Rinnai Report 2023 (Integrated Report)

Sustainability Policy

Aiming for the Realization of Healthy
and Comfortable Lifestyles andSustainable Societies

Since its establishment in 1920, Rinnai has contributed to more affluent lives for people aroundthe world by providing products and services suited to the lifestyles, climates, and energy
conditions of each country.

To fulfill our brand promise “Creating a healthier way of living,” we will continue to contribute to
the attainment of a healthy, comfortable lifestyle and sustainable society for people worldwide
by utilizing all energy sources in the areas of heat and lifestyles and health and lifestyles, and bysolving global social issues with our core technologies.

01

Rinnai Report 2023

02

Corporate Mission and Vision

Rinnai Report 2023 (Integrated Report)

Fundamental Concept

Quality is our destiny

Editorial Policy

Contents

Rinnai produced the Rinnal Report 2023 (Integrated Report) to convey tostakeholders management’s approach to the realization of a sustainable society,to describe the activities undertaken Groupwide, and to encourage a deeper
understanding of the Group’s operations to as many people as possible.

Rinnai’s Activities

Company Motto

和 Harmony:
Develop personal character of the highest caliber

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

Highly important activities(stakeholder perspective)

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

Brand Promise —Rinnai’s Corporate Mission—

Abridged version
booklet form
Rinnai Report 2023 (Integrated Report)

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

01

Sustainability Policy

03

Corporate Mission and Vision Editorial Policy/Contents

05

100 Years of History

09

Rinnai Group Profile

11

Message from the President

17

Value Creation Process

19Intellectual Capital Supporting Rinnai Growth21

Medium-term Business Plans

25

Message from the General Manager ofMarketing & Sales

27

Message from the President of an Overseas Subsidiary29

Identifying Material Issues

Environment
31

Materiality Special Feature (1)Promoting Carbon Neutrality by Expanding Sales of the ECO ONE Hybrid
Water Heater and Heating System Offering the Highest Level ofEnvironmental Performance

Highly important activities(Rinnai Group perspective)

Creating a healthier way of living
Scope

Schematic Diagram of Company Ideals

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

Reporting Period

Company
Motto

Spiritual support of Rinnai

This report focuses on events that occurred in fiscal 2023—April 1, 2022, toMarch 31, 2023—but also touches upon measures implemented and recent
activities undertaken since fiscal 2022 as well as future business direction,
targets, and plans.

Referenced Guidelines
Brand Promise—Rinnai’s Corporate Mission—

Rinnai Code of Conduct

Expectations and attractiveness that
we keep promising with our customers

In accordance with the United Nations Guiding Principles on Business and Human Rights, Rinnai
Corporation established the Rinnai Human Rights Policy and hereby declares that it will respecthuman rights in all its business activities. For details, please refer to the following.
https://www.rinnai.co.jp/en/corp/human-rights/

Materiality Special Feature (2)Launching Field Test of Japan’s First 100% Hydrogen-burning Water Heaters
at Kitakyushu Hydrogen Town

35

Responses to the Task Force on Climate-related
Financial Disclosures

37

Environmental Impact within Rinnai’s Value Chain

39

Links between Corporate Strategy and the Realization ofa Sustainable Society (SDGs)

Social41

Materiality Special Feature (3)Microbubble Baths Help Hydrate the Skin and Promote Better Sleep

43

Rinnai’s Human Capital Strategy

45Communication with Customers

47

Communication with Business Partners

49

Communication with Shareholders and Investors

Governance
51

Management Structure

Publication Schedule

53

Leadership
Skills Matrix of Directors

August 2023 (Japanese version)
Previous: August 2022, Next: August 2024 (planned)

55
56

Messages from Newly Appointed Outside Directors

57

Compliance

58

Risk Management

Specific rules of day-to-day corporate activities

Rinnai Human Rights Policy

03

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

33

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

Data Collection
59

Data Collection
Eleven-Year Financial Summary,
Human Resource- and Personnel-Related Data,
Environmental Data

Rinnai Report 2023

04

100 Years of History (Part 1) 1920–2004

Historical Overview

Phase 1

Phase 2Phase 3Phase 4Phase 5

Founding and Postwar Reconstruction

Establishing a Corporate Foundation

Promoting Business Activities Overseas

Becoming a Listed Company

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

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

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

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

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

In fiscal 1989, for the first time the Company achieved its
long-sought after sales target of ¥100 billion, and incommemoration of its 70th anniversary a year later, plans
were made to construct a new Head Office building thatwas completed in 1994.
In terms of products, the Company promoted
added value through safety functions that included gas
water heaters equipped with carbon monoxide sensors
and hobs (stovetops) equipped with a tempura oil fire
prevention function. In response to the rapid developmentof China and ASEAN countries, the Company establishedjoint manufacturing bases and acquired quality andenvironmental management certifications, including ISO
9001 and 14001 series in promotion of initiatives
undertaken as a global corporation.

2005¥202.0 billion

1989

Performance¥98.4 billion

1980¥48.3 billion

Net sales
1967¥5.6 billion

1951

Rinnai & Co. founded.
1921

Technologies andProducts

1951–●1920 The Rinnai-type kerosene gas stove registeredas a utility model is launched.
●1923 Gas tabletop stove, gas ranges, gas oven, gas
water heater and other product deliveries to gas
companies across Japan as overseas exports
begin.
●1937 Sales of oil and gas stoves across north China
market from base in Tianjin City are launched.

Rinnai-type kerosene gas stove

Management andOrganization

05¥21 million●1920 The company is incorporated as Rinnai & Co. byfounders Hidejiro Naito and Kanekichi Hayashi.
●1938 Manufacturing of aircraft parts takes place with thefactory coming under military supervision.
●1940 The company changes its name to Rinnai Aircraft
Parts Manufacturing.
●1947 Production of gas and kerosene appliances resumes
at the rebuilt Head Office factory.

●1957

1967–

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

●1967
●1971
●1972

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

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

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

1980–

1989–

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

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

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

(FY)

Highly efficient condensing
gas water heater

Gas instantaneous water heater, UT
●1979

2005

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

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

Rinnai Report 2023

06

Medium-term Business Plans

100 Years of History (Part 2) 2005–2025
Promoting Medium-term Business Plans Under a New Structure
Phase 6

Phase 7

Phase 8Phase 9Phase 10Phase 11

V-Shift Plan

Reform & BreakthroughJump UP 2014

Evolution and Succession 2017

G-shift 2020

New ERA 2025

[2006–2008][2009–2011][2012–2014][2015–2017][2018–2020][2021–2025]

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

Under the medium-term business plan launched in2009 entitled “Reform & Breakthrough,” theCompany aimed to become a comprehensive heat
energy appliance manufacturer contributing topeople’s lifestyles throughout the world, establishinga presence with a unique business model appealing
to both people and business partners.
While accelerating manufacturing that placed
top priority on the environment, the Company aimed
for a lean corporate structure and the thoroughelimination of wasteful business activities. At thesame time, cooperation and collaborations were
strengthened among Group companies in Japan andoverseas, sharing the same ideals in an effort topromote the consolidation of a structure as acomprehensive heat energy appliance Group.

Launched directly after the Great East Japan
Earthquake, “Jump UP 2014” aimed to establish
a corporate structure able to supply appliances
optimized from an environmental standpoint to global
markets in light of social needs for the best energy mix.
The Company stepped up its pursuit of zero
defects. Innovations aimed at revising development,
manufacturing and sales processes enhanced
mobility. Organizational capabilities were taken toa new level through Group coordination and strategic
human resource development in response to
globalization and increasing sophistication. Whilefocusing efforts on these initiatives, the Company
engaged in the long-term enhancement of its
corporate value.

The Company views “succession” as indispensable
for its business. With its origin in the concept “quality is
our destiny,” Rinnai’s mission is to “utilize heating toprovide society with a comfortable way of life” in all
global markets.
At the same time, with regard to “evolution,”in order to respond to the business environment, thisplan targeted business model innovations throughthe promotion of product sophistication in Japan and,overseas, the smooth horizontal deployment oftechnologies and products created by Group
companies. The plan also aimed to establish the
Rinnai brand as a comprehensive heat energy
appliance manufacturer.

Domestic sales

Focused on the 100th anniversary of Rinnai’s
founding, this plan introduced the Group slogan“innovating technologies for the next generation andstrengthening overseas growth strategies to leap
forward as a global brand.”The “G-shift” medium-term business planname represented three core policies aimed atpromoting global strategies leveraging the Group’s
network linkages, the shift to a new generation thatpasses on traditions accumulated over the past 100
years and breaks common sense, and theestablishment of a corporate governance systemmeeting the demands of society and modern times.
In 2019, the Company formulated the brand promise“Creating a healthier way of living” to further clarify
its stance.

Celebrating its 100th anniversary in 2020, Rinnai formulated a new
Medium-Term Business Plan covering the five-year period from fiscal
2022 to fiscal 2026 as it heads toward its next century.
We have positioned the year 2021 (101 years since ourfoundation) as the start of a New ERA. We will achieve Advancementin addressing social challenges through Expansion of business scaleand Revolution of corporate structure.
In anticipation of changes in the business environment that
include efforts to achieve carbon neutrality, the transformation ofneeds and the entrenchment of the “new normal” and digitaladvances, Rinnai aims to be the brand of choice and positions this asa period for delivering growth and implementing reforms froma medium- to long-term perspective.

¥425.2 billion¥41.4 billion

Overseas sales

Performance

56%

New ERA 2025
New Expansion, Revolution and Advancement

Operating income

Operating margin

Management andOrganization

Technologies and Products

2006

07

2007

2008

2009

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

2010

2011

2012

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

2013

2014

2015

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

2016

2017

2018

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

2019

2020

2021

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

2022

2023

2024

2025

2026 (FY)●2022 Launched sales of Leggiero waterless cooking pots.
Leggiero receives the Red Dot Design Award 2022.
●2022 Successfully developed 100% hydrogen combustion technology
for residential water heaters.

●2022
An ultra fine bubble water
heater launches.

●2022 Rinnai wins the Energy Conservation Award (the Prize of DirectorGeneral of the Agency for Natural Resources and Energy) for ECO
ONE hybrid water heater with heating systems.
●2006 Shanghai Rinnai Thermo Energy Engineering Co., Ltd.
is established.
●2008 Rinnai Italia S.r.l. is established.
●2008 The Integrated Logistics Center opens.

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

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

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

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

●2021 Rinnai wins the “Minister of the Environment Award (Large
company category)” at the highest award of the Environmental
Persons Development Awards.
●2021 Rinnai America acquired Industrias MASS S.A. de C.V. (Mexico).
●2021 Announced the Rinnai Group Path to Becoming Carbon-Neutral
and Rinnai Innovation Manifesto 2050 (RIM 2050).
●2022 Established the ESG Committee in April.
●2022 The Kasugai Logistics Center opens.

Rinnai Report 2023

08

Rinnai Group Profile● Manufacturing and sales companies

Corporate Data (As of March 31, 2023)◎ Sales companies

RinnaiWorldwide○ Other business□ Overseas representative office

Incorporated

September 1, 1920

Established

September 2, 1950

Paid-in capital(As of April 1, 2023)

SOUTH KOREA● Rinnai Korea Corporation● RB Korea Ltd.

CHINA

Rinnai UK Ltd.

◎◎ Rinnai Plus Corp.

● Shanghai Rinnai Co., Ltd.
◎ Rinnai Treading B.V.
Rinnai Italia s.r.l.

●Rinnai Corporation● Yanagisawa Manufacturing Co., Ltd.
Rinnai Hong Kong Ltd.
◎●

Rinnai (Malaysia) Sdn. Bhd.

◎●

11,150 (consolidated), 3,587 (non-consolidated)
46 (domestic 12, overseas 34)

UNITED STATESJAPAN◎ Hainan Rinnai Minsheng Kitchen Appliances Sales Co., Ltd.

Rinnai (Thailand)Co., Ltd.

(From outside Japan): +81-52-361-8211◎◎ Shanghai Rinnai Thermo Energy Engineering Co., Ltd.

Dubai
Representative
OfficeTelephone

Rinnai Canada Holdings Ltd.

● Shanghai RB Controls Co., Ltd.

□

2-26, Fukuzumi-cho, Nakagawa-ku,
Nagoya 454-0802, Japan

Number of Group companies◎ Guangzhou Rinnai Gas and Electric Appliance Co., Ltd.

◎

Head office

Number of employees● Mikuni RK Corporation¥6,484,416,754● Rinnai Technica Co., Ltd.

P.T. Rinnai Indonesia

South Korea¥32.0 billion● RB Controls Co., Ltd.

● Rinnai Precision Co., Ltd.
● RT Engineering Co., Ltd.

●

Rinnai Manufacturing Malaysia Sdn. Bhd.

Others ¥30.5 billion● Gastar Co., Ltd.

●Rinnai Taiwan Corporation
Rinnai Vietnam Co., Ltd.
Rinnai Holdings (Pacific)
Pte Ltd.

◎

Indonesia¥16.2 billion

Rinnai America Corporation●● Industrias Mass, S.A. de C.V.

Net Salesby Region
Total● Noto Tech Co., Ltd.

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

China
¥66.1 billion○ Rinnai Enterprises
●

425.2

¥

billion

INDONESIA
Rinnai Brasil Heating Technology Ltd.

AUSTRALIA●● Rinnai Australia Pty., Ltd.
○ Gas Appliance Services Corporation

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

Kitchen AppliancesHome Heaters

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

Commercial-Use Equipment, Others

Fan heaters, fanned flue heaters, infrared heaters, andothersJapan¥196.8 billion

United States¥55.7 billion

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

Water Heaters and Heating Systems

Australia¥27.6 billion

Industrial ceramics machines, commercial-use ranges,commercial-use cookers, gas clothes dryers, components, and others

Others ¥42.1 billion

Commercial-use equipment¥10.6 billion
Home heaters¥21.9 billion

DELICIA built-in
gas hob (stovetop)(JAPAN)Net Salesby ProductTotal

Gas clothes dryer(JAPAN)Gas fan heater A-style(JAPAN)

425.2¥
Kitchen appliances¥91.7 billion
Eco Jozu, gas water
heater with bath-fillingsystem(JAPAN)09

High-efficiency gas
tankless water heater(UNITED STATES)

Dishwasher(JAPAN)

Fanned flue heater(UNITED STATES)

Duct-type air-conditioning andheating system (AUSTRALIA)

billionWater heaters andheating systems¥258.6 billion

Rinnai Report 2023

10

Message from the President

We will pursue product quality andattractiveness to achievesustainable growth as a company
with a strong brandPresident

Hiroyasu Naito

Another Record High for Earnings, but Profit
Margin Improvement is an Issue
In fiscal 2023, the fiscal year ended March 31, 2023, the Rinnai Group saw salesof hot water heaters and other products grow in Japan and overseas as the global
economy continued to normalize from the COVID-19 pandemic. At the same time,
the rise in raw materials and other costs surpassed our expectations and had
a significant impact on our earnings. In fiscal 2023, net sales were ¥425,229 million(up 16.1% year on year), operating income was ¥41,418 million (up 15.5%), ordinary
income was ¥44,565 million (up 14.1%), and net income attributable to owners of
the parent company was ¥26,096 million (up 9.9%).
Although net sales, operating income, and ordinary income reached newrecord highs, profit margins fell below the upwardly revised plan figures due tohigh costs, and our initiatives to improve in profit margins treaded water. Supply
chain disruptions, which had been an issue, have been resolved, and the Group ismaking progress in establishing a more resilient production system.
Since we will be manufacturing both components and products with moreinventory than ever before, we will need to formulate a strategy going forward that
accounts for higher procurement costs related to materials and parts, as well as
the rising costs of personnel and raw materials.

