OSG Corporation

OSG REPORT 2022

3-22, Honnogahara, Toyokawa, Aichi Prefecture 442-8543, Japan
URL: https://www.osg.co.jp/en/

Printed in JapanOSG REPORT

2022
Fiscal Year Ended November 2022

Taking up the challenge to build a more prosperous future
and coexist harmoniously with our earth and society
Message from Top Management

Ever since our founding in 1938, OSG Group has developed proprietary
technologies and products, including our technology for tap grinding withgrindstones, which has enabled us to offer high value-added products andservices and expand our business globally.
In FY2022, disorder arose in world affairs prompted by Russia's invasion of
Ukraine, even as social and economic activities, which the pandemic had
suppressed, returned to normal and signs appeared pointing towards a brighter
FY2023. Within the global economy, considerable uncertainty is projected tocontinue in the business environment. Nonetheless, OSG is aiming to reacheven higher levels of performance as we continue to leverage our global
network encompassing production, sales, and technical support that is built
upon our Global Presence corporate philosophy.
In recent years, the automotive industry has been undergoing a realignment
as automobiles convert from gasoline to electric power. While this entails avariety of risks, it also presents new business opportunities for micro-precision
processing products, which the OSG Group is dedicated to. Also, a recovery indemand for products speciﬁcally designed for the aircraft industry, which wehave always focused on, will have a positive effect on performance. It is in thiscontext that we have been promoting our Medium-Term Management Plan
Beyond the Limit 2024. For FY2022 which is the ﬁrst year of this plan, werecorded our highest ever sales, ordinary income, and net income attributableto owners of parent. We will exploit a business environment promising further
growth and work to sustainably enhance corporate value through astrengthened corporate culture and overall optimization.
Our long-term vision points us toward being an essential player contributing
to the global manufacturing industry. We plan to actively develop Eco-friendly
Products in line with our basic environmental philosophy "Eco-Friendly
Company" as we head toward the age of carbon neutrality. The entire OSG
Group is devoted to working together to establish a brand trusted by our
Stakeholders, which will also empower us to sustainably enhance corporate
value. This report was prepared with the hope that it will provide a better
understanding of OSG's operations and activities.
We look forward to the continuing support and understanding of our
stakeholders.

1

OSG Re port 2022

Norio Ishikawa

Nobuaki Osawa

Chairman & CEO

President & COO

OSG Repor t 2022

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P URPOS E
Our aim is to support the global manufacturing industry
and realize a sustainable society.
OSG Group is a comprehensive cutting tool manufacturer that both

PHILOS OPHY

manufactures and markets cutting tools.
It is thanks to our supportive stakeholders and a prosperous business

Tool Communication

environment that we, as a global company, have been able tocontinue to meet challenges around the world and support Japan s

OSG s products are created through communication with our customers.

world-renowned manufacturing.

Communication is indispensable to our ability to supply products andservices that truly meet customers' needs and foster trust, as well as to our

The OSG Group believes it is our mission to continue to provide

continuing efforts to develop better products.

the best cutting tools to manufacturers aroundthe world. We also aim to grow your business,
contribute to our stakeholders, and realize

Global Presence

the sustainable development of our society.

As a comprehensive cutting tool manufacturer, we make products that at afundamental level contribute to enhancing people s quality of life.
Through continuous growth, we have established a production, sales, andtechnical support network spanning 32 countries.
Our corporate aim is to continue to grow our operations globally andstrengthen our contribution to manufacturing industries around the world.

Shaping Your Dreams
We want to give shape to the aspirations of every customer.
That goal motivates us to continue taking up new challenges as we work
to support manufacturing industries worldwide.

MIS S ION
CONTENTSOSG Values
Message fromTop Management
PurposeHistory

1
3
5

Value Creation Stories

Foundation for Value Creation

OSG Data

7
Message from the President
Financial and
Non-Financial Highlights 11
Value Creation Process 13
Key Strengths Maximizing
15
Value Creation
Value Chain Enhancement 17
Accumulated
19Management Capital
Medium-Term
23
Management Plan

ESG Management
Promotion
Environment
Society
GovernanceRisk and ComplianceCorporate Ofﬁcers

Key Financial Datafor the Past 10 Years
Consolidated
Financial Statements
Corporate Information

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manufacturing industry as we head toward the age of carbon neutrality.
This vision expresses our hope of being an integral part of ourcustomers business.
Stage 1 of our Medium-Term Management Plan Beyond the Limit runs
targets established for this period include achieving a 15% ROA and 30
billion yen in operating income by the ﬁscal year ending November 2024.

Disclaimer Regarding Forward-Looking Statements

OSG reports are published for the beneﬁt of our shareholders, investors, and all stakeholders. The
OSG Report 2022 is an integrated report providing a broader range of information that includes our
Medium-Term Management Plan and other information about management strategy as well as
ESG data, which serves as a foundation for sustainable growth, in addition to information about
OSG's corporate philosophy and ﬁnancial data. The International Integrated Reporting Framework
published by the International Integrated Reporting Council (IIRC) was referenced when compilingthis report.
OSG website's Investor page publishes the latest press releases and ﬁnancial highlights. In
addition, the Sustainability page also regularly updates information available for our stakeholders.
Please be sure to peruse both this report and the OSG website. We will continue endeavoring toprovide editorial content that meets readers' expectations.

Apart from information based on historical facts,
all references in this report to plans, strategies,
forecasts, or management initiatives pertaining
to OSG s future business performance areforward-looking statements and as such
represent assumptions and judgments based on
currently available information. Actual results
may differ from the forecasts in this report due
to a variety of factors, including trends in theeconomic environment in which OSG operates,
product demand, price trends, development of
new products, sales, raw material prices, andexchange rate ﬂuctuations.

OSG Re port 202 2

OSG Group aims to be an essential player contributing to the global

from 2022 to 2024 when we will create a robust corporate culture. The

Editorial Policy

HP URL：https://www.osg.co.jp/en/

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35
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49
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To be an essential player contributing to the global
manufacturing industry as the world moves toward
the age of carbon neutrality

Grounded in our Global Presence corporate philosophy, we willcontribute to realizing a sustainable society so that we may continue togrow together.

OSG Repor t 2022

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OSG Values

HISTORY

1

3

OSG Tap and Die (nowOSG USA, Inc.) (USA)OSG Asia Pte Ltd., holding
company for Asia (Singapore)

Since our company was founded in Tokyo in 1938, OSG has pioneered the global cutting tool market with
innovative products derived from the development of a range of proprietary technologies, such as tap grinding withgrindstones, and the opening of new sales channels.
The OSG spirit of meeting and overcoming any challenge or difﬁculty, which we have pursued since our founding,has been the driving force behind our unique advanced technologies, global network spanning 32 countries, and every
aspect of our current corporate value. We will continue to take up new challenges as we seek to further expand globally.

5
NEO Shinshiro Factory2
OSG Ferramentas dePrecisão Ltda. (now OSG
Sulamericana de
Ferramentas Ltda.) (Brazil)

4
OSG Europe S.A., holding company for
Europe (Belgium)

Our Initial Years

1960-1970

1980-1990

2000~

Developed the ﬁrst grinding taps in Japan

Aiming to be Worldwide OSG

Toward establishment of an ultra-high-mix low-volume production system

One agent in each country and M&A expansion

1938 OSG Grinding Co., Ltd.

1961
1963
1967
1968

1981 OSG listed on the First Section of the Tokyo

2000 Nine business sites in Japan certiﬁed as1982 Shinshiro Factory began operation
1990 Yana Factory began operation
1993 OSG Asia Pte Ltd. (SIngapore) established as

2001
2004
2006
2007
2014

established1943 Aichi Factory(now OSG Academy)
constructed

1951 Ohtaka Precision Works,

OSG founder
Hideo Osawa

LLC (now Ohtaka Precision
Co., Ltd.)established as part of business group

Toyokawa Factory began operation
Name changed to OSG Mfg. Company
Oike Factory began operation
OSG Tap and Die, Inc. (now OSG USA, Inc.)(USA) establishedFirst sales hub overseas

and Nagoya stock exchanges

the holding company for Asia

ISO 14001 compliant

OSG (Shanghai) Co., Ltd. (China) established
Design Center established
Global Technology Center completed
All OSG products acquire ISO 9001 certiﬁcation

1970 Taiho Tool Mfg. Co., Ltd. (Taiwan) established1995 OSG Belgium S.A. (now OSG Europe S.A.)

1971 Toyohashi Factory began operation
1974 OSG Ferramentas de Precisão Ltda. (now OSG Sulameri-

1997 Dabao (Dongguan) Molding & Cutting Tool

2020 NEO Shinshiro Factory completed
2023 Celebrated 85th anniversary

1973 OSG Tap and Die (now OSG USA, Inc.)

1986 Acquired bit manufacturer Aoyama

2000 Acquired Thrane Tools A/S (now OSG

1979 Taiho Sangyo, Inc. started to serve as

1994 Acquired Herramientas Metalicas de Corte,2003 Acquired VUMAT S.R.L. (now OSG ITALIAFirst production plant overseas

cana de Ferramentas Ltda.) (Brazil) establishedestablished as the holding company for
EuropeCo., Ltd. (China) established

Consolidated net sales of ¥100 billion
achieved in FY2014

Consolidated group companies
acquired tap manufacturer Sossner Corp.
wholesale agent, selling machine tools

Seisakusho Co., Ltd.

S.A. de C.V. (now OSG Royco, S.A. de C.V.)(Mexico)Scandinavia A/S) (Denmark)
S.R.L.) (Italy)

2004 Acquired Sterling Die, Inc. (now OSG USA,
Inc.) (USA)2005 Acquired NODA Precision Tools, Inc. (nowNODA Precision, Inc.)

2006 Acquired Nissin Diamond Works, Inc. (nowNissin Diamond Co., Ltd.)2016 Acquired Amamco Tool & Supply Co., Inc.
Diverse product lineup

1938 Began manufacturing taps and dies1942 Began manufacturing screw gauges
1956 Began manufacturing rolling dies1970 Began manufacturing HSS end mills

1980 Began manufacturing carbide end mills
1984 Began manufacturing drills
1987 Began manufacturing cutter bodies

2013 Launched Sales of A-TAP
2014 Introduced A Brand product line

Tokyo Olympics spurs increase in color television
sales, which together with the greater popularity of air
conditioners and automobiles in addition to high-economic
growth drive tool demand. In developed countries,
die machining is in demand for mass production.

Oil crisis triggers energy savings, causing a shift from heavy and unwieldy
products to light and compact products. Decrease in production in theautomotive, mechanical component, and die industries affects the toolindustry. Low-volume diversiﬁed production lots, high-quality, and quick
delivery are pursued to maintain international competitiveness.

Digitalization advances and people look to lead more convenient andfulﬁlling lives. In contrast to before, a ﬂexible way of thinking andapproaching the world is needed. Semiconductor manufacturing
equipment and industrial robots become more widespread, and electronic
devices more and more precise. The range of demand for tools expands.

Society
Demand for tools increases with the arrival of black& white televisions, washers, and refrigerators aswell as the postwar recovery propelled by demand
for aircraft and ships.

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OSG Re port 2022

OSG Repor t 2022

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Value Creation Stories

Message from the President

Beyond the Limit

We think outside the box, break through our own limits,and take up the challenge to go beyond what has ever done before.
The OSG Group is promoting our Medium-Term Management Plan Beyond the Limit 2024 to achieve our long-term visionof being an essential player contributing to the global manufacturing industry as the world moves into the age of carbon
neutrality. We have divided our long-term vision, which runs through 2030, into three stages over which we intend to alter
the composition of our customer portfolio in line with social and environmental challenges, create a robust corporate
culture, and enhance corporate value through overall optimization. Taking all of this into consideration, we asked President

Beyond the Limit

Osawa about OSG s powerful business model, how he sees the industry developing over the medium- and long-term,
efforts and initiatives to improve sustainability, OSG s engagement with its stakeholders, and other topics.

Business model, medium-and-long-term
industry insight, and opportunities & risks

President & COO

Nobuaki Osawa

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OSG Re port 2022

−To start off, could you please describe OSG Group s businessmodel, which is the source of its strength? Then, taking that into
consideration, please share with us how you see the industry
developing over the medium- and long-term as well as theopportunities and risks that presents.
OSG s initial product is a tool called the tap, which threads holes inmetal workpieces. When OSG was founded, there were no
Japanese-made taps that used a whetstone for grinding, and ourgoal was to create high-quality domestically-produced grinding
taps. We made use of technology for manufacturing taps that we
gained in that process to later expand our range of products toencompass specialty as well as standard items, such as end mills for
cutting and shaping metal and drills for making round holes. We
independently developed high-speed steel that is tough andwear-resistant as well as carbide round bars appropriate forhigh-speed cutting. We also produced in-house the production
facilities for processing round bars. We have continued to add value
with proprietary coating technologies improving the durability ofthese tools and a business model offering a variety of strengths.
As our business model has evolved, we have expanded globally
based upon our Global Presence corporate philosophy, beginningwith the establishment of OSG Tap and Die, Inc. in Chicago, USA in
1968. In the 1990s after the bubble collapsed in Japan, we modiﬁed
our slogan to Economic Global Presence. Our belief was the OSG
Group would not grow unless we found a means of surviving overseas
in the same way that people have gone off to ﬁnd work elsewhere.
This view created a heightened sense of urgency among management
and accelerated the expansion of OSG operations to China, India,
Europe, and other regions. As of the time of FY2022, the ratio of ouroverseas to total sales has risen to approximately 65%.
Over the medium- and long-term in the cutting tool industry, weforesee globalism put to the test in manufacturing industries
worldwide. An extensive realignment is occurring in the automotive
industry. Even as major automobile manufacturers shift todeveloping EVs, the percentage of EVs among total automobiles has
not yet reached 10%. Internal combustion engine vehicles account forroughly 90% of the market. In the years ahead, production of internal
combustion engine vehicles is forecast to move into third countries
where labor costs are lower. Regardless, tool manufacturers will haveto provide the same level of service no matter where the production
sites are located. The question that we face is how extensively tool
manufacturers will be able to support operations when plants
producing internal combustion engine vehicles move productionlines to emerging nations. I ﬁrmly believe the OSG Group s proactive
global expansion, which we have promoted in line with our
corporate philosophy Global Presence, will be able to ride thewave, if you will, of the automotive industry s realignment so that
OSG is the tool manufacturer that customers choose.

The transformation toward electriﬁcation entails risks as vehicles
switch to battery power, which will eliminate the need to machineparts around the internal combustion engine. However, thisconversion will also present opportunities for machining newcomponents for these electric vehicles. The trend is toward higher
precision machining as well as smaller diameter and lighter weightcomponents. This presents a new business opportunity for
micro-precision processing, and it will be a chance for the OSG Groupto leverage our strengths. We are ready to capitalize on this future. In
addition, even though the pandemic caused a temporary but
signiﬁcant downturn in the aircraft industry, we have seen signs inrecent months that this slump has bottomed out. We areconcentrating more on the aircraft industry now than we did in thepast. I believe the recovery in demand will have a positive impact on
OSG Group s performance.
−In the ﬁrst year of OSG s Medium-Term Management Plan,sales, ordinary income, and net income attributable to owners ofparent were the highest ever, exceeding even their peak during theﬁscal year ended November 2018. Why was the OSG Group able tosurpass that level even without a full recovery of production in theautomotive and aircraft industries?
If we look at product-speciﬁc sales during the previous term, tap
and drill sales were the highest ever. Even though many of our
specialty drills are designed for the automotive industry, it is a factthat we have been impacted by the sluggish demand for large
aircraft in the aircraft industry in addition to the downturn inproduction in related industries. On the other hand, we saw
signiﬁcant growth (27% in FY2022) in the percentage of sales ofstandard components represented by our ﬂagship A Brand products,
for which we have strived to expand sales to general engineering aswell as machinery and machine parts industries, and this offset the
impact of the automotive and aircraft industries. We are also seeing
the results of our efforts to build up our distribution organization
A-Club, which operates across our network in 32 countries aroundthe world.
In the previous term, we achieved our target of reducing thepercentage of automotive-related sales to total sales below 50%. Thistarget was set out in our Medium-Term Management Plan to bereached by the ﬁscal year ending November 2024. In other words,wereduced that ratio below 50% level earlier than planned. This wasmade possible in part due to the increase in production at the NEO
Shinshiro Factory, which began operating in May 2020. The factory isa demonstration of Project OSG 4.0, the objective of which whose is
to increase productivity. We will continue promoting our strategy ofincreasing the percentage of A Brand standard products sales to 30% in
FY2024 and then 40% by FY2027.
−The purpose of A Brand is to provide universal cutting tools
exhibiting outstanding functionality with a diverse range of
workpiece materials and under a diverse range of cutting

OSG Repor t 2022

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Value Creation Stories

Message from the President

conditions, which will help customers more easily manage theirtools. Could you please share with us what sort of advantage the A
Brand brings to increasing sales in industries, requiring
micro-precision processing, up to 30% of total sales by the ﬁscal
year ending November 2030 (sales were 16% in FY2022)? Also,
how does proﬁtability in this area compare with other areas?
The use of small-diameter tools for micro-precision processing is
projected to grow over the medium- and long-term in many
sectors, including semiconductor manufacturing equipment andcomponents, mobility services, EV motors, precision dies,
medical devices, and robotics. If I were to specify the OSG
Group s strengths facilitating growth in these areas, the ﬁrst
would be our three core products: taps, drills and end mills. Allof these are necessary for machining. The second would be thetwin billing of high-speed steel and carbide as our tool basematerials. We have the highest tap market share in the world(over 30%). OSG has the ability to present comprehensive
proposals to our customers. So, we see an inclination on the partof our customers to call for OSG products ﬁrst when threading
micro-precision components.
Production of micro-precision components is concentrated in
China and Asia because these small components are
mass-produced. Many of the machine tools used for processingthese components are automatic lathes. In that ﬁeld, several ofJapan s small precision machine tool manufacturers hold an
overwhelming share of the global market. Some of our largest
customers in China machine somewhere between 1,000 and
2,000 automatic lathes simultaneously side-by-side, so cutting
tool manufacturers also need to be able to supply thesecompanies with the level of products that they require.
High-speed processing is not necessarily what this sector
demands, rather it requires cutting tools that are not only carbide
materials, but also high-speed steel materials that are very tough.
The OSG Group maintains a world-class production system for taps.
This gives us the advantage of being able to put together an array ofdiverse product lines and, moreover, collaborate with machine tool
manufacturers to offer customers integrated processing. Because oursales teams have ofﬁces near customer sites in global, we arerecognized as having an advantageous position over the competition.
In addition, we also anticipate greater proﬁtability in this market
as small-diameter tools for micro-precision processing have a raw
material cost ratio that is lower overall than that of other products.

Signiﬁcant challenges and speciﬁc initiatives
contribute to realizing our long-term vision−The OSG Group s long-term vision is to be an essential
player contributing to the global manufacturing industry. Whichof the eight key issues that the group has identiﬁed pose thegreatest challenge? Please share with us efforts being made toaddress these.
As stated at the beginning of our long-term vision, we are heading
toward the carbon-neutral era, so initiatives to address climatechange, is the most important issue not only for OSG Group but for
all companies in the world. Although we are currently unable tocalculate our Scope 3 CO2 emissions, we are aiming to reduce the
Scope 1 and 2 emissions below the FY2019 level by 30% by FY2030
and achieve carbon neutrality by FY2050.
A speciﬁc effort that we have made relating to these goals
concerns the electric power which will be generated by the OSG
Group s dedicated solar power plant beginning in the spring of2023 as part of an off-site PPA to supply power over a 20-year
period to four of our domestic plants. The use of solar
power-derived CO2-free electricity will lead to a reduction of 2,000
tons of CO2 emissions annually.
In addition, we are aggressively implementing other initiatives,
including designing Eco-friendly Products. More speciﬁcally, we

9

OSG Re port 2022

Beyond the Limit

developed the A Brand product A-XPF, a highly-efﬁcient
multi-purpose forming tap that is an advanced version of the S-XPF.
Tap machining entails many problems, among which are breakage,
chipping, and inferior threading precision. The main cause of these
involves the cutting chips produced during machining. Forming taps
do not produce cutting chips. They enhance the efﬁciency of
customers equipment operation, making it possible to curb
electricity usage. A reduction in the work of removing cutting chips
which often is done manually, can be expected to improve theworking environment. So, this extends to the range of factors thatneed to be addressed to include the workpiece material as well as
cutting conditions so that they align with the machining environment.
From the standpoints of resource utilization and recycling as well, we
intend to increase to 15% by FY2027 the ratio of regrinding andcoating. These processes save resources and prolong tool life.
In January 2023, the OSG Group earned a B (management-level)
score on the CDP Climate Change Disclosure Ranking, an index
fostering engagement with institutional investors and suppliers
worldwide making ESG investments. The B score surpasses theaverage for the machinery industry as well as the Asia region, which
was given a C score. Long-term, there is also the possibility ofshifting to an overall assessment that takes into account tool
suppliers environmental management. Our aim is to rise further inthe rankings and achieve an A score in the future.
As a business contributing to the community, we launched a special
subsidiary OSG Active Co., Ltd. to create employment opportunities forpeople with health conditions or impairments. The establishment of
this special subsidiary creates opportunities for people facing
challenges throughout the OSG Group by offering an environment
where our personnel can work comfortably and at ease in an
arrangement that matches each individual s particular skill set with thework to be performed. In addition, we have also been active in thecommunity as the top sponsor of the San-en NeoPhoenix professional
basketball team based in the San-en region, which encompasses
eastern Mikawa and the Enshu region. One aspect of the corporate
value to which the OSG Group aspires is to develop into an
attractive company. We want to continue to contribute to thesustainable development of society through a broad range ofendeavors that facilitate realizable philanthropic activities in order
to effectuate co-creation with the community.

Challenge of how to best utilize humanresources for sustainable management−Sustainable management requires the use of human capital.
The Medium-Term Management Plan sets out four points for
maximizing the performance of each individual employee: (1) go
beyond the limit, (2) set no limits, (3) push forward and evolve, and(4) break out of the norm. What are the challenges that the OSG
Group faces in terms of utilizing its human capital in the future?
As of the end of FY2022, the OSG Group has 7,543 consolidated
company employees, of which roughly 40% are employed atgroup companies in Japan and the other 60% or so at groupcompanies around the world. In the process of accelerating OSG sglobal expansion, Chairman Ishikawa and myself have also been
members of teams that went overseas to work. We feel that thoseexperiences helped us to grow and learn so much. It is more
important now than ever before that our employees gain thisexperience and that we maintain personnel policies and programs
that enable such career paths. While it is important for the futurethat we develop executives for our domestic group companies, it
is also essential to develop executives among our local employees
overseas by having them become better versed in the OSG Group
corporate philosophy. We send employees from Japan to keybases overseas, but the challenge we face is how to increase thenumber of local executives rather than executives dispatchedfrom Japan. The advice we give to organization leaders is that

Engagement with stakeholders is vitalfor the OSG Group to continue to be the
manufacture customers choose ﬁrst.

there are limits to what one person can do, so the question they
face is how to discern individual team member s abilities andmaximize the skills and capabilities that the leader does notpossess but others do. If a team lacks certain talent, then humanresources nearby outside the team need to be brought in.
In addition, the OSG Group has a retirement age of 65, but
the trend today is toward extending a person s corporate life.
Advances are being made through digitalization to visualize
production sites, yet we are lagging behind in our efforts tovisualize our human assets. This shortcoming has resulted in an
inability to properly match our personnel with operations andassignments so that we have the right people in the right placethroughout our group. When we are able to put in place aframework for talent management as well as training andreskilling our employees, then we will be able to more
effectively match personnel to occupations as we may anticipate
which employees can perform which work. It is my intention to
strive to create a system that not only develops our next
generation, but also enables employees possessing extensive
experience to work enthusiastically.

