Value Creation Story

Initiatives to Achieve Our Goal of Zero
Fatal Traffic Accidents in 2030
Further advance our technologies to deliver “Enjoyment and Peace of Mind.”
Maintainthe SUBARU Difference even in the age of vehicle electrification.

SUBARU’s All-Around Safety
Attaching particular importance to protecting lives, SUBARU is working to achieve our target of zero fatal traffic
accidents*1 in 2030.
SUBARU will enhance the safety performance of its cars from every perspective as we aim to achieve zero fatal
traffic accidents in 2030. We will do this by making the four existing areas of Primary Safety, Active Safety, Preventive
Safety, and Passive Safety even better, while also adding Connected Safety.
*1 Zero fatal road accidents among occupants of Subaru vehicles and people involved in collisions with Subaru vehicles, including pedestrians and cyclists

Basic design features for avoiding accidents
Primary
SafetySafe situation

Increasing driving safety through basic design
features such as car shape and controls
Designing for visibility

Hazardous
situation

Preemptive
accident
avoidance

Driving position

Interfaces

The ultimate in driving performance for greater safety
ActiveSafetyFacilitating hazard avoidance by improving the performance ofbasic car functions: driving, turning, and stopping
Horizontally-opposed engine

Symmetrical AWD

SUBARU Global Platform

Advanced technology that supports safe driving
Accident

Preventive
SafetySupporting safe driving by helping avoid collisions
and reduce damage

SUBARU believes that to attain zero fatal traffic accidents in 2030, it is crucial to offer exceptional performance at a
price that is affordable for a wide range of customers. SUBARU’s EyeSight driver assist system, which was introduced inJapan in 2008 and achieved cumulative global sales of 5 million units in June 2022, has continued to evolve over thecourse of 15 years.
The stereo cameras equipped in EyeSight enable the system to recognize
objects with two cameras, similar to human eyes, detecting items on the road at ahigher level than radar-based systems. The development of EyeSight began
approximately 30 years ago. During the early stages, there were frequent issues withthe system’s ability to detect objects properly, particularly when it was raining or thewindows were foggy. However, these challenges were overcome through extensive
The stereo cameras of EyeSight version 3
testing in various real-world scenarios and subsequent improvements.
The EyeSight system was launched in 2008, achieving a world first in using solely
stereo camera technology to enable pre-crash braking and adaptive cruise control.
EyeSight version 2 was announced in 2010 with an enhanced pre-crash braking
system that provides support until the vehicle comes to a full stop. During thisperiod, EyeSight became a standard feature in numerous models for the Japanesemarket, and its affordability contributed to a significant increase in its recognition
Image depicting EyeSight’s recognition capability
and widespread adoption among customers. In addition, it began to be developedin certain models overseas as well.
In 2014, with the release of version 3, advancements in color recognition and an
expanded field of view using stereo cameras significantly enhanced the advanced
safety features. In the 2020 release of the Levorg, SUBARU introduced EyeSight X,
combining a new stereo camera with four radars in the front and rear, and a highprecision map locator.
Illustration of EyeSight X capability
In 2022, we newly adopted a wide-angle single lens camera for enhancing
EyeSight’s recognition capability in the mainstay Outback for the North American market. Through its evolution into a“three-eyed” system with stereo cameras and an ultra-wide-angle single lens camera, EyeSight can now recognize asignificantly wider range. This enhancement enables collision damage reduction through pre-crash braking forsituations where pedestrians and cyclists, often at higher risk of accidents at intersections, might emerge from adriver’s blind spots.
While there were other options available to achieve accident reduction in these scenarios with pre-crash braking,
SUBARU chose to utilize the wide-angle single lens camera to provide the highest level of safety at an affordable pricefor customers. EyeSight is currently integrated into the Crosstrek and Impreza for the Japanese market, with plans for a
gradual rollout to other models in the future.
<When the vehicle is turning left or right>

Damagereduction
during an
accident
Spread ofdamageRealized throughadoption of awide-angle
monocular camera

Protecting both passengers and pedestrians
Engine layout

SUBARU Global Platform

Pedestrian protection airbag

To save even more lives
Connected
Safety<When the vehicle is moving straight ahead>

