4

8.8

Management indices (%)

Return on total assets (ROA)

10.5

10.9

10.7

9.7

9.4

Payout ratio

24.3

23.8

23.4

25.5

25.7

9,833

10,101

11,73012,913

Number of health support pharmacies

5

16

16

14

Local alliance pharmacies

-

-

39

46

Pharmacies allied with specialized medical institutions

-

-

2

3

Percentage of prescription dispensing of drugs that require
special management (%)*2

-

-

2.4

2.2

487

541

556

565

128,880

146,794

160,411

176,037

11

13

13

14

12,453

14,59017,913

18,847

9.4

8.3

8.6

9.6

10.2

12.2

11

51

Number of prescriptions filled (thousand sheets)

Numbers relating to function updates for an aging society
Number of stores providing home-visit prescription dispensing
services
Total number of customers who used home-visit prescription
dispensing services (annual)

All stores: Corporate group as a whole

+6.9

+11.0

+11.2

+3.8

-*1

All stores: SUGI Pharmacy operations

+9.9

+13.8

+12.7

+5.3

+8.0

Number of home-visit nursing stations*2

Existing stores: Corporate group as a whole

+2.2

+5.1

+4.3

-0.7

+3.1

Total number of customers who used home-visit nursing
services (annual)

Existing stores: SUGI Pharmacy operations*2

+2.6

+5.9

+4.7

0.0

+3.6

Numbers relating to private brands

Indices on prescription dispensing information

Percentage of private brand sales (%)

Sales from prescription dispensing

91,074105,279

117,597

132,743

142,461

Percentage of eco-friendly private brand products (%)*3

Number of prescriptions filled (thousand sheets)

8,698

9,833

10,101

11,73012,913

Numbers relating to the supply chain

Prescription cost (yen)10,471

10,707

11,642

11,318

11,033

Number of private brand contract manufacturers that conducted plant checks*1: As the Company has applied “Accounting Standard for Revenue Recognition” (ASBJ Statement No. 28, March 31, 2020) and related guidance (hereinafter,“Accounting Standard, etc.”) since the beginning of the fiscal year ended February 28, 2023, the figures stated for FY 2022 are calculated by applying the
Accounting Standard, etc. For this reason, percentage changes from the previous fiscal year are not presented. *2: “SUGI Pharmacy operations” indicates
only the number of stores of SUGI Pharmacy.

28

Number of home-visit prescription dispensing centers

33Fact Data

Annual sales growth rate (%)

103

Some non-financial information is available only from the fiscal year in which we started data collection, and “-” indicates that the information is unavailable.

*1: This is the number since the revamp of the app in October 2018. *2: Percentage of drugs that require special management (narcotics, raw materials forstimulants, psychotropic drugs, and toxic substances) to the prescription dispensing of all drugs. *3: Percentage of eco-friendly products to all private brandproducts.

104

FY 2019

FY 2020

FY 2021

FY 2022

FY 2019

51

60

75

84

Comprehensive agreements

13

13

19

26

Watching-over agreements

9

10

10

11

Disaster risk reduction agreements

29

34

38

39

Agreements on the environment, etc.

0

3

8

8

Total number of AEDs donated to facilities for senior citizens

147

182

217

255

Total number of stores where AEDs are installed

47

130

180

231

Total number of first-aid kits donated to local governments, etc.

962

962

962

1,068

Numbers relating to employees

FY 2022

1,679

2,005

2,126

2,169

1,451

1,692

1,768

1,854

228

313

358

315

13.6

15.6

16.8

14.5

-

-

-

4,099

Number of employees with foreign nationality

353

472

454

433

Number of employees with disabilities

355

370

411

440

Percentage of employees with disabilities (%)

2.54

2.36

2.43

2.58

Number of employees who took parenting leave

455

697

805

448

Men

11

46

84

79

Women

444

651

721

369

-

-

-

86.6

Number of managers
Men
Women
Percentage of female managers (%)
Number of regional full-time employees

6,710

7,308

7,727

Men

3,340

3,540

3,804

4,016

Women

2,842

3,170

3,504

3,711

Men

-

-

-

53.0

Percentage of women (%)