Engagement with stakeholders−Dialogue and engagement with stakeholders are importantfor increasing corporate value over the medium- and long-termand promoting ESG management. If possible, could you sharewith us what you are striving for and the message that you wantto communicate through this engagement?
At least twice a year, I personally go out to engage in a dialogue
with our institutional investor shareholders. Some of theseshareholders recognize the OSG Group as a capital goods
manufacturer when they consider corporate value. However,cutting tools are actually nondurables, so we are able to say that
we are a consumer goods manufacturer.
The risks are no different as the automobile industry
transitions to electric vehicles, but this change also presents newopportunities. We believe that this will not hinder the mediumto long-term growth of the OSG Group. We intend to faithfully
continue to engage in these dialogues so that our shareholders
appreciate our strategy for new business sectors as well as our
vision of future value creation. In the previous term, we raised
from 30% to 35% the dividend payout ratio that we pledge toreturn to shareholders. Our aim is to further increase this ratio to
40% in the future. We are also considering measures to increase
the number of individual shareholders interested in the OSG
Group.
Internally, the President of OSG Group addresses employees
each year in December, traveling around to plants and ofﬁces inJapan to explain the company s policies and aims. In the hope of

conducting these talks in-person while, of course, taking steps toprevent any spread of infection, we have restarted these sessions
on-site. At each of our plants and business ofﬁces, I asked OSG
employees about four numbers, which are the KPIs set out in our
Medium-Term Management Plan: (1) our operating income for theﬁscal year ending November 2024, (2) ROA (on an operating
income basis), (3) our share of the global tap market, and (4) the
portfolio ratios of speciﬁc micro-precision processing by customers.
It has been my impression that we will need more time for our
personnel to be fully aware of these four ﬁgures. In order for us toachieve the targets set out in the Medium-Term Management Plan, I
believe it is important the same message be repeatedly conveyed toour employees in order to enhance their sense of ownership in thisendeavor and move everyone within the OSG Group in the proper
direction. This term, we achieved record levels of sales and ordinary
income, but Japan was the only region where we operate that
performance did not reach the highest level. Moreover, our targets
for FY2024 (operating income of ¥30 billion, 15% ROA, etc.) do not
permit us to be satisﬁed with the status quo.
I feel it will be difﬁcult for OSG Group s employees, who
support the strength wielded in our on-site capabilities, to see
beyond to the other side where we surpass our limits unless we
do a better job of instilling our medium- and long-term vision,
including understanding our monthly production targets andother short-run ﬁgures.
In addition, the percentage of employees participating in ourshareholders program is a little less than 50% of the entire group.
Increasing this rate will, I believe, lead to greater motivation andsense of ownership among employees. Employees are also key
stakeholders, and we need to engage in a dialogue with them.
This will result in an increase in corporate value while, at thesame time, enhancing the skills of each and every employee.
−You stated that your aspiration when you became president in2020 was to make the OSG Group into a company shining morebrightly than ever before by the year 2038 when the company
celebrates its 100th anniversary. What do you envision a company
shining more brightly than ever before to be? Also, in closing, isthere any message you would like to communicate, including any
remarks about your own responsibilities as a manager?
The OSG Group is such a familiar part of the community thatsome of our employees are even the third generation in theirfamily to work here. As a manager, I feel great joy when an
employee tells me that he or she decided to join our company,
saying, It was my dream to work at OSG. The OSG Group
provides a complete range of fringe beneﬁts as well as systems
and programs to speciﬁcally meet the needs of our employees.
I have heard people say that we provide a favorable working
environment. What underlies the ambition to make the OSG Groupshine more brightly than ever before is our ability to continue togrow beyond our 100th anniversary to another 10 and even 20 years
down the road as well as to continue to be a manufacturer that ourclients will select. For that way of thinking to take root, we need to be
the one and only company for all our stakeholders.
In 1996, our former chairman, the late Teruhide Osawa,
issued a three-pronged declaration for the OSG Group: global
presence, health consciousness, and eco-friendliness. This
statement was made at a time when the idea of pursuing ESG
management was hardly known, yet the spirit of thisthree-pronged declaration supports the foundation of the OSG
Group s management at the global standard level, which has
continued to be pursued to the present day.
My responsibility as the President & COO of the OSG Group is topresent and properly guide our employees along our future path inaccordance with our long-term vision. This direction will enhance
our corporate value. It is my sincere wish that our stakeholders
accompany us as we grow for many, many years to come.

OSG Repor t 2022

10

Value Creation Stories

Financial and Non-Financial Highlights
Financial Highlights
Net sales (millions of yen)

Operating income (millions of yen)
Operating income margin (%)

Record high142,525

150,000

EBITDA (millions of yen)
EBITDA margin (%)

24,000120,000
90,00021,89820,00025

16,00020

12,00060,00030,000
0

2018

2019

2020

2021

2022 [FY]

30

15.4

21,000

30

15

7,000

0
2022 [FY]02021

Operating income(left)
Operating income margin (right)

Free cash ﬂow (millions of yen)
Equity ratio (%)

Earnings per share (EPS) (yen)25,00020,00072.0

15,00010,000

8,004

100

180

80

150

60

120

40

90

5,000

20

60

0

0

30

-20

0

-5,000

2018

2019

2020

2021

2022 [FY]18,000

22.7

20
10

2018

2019

2020

2021

0

2022 [FY]25

12,000

20

10.7

6,000

10.0

10
5

3,000
0

15

2018

2019

2020

0

2022 [FY]2021

Net income attributable to owners of parent (left)
Return on equity (ROE) (right)
Return on assets (ROA) (Operating income basis) (right)

Total assets (millions of yen)
Total equity (millions of yen)

171.5

30

15,000EBITDA (left)
EBITDA margin (right)

Record high16,5349,000
14,000

5

2020

50
40

4,000

2019

32,39628,00010

2018

Record high35,0008,000

0Net income attributable to owners of parent (millions of yen)
Return on equity (ROE) (%)
Return on assets (ROA)(%) (Operating income basis) Record highDividend per share (yen)Dividend payout ratio (%)

250,000

228,852

200,000

164,659

60.0

60

100

45

75

30

50

150,000
100,000

2018

2019

2020

2021

2022 [FY]0Free cash ﬂow (left)
Equity ratio (right)

35.0

15

50,000

2018

2019

2020

2021

2022 [FY]

0

2018

2019

2020

2021

25

0

2022 [FY]Dividend per share (left)
Dividend payout ratio (right)

Total assets
Total equity

Non-Financial Highlights
Waste emissions (t)Recycling rate (%)

CO2 emissions (t)CO2 emissions per unit of production (t/millions of yen)
60,0003.047,81850,00040,0002.0

30,0001.5

20,0001.0

0.89

10,000
0

2018

2019

2020

2021

Total emissions (left)
Per unit of production (right)

11

2.5

OSG Re port 2022

0.5
02022 [FY]

Number of employees by region

2,500

125

Total 7,543

8,000

2,072.2
2,000

100

99.7

1,500

6,000

75
4,000

1,000

50

500

25

0

2018

2019

2020

Waste emissions (left)
Recycling rate (right)

2021

0

2022 [FY]

0

4

1,147

3

3,194
2018
Japan

2019
Americas

2020

2021

Europe/Africa

2022 [FY]
Asia

100

5

1,837

1,365

2,000

Number of directors
Composition of outside directors (%)

4
3
57.1

2

60
40
20

1
0

80

2018

2019

2020

2021

0

2022 [FY]

Outside directors (left)
Internal directors (left)
Percentage of outside directors (right)

OSG Repor t 2022

12

Value Creation Stories

Value Creation Process
Anchored in our corporate philosophy Global Presence, OSG contributes to sustainable manufacturingindustries through the provision of proprietary high value-added products and services around the world.

BUSINESS PROCESS

Financial capital P.19
■ Total assets ¥228,852 million■ Equity ratio 72%■ Cash ﬂow from operating activities ¥20,175 million
Human capital

PHILOSOPHY
Tool Communication

P.20■ Number of consolidated employees
Japan 3,194, Americas 1,365,

Global Presence

7,543

Europe/Africa 1,147, Asia 1,837■ Training expenditures

P.4¥20.06 million
Solutions to material issues

Manufacturing capital P.21
■ Production sites 33 ＊Consolidated only
■ Capital expenditures ¥8,600 million

P.25-26

OUTCOME

Financial capital■ Net sales ¥142,525 million■ Overseas sales ratio 64.9%■ Operating income 15.4%■ ROE 10.7%■ ROA 10.0% (Operating income basis)
Human capital■ Average tenure 17.9 years
Manufacturing capital■ Number of products approx. 37,550＊Only standard tools listed in catalogs■ Number of taps manufactured

Japan 14,956K

Value chain leveraging OSG strengths

Intellectual capital P.22
■ R&D expenditures ¥4,071 million■ Patents held 449■ Development engineers 53 & design engineers 138
Social capital P.22
■ Overseas sites 57 ＊Only consolidated subsidiaries

OUTPUT

Procurement/R&D and design/Ordering/Manufacturing &quality/Sales & logistics/After-sales service
P.17-18

Key strengths maximizing value creation■OSG brand tagline

Tool communication/
Global network/Product diversity
P.15-16

Global 31,659K＊Full ﬁscal year ended November 2022

Corporate governance and social &environmental initiatives
P.27-52

MediumTerm
Management
Plan

Beyond the Limit
Instill among all OSG
Group employees thespirit of "going
beyond your limits,setting no limits,＊Percentage of A Brand sales of total tap,
drill and end mill sales

norm" to spur theSocial capital
OSG brand tools have been highly
regarded by customers andworld-renowned manufacturing.

Foundations for value creation

SuppliersIntellectual capital■ FY2022 new products released 377■ FY2022 A Brand sales ratio 27%

contributed to Japan s

Natural capital P.22
■ Energy 1,057,923GJ

Customers

No.1 (estimated at 33%)
■ Japan tap market share 57.8%■ Global tap market share＊Source: Japan Cutting & Wear-resistant Tool Association

pushing forward andevolving, andbreaking out of the
OSG Group tocontinue to advance.
P.23-24

Employees
Shareholders/investors
Localcommunities■ Strengthen current products

Global tap market share 40％（2027）■ Shift customer portfolio

Sales for micro-precision

processing 30％ or higher（2030）■ Expand premium tool brand

A Brand sales percentage

40％（2027）

To be an essential player contributing
the global manufacturing industry

INPUT■ Increase coating &reconditioning rate to10％（2024）■ Empower women

Percentage of managers who are
women 7％（2025）■ Reduction in CO2 Emissions▲30％（2030）

Achieve carbon neutrality（2050）■ Dividend payout ratio

35.4%（2023）

Natural capital

99.7%
47,818t■ Waste recycling rate
■ CO2 emissions

Beyond the Limit 2022-2024（Stage1）
13

OSG Re port 2022

Beyond the Limit 2025-2027（Stage2）

Beyond the Limit 2028-2030（Stage3）

OSG Repor t 2022

14

Value Creation Stories

Key Strengths Maximizing Value Creation
OSG sets great store in tool communication, an essential element of our philosophy. We continue to provide
value exceeding all stakeholders expectations by leveraging our global network to deliver to the world
proprietary high-value added products and services.

Tool Communication

Product Diversity
OSG s reliable technological innovation supports manufacturing industries worldwide withproducts that achieve high machining precision and efﬁciency. We manufacture tools
employed for a variety of uses, including taps, which have been one of our core products eversince our company was founded, as well as drills, end mills, and rolling dies. To supply our highvalue-added products, OSG s vertical value chain encompasses all stages from theprocurement cemented carbide that is the raw material for our tools to the development andproduction of proprietary coatings to enhance the durability of production equipment andtools. We have a ﬂexible production system that has achieved high productivity thanks to our
proprietary production facilities.

Threadingtools

Rolling dies

35%

7%
Other

10%
Milling
cutters

19%

Sales byproduct
category

Drills &othercuttingtools

29%

By tool, we mean the cutting tools that OSG Group provides tomarkets around the world. We are committed to having our tools
utilized by customers in many different industries and countries in aworld where industry is increasingly diversiﬁed. We train our
personnel to think globally when coming up with ideas and make acontinuous effort to contribute to the development of industry
worldwide. The OSG Group regards as our highest calling the duty ofeach and every one of our employees to use tools as a vehicle toengage in thoughtful communication with our customers worldwide.
Our advantage lies in the combination of our innovative technologicalknow-how for producing high-quality and high-performance
products, sincere and devoted service for ﬁnding solutions to ourcustomers needs, in addition to our ability to offer out-of-the-box
thinking and total solutions enabling us to anticipate our customers
future requirements. We are committed to assisting our customers inturning their dreams into reality and, by extension, continuously
contributing to the advancement of manufacturing industries.

■ TapsOut-ofthe-box
thinking

Total
solutions

Taps are used to cut female screw threads on the inside surfaces of holes, and fulﬁll a vital role in themachining of precision threaded holes in a wide range of industries. OSG offers a diverse lineup ranging fromsmall- to large-diameter taps. Taps have been one of our core products ever since our founding and we havestrived to maintain competitive world-class quality. Cutting taps ﬁrst appeared in Japan sometime between the

Global Presence

1910s and 1920s. However, they were not suitable for the precision machining required for aircraft and otherWe will expand ouroperations globally andcontribute to manufacturingindustries worldwide

OSG s taps sprang from the idea of our founder Hideo Osawa to produce cutting taps domestically.

Customer
servicessuch work, which was in much demand at the time OSG was founded, so foreign-made cutting taps were used.

■ Drills
Drills are hole-cutting tools. We have gained an excellent reputation among our clientele through theInnovation

development and sale of high-precision and high-value added products designed for automobile and aircraftcomponents, for which even the slightest error is intolerable and advanced machining technology required.
When using a tap to cut female screw threads on the inside surfaces of holes, a pilot hole needs to be readiedin the work material. To meet the needs of current tap users, OSG has developed and commercialized
high-value added drills capable of stable high-speed machining for long periods of time.

■ End mills

Global Network

End mills cut away metal to create shapes. They are used, for example, to cut and contour molds for plastic parts as well as press

Since the OSG Group established our ﬁrst foreign subsidiary in
Chicago, USA in 1968, we have set up manufacturing and sales hubs

November 2022 rose to 64.9%. Our overseas hubs have design andsales staff possessing a wealth of knowledge and the capability todies. There is a greater need for carbide end mills with outstanding machining precision and durability to meet the requirements ofin 32 countries. OSG products have earned praise in the global market
for their excellent quality, quick delivery, and high-cost performance.
The percentage of overseas sales to total sales in the ﬁscal year ended

fully support our customers. We intend to continue to actively expand
our global network in partnership with our customers.

was an explosion in end mill demand for mass production of products. End mills have been used in the automotive, home

Asia

Japan

25%

35%

today for reducing the cost and weight of smaller and smaller diameter machined products. In the United States in the 1950s, there
appliance, and plastic industries. OSG was able to capture some of that demand soon after we branched out into the United States.
Expecting that a similar situation would certainly present itself in Japan as well, we started developing and selling end mills.

■ Rolling dies
Rolling dies are used to form a male thread on a bolt. A mirror image of the thread is formed on a round bar bypressing the rolling die against the bar from the left and right. The OSG Group manufactures and sells rolling diesJapan

Europe/Africa

Americas＊companies

18

27

companies

Incl. theOSG GroupAsia

companies

1020

designed and built to fulﬁll our customers purposes. This term in both the North and Central American markets

Regional
sales
ratioswhere OSG is focused, rolling dies for the CNC cylindrical dies for spline, which are manufactured by our consolidated
subsidiary OSG EX-CELL-O GmbH, were used, which led to an increase in orders for rack type rolling dies.

Europe/AfricaAmericas

20%

20%

Asia

Japan

25%

42%

mechanical components. While end mills are used for ﬁnishing, indexable tools are mainly intended forto be used just by replacing the blade (insert). The OSG Group offers tools with interchangeable blades forthreading, milling, and drilling.

■ Gauges

Percentageof employees
by region

Gauges are used to measure the precision of threads, holes, and other work. Inspecting work precision is anextremely important process amid the trend toward greater product precision and compliance with

＊Only consolidated subsidiaries

OSG Re port 2022

Indexable tools, which are cutting tools with interchangeable blades, are used to cut metal to produce dies androughing. Solid tools are reconditioned when the cutting edge is worn down, but indexable tools may continuecompanies

15■ Indexable tools

international standards. Precision on the order of several microns is sought for taps and dies, but gauges require

Europe/AfricaAmericas15%18%

higher precision that is able to hold error to less than one micron. The development of gauges has also led to an
improvement in grinding technology and is reﬂected in the quality of our taps and dies. The OSG Group isrenowned not just for our cutting tools, but also world-class quality in the ﬁeld of measuring instruments.

OSG Repor t 2022

16

Value Creation Stories

Value Chain Enhancement
OSG has proprietary business operations on a global scale for everything from the production and procurement ofbase materials to the development of production facilities as well as coating, reconditioning, and other after-sales services.
We have an overwhelming advantage as a comprehensive cutting-tool manufacturer across all six elements of the value chain.

Procurement

OSG has built good relationships with our
suppliers. We strive to purchase fromseveral companies as a hedge against
risk. Base materials for carbide tools areproduced and procured by our groupcompanies in Japan. We have also
extended our procurement globally for
optimal purchasing.

Speciﬁc initiatives

Speciﬁc initiatives

In our procurement activities the goal of which is to achieve carbon

We are striving to make data aggregation, a routine task which has always

neutrality, we endeavor to use and increase the amount of recycled

been done the same way, more productive as well as improve thematerials as well as promote substitution with eco-friendly materials.
In addition, to avoid procurement risks, we have bolstered our BCP incoordination with our suppliers to stabilize procurement.
Moreover, we are opening up lines with new suppliers, evaluating
alternatives, advancing procurement from multiple companies, all as part ofManufacturing
Quality

At our mother factory in Japan, we
promote improvements in our ability tomeet delivery deadlines andmaximization of output throughproduction management and planningour efforts to increase supply ﬂexibility.

that utilizes digital data. We also support

In addition, we are endeavoring to maintain and manage appropriate

production optimized for overseas

inventory levels of materials and other items along with distribution

markets and promote global quality

inventory so as to build a structure capable of ﬂexibly handling any changes

certiﬁcation systems to maintain thein the business environment.

quality of all the products that we

Amid calls for construction of sustainable supply chains, we need to

produce anywhere in the world.

ascertain and support CSR activities across the entire chain and strive forindependence of our group companies quality assurance systems andmachine maintenance capabilities. Some components of the OSG Group s
production process are handled with machines that operate slower than thecurrent production speed of the industry these days. We need to implementa sequential upgrade of our production facilities and, at the same time,
introduce automation and labor-saving devices to address labor shortages.
In addition, leveraging digital-power to visualize production has
augmented our ability to maintain deadlines and maximize output. We haveseen a variety of new needs emerge in association with EVs and 5G, areas
where growth is anticipated. To prepare for these opportunities, we areworking to develop smaller and smaller tools that offer even greater
precision and produce these globally while maintaining consistency inquality. Along with this, we will marshal the capability to guarantee quality

responsible mineral sourcing so that we may meet the needs of society.

based on a uniform standard worldwide.

R&D
DesignTo quickly resolve customer issues, wehave assembled at the OSG Academy theengineers who develop and design tools,
develop coatings, and perform other R&D
and design functions. We also trainengineers at our major overseas locations
so that we may respond to local needs aswell as ascertain global technologicaltrends and requirements.

Speciﬁc initiatives

Speciﬁc initiatives

To better handle consultations not only about particular types of tools but

Our sales departments are advancing digital-powered sales and marketing

also comprehensive machining, we have assembled the design andactivities as part of our efforts to achieve both green and digital transformations.

development capability for all of our tools at the OSG Academy. This makes
it possible for us to promptly provide top-notch comprehensive proposals.
Within the institute, we have set up departments to research and develop
materials and coatings so that we may develop and offer materials,
coatings, and other elemental technologies in addition to tool shapes. The

Sales

OSG s global online ordering system

Logistics

orders, provide estimates, and shipenables us to more efﬁciently handle
products. In addition, we leverage data tocentrally manage our inventory of

OSG Academy fosters an environment for design and development

100,000 standard items worldwide.

integrating materials, tool shapes, and coatings.

Data-based inventory management

We proactively utilize CAE analysis to narrow down prototype

provides us with the capability to control

speciﬁcations in order to expedite product development. This reduces the

production and swiftly ship customers

time required for development, provides us with theoretical evidence, andorders.

decreases loss from scrapped prototypes. We have assigned engineers from

We are actively researching and addressing new areas as well as sectors of
future growth to handle the variety of changes prompted by the surge inresource prices and emergence of electric vehicles. Our distribution
departments have decentralized risk by streamlining inventories at our sites inJapan and around the world to facilitate business continuity planning measures.
We are also demonstrating our concern for the environment through theelimination of as much plastic as possible in our packaging and auxiliarymaterials. We are promoting the recycling of packaging and secondary
materials, refusing to use plastic items that can only be discarded, and striving torecycle whatever we can. Furthermore, we have reassessed materials used for
cardboard boxes as well as delivery slips and shipping invoices in an attempt to

OSG Academy to posts all around the world and established technology

reduce the thickness of paper and cardboard. This has a secondary effect as thecenters in seven countries so that we may maintain a high level of technicallighter weight has reduced CO2 emissions during shipping and made loading

service wherever our customers need it.

cargo onto trucks more efﬁcient. We have also introduced automatic cartoning
and packaging machines to automate that portion of our operations.

Ordering

We have a supply system in place for ourSpeciﬁc initiatives

Speciﬁc initiatives

As set out in our Medium-Term Management Plan Beyond the Limit,

So that we may provide even better after-sales service, it is essential that we

our aim is to increase OSG s global tap market share above 40% andascertain the speciﬁc needs of our customers at their processing sites and sharefurther expand sales of our high-value added products. To achieve

ﬂagship A Brand products thatthese goals, we need to strengthen our order management system toencompasses tens of thousands of

respond to new trends in the industry as well as establish a digital sales

standard products. We have developed

system. We will be advancing a distribution strategy with the goal of

the capability to receive orders for
specialized items to meet customers
speciﬁc needs. We maintain a highmarket share globally among customers

increasing our ﬂagship A Brand products as well as securing newcustomers in the micro-precision machining sector.
The OSG Group has also diversiﬁed our product lines to meet our

After-Sales

OSG s global logistics and sales network

Serviceservices to our customers throughout theoffers reconditioning and coatingworld. In addition, we follow up on oursales with face-to-face visits, enabling us
to propose optimal machining conditions
and speciﬁcations to our customers. We
provide consistent global support thatin the broad-based component

customers speciﬁc needs. Both our sales and engineering teams use theonly a comprehensive cutting toolindustries.

same systems. This affords us a one-stop platform for sharing customer

manufacturer can offer.

information and acquiring a better understanding of what customers
require. Our enhanced automated diagramming system and otherhardware bolsters our ability to propose innovative solutions.

their essential requirements with relevant departments within the OSG Group. In
adding value to the high-quality service that we as a tool manufacturer provide,
we propose ideas for optimizing our customers processing sites, which will help
them improve productivity. Leveraging the wealth of knowledge that we as a tool
manufacturer possess about cutting along with verifying the conditions in whichcustomers use our equipment and the state of abrasion allows us to propose
optimal tool speciﬁcations and machining conditions. We are continually offering
our customers the latest grinding and surface treatment technologies. Althoughregrinding faces challenges in terms of small-diameter tools, deep-hole drilling
tools, sintered tools and others that are difﬁcult to grind, we are steadily
expanding the scope of tools that we are able to regrind to include small-diametertools, ultra-long tools, as well as CBN and DIA tools. With our coatings as well, weare expanding the market for coating to include dies and components so as toestablish coating technology applicable for products other than cutting tools.
Moreover, we have an even more robust framework in place that aligns
technologies with the regrinding and coating factories within our group.