Realized throughadoption of awide-angle
monocular camera

An extra level of safety, just in case
Passive
SafetyCorporate Data

Evolution of EyeSight Driver Assist System

EyeSight

Collision

Foundations Supporting Value Creation

Commentary on Strategy

24-hour/365-day access to rapid emergency assistance

The wide-angle single lens camera

Click on the links or scan the QR codes to view the videos explaining SUBARU’s efforts to reduce accidents.
Preventive Safety (1)Active Safety

https://www.subaru.co.jp/topic-en/2022_11_15_203208/

https://www.subaru.co.jp/topic-en/2023_05_22_081936/

Passive Safety

Preventive Safety (2)https://www.subaru.co.jp/topic-en/2023_01_31_144916/

https://www.subaru.co.jp/topic-en/2023_09_26_165037/

Advanced Automatic Collision Notification (AACN) system

28 Integrated Report 2023

Integrated Report 2023

29

Value Creation Story

Foundations Supporting Value Creation

Commentary on Strategy

Corporate Data

EyeSight and AI combine to Enhance Preventive Safety

Plan to Achieve Zero-Fatality Road Safety

SUBARU is committed to enhancing its preventive safety technologies and is actively exploring new technologies as it
strives to achieve zero fatal traffic accidents. Our current focus is on integrating AI technology with EyeSight.
The fundamental principle of spatial recognition using stereo cameras is to
An image captured by EyeSight
precisely calculate the distance to objects from each pixel by triangulating thedisplacement of images captured by the two cameras, one on the right and one on
the left. The strength of EyeSight lies in its ability to accurately convert everything
captured by the cameras into a three-dimensional representation, allowing it toperceive the shape and distance of various objects. However, when it comes to
Calculates the distance to objects pixel by pixel(Near Red < Orange < Yellow < Green < Blue Far)
capturing small objects or subtle irregularities, determining whether to pass overAn image recognized by AI
them or consider them obstacles solely based on EyeSight‘s image recognition can
be challenging. In contrast, AI excels at precisely categorizing objects captured incamera, pixel by pixel, based on extensive previously learned data. Since EyeSight
can fuse the distances to recognized objects with the classifications made by AI inthe same image, EyeSight and AI are considered an excellent match. If this can be
Can focus solely on the road surface even in
put into practical use, it is expected to lead to an enhanced level of vehicle safety incomplex road environments
various situations by allowing for more detailed and accurate recognition of the(Color-codes the recognized road surface on a
pixel-by-pixel basis)
driving environment’s information than ever before.
This initiative is being pursued at SUBARU Lab, a newly established independent
office, designed to create an environment for generating fresh ideas from a different perspective. This new base inTokyo’s Shibuya, an area increasingly seen as an IT hub following recent redevelopment efforts, has enabled us tostreamline and effectively recruit the talent essential for AI development. While our current focus is on AI technology, we
aim to continue advancing our development by actively incorporating not only AI but also new technologies in the future.

To achieve zero fatal traffic accidents, SUBARU conducted a comprehensive investigation of all fatal traffic accidents
that occurred in the United States from 2017 to 2019*2, analyzing the causes of the accidents and the reasons forfatalities. Based on this analysis, we identified functionalities that can effectively eliminate these causes. Following this,we decided on specific measures to implement thesePresentfunctionalities and are actively engaged in their
ADAS enhancement
Causeddevelopment to bring them to fruition.
Advancedby other
Driver-Assistancevehicles%Systems
In concrete terms, we will improve Advanced Driver
reduction
Down
to
zero
Assistance Systems (ADAS) to further avoid and mitigate
fatal traffic
accidents
accidents, and reduce at-fault traffic accidents. For no-fault
AACN utilizationin 2030
Advanced Automatic
accidents, we aim to achieve zero fatal traffic accidents in
Collision Notification%
Caused2030 by strengthening our existing four safety performance
reductionbyownareas, beginning with Passive Safety, and adopting
vehicleCausedConnected Safety in the form of our Advanced Automaticby otherContinual
improvement ofvehiclespassive safety
Collision Notification (AACN) system.