11

Rinnai Report 2023

12

Message from the President

Progress in the Second Year of New ERA 2025
Advancement in addressing social challenges—Adapt to the energy transition and step into the future
Rinnai has formulated the Rinnai Innovation Manifesto

Concept model of hydrogen water heater

Another effective way to reduce environmental

new products, and I look forward to hearing our

100% hydrogen combustion water heaters. We have also

2050 (commonly known as RIM 2050), a policy to achieve

impact is to switch from conventional water heaters to

employees’ free and open-minded inspirations.

begun joint development with Toyota Motor Corporation

carbon neutrality by 2050. And in its New ERA 2025

the highly efficient Eco-Jozu water heater. We intend to

medium-term business plan, Rinnai is working to enhanceincrease awareness of the availability of subsidies byhydrogen energy technologies and are preparing

its lineup of environmentally friendly products to contributepublicizing the fact that single function hot-water units,a structure that will allow us to introduce technologies

Rinnai will continue its research and development

to resolving social issues. Recently, demand has been

which account for less than 10% of all hot-water unit

and equipment as soon as the infrastructure is in place.

based on the possible paths for energy at this turning

growing for ECO ONE, a gas-electric hybrid water heater

replacements, are eligible for government support for

We have launched proof of concept tests in Japan atpoint, so that we can expand our business regardless ofwith heating systems that we have offered for many years.

energy-saving home renovations. Meanwhile, in

Kitakyushu Hydrogen Town and overseas in Australia forwhat technology ends up dominating.

Sales in fiscal 2023 were up 28.2% versus the previous

overseas markets, the switchover from storage tank-year, marking a record high. This product combines

type water heaters, the most widespread type in the

Eco-Jozu, a highly energy-efficient gas water heater, with

United States, to tankless water heaters (instantaneousa highly energy-efficient electric-powered heat pumpwater heaters) and beyond that to Eco-Jozu will lead towater heater and achieves a substantial reduction ina significant reduction in CO₂ emissions. We areenvironmental impact. ECO ONE is eligible for subsidies

targeting the new housing start market for this transition

from the Japanese government as part of a project toin the United States.

save energy consumed in the supply of hot water, and thiswill also encourage its widespread use.
I am confident ECO ONE installations will expand

Rinnai established a dedicated business unit in April
2023 to further strengthen its ability to develop
environmentally friendly products. Until now, Rinnai has

overseas as well. In Europe, electric hot water andspecialized in the manufacture and sale of gas

heating systems are currently being used, but it is difficult

appliances, but from now on it will need to develop andto maintain sufficient warmth with these in cold climates.

manufacture products that are not focused exclusively

As such, there is a trend to re-evaluate the use of high-on gas. Rinnai’s basic stance is to challenge all its

efficiency gas. Even in Europe, where environmental

employees to come up with various ideas and create

restrictions are advancing, I believe people there will

We are also making steady progress in accumulating

for hydrogen-powered cooking equipment and are aiming
to introduce this technology at Toyota Woven City.

Expanding the Scale of Business: Growing by Developing Business in Tandemwith Trends in Each Country
Rinnai is also focusing on expanding the scale of its

Our e-commerce business has been very strong

business overseas. As the world moves toward carbon

in China. Fortunately, we have not been significantly

neutrality, some countries are shifting to electric heataffected by the intermittent lockdowns caused by thepump water heaters, but it is also a fact that others are

COVID-19 pandemic, and we were able to outperform

focusing on the diffusion of gas water heaters. We willin gas water heater sales in fiscal 2023. We attribute thisdevelop our business based on our contribution to theability to surpass our competitor, the market leader inattainment of carbon neutrality, taking into account the

China, to our partnership with a Chinese company withenvironmental measures that each country is required toa strong e-commerce presence. We will continue to work

take depending on its circumstances and situation.

together to achieve a better balance of profits as well

Overseas, we have positioned the United Statesas sales.

and China as priority markets. In the United States,
demand for instantaneous water heaters has grown tocontinue to live not in an all-electric world but a hybrid

the extent that we have a backlog of orders. That said,

one that also uses gas. Although it is difficult to anticipate

we expect demand to slow down over the near term as

the speed of the diffusion of this technology both inconditions in the housing market began to deteriorate inJapan and overseas, we will continue our initiatives tothe second half of 2022. It is also true that some states

ensure we are ready to respond adequately when theare stepping up environmental measures, such as

time comes. We currently do not make our own heatbanning the installation of gas lines in new buildings.

pump hot water heaters for ECO ONE, so we need to

Despite these challenges, we believe the US market,

invest in the research, development, and manufacturing

which is much larger than the Japanese market, holdsof heat pump units. This will be a major investment, but

great promise and we will aggressively pursue market

we will certainly proceed with it.
ECO ONE X5 contributes to achieving carbon neutrality

13

Announced the successful development of hydrogen combustion technology(May 2022)

share there.

Trade show in the United States (June 2023)

Rinnai Report 2023

14

Message from the President

Rinnai will Contribute to Society by Thinking Through its Own Aspirations
Rinnai’s fundamental concept is to enhance corporate

From fiscal 2024, Rinnai has added two Outside

value through profit growth, and we will actively invest in

Directors, including one woman. We will strive to improvethe basic scenario of the medium-term business plan

our corporate value through the more transparent operationand growth areas with optimal allocation. The research,of the Board of Directors and diverse discussions

development, and manufacture of heat pump units that

including women. Furthermore, one of the new Outside

I discussed earlier is part of this thinking. Assuming these

Directors is an expert in investor relations and will be able

growth investments are implemented as planned, ourto strengthen Rinnai’s dialogue with the capital markets.

visitors to experience the appeal of the products firsthand.

cash holdings in fiscal 2026 are expected to be lower

I believe this will enable us to identify issues and makeWe are also working on digital transformation (DX) to

than the projected amount of ¥180 billion, owing to an

improvements in a better way.

Phase 2 of Shanghai Factory Construction

Revolution of Corporate Structure: Toward a Company and Products with Brand Strength
Rinnai has a long-standing commitment to high-quality
manufacturing as a company that supports people’s daily
lives. In addition to this, we are now focusing on improving

create new value through innovative customer

increase in shareholder returns. ROIC is estimated to be

The ESG Committee has already extracted key

our brand strength to transform into a company thatconnections that have never been witnessed before. We

below the projected value of 19.0% (fiscal 2026) due toissues from the opinions of shareholders and investors

provides high value-added products that are moreare currently exploring the optimal ways to analyze andthe search for an appropriate level of inventory to makeand is working on them. In addition to this work, it is also

attractive to consumers. In our medium-term business

utilize data for Rinnai by learning from companies thatgrowth resilient and the execution of growth investments.

important is to think exhaustively about what we shouldplan, we have set a goal of a revolution in our corporate

excel in the application of customer data.

I would like to mention that Rinnai has added ROE

do from the perspective of Rinnai’s place in society andOver the past few years, Rinnai has continued toas a new management indicator. We aim to achieve 8%

the Company’s sustainable growth, and to tackle on

The acquisition of land and buildings in Minami-Aoyama,

grow despite the dramatic social and economic changes

in fiscal 2026 and will make further improvements during

these issues on our own. Based on this basic stance, we

Minato Ward in Tokyo in April 2023 is one facet of this goal.

it has experienced in both Japan and abroad. Investment

the next medium-term business plan duration. We will

will promote dialogue with our stakeholders, provide highFor some time, there have been high expectations forin our employees, who are responsible for our business

improve ROE by building a business foundation forvalue-added products, and contribute to a society that is

Rinnai to develop super-luxury kitchen products for upper-

activities and are the source of the Company’s vitality, issustainable profit growth and increasing Rinnai’s

facing many challenges.

end consumers. Most system kitchens offered in Japan

exceptionally important. In April 2023, the Company

dividend payout ratio to around 40% in fiscal 2026 fromthat combine attractive interior design aesthetics andimplemented a transfer of restricted stock incentives to its

the current level of around 30%.

quality are made by overseas manufacturers. As such,

Employee Stock Ownership Plan. We began conducting

many customers have expressed concerns about

an employee engagement survey in fiscal 2022, and one

breakdowns and maintenance, which has led toof the Company-wide issues highlighted was the lack ofa demand for Japanese products. To address such needs,

a framework to encourage employee growth. We expect

Rinnai has launched high-end models under its G:LINEthat the restricted stock incentives will be closely linked toseries and is looking to expand its product lineup and

Rinnai’s performance and growth potential, allowing

develop even higher quality models. Minami-Aoyama is

employees to sense their own contributions and providing

an ideal location for capturing the latest information on

an opportunity to boost their motivation.

structure to “become more consumer-oriented.”

market trends for luxury lines and is also a favorable

In terms of addressing issues raised in thelocation for the sales perspective of the business. I am

employee engagement survey, we aim to improve thecertain that our employees will develop the ability to thinkpercentage of positive responses by 15 percentage

about and judge what higher value-added products lookpoints by fiscal 2026 versus the results of the first survey

like in this kind of setting.

implemented in fiscal 2022 by sharing the issues

We also envision the opening of a showroom, notsimply to display products, but to provide a realistic

We look forward to your continued guidance andsupport.

identified across the Company and by each organizationand implementing improvement measures.

experience of the lifestyle they embody and to allow

15

Rinnai Report 2023

16

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

Rinnai Group Value Creation Process

External Environment / Social Issues

Value Provided

Business Activities

Climate change /global warming

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

Product usage risks

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

Work style changes
cause decrease inquality of lifestyles

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

Consolidated net sales

Creation of products
and services that are safe,
secure, andenvironmentally friendly¥425,229 million

Environmental
contribution(local production / in-house production)

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

Invested Capital (Fiscal 2023)
Human capitalIntellectual capital

Financial capital

Employees*1:
Employed (Rinnai non-consolidated) *1:
Training and development expenses:(Rinnai non-consolidated)
Overseas trainees (Rinnai non-consolidated):

11,150 people
103 people¥127 million

Research & Development Headquarters staff:(Rinnai non-consolidated) *1
Production Engineering Headquarters staff:(Rinnai non-consolidated) *1
R&D expenses (Rinnai non-consolidated):ISO 9001 certification acquisition:(number of companies) *1
ISO 14001 certification acquisition:(number of companies) *1
ROE
ROIC
Equity ratio

501 people¥41,418 million
Operating income ratio
9.7%¥26,096 million

173 people

Net assets (equity ratio)¥8,104 million
17 companies
15 companies
7.4%
13.3%
66.6%

Rinnai Group production bases:
23 companies(number of companies) *1
Production group staff (Rinnai non-consolidated) *1:
1,559 people
Capital expenditure (Rinnai non-consolidated):¥14,934 million

Natural capital

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

Social andrelationship capital

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

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

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

1,155,651 GJ
220,458 m3
742,154 m3

Growing demand for energy-saving products
by strengthening environmental policies[Domestic] Price reduction of gas
appliances due to customer requests

Increasing needs for safety and accident
prevention as social issues[Domestic] Declining birthrates, an aging
population, and a decreasing number ofhouseholds[Overseas] Expand use of natural gas andhydrogen[Overseas] Improving living standards
Progress in evaluation of corporate ESG
initiatives

Dividend per share(annual) ¥160
Products contributing to improved
quality of life

Products that benefit the
global environment

Opportunities[Domestic] Expansion of thermal energy
systems centered on electric power¥407,199 million (66.6%)

Sales Approx. ¥124,000 million*1 As of March 31, 2023

Decreasing working hours and intensifying
competition for securing human resources

Operating income

Net income attributable toowners of the parent company

0 people

Manufactured
capitalRisks

Fiscal 2023 Achievements

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

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

Social issue recognition

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

Sales Approx. ¥176,000 million
Amount contributed toreducing CO2 emissions*5.82 million tons
Announcements of productrecalls due to defects:
0 case* Consolidated basis

17

Rinnai Report 2023

18

Intellectual Capital Supporting Rinnai Growth

R&D Policy

Intellectual Capital Key Data

The Rinnai Development Division is engaged in the research and development of products, services, and technologies centered on
housing equipment closely linked to people’s lives, with the aim of providing people to lead richer, more enjoyable lives while also ensuring
a sustainable global environment.
Specifically, to make bathroom, living room, and kitchen spaces more comfortable, we will develop products based on the
combustion, heat transfer, fluid control, IoT, and electronic control technologies cultivated up to now, while further incorporating sensing,
network, AI, and other advanced technologies to create new value.
To achieve carbon neutrality, which has become a social issue, in addition to the development of ECO ONE hybrid water heatersystems and other environmentally friendly equipment providing high energy efficiency, we will promote the research and development ofhydrogen combustion and electrification-compatible equipment.
For the ever-growing overseas market, we will promote the development of products and technologies that support local lifestyles inline with the policies of each country by developing global human resources and strengthening cooperation with overseas subsidiaries.

R&D ScopeWith foundational technologies comprising combustion, heat transfer, fluid control, IoT, and electronic control technologies, Rinnai
develops gas burners. electric valves, and other functional components and products that realize water heaters facilitating highly efficient
hot water supplies and kitchen appliances with automatic cooking functions in an effort to create value that leads to improving customer
quality of life and environmental contributions.
Having defined the scope of Development Division activities as the “Rinnai Innovation Circle” leading from foundational technologies
to value provision, our mission is to further expand the framework (RIM) of this scope through innovation.

FY2019FY2020

FY2021

FY2022

FY2023

Number of patent applications

217

203

223

190

200

Number of registered patents

101

170

178

229

179

Number of patents held

2,328

2,300

2,358

2,406

2,350

R&D expenses (Millions of yen)

9,503

9,308

11,802

12,762

13,458

Production Engineering Policy
The Rinnai Production Engineering Division pursues “healthy and comfortable lifestyles for people” and “a stable profit structure”
through the development of manufacturing technologies.
For many years, we have engaged in the research and development of technologies, methods, and mechanisms implemented at
our manufacturing sites that facilitate the delivery of Rinnai Group products and services to customers in a timely manner at reasonable
prices. To responsibly ensure Rinnai’s fundamental concept of “quality is our destiny,” we are enhancing core technologies while
conducting the in-house production of molds, equipment, and information systems, as well as pursuing collaborative creations withbusiness partners.
In recent years, amid the accelerating transition toward digitalization, globalization, and a decarbonized society, we are expanding
our challenge domain to larger themes. Rinnai must transform processing methods for single parts into the assembly and developmentof products themselves, while transitioning from stand-alone facilities to large-scale automation systems encompassing factories,
including those located overseas, as well as global supply chains. To this end, we are strengthening technological fields such as IoT, AI,
robotics, and simulations, while engaging in daily efforts to create systems and develop human resources with the aim of dynamicallyreforming cross-functional business processes and mechanisms.
To maintain our promise of “creating a healthier way of living” for customers throughout the world, Rinnai will continue developing
technologies to deliver quality products that support healthier, more comfortable, and higher quality lifestyles in a timely and reasonable
manner, while growing as a professional Group that continuously takes on challenges with high aspirations.