17

OSG Re port 2022

OSG Repor t 2022

18

Value Creation Stories

Accumulated Management Capital
Financial Capital

Human Capital
Basic Policy on Financial Capital

Basic Policy on Human Capital

As an essential player contributing to the global manufacturing industry, the OSG Group regards it as crucial that we enhance corporate value and achieve

A company is its people. The OSG Group aims to effectively utilize the capabilities of our human resources and promote employee well-being with the goal of creating an environment

sustainable growth so that we may contribute to society s sustainable development. Our basic ﬁnancial policy is to establish a sound and solid ﬁnancial

where our personnel may conﬁdently take up the challenge of successfully performing their work.

base upon which we may invest in growth areas while consistently providing an appropriate return to our shareholders over the long-term.

Amid the drastic changes in the working environment due to the pandemic, we have conveyed the importance of going beyond what we have done before with the slogan Beyond the

A key management target for us is to ensure and maintain a stable high rating, which will reduce our borrowing costs and enhance

Limit for our Medium-Term Management Plan launched in 2022. We intend to create an environment and culture where our human resources think outside the box and continually take up

ﬁnancing ﬂexibility. Every year, we obtain a long-term credit rating from an external rating agency. As of the end of March 2023, OSG s

the challenge of transforming themselves to be better so that ultimately, they are able to take up the challenge of forging new ideas and projects without being hindered by a fear of change.

long-term issuer rating is A.

Shareholder return policy

Tap and drill sales led in FY2022 resulting in the highest level of both

The dividend payout ratio will be increased from the current

sales and net income ever recorded by the OSG Group, reaching¥142.5 billion and ¥16.5 billion, respectively. The overseas sales ratiorose favorably to 64.9%. Boosted by the weak yen, double-digit

commitment of 30% to 35% beginning in FY2022. In the future, wewill aim for a payout ratio of 40%, while continuing to monitor
business performance. In addition, we will make decisions on share
repurchases with consideration given to our capital position, businessgrowth was achieved in the Americas, Europe, Africa, and Asia.

trends, stock prices, growth investment opportunities, capital

Total assets on a consolidated basis amounted to ¥228.8 billion,

efﬁciency enhancements, and other factors.

an increase of ¥19 billion year-on-year. The effect of foreignexchange rates led to an increase in inventory, which increased
current assets by ¥13.2 billion. Non-current assets increased by ¥5.8●

FY2022: 35.0%●

FY2023 (forecast): 35.4%

billion, spurred by a rise in machinery, equipment and vehicles andan increase in deferred tax assets. On the other hand, total liabilities
amounted to ¥52 billion, a decrease of ¥2.9 billion year-on-year. The
decrease in short-term loans payable as well as bonds to be

Green bond ﬁnancing
In April 2023, the OSG Group became the ﬁrst cutting tool manufacturer
in the world to procure ﬁnancing with a green bond issue. The issue

redeemed within one year pushed down liabilities by ¥2 billion. In

amount was ¥5 billion with a maturity of ﬁve years.

addition, a decrease in long-term loans payable and other declines
reduced non-current liabilities by ¥800 million. Net assets at the endof the term totaled ¥176.8 billion, of which total equity amounted to¥164.6 billion with an equity ratio of 72%, ROA (operating income

In issuing the bonds, OSG Group aligned under the Green Bond
Principles 2021 set by the International Capital Market Association (ICMA)and the Green Bond Guidelines 2022 established by the Ministry of theEnvironment. We have created a green bond framework that addresses

basis) of 10.0%, and ROE of 10.7%.

four requirements: (1) use of proceeds, (2) project evaluation selection
process, (3) management of proceeds, and (4) reporting.
The OSG Group obtained Green 1(F), the highest rating for JCR Green
Bond Framework evaluations provided by the third-party Japan Credit

Regional sales ratios

25.5%

Japan

Principles 2021 and Green Bond Guidelines 2022 as well as provide greater

35.1%

transparency about the green bond offering, and further attract investors.
The funds procured are set to be allocated for capital investment aswell as research and development relating to projects categorized asenergy-saving and eco-friendly.

Overseas
sales ratio

Europe/Africa2024, we will strive to maximize corporate value created by linking our
growth strategy and ESG initiatives.

19.8%

Equity ratio/Net assets

70.4

140.6

Net assets

19

140.1

154.8

176.8
72.0

64.6

2018

OSG Re port 2022

2019

See P.23

2020

Management Plan, launching us toward the achievement of new targets.

Equity ratio

68.6

67.8

50
0

Plan Beyond the Limit 2024

In January 2022, the OSG Group announced our Medium-Term(billions of yen)
200

100

and communication, which have continually been passed down since OSG wasable to capitalize on their individual personalities and character as well as

founded. As was stated earlier in relation to the slogan of our Medium-Termdemonstrate their abilities to the fullest regardless of their nationality, gender,

Management Plan Beyond the Limit, we value out-of-the-box thinking andethnicity, sex, disability, or other characteristics so that we may employ acontinually striving to transform and better oneself, both qualities that enable andiverse range of human resources.

individual to take up the challenge of creating new ideas and new projects without

OSG recognizes that empowering women in the workplace is an importantfearing change. So that we as a company achieve our targets, it is essential that ourissue. Our aim is to enable each and every woman to demonstrate her abilities

communication transcends group companies, departments, teams, and individuals.

to the fullest in her career by continuing to work passionately and assuredly.

We also provide support for each and every employee to develop and improve

［%］
74

70

66

2021

2022

62
[FY]

Stage 1 is the three-year period beginning in FY2022 and continuing

In addition, we are working to leverage our global human resources by,themselves with grade-speciﬁc employee training programs, e-learning leader

among other initiatives, hiring individuals who have acquired Speciﬁed Skilled

training courses, distance-learning programs, certiﬁcation incentive programs, andWorker (i) status as well as accepting trainees.

other curricula.

Percentages of men & women hired after university graduation(number)
80
60
40
20
0

12.1

Men

Women

7
11.1

15.6
7

4
29
2018

56
2019

［%］
20

Ratio of women

38
2020

18.0

(millions of yen)
2,500

1,500

9

10

3
41
2021

28
2022

500
0

787
2018

Advancement of Measures to Support Development of thesystem the following October and telework system in April 2022. We are0[FY]

working so that employees are able to lead more active and fulﬁlling lives.

OSG Safety & Health Management Declaration

931

668

See P.37

In October 2022, the 2022 Safety and Health Management White Paper was issued.
Then, in March 2023, the Ministry of Health, Labour and Welfare certiﬁed the OSG
Group as an outstanding Health and Productivity Management Company.

1,673

381

Women s Participation and Advancement in the Workplace and Act on
Next-Generation which took effect in April 2019, we introduced a ﬂextime

2,006

1,293
300

The OSG Group aims to improve our personnel s work-life balance. We
balance both work and family. In line with the Act on Promotion of

9.7

Language training subsidy
Distance-learning expenditures
Certiﬁcation incentive programs

1,456
302
366

System reforms and awareness-raising activities
for improving work-life balance See P.36
have strived to create an environment where our employees are able toTraining expenditures

1,000

Achieving OSG s Medium-Term Management

Americas

19.6%

150

OSG has strived to create a pleasant work environment based on the theme ofpromoting diversity and inclusion so that our diverse human resources are

2,000

To realize our Medium-Term Management Plan Beyond the Limit

64.9%

138.3

To articulate the abilities that we expect of our employees, we have set out the Seven
Qualities Required of OSG Employees. Among these are the concepts of challenge

Rating Agency in order to ensure our eligibility with the Green Bond

Asia

Diversity

Challenges and communication

Realizing high margins upon a solid ﬁnancial base

From the very top of the OSG Group on down, we are committed to promoting

1,152

employee well-being and contributing to creating a prosperous future for our
employees, their families, our customers, the community, our society, and the

476

612

474
378
79

528

458

2019

2020

2021

2022

earth. In recent years, we have stepped up efforts to address the increasing number394

of young people dealing with lifestyle-related illnesses, the safety and health risks
accompanying aging, as well as risks affecting mental health due to a decline in[FY]

Career design program
Through our Career Plan Reporting Program, the OSG Group has establishedopportunities for communication. We will strive to create an environment where
our employees can play an active role and pursue improvements in productivity.

Management of human capital for the future

until FY2024, during which we will focus on reinforcing businessregular opportunities for our personnel to create a plan for their own career

efﬁciency, improving proﬁtability, and enhancing our corporate structure

path within the company. This program promotes reskilling that enables

work history, and other aspects, we are aiming to develop our human resources and construct a

in a way that enables us to stably generate proﬁts.

employees to gain the knowledge and skills required for certain work, andsupport system to place the right people in the right position throughout our entire group in aWith the Human Resources Skill Map that provides a visualization of employees competencies,

facilitates skill visualization and self-development utilizing distance-learning

way that maximizes how our best-qualiﬁed human resources are employed. In a time when notand certiﬁcation acquisition in order to further improve the productivity of

only work styles, but also the way we think is increasingly diverse, it is more important than everMedium-Term Management Plan while also taking into considerationeach and every individual. We aim to institute a system that makes it

for employees as well as leaders to have the knowledge and skills to handle the many changes

the needs of society and the business environment, and we will continue

possible for individual employees to design their own careers and grow. By

that will come their way. Concurrently with these efforts, we are also focusing on developing

to be an essential player contributing to the global manufacturing

placing the right personnel in the right position, we will further contribute to

our next generation of leaders as well as the diversity of working styles in addition toindustry as we move toward the age of carbon neutrality.

our corporate growth.

reassessing our personnel systems so that they motivate our employees even more.

In order for us to be the company that we envision, we will
implement measures for achieving the targets set out in our

OSG Repor t 2022

20

Value Creation Stories

Accumulated Management Capital

Manufacturing CapitalIntellectual Capital

Basic Policy on Manufacturing CapitalIntellectual Capital Basic Policy & Strengths

Grounded in our basic philosophy as stated by the founder of OSG which is to provide products that will delight customers, the OSG

OSG s research and development activities are principally conducted at the R&D Center and Design Center at OSG Academy. Long-term basic

Group has developed an efﬁcient production system for high-quality and high-value added manufacturing suited to the needs of the time.

research is carried out jointly with university, national and public research institutes.The Design Center develops and improves products. It is

The tag line shaping your dreams, which we adopted in 2014 embodies our strong determination and resolve to realize our customers

equipped with the latest machine tools and evaluation instruments of all types speciﬁcally for cutting prototypes so as to develop machining

dreams by providing them with fully-satisfying products and services through manufacturing. It is upon this basis that we are aiming totechnologies that maximize tool performance as well as to provide expedient feedback for development of products using cutting tests conductedenhance our customer service.

under an array of diverse use conditions.The R&D Center is engaged in research and development of coatings, nitriding, and other surface-modifying
technologies, technologies for developing and improving high-speed steel and die steel material, as well as heat treatment technologies.

Digital production facilitates visualization
At our four mother factories in Japan, we

OSG s value-added

have actively promoted digitalization to

The A Brand, which is been our focus, began with the development of

Achieving OSG s Medium-Term Management
Plan Beyond the Limit 2024

A-TAP. The combination of new technologies to reﬁne product

Along with advancing product development driving an

speciﬁcations speciﬁc for current uses culminated in A-TAP, which

increase in sales of A Brand and micro-precision tools

achieves stable threading across a wide range of workpieces andwhich are fundamental aspects of the strategy laid out incutting conditions. The new technologies incorporated into A-TAP

our Medium-Term Management Plan, we are touting

support our on-site capabilities and made it
possible to visualize in real-time equipment
operation, process load and progress,

Dashboard for visualizing
process-speciﬁc progressproduct ﬂow, and other manufacturing data.
The visualized data help to accelerate ouranalysis and response to problems as well as
make improvements, signiﬁcantly
enhancing productivity.
Our ﬂagship NEO Shinshiro Factory,
which began operating in 2020 andproduces many products in small quantities,

Illustration of new Oike Factory
Dashboard showing status ofprocess-speciﬁc delays(arrival time/completion time)

promotes digitalization to support on-site capabilities. It has been an integral part ofour efforts to differentiate the OSG Group from other companies, highlighting ourcapability to meet deadlines. We have merged digital tools with the production
logic built up over the years to realize optimal integration and make it possible tocontinuously operate multiple lots for 72 hours on weekends and increase output
from bottleneck processes. This is not the result of an external production
improvement package , but something that OSG is still developing into a ﬁrst-rate

17,13915,00010,000
5,000
0

2019

2020

2021

150,000

100,000

126,964
19,554

multiple processes may be machined with one piece of equipment, thereby
shortening processing and setup time. We have also established production

50,000technology departments at our machine shops and established a system to search forthe latest technology available around the world and apply it within our company.
In order to augment production capacity for carbide end mills which are key fordevelopment of the micro-precision machining sector--a target that we set to achieve inthat we must realize when developing new products.

Social Capital Basic Policy & Strengths
2022

013,686

126,156
104,389

142,525
21,898(millions of yen)

145,000
24,00035,00025,000

16,105
16,534

8,397

16,20010,9892020

2021

business sectors, but also our account of how we will create value in the future. Whilestill taking into account measures required by the pandemic, we restarted our investor

aware of what sort of value we are creating in society so that we may

relations dialogue locally in July 2022. OSG Group managers have taken the valuable

contribute through our business to the sustainable development of our

feedback received during these sessions into account to improve management.

earth and society. Since we ﬁrst branched out overseas in 1968, we
have built a global network spanning 32 countries. We will continue in

Principal IR activities

Achievements

our aim to establish the OSG Brand that it always earns the trust of OSG

Financial results brieﬁngs

2 brieﬁngs

Individual meetings with institutional investors

159 sessions

stakeholders around the world. We will also strive to take up thechallenge of creating a more prosperous future as well as live andoperate in harmony with our earth and society.

15,0002022

02023 [FY](Projected)

17 sessions

Natural Capital
Basic Environmental Philosophy

The OSG Group is advancing on a global scale our plan to increase production of

production line saving labor and SD Manufacturing Company serves as a

micro-precision tools for growth industries. We will be expanding our digital

Based on the philosophy of developing eco-friendly products

digitally-powered plant handling low-volume diversiﬁed production.

production system from our mother factories in Japan to overseas sites. In working

Also, to become more environmentally friendly and reduce greenhouse gas

toward our goal of securing a 40% share of the global market for taps which are one

emissions, we will work to promote resource and energy savings, waste reduction, andof our core products, we have set up production at optimal locations with half at ourrecycling of carbide materials across all processes based on our philosophy of being an

Yana Factory in Japan and the remainder arranged across our production network inenvironmentally-friendly company. Our aim is to have state-of-the-art factories thatnine countries. To improve ROA, we set total asset turnover rate as a KPI for assessing

both maximize productivity and protect the environment.

our manufacturing department, and have been managing and improving this metric.

OSG Re port 2022

Investor relations meetings overseas*As of February 10, 2023

production process so that the Oike Factory transforms into a fully-automatedproduction method established at the NEO Shinshiro Factory as well as separate theshareholders and investors so that they fully appreciate not only our strategies for new

utmost to help realize our customers dreams and, beyond that, be

Natural Capital Basic Policy & Strengths

will further boost our supply capacity with additional enhancement of the digital

The OSG Group places great importance on engaging in regular dialogue with our

The OSG slogan is Shaping Your Dreams. We are always doing our

Achieving OSG s Medium-Term Management
Plan Beyond the Limit 2024

at SD Manufacturing Company, one of our group subsidiaries, and the Oike Factory. We

Example of eco-friendly
products

50,00

5,640
2019

2023 [FY](Projected)

our Medium-Term Management Plan--we launched a project to construct a new plant

21

standard for evaluating eco-products as well as indices

Dialogue with stakeholders

Net sales (left)
Operating income (right)
Net income attributable to owners of parent (right)(millions of yen)

the speed at which we transform our production methods to introduce robots,
multi-task processing, our aim is to connect processes and merge them so thatand thereby promote ESG management. We have set a

recognize A Brand as their ﬁrst choice.

8,600
5,555

Consolidated results

unattended operations, and make other changes so that we are better automated. For

these product lines to items besides taps so that our customers will

Social Capital

12,5009,895

organization which is connected to plants overseas.

Initiatives for further manufacturing advancement

is to contribute to social solutions that help achieve SDGs

(millions of yen)
20,000will be extended to other plants. Our aim for the future is to develop a one-factory

In addressing the challenge of a shortage of human resources, we need to accelerate

eco-friendly product development the purpose of whichand designers of all tools that we carry. We have been expanding

Capital expenditures

digitalized platform, consolidating a variety of ideas that we have devised internallyon our own. In the future, the knowledge gained from digitalization at these plants

were developed by assembling at the Design Center the developers

in our environmental activities, the OSG Group has strived todevelop and offer new products and services that achieve
greater manufacturing efﬁciency and energy savings.To
mitigate any environmental impact, we are promoting
resource and energy savings, waste reduction, and recyclingof carbide materials across all processes.

● We will act based on the recognition that symbiosis with nature andpreservation of the global environment in harmony with our basic
management policies are fundamental obligations.
● Our three declarations made in October 1996--Global Expansion,

Health-consciousness, and Eco-friendliness--are part of our corporate
ethics and we will disclose this information universally.
We will make consideration of the environment an essential task while
offering products and services that contribute to society.
● While following social norms, we will join forces through communication

to contribute to harmonious and sustainable development.

OSG Repor t 2022

22

Value Creation Stories

Medium-Term Management PlanIn FY2021, the OSG Group reformed our management structure, based upon which we launched our Medium-Term Management Plan
Beyond the Limit 2024.

■ A Brand Strategy
A Brand is our premium tool brand harnessing the OSG Group s
cutting-edge technology and developed to handle a variety of workpieces

Our focus on bolstering operating efﬁciency once again resulted in an ROA of 10% (operating income basis) in the initial year as planned.

and execute a broad-range of machining methods. The OSG Group has

We will continue to enhance proﬁtability, build a robust corporate culture, and contribute to the global manufacturing industry as wePlan strategy and promoted development of A Brand series to be available

advance toward the era of carbon neutrality.

made the A Brand an important facet of our Medium-Term Managementwith our standard cutting tools (catalog items). Since the A Tap was
released in 2013, we have proceeded to develop the A Drill and A End Mill,
expanding our product lineup. A Brand products are used in a wide range ofindustries and have also contributed to increasing sales to themicro-precision processing sector, one of the areas we are focusing on. In
Stage 2 (2025-2027) of our Medium-Term Management Plan, our target is

Basic Policy

for A Brand products to be 40% of total sales of our standard taps, drills, andend mills. We will continue to market A Brand products in answering our● To transform OSG into an essential player contributing to the global manufacturing industry, our long-term vision is divided into threestages. The ﬁrst three-year period is "Beyond the Limit 2024" during which we will strengthen our corporate culture.
●Over the course of these three stages up to the year 2030, OSG will change the composition of our customer-speciﬁc portfolio so that wemay better address social and environmental changes.
●As we advance toward the era of carbon neutrality, the entire OSG Group will strive together to enhance corporate value with the aim ofachieving overall optimization.

（Stage1）

Toward the carbon neutral era

Beyond the Limit 2025-2027

Beyond the Limit 2028-2030（Stage2）（Stage3）

15.0％¥21.8 billion

TargetAchieved● Progress

30%

27%

The OSG Group set a target for Stage 1 (2022-2024) of our Medium-Term
Management Plan of increasing the percentage that A Brand products accountitems rose steadily in Japan, North America, Europe, China, and other regions
to reach 27% of total sales. We will strive in our aim to surpass last year s
2023.

Based on our corporate philosophy of Global Presence, OSG will promote
ESG management as we seek to sustainably enhance corporate value.

2020

2021

Medium-term
management targets

Taps
Global market share40%

30% or moreindustries for small-diameter tools. We launched a new sales organization to promote
new business development in these areas and our sales force has been actively working
and successfully securing new users for our products. These marketing campaigns have
not just been rolled out in Japan, but are also actively running globally. The market for
micro-precision processing is anticipated to grow in the future and our aim is for sales inthat area to reach 30% of total sales by the ﬁscal year ending November 2030, the ﬁnal
global network which is one of the OSG Group s strengths, we will leverage our ability●Share of global tap market 40%●Increase micro-precision processing

customers to 30% or more

●A Brand sales ratio 40%●Coating & reconditioning ratio 15%●Globally expand and optimize production of

Target[Ratio of micro-precision processing sales]

securing a greater market share.

30%

Target25%

Target● Progress

20%

Achieved

16%

The target that we set for Stage 1 (2022-2024) of our Medium-Term
Management Plan is to have the ratio that micro-precision processing sales●Become a company that contributes tocustomers carbon neutrality efforts

digital manufacturingaccount for in our customer portfolio reach 20%. For the ﬁscal year ended
November 2022, our efforts to secure new business with customers requiring
micro-precision processing resulted in increasing that ratio to 16%. We willcontinue to actively work to secure new business not only in Japan but also
globally with the aim of further pushing up sales during FY2023.

●Increase sales in micro-precision processing,●Establish sales and production systems fully[FY]

year of Stage 3 (2028-2030) of our Medium-Term Management Plan. Through our

Basic Strategy Further enhance business efﬁciency and strengthen OSG s corporate culture so that we may stably generate proﬁts.

and energy industry

2027

machining which requires precision processing and demand has risen in these

Micro-precision processing

our customers deadlines, and provide on-site technical support, all of which will lead to●Increase sales in micro-precision processing2026■ Micro-Precision Processing

to turn sales calls into orders, provide outstanding service for manufacturing that meets●Coating & reconditioning ratio 10%2025

other industries which are forecast to grow, there is considerable component

2024 Target

and create a robust corporate culture2024

semiconductor, robotics, automation, mechanical components, mobility, medical, andCustomerportfolio

Be a company contributing
to carbon neutrality¥30 billion●A Brand sales ratio 30%

2023

taps, drills, and carbide end mills for micro-precision processing. In the 5G,

Operating income●Improve proﬁtability and business efﬁciency,

2022

A key strategy of our Medium-Term Management Plan has been to increase the share of

15%

2022

目標

To be an essential player contributing to the global manufacturing industry(FY2024)
ROA (Operating income basis)

ROA

7.9％

2021

40
40%%

increase in pursuit of reaching our target in the ﬁscal year ending November¥30 billion＊ROA (%) =Operating income ÷ Total assets × 100¥16.1 billion

Target[Ratio of A Brand sales]for of total standard tap, drill, and end mill sales. For FY2022, sales of A Brand

Beyond the Limit 2022-2024

Operating income

customers calls for high-quality and high-performance tools.