46.0

47.2

47.9

48.0

Women

-

-

-

100.0

-

-

-

7,727

307

368

508

603

10,282

11,467

11,77011,692

9

10

18

15

62.5

63.1

61.7

60.2

298

358

490

588

590

695

727

533

93.4

93.7

97.7

95.2

Men

174

234

245

176

Men

100.0

100.0

100.0

100.0

416

461

482

357

Women

92.5

92.6

97.9

94.7

Women

9

12

13

16

613

227

402

397

Men

1

0

1

1

Men

293

121

213

212

Women

8

12

12

15

Women

320

106

189

185

31

27

21

32

Number of pharmacists

2,803

3,025

3,390

3,688

Percentage of full-time employees re-employed after mandatory
retirement (%)

93.9

93.1

90.5

90.6

Number of registered pharmaceutical distributors

7,810

8,527

9,704

9,019

Employee engagement (P)

-

-

-

3.1

426

466

498

501

Numbers relating to safety and health

-

-

87

105

Regular health checkup rate (%)

99.7

99.6

95.3

99.0

1,139

1,208

1,214

1,268

Percentage of smokers (%)

17.0

15.2

12.0

12.3

-

-

5,259

5,391

Percentage of specified health guidance completed (%)

88.4

82.2

57.9

40.1

Men

-

-

5,947

5,894

-

-

-

170

Women

-

-

4,283

4,782

Number of employees who returned

-

-

-

68

Number of employees who left

-

-

-

51

-

-

-

65.0

Number of participants enrolled in dementia supporter courses

9,469

10,213

10,284

11,239

241

308

282

235

Average hours per employee spent in capacity development training

88.3

68.3

136.0

253.2

Number of occupational injury incidents (at work)

154

205

238

187

Training costs for full-time employee (million yen)

361

354

307

652

Number of occupational injury incidents (during commutation)

87

103

44

48

Compliance training attendance ratio (%)

95.3

100.0

100.0

100.0

0

0

0

0

Employees working in Japan
Number of partner employees (converted into the number of
8-hour workers)
Percentage of partner employees (converted into the number of
8-hour workers) (%)

Number of new graduates hired

Number of mid-career hires

Number of registered dietitians
Number of nurses
Number of beauty advisors
Average annual salary of full-time employees (thousand yen)

Numbers relating to human resource development

Percentage of employees who took parenting leave (%)

Number of employees who worked on reduced working hours for childcare
Men
Women
Percentage of those returning to work after parenting leave (%)

Number of employees who took nursing care leave

Number of full-time employees re-employed after mandatory retirement

Number of employees who took leave due to a mental health problem

Percentage of employees getting enough sleep (health checkup results) (%)
Number of occupational injury incidents

Number of fatal occupational injury incidents

Fact Data

6,182

Number of full-time employees

105

FY 2021

Numbers relating to diversity and work style

Numbers relating to contribution to the enhancement of community safety and security (cumulative)
Total number of agreements

FY 2020106

Consolidated Balance Sheet
FY 2019

FY 2020

FY 2021

FY 2022

Numbers relating to the environment

43

65

2,000

1,100

328

507

-

-

-

755,045

CO2 emissions - Scope 1 (t-CO2)

1,769

1,729

1,832 To be calculated

CO2 emissions - Scope 2 (t-CO2)

115,841

124,430

133,316 To be calculated

CO2 emissions - Scope 3 (t-CO2)-

1,669,962

1,700,421 To be calculated

250,121279,619

307,889 To be calculated

-

-

-

3,117

348,007375,300

405,420427,679

Number of stores with LED lighting

1,126

1,353

1,454

1,552

Percentage of stores with LED lighting (%)

81.0

97.0

98.0

99.0

Prescription drugs waste ratio (%)

-

-

0.41

0.41

Food waste ratio (%)

-

0.45

0.41

0.41

Return ratio (%)

-

-

2.2

1.8

Buildings and structures ccumulatedA
depreciation
Buildings and structures(net)

Water consumption (m3)Electric power consumption (thousand kWh)
Renewable energy consumption (thousand kWh)Gasoline consumption of company cars (liters)

Numbers relating to governance risk and compliance

As of the end of FY As of the end of FY
2021 (Feb. 28, 2022) 2022 (Feb. 28, 2023)