Core Production Technologies
The Production Engineering Division strives to improve quality based on Rinnai’s fundamental concept of “quality is our destiny.”
Defining production design, material technologies, processing technologies, inspection and analysis technologies, molding and casting
technologies, automation technologies, production system technologies and digital technologies as our “core production
technologies,” we are working to improve and implement these core technologies at all manufacturing sites.
Material
Technologies

Processing
Technologies

Inspection andAnalysis Technologies• Heat exchanger design• Analysis technologies• Metal and resin materials• Ceramic coatings• Enameling• Welding and brazing• Pipe processing• Innovative processes• Innovation inspections• Image inspections• Inspection-free

Mold and casting
technologies

Automation
Technologies

Production System
Technologies• Mold technologies• Press technologies• Factory automation
development• Robot systemdevelopment• Production system design• Assembly process design

Production Design

Rinnai Innovation Circle

19

Digital Technologies• IoT (equipment,
people, things)• AI, data science

For details regarding Rinnai technologies, please visit the “Technologies” section of our corporate website.
https://www.rinnai.co.jp/technology/

Rinnai Report 2023

20

Medium-term Business Plans

New ERA 2025

New Expansion,
Revolution and Advancement

Expanded Lineup of Products That Contribute to Improved Quality of Life and Benefit
the Global Environment
Expanded lineup of ECO ONE products aimed at realizing carbon neutrality, launched sales of a new deluxe model in the popular
Kanta-kun product line.
Ultrafine bubble water heater(sales launched in October 2022)

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

Advancement in addressing
social challenges

Expansion of business scale

Revolution of corporate structure

ECO ONE X5 hybrid water heater with heating system for high-density housing(sales launch planned for September 2023)• Improve quality of life
• Help resolve global environmental
problems• Become more consumer-oriented• Make focused investments inintangible assets• Enhance profitability• Expand regional domains• Expand business domains

Deluxe model Kanta-kun gas
clothes dryer(sales launched in July 2023)

Group Net Sales and Operating Income After the Second Year of the Medium-term Business Plan

Net sales and operating income both reached all-time highs and are on track to achieve medium-term business plan targets.

(Billions of yen)

450.0

425.2
348.0

340.4

■■ Net sales■■ Operating income

8.9%

10.1%

344.3

366.1

11.8%
9.8%

9.7%

11.1%

● ● Operating margin

30.8

34.4

40.6

35.8

41.4

2018

2019

2020

2021

2022

50.0
…

2025 (Plan)Three Strategic Stories: Advancement in Addressing Social Issues

Maintain target of +50% increase in sales of products that contribute to improved quality of life and benefit the global environment.

2020

21

2021

2022

Maintain overseas sales ratio at 50% by capturing growing demand overseas and increasing sales in Japan.
Consolidated Domestic/Overseas Sales (Billions of yen)

Sales of products that benefit the global environment■Domestic+48% vs. fiscal 2021

Red text: Overseas sales ratio

2020

Compact bathroom heater/dryer(sales launched in October 2022)

Three Strategic Stories: Expansion of Business Scale—Regional Domains—

Target in the final year of the medium-term business plan: +50% increase (vs. fiscal 2021) in sales of
products that contribute to improved quality of life and benefit the global environment+59% vs. fiscal 2021

Built-in instant-heating gas water
heater with heating system heatsource device(sales launched in December 2022)

New ERA 2025

Previous Medium-term Business Plan

Sales of products that contribute to improved quality of life

Built-in dishwasher/dryer 405LP/GP series(sales launched in December 2022)

2021■Overseas

55.8%

48.9%

55.8%

168.4

204.1

175.8

162.0

187.8

2020

2021

2022

237.4

In the final year of the Medium-term Business Plan,
the consolidated net sales target of ¥450 billion
breaks down to domestic sales of ¥200 billion andoverseas sales of ¥250 billion.

2022

Rinnai Report 2023

22

Three Strategic Stories: Expansion of Business Scale—Business Domains—

Acquiring Land and Property in Tokyo’s Minami-Aoyama District to Become More Consumer Oriented

Hydrogen equipment-related business
Promote initiatives aimed at hydrogen development as part of Rinnai’s RIM 2050 commitment to carbon neutrality.

■ 1. Hydrogen water heaters (Australia)■ 2. Hydrogen cooking appliances

BackgroundTo enhance sustainable corporate value, Rinnai believes it important to empathize withthe essential needs that lead to improved quality of life, and to expand and deepen
awareness of the Rinnai brand. To this end, we must establish lines of communication
with consumers in both the real world and in digital life, and facilitate life and brandexperiences that resonate with consumers.

Objective

Rinnai will build a brand experience showroom and value creation laboratory to pursue
what consumers consider “intrinsically good,” experiment with value creation, andco-create with consumers and companies in other fields.

■ 3. Field testing at Kitakyushu Hydrogen Town

Plans

Various field testing(from Kitakyushu City website)

Field testing conducted at the “Hydrogen House”
in Australia

Hydrogen cooking equipment currently underjoint development• Developing water heater technology based on
100% hydrogen combustion (world’s first
technology for residential water heaters)• Supporting field tests using actual equipment in Australia,
where hydrogen is being proactively promoted• Jointly developing hydrogen combustion-fueledcooking equipment (in conjunction with the Toyota
Motor Corporation)• Through field tests at Woven City and other facilities, we arescientifically verifying the safety and efficiency of hydrogencooking and its effects on the taste and flavor of food• Commenced field-testing of Japan’s first 100%hydrogen-fueled water heater at Kitakyushu Hydrogen Town
(Iwatani Corporation, Kitakyushu City and elsewhere)• Commenced field tests in environments similar to actual use(fields with proven track records of hydrogen utilization
through pipelines since 2009)

Three Strategic Stories: Revolution of Corporate Structure
Increase capital productivity through efficient investment of management capital in linewith improved business performance.
7.0% 7.0%(Plan)

6.9%

7.4%

8.0%

7.6%

Total Shareholder Return
Rinnai will expand shareholder returns while placing a priority on investments in future growth and strategic spending.

Shareholder return policy under the current Medium-term Management Plan:
Total return ratio of 40% (2021–2025 average)
84.7% (cumulative fiscal 2022–fiscal 2023)■■Total dividends (Billions of yen)■■Share buybacks (Billions of yen)

(Target)8.4%

Formulate details during fiscal 2024 based on the assumption of a pre-open test run infiscal 2025.

Rinnai hydrogenwater heater(concept model)

24.3

17.4

■ ROE
ROE has been included as a new performance indicator based on the importance of improving
capital policy transparency and capital efficiency

Fiscal 2026 ROE: Targeting 8.0% and further improvements during thenext medium-term plan period

10.0

6.4

10.0

4.8

5.0

4.8

5.0

6.4

6.9

7.8

8.5

2018

2019

2020

2021

2022

2023
(Plan)

Previous Medium-term Business Plan

■ ROIC

18.5

17.8

New ERA 2025

Current plan target: 19.0% ⇒ 13.3% (fiscal 2023)
Profit growth will continue, but ROIC is currently below the plan target due to appropriate
inventory level revisions and the execution of growth investments.

2018

2019

2020

2021

Previous medium-termbusiness plan

2022

2023

…

2025

…

Next medium-termbusiness plan

New ERA 2025

ROE Actual vs. Target

Focused Investments for the Future

Growthinvestments

Necessaryinvestments

Investing in increased production capacity in the United States, China, and other countries in line with expansion of overseas business.
Expanding investments to meet demand.

Dividends per Share and Payout Ratio
Continuing to consecutively increase dividends while steadily raising the dividend payout ratio to reach 30%.

As an additional policy under the current Medium-term Management Plan,
incrementally increase the payout ratio Fiscal 2026: 40% level■Dividends per share (Yen) ● Consolidated payout ratio (%)
Figures in parenthesis are on a pre-stock split basis.

United States: Griffin
Factory (commenced
operations in April 2022)

China: Fengxian Factory
Phase 2 (scheduled tocommence operations
in August 2023)

Japan: Kasugai Logistics
Center (commenced
operationsin October 2022)

(82)
27.3

(86)
28.6

(90)
30.0

Embodiment • Create consumer contact points to become more consumer-oriented
Futureinvestment
themes• Strengthen R&D, production technologies, and manufacturing capabilities (Innovation Center, etc.)• Make focused investments in intangible assets (information, brand, human resources, know-how)

18.8%

2015

20.0%

2016

21.9%

2017

(125)
41.6

(94)
31.3

(98)
32.6

23.6%

23.4%

23.3%

2018

2019

2020

(140)
46.6

(160)
53.3

(180)
60.0
40.0%

32.7%

• Consider methods (M&A, etc.) needed to promote expansion of business scale and business domains

29.8%

30.1%

2021

2022

2023
(Plan)

2024

2025

Note: On April 1, 2023, Rinnai conducted a 3-for-1 split of common stock.

23

Rinnai Report 2023

24

Message from the General Manager ofMarketing & Sales
Aiming to Further Stimulate Demand by ClearlyCommunicating to Customers the Value of Rinnai
Products that Meet Society’s Needs

Hideyuki Shiraki
Director, Senior Managing Executive Officer
Bathroom heaters/dryers equipped with Mold Guard Mist

Stoves equipped with automatic cooking functions linked to a smartphone app

Fiscal 2023 Supported by Growing Demand
In fiscal 2023, the Rinnai Group achieved record-high sales and profits, driven by growth in the sales of water heaters and other products,

Rinnai products have been supported by regular replacement demand, but as there are limits to continued growth in mature markets,

which I attribute to two factors. First, the entire Company has made efforts to strengthen our production system and clear the order

we are focused on providing products that add value and improve quality of life. Our launch of the industry’s first water heater thatbacklog that accumulated during fiscal 2022. As distributors currently have more inventory in their warehouses than ever before, we will

generates ultra-fine bubbles, bathroom heaters/dryers with Mold Guard Mist that prevent 99.9% of black mold growth, and stovesimplement various measures in fiscal 2024 to stimulate sales demand through proactive marketing. The second factor driving strong

equipped with automatic cooking functions linked to a smartphone app all play a role in reducing the burden of household chores andearnings was growing demand for environmentally friendly products. The Group medium-term business plan aims to help resolve global

supporting healthy lifestyles. At the same time, in addition to purchases to replace old equipment, Kanta-kun gas clothes dryers are being

environmental problems and improve quality of life as advances in addressing social challenges. I believe we have launched high value-

installed at newly constructed properties, with the number of condominiums installing them as standard equipment growing throughout

added products that meet the needs of society and consumers and are used in numerous households. However, in response to soaring

Japan. I think this reflects the rising awareness among consumers of the convenience and energy efficiency of gas clothes dryers, as wellraw material prices and rising logistics and energy costs, we had to revise prices for the second time between May and July 2023, after

as condominium developer efforts to design washing and dressing rooms as spaces for household chores. In recognition of Kanta-kun as

initially revising prices in April 2022.

a product that can and will grow even further, we will focus efforts on sales going forward.

Launch of Strategic Products under the Medium-term Business Plan

Domestic Sales Strategy and Human Resource Development

In terms of environmentally friendly products, Rinnai makes ECO ONE hybrid water heaters, which have attracted remarkable consumer

As energy conservation and environmental friendliness in housing are expected to accelerate in order to achieve carbon neutrality byinterest in recent years, and I think we should see sales expand in the next few years. ECO ONE combines the gas-powered Eco-Jozu with

2050, there will be an increasing number of opportunities to quantify how we can contribute to environmental measures and conduct

an air-source heat pump, and because it requires a certain amount of space for installation, it has so far been used mainly in detachedsales activities in cooperation with related businesses. Accordingly, it will become essential to transform the style and quality of sales

housing. In September 2023, we will launch the X5 model, which can be installed on apartment building balconies and in pipe shafts, inactivities, and Rinnai will use digital technologies to facilitate these changes. Paperwork associated with sales activities will be input into

an effort to expand the range of applications. As this product will be installed in limited residential spaces, we will work closely with home

this system to streamline and simplify the recording of results, while also being used to quickly analyze sales efforts, eliminate thebuilders, condominium developers, gas companies, and other related businesses to further promote the spread of ECO ONE.

personalization of information, and provide customers with better proposals. We will also encourage the digitalization of product orders toenhance convenience and enable customers to place orders from a smartphone. As information visualized through these efforts can also
be used in meetings between supervisors and subordinates and on-the-job training, Rinnai intends to use it as a tool for developing humanresources within sales activities.
Nowadays, products offer added value in addition to conventional functionality, increasing the complexity of knowledge and skills
required for sales representatives. Rinnai conducts regular training and study groups that facilitate the presentation of product value tobusiness operators, and going forward, we also plan to introduce a Meister system for each product to cultivate professionals adept inincreasingly complex products.
Although Rinnai develops B2B business, we also focus efforts on brand strategies to better convey the value of our products to
consumers. We will use land and buildings acquired in the Minami Aoyama district of Tokyo to create an interactive showroom that canalso be used by consumers. For example, this space will be used to exhibit products sold overseas and environmentally friendly products,
providing visitors with an opportunity to experience how comfortable life can be with products that make effective use of limited energy
supplies. Rather than having to put up with cold and heat while pursuing energy-saving and environmentally friendly lifestyles, we want

ECO ONE X5 can be installed on apartment building balconies and in pipe shafts

25

Kenta-kun gas clothes dryers help reduce time required for household chores

consumers to feel that Rinnai technological and product capabilities also enable them to enjoy comfort in daily life.

Rinnai Report 2023

26

Message from the President ofan Overseas Subsidiary
Aiming for “Total Home Comfort” with a Lineup of
Products that Contribute to Comfort and the
Global Environment

Lucas van Raay
CEO Rinnai Australia
Commercial-use air conditioner

Heat pump water heater

Fireplace2022 Management Review
Despite product supply issues, Rinnai Australia saw sales growth in its commercial-use business, especially the air conditioners business.

Further, I think gas equipment will remain a viable market going forward as these have been the preferred products for both installers

Commercial-use air conditioner products are manufactured by Rinnai Engineering Malaysia and sold under the “APAC” brand developed

and users for many years. While gas heaters will likely be replaced by heat pump equipment, there will still be demand for tankless waterby Specialized Engineering, acquired in 2017, whose high quality and brand power have contributed to sales and profits. At the same time,

heaters as they offer unique features that heat pumps do not, such as never having to worry about running out of hot water.

gas appliance sales are declining amid the ongoing trend toward electrification. Soaring raw material prices and increased distribution

In line with RIM 2050, the Rinnai Group’s Commitment to Carbon Neutrality, we will move forward with a focus on three directions:costs have also placed downward pressure on profits.

Heat pumps and other electric equipment, hydrogen combustion equipment, and conventional gas equipment.

Strategy Story and Priority Measures Going Forward

Corporate Structural Transformations: Brand Power Enhancement and Human Resource
Development

While gas tankless water heaters currently account for about 30% of the water heater market, we do not expect significant growth in the
future due to the ongoing trend toward electrification. In terms of an approach to the energy mix, the Australian government is promoting

Heat pump equipment is highly subsidized by the Australian government, and even companies that never had brands can enter thethe use of heat pump equipment for primary energy as well as household appliances. The main sources of profit for Rinnai Australia at

market and purchase heat pump equipment at low prices. To compete with such competition, I believe it is important to leverage Rinnai’spresent are gas water heaters and heating units, but I think heat pump-related products such as room air conditioners, duct-type airstrong brand power. We want to convey the message that Rinnai is not only a gas equipment company but also a company engaged in

conditioners, heat pump water heaters, and commercial-use air conditioners will become sources of profit in the future.

renewable energy, but I do not think we can send this message with our current product portfolio. In addition to enhancing our lineup of

At the same time, although hydrogen is slowly being adopted for commercial use in power generation and other areas, conditions
surrounding its residential use remain unclear. The transition from natural gas to hydrogen is quite complicated in terms of social

products that contribute to the global environment, we want to create a means of communications as a solid environmental company.
High-performing and strongly motivated employees are provided with a variety of developmental support, including special training

infrastructure and technology, while the transition from natural gas to electrification is very simple, hence this is the direction the Australiancourses for engineers and assistance with obtaining certifications. In my case, the Company supported me in acquiring an MBA degree.

government seems to be promoting. However, as we must also be prepared for movement toward hydrogen combustion equipment,

As employees are one of our assets, the Company encourages increased motivation and enhanced skill sets.

we are currently testing hydrogen combustion water heaters developed in Japan.