2020

2021

2022

2023

2024

2025

2027

2028

2030

[FY]

energy and aircraft industries

utilizing digital technology

Generalengineering

20％
Microprecision
processing

20％
23

OSG Re port 2022

Automotive

50％

Aircraft &energy10％

Generalengineering

23％
Microprecision
processing

25％

Automotive

40％

Aircraft &energy12％Generalengineering

25％
Microprecision
processing

30％

Automotive■ Coating & Reconditioning

30％

The OSG Group has been expanding our business to contribute to a sound● Progressmaterial-cycle society as we strive to promote recycling by reconditioning and

The target that we set for Stage 1 (2022-2024) of our Medium-Term

recoating cutting tools. Reconditioning and coating technologies contribute toManagement Plan is to have cutting tool reconditioning and coating

reducing expenditures and improving the productivity of our customers as well as

account for 10% of sales. We achieved a rate of 7% in FY2022. In

extending tool life, thereby reducing the burden on the environment.

addition to tools, we will also expand our water-resistant coating

Aircraft &energy15％

business for medical and electronic components in FY2023.

OSG Repor t 2022

24

OSG Group s Material (Important) Issues

Foundation for Value Creation

ESG Management

ESG Management Promotion

Identiﬁed Material Issues

Climate Change Initiatives

OSG has been promoting ESG management with the aim of maximizing
sustainable corporate value long-term at a time when it is difﬁcult to predict the future.

The OSG Group has expressed its support for TCFD and strives to adapt our operations

Moreover, we have identiﬁed key issues that we must address andto protect against the effects of climate change. We have been promoting activities that
contribute to a carbon-free society as well as reducing greenhouse gas emissions.

made these known to our stakeholders.

Development of a Rewarding
Workplace Environment

Basic Sustainability Policy

OSG will develop and maintain an environment in which each and every employee can

OSG Group aims to be instrumental in the sustainable development of society.

ﬁnd pride and fulﬁllment, leverage diversity, and demonstrate their abilities to their full

We will be an essential player contributing to sustainable manufacturing industries

potential.

worldwide by delivering proprietary high value-added products and services.
The Sustainability Committee deliberates
ESG-related issues, policy and visionconsistency, priority measures, and othermatters, and regularly reports on its activities
to the Board of Directors.
Measures for promoting sustainability are
implemented by department heads (ESG

Initiatives for Employing People with
Disabilities

Sustainability Committee (meets quarterly)

Board ofDirectors

Chair：President
Members：Directors responsible &Reports&
approval

department general managers

Chairman

Secretariat：Management Planning Department
Agenda：Deliberate and made decisions on

President

Planning,
Promotion&
implementation

Management Planning Department (Sustainability Administrator)

consistency in their understanding of what

Department general
Responsible for ESG promotion
managers (ESG ofﬁcers)

sustainability entails, they regularly provide
progress reports on their activities, exchange

gives consideration to people dealing with disabilities and supports them in enthusiastically performing their jobs.

Health & Safety Management

based on decisions made by the President,
So that department facilitators maintaindisabilities, the ﬁrst such special subsidiary in the cutting tool industry. We have created an inclusive environment thatsustainability-related policies, initiatives, etc.,
and issue regular reports on these topics

ofﬁcers) and facilitators in each organization
who chairs the Sustainability Committee.

In December 2022, we established OSG Active Co., Ltd. to promote employment opportunities for people with

As a health-conscious company, we understand that keeping our employees safe andhealthy is an important management concern, and we promote employee health aswell as facilitate a workplace environment that is both comfortable and safe.

Community Contribution①Sports Promotion Initiatives

views with colleagues, and promote initiatives
for achieving solutions to key issues.

The OSG Group has supported local professional sports and been the top sponsor of the San-en
NeoPhoenix professional basketball team, which is based in eastern Mikawa and the Enshu region. We

Process for Identifying Material (Important) Issues

also hold events inviting fans to watch games for free, which has helped energize the community.

With the aim of maximizing corporate value, we have identiﬁed eight material issues for the OSG Group to prioritize.

STEP 2

STEP 3

STEP 4

Identify prospective
material issues

Assess and analyze
prospective material issues

Management assesses
appropriateness

Identiﬁcation ofmateriality

Of the issues identiﬁed in STEP 1, particularareas were selected that are very relevant
to OSG s operations, after which thesewere assessed in terms of importance.
Issues are assessed along two axes:
importance to stakeholders andimportance to OSG and then ranked
according to priority.

Management examined
the appropriateness ofthe process for assessing
materiality and theanalysis results, andveriﬁed the prospective
material issues to beprioritized. The selectedmaterial issues havebeen approved by the
Board of Directors after
deliberation by management.

Eight material issues
were identiﬁed.
The process for
identifying material
issues will be
implemented toreconsider issues,
then assess andanalyze themappropriately.

Environmental, socialand economic issues
were identiﬁed withreference to GRIStandards, SDGs, andother internationalframeworks andguidelines.

Importance tostakeholders

Very high

STEP 1

Identiﬁcation ofmateriality(important issues)

Community Contribution②Support for Medical Institutions & Facilities
As part of our support for combating the Covid-19, OSG has donated protective gear and masks to healthcare workers and cooperated
with the administration of workplace vaccination programs in nearby communities. We contribute to creating a heartwarming

Improvement of Corporate Governance
The Board of Directors is OSG s governing body, of which the majority of seats are held by highly-independent outside directors.
The Board is invested with the capability to sufﬁciently exercise its management oversight functions. Corporate ethics complianceguidelines are shared throughout the entire group to raise awareness as part of our efforts to enhance corporate governance.

Sustainable Financedisclose this information.We are considering adopting sustainability-linked loans, green bonds, and other forms of sustainable ﬁnancing

25

OSG Re port 2022

Importance to
OSG Group

Very highAs humanity advances toward the age of carbon neutrality,
we are developing eco-friendly products and bolstering
usage of carbon-free electricity, which is derived from solar
power generated through an off-site PPA. We will beadvancing initiatives with an eye toward acquiring a scoreof A from the CDP and calculating Scope 3 CO2emissions.

P.33-34

We have implemented systems for improving
employees work-life balance and developed
leaders with the capability to manage diverse
working styles and ways of thinking in a mannerthat enables our employees, who are valuablestakeholders as well, to maximize their performancein a comfortable working environment.

P.36

Along with promoting the creation of a more conducive work
environment for people facing disabilities, OSG partners withsupport organizations and agencies, actively participates inmeetings, and supports promoting community efforts to hire people
with disabilities. OSG will not only achieve and maintain its statutory
employment rate, but also contribute to the community andsociety through employment of people with disabilities.

P.38

FY2022 was the inaugural year for our safety and healthmanagement initiatives. Our slogan is promote employee
well-being and contribute to creating a prosperous future for our
employees, their families, our customers, the community, oursociety, and the earth. With this slogan, we are working to create
an environment where each and every one of our employees
may work with enthusiasm and good health.

P.37

As part of the program Everyone Smile! Onward to the
Future! we have invited people from the disability
community to enjoy San-en NeoPhoenix games, which areheld at the Toyohashi City General Gymnasium, as our guests.
At the venue, merchandisers for welfare institutions have soldhandicrafts and other products, which allows these sporting
events to be a vehicle for contributing to the community.

As part of our pandemic prevention measures,
OSG has donated medical masks to medical
institutions in the eastern Mikawa region. We also
donated necessary items to 12 social welfareorganizations.

community through such activities as regularly donating furniture and other furnishings to facilities assisting people with disabilities.

OSG signed an agreement for ESG Assessment-Type Financing Procurement in order to monitor the status of KPI achievement andHigh

Environmental Initiatives

when investment funds are procured, and have been striving to practice more sophisticated ESG/SDGs management.

To provide for greater gender diversity, ensure effectiveness,and improve the Board of Directors functions, one woman
outside director has been elected and an assessment
conducted of the Board s effectiveness. An English version of
the Corporate Governance Report has been released toprovide stakeholders globally with a better understandingof the OSG Group and its corporate governance.

P.45

FY2022 was a time of preparation for our green bondissue, which will procure funds for investing in green
buildings and eco-friendly products. This green bondissue, which is the ﬁrst-ever of its kind in the cutting
tool industry, will further accelerate OSG s ESG
initiatives and enhance the appeal of our efforts more
broadly to capital markets and stakeholders.

P.19

OSG Repor t 2022

26

Environmental Education / Education Training System / ISO 14001 Certiﬁcation Status

Foundation for Value Creation

ESG Management

Environment

Environmental Education

OSG is committed to the creation of a sustainable environment and society through eco-friendly business activities.

Basic Philosophy
The OSG Group recognizes protection of the global environment
as a vital priority for humanity. Under our Basic Environmental
Philosophy, we are actively committed to efﬁcient resource use
and environmentally responsible manufacturing. We strive tosupply customers with environment-friendly products and services
as part of efforts to reduce environmental loads and contribute todevelopment of a society based on resource recycling.

Environmental Management System

OSG provides ISO 14001 internal environmental auditor training for newly
appointed supervisors so that they will develop the skills of a qualiﬁed
internal auditor for environmental management systems.
We also train the personnel responsible for environmental affairs at
each ofﬁce to enhance their knowledge and develop their practical skills
through proﬁciency in environmental laws and regulations so that they
will acquire a broad basic understanding of these laws and regulations. In
addition to the above, emergency response training is conducted for those
directing such actions at each ofﬁce in order to ensure thoroughawareness.

director responsible for environmental affairs, who is thehighest-ranking executive overseeing environmental
management activities, and the Quality Assurance Department,
which serves as the general environmental management team,
direct this structure and carry out environmental management
activities.

Headquarters Environment Secretariat

NODA Seiko, Inc. (now NODA Precision, Inc.)

October 2008

Ohtaka Precision Co., Ltd.

December 2005

Sanwa Seiki Co., Ltd. Shiga Factory

October 2008

Taiho Sangyo Corporation

October

Nihon Hard Metal Co., Ltd. Kyushu Factory

June

Nihon Hard Metal Co., Ltd. Head Ofﬁce and Headquarters Factory

2004

2007

Material Balance in Operations

Resource extraction &raw material production

Suppliers

Materials extracted fromenergy resources (smelting)Storage(processing)EnergyOSG104,534,000 kWh

OSG Active Co., Ltd.

Headquarters Factory

Ohtaka Precision Co., Ltd. Ofﬁce

Toei Factory

Honnogahara Center Ofﬁce

Toyokawa Factory Ofﬁce

Sports Square Ofﬁce

Headquarters Ofﬁce

OSG Academy Ofﬁce

Aoyama Seisakusho Co., Ltd.

Oike Factory Ofﬁce

Ohtaka Precision Co., Ltd.
Oike Factory

Toyohashi Factory Ofﬁce

Ohtaka Precision Co., Ltd.
Toyohashi Factory

Shinshiro Factory Ofﬁce

Supply Chain Management
Promotion Group Logistics Shinshiro

OSG Coating Service, Ltd.

Ohtaka Precision Co., Ltd.
Shinshiro Factory

Aoyama Seisakusho Co., Ltd.
Shinshiro Factory

Yana Factory Ofﬁce

City gas

210t
113m3

Service water/tap water

105,458m3

Industrial-use water

18,631m

Well water

4,325m3

Design development

Energy saving, resource saving(high-efﬁciency and long-life)
Reduction of environmental footprint(dry cutting tools)

Procurement

Paper (A4 size copy
3.03 million sheets
paper equivalent)

Entrance controls

PRTR substances
FY2022
TargetFY2023Result

1.0% reduction

1.2% reduction

1.0% reduction(energy sources: electricity, fuel oil, and LPG)

1,118 GJ/month

1,360 GJ/month

1,118 GJ/month

Total usage BM: 95,676 GJ/month

reduction

reduction

reduction

Development of eco-friendly products

34 points

45 points

35 points＊

74 points

38 points＊

Eco-friendly production

37 points

Products
Production

53,814 million yen

Packaging supplies

289 million yen

Waste
Amount sold909t

Amount recycled

1,159.5t

Final landﬁll amount

3.7t

Total

2,072tDischarges to water bodies
Manufacturing

1,771t222tReduction in environmental impact

Oils (cutting and grinding ﬂuids) 544kL

Packaging

TargetReducation in total energy use)

Green procurement

Eco-friendly production

Environmental Objectives（

OU T PU T

Waste, discharges to water bodies,
atmosphere, etc.

Development of eco-friendly products

3

Raw materials (metals)

Eco-Factory

2014

Resources

FY2022 Environmental Performance and FY2023 Targets

3

Needs-based training

October

LPG/air conditioning

Eco-Products

Competence training

Aoyama Seisakusho Co., Ltd.

Purchased
electric power

Ofﬁce Environment Committee

2

External training

October 2007

Ofﬁce Environmental Management Ofﬁcer(Ofﬁce Environment Secretariat)

Internal Environmental Audit Team

Energy Conservation

Awareness training

Nine ofﬁces of OSG(Natural resources, energy, etc.)

Content

Partner/vendor training

Environmental
education

November 2000

INPU T

Headquarters Environment Committee

Expert Committee

1

Needs-based training

To contribute to realization of a low-carbon society and creation of a resource-recycling society, OSG ascertains and manages the various
environmental impacts of our business activities. We continually strive to manage these effects with initiatives, such as reducing energy
use and putting waste from our manufacturing processes to use as recycled material.

Highest-Ranking Executive
Director Responsible for Environmental Affairs

General Environmental Management Ofﬁcer

Item

Competence training
Internal training

Status of Environmental Management Systems at Group Afﬁliates
Status of ISO 14001 Certiﬁcation Acquisition

Eco-friendly company andenvironment-respecting culture

General Environmental Management Ofﬁcer
Quality Assurance Department

No

Awareness training

Environmental Slogan

Environmental Policy
OSG has established the Headquarters Environment Committee,
developed a company-wide environmental strategy, and actively
endeavored to resolve environmental problems. Within theenvironmental management structure, departments closely
afﬁliated with sites having a signiﬁcant environmental footprint
are primarily responsible for environmental management. The

Education Training System

Reduction efforts
Reduction in environmental impact

Drainage water volume

128,414t*Drainage is mostly domestic sewage.
*OSG has balanced water usage so that thewater drainage volume equals the amount ofwater usage. We estimate that 50% to 60% ofactual drainage is from the use of water-soluble
coolants, air conditioning evaporation, etc.
Atmospheric emissions
Energy-derived CO²

Sales & services

Customer waste

Products

Recycle or dispose

Production

47,818t＊Points according to OSG Group standard for improvement of environmental activities (total: 60 points)

27

OSG Re port 2022

OSG Repor t 2022

28

Energy usage

ESG Management

Environment［%］[t/millions of yen]

1,200,000

30

60,0001,000,000

Costs and Effects over Past Three Years[thousands of yen]

FY2020

FY2021

FY2022

1.Positive costs

223,52051,026

68,8272.Maintenance costs

66,326

63,82474,9893.Environmental damage compensation

0

0

0

4.Effects of environmental conservation

37,16912,10333,431■Costs[thousands of yen]
Item

Speciﬁc initiatives

Investments in equipment, etc.

achieving environmental
targets②Global environmental conservation costs

Updating heat source devices, transformers and air
conditioning units, converting to LED lighting, etc.

68,827
0③Resource environmental costs
Subtotal

2. Environmental
management system
maintenance costs

Environmental secretariat expenses,
management operating expenses

13,500②Environmental education and training
material preparation costs

Seminar participation, environmental reports

2,723③Environmental audit expenses

External review expenses, registration
maintenance expenses④Environmental regulation compliance costs

Designated chemical substance measurement, etc.

1,478

⑤Waste disposal and recycling expenses

Waste disposal expenses

52,404⑥Circulation measurement expenses

Various environmental measurement and analysis
expenses

4,068⑦Environmental conservation costs
associated with social activities

Japan Cutting & Wear-Resistant Tool Association
Environment Committee activity expenses

816

1,057,923

25

Subtotal0

Total

143,816[thousands of yen]
Item

Speciﬁc initiatives

Total environmental improvement effect

Energy savings achieved by updating heat source devices,transformers and air conditioning units, and converting to LED lighting

OSG Re port 2022

0.95

40,1690.87

47,818

1.0

0.89

0.8

40,00015

30,0000.6

400,000

10

20,0000.4

200,000

5

10,000

0.2

18.4

0

19.7

18.4

2018

Electricitys (left)
LPGs (left)

2019

2020

0
[FY]

2022

2021

0

Fuel oil (power generation, air conditioning & heating)s (left)

City gas (left)

0.86

2018

39,62220192020

Total emissions (left)

2022

2021

0
[FY]

Per unit of production (right)

Per unit of production (right)

Streamlining Product Packaging to Reduce Plastic Usage
With the development of multiple models of taps, end mills, and drills,
the types of cases and packaging used for these have also becomemuch more varied. Nevertheless, marine microplastic pollution is a
global problem now and we urgently need to reduce the amount ofplastic that we use.
OSG has been working to standardize packaging cases and labelsand has taken other steps to adopt more eco-friendly new cases aswell as switch to ecological packaging ﬁlm.
We launched this effort in 2021 and have steadily made headway,
consolidating or integrating 20 of the 78 types of packaging. We
anticipate these initiatives will ultimately reduce annual plastic waste
volume by 12 tons.

Saving Energy Through More EfﬁcientCompressor Use

Shutdown

Area A

Material
packagingarea

At OSG, we operate compressors to supply air, so we have beensaving energy by checking how machinery and compressors areoperated and operating this equipment when conditions are optimal.
We have been ascertaining the status of machinery operations at nightand shutting down air supplies at plants where equipment is notoperated at night. In areas where equipment is operated at night but
air usage is modest, we have switched to using small air compressors.
These activities have curbed our electricity usage.
In FY2022, this effort was recognized by the Japan Cutting &Wear-Resistant Tool Association with the presentation to OSG of theEnvironmental Activity Award at the 7th Awards Ceremony.

OSG has been promoting zero emission activities to reduce waste.
We have also developed a system to recycle reusable andrecyclable resources and established a structure to ensure theproper disposal of waste from our operations. These efforts haveenabled us to maintain a recycling rate of over 99% since 2005.

Recycling rate
FY2018Investments in equipment, etc.

［%］

FY201999.8

Main
No. 3 Constantcompressor
temperature room
22kW
Machining

Area BNo. 1 Constanttemperature room

No. 2 Constanttemperature room

Development
testing

Machinery
test operation

Small amount intermittently used

Continuously
closedNight
Electric ball valve
shuts duct

Startup
Small compressor
2.2kW

99.7

FY202099.7

FY2021

FY202299.8

99.7

Weight of recycled materials［t］

Metal scrap (sold)

661.1

Waste grinders (recycled)

41.5

Cardboard boxes (sold)

47.2

Waste plastic (recycled)

54.2

Waste oil (sold and recycled)

477.1

Wood chips (recycled)

83.5

Oil sludge (sold and recycled) 211.5

Other (recycled)

58.8

Waste diatomaceous soil
(sold and recycled)

Total recycled

433.1

2,068.5t

33,431

Reduction in CO² Emissions

29

50,0001.2

1.07

49,76820

21.3

Waste emissions and ratio of valuable materials

At all OSG business ofﬁces and sites, we have prioritized activities thatuse energy more efﬁciently and switch to energy-saving equipment
so that we may continue to mitigate the impact which we have on theenvironment. Throughout our entire company we have converted to
LED as well as saved energy by optimizing room temperatures andcoolant as well as upgrading thermal source devices, transformers,
and air conditioners. During the preceding ﬁscal year, these efforts
decreased by 7% the amount of CO2 emitted per unit of production,
reducing the level from 21.3% to 19.7%. Our emissions factor

53,001

74,9890■Effects

4. Effects of environmental
conservation

966,386

Resource Recycling Initiatives

Costs for soil remediation,
restoration of natural destruction, etc.

environmental damage

Category

68,827①Labor costs associated withenvironmental conservation activities

Subtotal

3. Compensation costs for

915,000［%］

0①Pollution prevention costs
1. Positive costs for

1,061,271

24.3

600,000

Detailed Accounting of Costs and Effects in FY2022

Category

1,027,255

800,000

Environmental Accounting
OSG's environmental accounting system references theEnvironmental Accounting Guidelines established by the Ministryof the Environment. This concerns the SDGs, which are global goals
aiming to ensure a sustainable and better world by 2030, and ESG,
which stands for the environmental, social and governanceframework. Our aim to present an environmental accounting tohelp stakeholders understand the stance and approach of the OSG
Group as we undertake our environmental conservation efforts so
as to further improve our relationship with society.

CO² Emissions[GJ/millions of yen]

［%］

［t］

2,500

100

160,000

2,165
2,000

increased 11% year-on-year, which led to a 2% increase over theprevious year in the amount of CO2 emitted per unit of production.
Total CO2 emissions increased 21% along with this emissions factor
and production increases. In addition, we upgraded equipment to themost efﬁcient model available and took other steps to reduce CO2
emissions. However, these efforts still did not decrease total CO2
emissions over the ﬁscal year. In the future, we will reinforce these
activities and strive in a systematic manner to save energy inaccordance with our Medium-Term Environmental Plan.

Drainage water volume

［t］

2,064

1,863

2,069

80

1,629
60

1,500

［%］
152,130

140,000
120,000
100,000

50

45

46

45

44

40

500

20

0

0
[FY]

2018

2019

Waste emissions (left)

2020

2021

2022

Valuable materials ratio (right)

4.0
122,134
3.2

2.7

80,0001,000

144,173

119,847
2.6

2.5

128,414

3.5
3.0
2.5

2.4

2.0

60,0001.5

40,0001.0

20,000

0.5

0

2018

2019

Efﬂuent volume (left)

2020

2021

2022

0
[FY]

Per unit of production (right)

OSG Repor t 2022

30

ESG Management

Environmentally Conscious Product Development

Environment

Product

Management of Environmentally Hazardous Substances
PRTR chemical
substances

Manganese
5.2（2%）

Nickel1.5（1%）

Vanadium
30.2（14%）
VolumeCobalt 222.3t/year
54.4
（24%）

Chromium
72.4
（33%）

Challenge

As part of our efforts to prevent contamination, each of our sites
conducts emergency training and drills to verify countermeasures
to be employed when there is an oil spill or leak.
In conjunction with these initiatives, we have ascertained
those chemical substances handled in our production processes
that are subject to controls under the PRTR system. We have also
identiﬁed the amounts of six controlled chemical substances (seediagram at right): chromium, molybdenum, cobalt, vanadium,
manganese, and nickel.

Indexable Flat Drill PDZ

Molybdenum
58.6
（26%）

When counterboring* diameters of φ16 or greater, it is common to use a solid carbide tool or a headexchangeable tool. Carbide tools are costly and reground many times, and it is troublesome to manage those
reground tools.
With conventional drills, the bottom surface needs to be ﬂatted after drilling process. For turning operations,different tools need to be used for drilling, internal turning, and face turning, which inevitably increases thenumber of tools required.
OSG started working on a indexable ﬂat drill development that can minimize a use of multipe tools. Enlarging
the diameter of the top of the drilled hole so that a head of bolts can sit inside the workpiece surface.
*Enlarging a hole so that the head of a screw or bolt may be inserted and not project out as well as evenly machining the hole so that the torque fortightening the bolt or nut is uniform, which ensure its rigidity.

Green Procurement
OSG aims to provide our customers with environmentally-soundproducts in accordance with the OSG Group environmental policyof transforming our entire supply chain so it is environmentallyfriendly.
For necessary resources, OSG has endeavored to promote

green procurement together with our partner suppliers. We placeappropriate controls on products containing chemical substancesand conduct green procurement self-assessments so thatmaterials and products having a low impact on people and theenvironment are prioritized in our procurement and purchasing.