Continuous Enhancement of Passive Safety
SUBARU focuses on developing cars with the utmost priority of safeguarding everyone in
the event of a collision, not just the vehicle occupants but also pedestrians and cyclists.
Strengthening the vehicle body and enhancing restraint systems are two criticalelements to occupant protection. In strengthening the vehicle body, we combined acabin structure that can withstand severe collisions by using high-strength materials
with the Subaru Global Platform, which helped realize a body structure that efficiently
absorbs collision energy. This design ensures protection in collisions from any direction.
In enhancing restraint systems, we reduce the load on the upper body by firmly restraining the lower body withknee airbags and seat cushion airbags. We also adjust the seatbelt tension based on the occupant’s physique toprevent excessive pressure. This ensures the protection of all occupants, regardless of age or body size. Nevertheless,even with the evolution of restraint systems, they will not be fully effective unless seat belts are properly fastened. The
rate of rear seat belt usage in Japan is only around 40%. SUBARU has taken steps to address this situation byintroducing advanced seat belt reminders and expanding the number of models equipped with them.
Pedestrians and cyclists sustain injuries at a rate 2.5 times higher than that of vehicle occupants. To reduce thedamage to pedestrians and cyclists in the event of an accident, SUBARU not only uses
soft structures for bumpers, bonnets, and other areas that can absorb impacts but also
equips its vehicles with pedestrian airbags.
In the pursuit of zero fatal traffic accidents, it is necessary to anticipate morediverse and severe accidents than ever before, however. For example, in collisions
involving bicycles, it has been recognized that under certain limited conditions, thecurrent pedestrian airbags may not cover all cases, given the various factors such as the cyclist’s physique and theorientation and speed of both the bicycle and the vehicle at the time of impact. As a result, we are utilizing computer
simulations to identify worst-case scenarios from the countless collision patterns that can be imagined and to develop
specific countermeasures.

30 Integrated Report 2023

65

35

*2 All fatal traffic accidents involving vehicles from the most recent five model years

Caused byown
vehicleCar Assessments
SUBARU undergoes safety performance testing and assessment of public organizations in and out of Japan
including JNCAP in Japan, IIHS*1 in the U.S., and Euro NCAP*2 in Europe, and has gained the highest rank ofassessment in most of them.
In FYE March 2023, the Solterra won the JNCAP Five Star Vehicle Safety Performance 2022 Award, the highest
rating in the JNCAP. At the IIHS, as of May 2023, three of SUBARU’s 2023MY (model year) vehicles had won theorganization’s 2023 TOP SAFETY PICK+ (TSP+) Award, and two vehicles had won its 2023 TSP Award. In addition,
the Legacy, Outback, Ascent, Forester, WRX, BRZ, and Solterra received the highest rating of “Good” in the IIHS
Seat Belt Reminder evaluation test, a program launched in March 2022. Euro NCAP gave the Solterra a five-starrating in its 2022 assessment.
*1 IIHS: Insurance Institute for Highway Safety*2 Euro NCAP: European New Car Assessment Programme, a safety information disclosure program for automobiles in Europe.

FYE March 2023 Commendations
Assessed Automobiles

Assessment Organization

Assessment

Solterra

JNCAP, Japan

Vehicle Safety Performance
JNCAP Five Star Award 2022

2023 models of the Outback, Ascent, Solterra(built after October 2022)(U.S.-specification
models only)
IIHS, U.S.

2023 TSP+ Award*

2023 models of the Legacy and Forester(U.S.-specification
models only)
IIHS, U.S.

2023 TSP Award*

Solterra

Euro NCAP, Europe

2022 Five-star rating* In the IIHS’ s publication of vehicle safety information, the TOP SAFETY PICK (TSP) Award is given to vehicles that earned the rating of “Good” in theoriginal moderate front overlap test and small overlap tests (driver- and passenger-side), and the rating of “Acceptable” or higher in the updated sidecrash test and headlight evaluation (standard equipment), as well as the rating of “Advanced” or higher in the daytime vehicle-to-pedestrian crashprevention test. In addition to these ratings, vehicles that earned the rating of “Good” in the updated side crash test and “Advanced” or higher in thenighttime vehicle-to-pedestrian crash prevention test are awarded the TOP SAFETY PICK+ (TSP+) Award.