The Ideal Targeted by Rinnai Australia
The Australian home heating and cooling sector is moving toward electrification, a trend I assume will continue. “Control technologies”
will become a crucial aspect of this trend, as temperature controls for individual rooms will become as important as home automation
using monitors.
I want “Total Home Comfort” to become equally as important as the Rinnai Group brand promise “Creating a healthier way of living.”
We aim to achieve “Total Home Comfort” based on the idea that all Rinnai products, including home water heaters, heater units, and air
conditioners, which emphasize comfort throughout the home and are recognized as a premium brand, can be used to facilitate
a comfortable living environment.

Rinnai Australia head office27

Rinnai Australia warehouse

Rinnai Report 2023

28

Identifying Material Issues

We make every effort to identify social challenges affecting the Rinnai Group through day-to-day communication

Material Issue Targets and Results

activities with stakeholders coupled with study and analysis of applicable guidelines and ESG indices. We also
identify CSR material issues through the Rinnai Group value creation process in relation to our management

Material Issues

Main Target Indicators

Energy consumption
CO2 emissions

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

Target area: Global
Target stakeholders: All

Material Issues

Main Target Indicators

Consumer safety
Improving quality

Number of defects that have
led to product recall
announcements

strategies, revolving primarily around our Corporate Planning Division.

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

Step 1

Step 2Outline existingengagement

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

Step 3
Analyze international
standards andguidelines

Step 4
Analyze ESG indicesand questionnaires● Analyze sustainability-related
international standards andreporting guidelines (ISO 26000,
GRI G4 Guidelines, etc.)

Step 5

Step 6

Study othercompanies

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

6.00

million tons

2025 target

7.00

CO2

million tons

2022 results: 5.82 million tons

0

cases

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

2022 results: 0 cases

Determining and Identifying Material Issues

Creating a System to Support Rinnai Quality

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

Daily efforts to realize the goals of consumer safety and improving quality, identified as Rinnai material issues, are based on the Product Safety
Measures Chart.

○ Environmental issues

High<Importance to stakeholders>

Very highClassification of Issues□ Diversity□ Communicating with suppliers○ Biodiversity□ Child labor/forced labor◇ Pandemic□ Support for cultural activities andthe arts□ Support for school education/
vocational training□ Preventing corruption

High

29

● Determine social challenges relating to the
Rinnai Group, and analyze their level ofimportance to stakeholders and Rinnai● Examine consistency with Rinnai management
strategy and identify CSR material issues

2023 target◇ Customer issues□ Other issues

Collaboration with distributors in responding
to recalls◇ Health◇ Housework time reduction□ Stable procurement□ Work-life balance○ Waste○ Harmful chemicals○ Energy consumption○ CO2 emissions◇ Consumer safety◇ Improving quality○ Conserving resources/waste○ Drainage□ Industrial relations□ Occupational health and safety□ Protecting privacy◇ Repair and inspection services□ Wages and welfare□ IR communication activities□ Fair trade□ Work style reforms○ Transport and transfer◇ Enhancing Customer Center
services□ Training and education□ Dividend policy□ Surveying and evaluating suppliers<Importance to the Rinnai Group>

Product Safety Measures Chart

Gate

Planning◇ Marketing communication

Unified management of
repair information• Repair information push
notifications• Rulebooks• Knowledge collection

Gate

Development

Government agencies
and industrial
associations

Gate

Sales

Production

Designs realizing safety• Product safety through research that
includes products from other industries• Product safety exceeding industry
standards• Product safety preventing natural
disasters• Creation of safer products• Safety measures preventing misuse
and inadvertent accidents

Efforts to establish a culture of
product safety in collaboration
with government agencies andindustrial associations• Designation of criticalsafety parts andthorough managementin production processes• Elimination of silent
changes
Accelerated durability
testing for accurate
deterioration
countermeasures

Production personnel
training andtechnology transfers
Awareness of suppliermanagement systems
and systems forevaluations andcommendations

Customers

Alerting customers
using online
methods andprinted materials

Construction• Repair information• Claim information• Safe utilization explanations• Inspections and replacement
purchase proposals fordeteriorated products
Thorough and accurate
repair support using
technical service information

Information processing feedback

Repairs
Very high

Dissemination of safety measures through feedback

Rinnai Report 2023

30

Environment

Materiality Special Feature (1)Promoting Carbon Neutrality by Expanding Sales of
the ECO ONE Hybrid Water Heater and Heating System Offering the Highest
Level of Environmental Performance

VOICE
Conversation with Tokyo Gas, Focused on the Introduction of ECO ONE
The Tokyo Gas Group has a long-established culture of proposing
gas-powered hot-water floor heating as a comfortable heating
solution. Customer feedback indicates that while hot-water floor
heating systems are highly satisfactory with regard to comfort, the useof floor heating is less efficient than heat-pump air conditioners fromthe perspective of energy consumption, putting these systems at a
relative disadvantage in terms of environmental impact. Given these
conditions, hybrid water heater and heating equipment can reduceenergy consumption even when gas-powered hot-water floor heating
is used, achieving both carbon neutrality and comfort in daily life.
Additionally, as the benefits of selling electricity generated using
solar power are decreasing, we believe that hybrid water heater andheating systems, which can store energy in the form of hot water
without incurring storage battery costs, are one of the best ways to use
energy for household consumption. For this reason, we recommend

PLUG-IN MODE (L plug-in model) compatible with household outlets aimed at expanding the ECO ONE series

ECO ONE as a water heater and heating system compatible with solar
power generation systems.

The Rinnai carbon neutrality declaration RIM 2050 sets forth an ECO ONE hybrid water heater and heating system sales
target of 300,000 units per year in calendar 2030. ECO ONE is a hybrid water heater combining both electricity and gas
offering the highest thermal efficiency in the industry, making it an outstanding example of energy-saving equipment
among housing equipment.
Rinnai launched sales of the ECO ONE in fiscal 2010, and while its reputation has grown in line with repeatedfunctional and performance improvements that have caused sales to gradually increase, there has been no major
breakthrough to date, and sales have been limited to around 10,000 units per year.
Despite being one of the industry’s most energy-efficient products, installation workability is one factor preventing
sales expansion. Rinnai is making efforts to broaden its target by
expanding the ECO ONE product lineup, including the ECO ONE X5
launched in 2022 offering the same functions in a smaller unit, the X5
series used in high-density housing planned for launch during fiscal
2024, and plug-in models being prepared for use in existing buildings.
At the same time, with regard to the external environment, theenvironment surrounding climate change issues is changing, with the first
ECO ONE installed at Proud Season Inagi Minamiyama
Japanese government subsidy program for the hybrid water heater(Nomura Real Estate Development Co., Ltd.) in Inagi, Tokyo
category launched in 2023, and new systems related to the mandatory
installation of solar power generation equipment in Tokyo and other areas set to commence in April 2025. Further,businesses that have introduced energy-saving equipment offer fuel cell battery energy farms as products suitable forcarbon neutrality, while city gas companies have added ECO ONE to their product lineups, conveying a sense ofacceleration in all efforts aimed at realizing carbon neutrality. We asked Hironao Sato of Tokyo Gas Living Advance, which
conducts Tokyo Gas Group home equipment-related business, about the reasons behind the Tokyo Gas Group’s
proactive introduction of ECO ONE, mainly in newly constructed housing.

Managing Director, General Manager of Distribution Department
TOKYO GAS LIVING ADVANCE CO., LTD.

Hironao SatoIn this era of energy deregulation, the Tokyo Gas Group is no longer focused on“gas” or “electricity” with respect to energy sources and equipment sales. We are now
in a position to simply lead customers in the right direction and make proposals basedon themes such as comfort and contribution to the global environment. Further,regarding the achievement of carbon neutrality as a social issue, we are ata major turning point with respect to changes in customer values and the direction of
government policies on climate change issues. We believe companies that provide
energy equipment for household use view ECO ONE as a more optimal solution.
Even today, with disasters on the rise and difficulties in fully securing
infrastructure, we feel that hybrid systems able to use both gas and electricity provide
great peace of mind in everyday life and are truly superior in terms of resilience.
ECO ONE is highly compatible with solar power generation

The Tokyo Gas Group plans to expand its sales target for hybrid
water heater and heating systems in the newly built detached housing
market to 10,000 units by fiscal 2026. At present, although mostproducts are installed in newly built detached housing, as ECO ONE
continues to improve its space-saving and functional capabilities, we
expect to add this product to our lineup for the volume zone, comprisingexisting detached houses and newly built high-density housing, whilepursuing carbon neutrality and customer comfort as energy that is closer
to people, supports society, and leads to future developments.
ECO ONE provides energy savings and comfort

31

Rinnai Report 2023

32

Environment

Materiality Special Feature (2)We spoke with Noriaki Seki, Chairman of NPO SATOYAMA, who has been involved with Kitakyushu Hydrogen Town
since its inception in 2011, and also owns a house there equipped with a 100% hydrogen-burning water heater.

VOICE
Thinking about New Urban Development through Hydrogen Energy
NPO SATOYAMA began engaging in activities based on an awareness of “satoyama as

Launching Field Test of Japan’s First 100% Hydrogen-burning
Water Heaters at Kitakyushu Hydrogen Town

a model for a sustainable society,” becoming an NPO in 2002, and remaining active up to now
based on the concept of coexistence and co-prosperity between nature and people. Living incities, even with opportunities to come in contact with nature, it is not a daily experience. Having
developed this idea further, we are now engaged in efforts aimed at “converting cities
into satoyama.”
Kitakyushu Hydrogen Town is located on the site of a former factory, one that is still there

In May 2022, Rinnai announced that it had succeeded in the technological development of 100% hydrogen-burning
residential water heaters. We then began preparing for overseas field tests in Australia and, in April 2023, announced thelaunch of 100% hydrogen-burning water heater field testing in conjunction with Iwatani Corporation at Kitakyushu
Hydrogen Town in Japan.

Chairman of NPO SATOYAMA

today. We believe that the utilization of energy generated from byproduct hydrogen produced by

Noriaki Seki

this factory will enable the achievement of a sustainable society and facilitate coexistence
between the town and people.

I feel that Rinnai hydrogen-burning water heaters are an important part of this project in terms of “making hot water,” which isessential in our daily lives, and I assume field tests will go well and that hydrogen energy will be used naturally in our daily lives.
The term “carbon neutral” has become commonplace, and I believe we have now reached a point where the world supports thisKitakyushu Hydrogen Town was constructed in 2011 as part of the Ministry of Economy, Trade and Industry’s“Demonstration Program for Establishing a Hydrogen Utilization Society System,” the world’s first (as of 2011) attempt to
supply byproduct hydrogen from factories to urban areas via pipelines to utilize hydrogen as energy for ordinary
residences as well as commercial and public facilities. Subsequently, infrastructure construction and environmental
improvements have commenced, and hydrogen utilization field tests have been conducted, with the hydrogen water
heaters installed becoming the first 100% hydrogen-burning residential water heaters in Japan.
The 100% hydrogen-burning water heaters will be installed in rental housing built within Kitakyushu Hydrogen Town,
with three of the seven buildings for sale equipped with hydrogen water heaters. These rental housing units are occupied
by members of the general public, and we will examine the conditions under which they use hot water in their daily lives,
while ensuring sufficient safety precautions. In addition to general residences, these water heaters will be installed ina privately owned café to conduct field tests of commercial use cases that differ from everyday life.

goal. Hydrogen is said to be the ultimate clean energy, and if we can create a system whereby this energy functions properly andcirculates efficiently from production to usage, we can expect to create new communities where nature, the city, and people are able tocoexist and prosper together.

Field Testing Hydrogen Equipment Overseas
100% hydrogen-burning water heater field testing has commenced
overseas in Australia. In conjunction with the Australian Gas
Infrastructure Group (AGIG), we have installed a 100% hydrogenburning water heater at the “Hydrogen House” located in the stateof Victoria, and are currently verifying the equipment. Hydrogenburning equipment for residential use will be installed in the“Hydrogen House” to test the operational status of the equipment in
actual daily usage with the aim of realizing the utilization ofhydrogen in everyday life. Two 100% hydrogen-burning water
heaters will be installed and tested in various hot water usage
scenarios involving the kitchen, sinks, and bathroom showers, withthe aim of commercialization by 2030.

Kitakyushu Hydrogen Town street view

33

Buried hydrogen pipeline

Installed 100% hydrogen-burning water heaters

Australia’s “Hydrogen House”

Having formulated the RIM 2050 carbon neutrality declaration, Rinnai is exploring potential advances anddeveloping technologies necessary to comply with various environmental and energy policies being advanced incountries throughout the world. Hydrogen technology development is one of these options, constituting a theme thatmust be developed in order to address climate change and achieve carbon neutrality. Recognizing the extreme
importance of Rinnai’s positioning amid advances in hydrogen development, we will maintain these efforts going forward.

Rinnai Report 2023

34

Environment

Responses to the Task Force on Climate-related
Financial Disclosures

Strategy
As a company that handles heating equipment, we understand that climate change is an important issue, and we assume
that climate change will have an impact on Rinnai’s business. We are also considering what actions are necessary toaddress the changes ahead and what the financial impact could potentially be.
ProfitImpact(Amount/
Duration)

Degree ofurgency

Convert to recyclable
materials¥(15.4)billion/
year

Low

Reduce procurement
costs throughindependent efforts¥(1.4)
billion/year

Low¥(0.7)
billion/5 yearsLow¥(15.0)billion/year

Medium

Impact on Rinnai

Raw material
procurement risks
associated withclimate change

Transition risks

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

Governance
ReportBoard ofDirectors

Report

ESG Committee

ReportSharing of
ESG Matters(What Rinnai will do to keep the increase intemperature below 1.5°C)(Impact on Rinnai if the temperature rises
by 4°C)

Risk of procurement cost increases
in line with raw material costs thatare passed on through carbon
pricing (carbon taxes andemissions trading) to suppliers ofmaterials that emit large amounts ofgreenhouse gases.
Risk that the sale of water heaters
potentially using large amounts ofwater resources will be restricted asa result of global water shortage
problems.

Gas water heater
regulations in line withfossil fuel regulations

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

ESG Working

Operation andEnvironment Management Management
Committee

4°C scenario*

Water heater
regulations as a resultof water resource
depletion

Risk Management
Committee

Physical risks fromnatural disasters

ISO 14001—
Physical risks

Rinnai reports on environmental issues tomanagement through the Risk Management
Committee, ESG Committee, andEnvironmental Management Committee.
The ESG Committee has an ESG Working
Group to handle day-to-day improvement
activities. In addition, Rinnai is promoting
initiatives related to risks and opportunities
associated with climate change andreporting to management through theoperation of ISO 14001 with the Environmental
Management Committee as the secretariat.

1.5°C scenario*

Risk of increased
operating costs—

Risk Management

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

35

Opportunities

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

Adoption of energysaving water heaters
in line with tighteningof environmental
regulations (CO₂)

Current “low-carbon society”
initiatives require higher efficiency
energy-saving water heaters.
Additionally, the advance oftechnologies such as decarbonizedgas for realizing a “decarbonizedsociety” will require more efficientenergy-saving water heaters than in
the past.

Adoption of gas
boilers in line withtightening ofenvironmental
regulations (PM 2.5)

In areas where coal boilers areused, gas boilers that do not
generate PM 2.5 will be required.

——

Rinnai’s response or
impact on Rinnai.

Develop water heaters
able to restrict theamount of water used.

Ascertain changing
conditions related toenergy while developing
and establishingtechnologies focused on
essential products.
—

Risk of supply chain distribution
disruptions due to the impact ofnatural disasters (floods, torrential
rains, water shortages and otherevents).

Enhance response
capabilities with business
continuity planning (BCP),
including decentralizedmaterials procurement
sources and production
bases.

¥(0.4)
billion/year

MediumRisk that air conditioning andcooling equipment operating costs
will increase due to a rise in averagetemperatures.

Promote the introductionof residential power
generation throughsustainable energy andother measures.