OSG Group is striving to create eco-friendly products and provide these to our customers. We are actively working to reduce ourenvironmental footprint by improving reconditioning and recoating operations and developing resource-saving high-speed cutting
products that are very durable and highly efﬁcient.

■ Promotion of Carbide Recycling
Tungsten, cobalt, and other rare metals are among
the raw materials used for manufacturing carbide
tools. The entire OSG Group has been striving torecycle carbide products.
We recover used tools from our customers andrecycle the rare metals so that these materials may
be reused as part of our efforts to effectively utilize
resources. This also is beneﬁcial to our customers infacilitating their CSR activities and achieving zero
emissions.

RecoveryRare metals
Resources
Tungsten ore
Scarce resources

Nihon Hard Metal
Co., Ltd.

ReﬁnerResources

Carbide alloy
manufacturer

Product

Product recycler2

Outstanding chip breaking capability
With OSG's proprietary chip breaker called "Muscle breaker",it helps to curl and break chips into small pieces

Outstanding chip evacuation
With smoother ﬂute surface ﬁnish, chip evacuation capability
is maximized

Optimized insert positions

3

RecoveryCutting load on the center cutting edge is reduced by
optimizing insert positions. In addition, internal and faceturning is possible with PDZ.

Normal rotation(Drill = ﬁxed)

Reverse rotation(Drill = ﬁxed)

❺
❶
❸

❷
❹

❶Drilling from solid ❷Internal turning❸Facing ❹Facing ❺Outer turning

Resources■Reconditioning and Recoating Services
Taps, end mills, drills, and other cutting tools
become worn and dull after repeated use.
Reconditioning these tools restores their sharpness
so they are as good as new. These tools may also berecoated if necessary.
OSG Group companies offer reconditioning andrecoating services customized to meet ourcustomers needs.

Recovery

Customers
Carbide tool users

1
OSG Developed Product

Eco-Friendly Products and Services

The Indexable Flat Drill PDZ, which boosts machining efﬁciency and tool life, has three key features.

*Case ofreconditioning
RequestDelivery

AoyamaSeisakusho
Co., Ltd.
ORS

RequestDeveloper scomments

Delivery

OCS

RequestCustomers

Today, high-efﬁciency, high-precision, and long tool life are not the only characteristics required formachining. With efforts to achieve SDGs, we now also need to eliminate waste as much as possible
and establish environmentally-conscious processes.
Customers can reduce waste by a use of indexable tools. By a use of multi-tasking tool, such as
PDZ, higher productivity is achivable.
OSG will contribute to society by supplying earth-friendly products as a part of our efforts topromote ESG management.

Delivery*Case where recoatingis also necessary

OCS
DeliveryIndexable Tool Development Team Development Group Design Center

Mitsuru Suganuma

Request

Before31

OSG Re port 2022

After

*Case of recoating only

OSG Repor t 2022

32

Opportunities and Responses

ESG Management

Climate Change Risks & Opportunities: TCFD ComplianceType

Based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) agreed to in
October 2021, we have begun analyzing climate change scenarios and promoting initiatives under the following framework.

Opportunities

Moderate

Adopt internal carbon pricing

Technology

Dissemination of renewables
and energy-saving technologies

Increase in demand for tools for renewables and energy-saving technologies

Moderate

Develop and increase sales of tools for energy-saving
facilities and renewable energy-related items

Expansion of renewableenergyTransition to environmentallyfriendly products

Increase in demand for renewable energy projects as development
increased of solar panels and offshore wind power
Greater demand for long-lasting products

Moderate

Greater use of electric vehicles
and fuel-cell vehicles

Increase in demand for precision die machining due to development andpromotion of batteries
Increase in demand for EV chargers and storage batteries
Greater demand for small-diameter tools (micro-tools) due to larger market
for semiconductors, connectors, and electronic components

Reputation

Changes in customer base and investors

Proactive information disclosure to improve evaluation by stakeholders

Acute

Increased severity of extreme
weather events

Increase in demand for disaster prevention products, services, etc. for times
Moderatewhen natural disasters strike

Physicalrisks

OSG ranks climate change as an important management issue and
the President, serving as chair of the Sustainability Committee, is
responsible for monitoring and oversight of climate-related
issues.
The Sustainability Committee deliberates climate change andother ESG-related issues, policy and vision consistency, priority
measures, and other items, and regularly reports on its activities
to the Board of Directors.
Measures for promoting sustainability are implemented bydepartment heads (ESG ofﬁcers) and facilitators in eachorganization based on decisions made by the President, whochairs the Sustainability Committee.
Based on the impact to our business, the Risk and ComplianceManagement Committee evaluates the priority of climate change
and other risks affecting our entire company.
The Sustainability Committee, Risk and ComplianceManagement Committee, and Safety and Health Committee
operate in conjunction with each other to monitor risks andopportunities associated with climate change.

ReportsHigh
High
Moderate

Accelerate development of machining tools for EV chargers and storage batteries
Develop, increase investment, and build sales of small-diameter
tools
Adopt ESG/SDG assessment-based financing

Develop tools for disaster preparedness items

Reports & approvals
Risk and Compliance Management Committee (meets quarterly)

Chair: President
Members: Directors responsible and department heads
Secretariat: Strategic Planning Division

Chair: President
Members: Directors responsible and department heads
Secretariat: Legal Affairs Department

President

3.Metrics and Targets
Reduction of CO2 Emissions
OSG set the following targets in our Medium-Term Management Plan Beyond the Limit 2024, which was announced in January 2022.

・FY2030 target: 30% reduction from FY2019 level
・FY2050 target: Achievement of carbon neutrality

Sustainability Committee (meets quarterly)

ChairmanHigh

Develop and increase sales of tools for energy-saving facilities andrenewable energy-related items
Further enhance quality, develop, and increase sales oflong-lasting products
Further enhance quality, develop, and increase sales oflong-lasting products
Develop tools that enhance efficiency and shorten processing time
Increase sales in the precision micro-machining sector*Timeline ranging from 2030 to 2050 is assumed.

Sustainability Promotion Structure
Board of Directors

Moderate

Marketassessment organization that rates companies on an eight-tier scale. OSG received a score of B in this ﬁrst assessment.

Governance & Risk Management

Response

Investment hurdle lowered due to consolidation of internal carbon pricing (ICP)or the number of years for recouping investments incorporating carbon tax

In December 2022, we also underwent an assessment by the Carbon Disclosure Project (CDP). CDP is a global environmental
Our aim is to secure a score of A. Therefore, we will make an even greater effort to promote environmental-conscious activities.

ImpactTighter regulations on GHG
emissions

Transition risks

OSG Group recognizes climate change as an important issue affecting the sustainable growth of our business.

Subcategory

Policies &legal restrictions

Collaboration

Reports
Planning
Promotion & implementation

Strategic Planning Division(Sustainability administrator)

Safety and Health Committee

In FY2023, OSG will be advancing efforts with a view toward calculating our Scope 3 CO2 emissions and obtaining a CDP score of A.

Carbon Neutral Declaration(Illustration of CO2 reductions made toward achieving target)［t］

CO2 emissions (t)50,000△10％
achieved △20％
achieved

40,000△30％
achieved

Department general managers (ESG ofﬁcers and Risk & Compliance ofﬁcers)
Responsible for advancing ESG as well as risk and compliance matters

30,00020,0002.Strategy and Scenario Analysis

Scope1・Scope2・Scope3

Scenarios projecting a 1.5℃ and a 4.0℃ rise in temperature were selected and a review conducted, referencing the following scenarios, ofthe risks, opportunities, and OSG s responses.
[Referenced Scenarios]1.5℃ scenario: IEA NZE2050, etc. 4.0℃ scenario: IPCC RCP8.5

Risks and Countermeasures
Type

Subcategory

Risks

Tighter regulations on GHG
emissions

Increase in manufacturing, development, production andprocurement costs due to carbon taxes and other charges

Transition risks

Policies& legalrestrictions Tighter regulations on fossil
fuel power generation

Dissemination of renewables

Technology and energy-saving technologies
Markets

Transition to eco-friendly products
Greater use of electric vehicles andfuel-cell vehicles

Reputation

Changes in customer baseand investors

Physical risks

Acute

Increased severity of extreme
weather events

Chronic

Rise in mean temperatures

Decrease in demand and increase in development andmanufacturing costs of tools for fossil fuel power generation

ImpactResponse

・Set targets for reduction of CO2 emissions
・At plants, introduce CO2-free purchasing, off-site power purchaseagreements, and carport power purchase agreements
・Promote eco-friendly factories and plants (more energy efficient in-housemachine tools, improve facility operation, and greater transparency)
Moderate ・Reassess items manufactured in light of changes in target markets
・Closely watch renewable energy market trends, and commit resources todevelopment of cutting tools whose demand is forecast to increase

Moderate

Decrease in sales of eco-unfriendly products and services

Moderate ・Develop environmentally-friendly cutting tools
High

0
2019

*Scope 3 calculation and evaluation by FY2030

2021

2024

2027

2030

2050

[FY]

FY2019 CO2 emissions
Scope 1 (company vehicle gasoline usage)

515t

Scope 2 (electricity usage)

49,768t

Scope 1 and 2 total

50,283t

・Commit resources to development and design of non-gasoline-powered vehicles

Decline in corporate value and loss of opportunities for securing
orders due to insufficient disclosure of non-financial information
Contraction of scale of eco-unfriendly business
Increase in financing procurement costs

Moderate ・Proactively disclose information and reply to CDP questions

Increase in procurement costs due to reassessment of suppliers

Moderate ・Review BCP for all suppliers (ascertain risks affecting suppliers in terms ofnatural disasters, logistics, raw material procurement, etc.)
・Diversify suppliersHigh

Moderate ・Consider optimizing business portfolio (small-diameter micro-tools)
Moderate ・Adopt ESG/SDG assessment-based financing

Difficulty in procuring materials, production shutdowns, andproduction delays due to disasters affecting suppliers
Damage to production facilities, production shutdowns/delays,
Moderate ・Draft and revise BCP, implement concrete facility countermeasures, diversify
discharge of toxic substances resulting from damage to OSG plants
production sites, and thoroughly control hazardous and other such substances
Increase in air conditioning energy
Deterioration of working environment

10,000High

Increase in development and manufacturing costs

Decrease in demand for tools for gasoline-powered vehicles△100%
targetachieved

Moderate ・Adopt high-efficiency air conditioners
Moderate ・Promote labor savings and automation at factories (automated measuring and packaging),
promote safety and health management, improve thermal environment inside factories
Production shutdown due to shortage of electricity or water Moderate ・Introduce in-house power generation facilities and storage batteries, and reduce electricity
and water usage at factories and offices

S T E P1 Reduce (Save Energy)

S T E P2 Create

S T EP3 Utilize

Greater energy savings in manufacturing process

Utilize clean energy

CO2 free electricity

・Install high-efﬁciency equipment and implement initiatives to enhanceenergy efﬁciency during production at in-house factories
・Invest in high-efﬁciency equipment achieving a sufﬁcient level of energy
savings to realize carbon neutrality
・Research and develop new processes for saving energy

・Introduce solar power
generation facilities, etc.
・Install facilities and implement
initiatives to convert electricity
used during in-house
operations to clean energy

・Purchase electricity sourced
from renewable energies
・Consider carbon offset
platforms*Timeline ranging from 2030 to 2050 is assumed.

33

OSG Re port 2022

OSG Repor t 2022

34

Work-Life Balance

Foundation for Value Creation

ESG Management

Society

OSG Group fulﬁlls our social responsibility to a broad range of stakeholders, including customers, partners, employees, communities, and others.

OSG Group s Ideal Employee and Human Resource Development
Seven Qualities Required of OSG Employees
・Global outlook
・Communication
・Innovation

・Spirit of challenge
・Leadership・Conceptualization
・Followership

Roles, responsibilities, and required abilities
Supervisors

Advanced specialized occupations[Rank-speciﬁc training & seminars]
Executiveofﬁcer[Rank-speciﬁc skill improvement training]Ofﬁce manager
e-Learning courses

GeneralmanagerManager●Management theory●Company management●Marketing●Training subordinates Etc.

Sub-section head &ofﬁce manager

Sub-section heade-Learning courses●Presentation skills●Instructing subordinates●Coaching●Interpersonalnegotiating
Etc.

Team leader(Group training)●New manager training●Management training●Special safety training

Ability to direct & lead

●Mastery of specialized
knowledge & proﬁcient skills
5th grade●Directly contributing tosubsection policies●Mastery of specialized
knowledge &4th grade
proﬁcient skills●Directly contributing
to team policies

2nd grade ●Independently performing basic duties
New employee orientation training &New
employee mid-career hire orientation training●Basic job performance

UP !

10%
5%
0

10%

5%

2022

2023

2025

2024

[FY]

I took childcare leave because I wanted to be able to spend time with my child, if at all
possible, during that once-in-a-lifetime young age. Initially, I was uneasy about leaving
work to my coworkers. However, as the days went on, I realized how difﬁcult housework
is and my respect grew for those who have experienced raising a child. More thananything though, I was able to spend an enjoyable time with my child. I feel that moremen should take childcare leave.

Supervisor scomments

Childcare leave is different from taking leave for an illness or other situation that must be immediately addressed. With childcare
leave, plans can be made in advance. Even so, it is actually quite difﬁcult to hand over your duties to a coworker. For that reason, I
felt it was necessary to write meeting minutes of even the small meetings on a regular basis, and to assign a person to assist ineach task so that team members have a general understanding of the work that he performs in the workplace.

Teamwork skills

Set out on the theme of creating a starting point for growth in the workplace, OSG Group s new employee training
program provides introductory as well as specialized job-speciﬁc training. We have a curriculum that emphasizes amindset for new employees, who just graduated from high school, to help them become mentally prepared andbehave as working adults, and to provide new employees just out of university with the mental preparedness andknowledge to produce results in business. The specialized training is arranged according to department assignment
and focuses on trainees acquiring practical skills.
The program also incorporates a lot of group work, which requires dialogue and cooperation, to improve
employees communication skills and build human relations during the same time interval. This also serves as a ﬁrst
step to creating a personal network. By providing optimal training tailored to the certain age of new employees as wellas the departments to which they are assigned, the program provides a boost to all personnel enabling them to grow.

My motto is never extinguish the ﬂame of human resources development. I have been involved in developing
OSG s human resources for six years. In recent years, I feel there has been a shift from the acquisition of skills andknowledge through experience to their acquisition through training and education. All the same, the way in which
we might best interact with other people is something that manuals are unable to help us resolve. The goal of all
human resources training is dialogue. I hope that, as a result of the training, our employees are able to take withthem one thing that they have learned, put that into practice, and recognize its value. Employees who aresubordinates are always demanding the three desires: to be seen, to be heard, and to be understood. The
satisfaction of these three desires fosters the initiative to grow as a team.
While allowing for diverse values in work and private affairs, I believe a supportive group helps all membersfunction as a team to achieve their goals. That is what human resource development is all about. We will continue
to take up the challenge of developing the OSG Group s human capital with the goal of connecting training toevaluation.

Human Resources & Human Resources Development Team Human Resources & General Affairs Department Kenichi Makaino

OSG Re port 2022

March 31, 2025 target:10% of men take childcare leave(5% as of November 30, 2022)

General occupations

New Employee Training Program

35

Comments bymale
employee onchildcare leave

3rd grade ●Independently performing advanced duties

Employees of all grades(environment, safety, harassment, compliance, leadership training, communication training, on-the-job training, etc.)

VO I C E

Targets in line with the Act on the Promotion of Women s
Active Engagement in Professional Life and Act on Measures to
Support the Development of the Next Generation

One work-life balance program participant's story

Management candidate
e-Learning courses●Evaluation & feedback●Communication●Harassment prevention●Mental health●Stress checks, etc.

intentions of our male employees who have welcomed a new baby about whether
they would like to take childcare leave and provide individual consultations to those
who so desire. We sense there are actually many employees who have concerns about
a decrease in income, the effect their leave will have on the workplace, the impact thattaking leave will have on their evaluations, and so on. Having ascertained the current
state and issues faced in taking leave, we are committed to creating an environment
where people who desire to take childcare leave may easily and conﬁdently avail
themselves of this program with the understanding of their workplaces.

9th grade

Abilities & skills

Management skills

In 2013, OSG Group revamped our personnel system
to reﬂect our belief that our employees possess
unlimited potential and to put in place a structurethat aims to develop our human resources in a waythat maximizes corporate value while also fostering a
corporate culture which emphasizes personal
development and the spirit of challenge. Building on
our human resource development philosophy, weare striving to enhance and improve our employees'
capabilities so they develop in line with the sevenqualities required for advanced manufacturing.
To develop leaders capable of adapting to a time
when working styles and ways of thinking areincreasingly diverse, we provide e-learning courses
on communication, management, harassment, andattentive listening. This is training that our personnel
can put to use to better perform their jobs.
In addition, we also have more than 150 distancelearning courses for self-development. Group trainingis also offered to help our employees understandwhat kind of personnel OSG views as ideal as well as
requirements for promotion. These are part of ourinitiatives for developing the next generation ofleaders.
All of our training aligns in the same trajectory as
set out in our Medium-Term Management Plan and
Human Resources Development Policy. It is our aim
to establish a continuing program for humanresources development.

The work-at-home system, which the OSG Group launched in April 2022 as a means for
improving work-life balance and a business continuity planning measure, is gradually
being utilized.
In addition, the change in the minimum segment of time available for paid leavedown to one-hour units has helped employees use their paid leave for a wide range ofactivities such as medical appointments, personal errands, and, of course, child andfamily care. The scope of memorial leave (birthday leave) that employees may take has
also been expanded to include up to four weeks both before and after an employee s
birthday for a total interval during which memorial leave may be taken of eight weeks.
This has made it easier for employees to avail themselves of such leave.
In April and October, sections of the Revised Act on Childcare Leave, Caregiver
Leave, and Other Measures for the Welfare of Workers Caring for Children or Other
Family Members took effect. The establishment of paternity leave has helped balancefamily and work, as well as broaden the way in which dual-income households work,
take time off, and provide elderly care in our aging society. Currently, in comparison to
a 100% rate for women taking childcare leave, that percentage is still low for men at
only 5%. OSG has been working to promote childcare leave among men so that a rateof 10% can be achieved by 2025.
The ﬁrst step in this effort has been to provide more information in our in-house
publications about the merits of taking childcare leave, the period during which it isavailable, how to apply, as well as beneﬁt payments. We are committed to letting all
our employees know about the childcare leave program. We make sure to conﬁrm the

Expansion of conditions for utilizing accumulated annual leave
We have set a goal for both labor unions and management to recommend our
employees take at least 70% of their annual leave each year, and we have been striving
to increase that percentage. We have set up a system for accumulating annual leave thatwould lapse and changed the maximum number of days employees may accumulate
from 30 to 40. In addition, we have expanded the conditions upon which this system
may be utilized to upgrade and expand the framework so that employees may utilize
their leave to take care of family members as well as non-work-related illness or injury.

Percentage of annual paid leave taken (%)
［%］
100
75

71.6

73.6

72.8

69.1

2018

2019

2020

2021

73.8

50
25
0

2022

[FY]

Careers and Reskilling
The OSG Group promotes reskilling so that our employees learn theknowledge and skills necessary for operations, which allows for theappropriate personnel to be assigned to the appropriate position. Our
aim is to establish a system that better links employees careers andbusiness operations in order to improve the productivity of each andevery individual.
OSG Group administers a career planning program so that ouremployees themselves think about their own careers and periodicallysubmit their aspirations detailing where they want to be in three, ﬁve,and ten years. Along with a certiﬁcation incentive program throughwhich we support our employees in improving the skills that will help
them prepare to boost their own careers, we are seeking to create a
distance learning program that functions interactively and allows
employees to choose what they want to learn to improve themselvesfrom among 171 courses, as well as to create a system helping
employees to ﬁnd fulﬁllment and motivation in their work.

Career Plan Statement System
Career plan requests for●３ ●５ ●10 years later■Leader training ■Overseas assignment■Workplace transfer

Employee database

Certiﬁcation incentive programThis program pays tuition fees and provides grants according to the type of certiﬁcation when an
employee successfully passes an exam for certiﬁcations that OSG recommends employees obtain.
These certiﬁcations are related to operations as well as speciﬁc departments, experience andknowledge regarded as necessary in order to improve employees skills and motivation.

Subsidized distance learning programThis program serves as a tool for employees to learn skills and knowledge on their own and offers 171
distance learning courses. If the employee attends the sessions, obtains a satisfactory grade, and meets otherconditions within the time period designated, the employee is able to receive a subsidy to help with tuition.

OSG Repor t 2022

36

ESG Management

Empowering Women

Society

Health & Safety Management Initiatives: Pursuit of Well-Being
Since OSG declared in 1996 that we will be a health-conscious
company, we have adopted many measures and policies to support
our employees in getting and staying physically ﬁt, balancing both
work and medical treatment, and other issues they face so as to create
an environment where each and every one of our employees is able
to work in good health.
Amid the rapidly changing environment due to the spread of
Covid-19 infections, we believe it is important, in terms of both safety

and health, to work for the well-being of our employees, theirfamilies, our customers, our communities, society, and the earth. So,with that in mind, we have promoted safety and health management.

Managerial System Promoting Safety & Health Management
Highest-Ranking Executive
President & Representative Director

Safety & Health Promotion Secretariat
Safety & Health Promotion Team

Workplace

Safety & Health Management Declaration
OSG will strive to enhance the well-being of our employees andcontribute to building a prosperous future for our employees, theirfamilies, our customers, our communities, society, and the earth.

Safety Management Committee
Health Management Committee

Focused on promoting diversity and inclusion, OSG has set the targets
listed at right pursuant to the Act on the Promotion of Women s Active
Engagement in Professional Life in order to establish an employment
environment where employees are able to balance work and home
and achieve even greater success. Our aim is for each and every
woman employee to work passionately and assuredly and, thereby,demonstrate her abilities to the maximum and advance her career.
In addition, OSG Group provides all employees with training on
women s health as well as maternity and paternity harassment withthe objective of enhancing employee s knowledge about these issues
and facilitating harmonious communication in the workplace.
Our Medium-Term Management Plan sets out policies that embody
ESG management. We appointed eight women to serve as membersof the Sustainability Promotion Ofﬁce with the hope that theiractivities will pioneer initiatives in this area.
The OSG Group will be proactively hiring women, ascertaining anddisclosing the actual state of such hiring as well as awareness of
women s activities, communicate this information within thecompany, and take the initiative to provide relevant training.

Target in line with the Act on the Promotion of Women s
Active Engagement in Professional Life
March 31, 2025 target: Women occupy 7% of subsection
chief positions (4.06% as of November 30, 2022)

UP !