Integrated Report 2023

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Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

SUBARU’s Idea for a Digital Transformation Strategy

SUBARU’s Unique Digital Transformation (DX) Strategy with a Firm Foundation to
Respond to Environmental Changes
The automotive industry is undergoing a once-in-a-century upheaval that adds further complexity to car-making. Until
now, automakers were tasked with the product planning, development, and manufacture of cars which were thendistributed to dealerships. More recently, however, it has become possible to secure touchpoints with customers
through the use of data and digital technologies.
It is generally said that consumer needs are shifting from goods to experiences. SUBARU provides products thathave functional value backed by sound car-making and considers it important to strengthen relationships withcustomers through their experiences driving our cars. SUBARU’s DX strategy utilizes data and digital technology tostrengthen Monozukuri (car-making) while simultaneously facilitating the creation of experiences.

Primary Initiatives
In order to strengthen ties with our customers, we continuously carry out an array of measures, which are making
steady progress.
Strengthening Monozukuri

Creating Experience-making• We will streamline development and production by using a
digital twin that combines partial model-based developmentusing data and digital technology in conjunction with real-world
development.

• We are deploying connected services, which started in the U.S.,in Japan as well. We are working toward enhancing functionality
and expanding the market in the future.

• We will establish data handling tools and skills to process alarge number of control items and expand their use on-site.

• We established the SUBARU Digital Innovation Lab to make useof digital technology and data in areas such as sales andmarketing.

• We will build a data integration platform that links data acrossdepartments to address a siloed, functional organization.

• We are expanding the domains of services provided by the
SUBAROAD driving app.

*F or more details on our initiatives, please see pages 40 to 43 of our Integrated Report 2022.
https://www.subaru.co.jp/en/ir/library/annual-reports.html

Strengthening Ties between SUBARU and our Customers

Fostering DX Human Resources

For a smaller car manufacturer like SUBARU to respond to the current upheaval in the automotive industry, we need to
select and establish focuses in regard to the use of data and digital technology. As a result of these major changes, thevertical division of units by function (such as development, procurement, manufacturing, sales, and after-sales service)that worked well for car-making in the past is becoming obsolete. In response, we are changing the way business isconducted across the entire Company by establishing data systems and enabling everyone to share that data tofacilitate changes to organizational culture in the future.
SUBARU has many customers around the world wishing to enrich their lives by leading a lifestyle that includes a car.
In response to these customers, we are working to establish data and digital-based “experience-making” for ourcustomers as our new challenge. We are also working to enhance the value SUBARU provides to customers in the formof Enjoyment and Peace of Mind by strengthening our Monozukuri through similar data and digital-based methods.
The common goal between Monozukuri and experience-making is to increase the number of customers who feel anaffinity with our value statement, and deepen our relationships with these customers. In other words, the ultimate goalof all our initiatives is to deliver happiness to our customers.

Currently, SUBARU is proactively hiring mid-career DX human resources, but as a basic principle, we believe it is criticalto foster human resources internally in this area as a company engaged in Monozukuri. As an example of this, we havelaunched the Software Human Resource Development Project for engineers as a way to adapt to electrification (seepage 42 of this report). In addition, we have been focusing on on-site education in cooperation between a specialized
IT department and the respective operating department. Furthermore, we are working to build a system to raiseawareness and skill levels on the manufacturing floor, utilizing data and digital technologies. To do this, we have takena standard training program for data scientists, one of the six kinds of DX human resources defined by the IPA*, andadapted it to suit the SUBARU ideals. This course is used to train experts who can use data as a tool for improving workon the manufacturing floor. To ensure the establishment of individual skill development as part of our corporate
culture, we are conducting a continuing chain of grassroots activities in which the first generation of students mentors
the second generation, and the second generation then mentors the third generation.