¥(8.6)
billion/5 yearsLow¥6.0
billion/year

Medium

¥6.0
billion/year

MediumPromote the expansion of
product lineups and salesof more efficient energysaving water heaters.
——

Target areas whereenvironmental regulations
have not yet tightened,
expanding the adoptionof products
corresponding to usage
environments in thoseareas.

* 1 .5°C and 4°C scenarios
Scenarios used in the Fifth Assessment Report (released in 2014) of the Intergovernmental Panel on Climate Change (IPCC), which estimates the impacts of approximate 1.5°C and
4°C temperature increases due to global warming.
Rinnai Report 2023

36

Environment

Environmental Impact within Rinnai’s Value Chain

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

Rinnai’s Value Chain

Demands and Expectations
from Society(Overseas/Japan)

INPUT
Main resources consumed(Raw materials and energy)

Procurement

Development and Manufacturing

Sales, Logistics, and Services

Product Usage

Disposal

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

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

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

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

EnergyWater• Energy; 1,155,651 GJ• Ground water: 220,458 m3

EnergyWater

EnergyWater

EnergyWater• Public water: 742,154 m3

CO2 Emissions (Emissions Ratio)
Scope 3 (Category 1)*1

OUTPUT

1,072,825 t (6.74%)—

Solid waste(Includes valuable substances)

Wastewater

27,368 t 946,708 m³

Supply chain management

Pursuit of environmental
performance and streamliningof manufacturing processes

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

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

Rinnai’s estimates based on the “Basic Guidelines for Calculating Green House Emissions Through the Supply Chain”[Target scope] Development/manufacturing: Rinnai Corporation and consolidated subsidiaries
Procurement, sales/logistics/services, product usage: Rinnai Corporation/end of life treatment: Rinnai Corporation (Domestic consolidated subsidiaries)[Target period] Domestic: Fiscal 2023 (April 2022–End of March 2023)
Overseas: January 2022-End of December 2022
[CO₂ emissions (units)]: t/CO₂e, (%) represents the emissions ratio within each process.

37

Scope 3 (Category 4)*1

9,703 t (0.06%)

Scope 3 (Category 11)*1

Scope 3 (Category 12)*2

7,125 t (0.04%)

14,597,287 t (91.75%)(Concerns emissions from Japanese water heaters)(Market based)

Rinnai’s environmental impact

Initiatives Rinnai conducts
through business

36,778 t (0.23%)
Scope 2 69,243 t (0.44%)
Scope 1—
Spread of environmentallyfriendly products
Sales: Strive to spread products that
contribute to energy efficiency inthe water heater and heating fields
Logistics: We are promoting logisticalstreamlining.
Services: Elevate the Rinnai brand withsecurity activities through a wealthof service maintenance andinspections——

Proposal of reasonably
achievable ecological lifestyles

Promotion of environmentallyconscious design

Product Usage: We are teaching customers the environmental
Disposal: Application of design for thefriendliness of our products and promoting theirenvironment, e. g., to makeecological use through Company-sponsored
products easy to disassemble
product events.
in accordance with product
Proposal of sustainable, comfortable, and green
assessment standards
lifestyles through use of energy-saving products
Through various events, we will emphasize to allof our end users the environmental
performance of our products and how to usethem with the environment in mind.
The indicators marked □ have received third-party assurance by LRQA Limited.

Rinnai Report 2023

38

Environment

Links between Corporate Strategy and the Realization ofa Sustainable Society (SDGs)

Contributing to Reductions in Housework Burdens with Powerful Gas Drying That
Shortens Time Spent Doing Laundry

Medium-term Business Plan 2021–2025 New ERA 2025 Targets
Under the Rinnai medium-term business plan New ERA 2025, which runs from fiscal 2022 to fiscal 2026, we aim tocontribute to the resolution of social issues by reducing CO₂ emitted during product use by seven million tons andincreasing the sales ratio of products that contribute to improved quality of life and the global environment by 50% in 2025
(compared to 2020). Rinnai will make an effort to achieve the SDGs through products that contribute to improved qualityof life and the global environment.

50%UP

120.0

In a questionnaire asking, “Who does the daily laundryin your house?” 93% of households responded “wife.”

80.0

In a questionnaire asking, “What are your concerns
regarding doing laundry during the rainy season?”
80% of households responded “difficult to dry.”
(%)

80

80.0%
63.5%

70

Husband
2020

2021

2022

2025

2020

Other

6.4%

2025

0.3%

60
50
40
30

As the products Rinnai provides are directly linked to the SDGs,
we believe that the ongoing spread and expansion of our products will leadto the resolution of social issues. As an example, replacing water heaters
with highly energy-efficient water heaters reduces burdens on the global
environment, creating a world in which gas clothes dryers, dishwashers andstoves with an automatic cooking function are widely used, equalizing therole of housework and advancing the movement toward gender equality.

17.9%

20

Wife

10.8%

Awareness Survey on Laundry, Netsu to Kurashi Tsushin, May 2019; N = 534

Bad smell

93.3%

0

Difficult to dry

10

7.2%

0.2%
Other

(Unit: billions of yen)

None of the above

5,150

7,000

darkening

4,500

5,820

Sales of products contributing to improved
quality of life

Causes yellowing or(Unit: 1,000 t)

Rinnai Conducts Surveys and Analyses on Various Social Issues, Disseminating Information
through the Netsu to Kurashi Tsushin (Heat & Life Newsletter).

Mold on clothing

Contributing to a reduction in CO2
emitted during product use

Gas clothes dryers use gas-heated air to dry clothing straightaway. This shortens the time spent doing laundry andmakes bath towels soft and fluffy. It also provides the same level of sterilization as line drying in the sun. Powerful gasdrying shortens the time required to perform daily housework, facilitating more relaxed lifestyles. Rinnai aims to achieve
gender equality both in terms of housework burdens and lifestyle freedom.

Awareness Survey on Laundry, Netsu to Kurashi Tsushin, May 2021; N = 1,000

Products Provided by Rinnai and their Connection to the SDGs
Product

Theme

Contribution

Energy-efficiency

Higher energy-efficient water heaters contribute to the global environment

ResilienceGas-electric hybrids contribute to the securing of lifelines during emergencies

Micro Bubble Bath units

Health promotion

The hot bath effect from bathing in ultrafine air bubbles contributes to healthy lifestyles

Gas clothes dryers

Reduces time requiredfor houseworkPowerful gas drying shortens time spent doing laundry, contributes to reducing houseworkburdens

Reduced water usage

Conserves water when washing dishes, contributes to the conservation of water resources

Reduces time requiredfor housework

Automated dishwashing contributes to reducing housework burdens

Stoves with automatic
cooking functions

Reduces time requiredfor housework

Automated cooking contributes to reducing housework burdens

Bathroom heaters/dryers

Prevents heat shock

Bathroom heating eliminates temperature differences when bathing, contributes to theprevention of heat shockHybrid water heaters

Dishwashers

Gas tankless water heaters Energy-efficiency
Gas boilers

39

Air pollution
countermeasures

Goal

Powerful gas clothes dryers can dry an ample five kilograms oflaundry in approximately 52 minutes. Drying laundry in about
one-third the time required with electric dryers significantly
reduces time spent on housework.
Drying time comparison (laundry = 5 kg)

Gas clothes dryer

Fully automatic washer-dryer
with electric heat pump

Fully automatic washer-dryer
with electric heater

Approx.

Approx.

52 minutes

162 minutes
Approx.

281 minutes

Gas clothes dryer

Enhancing the energy efficiency of water heaters contributes to the global environment
Switching fuel from coal to gas in water heaters with heating systems contributes to the controlof air pollution
Rinnai Report 2023

40

Social Materiality Special Feature (3)Microbubble Baths Help Hydrate the Skin and Promote Better Sleep
Microbubbles Keep the Skin Moist for Longer
The results of a study have indicated that immersing oneself in the water of our microbubble bath units leads to anincrease in skin moisture content compared to bathing in regular water. Taking a bath in microbubbles not only makes it
easier to remove grime from the skin, but it has also been demonstrated to have a moisturizing effect essential for
maintaining skin health.

Some parents have expressed concern about not being able to take care of their own skin after taking a bath because
their attention soon turns to looking after their children. Ultimately, they worry and stress about having dry skin. Research
indicates that the skin’s moisture content 30 minutes after a microbubble bath is higher than the moisture content 15
minutes after a regular bath. This allows for a more relaxed skincare routine.
Also, microbubble baths are recommended for children because of their sensitive skin. Choosing the right soap for achild is actually quite challenging because some products do not agree with the child’s skin. Using as little soap as
possible when bathing is also advisable in some cases, so in this regard, a microbubble bath is reassuring because it onlyuses air and water.

Microbubble Baths also Support Better-Quality Sleep
The results of a study also indicated that when compared to a regular bath, a microbubble bath leads to a shorter duration
between the post-bath state of excitement and the state of calmness.

VOICE
Usually after taking a bath, one’s body is in a state of excitement or tension, and will not be readyfor sleep for another 70 minutes or so. After a microbubble bath, however, this period of tension
can be reduced to around 50 minutes. For busy people, the considerable advantage of saving
20 minutes before falling asleep can help ensure as much sleep time as possible.
To be able to fully recover from exhaustion and refresh the mind through sleep, entering a
We use Air Bubble Technology tocreate fine bubbles

Rinnai’s water heatersthat generate finebubbles*F ine bubbles are microscopic in size and classified as either ultrafine bubbles or microbubbles.
They are effective at removing bodily dirt and grime from water pipes and the like.

Considering the findings ofthis study, we surmise that
Faculty of Science and Technology,
Keio University

VOICE

Ph.D Yasue Mitsukura

Microbubble bathing can cleanse the body of dirt, but when dirt is removed, the natural oils inthe skin, called sebum, are also reduced. It is commonly thought that a decrease in sebum
tends to limit the skin’s ability to remain hydrated, but research has shown that despite areduction in sebum, microbubble baths are capable of maintaining the skin’s stratum corneum
moisture content.

microbubble baths might
further shorten the time ittakes for the body to entersuch a state of deep sleep.

Comparing time series variation in coefficient ofheart rate variability (CV)*
0.25
20 minutes
earlier

0.20

0.15

0.10

Point of transition toa state ready for sleep

0.05

0

10

20

30

40

50

60

70

80

90

100

110

120

Elapsed time after bath (minutes)

To begin with, the moisturizing effect of bathing itself is supported by multiple studies thatsuggest various mechanisms are at play. The mechanism thought to be the most significant is
the warming of the body and improved blood circulation that bathing promotes. With improved
circulation, more moisture content is transported to the skin via the bloodstream, which
Human Life Sciences, Tokyo City University

a deeper sleep more quickly.

Coefficient of heart rate variability (CV)Fine bubbles generated in the bathtubstate of deep sleep soon after the onset of sleep is ideal. Taking a bath can help one’s body fall intosuggests that moisture can be distributed to all areas of the skin.

Point of increase reaching a certain level

Regular bath

Microbubble bathExperimental conditions Experimental conditions: FY2020 Rinnai Corporation test data
A simulated dirt mixture of tallow and 10% carbon black was applied to the abdominal area and brightness was measured using a spectrophotometer
before and after bathing. The removal rate was calculated from the brightness values before and after bathing. Test subjects: six healthy adult males.
Bathing method: full-body immersion for 10 minutes at 38°C. *Statistically significant difference at a significance probability of less than 5%.
* The coefficient of heart rate variability (CV) is considered an indicator of parasympathetic nervous system functions and is used for the simplified assessment of autonomic nervous
system functions.

Professor Shinya Hayasaka

entire body, reaching even the tiniest of crevices. Thereis no need to vigorously scrub one’s body, making ita time-saving option. The easy, gentle cleansing of theskin provided by microbubble baths are believed tocontribute to beautiful skin over the long term.

Stratum corneum moisture content (µ s)Results of study on maintaining skin moisture content
Microbubble baths are capable of cleansing theRegular bath

160

120

Microbubble bath

116%

80

40
Immediately after bathing

Five minutes later

15 minutes later

30 minutes later

Experimental conditions Measurement: Stratum corneum moisture content of the forearm before and after a microbubble bath and a regular bath
Research paper by Shinya Hayasaka, Yuko Iwama, and Masao Nonoyama: “Effects of microbubble bathing on stratum corneum moisture content”;
Japanese Journal of Health and Research; 2022; Vol. 43, p.39–43 (test subjects: 15 adult females)

41

With good sleep, even a short duration can be enough to feel refreshed. Microbubble baths can help people benefit
from quality sleep whilst also saving time.
The everyday, casual use of hot water can deliver a myriad of functions that underpin our comfortable lifestyles andoverall health. At Rinnai, our proprietary technology related to microbubbles and ultrafine bubbles is called Air Bubble
Technology—an area in which we will continue to pursue technological developments.

For more information about our Air Bubble Technology, please visit the following websites: Microbubble bath units: https://rinnai.jp/lp/microbubble/
Ultrafine bubble water heaters: https://rinnai.jp/ultrafinebubble/

Rinnai Report 2023

42

SocialRinnai’s Human Capital Strategy
In our Medium-term Management Plan, New ERA 2025, we formulated a set of strategy narratives around how we intend
to contribute to “Advancement in addressing social challenges”, “Expansion of business scale”, and “Revolution of
corporate structure.” The aim of the plan is to achieve sustainable and sound long-term growth. In order to put thesestrategy narratives into practice as the first step towards growth for the next generation, it is absolutely essential that we
mobilize the strengths of our employees—the driving force of growth—and constantly embrace challenges. We intend toactively invest in human capital tied to our management strategy, and not only will we aim to achieve corporate growth byfurthering our strategy narratives, but we will facilitate employee growth and higher levels of engagement by driving thisprocess forward.

increase by 50%

Developing DX-savvy Employees
Indicator — No. of core employees driving DX

DX professionals: 0 10
DX technicians: 0 50

Brand Penetration

Expansion of business scale• Expand geographical regions• Expand business domains

74

Indicator — Brand training
participation rate

Domestic employees: 8.9% 100%
Overseas Group employees: 0.0% 100%

Improvements in global
business capabilities

Innovation/
greater productivity

Changes in
employee mindset

HR Investments
Revolution of corporate structure• Adopt a consumer-oriented approach• Invest heavily in intangible assets• Boost profitability

Main HR investment initiatives to support the strategy
Greater opportunities
for learning

Employee working styles/
workplace environments

Promotionof diversity

Indicators concerning the empowerment of women
Raising the percentage of women in management positions: 0.4%
Raising the percentage of employees taking paternity leave: 3.3%
Closing the gender pay gap: 58.8% 61.8%（* Numerics FY2021

Better performing
employees(invigoration of organizations
and employees)• Improve quality of life
• Tackle global environmental problems

Indicator — No. of employees with overseas
work experience:

Improvements in
employee engagement

Advancement in addressing social challenges

Human capital value (outcomes)

Nurturing Global Talent

Enhancing human capital value
by driving strategy narratives forward

Strategy narratives

Key measures/indicators

Employee engagement survey
Positive responses

1.5%
50.0%

FY2026: +15pt

In terms of employee education initiatives, we have long focused on improving the skills of employees under a framework comprising mainly
rank-based and departmental training, as well as self-improvement programs. However, an analysis of the results of the first-ever engagement
survey conducted in October 2021 revealed two Company-wide issues: (1) a significant difference in engagement scores between managerial
and non-managerial employees; and (2) a shortage of mechanisms that encourage employee growth.
To remedy these issues and improve the capabilities of individual employees, as well as organizational strength, we are currently
implementing various support measures. For example, initiatives that facilitate a change in mentality (such as an improvement in management
skills) among managerial staff who play a pivotal role in linking management and frontline operations, initiatives that improve the basic businessskills and expertise of employees, and the development of an environment that encourages proactive learning in view of future career planning.
Also, in addition to the above, the environment in which corporations currently operate is characterized by a wide range of issues, such ascarbon neutrality, digitalization, and Japan’s aging population. To ensure the sustained growth of the Company into the future, it is vital that we
identify and nurture leaders who can shoulder the responsibilities of management from a holistic perspective. In this regard, in FY2021 welaunched a core talent development project, for which we have already completed the selection process and training program for the firstcohort of participants. Up ahead, we will continue to work on nurturing outstanding leaders.