Current assets

Current liabilities

Cash and deposits

62,83162,642

 ccounts receivableA– trade33,57737,514

Securities

9,000

8,000

Inventory

71,571

74,503

Others15,455

17,324-1-0

192,434

199,984

 llowance for doubtful
Aaccounts
Total current assets
Non-current assets

112,267

120,771-46,622-52,261

65,64568,510121212Number of Risk Committee meetings held

21

58

31

33

Number of Board of Auditors meetings held

13

12

12

14

Land

8,764

8,583

Number of Directors

6

7

6

5

Construction in progress

3,238

2,001

Men

5

5

4

4

Women

1

2

2

1

Others40,65145,4252

3

3

2

 ccumulatedA
depreciation-28,933-32,608

Men

1

1

1

1

Others (net)

11,717

12,817

Women

1

2

2

1

89,366

91,913

Percentage of Independent External Directors (%)

33.3

42.9

50.0

40.0

Percentage of female Directors (%)

16.6

28.6

33.3

20.0

6,612

8,121

3

3

3

3

Investments and otherassets

Men

2

2

2

2

Investment securities

Women

1

1

1

1

Percentage of Independent External Auditors (%)

100.0

100.0

100.0

100.0

L ong-term loans
receivable

Percentage of female Auditors (%)

33.3

33.3

33.3

33.3

Annual number of calls to “Anything Consultation Call Service for All
Workplace Concerns”*5

430

832

1,254

1,585

Number of Auditors

Number of occurrences of human rights issues

-

-

-

0

Number of complaints

-

7,229

5,463

4,437

*5: The system was renamed in FY 2021 to ensure that employees feel able to use it more freely.

Intangible assets

4,297

5,459

5

5

Deferred tax assets

11,946

14,669

Guarantee deposits

27,491

28,902Others

2,631

2,868

-27

-27

46,34451,876142,323

151,911334,758

351,895

 llowance for doubtful
Aaccounts
Total investments andother assets
Total non-current assets

Total Assets

70,98777,038

Income taxes payable

1,586

4,981

-

18,059Provision for bonuses

1,899

1,488

Others28,092

15,446

Total current liabilities

102,565

117,015Retirement benefit liability

8,169

8,282

 sset retirementAobligations

6,659

7,063

Others

3,473

2,995

Total non-current liabilities

18,302

18,341

120,868

135,356

Capital15,434

15,434

Capital surplus

24,632

24,632Retained earnings

182,427

194,155

Treasury shares-9,300-18,215

213,194

216,007 aluation difference onVavailable-for-sale securities

1,065

378

 emeasurements ofRdefined benefit plans

-369

153

 otal accumulated otherTcomprehensive income

695

531

213,890

216,538

334,758

351,895

Contract liabilities

Total Liabilities
Net Assets
Shareholders’ equity

Total shareholders’ equity

Fact Data

13 otal property, plant andTequipment

Accounts payable – tradeNon-current liabilities

 roperty, plant andPequipment

Number of Board of Directors meetings held

Number of Independent External Directors

107

As of the end of FY As of the end of FY
2021 (Feb. 28, 2022) 2022 (Feb. 28, 2023)
Liabilities

144

Tonnage of plastic bags used

(Millions of yen)

Assets262

Number of plastic bags used (million bags)(Millions of yen)

 ccumulated otherA
comprehensive income

Total Net Assets
Total Liabilities and Net Assets

108Consolidated Statement of Income and Consolidated Statement ofComprehensive Income(Millions of yen)
Consolidated Statement of Income

FY 2021

FY 2022(Mar. 1, 2021 to Feb. 28, 2022)(Mar. 1, 2022 to Feb. 28, 2023)(Millions of yen)

FY 2021

FY 2022(Mar. 1, 2021 to Feb. 28, 2022)(Mar. 1, 2022 to Feb. 28, 2023)

Net cash provided by (used in) operating activities

Net sales

625,477

667,647

Cost of sales

433,987

465,123

Profit before income taxes

27,45628,184Gross profit

191,490

202,524

Depreciation

11,26812,362

Impairment loss

5,626

5,208

Selling, general and administrative expenses
Salaries, allowances and bonuses

66,68869,898

Increase (decrease) in provision for bonuses

-699

-411

Provision for bonuses

1,873

1,463

Increase (decrease) in retirement benefit liability

804

904

Increase (decrease) in allowance for doubtful accounts-8-0Retirement benefit expenses