Setting common goals and implementing parallel initiatives
Changes to products, services,and business models

Areas forchallenge

Attempts to create
new value

Creation of new values(Experience-making)

Strengthening ties between the SUBARU brand andcustomers by utilizing data and digital technology

Changes in our business,organization, processes, andcorporate and organizational culture
Strengthening Monozukuri

32 Integrated Report 2023

Reforms

From improvements tobusiness process reform

Improvements

Improvement as the core element

Foundation

Development of infrastructureand human resources capableof utilizing data

* Information-technology Promotion Agency (IPA), JapanMy role is to support the production of molds for car body parts from the IT
technology side. The molds I work with are used with presses to shape sheet
materials such as steel and aluminum into panel parts such as bonnets and doors,which are important to a car’s external appearance. This is why I work to develop
systems to ensure that the machine tools used to make the molds operate withintolerances measured in units of a hundredth of a millimeter. We have always had
quite a bit of data in our engagements with mold and panel manufacturing floors,and I thought that being able to make better use of this data would streamline
operations and enable the provision of higher quality molds. And, since this would
consequently improve mass-produced panel quality and deliver happiness toour customers, I joined the data scientist training program.
Tatsuya Ichikawa
Participants in this training program came from many different departments. In
addition
to general classroom lectures and practical training, there was also a lot
Vehicle Body Manufacturing
Engineering Departmentof time for discussion and sharing the data utilization issues we had been facingin our respective departments. Hearing opinions from colleagues in otherdepartments where I normally have no work connection was refreshing. It offered me new insights and hints forformulating improvement plans in my own department. I was also able to turn the lessons I learned in this training
program into action, developing and proposing a plan to use data for improving press line quality.
After completing the program, I also became an instructor to help train the next class of trainees. Part of this is mystrong feeling that it is more effective when employees who have a real sense of SUBARU’s situation today provide
guidance to their internal colleagues. It is my desire to motivate colleagues who are aware of issues but have not beenable to take action, and I would like to expand the circle of my support to help make SUBARU as a whole even better.

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Value Creation Story

Foundations Supporting Value Creation

Commentary on Strategy

Corporate Data

Message from the CFO

To thrive amid competition in theage of electrification, we will makegrowth investments while maintaining
financial soundness and stability.
Katsuyuki Mizuma
Director of the Board, Executive Vice President
Chief Financial Officer (CFO) and
Chief Risk Management Officer (CRMO)

Profile1984 Joined The Industrial Bank of Japan Ltd
2014 Became Managing Executive Officer of Mizuho Bank, Ltd.
2016 Joined SUBARU as Senior Vice President and Senior General Manager
of Subaru Overseas Sales & Marketing Division 22018 E xecutive Vice President, Chief General Manager of Overseas Sales &Marketing Division 1, Chief General Manager of Overseas Sales &Marketing Division 2
Executive Vice President, CFO and CRMO since June 2021

Financial and Capital Strategies Contributing to Sustainable Growth and Greater
Competitive Advantage
As the SUBARU Group does not possess a large scale among automakers, we have developed a highly profitable businessmodel through selection and concentration, in which we allocate limited management resources to areas where we candemonstrate our strengths. In order to achieve success in the coming era of full-scale vehicle electrification, we are striving
forward in adherence to this principle.
In an increasingly uncertain business environment, it will become even more important to have financial and capital strategies
that will enhance business growth and competitive advantage while reducing business risks. To ensure that SUBARU will thrive amid
competition in the age of electrification, we will make solid growth investments while maintaining financial soundness and stability.
We also believe that achieving sustainable growth will necessitate management practices that are mindful of cost of capitaland stock price. Our current cost of capital, as measured by weighted average cost of capital (WACC), is mid 6%. Return on
equity (ROE), which expresses the profitability and efficiency of our business, has been an important indicator for us, including
as a KPI for executive performance-linked compensation. We recognize that a level of 10% or higher is where we should
aim currently, and we are working. We will continue our efforts to steadily fulfill our duty toward shareholder returns with
unprecedented attention toward improving capital efficiency, to gain stakeholders’ understanding of these approaches andstrategies, and to meet their growth expectations as indicated by the price earnings ratio (PER).