FY2022 result: Around 50%

FY2026）• Key Measures (HR development policy, workplace environment development policy)• Promotion of Diversity

Nurturing Global Talent
Considering that overseas sales account for more than 50% of our total revenue, growth in international markets is a major driver accelerating
the expansion of our business scale. To expand our presence overseas more aggressively than ever before, guaranteeing the quality andquantity of global talent will be a key element in our human resources strategy. In addition to the specialist fields of mainly product technology,
manufacturing technology, and financial skills required for our hitherto endeavors in the global market, we will seek to nurture internationallyminded employees backed by real-life experiences abroad.

As Japan’s working population continues to shrink, we are advancing initiatives around the utilization of female employees, senior personnel,
people with disabilities, and mid-career hires in order to secure enough labor and spark new ideas by harnessing a workforce possessing
different values and experiences.
Particularly regarding female employees, even though they make up roughly 30% of our workforce, most of them work in support roles(general positions) and we acknowledge that there is still more to be done when it comes to leveraging their capabilities. We are actively hiring
personnel for career-track positions and enabling employees to transition from a general position to a more specialized role. In addition, we areappointing female employees to key postings through the selection and planned development of candidates for managerial positions.
Alongside efforts to create a comfortable workplace environment in which female employees can keep working, mainly with the use ofa shortened working hours system and childcare leave, we are aiming to boost productivity by raising the understanding of childcare among
male employees and reassessing work styles. We are also taking steps to increase the percentage of male employees taking paternity leave.

Developing DX-savvy Employees
In a society characterized by changing buying behaviors and distribution structures, it is crucial that we fundamentally reassess ourconventional business and operating processes and transform our corporate structure, primarily by shifting to a consumer-oriented approach,in order to ensure future competitiveness in our mainstay business. To that end, we are currently driving a digital transformation (DX), and wehave already undertaken a number of initiatives, such as establishing a framework to promote DX, training human resources, developing tech
infrastructure, and building a data management platform. Particularly in terms of human resources, we have defined two types of core
employees that will lead the Company’s digital transformation—DX professionals and DX technicians—and we have launched somespecialized training programs to aid their development. Other than these core individuals, we are also promoting basic digital training for
employees that use IT devices with the goal of raising their level of IT literacy. The Company as a whole will work towards generating innovationand improving work productivity.
Brand Penetration
Since 2016 we have deployed a unified brand strategy both domestically and internationally. At the core of our branding activities is theinstillment of our brand message among employees. That is why since launching the new brand, we have run training sessions for mainly
employees in Japan, based on the thinking that having every employee understand, and embody in their day-to-day tasks, the brand promiseof “creating a healthier way of living,” is vital to the establishment of the Rinnai brand. Going forward, with the aim of realizing a brand that is evenmore differentiated and preferred than ever before, we will expand this training program to overseas Group company employees and set aboutchanging the mindset of employees.

43

Alongside our global, DX, and branding initiatives, we are also undertaking medium- to long-term investments in humanresources with the aim of enhancing employee performance, which is essential to the execution of our management
strategy.

• Greater Opportunities for Learning• Outline of Human Capital Strategy (metrics and targets)
Medium-term Management Plan:
New ERA 2025

HR investments to support the strategy (greater opportunities for learning, promotion of diversity,
employee working styles/workplace environments)• Employee Working Styles/Workplace Environments
With the arrival of Japan’s so-called “age of centenarians” and in the midst of considerable changes in societal values, including the way peopleview their own career, we are encouraging our employees to embrace new ways of working, including telecommuting, and we are taking steps
to develop workplace environments that are supportive of the physical and mental well-being of employees in order to ensure that they arehighly motivated and can continue to unleash their full potential. With the aim of raising employee awareness of health matters on a daily basis,
we are undertaking a raft of initiatives that support the day-to-day performance of employees. This includes more healthy food options in thecafeteria, the rollout of health programs linked to the employee benefits scheme, and the promotion of various harassment training and health& safety activities to ensure the psychological and physical safety of employees.

Rinnai Report 2023

44

SocialCommunication with Customers

Rinnai DX Initiatives
We have formulated three key strategies under the Medium-Term Management Plan New ERA 2025: Advancement inaddressing social challenges, Expansion of business scale, and Revolution of corporate structure. By utilizing digitaltransformation (DX), we will ensure the realization of our strategies, including the achievement of numerical targets.
We aim to contribute to solving social issues by strengthening our touchpoints with customers and business partners andproviding products and services that contribute to improving the quality of life in a timely manner. Furthermore, we willthoroughly review business processes in business and administrative divisions through the use of digital technology,
leading to the transformation of the corporate structure and expansion of business scale.

Rinnai’s DX collects various types of information obtained through business activities and repeatedly makes hypotheses
and verifies them based on findings from data analysis to improve business functionality. The Company aims to build
a virtuous cycle in which the provision of attractive services leads to an increase in the number of users, and in turnan increase in the amount of information that can be obtained further accelerates the upgrading of functionality.

Medium-Term Business Plan New ERA 2025 Three key strategies
Advancement in addressing
social challenges

Expansion of business scale

Revolution of corporate structure

Rinnai App• Improve quality of life
• Help resolve global environmental
problems• Expand regional domains• Expand business domains• Become more consumer-oriented• Make focused investments inintangible assets• Enhance profitability

DX: Digital transformation

45

Examples of Initiatives 1

Examples of Initiatives 2

The Rinnai App, which allows users to control bath-fillingsystems, bathroom heater/dryers, floor heating systems,
and panel heaters from their smartphones, can collectproduct usage and sensor information. By analyzing andutilizing this information, Rinnai will propose ways ofusing the ecosystems that match the lifestyles of ourcustomers and solve their problems, thereby contributing
to the improvement of their quality of life. We will also
expand our business domains by offering attractive
new services.

We have released “RinnaiBiZ,” a new information
communication platform connecting business partners
with Rinnai. The site provides the latest productinformation, replacement and inventory searches,
catalog browsing, building information, and otherbusiness support services, as well as a variety of content
to enhance sales. We will build an optimal cycle ofinformation dissemination, proposals, and businesssupport to enhance profitability by analyzing theinformation accumulated through daily sales activities
and the usage status of RinnaiBiZ.

Data

UP
RinnaiBiZ

Data analysis

Hypothesis Verification

Business function enhancement

To aggressively promote DX, we are working on the establishment of a framework, human resource development
and technology environment, and data management infrastructure. In the promotion structure, members to promote DX
are assigned to each of the business and administrative divisions. We have also established a cross-functional project tounite the entire Company.
For human resource development, we have defined “DX business personnel” to lead business transformation andDX technology personnel to create strategies through the use of digital technology as “DX promotion core personnel” andare working to cultivate them. At the same time, we are striving to improve skills Company-wide to ensure that we havethe competencies to respond to business models that utilize digital technology. In establishing the technologicalenvironment, we are promoting a swift environment build-out and optimizing operations through the use of cloudtechnology and have begun reviewing the entire system to ensure that it can flexibly respond to new business processes.
Our data management infrastructure is working to build an environmental infrastructure that can accumulate and analyze
a variety of information necessary for the creation of new value.

Rinnai Report 2023

46

Social
Implementation of CSR Questionnaire

Communication with Business Partners

Working with the Supply Chain to Build a Stable Procurement System
In 2022, the ongoing COVID-19 pandemic and the outbreak of theRussia-Ukraine conflict continued to make stable parts procurement
very challenging.
Going forward, geopolitical risks and natural disaster risks are
expected to remain ever-present and create an urgent need to build
a stable parts procurement system.
In this context, Rinnai works closely with its business partners to
exchange information, examine supply chain risks and grasp themarketability, availability and future viability of parts. To mitigate risks,
Rinnai is engaged in the diversification of materials, processes andlogistical networks. It also promotes inventory optimization to preparefor various risk scenarios.
To ensure a more stable supply of our products, which areessential to daily life, our supply chain will work together to build arobust product supply system that can respond to the risks it is
exposed to.

Flow of Initiatives

1

Ascertain risks

Specify targets

2• Suppliers• Parts and materials• Parts, materials

3

Implement countermeasures

In accordance with the Rinnai Human Rights Policy, which is based on the United Nations Guiding Principles on Businessand Human Rights, Rinnai identifies and assesses the negative human rights impacts of its business activities andconducts ongoing human rights due diligence to prevent or mitigate such risks. In fiscal 2023, we requested our suppliers
to respond to a CSR questionnaire and received replies from 246 of them (including 173 primary suppliers).
When issues are uncovered through the CSR questionnaire, we encourage our suppliers to correct them. We also
conduct audits, including on-site inspections and interviews, as necessary.

Responsible Mineral Procurement
To fulfill our social responsibility in procurement activities, we will ensure that payments for minerals (tin, tantalum,
tungsten, and gold) used in our products are not diverted to finance militant forces involved in civil wars and conflicts thatcause serious human rights abuses in conflict and high-risk areas by conducting responsible mineral procurement
throughout the entire supply chain.
Promoting responsible mineral sourcing requires due diligence that is undertaken throughout the supply chain.
We will ask relevant suppliers to provide information on smelters and refiners through the supply chain and aim to procure
from issue-free suppliers.
We use industry standard survey forms such as the Conflict Minerals Reporting Template (CMRT) published by
the Responsible Minerals Initiative (RMI) as survey tools since responsible mineral surveys require the cooperation of
all our business partners, down to smelters and refiners.

Diagram of Information Linkage

RinnaiBusiness partners

Information

Primary processors

Raw materials
Subsidiary materials

Natural disasters, fire, accidents, disputes,
epidemics, logistics disruptions, etc.

Survey of Conflict Minerals
Rinnai conducts surveys regarding conflict minerals for its suppliers. In fiscal 2023, survey forms were collected from 173
suppliers who were requested to participate. Based on the collected forms, we conduct risk analysis and evaluation,and if risks are detected, we request procurement from smelters and refiners without issues.

VOICE
Initiatives to Ensure Stable Supply
Rinnai’s overseas production bases have temporarily shut down their plants due to thepandemic and geopolitical factors, and on the logistics side, ports and airports have also been
shut down on occasion.
Based on this experience, we first established multiple production bases and built a
production system by designing, developing, and building new automated machines in Japan
as well as at separate bases outside of Japan. Furthermore, the company is diversifying its
suppliers of parts and materials.
Tateyama Kagaku Sensor Technology Co., Ltd.
Representative Director & President

Iwao Hayashi

47

We will continue to promote BCP initiatives in close cooperation with our customers,
considering stable supply to be our top priority so that our customers can place orders withpeace of mind.

It is available in advance on the website shown below. (Bottom of page below)
https://www.rinnai.co.jp/csr/b-partner/ (in Japanese only)

Rinnai Report 2023

48

SocialCommunication with Shareholders and Investors

Aiming for Longer-Term Business Growth and Stable Shareholder
Returns

Announcement of Rinnai’s year-end financial results

We disclose information in an appropriate, timely, fair, and impartial manner, and engage in IR activities with
an emphasis on two-way communication in order to earn the trust of shareholders and investors. In an effort to provide
our shareholders and investors with direct updates on our business activities, and to ensure that information is disclosed
quickly and fairly, we provide information via channels such as results briefings for analysts and institutional investors(twice a year), biannual shareholder reports, press releases and presentation materials for results briefings on our website,and our IR calendar. Through various opportunities to meet with them, shareholders and investors are able to understandour business growth strategies from a longer-term perspective and to hold expectations for stable shareholder returns.
In August 2023, Rinnai invited investors and their families to Rinnai Hot.Lab Yokohama for a hands-on product experience
event held jointly with institutional investor Commons Asset Management, Inc. Rinnai Hot.Lab is a training facility forclients that provides hands-on experience with products that include DELICIA stoves with automatic cooking functions,and Kanta-kun, which dries clothes quickly using the power of gas. This event was attended by many investors in the
Commons Asset Management “Kodomo Trust” and their children, who were able to experience the fluffiness of dried
towels from Kanta-kun gas clothes dryers and try meals prepared by using DELICIA, which contributed to deepening
their understanding of our products and Company initiatives by seeing and actually touching them.
Kodomo (Children’s) Trust is an account for underage children provided by Commons Asset Management thatfacilitates asset growth in tandem with the growth of children. Kodomo Trust seminars provide children with opportunities
to experience initiatives promoted by the companies in which they are invested and learn that investing is a way tosupport the efforts of these companies. The Kodomo Trust seminar was a great opportunity for communication among
investors and children, as well as with companies.
As Rinnai handles products related to “clothing,food, and housing,” we provided children with anopportunity to experience how these products are
related to their daily lives. We provided a dietaryeducation program to provide children with
an opportunity to learn about “eating,” which is very
important to them, and to experience what happens
before and after the process of eating “food,” as wellas what kinds of “ingredients” become “cuisine” whenprocessed using “cooking utensils.”

Fiscal 2023 Activities
IR interviews conducted a total of 251 times
One-on-one interviews: (Tokyo: 45; Nagoya: 16)
Telephone interviews: 36 times
Online coverage: 154 times

Fiscal 2023 interim results briefing (livestream):
105 attendees
Fiscal 2023 year-end results briefing (livestream):
78 viewers

Institutional Investor Opinions at Fiscal 2023 Year-End
Institutional Investor Question Topics

In addition to customary questions regarding business performance,
Othersfuture outlook, and the status of product sales, at the fiscal 2023
24%
ESG
financial results announcement, institutional investors and analysts had
Shareholder
proposalsa wide range of questions and comments pertaining to domestic andForecasting
international demand fluctuations related to the pandemic, capitalMarkets
expenditures, capital policies, and other recent events andParts procurement
announcements.
Materials
Results
This was a period of wide-ranging discussions on capital policy
Price revisions
and growth strategy, with many exchanges regarding the use of funds,
including share buybacks, dividend increases, and proactive
Products
Capital policy
Supply chain
14%
Investments
investments. Rinnai will deepen communications with shareholders andinvestors as we move forward with the dynamic movement of funds.

Performance
45%

Medium-termbusiness plan
17%

49

Rinnai Report 2023

50

GovernanceManagement Structure
Director Compensation System

Corporate Governance Structure

A summary of the details of the Company’s policy for determining the content of compensation, etc. for individual directors is presented in 1.
through 4. below. The “Basic principles on determining compensation for directors” stipulate that the Company shall continuously verify theappropriateness of 2. the structure of compensation system and 3. the level of compensation, which will be reviewed in fiscal 2024.

General Shareholders’ Meeting
Election and dismissal

Audit & Supervisory Board
Cooperation

Accounting Auditor

Election and dismissal

Election and dismissal

Cooperation

Audit

Consultation andrecommendation

Nomination/Compensation
Advisory Committee

Board of Directors

Election, dismissal,
and administration

1. Basic principles on determining compensation for directors

Election, dismissal,
and administration

I. Promoting solid corporate value creation over the medium to long term
II. Securing objectivity and transparency to underline our accountability to a broad range of stakeholders, including shareholders

Direction

PresidentInternal Control Office

ReportReport

Audit

ReportManagement

Audit

Related Committees

Internal
Audit

Report2. Structure of compensation

Environment Management
Committee
ESG Committee*1 and other

Executive Officers
ReportCorporate Ethics Committee
Risk Management Committee

Compensation for directors consists of a basic component (fixed compensation) and a performance-linked component in a ratio of
approximately 70:30 for the purpose of providing a sound motivation for increased corporate value and target achievement.
Performance-linked compensation consists of an annual bonus, designed to promote steady attainment of performance targets every
fiscal year, and a restricted stock compensation, designed to seek steady improvement of corporate value through sharing interests
with shareholders by holding the Company’s shares for the medium to long term.
Compensation for outside directors is limited to a basic component (fixed compensation) only, in order to promote proper
conduct of their duties to supervise and give advice to management from a position independent of executive management.
The composition of compensation and summary of each component are as follows:

Cooperation

Direction

Business Divisions

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

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

Nomination Advisory Board and Compensation Advisory Board
Rinnai established a Nomination Advisory Board and a Compensation Advisory Board comprising a majority of outside independent directors
as advisory bodies to the Board of Directors to ensure a higher degree of objectivity and transparency in the process of determining
nominations and compensation for senior management and directors. Nominations and compensation of directors and executive officers are
discussed by the respective advisory committee, with a final decision made by the Board of Directors.