10%

7%

4.06%

5%
0

2022

2023

2024

2025

[FY]

4.06

［%］
4

Women Employees & Managers[Number]
400
300
200

3.3

3.28

2.66

2.66

324

333

3

345

329

2

344

100

1

0

Safety recognition training

Special training

Trafﬁc safety patrol

2018

New employee safety training

2019

2020

No. of women employees (left)

2022

2021

0
[FY]

Ratio of women managers (right)

SafetyReturning homefrom work as
healthy as you
arrivedin the morning

Company
Initiatives
HealthCreating anenvironment where
employees may
perform theirwork in good healthboth mentally andphysically

VO I C E
Trainees experience hazardous situations
to stimulate greater safety awarenessStatutory training required forwork

Trainees are educated about trafﬁc safety
for employees and communities

New employees learn safety basics

Easily-accessible health consultation centers

Combating Covid-19

Healthy meals offered

Promoting communication

Labor Affairs Team Human Resources & Labor Affairs Group Human Resources & General Affairs Department
Management Planning Department Sustainability Promotion Ofﬁcer

Staffed by occupational health physicians,
counselors, and healthcare personnel

Transformation in Greater safety awarenessemployees
Healthier both mentallyand physicallyattitudes

Workplace vaccination programfor peace of mind at work

Optimal working experience
Pro-health sensitivity

Balanced healthy meals offered
at company cafeterias

Employees and their families take partin welfare and beneﬁt programsHigher job satisfaction
and more fulfilling life

Well-being

Sustainable Growth of Employees, OSG, and Society
Initiatives Upholding Respect for Human Rights
OSG Group Human Rights Policy
In March 2022, we established the OSG Group Human Rights Policy. The
OSG Group and all employees both in Japan and abroad shall performtheir work with respect for human rights and be committed to following
the letter as well as the spirit of all relevant laws, regulations andinternational rules, while taking a proactive approach to the creation of asustainable society with sound values. We ensure a work environmentthat will neither offend nor discriminate by race, belief, skin color, sex,
religion, nationality, language, physical appearance, wealth, or birthplace.

37

OSG Re port 2022

It was my feeling that sustainability promotion operations require one to look at the company from a more objective
standpoint than I had imagined and an understanding of operations in a broad range of areas is required. I havebeen able to consider the roles of a variety of departments from perspectives different from those I had ever taken
before. This experience has been very inspiring. Having taken childcare leave and returned to work on two separate
occasions, I am still raising my children and the leader of the labor team that supports our employees.
I want to make use of my experience balancing both home and work to implement activities that will broaden theplaying ﬁeld for women in a unique way at OSG, while also exchanging views with other women team members ofa broad range of ages actively working in a variety of different departments.

To promote and improve human rights awareness, we raise humanrights issues in our in-house newsletter and make every effort to prevent
such problems from arising in our work environment. In addition, allemployees undergo harassment prevention training so that such
instances may be prevented. A special ofﬁce has been set up to receive
consultations, complaints, and provide other services relating toharassment, and we are striving to further strengthen our consultation
system so that we are able to respond quickly to such instances.

Yuko Minamoto

Disability Employment Initiatives
To further promote employment of people with disabilities, OSG
established a special subsidiary OSG Active Co., Ltd., the ﬁrst of its kindin the cutting tool industry, in December 2022. We have always
maintained our statutory quota. Now, with the establishment of thisspecial subsidiary, we have created an environment that sets working
hours and conditions in a way that best suits the abilities of eachindividual so that person feels the environment is more conducive tohelping him or her perform the work.
At OSG, all employees work together regardless of their disability.
Depending upon the situation, some employees may require certain
considerations. However, with all team members understanding andassisting the other members, everyone is able to play an active part asa member of the team. Our aim is to create an environment where
people with a disability are able to be a dynamic force in theirrespective workplaces, shine in their achievements, and feel joy intheir accomplishments.
In addition, the special subsidiary OSG Active Co., Ltd. partners with
community social welfare organizations and government institutions.
We cooperate in promoting employment for people with disabilities
throughout the community by arranging activities and lectures topromote such opportunities as well as tours of our facilities so thatpeople may see how all of our employees work. With the statutory
quota to be raised from the current 2.3% to 2.5% in 2024 and then to
2.7% in 2026, the OSG Group will proactively promote community andsocial contributions premised upon our social responsibility to achieve
and maintain the statutory quota.

Percentage of Employees with Disabilities
［%］
4
3

2.2

2.6

2.2

2.8

3.1

3.0
2.2 2.6

2.3

2.3

2
1
0

2018
Statutory quota

2019

2020

2021

2022

[FY]

OSG Group hiring rate

OSG Repor t 2022

38

ESG
ESG経営
Management

QC Circles

Society

OSG promotes QC Circle activities to help each of our employees improve their problem-solving
abilities. In addition to enhancing these abilities, the QC Circle also aims to improve individuals
communication abilities by working as a team. Within the Manufacturing Department, QC activities
are held with the aim of enhancing productivity. In addition, the QC Circle s objectives are also tofacilitate interdepartmental activities and rollout these activities to other departments and business
units. A company-wide QC Circle Tournament is also held on the theme of solving problems as ateam where teams present the results of their efforts.

Commitment to Customer Satisfaction
The OSG Group not only regularly holds in-person seminars, butalso online seminars, which allow people to join in fromanywhere. The seminars help us hear and understand customer
satisfaction as well as any comments or concerns from surveys
completed after the seminar. These customer comments are put
to use in improving the seminars, constantly enhancing quality,and developing products. In the future as well, we will be mindfulof providing content during in-person seminars that is bestexperienced in a real environment, and harnessing the advantagesof digital communication during online seminars as we strive tooffer information in a way that is best tailored to our customers.
Our Communication Dial service responds to more than 100
telephone inquiries from customers every day. These queries
range from basic questions to speciﬁc and highly-technicalinquiries relating to actual machining processes. Depending on

VO I C E

the nature of the inquiry, it may be necessary to check with thedesign and development divisions or contact the relevant sales
team to arrange a visit to the customer's site. We are committed toproviding the best service tailored to each individual customer. In
addition, we monitor the percentage of inquires handled, andappropriately staff Communication Dial so that our customers do
not have to wait for answers to their questions.
We have also developed a system to receive customer queries
through an online chat system. Our aim is to increase customer
satisfaction by allowing customers to easily contact us either byphone or online. Communication Dial will continue to evolve
based on our Customer First spirit and a commitment to building
a sense of assurance that OSG's Communication Dial is always
there with a solution to any queries when a problem arises.

The OSG Technical Consultation Service receives many questions every day. These range widely from thedimensions of thread standards or end mill cutting conditions to selection of the optimal drill. In addition,
callers experience ranges from new employees ﬁrst using a certain tool all the way up to the veteranemployees with 50 years of machining experience.
We are always trying to anticipate what sort of problem a customer is experiencing now and what is it thatthey want to know. We do our best to provide the answer that they are looking for. This is also a very valuable
opportunity as it provides real feedback from the ﬁeld, detailing good and bad points about using OSG Group
tools.

Customer-First Promotion Team Planning & Promotion Group Global Marketing Department

Mikayo Kondo

Supply Chain Management
As an essential player contributing to the global manufacturing industry, the OSG Group implements initiatives to provide solutions tohuman rights, environmental, and other challenges as well as to fulﬁll our social responsibility across the entire supply chain.

Establishment of CSR Procurement Guidelines
The OSG Group established the OSG Group CSR Procurement
Guidelines to serve as principles governing conduct as relates toour basic procurement policy. We also share these guidelines with
our suppliers and pursue transactions in accord with the guidelines.
So that both the OSG Group and our suppliers fulﬁll our social
responsibility together, we have set out the nine items at right andconstructed a supply chain across which there is accountability.

・Governance・Quality/safety

・Human rights

・Environment/biological diversity

・Labor/safety & health・Information security

・Fair corporate activities

・Co-existence withlocal communities

・Supply chain/conﬂict minerals

Guideline-Based Sustainable Procurement
In 2022, the OSG Group conducted a CSR self-assessment survey,
which was based on our OSG Group CSR Procurement Guidelines.
The purpose was to ascertain the status of CSR initiatives acrossthe supply chain as well as have suppliers develop a better
understanding of the OSG Group s CSR procurement approachand efforts. We are enhancing communication with our suppliers
so that together we promote CSR activities resulting in asustainable society.

CSR Self-Assessment Survey

Average score

A survey was conducted of OSG Group s principal suppliers in Japan to better understandthe status of such efforts.

・Time frame: July-September 2022

Quality Management System
OSG received our ﬁrst ISO 9001 certiﬁcation, an international
quality management standard, in 1998 for our Yana Factory. Since
then, we have broadened the scope of applicability and continue
to receive certiﬁcation today for all processes, including for our

OSG Quality Slogan

Quality Policy

We put quality ﬁrst and earn the trust and satisfaction of ourcustomers through our exceptional products and services. In
order to maintain this level of service, we will continually
make improvements to enhance the effectiveness of ourquality management system.

1. Offering the best quality that satisﬁes our customers and society
2. Promoting standardization of operations
3. Preventing progression of faulty products
4. Shipping products on schedule
5. Improving the quality control circle and 5S methodology

OSG Quality Certiﬁcation System
We have established our own quality certiﬁcation system toensure consistent quality, and strive to maintain and improve
quality at our group companies in Japan and overseas. The quality
certiﬁcation system is a system to certify that quality managementfrom receipt of raw materials (or components to bereconditioned) to product shipment and after sales service isequivalent to that of a mother plant managed by OSG Japan.
Evaluations are conducted by certiﬁed quality auditors from OSG
Japan in accordance with the Three Reality Principles ("going on

39

OSG Re port 2022

site," "knowing the situation," and "being realistic"). The Systems
are in place to ensure that we assess that the quality required ofcustomers is consistently delivered as well as our employees
ability to correctly evaluate products. This is done through quality
audits based on evidence submitted through communication withthose in charge and those carrying out work.
We will continue to further expand these activities in order toensure that OSG's standards of manufacturing are maintained at
our group companies around the world.

Local communities

100%
75%
50%

Supply chain

・Target: 117 key suppliers of raw and other materials
key plants in Japan. Also, in 2018, we acquired JISQ 9100
certiﬁcation, a quality management standard to which particularrequirements have been added for the aerospace industry. We willcontinue our efforts to obtain even more certiﬁcations.

Case presentations by QC Circle
promoting better quality control

Corporate
governanceHumanrights

25%

Labor

0%

・No. of responses: 96 companies (response rate: approx. 82%)
The survey was analyzed and evaluated, and feedback provided. We will continue toimprove the survey, giving consideration to expanding the target range as well as therevising survey questions.

Information
security
Quality & safety

Environment

Fair corporate
activities

Corporate Philanthropy
Developing Young Skilled Workers with the Community Skilled Worker Utilization Project for the Future of Manufacturing
OSG Group was selected to participate in the Community Skilled
Worker Utilization Project, which is administered by Toyokawa City,
to help develop human resources who will lead the manufacturingindustry in the future so they may acquire certiﬁcation with guidance
offered by skilled workers in the community. OSG dispatched three ofour experienced personnel to serve as instructors at Toyokawa
Technical High School. These three provided guidance to students
with the goal of having them successfully pass the Engine Lathe Grade

3 Exam. They taught the students about work safety, time-saving
hints, as well as points to keep in mind to achieve greater efﬁciency
and precision, and had the students practice mostly machining work.
The way the students eyes lit up as they trained was quite impressive.
The students also asked questions about cutting tools and what it islike to work in this machining profession. The OSG Group encourages
the growth of our younger skilled workers. They are the ones who will
eventually sustain the manufacturing industry in the future.

Contributions to Local Communities
On days that end with a zero each month, members of the OSG Safety and HealthCommittee at each business ofﬁce and community crossing guards conduct safety patrols
to prevent trafﬁc accidents as well as protect all important community residents and our
employees. These safety patrols are part of a campaign to end trafﬁc accidents and thereby
realize a safe, peaceful, and pleasant transportation society that values human life.
Community Skilled Worker Utilization Project

OSG Repor t 2022

40

Society

Roundtable Talk with OSG Junior Employees
feels comfortable working somewhere, then that person is more likely to
be enthusiastic and more productive. How do you feel about the workthat you perform day-to-day?

Employees Views on Working at OSG
One of OSG Group s material issues is to develop a rewarding workplace environment.
Our aim is to create and maintain an environment in which each and every employee can ﬁnd pride and fulﬁllment anddemonstrate their abilities to their full potential as they continue to take up the challenge of breaking out and going
beyond what they ve ever done before. This will help us to achieve our long-term vision as laid out in our Medium-Term
Management Plan Beyond the Limit.
For this roundtable talk, we brought together ﬁve of OSG s junior employees to talk about what motivates them, theculture of challenge, issues they are facing, and other topics.

Ito：A work atmosphere in OSG is excellent. Occasionally, my supervisorand senior coworkers have given me candid advice. No one has ever said
anything unreasonable. There is good communication so that other
employees even listen to the opinions of younger employees and support
them. One of the attractive points of OSG is the close working relationshipthat employees have with department and section managers. Even
President Osawa is approachable and friendly.
Y. Sugiura：I feel a sense of achievement when I see the machines lined
up, which I myself worked on, on the manufacturing floor of a plant. To
efficiently design machinery, I think it s also good to have a flextime
system where employees are able to pretty much freely determine thehours when they will work. A system where employees are able to set
their own their working hours encourages a positive attitude among
employees. In terms of health also, I appreciate the employee cafeteria,
which serves inexpensive and delicious meals.
K. Sugiura：I am very happy that the parking area is close to the office.
The Design Center also has good communication. The department andsection managers as well as regular employees all have their desks on
the same floor, which creates an environment where it is easy toconverse. OSG s operations are mainly based in eastern Mikawa, which
provides a close lateral link between design and production that makes
it easy to perform the work. I have also been impressed by thecompany s recent promotion encouraging male employees to takechildcare leave, which adds to the wealth of employee benefits that thecompany provides.
Tanaka：Because production lines operate with three shifts a day, factories
have not adopted flextime. Sales teams need to coordinate theirschedules with customers business hours. There are other disparities interms of operations among the different departments, but the system of
remote work from home has really helped. If the weather forecast for
tomorrow is snow, then I will arrange my schedule to work from home.
Now I m responsible for work that I didn t have a chance to try in myprevious job. This environment where there are new challenges makes
the work very fun and every day fulfilling.

Masaki Ito

Ofﬁce,( Toyokawa)
Sales Dept.

Keiichi Sugiura

Design Team,( TapDesign
Center, )Ayumi Sawano*

Yusuke Sugiura

Machine Design Team,( Production
Technology Dept. )Aiko Tanaka

Development Team, Personnel & Labor Affairs Group,
Team, Accounting Group,( Personnel & Human Resources) ( Finance & Accounting)
Human Resources & General Affairs Dept.
Accounting Dept.

Sawano：I am in charge of recruitment and training on the Personnel &Human Resources Development Team in the Human Resources & General
Affairs Department. I joined OSG right after I graduated in 2015. What
attracted me to OSG was how the company s organization operates with
its focus on people, its many fascinating individuals, and its employee-friendly
reputation. To start off, could I ask each of you to introduce yourself?
Ito：I work in sales at the Toyokawa Office. Since I graduated from a
university overseas, I wanted to use English and work in foreign country.
That is why I joined OSG right after I graduated in 2017 because thecompany has expanded its business globally. I want to take up thechallenge of working overseas once I have built up not only myknowledge of tools, but also gained broad understanding and experiencein OSG s business.
Y. Sugiura：April 2023 marks my eighth year with OSG. My firstassignment was the Manufacturing Technology Section where I worked on
carbide end mills. I m interested in machinery design. After communicatingthat interest in my career plan, I was transferred to the Machinery

41

OSG Re port 2022

Sawano：OSG helps people who are taking up the challenge of realizing
the company s long-term vision. Could you please share a challenge thatyou have or would like to attempt?
*Facilitator

Department (presently, the Production Technology Department), which
produces machines for use within the company.
K. Sugiura：I joined OSG right after I graduated in 2017 and I am currently
doing tap design work at the Design Center, which is part of the OSG
Academy. I wanted to improve myself, so I have been temporarily
assigned outside OSG to an automobile manufacture where I have gained
good experience as a tool technician. I was born and raised in Toyokawa.
When I interned at OSG, I really liked the academic and home-likeatmosphere. That is what prompted me to apply to work at OSG.

Tanaka：My department provides an environment where we can take up
new challenges on our own initiative, negotiate with other departments,
and go about performing our work as we see best. Take, for example, thetaxation system promoting carbon neutrality which is being spearheadedby the Ministry of Economy, Trade and Industry. OSG is able to enjoy tax
benefits by coordinating a variety of departments. I feel OSG provides aculture that supports its employees, prompting them to take the initiativein their jobs.
Ito：Just as the supervisors and senior employees that I respect have done,
I would like to have the experience of managing my own team. Once I
have acquired the confidence of a full-fledged employee and able toperform that work, I would like to try working overseas.

Tanaka：I joined OSG mid-career in October 2019. I am doing tax-related
work as part of the Finance & Accounting Team in the Accounting
Department. In my previous job, I was doing accounting at a company in
Kanagawa Prefecture where I am originally from. I wanted to broaden mycareer, gain experience and grow, so I decided to move away from myhometown and find a job.

Y. Sugiura：Last year, I was responsible for developing loading equipment
for production facilities. It was the first development project that I everattempted, but I was able to complete it thanks to the help of everyone
around me. Now, we need to lower production costs also to achieve ouraim of 15% ROA on an operating income basis as laid out in our
Medium-Term Management Plan. I think we will be able to increase thenumber of development projects for reducing manpower and labor, so I
want to volunteer to apply myself to achieving some of those tasks.

Sawano：I think if a person derives satisfaction from his or her job andK. Sugiura：OSG is aiming to achieve a 40% share of the global tap market

by 2027. To reach this goal, we need to expand sales of specialty products
while also increasing the rate of repeat customers. I hope to contribute toaccelerating output and enhancing production efficiency with a systemthat manages specialty products, which are outside of the design
management system, in the same way as that repeat standard products
are administered.
Sawano：Lastly, I would like to ask if you see any issues that OSG is facingor have any proposals for how to do something better.
Ito：The environment at OSG is now more conducive to male employees
taking childcare leave. However, at the Toyokawa Office, it is just myself
and the office manager. So, even though such a program is available, I
think it would be difficult for me to take leave. Even at offices where there
are many personnel, there is always the question of who s going to cover
for an employee taking childcare leave. So, I hope the company would
also consider creating or somehow putting in place a better system tosupport that.
K. Sugiura：If you take childcare leave, you only receive about 70% of yourbase pay. If the employee is young and his partner is a full-timehousewife, that would put probably strain their livelihood. There haven t
been any cases of women in sales taking maternity and childcare leave. I
wish the company would present its vision for how an employee could
take childcare leave. Also, if the company instituted an open recruitment
system as part of the Career Plan Statement System, it would probably beeasier to find and place the appropriate personnel in the appropriate
position.
Y. Sugiura：The Production Technology Department is able to reduce
production costs. However, to do so, a reassessment is needed of current
manufacturing processes as well as the development of production
machinery. Moreover, a change is needed not only in the way we havebeen doing things, but also the way that our employees think. To addressthese changes, I believe it is important for each and every individual tocontinually try new things and the entire Manufacturing Department towork together to advance development of these aspects.
K. Sugiura：At the automobile manufacture to which I have been
assigned, employees have the opportunity to sit down and have a
discussion with their supervisor once a month. I would like OSG to set up
regular opportunities throughout the company for supervisors and theirsubordinates to exchange views. I believe direct discussions withsupervisors would help everyone to become more aware of thecompany s numerical targets and it would also foster a sense of unity
within the organization. In addition, if employees are more aware of andbetter understand the standards by which their performance is evaluated
and what the opportunities for promotion are, then they will understandwhat is being asked of them. This will make it easier to set goals andinspire employees to perform better.
Ito：More and more employees are aware of and understand theMedium-Term Management Plan. OSG now has a strong corporate culture
encouraging employees not to fear failure. More people have becomeaware of numerical targets through the President s talks and othercorporate communications. I myself am also thinking about what I should
focus on as an employee to achieve the targets laid out in the Medium-Term
Management Plan. Still, I feel that these numerical targets are not linked to
employee evaluations or the goals that we need to achieve, so this issomething that we should be more aware of throughout the entire
company. It is also important for standards to be set out for personnel
evaluations. I think it would be effective for comprehensive assessments toinclude supervisors evaluations of their subordinates performance.
Sawano：Thank you very much for sharing your valuable insight today.
This roundtable talk shows once again the employee-friendly atmosphereand open communication at OSG. I hope to take the issues and proposals
that you have made and put them to work to improve the personnel
system with an eye toward making OSG a company where we all growtogether.

OSG Repor t 2022

42

Conversation with OSG Outside Directors and Chairman

Governancesystem, there is also a sense of solidarity within the group regarding
compliance and internal controls. It is also important that President
Osawa and I go out to our local subsidiaries and talk with ourmanagers about OSG s management policies and business plansfrom the same viewpoint maintained by these managers. I believe it
is essential that we have clear rules and straightforward communication with people of different races and cultural backgrounds.