Review of FYE March 2023 and Outlook for FYE March 2024
In FYE March 2023, needs for SUBARU vehicles remained extremely high, especially in the U.S. market, though there was acontinuing supply shortage of semiconductors and other components, which had been significantly affecting automobile
production since around 2021. In this environment, we have sustained efficient sales through maximum control of production
constraints through Group-wide activities such as strengthening supply chain management, switching to alternative
parts, and flexibly adjusting production plans. In addition, despite significant impact from higher raw material prices,
we successfully offset a great deal of impact through pricing policies and improved sales mix, which was augmented bysignificant tailwinds from the yen’s depreciation on our operating results. As a result, operating profit increased 196% to267.5 billion yen, the first increase in both sales and profit in three fiscal years. ROE increased 6.2 points from the end of theprevious fiscal year, achieving the 10% level we established in our capital policy as an evaluation indicator.
For FYE March 2024, we are targeting revenue of 4,200 billion yen and operating profit of 300 billion yen, the latter 32.5
billion yen higher than the previous fiscal year. In the automotive segment, gradual recovery is expected despite lingering
semiconductor supply risks. Many markets are still showing strong demand for SUBARU vehicles, and given this, we plan
to return production and consolidated sales volume to their respective pre-pandemic levels of 1.01 million vehicles each.
Although market prices for precious metals and other raw materials have calmed somewhat, the burden on our suppliers
is growing due to factors such as soaring energy prices, and we believe it is an important issue to thoroughly engage

34 Integrated Report 2023

them in discussions and take actions to mitigate these. We will minimize the negative impact of cost increases throughincreasing sales volume and utilizing pricing policies. In addition, the quality enhancement measures set forth in the midterm management vision “STEP” have been generating results, with total quality-related costs now steadily decreasing. We
will continue to focus on achieving our performance targets by optimizing the overall cost of our business processes while
maximizing our efforts to deliver as many vehicles as possible, as quickly and courteously as possible, to our customers
waiting for SUBARU vehicles around the world.
In the aerospace segment, the business environment has been severe since the COVID-19 pandemic, and the segment
has sustained net losses for multiple years. However, we expect the segment to return to profitability in FYE March 2024. We
will continue the structural reforms we have carried out to date and grow our three business pillars of defense, commercial,and helicopter.

Steady Investments in Electrification toward Reaching Industry-leading Profitability
In August 2023, President Osaki presented our policies under the new management structure. This presentation also
included an update to our electrification plan, which we had announced in stages beginning in 2022. This update described
how we will concentrate our resources on BEVs and aim to achieve world-leading Monozukuri innovation and value creation
without being lost in the current upheaval of the automotive industry. To achieve this goal, we will aggressively invest in
growth in order to thrive amid competition in the age of electrification while maintaining financial soundness and stability.
Specifically, we expect to invest approximately 1.5 trillion yen in electrification by around 2030. While this does of course
include estimates due to its nature as a long-term outlook, we will bring about this significant investment while maintaining
both an equity ratio of 50% or more and an appropriate level of net cash based on the situations SUBARU finds itself
in along the way. Currently, we retain net cash of around 700 billion yen. In the interest of ensuring a balance between
Japanese yen and U.S. dollar holdings and striking an optimal capital structure, if it is deemed appropriate to raise funds,
we will explore the potential of doing so in through yen-denominated debt with an eye to sustainable finance and otherfinancing options, where appropriate. As President Osaki has emphasized, human resources are the driving force behindinnovation toward electrification, and fostering human resources is the source of SUBARU’s competitiveness. This is why wewill also invest in human capital to ensure that the people who will lead our transformation are fully primed for success. To
ensure competitiveness even in the age of electrification, we will aggressively invest and maintain a rigorous selectivity ofwhere we invest while carefully monitoring global economic trends and the business environment.
In the update to our electrification plan, we announced the 2030 target that we aim to sell 1.2 million vehicles
worldwide, of which 600,000 will be BEVs. Toward this, we will improve profitability through value creation, as well as reduce
costs through greater density and efficiency in our manufacturing through Monozukuri innovation. In addition, we will takeunprecedented steps to improve capital efficiency for the investments that are expected to increase. By completing these
initiatives competently, we will achieve industry-leading profitability.
There has been no major change in our approach to shareholder return, but our aim is to return profits with a greaterawareness of improving capital efficiency going forward. With the aim of maintaining a total return ratio between 30% and50%, we will pay stable and consistent dividends and flexibly repurchase shares after comprehensive consideration of ourbusiness performance, investment plans, and the business environment. Even as we increasingly make investments, we willemphasize shareholder returns and flexibly implement a capital policy that is optimal and balanced for both ourshareholders and the Company, based on the business conditions and valuations at the time.
Though we are already actively engaged in investor dialogue both in Japan and overseas, we will further improve thequality of our engagement here so that they can gain a firm understanding of SUBARU’s electrification strategy and gaina strong sense of expectation for our growth. Despite a challenging outlook, especially in the automotive industry, we willcontinue to make steady efforts to achieve sustainable growth for the SUBARU Group through management practices that are
mindful of cost of capital and stock price. We look forward to your continued support of the SUBARU Group.
Operating Profit (Billions of yen) / Operating Margin (%) / ROE (%)
300