Remuneration for Directors and Audit & Supervisory Board Members (Fiscal 2023)
Category

Directors(including outside directors)

Recipients(persons)
5(2)

Audit & Supervisory Board
members

44
(12)

44
(12)

—
(—)

—
(—)

5
(2)

Total

330
(28)

243
(28)

79
(—)

7
(—)

10
(4)

(including outside members)(including outside members)

51

Total Remuneration by Item (Millions of yen)
Total Remuneration(Millions of yen)
Basic component
Annual bonus
Restricted stock
286
199
79
7
(16)
(16)
(—)
(—)

Composition of Compensation
Basic component

70%

20%

10%

Annual bonus
Restricted stock

3. Level of compensation
The level of compensation for directors (excluding outside directors) is set so that directors are strongly motivated to realize increased
corporate value and attain goals through the concerted efforts of the entire Company. It is determined on the basis of position andduties and by using objective data on executive compensation gathered through a survey conducted by an outside expert agency(Willis Towers Watson’s Executive Compensation Data) and using those of selected comparable companies as a benchmark.

4. Process of determining compensation
Policies on determining compensation for directors are deliberated objectively at a meeting of the Compensation Advisory
Committee, composed of a majority outside directors, and ratified by resolution of the Board of Directors based on the Committee’s
recommendations. The amount of each director’s compensation, including an assessment of an individual performance-evaluation
component, is determined by deliberation of the Compensation Advisory Committee to which the Board of Directors has resolved todelegate authority, ensuring more objectivity and transparency in the process of determining compensation.
Deliberations of the Compensation Advisory Committee are conducted from an objective viewpoint and by referring toexpertise about compensation systems. Accordingly, information is obtained from an outside expert agency (Willis Towers Watson in
fiscal 2023) when necessary. The following are the members of the Compensation Advisory Committee who deliberated policies forfiscal 2023 and their activities during the fiscal year.
Members• Nobuyuki Matsui, Outside Director (Chairman of the Committee)• Tadashi Ogura, Outside Director• Takashi Kamio, Outside Director• Hiroyasu Naito, Inside Director
Activities
May 18, 2022: Decision of annual bonus for fiscal 2022, and deliberation on compensation policies for fiscal 2023
June 29, 2022: Deliberation on selection of Compensation Advisory Committee Chairman and individual amounts of compensationfor officers (directors) for fiscal 2023

Rinnai Report 2023

52

Governance

Leadership (As of June 29, 2023)
Board of Directors
Kenji Hayashi

Audit & Supervisory Board Members

Hiroyasu Naito

Kinji Mori

Representative Director, Chairman of the Board

Career Summary and Current Position in the Corporation:
Apr. 1972 Joined Rinnai Corporation
Sept. 1978 Director
Feb. 1980 Director, and General Manager of Corporate Planning OfficeJun. 1983	Managing Director, and General Manager of Production Technology Division

Jul. 1992	Managing Director, and General Manager of Related Business DivisionJun. 2005	Director, Managing Executive Officer, and General Manager of Related Business
Division
Jun. 2006 Representative Director, Vice Chairman of the Corporation
Apr. 2017 Representative Director, Chairman of the Board (current)

Representative Director and President and Executive President

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

Career Summary and Current Position in the Corporation:
Apr. 1967 Joined Rinnai Corporation
Jun. 1988	Director, General Manager of Technology Research Headquarters andconcurrently General Manager of Quality Guarantee DivisionJun. 2001 Managing Director, General Manager of Production Headquarters
Jun. 2005	Director, Managing Executive Officer, and General Manager of Production
Headquarters
Nov. 2005	Director, Managing Executive Officer, in charge of domestic business, andconcurrently General Manager of Marketing & Sales Headquarters
Apr. 2006	Director, Senior Executive Officer, in charge of domestic business, and concurrently
General Manager of Marketing & Sales Headquarters

Apr. 2009	Director, Executive Vice President; responsible for Research & Development
Headquarters, Production Headquarters, Overseas Business Headquarters andCustomer Division, and General Manager of Marketing & Sales Headquarters
Apr. 2010	Representative Director, Executive Vice President; responsible for Research &Development Headquarters, Production Headquarters, Overseas Business
Headquarters and Customer Division, and General Manager of Marketing & Sales
Headquarters
Oct. 2010	Representative Director, Executive Vice President; responsible for Research &Development Headquarters, Production Headquarters, Overseas Business
Headquarters, and General Manager of Marketing & Sales Headquarters
Apr. 2016	Representative Director, Executive Vice President, President’s Assistant, in chargeof Production Headquarters and Overseas Business Headquarters
Apr. 2018	Representative Director, Executive Vice President, President’s Assistant (current)

Hideyuki Shiraki

Kazuto Inoue

Director, Senior Managing Executive Officer

Takashi Kamio

Career Summary and Current Position in the Corporation:
Apr. 1985	Professor at Department of Electrical Engineering in Nagoya Institute ofTechnology
Jan. 2004 President at Nagoya Institute of Technology
Apr. 2010	Auditor at Aichi University of Education, Advisor of Aichi Prefectural Government
Office (Industrial Labor Section)
Apr. 2012 Professor at Chubu University
Jun. 2014 Outside Director, Rinnai Corporation (current)
Apr. 2021	President at International Professional University of Technology in Nagoya (current)

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

Outside Director, Independent Officer

Career Summary and Current Position and Responsibility in the Corporation:
Apr. 1975 Joined Nippon Toki Co., Ltd. (currently, NORITAKE CO., LIMITED)
Jun. 2005 Director at NORITAKE CO., LIMITED
Apr. 2008 Director, & Managing Executive Officer at NORITAKE CO., LIMITED
Jun. 2010 Director, & Senior Managing Executive Officer at NORITAKE CO., LIMITED
Jun. 2011 Director & Vice President, Executive Officer at NORITAKE CO., LIMITED
Apr. 2012	Representative Director & Vice President, Executive Officer at NORITAKE CO.,LIMITED
Jun. 2013 Representative Director & President, Executive Officer at NORITAKE CO., LIMITED
Jun. 2018 Representative Director & Chairman at NORITAKE CO., LIMITED (current)
Jun. 2023 Outside Director, Rinnai Corporation (current)
Current Representation in Other Companies:
Representative Director & Chairman at NORITAKE CO., LIMITED

Masaaki Matsuoka Outside Independent Audit & Supervisory Board Member

Ippei Watanabe

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

Career Summary and Current Position in the Corporation:
Apr. 1978	Registration of attorney
Joined Saji & Ohta Law firm
Jun. 1991	Established Ohta & Watanabe Law firm (currently, TRUTH & TRUST Law Office)(current)
Jun. 2016 Audit & Supervisory Board Member (current)

Current Representation in other companies
Audit & Supervisory Board Member at Kanemi Co., Ltd.
Outside Audit & Supervisory Board Member at Mitachi Co., Ltd.

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

Yoko Dochi

Outside Independent Audit & Supervisory Board Member

Executive Officers (excluding concurrent directors)
Managing Executive Officer

Chuji Nakashima

General Manager of Quality Assurance Headquarters

Managing Executive Officer

Hirohisa Ooi

General Manager of Production Headquarters

Managing Executive Officer

Takuya Ogawa

General Manager of Corporate Planning Headquarters

Managing Executive Officer

Yoshihiko Takasu

General Manager of Research & Development Headquarters, andGeneral Manager of Technology Administration Division

Senior Executive Officer

Kenichi Ebata

General Manager of President’s Office, andGeneral Manager of General Affairs Division

Senior Executive Officer

Hayao Nishizawa

General Manager of Overseas Business Headquarters

Executive Officer

Katsunori Tanioka

General Manager of Chubu Branch, Marketing & Sales Headquarters

Executive Officer

Hiroyuki Hoyano

General Manager of Kanto Branch, Marketing & Sales Headquarters

Executive Officer

Atsuo Kashima

General Manager of Accounting Division

Executive Officer

Daisuke Naito

Deputy General Manager of Overseas Business Headquarters

Executive Officer

Kenji Endo

President of RB Controls Co., Ltd. and President of Noto Tech Co., Ltd.

Outside Director, Independent Officer

Current Representation in Other Companies:
Chairman of Sasaeai, specified nonprofit corporation

Tadashi Ogura

Standing Audit & Supervisory Board Member

Career Summary and Current Position in the Corporation:
Apr. 1984 Joined Rinnai Corporation
Apr. 2016	Executive Officer, General Manager of Technology Development Division,
Research & Development Headquarters
Apr. 2021	Executive Officer, Deputy General Manager of Quality Assurance Headquarters,
concurrently General Manager of Quality Assurance Division
Apr. 2022 Senior Executive Officer, General Manager of Quality Assurance Headquarters
Jun. 2023 Standing Audit & Supervisory Board Member (current)

Director, Senior Managing Executive Officer

Career Summary and Current Position and Responsibility in the Corporation:
Apr. 1985 Joined Rinnai Corporation
Apr. 2008 Vice President of Rinnai Korea Corporation
Jun. 2012 President of Rinnai Precision Co., Ltd.
Apr. 2016	Executive Officer of the Corporation, General Manager of Production Control
Division, Production Headquarters
Apr. 2017 Executive Officer, Deputy General Manager of Production Headquarters
Apr. 2018 Executive Officer, General Manager of Production Engineering Headquarters
Managing Executive Officer, General Manager of Production Engineering Headquarters
Apr. 2021	
Apr. 2023	Senior Managing Executive Officer, General Manager of Production Engineering
Headquarters
Jun. 2023	Director, Senior Managing Executive Officer, General Manager of Production
Engineering Headquarters (current)

Nobuyuki Matsui Outside Director, Independent Officer

Current Representation in Other Companies: Outside director at Aichi Tokei Denki Co., Ltd.,
President at International Professional University of Technology in Nagoya

Masanori Shimizu

Current Representation in Other Companies: Outside Director at Nagoya Railroad Co., Ltd.

Tsunenori Narita Representative Director and Executive Vice President, President’s assistant

Career Summary and Current Position and Responsibility in the Corporation:
Apr. 1989 Joined Rinnai Corporation
Apr. 2017	Executive Officer, General Manager of Kanto Branch Office, Marketing & Sales
Headquarters
Apr. 2019	Executive Officer, Deputy General of Marketing & Sales Headquarters,
concurrently, General Manager of Kanto Branch OfficeJun. 2020 Managing Executive Officer, General Manager of Marketing & Sales Headquarters
Apr. 2023 Senior Managing Executive Officer, General Manager of Marketing
Jun. 2023	Director, Senior Managing Executive Officer, General Manager of Marketing(current)

Standing Audit & Supervisory Board Member

Career Summary and Current Position in the Corporation:
Apr. 1981 Joined Rinnai Corporation
Apr. 2010	Executive Officer, General Manager of Product Development Division, Research &Development Headquarters
Apr. 2011	Executive Officer, Deputy General Manager of Research & Development
Headquarters, General Manager of Product Development Division
Apr. 2016	Managing Executive Officer, General Manager of Research & Development
Headquarters
Apr. 2018	Managing Executive Officer, General Manager of Research & Development
Headquarters, General Manager of Technology Administration Division
Apr. 2019	Managing Executive Officer, General Manager of Quality Assurance Headquarters,
General Manager of Environment DivisionJun. 2022 Standing Audit & Supervisory Board Member (current)

Outside Director, Independent Officer

Career Summary and Current Position and Responsibility in the Corporation:
Apr. 1975 Joined The Bank of Tokyo, Ltd. (currently, MUFG Bank, Ltd.)
Apr. 1993 Deputy General Manager of Finance Development Division at The Bank of Tokyo
Sept. 1996 Joined World Bank Group (WBG)
Sept. 1998 Investment Officer of International Finance Corporation under WBG
May 2001 Joined Toyota Motor Europe S.A./N.V.
Jan. 2013 General Manager of Investor Relations at Toyota Motor Europe S.A./N.V.
Jan. 2015	General Manager of Global Treasury and Investor Relations at Toyota Motor
Europe S.A./N.V.
Jun. 2018	In charge of Investors Relations and Accounting Division, and Stock Group at
Toyota Motor Corporation
Nov. 2018	Joined SoftBank Group Corp. In charge of Finance, General Manager of Investor
RelationsFeb. 2020 Joined SoftBank Group International Managing Partner, Head of Investor Relations
Jun. 2020 Outside Director of NIPPO LTD. (current)
Jun. 2023 Outside Director, Rinnai Corporation (current)
Current Representation in Other Companies:
Outside Director of NIPPO LTD. Trustee of Daiwa Anglo-Japanese Foundation

53

Rinnai Report 2023

54

Governance

Skills Matrix of Directors

Messages from Newly Appointed Outside Directors

Technology<Development/
Business Plans/
Production/
Marketing
Environment(E)>

I served as President and Chairman of NORITAKE CO., LIMITED, which was founded as
Finance/
Accounting/
Capital Policy

Human
Resources
Strategy (S)Governance (G)/Legal Matters

ESG/
Sustainability

IT/Digital
Transformation
(DX)

−

●

●

●

−

−

●

−

●

−

−

●

−

−

●

●

−

●

−

−

−

monozukuri activities throughout the company for more than 10 years. Furthermore, as

−

−

−

●

−

●

−

−

●

Chairman of the Chubu Productivity Center until May 2023, I had been involved in activities

Kazuto Inoue

−

●

●

−

−

−

−

−

●

Nobuyuki Matsui

−

−

●

−

−

●

●

−

●

Takashi Kamio

●

●

−

●

−

−

●

−

−

Tadashi Ogura

●

−

●

−

−

●

●

−

−

Yoko Dochi

−

●

−

−

●

−

−

●

−

Corporate
management

Globalmanagement

Kenji Hayashi

●

●

−

Hiroyasu Naito●●

Tsunenori Narita●

Hideyuki Shiraki

a maker of Western-style tableware, but now industrial products such as grinding andpolishing tools account for 95% of its sales. I first joined that company’s R&D Division
followed by stints in the Engineering Division and Human Resources Division and then by six
years as general manager at two plants. During my tenure as President, I invited Toyota
Production System (TPS) trainers from Toyota Motor Corporation and promotedthat contribute to the improvement of productivity necessary for the sustainable growth ofcompanies. Through these experiences, I became keenly aware that improving productivity

Tadashi Ogura
Outside Director

depends on people and how critical it is to support their growth, create workplaces where
they can express their abilities, and foster their engagement there.
Since its founding in the Chubu region, the heart of monozukuri in Japan, Rinnai hasdeveloped its heat energy appliance business by cultivating heat-related technologies
underpinned by the fundamental concept of “Quality is our destiny.” As it aims to continue
going out in the world and take on challenges, in my opinion Rinnai must create synergies* This table does not show all of the skills possessed by each Director.

through the formation of diverse human capital and partnerships with universities and otherexternal institutions to generate innovation on a sustained basis. I will do my utmost tocontribute my knowledge and experience to the advancement of the Company.