1,267

1,439

Rent expenses

32,362

34,687

Interest and dividend income

-87

-163

Others

57,161

63,377

Gain on donation of non-current assets

-233

-164

Total selling, general and administrative expenses

159,353

170,865Interest expenses

19

16

32,13731,658Loss (gain) on sale of non-current assets--1,002

Loss on retirement of non-current assets

36Interest income

84

160

Decrease (increase) in trade receivables-1,922-3,922

Dividend income

2

2

-203

-2,901

455

312

Increase (decrease) in trade payables-20,079

5,976

1,856

1,934

Increase (decrease) in contract liabilities

-

794

729

572

Others

-128

545

3,129

2,982

Sub-total

21,81445,43425

94

Operating income
Non-operating income

Gain on donation of non-current assets
Rental income
OthersTotal non-operating income
Non-operating expenses

19

16

1,547

1,675

Loss on retirement of non-current assets

281

230

Others335

325

Interest expenses
Rental costs

Total non-operating expenses
Ordinary income

2,183

2,249

33,08232,391

Extraordinary income
Gain on sale of non-current assets

-

1,002

Total extraordinary income

-

1,002
5,208

5,626

5,208

Profit before income taxes

27,45628,184

Income taxes – current

9,660

10,587

Income taxes – deferred-1,594-1,409Total income taxes

8,066

9,177

Net income

19,38919,007

Profit attributable to owners of parent

19,38919,007(Millions of yen)

Consolidated Statement of Comprehensive Income
Net income

FY 2021

FY 2022(Mar. 1, 2021 to Feb. 28, 2022)(Mar. 1, 2022 to Feb. 28, 2023)

19,38919,007

Remeasurements of defined benefit plans
Total other comprehensive income
Comprehensive income-1,142

-686

-39

522

-1,182-164

18,207

18,842(Breakdown)Comprehensive income attributable to owners of parent

Interest and dividends received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities

18,207

18,842-16-14-14,648-7,234

7,174

38,279-81,000-79,020

Net cash provided by (used in) investing activities
Payments into time deposits
Proceeds from withdrawal of time deposits

81,00081,000Purchase of securities-24,000-26,000

Proceeds from redemption of securities

26,00026,000Purchase of property, plant and equipment-20,743-18,192-

1,273

Proceeds from sale of property, plant and equipment
Purchase of intangible assets
Purchase of investment securities
Proceeds from sale of shares of subsidiaries and associates
Payments of guarantee deposits
Proceeds from refund of guarantee deposits
OthersNet cash provided by (used in) investing activities-2,636-3,320--2,207100--2,512-2,707

299

317

-399

-399

-23,892-23,256-1-8,931-348-365-4,944-4,912-0-0-5,295-14,209--22

Net cash provided by (used in) financing activities
Purchase of treasury shares
Repayments of finance lease obligations
Dividends paid

Other comprehensive income
Valuation difference on available-for-sale securities

Decrease (increase) in inventories

Fact Data

5,626

Total extraordinary losses

Impairment loss

109

Consolidated Statement of Cash Flows

OthersNet cash provided by (used in) financing activities
Effect of exchange rate change on cash and cash equivalents
Net increase (decrease) in cash and cash equivalents-22,013790

Cash and cash equivalents at beginning of period

55,84533,831

Cash and cash equivalents at end of period

33,831

34,622110

Stock Information and Corporate Profile(As of February 28, 2023)

Stock Information

Corporate Profile

Total number of shares authorized to be issued

Treasury shares:by the Company: 200,000,000

4.76%

Total number of issued shares: 63,330,838
Number of shareholders: 36,712

Individuals andothers:16.36%

Share
distribution
according toshareholders

Financial institutions:

Trade name:

SUGI Holdings Co., Ltd.