Diversity of OSG s leadership and Board of
Directors
Ishikawa：OSG has two representative directors. As Chairman andCEO, I chair the Board of Directors. Nobuaki Osawa, who is
President and COO, chairs the Executive Committee. It is my role tooversee the execution of business operations and determine thegeneral direction in which OSG is oriented. President & COO Osawa
has all authority for executing business operations. There may also
be companies where approval by the chairman is necessary when alarge amount of money is at stake, but the authority and decisions
regarding business execution at OSG are centralized in the
President & COO. OSG is structured in a way that clearly delineates
operational execution and oversight, so this makes it less likely
mistakes will occur.
Takahashi：The positions of CEO and COO vary from company tocompany. However, if their respective authorities are not clearlydeﬁned, then internal communication might get complicated. At
OSG, these two positions function like wheels on a car supporting
each other based upon a relationship of trust. That is one reason I
believe OSG practices sound management.
Outside director

Chairman & CEO

Outside director

Chair, Nomination and Compensation Committee

Chair, Board of Directors

Deputy chair, Nomination and Compensation Committee

Yoshiyuki Sakaki

Norio Ishikawa

Akito Takahashi

Roundtable Discussion with OSG Outside Directors and Chairman

OSG Governance Reforms and Functions
Exercised by the Board of Directors
Governance reform initiatives andachievements
Ishikawa：Since 2016, it has been our aim to construct a structure
for governance beﬁtting a listed company while also maintaining
the unifying force demonstrated by our founder. In 2016, ten of the
fourteen seats on the Board of Directors were held by insidedirectors. Today, there is a total of seven directors, of which four are
independent outside directors, constituting a majority. This has
greatly enhanced the independence of the Board of Directors.
Sakaki：The governance reforms that I have participated in so far
have been from a position outside the company. Now, outsiders
comprise a majority of the Board of Directors. Five of the sevenmembers are non-executive directors. The Nomination andCompensation Committee is comprised of ﬁve non-executive
directors, and both the chair and deputy chair positions are held byoutside directors. Neither the Chairman nor President are members

43

OSG Re port 2022of the Nomination and Compensation Committee.
Takahashi：Another particular feature of OSG s governance is its
highly-effective global governance, which encompasses its
overseas subsidiaries. When we have questions or don t understandsomething, outside directors take a proactive stance in asking
employees at OSG Group s overseas sites. It is probably tedious tohave to respond to each and every one of the crazy questions posedby outside directors, but I believe such dialogues also serve aschances for us to discover risks and opportunities that may havebeen overlooked. I have a strong sense that the OSG Group intends
to exercise management in a way that harnesses outside
viewpoints, so we outside directors are able to conﬁdently exercise
our oversight.
Ishikawa：We are constantly reﬁning the OSG management system
which applies to group companies. Financial data of groupcompanies is checked monthly, so investment decisions can bemade quickly. In addition to maintaining a management accounting

Sakaki：When the previous chairman was CEO, Norio Ishikawa
served as President & COO, so he has built upon that experience as
he has worked to strengthen OSG s governance. A governancesystem with a Board of Directors on which outside directors hold amajority of seats is the best framework for OSG at this time. In termsof the diversity of the Board of Directors as well, we have worked on
the challenge of ensuring diversity while also scaling down thenumber of directors. Although the current outside directors also
provide gender diversity, I feel that, in the future, it will be more
important to maintain the perspectives of technological development
and global management strategy, which foster innovation in the
manufacturing industry.
Takahashi：I also believe that OSG ensures a healthy diversity evenas there are naturally certain limits on the number of directors.
When I joined discussions among the outside directors, I have often
been inspired myself. So, I think that we have been able to provide
multifaceted knowledge to the business execution side. I think that,as Yoshiyuki Sakaki pointed out, skills in global management aswell as technology and global development, both of which spur
innovation, will be necessary components in the future. Options arealso available for achieving these perspectives, such as having atechnical advisor, who is more closely involved with actual
development, provide expertise about product development. With
regard to global management, OSG might need to further expand
the pool of next-generation management resources, mainly
individuals with extensive overseas experience.
Ishikawa：As our business expands further overseas, it will be vitalfor us to have expertise and insight of management from overseas.
With only Japanese people coming up with new ideas, there is thelikelihood that we will make mistakes characteristic of the Japanese.
So, we have created a system for having talented people fromoutside the company at our local subsidiaries provide oversight ofmanagement at our group management companies in Europe,Asia, and the Americas. Although it is also important for the Board of

Directors of the OSG Headquarters be globally-minded, we alsoneed to ﬁnd ways to incorporate an outside perspective into thecomposition of the directors at our group management companies.
Takahashi：OSG has set up a Nomination and Compensation
Committee, which is comprised mainly of outside directors who
deliberate queries submitted to the committee by the Board of
Directors. The compensation scheme sets out a clear formula for
calculating performance-linked compensation. This has also been
made available publicly, thereby eliminating any arbitrariness. We
recognize that we will need to deliberate whether to add capital
productivity as well as ESG-related metrics to the standard forassessing performance-linked compensation. I believe it isimportant for nominations as well that there be proper participationin the nomination process, including taking a proactive stancetoward posing questions when something feels amiss about aselection presented by the executive leadership.
Sakaki：Prior to establishment of the Nomination and Compensation
Committee, it was difﬁcult for outside directors to participate in theprocess of determining compensation and nominations. I feel weare now able to provide accountability to stakeholders by having an
outside perspective in the process rather than simply allowing the
top people to exercise their choices as they see ﬁt. I also hope wewill be able to engage in more substantial discussions about plansfor developing successors and expanding the pool of humanresources for the next generation of management.
Ishikawa：We have also put inquiries to the committee about
compensation amounts and performance assessments of executive
directors in addition to the CEO and COO. There are three metrics
that serve as the standard for assessing the performance ofexecutive directors. They are the sales growth rate, amount ofoperating income, and the rate of operating income. We hope thatcommittee members will discuss approaches to compensation andevaluation metrics in a way that keeps pace with changes in thetimes. What are your thoughts about the functions and roles of
Audit & Supervisory Committee?
Takahashi：Because there will always be aspects of what ishappening on the front lines that those of us non-executive
members of the Audit & Supervisory Committee will not be in aposition to directly ascertain, I believe it is important tocommunicate with full-time statutory committee members.
Personally, my focus in on the number and types of reports received
under the whistle-blower notiﬁcation system. It has been pointed
out that a culture of speaking up is not well rooted when it comesto quality assurance problems in the manufacturing industry as
evidenced by those which have surfaced during the past few years.
Don t you think it is important to have a culture in place enabling a
prompt and appropriate response if a scandal arises?
Sakaki：By coordinating information with outside auditors, talking
with full-time statutory Audit & Supervisory Committee members,
and receiving regular reports from the internal audit department,
we have been striving to get a handle on what sort of issues need to
be promptly responded to when something happens internally.
OSG also has more and more sites overseas, so there have beencalls to further enhance internal auditing. Monthly management
accounting data is able to be checked the following month and thishas contributed to enhancing the efﬁciency of internal audits.
Ishikawa：So that the Board of Directors, which is comprised of amajority of outside directors, functions properly, a constant effort isrequired of each and every director. We will continue to reassess theway that governance should optimally be exercised so that we may
meet the expectations of our shareholders as well as all of our otherstakeholders.

OSG Repor t 2022

44

Foun d at i o n fo r V a l u e C r e a ti on

ESG Management

Governance

We will continue to develop a highly effective corporate governance structure and strive to enhance this framework.
■Corporate Governance Structure

Basic Philosophy
Based on our corporate philosophy of maintaining a global presence,
we regard compliance with laws, regulations, and social norms as afundamental part of our management policies, together with fairness
and transparency in our business activities. We also believe thesequalities contribute to sustainable corporate development andenhancement of corporate value. Measures to enhance corporate
governance, including the establishment of efﬁcient and transparent
management organizations, are among our most importantmanagement priorities for achieving these objectives.
One of the ways in which we enhance corporate governance is byraising compliance awareness among directors, executive ofﬁcers, andemployees of OSG and our group companies through dissemination of
the OSG Philosophy and OSG Corporate Code of Ethics, which provide
speciﬁc guidelines designed to raise ethical standards within thecompany.

Reasons for Adopting Corporate Governance Structure
Appointment, dismissal

Appointment,
dismissal
Appointment,
dismissal

Board of Directors<Directors (incl. Audit &Supervisory Committee Members)>

Risk and ComplianceManagement Committee

Management Committee

Reports

Collaboration

Accounting Auditors
Collaboration

Management Audit Section

Directives

AuditsNomination & Compensation Committee

Legal & Tax Advisors

Advice,consultation■Directors Expertise & Areas of Specialization (Skills Matrix)

Kayoko Yamashita

〇
Chair

〇

〇
Deputy
Chair

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

〇

OSG has established a Nomination & Compensation Committee toserve as an advisory body to the Board of Directors. Its purpose is tostrengthen the independence, objectivity, and accountability of board
functions through the appropriate involvement of independent
outside directors and the provision of advice in relation to theappointment of directors, executive ofﬁcers, and other corporateofﬁces and their compensation. The Nomination & Compensation
Committee consists of directors who are also members of the Audit &Supervisor Committee. Four of the ﬁve members arehighly-independent outside directors. In addition, an outside director
chairs the committee.
Persons deemed suitable to be directors of OSG, on the basis of
their extensive experience, advanced knowledge, and high-levelspecialization, are selected and nominated as candidates formembership of the Board of Directors. The Board of Directors makes
decisions on appointments after seeking and receiving advice from theNomination & Compensation Committee.
For details about OSG s process for determining compensation,please refer to the section with that heading on p.48.
Name of committee

Nomination & Compensation Committee

Total members

5Internal directors

1

Outside directors

4Outside experts

0

Chairperson

Outside directors

〇

〇

〇

〇

Diversity

Outside/Independent

〇

〇

〇

〇

〇

GovernanceOutside/Independent
Kunihiko Hara〇

Riskmanagement

Outside/Independent
Akito Takahashi〇
Statutory

Legal affairs〇

International
affairs

COO
Nobuaki Osawa

Finance〇Financialaffairs &accounting

Production &technology〇

Sales &
marketingGeneralmanagement

CEO
Norio Ishikawa

Yoshiyuki Sakaki

Executive
director

Information
gatheringOperational Executive Divisions(including subsidiaries)

Nomination &Compensation
Committee

Internal directors

Independent
auditsReports

Directives,supervision

Outside/Independent

Outside directors

Audit & Supervisory
Committee Section

Appointment,
dismissal

Executive Ofﬁcer

Total of 7 directors (4 outside directors)

Audit &
Supervisory
Committee
memberAudit & Supervisory Committee<Directors who are Audit &Supervisory Committee Members>

Representative director

Takehiro Tomiyoshi

3

Audits, etc.

Sustainability Committee

Board of Directors

4

Appointment,
dismissal

Reports

Audit &
Supervisory
Committee
memberHaving selected to establish an audit & supervisory committee, OSG scorporate governance structure consists of the Board of Directors, Audit& Supervisory Committee, and accounting auditors. The role of the Boardof Directors is clearly deﬁned under this structure. Operational executivefunctions are performed by executive ofﬁcers, while the Board of
Directors is responsible for decision-making and the supervision ofoperational executive actions. To strengthen decision-making functions,the seven-member Board of Directors includes two members who arealso involved in business operations as executive ofﬁcers. The remaining
ﬁve directors, of whom four are outside directors, are also members of
the Audit & Supervisory Committee. The outside directors also make up
the majority of the Board of Directors. By creating this structure, we haveenhanced the transparency and independence of the Board of Directors
and the effectiveness of its management supervisory role, while bringing
in outside perspectives.
In addition, OSG has adopted an executive ofﬁcer system to ensure
effective responses to changes in the business environment, as well as toclarify the roles and responsibilities of the executive organization. The
executive ofﬁcers are solely responsible for the performance of business
operations in accordance with policies determined by the Board of
Directors. They strive to make performance more expeditious andefﬁcient in a timely manner.

Nomination &Compensation Committee

Advice, reports

Directives,supervision

Overview of Corporate Governance Structure

By adopting our present corporate governance structure, we haveenhanced the ability of the Board of Directors to engage inmanagement decision-making and oversee performance ofbusiness operations, thereby improving management efﬁciency andensuring that management decisions are made appropriately andstrategically. The activities of the Audit & Supervisory Committee, of
which four of the ﬁve members are outside directors, include auditing
the company s ﬁnancial position and operations as well as theperformance of duties by the representative director and executiveofﬁcers. All of OSG s four outside directors are independent ofﬁcers as
stipulated in the listing rules. With the ﬁve members of the Audit &Supervisory Committee, including these highly independent outside
directors, also having seats on the Board of Directors, we believe wehave put in place a corporate governance structure that veriﬁes andensures management transparency and appropriateness so as toprovide an environment in which management oversight functions
effectively.

General Meeting of Shareholders〇*As of February 17, 2023

45

OSG Re port 2022

OSG Repor t 2022

46

ESG Management

Compensation for Company Ofﬁcers

GovernanceCompensation Structure

Reasons for Appointment of Outside Directors & Concurrently-Held Positions
Audit & Supervisory
Outside directors Committee member

Yoshiyuki Sakaki

Akito Takahashi

Kunihiko Hara

Kayoko Yamashita

Reasons for appointment〇

Mr. Sakaki possesses extensive experience and broad knowledge acquired over along academic career. He was judged to be someone who would participate inboard meetings from an independent perspective and contribute to corporate
management auditing and supervision. In addition, he is not associated with any
OSG-affiliated company, major supplier or customer. It was deemed that hepresents no risk of conflicts of interest with general shareholders. Therefore, thedecision was made to appoint him as an outside director.

〇

Mr. Takahashi has extensive experience, advanced knowledge, and specializedskills gained through his career as an attorney. As a legal expert, he was judged to
be a person who would participate in board meetings from an independent
perspective and contribute to management auditing and supervision. In addition,
he is not associated with any OSG-affiliated company, major supplier or customer.
It was deemed that he presents no risk of conflicts of interest with generalshareholders. Therefore, the decision was made to appoint him as an outside
director.

〇

In addition to an academic career spanning many years, Mr. Hara has extensive
experience in and knowledge of corporate management. He was judged to be a
person who would participate in board meetings from an independent perspective
and contribute to management auditing and supervision. In addition, he is not
associated with any OSG-affiliated company, major supplier or customer. It wasdeemed that he presents no risk of conflicts of interest with general shareholders.
Therefore, the decision was made to appoint him as an outside director.

〇

Ms. Yamashita has extensive experience, advanced knowledge, and specialized skills
gained through her career as a certified public accountant. As an expert in accounting
and tax affairs, she was judged to be a person who would participate in board
meetings from an independent perspective and contribute to corporate management
auditing and supervision. In addition, she is not associated with any OSG-affiliatedcompany, major supplier or customer. It was deemed that she presents no risk of
conflicts of interest with general shareholders. Therefore, the decision was made toappoint her as an outside director.

Positions held concurrently●Outside Director,
Oriental Consultants Holdings Co., Ltd.
●Outside Director, TOA Oil Co., Ltd.

●Designated Professor,
Future Value Creation Research Center,
Nagoya University,
Graduate School of Informatics●Outside Audit & Supervisory Board Member,
Sotoh Co Ltd.
●Outside Audit & Supervisory Board Member,
FUJI CORPORATIONTo enhance the Board of Directors functions, OSG began conducting
analyses and evaluations of the Board s effectiveness in FY2022.
To ensure this effectiveness evaluation would be objective andtransparent, the support of an external organization was secured andthe evaluation conducted in June 2022. An extraordinary session of
the Board of Directors was held in August 2022 to analyze, discuss,and evaluate the results. An overview of those evaluation results isgiven below.

■Survey■Evaluation Results

Evaluation
methodAnonymous questionnaire

Time frame

Responses received (June 10 - June 24, 2022)

Overview ofquestions●Composition of the Board of Directors●Operation of the Board of Directors●Deliberations by the Board of Directors●Monitoring function of the Board of Directors●Performance of Outside Directors(incl. Audit & Supervisory Committee Members)●Support structure for Directors(incl. Audit & Supervisory Committee Members)●Training●Dialogues with shareholders (investors)●Voluntary initiatives●Nomination and Compensation Committee●OverallEvaluation
method47

OSG Re port 2022

Survey results were consolidated by an externalorganization and then analyzed, deliberated, andevaluated by the Board of Directors.

■Variable Compensation
Starting in the fiscal year ended November 2019, the company has provided variable compensationin the form of profit-linked bonuses in line with the definition of profit-linked salaries as provided in
Article 34, Paragraph 1 Item 3 of the Corporation Tax Act, as well as personal assessment bonuses.

Profit-linked Bonuses
・Eligibility：Managing directors and eligible directors whoare serving as executive officers
・Calculation method：Amount of profit-linked bonus =Consolidated operating income X Rank-based bonus ratio(Table below)
The maximum amount shall be ¥7 million.

Rank-based bonus ratio

Evaluation of Effectiveness of the Board of Directors

Targets■Fixed Compensation
The total amount of fixed compensation is determined within the upper limit definedby a resolution of the 103rd Ordinary Shareholders Meeting held on February 20,
2016. Compensation is set at ¥396 million per year for directors (excluding directors
who are members of the Audit & Supervisory Committee), and ¥84 million per year
for directors who are also members of the Audit & Supervisory Committee.

*As of February 17, 2023

All members of the Board of Directors
2 Directors who are not members of the Audit & Supervisory Committee
5 Directors who are members of the Audit & Supervisory Committee(4 of whom are outside directors)
Total: 7

Compensation for directors (excluding directors who are members of the Audit & Supervisory Committee) consists of fixed basic compensation, variable
compensation linked to business performance, and allocations of restricted stock. Since directors who are members of the Audit & Supervisory Committee are
independent from the other directors and not involved in the execution of business operations, their compensation consists solely of fixed compensation.

The survey responses gave a favorable evaluation to the mannerin which the Board of Directors is expected to operate and its
response to those expectations. There is a recognition that theBoard of Directors has maintained its effectiveness overall.
On the other hand, more in-depth comments were provided
about further enhancing support systems, coordination withinternal auditing departments, sharing details of dialogues withshareholders and other investors, as well as exchanging views
with outside directors. The results shared an awareness that theBoard of Directors faces challenges in encouraging discussion
and further improving the functions that it exercises.

■Initiatives for Enhancing EffectivenessOnce the OSG Board of Directors has taken into consideration thiseffectiveness evaluation and conducted a sufficient review of thechallenges faced, it intends to respond promptly as well as tocontinue to further initiatives augmenting its functions.

Rank

Percentage

Chairman & Representative Director

0.365%

President & Representative Director

0.405%

Managing Officer

0.162%

Personal Assessment Bonuses･Eligibility: Managing officers･Calculation method: Personal assessment bonuses are paid
according to qualitative assessments ofeach person s contribution to businessperformance.
The maximum amount shall be ¥50 million.

■Compensation Based on Allocations of Restricted Stock･Eligibility: Directors(excluding members of the Audit & Supervisory Committee)･The amount of compensation is determined within the upper
limit of total compensation determined by resolution of the106th Ordinary Shareholders Meeting held on February 16,
2019. The maximum total value of shares allocated to eligible
directors is set at ¥200 million per year, and the maximum total
number of the company s ordinary shares that can be issued or
disposed of is 100,000 per year. The purpose of this system is toprovide an incentive to achieve continual improvement in thecompany s performance and corporate value as well as increasevalue shared with shareholders.

Policy for Determining Compensation Packages
The policy for determining the specifics of compensation and other renumeration for directors is drafted by the Representative Director entrusted withpreparing the company policy by the Board of Directors. The Representative Director then seeks and receives advice from the Nomination and Compensation
Committee, which is comprised of a majority of independent outside directors. The policy is decided on by resolution of the Board of Directors.

Process for Determining Compensation■Fixed Compensation and Compensation Based on
Allocations of Restricted Stock

In order to determine the amount of compensation for directors (excluding members of
the Audit & Supervisory Committee), the Board of Directors delegates the Representative
Director to prepare proposed compensation amounts according to standards set by thecompany. The proposed amounts are then referred to the Nomination and Compensation
Committee. Based on the response from the Nomination and Compensation Committee,
the amounts are then finalized by a resolution of the Board of Directors. The amount ofcompensation for directors who are also members of the Audit & Supervisory Committee
is determined through consultation among those directors.

■Variable Compensation
Variable compensation is linked to the company s business performance. The
Representative Director is delegated by the Board of Directors to calculate the proposed
amounts for profit-linked bonuses and personal assessment bonuses using the methods
outlined above. These proposed amounts are then submitted to the Nomination andCompensation Committee. Based on the report from the Nomination and Compensation
Committee, the Board of Directors determines the final amounts to be paid, subject toapproval of the total amount by a resolution of the ordinary shareholders meeting.

The company discontinued payment of retirement bonuses for corporate officers at the conclusion of the 92nd Ordinary Shareholders Meeting held on February 19, 2005.

Basic Policy on Constructive Dialogue with Shareholders
Under the leadership of the Representative Director and President, theManagement Planning Department coordinates the activities of units involved in
IR activities and maintains collaboration among these units on a day-to-day basis.
The Management Planning Department actively responds to requests for IR
information, including telephone inquiries from investors and small meetings.
OSG holds quarterly meetings to present its financial results, as well as half-yearlyfinancial presentations by top management. If necessary, any opinions andconcerns gathered through shareholder dialogue are fed back to the Board of
Directors and senior management by the unit that carried out the IR activities
concerned. When engaging in dialogue with investors, OSG is mindful of the
management of insider information and fair disclosure rules by ensuring thatsuch dialogue, whether at financial presentations or small meetings, focuses on
strategies for the achievement of sustainable growth and the enhancement of
OSG s corporate value from a medium- to long-term perspective.

OSG Repor t 2022

48

ESG Management

Information security

Risk and Compliance

Basic Approach to Risk and ComplianceIn addition to measures to improve management transparency andfairness as well as ensure timely information disclosure, OSG has alsoestablished the Risk Management Rules, which are the framework forcreation of risk management structures to maintain managementsoundness and corporate ethics in the OSG Group. We have alsoestablished the Risk and Compliance Management Committee toensure effective and efﬁcient implementation of the Risk
Management Rules. The committee s role is to formulate basic risk
management policies, as well as consider and implement timelycountermeasures after assessing the signiﬁcance and urgency of risks.

Risk Management Policy

Risk Classiﬁcation

OSG Group strives to ensure the smooth operation of our business by
preventing potential risks from arising, responding to risks that do
occur, and establishing a system for risk management. Risks are
divided into those associated with the external environment, risks
associated with business processes, and risks associated with ourinternal environment. Risks that management recognizes as likely
having a major impact on our ﬁnancial position, businessperformance, and cash ﬂow are listed in the table to the right.

Basic Philosophy

Type of risk
Economic conditions and market trends
Trends affecting procurement of raw materials
Climate change, natural disasters, and pandemics
Stable supply to the market

Business process risks

Employee working conditions
Safety and health management for employees
Information security
Corporate governance and ﬁnancial risk
Retaining and training human resources

Internal risks

Trafﬁc accidents

BCP
OSG Group has formulated a Business Continuity Plan (BCP) in theevent an earthquake strikes along the Nankai trough in the South Sea
or Southeast Sea segment. We have also conducted training andexercises for implementing the BCP. Moreover, even if a large-scaledisaster occurs, a secure living environment with essentials such as
water and food is always assured and ready for employees at each site
until a relief system can be established by the municipal or national
governments.
Additionally, when the Covid-19 outbreak initially erupted in 2020,
we launched response teams to track and interpret information which
was changing daily. OSG Group was quick to respond in Japan as well
as overseas. In our workplaces, we have worked to educate employees
on preventing infection as well as preventing discrimination. We havecoordinated with municipalities, hospitals, and testing centers toquickly respond if someone is infected. At our production plants, we
devised ways to reduce opportunities for contact by changing to a

BCP training

Number of Occupational Accidents

Company-wide Safety and Health Committee

rotating shift system. We have also implemented measures so that ourplant operations will not shut down.
Ordinarily, the Safety and Health Committee, which meets monthly,
identiﬁes hazardous work, locations, and other such risks, and strives
to mitigate the impact of a natural disaster or accident on production.

Health Management
Committee

20

Zero-Accident
Meetings

9
6

Hongu Center

AcademyHonnogahara
CenterHeadquarters

Oike Factory［FY］

Toyokawa Factory

Lost-time accidents

2022

Toyohashi Factory

2021

Shinshiro Factory

OSG Re port 2022

2020

Yana Factory

2019

Ofﬁce Safety and
Health Committee

2018

Non-lost-time accidents

49

Safety Management
Committee
Meetings held when
accident has occurred

60

Meetings held
regularly

15

5

Promotion of Compliance

Compliance Promotion System

Even as we comply with laws, regulations, and other rules, OSG
has appropriately maintained and reassessed the OSG Corporate
Code of Ethics to incorporate training measures when employees
are assigned to design, development, or other compliance-related
units as part of our training as well as professional education for
new employees and others. We have worked to raise our
employees awareness of compliance. Not only do we thoroughlywork to uphold conventions such as compliance, adherence, andrule enhancement, but we also strive through training to imbue asense of pride in our company as well as foster awareness andpromote understanding of compliance in each and every one of
our employees.

Internal Reporting System

25

10business activities should be carried out by senior management andemployees at OSG Group companies and how they should conduct
themselves in order to ensure the prompt and appropriate
implementation of fair and appropriate practices. The latter is a detailed
code of conduct to ensure implementation of business ethics norms inbusiness activities carried out by senior management and employees at
OSG Group companies.

Reports & approvals
Board ofDirectors

Risk and Compliance Management Committee(meets quarterly)

Chairman

Chair
Members

President

Secretariat
Agenda: President: Directors responsible and department
heads: Legal Affairs Department: Deliberation, decisions, and review ofreports pertaining to policies,
initiatives,and other matters related to risk andcompliance

Formulate, promote & implement plans

Department heads(Risk and Compliance Ofﬁcer)

Headquarters Safety and
Health Committee

10

The OSG Corporate Code of Ethics was established as a set of values
and ethics that we thoroughly practice to ensure all directors,
executives, and employees at OSG Group companies conduct businessactivities based on social common sense and comply with laws,
regulations, and social standards. The Corporate Code of Ethics
comprises two sections: business ethics norms and company action
standards. The former are guidelines establishing the basis upon which

Risk and Compliance Management Committee(Risk and Compliance Management Ofﬁcer)

[No.]