Reasons behind Selecting Eight-Point Skills Matrix

55

Corporate management

It is vital for Rinnai, which seeks to address global social challenges through core technologies under the business themes of"heat and lifestyles" and "health and lifestyles," to have directors who possess a wealth of knowledge in consumer services as wellas management experience at manufacturing companies, research facilities and other organizations.

Global management

Rinnai must have directors who possess overseas business management experience and a deep understanding of andinvolvement at the local level, that is, the local lifestyle and culture and the environment, to support business expansion in global
markets, particularly Japan, the United States and China, and to support sustainable growth.

Technology<Development/Production/
Environment>

Basic research into the use of all sorts of energy sources and component development as well as measures to maintain a highly
reliable production system are essential to an expanded lineup of products that contribute to "heat and lifestyles" and "health andlifestyles," and Rinnai must therefore have directors with demonstrated knowledge and experience in development, production
and the environment.

Business Plans/Marketing

Rinnai must have directors with demonstrated knowledge and experience in business planning and marketing to gather
information on the real needs of consumers and develop product planning and sales planning matched to these needs, and to
reinforce business activities related to direct sales.

Finance/Accounting/
Capital Policy

Rinnai must have directors with demonstrated knowledge and experience in financial, accounting and capital policy disciplines
for optimum allocation to strategic investments, return to shareholders and risk-responsive capital from the current added-value
and profit-emphasis management perspective as well as a medium-term perspective.

Human Resources Strategy (S)Rinnai must have directors with demonstrated knowledge and experience in human resources development, workplace creation,
health management and diversity-oriented hiring to realize personnel system reform that encourages employees to challengethemselves and strive for personal fulfillment, and to present new workstyles and improve brand power.

Governance (G)/Legal Matters

Rinnai must have directors with demonstrated knowledge and experience in corporate governance, risk management and legal
matters to maintain the appropriate global governance structure and keep business activities going in a fair and equitableworkplace environment.

ESG/Sustainability

Directors with solid knowledge and experience in the field of ESG and sustainability are needed to solve social issues as wellas to incorporate them into business activities as earnings opportunities toward the realization of a sustainable society.

IT/Digital Transformation (DX)

Rinnai must have directors with demonstrated knowledge and experience in IT and DX, not only to promote digital transformation
throughout the Corporation but also to establish an information infrastructure to thwart cyberattacks and to utilize leading-edge
information technologies.

For more than 20 years, I have been at the front lines of numerous dialogues with investors
and shareholders in Japan and overseas as the general manager and head of investor
relations for Toyota Motor Corporation and SoftBank Group Corp.
I aim to apply the skills and experience cultivated in building relationships of trust
through dialogue on business strategy, finance, technology, ESG (environmental, social, andgovernance), and other issues at various stages of growth and in various management
environments. In this way, I aim to be a Director with a high level of sensitivity so that I canalways understand investor and shareholder expectations, interests, and concerns regarding
Rinnai and reflect them in discussions at our board meetings.
Rinnai has been a monozukuri company for more than 100 years and has just started

Yoko Dochi
Outside Director

running toward its next century. Going forward, against the backdrop of the global demandfor carbon neutrality, it will become increasingly vital for its core business, which is led by gas
appliances, to respond to the diversification of energy sources and decarbonization.
As Rinnai seeks to achieve sustainable growth and enhance its corporate value toward thenext 100 years of its history, I would like to contribute to the decision-making process related
to future-oriented growth strategies and capital policies that are inextricably linked to thesestrategies, from the perspectives of different industries, a global view, and from the viewpointof its stakeholders.

Rinnai Report 2023

56

GovernanceCompliance

Risk Management

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

Risk Management Policy

Rinnai Group Code of Ethics

Promotion Structure

The Rinnai Group has compiled behavioral standards that all executives and employees must obey in the “Code of
Ethics,” a small booklet that includes the “Rinnai Code of Conduct” as a guideline for specific daily activities.
In addition, an English-language version of the “Code of Ethics” is issued to Group companies, and in countries
where the official language is not English, the manual is translated into the local language of that country.
Each year, Rinnai conducts Code of Conduct awareness activities for all Group employees including those outsideof Japan.
Furthermore, in Japan we have created the “Rinnai Code of Conduct Guidebook” as a tool to deepen understandingof the content in the “Rinnai Code of Conduct” and we also implement tests using e-learning to confirm the level ofunderstanding.

Rinnai’s Risk Management Committee is comprised mainly of Material Risks (Excerpted)• Compliance• Intellectual property
executive officers and divisional heads with the President• Product accident defects• Supply chain
Management
Risk
serving as Chairman. The Risk Management Committee• Labor-related• Market environment,• Environment
etc.
identifies risks that may affect life, Rinnai’s reputation, business
Financial Risk
• Foreign exchange rates• Taxation, etc.
activities, and assets, and prepares a List of Material Risks,
Accident andwhich evaluates the importance of each item in terms of• Production shutdowns, etc.
Disaster Risk
magnitude of impact and potential frequency of occurrence.
IT Risk• Cyberattacks• Information leakage, etc.
The Committee also determines which business divisions
Health Risk
• Infectious diseases• Mental health, etc.
have a primary responsibility for each type of risk. These
Country Risk
• Geopolitical risk, etc.
divisions discuss and work on developing mechanisms toprevent risks from materializing, rapidly resolve crises,
minimize any damage that may occur as a result, and prevent recurrences.
The Committee works with all divisions and Group companies to mitigate risks and enhance risk response capabilities.

As society becomes increasingly complex, companies face a variety of risks. As a manufacturer of thermal energy
equipment that supports people’s daily lives, we believe it is our social responsibility to continue to provide products in astable manner. We are committed to risk management to live up to the trust of our customers and society and to conduct
stable business activities.

Promotion of Business Continuity

Code of Ethics summary awareness meeting(Rinnai (Thailand) )In the event of a major risk such as a natural disaster, fire, or infectious disease materializing, we envision that business
operations may be suspended for a long time, resulting in significant losses and having a serious impact on stakeholders.
We position cases where there is a risk of interruption in the manufacture or supply of products vital to customers asimportant issues for business continuity management and are formulating and reviewing business continuity planning(BCP).

Code of Ethics summary awareness meeting(Guangzhou Rinnai Gas and Electric Appliance)

Response to Natural Disasters
윤리강령

Code

Code

Rinnai (New Zealand) written
paledges

57

of Ethics

ics

of EthRinnai Group Code of Ethics(English, Chinese and Korean versions)2019.4

Rinnai’s business sites are concentrated in the Chubu region. To prepare
for a Nankai Trough Mega Earthquake that is said to occur within the next
30 years, we are promoting Companywide seismic and disasterprevention measures and reviewing our BCP. In addition, all employees
participate in annual drills using the safety confirmation system.

Risk ofnon-compliance ormanagement inviolation of applicablelaws

Geopoliticalrisks

Risk of fire,
explosionaccidents, andnatural disasters

Important Identified
Risks

Health risks such as
infectious diseases andmental health

Risk of suspension ordelays affecting raw
material procurement
activities

Risks related tothe environment

IT risks such as
cyberattacks andinformation leaks

Rinnai Report 2023

58

Data Collection
Eleven-Year Financial Summary
FY2013

FY2014FY2015FY2016FY2017FY2018FY2019FY2020

FY2021

FY2022

FY2023

Net sales(Millions of yen)

251,832

286,981

295,022

319,935

330,256

347,071

348,022

340,460

344,364

366,185

425,229

Operating income(Millions of yen)

26,35134,01830,787

34,59334,05632,84930,87934,422

40,69035,864

41,418

(%)

10.5

11.9

10.4

10.8

10.3

9.5

8.9

10.1

11.8

9.8

9.7

Ordinary income(Millions of yen)

29,06436,91032,93835,80735,28034,28633,31835,67942,40039,06044,565

Net income attributable to owners of
the parent company(Millions of yen)

19,371

23,254

20,64722,71022,322

21,194

20,48021,561

27,581

23,74826,096

Total net assets(Millions of yen)

178,007

232,635

261,414271,709290,638

307,965

320,696

340,959

371,318

378,856

407,199

Total assets(Millions of yen)

262,590334,382355,140

368,084

402,107422,422430,885

450,486

497,291

512,867

547,114

Net assets per share(Yen)

3,516.11

4,245.48

4,742.42

4,924.24

5,245.62

5,589.17

5,819.80

6,140.52

6,660.40

6,889.76

7,462.80

Net income per share(Yen)

394.86454.74397.03436.71429.27410.41398.45419.49536.62

470.39530.76Equity ratio

(%)

65.7

66.0

69.4

69.6

67.8

68.0

69.4

70.1

68.8

66.9

66.6

Return on equity

(%)

12.0

11.8

8.8

9.0

8.4

7.6

7.0

7.0

8.4

6.9

7.4

Cash flows from operating activities(Millions of yen)

22,87236,45325,671

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

28,696

19,387

Cash flows from investing activities(Millions of yen)

(12,607)(32,908)(23,649)(17,770)(17,732)(12,190)(7,288)(7,124)(15,820)(25,486)(30,087)

Cash flows from financing activities(Millions of yen)

(5,002)

13,183(8,659)(6,554)(5,217)(11,725)(6,150)(6,436)(7,269)(27,109)(21,313)

Cash and cash equivalents at end ofyear(Millions of yen)

55,03074,27969,34079,60095,297

101,697

116,133

140,138

166,524

147,972

120,213

Capital expenditures(Millions of yen)

8,222

12,43913,774

16,93820,664

16,105

13,481

10,58013,301

22,682

26,521

Research and development expenses(Millions of yen)

8,060

8,380

8,895

9,113

9,340

9,918

9,503

9,308

11,802

12,762

13,458Operating income margin

Dividends

(Yen)

60

68

76

82

86

90

94

98

125

140

160*2

Payout ratio

(%)

15.2

15.0

19.1

18.8

20.0

21.9

23.6

23.4

23.3

29.8

30.1

Number of outstanding shares(Shares)

54,216,463

52,216,463

52,216,463

52,216,463

52,216,463

51,616,463

51,616,463

51,616,463

51,616,463

50,021,057

50,021,057*2

Closing price at the end of the period

(Yen)

6,770

9,070

8,910

9,940

9,230

10,100

7,830

7,650

12,3909,170

9,705*2(Millions of yen)

367,045473,603465,249

519,032

481,958

521,326

404,157

394,866

639,528

458,693

485,454

Market capitalization
Three stock splits*2
Dividends

(Yen)

20.0

22.6

25.3

27.3

28.6

30.0

31.3

32.6

41.6

46.6

53.3

Number of outstanding shares(Shares)

162,649,389

156,649,389

156,649,389

156,649,389

156,649,389

154,849,389

154,849,389

154,849,389

154,849,389

150,063,171

150,063,171

Closing price at the end of the period

(Yen)

2,257

3,023

2,970

3,313

3,077

3,367

2,610

2,550

4,130

3,057

3,235

Net assets per share(Yen)

1,172.04

1,415.16

1,580.81

1,641.41

1,748.54

1,863.06

1,939.93

2,046.84

2,220.13

2,296.59

2,487.60

Net income per share(Yen)

131.62151.58132.34145.57143.09136.80132.82139.83178.87156.80176.92*1 W
 e have applied the Partial Revisions to Accounting Standards for Tax Effect Accounting (Corporate Accounting Standards No. 28, February 16, 2018) since fiscal 2019.
As such, figures for fiscal 2015–fiscal 2018 have been adjusted to retroactively apply said accounting standards.
*2 On April 1, 2023, we conducted a three-for-one stock split of our common stock.

59

Rinnai Report 2023

60

Data Collection
Human Resource- and Personnel-Related Data

Environmental Data

Number of Employees (Non-consolidated)
Male
FemaleSubtotal
Male
FemaleSubtotal
Subtotal
Subtotal
Male
FemaleSubtotal
Male
FemaleSubtotal

Newly recruited employees

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

Average age (Years old)

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

Maximum number of days added with paid leave
Average number of days taken with paid leave
Utilization ratio (%)
Number of persons with disabilities
Employment rate (%)

Number of accidents
Number of disasters(%)(LTIFR)

Number of employees on mental health leave
Periodic health checkup participation ratio
Secondary health checkup participation ratio
Smoking ratio
Participation ratio in measures*1 for high-risk individuals*2 (%)
Stress check test taker ratio (%)
Number of employees who used childcare leave
Number of employees who took childcare leave of absence
Number of employees who took maternity leave (persons)
Proportion of employees who return to work after taking parental
leave (%)
Number of employees who used shortened work hours

Number of employees who used family care leave

Number of employees who used nursing leave

Number of employees who took nursing leave of absence
Number of employees who used our reemployment (Come Back)systemNumber of employees who used the work from home program

Male
FemaleSubtotal
Male
FemaleMale
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal
Male
FemaleSubtotal

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

Fiscal 2022
71
13
84
7
1
8
9
178
18.7
15.3
17.7
41.0
36.3
39.6

Fiscal 2023
89
14
103
5
6
11
10
181
19.1
16.2
18.3
41.4
37.3
40.2

Fiscal 2021
20
12.2
63
79
2.22
28

Fiscal 2022
20
14.0
70
82
2.33
26

Fiscal 2023
20
11.6
61
79
2.19
25

0.56
20
100
72.3
21.8
100
95.4
62
4
95
99
3.3
103.3
100
98
99
0
161
161
1
27
28
2
3
5
0
5
5
0
0
0
835
247
1,082

0.00
31
100
88.6
19.9
100
94.4
63
7
123
130
6.5
85.7
100
97
99
4
199
203
2
38
40
3
2
5
0
1
1
0
0
0
512
210
722

0.74
21
100
91.7
19.4
100
95.8
64
18
91
109
21.7
106.4
100
98
99
2
215
217
4
59
63
4
9
13
1
0
1
0
1
1
806
233
1,039

Total energy used

Non-renewable energy usage

(TJ)
1,200

1,107

1,101

Renewable energy usage

1,134

1,156

Total amount ratio of the entire value chain(CO2 emissions) * 1
Scope 3 Category 1
Purchased goods / services

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

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

61

7,000

(6.74%)

1,000

Fiscal 2022
2,054
211.3
17.6
6,532,997

Fiscal 2023
2,065
246.7
19.9
6,671,135

Fiscal 2021
2
0
13
0.7

Fiscal 2022
10
0
27
0.7

Fiscal 2023
16
0
12
1.2

5,820

6,000

5,150

800

4,510

Total of Scope 1, 2, 3

15,910,000 t

600

4,000

400
2,000
200
0

0

Scope 3 Category 11
Use of sold products

Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

Fiscal 2021 Fiscal 2022 Fiscal 2023

14,600,000 t (91.75%)

Water used

Solid waste(Weight of exterminating specified invasive species)(1,000 t)
40(1,000 m3)
1,000
31

30

Fiscal2026(Target)Biodiversity protection(includes valuable substances)

30

808

800
27

962
758

786

(kg)
800
628

600

27
600

20

400

360

400
230
10

200

200

101

0

0

Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

0

Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

CO2 emissions reductions*1

Waste curtailment*1

Water saving*1(1,000 tCO2e)15(1,000 t)
1.0(1,000 m3)
40
31.8

10.8

30

10

5

5.2

21.9

0.5

0.5

6.0

20

0
Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

17.0

0.3

3.5

10
0.1

Fiscal 2021
1,952
176.7
14.7
6,440,168(contribute to reduction of CO2 emissions)(1,000 tCO2e)
8,000

1,070,000 t*1 Employees who have two or more of the “Recommended Value for Medical Examination” items and have at least one untreated item.
*2 Measures to prevent aggravation of health insurance

Working Hours

Eco-friendly products

5.2

0.1
0

0.0
Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

Fiscal 2020 Fiscal 2021 Fiscal 2022 Fiscal 2023

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

Rinnai Report 2023

62

2023.10
Printed in Japan