13.87%

Established:

March 8, 1982

Capital:15,434,588,000 yen

Financial instrumentbusiness operators:

Number of employees: Number of full-time employees: 7,727 (on a consolidated basis)
Number of partner employees: 11,692*

1.09%

Foreigners:

Other domestic
corporations:28.14%

35.78%* Number of partner employees converted into the number of 8-hour workers

Major operations:Control and management of companies operating in such fields as prescription dispensing,drugstores, and home-visit nursing stations

Headquarters:

62-1 Shin'e, Yokone-machi, Obu-shi, Aichi 474-0011, Japan

Main store:

1-8-4 Mikawa Anjo-cho, Anjo-shi, Aichi 446-0056, Japan

Number of stores:

1,565 (Total of the Group)

Major shareholders

・SUGI Pharmacy: 1,446
Number of shares held
(thousand shares)

Name

Holding ratio to total
number of issued
shares (excluding
treasury stock) (%)

Sugi Shoji Co., Ltd.

20,97234.76

The Master Trust Bank of Japan (trust account)

6,349

10.52

STATE STREET BANK AND TRUST COMPANY 505223(Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Department)

2,365

3.92

Katsunori Sugiura

1,892

3.13

Shinya Sugiura

1,892

3.13

THE BANK OF NEW YORK MELLON 140051(Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Department)

1,567

2.59

Custody Bank of Japan, Ltd. (trust account)

1,374

2.27

Tsuruha Co., Ltd.

1,272

2.10

CEP LUX-ORBIS SICAV (Standing proxy: Citibank, N.A., Tokyo Branch)

860

1.42

STATE STREET BANK AND TRUST COMPANY 505103(Standing proxy: Mizuho Bank, Ltd., Settlement & Clearing Services Department)

821

1.36

39,368

65.27

Total

Note: On April 5, 2023, the Company was notified by Sugi Asset LLC that Sugi Asset would acquire from Katsunori Sugiura, Representative
Director & President of the Company, and Shinya Sugiura, Director of the Company, some of the shares of the Company held by them.
In the statement of large-volume holdings (change report) made available for public inspection as of April 12, 2023, Sugi Shoji Co., Ltd.
was reported to hold the following shares as of April 5, 2023. As a result, there have been changes in the major shareholders of theCompany as follows as of April 5, 2023:

Name

111

Address

Number of shares held
(thousand shares)

Holding ratio to total
number of issued
shares (%)

Sugi Shoji Co., Ltd.

1-8-4 Mikawa Anjo-cho, Anjo-shi, Aichi

22,57735.65

Sugi Asset LLC

62-1 Shin’e, Yokone-machi, Obu-shi, Aichi

3,019

4.76

Katsunori Sugiura

Kariya-shi, Aichi

150

0.23

Shinya Sugiura

Kariya-shi, Aichi

150

0.23

・Japan: 105
・SUGI home-visit nursing stations: 14
Directors

Representative Director & Chairman: Eiichi Sakakibara(as of May 30, 2023)

Representative Director & President: Katsunori Sugiura External Auditor: Kana Yasuda
Director & Senior Vice President: Shinya Sugiura

External Full-time Auditor: Toshihiko Sakamoto
External Auditor: Makoto Kamiya

External Director: Shigeyuki Kamino
External Director: Yoshiko Hayama

Editorial Policy
The Integrated Report 2023 has been edited for the purpose of presenting the SUGI Pharmacy Group’sbusiness philosophy and attitude toward sustainability and providing stakeholders with easy-to-understand explanations of our activities carried out based on them and their results. The report contains data
and articles regarding the corporate activities that we deem especially important.
Reporting Coverage
The report has been designed to cover the companies in the consolidated financial statement of the SUGI
Pharmacy Group to the extent possible, although the reporting coverage varies according to the item.
Coverage Period
March 1, 2022 – February 28, 2023
For some activities, more recent events have also been reported.
Reference Guidelines• International Integrated Reporting Framework, International Integrated
Reporting Council (IIRC)• Guidance for Collaborative Value Creation, Ministry of Economy,
Trade and Industry
Notes on Our Outlook
The Integrated Report 2023 presents forecasts and outlooks regarding future plans, strategies and business results of the SUGI Pharmacy Group and its subsidiaries. They are based on assumptions and views
judged from the information currently available to the SUGI Pharmacy Group. Please note that actual business results may differ from the outlook due to risks and uncertainties concerning future economic trends,
consumer spending, market demand, taxation, various systems, etc.

112