15

as raise the level of security literacy among our employees. We haveconducted information system risk evaluations in response to continuallychanging cybercrime techniques, and adopted a series of measures toaddress any elements of risk. The necessary investments have been madewith a view to minimizing the scope of impact in the unfortunate event that
we do sustain damage as well as to ensure business continuity. As part ofour measures to educate employees, OSG has endeavored to educate ourpersonnel so they are more literate about information security. We conduct
training with exercises using targeted emails and other schemes so
employees are able to recognize recent cybercrime trends and maintaincapabilities commensurate with our advanced information society.

Compliance

Risk category

External risks

OSG Group has strived to enhance information security. We established the
Basic Information Security Policy to maintain the trust of our customers andsociety as well as protect information assets from threats such as accidents,
natural disasters, and criminal activity in today's highly
information-oriented society. This is part of our efforts to continue toprovide products and services that satisfy our customers' needs. To
minimize the risk of an accident or other internal incident occurring, we
thoroughly educate all employees about compliance with legal andcontractual requirements commensurate with the level of secrecy of theinformation assets handled. In preparing for external risks, we continue toassess risks to information systems and develop countermeasures as well

OSG Group has established internal reporting standards, which
provide a mechanism to ensure that reports and consultations areappropriate handled regardless of whether they are received
from within the company or without, as concerns organizational
or individual violations of laws and regulations in any corporate
activity, personal violations of laws and regulations, fraudulent
activities, and actions in violation of the OSG Corporate Code of
Ethics. Upon receipt of a report or consultation from an individual,
an investigation team endeavors to discern the facts. If the resultsof the investigation so dictate, disciplinary provisions in theemployment regulations of the relevant OSG Group company areapplied, and measures taken to prevent any recurrence. After
recurrence prevention measures have been adopted, the director
in charge of internal reporting conﬁrms the adopted measures
are functioning sufﬁciently and contributing to strengthening
corrective compliance management as well as early detection, in
addition to preventing any legal or regulatory violations andprotecting the person who came forward with the notiﬁcation or
consultation.

Responsible foradvancing risk
and complianceInternal Reporting System
NotiﬁerInternal contact point(Human Resources & General Affairs
Department, Legal Affairs Department,
and Management Audit Section)

External contact point(attorney)

Written acknowledgement prepared
concerning notiﬁcation/consultation
Director in charge of internal reporting(General Manager, Human Resources & General Affairs Department)

Investigation team formed (to discern facts)

Board of Directors and Audit &Supervisory Committee

Risk and ComplianceManagement Committee

OSG Repor t 2022

50

Corporate Ofﬁcers (As of February 17, 2023)

Directors*Outside Directors

Chairman &Chief Executive Ofﬁcer (CEO)President &Chief Operating Ofﬁcer (COO)

Director (Statutory Member,
Audit & Supervisory Committee)

Director(Audit & Supervisory Committee Member)

Norio Ishikawa

Nobuaki Osawa

Takehiro Tomiyoshi

Yoshiyuki Sakaki＊

May. 1983

Nov. 1997

Seconded to Norman Taps and Dies

Apr. 1982

Joined Nomura Securities Co., Ltd.

May 2004

Ltd. (Currently OSG UK Limited)

Oct. 2016

Joined OSG Corporation

Seconded to OSG Tap and Die, Inc.
(Currently OSG USA, INC.)

Oct. 1995

Vice President, OSG Tap and Die, Inc.

Aug. 1999

Director and President, OSG Europe S.A.

Feb. 2001

Director

Feb. 2003

Executive Ofﬁcer

Feb. 2004

Director

Feb. 2010

Managing Director

Feb. 2007

President & Chief Operating Ofﬁcer

Jan. 2014

Representative Director and Chairman,

Oct. 2003
Dec. 2004

President & Chief Executive Ofﬁcer

Sep. 2016(CEO)
Feb. 2021

General Manager, New Business

Limited (Current position)

Development Ofﬁce

Representative Director andFeb. 2017

President, OSG Europe S.A.

(COO)
Feb. 2017

Representative Director, OSG UK

Executive Ofﬁcer ; In charge of New

Councilor, Osawa Scientiﬁc Studies
Grants Foundation

Executive Ofﬁcer ; In charge ofApr. 2014

Statutory Auditor

Strategic Planning Ofﬁce

Jul. 2014

President, Shizuoka Futaba Gakuen

Feb. 2016

Director (Audit & Supervisory

New Business Development Ofﬁce

Feb. 2022

Director (Statutory Member, Audit &Committee Member), (Current

Grants Foundation (Current position)

Supervisory Committee) (Current

position)

position)(CEO) (Current position)

Feb. 2019

Director and Senior Managing Ofﬁcer

Feb. 2021

President & Chief Operating Ofﬁcer

Koji Takeo

Senior Executive Ofﬁcer

Senior Executive Ofﬁcer

Senior Executive Ofﬁcer

Mitsuyoshi Hikosaka

Yasutaka Yoneda

Yukinori Chikada

Executive Ofﬁcer

Executive Ofﬁcer

Executive Ofﬁcer

Jeffrey Tennant

Toshihiro Hisadome

Yasushi Suzuki

Technology
Apr. 2012

Feb. 2020

Managing Ofﬁcer

Managing Ofﬁcer

Hideaki Osawa

President, Toyohashi University of

President,Osawa Scientiﬁc Studies

Feb. 2018

Managing Ofﬁcer

Jiro Osawa

Emeritus professor, the University

OSG Europe S.A. (Current position)

Chairman & Chief Executive Ofﬁcer

Managing Ofﬁcerof TokyoApr. 2008

Business Development
Feb. 2018

Executive Ofﬁcers(COO) (Current position)

Director(Audit & Supervisory Committee Member)

Director(Audit & Supervisory Committee Member)

Director(Audit & Supervisory Committee Member)

Substitute Outside Director(servings as Audit & Supervisory Committee Member)

Akito Takahashi＊

Kunihiko Hara＊

Kayoko Yamashita＊

Yoshitsugu Hayashi

Executive Ofﬁcer

Executive Ofﬁcer

Executive Ofﬁcer

Apr. 2000

Admitted as an attorney-at-law in Japan

Jun. 1998

Director, DENSO CORPORATION

Apr. 1996

Admitted as a certiﬁed public

Apr. 1992

Professor, Graduate School, Nagoya University

Kenya Sugihara

Seungjin Chung

Osamu Ishida

Apr. 2005

Admitted as an attorney-at-law inJun. 2002

Left the post of Director, DENSO ORPORATION

accountant

Jul. 1992

Director, World Conference on Transport

New York State

Jul. 2010

Project Professor of "Tailor-Made Baton-Zone"

Sep. 2009

Research Society (Current position)

Public Accountant Ofﬁce,

Apr. 2006

Dean, Graduate School of Environmental Studies, Nagoya University

Law Ofﬁce, Representative (Current

Toyohashi University of Technology

Representative (Current position)

Jul. 2013

President, World Conference on

position)

Dec. 2015

Outside Director, Nippon Carbon Co., Ltd.
Outside Director, ACKG Limited

Apr. 2016

Vice President(Research Enhancement),

Apr. 2008

May. 2018

Designated Professor, (Innovation

Admitted as a certiﬁed tax
accountant

Toyohashi University of Technology(Currently Oriental Consultants

Jun. 2015

Transport Research Society
Apr. 2016

Emeritus Professor, Nagoya University,and Professor, Integrated Engineering Research Institute, Chubu University

Outside Audit & Supervisory Board Member,

Strategy Ofﬁce),Nagoya University

Sotoh Co Ltd. (Current position)

Jun. 2017

Outside Director, FUJI ELECTRIC CO., LTD. (Current position)

Holdings Co., Ltd.) (Current position)

Jun. 2018

Professor Emeritus, Toyohashi University of Technology

Outside Audit & Supervisory Board Member,Mar. 2019

President, The Japanese Association of The Club of Rome (Current position)

Director (Audit & SupervisoryFeb. 2020

Director (Audit & Supervisory Committee

FUJI CORPORATION (Current position)

Apr. 2019

Co-Director and Visiting Professor, Research Center on World

Member) (Current position)

Committee Member), (Current

Feb. 2022

Transport, Tongji University (China) (Current position)

Director (Audit & Supervisory

Designated Professor, Future Value Creation

Committee Member), (Current

Jun. 2019

Distinguished Visiting Professor, Tsinghua University (China) (Current position)

Outside Director, TOA Oil Co., Ltd.

Research Center, Nagoya University, Graduate

position)

Oct. 2020

Executive Committee Member, The Club of Rome (Current position)(Current position)

School of Informatics (Current position)

Apr. 2021

Distinguished Professor, Center for Sustainable Development

position)
Jun. 2022

Established Yamashita Certiﬁed

Education Promotion Ofﬁce

Mar. 2015

Feb. 2018

Apr. 2006

Established Takahashi & Katayama

Apr. 2020

and Global Smart City, Chubu University (Current position)

51

OSG Re port 2022

Executive Ofﬁcer

Hitoshi Masuoka
OSG Repor t 2022

52

Financial
SectionKey Financial Data for the Past 10 Years(millions of yen)

2013/11

2014/112015/112016/112017/112018/112019/112020/112021/112022/11Net sales

88,378101,031111,917

105,561

120,198

131,368

126,964

104,388

126,156

142,525

Cost of sales

52,77758,061

61,86559,17969,711

74,83373,28165,71576,96983,459Selling, general and administrative expenses

22,77425,55428,45428,13531,34934,01534,12830,27633,081

37,166

Operating income

12,827

17,415

21,597

18,246

19,13722,52019,554

8,396

16,10521,898

Ordinary income

13,91017,56821,51017,813

19,14422,567

19,7108,950

16,141

23,648

8,619

9,989

12,518

10,134

13,993

14,71013,686

5,639

10,98916,534

Cash ﬂows from operating activities

16,171

19,68819,58816,333

20,82020,125

19,261

17,03826,982

20,175

Cash ﬂows from investing activities△2,972△3,119△16,976△16,843△7,566△13,351△20,314△17,133△6,961△12,170

Cash ﬂows from ﬁnancing activities△9,423△12,813△6,216△778△11,137△4,723

3,465

9,658

△14,264△14,740

6,716

6,830

7,705

7,885

8,612

9,100

9,522

10,518

10,591

10,49819,54424,24629,302

26,132

27,74931,621

29,076

18,915

26,69632,396

Capital expenditures

5,876

7,327

12,487

13,394

9,494

11,464

17,139

9,895

5,555

8,600

Number of employees

5,118

5,233

5,569

5,866

6,611

7,020

7,236

7,173

7,489

7,543

Total assets

134,503

142,302

155,129

156,081

166,712

178,054

190,414200,112

209,757

228,852

Net assets

87,621

100,943

113,637

103,059

128,394

138,354

140,658

140,179

154,800

176,838

Interest-bearing debt

29,06320,00920,19533,506

16,325

15,612

26,782

41,76930,751

25,570Total equity

80,02491,458102,566

92,216

115,810

125,332

129,078

129,338

143,811

164,659

Net income (yen)90.76

105.20131.78110.59153.70150.47140.06

57.94

112.63171.54

Net assets (yen)842.71

963.15

1,079.12

1,024.34

1,191.65

1,279.29

1,328.08

1,327.22

1,472.45

1,721.14

Dividends (yen)

30.00

34.00

46.00

50.00

46.00

47.00

47.00

22.00

36.00

60.00

Overseas sales ratio (%)

53.5

54.6

57.8

55.3

57.6

58.4

57.3

59.4

61.8

64.9

Operating income margin (%)

14.5

17.2

19.3

17.3

15.9

17.1

15.4

8.0

12.8

15.4

Return on equity (ROE) (%)

11.9

11.7

12.9

10.4

13.5

12.2

10.8

4.4

8.0

10.7

Return on assets (ROA) (%) (Operating income basis)

10.0

12.6

14.5

11.7

11.9

13.1

10.6

4.3

7.9

10.0

6.7

7.2

8.4

6.5

8.7

8.5

7.4

2.9

5.4

7.5

Equity ratio (%)

59.5

64.3

66.1

59.1

69.5

70.4

67.8

64.6

68.6

72.0

EBITDA margin (%)

22.1

24.0

26.2

24.8

23.1

24.1

22.9

18.1

21.2

22.7

Dividend payout ratio (%)

33.1

32.3

34.9

45.2

29.9

31.2

33.6

38.0

32.0

35.0

Taps

28,92434,65538,23933,94838,17541,72939,89533,671

43,23950,374

Drills

20,72423,60025,743

26,70931,66236,81136,14729,48435,721

40,982

End mills

20,85722,886

26,554

24,83727,09027,917

26,69021,21924,006

26,383

Rolling dies

7,681

9,165

9,921

9,443

10,218

10,645

9,973

7,947

10,052

10,616Gauges

1,232

1,419

1,538

1,478

1,625

1,757

1,946

1,712

1,747

1,991

Others

8,958

9,304

9,919

9,143

11,424

12,50812,31010,354

11,387

12,176

Japan

41,922

46,65948,15048,257

51,63955,28754,72542,81648,93550,858Americas

16,093

18,236

21,75819,47821,413

22,68023,152

18,81821,91527,845

7,827

9,879

11,382

12,26818,177

22,13420,893

19,396

24,57328,964

22,53426,25630,62625,55628,96831,26628,19323,35630,732

34,856

Net income attributable to owners of the parent
For the year

Depreciation and amortization
EBITDAEnd of ﬁscal year

Per share

Management indices

Data by productcategory

Sales to externalcustomers

Return on assets (ROA) (%) (Net income basis)

Europe/Africa
Asia

53

OSG Re port 2022

OSG Repor t 2022

54

Financial
SectionConsolidated Statement of Income &Consolidated Statement of Comprehensive Income

Consolidated Summary Balance Sheet(millions of yen)(millions of yen)

FY2021

FY2022

Assets

FY2021

Liabilities

Cash and deposits

46,795

46,697

Notes and accounts receivable - trade23,531

26,885Current liabilities
Notes and accounts payable - trade

5,244

5,887

Short-term loans payable

101

0

2,329

677

28,55333,238Current portion of convertible bond-typebonds with share acquisition rights

1,670

−

6,566

8,641

Current portion of long-term loans payable

1,615

1,019

Raw materials and supplies

7,718

10,146

Accrued expenses

7,593

8,894

Other

2,669

3,731

Income taxes payable

3,156

3,105

Allowance for doubtful accounts

△179

△374

Reserve for directors bonuses

282

371

115,757

128,967

Securities
Merchandise and ﬁnished goods
Work in process

Total current assets

58,09560,635

Accumulated depreciation △33,903△35,923

Buildings and structures, net

24,191

24,712

Machinery, equipment and vehicles

138,413150,853

Accumulated depreciation △105,813△116,113

32,60034,739Machinery, equipment and vehicles, net

3,938

3,809

25,83023,765Tools, furniture and ﬁxtures

9,653

10,497

Accumulated depreciation△7,575△8,386

Bonds payable
Long-term loans payable
Deferred tax liabilities
Net deﬁned beneﬁt liability
Provision for loss on guarantees
Other
Total non-current liabilities
Total liabilities

FY2022(Dec. 1, 2021 toNov. 30, 2022)

Net sales

126,156

142,525

Cost of sales

76,96983,459Gross proﬁt

49,18659,065

Selling, general and administrative expenses

33,081

37,166

Operating income

16,10521,898Interest income

178

397

Dividend income

63

110

Purchase discounts

38

49

Share of proﬁt of entities accounted for using equity method−

2Foreign exchange gains

32

718

Other

1,025

1,168

Total non-operating income

1,338

2,446

Interest expense

255

285

Sales discounts

706−

Non-operating income

Non-operating expenses

Non-current liabilities

Property, plant and equipment
Buildings and structures

Other
Total current liabilities

Non-current assets(millions of yen)(Dec. 1, 2020 toNov. 30, 2021)

As of November 30, 2021 As of November 30, 2022

Liabilities and Net Assets

Current assets

5,000

5,000

20,136

18,873

1,630

1,799

788

879

38

185

1,533

1,511

29,12628,24854,95752,014

Share of loss of entities accounted for using equity method
Other
Total non-operating expenses

4

−

335

410

1,302

696

16,141

23,648Gain on sales of non-current assets

213−

Total extraordinary income

213−

Provision of allowance for doubtful accounts−

170

Provision for loss on guarantees−

100

Total extraordinary losses−

270

Income before income taxes

16,35423,378

Ordinary income
Extraordinary income

Extraordinary losses

2,077

2,110

15,95016,006

Construction in progress

2,687

2,840

Capital stock

12,23913,044

Other

1,627

1,666

Capital surplus

12,968

13,792△879△1,013Retained earnings

120,192

132,320

Income taxes - current

5,567

7,292

748

653

Treasury stock△1,041△6,388

Income taxes - deferred△514△1,091

78,25581,062

Total shareholders equity

144,359

152,768

Total income taxes

5,052

6,200

Net income

11,302

17,177

Tools, furniture and ﬁxtures, net
Land

Accumulated depreciation
Other, net
Total property, plant and equipment

Net assets
Shareholders equity

Accumulated other comprehensive income

Intangible assets
Goodwill

4,638

4,402

Unrealized gain on available-for-sale securities

Other

1,276

1,396

Deferred gains or losses on hedges

30

Total intangible assets

5,915

5,799

Foreign currency translation adjustments△1,32911,038Investment securities

4,292

4,800

Non-controlling interests

Investments in capital

970

1,946

Total net assets

Long-term loans receivable

484

562

Total accumulated other comprehensive income

Investments and other assets

2,551

3,833

108

189

Other

1,867

2,133

Allowance for doubtful accounts

△445

△443

Total investments and other assets

9,829

13,023

Deferred tax assets
Retirement beneﬁt asset

Total non-current assets
Total

55

FY2022

FY2021

As of November 30, 2021 As of November 30, 2022

Consolidated Summary Statement of Income

OSG Re port 2022

94,00099,885

209,757

228,852

Total liabilities and net assets

778

852

△547

11,89010,988

12,178

154,800

176,838

209,757

228,852

Net income attributable to non-controlling interests
Net income attributable to OSG Corporation

312

642

10,98916,534

11,302

17,177

Consolidated Statement of Comprehensive Income
Net income
Other comprehensive income
Valuation difference on available-for-sale securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Share of other comprehensive income of associates accounted for using equity method
Total other comprehensive income
Comprehensive income

△317

6

3

△3

5,850

13,364

△7

△21

5,528

13,345

16,83030,523

16,35728,972473

1,550(Breakdown)Comprehensive income attributable to OSG Corporation
Comprehensive income attributable to non-controlling interests

OSG Repor t 2022

56

Financial
SectionConsolidated Summary Statement of Cash Flows

Corporate Information(millions of yen)

FY2021

FY2022(Dec. 1, 2020 toNov. 30, 2021)(Dec. 1, 2021 toNov. 30, 2022)

Income before income taxes

16,35423,378Depreciation and amortization

10,591

10,498

795

881

92

151

Company ProﬁleCompany name

OSG Corporation

Capital¥13,044 million

Headquarters

3-22, Honnogahara, Toyokawa,

Employees

7,543 (Consolidated)

Operating activities：

Amortization of goodwill
Increase (decrease) in allowance for doubtful accounts(As of Nov. 30, 2022)

Aichi Prefecture 442-8543, Japan
Date established1,899 (Non-consolidated)
Business activities Manufacture and sale of cutting tools, rolling

March 26, 1938

dies, gauges, machine tools and machineparts, importation and sale of tools

Increase (decrease) in provision for directors' bonuses

127

80

Increase (decrease) in net deﬁned beneﬁt liability

△16

△40

△0

147

△242

△508

Number of shares issuable

200,000,000 shares

Minimum share purchasing unit

100 shares

255

285

Number of shares outstanding

99,182,517 shares

Stock listings

Tokyo Stock Exchange,

4

△2

△213

−

Number of shareholders

7,918

Loss (gain) on sales of non-current assets
Change in notes and accounts receivable△2,448△1,466

1,864△5,269

243

247

1,227

853

Other, net

1,081△1,620Subtotal

29,71827,617225

500

Increase (decrease) in provision for loss on guarantees
Interest and dividend income
Interest expense
Equity in loss (earnings) of an associated company

Change in inventories
Change in notes and accounts payable
Change in accrued expenses

Interest and dividend income received
Interest expense paid

△257

△296

Income taxes - paid

△2,703△7,645

Net cash provided by operating activities

26,982

20,175

Status of Shares△5,014△7,783

Proceeds from refund of time deposits

3,559

5,188

Purchases of investment securities

△190

△560

0

227

Proceeds from sale/redemption of investment securities△5,555△8,600

Proceeds from sales of property, plant and equipment

1,000

1,161

Purchase of intangible assets

△235

△264

Payment for purchase of subsidiaries' stock

△346

△981

Other, net

△180

△558

△6,961△12,170

Purchase of property, plant and equipment

Net cash used in investing activities

Nagoya Stock Exchange

6136

Securities code
Breakdown of Holdings by Shareholder(One unit = 100 shares)
Individuals
and others
303,886 units

30.67％

Investing activities：
Payments for time deposits(As of Nov. 30, 2022)

Financial
institutions
330,444 units

33.35 ％

Securities
21,877 units
Overseas
institutions
and others
229,470 units

23.16％

2.21％

Other
corporations
105,139 units

10.61％(Notes) 1. Amounts of less than one unit are not included.
2. Treasury stock is included under Individuals and others.

Major shareholders
Name

Number ofshares held(Thousands)

Percent
ownership（%）

The Master Trust Bank of Japan, Co., Ltd. (Trust Account)

14,483

15.10

Custody Bank of Japan, Ltd. (Trust Account)

5,861

6.11

SSBTC CLIENT OMNIBUS ACCOUNT

3,986

4.15

OSG Agent Association

3,356

3.50

NORTHERN TRUST CO.(AVFC) RE FIDELITY FUNDS

2,970

3.10

OSG Stock Holding Association

2,621

2.73

Osawa Scientiﬁc Studies Grants Foundation

2,350

2.45

Sumitomo Mitsui Banking Corporation

2,100

2.19

Nomura Trust and Banking Co., Ltd. (Investment Trust Account)

1,844

1.92

THE BANK OF NEW YORK MELLON 140051

1,824

1.90

(Notes) 1. The number of shares held is rounded down to the nearest thousand.
2. Other than above, there are 3,241 thousand treasury shares.
3. The ownership percentage is calculated after deducting treasury shares.

Financing activities：
Redemption of convertible bond-type bonds with subscription rights to shares
Change in short-term borrowings, net△30△2,205

Proceeds from long-term borrowings

8

146

Repayments of long-term borrowings△9,079△2,137△2△5,953Purchase of treasury stock
Proceeds from sales of treasury stock
Dividends paid
Dividends paid to non-controlling interests
Other, net
Net cash provided by ﬁnancing activities

397

516

△2,440△4,357

△323

△359

△308

△359

△14,264△14,740

Effect of exchange rate change on cash and cash equivalents

1,224

3,098

Net increase (decrease) in cash and cash equivalents

6,981△3,63733,29940,354

Cash and cash equivalents at beginning of year
Cash and cash equivalents from newly consolidated subsidiaries
Cash and cash equivalents at end of period

57−△2,515OSG Re port 2022

73−

40,35436,717

Introduction to the OSG corporate website

To OurStakeholders

OSG s website provides timely access to a variety of information,
including corporate data, product information, industry solutions,news releases, and IR information.

https://www.osg.co.jp/en/
Introduction to the OSG sustainability website
The OSG sustainability website showcases our efforts to achieve sustainablegrowth in our corporate value, including environmental initiatives, social programs,
and corporate governance systems.

https://www.osg.co.jp/en/sustainability/index.html

OSG Repor t 2022

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