8.5

10.0

9.0

6.3

4.4

3.8

100

181.7

210.3

0

’19/3
Operating Profit (Left)

150

100

144

8

200

5.8

Dividend Per Share (Yen) / Dividend Payout Ratio (%) / Total Return Ratio (%)
10

’20/3

3.6

3.3

102.5

90.5

’21/3

’22/3

Operating Margin (Right)

7.1
267.5

6
4

100

78.1

100

0

ROE (Right)

75

61.3
49.1

50.3

50

2

’23/3

56.1

56

56

29.1
76

0

’19/3
Dividend Per Share (Left)

’20/3

’21/3

’22/3

Dividend Payout Ratio (Right)

50
25
0

’23/3
Total Return Ratio (Right)

Financial Information
Please visit the SUBARU website for details about financial information.

https://www.subaru.co.jp/en/ir/library/index.html
Integrated Report 2023

35

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Quality Enhancement

Since launching activities in 2018 to achieve Quality Enhancement, we have been taking actions in three areas: 1)
Thorough implementation of a “Quality- First” mindset and reinforcement of organizational efforts and structure, 2)
Execution Quality enhancement, and 3) Innate Quality enhancement. Through efforts in these areas, we are steadily
reducing the number of recalls (including the number of vehicles affected) and total costs related to quality. In 2023,
we launched the new Crosstrek and Impreza, which have incorporated these three quality enhancement activities fromthe vehicles’ respective planning stages. The SUBARU Group will continue to pursue “Monozukuri Innovation” andunflaggingly evolve its quality enhancement activities. Even in this era of change, including accelerating electrification,
we will always pursue quality that delivers happiness to our customers.
1

Thorough Implementation of a “Quality-First” Mindset and Reinforcement of Organizational Efforts andStructure

We are consistently conducting regular activities to raise quality awareness for each and every SUBARU employee. These
include in-house quality education tailored to each employee's level of knowledge and experience, and the Quality Caravan,
which introduces actual cases of defects that have occurred and prevention measures. In addition, we set up the FAST* quality
improvement team in 2021 in the North America market, creating a speedy market response system. In this team, quality
assurance and development functions work in unison with service functions at dealerships to address issues.
* FAST: Fast Action & Solution Team

2

Execution Quality Enhancement

This initiative aims to prevent the occurrence of defects during the vehicle production stage, and includes activities to rapidly
resolve defects that have occurred in the market. We have increased the speed at which we improve execution, including the
expansion of QA (Quality Assurance) Lab facilities to enhance investigation capabilities and expand the scope of application ofparts traceability. As of 2022, we have also launched operations at our new final vehicle inspection building so as to carry out
more rigorous inspections. We intend to gradually roll this out to each production line going forward as well.
3This initiative aims to prevent the occurrence of defects during the vehicle development stage. We have given greater authority
to employees responsible for development and have worked to ensure quality throughout all processes, from the initial planningand conceptualization stages to development, design, production preparation, and distribution. In addition to taking rigorous
action to prevent recurrence of past defects occurring in the market and similar defects that could occur, we are also working
at the development stage to deliver defect-free vehicles to customers through focused change point management to prevent
defects in newly adopted parts and systems.

Accelerating Quality Enhancement in Three Areas, as a Top Priority

2

Innate Quality
Enhancement

Execution Quality
Enhancement

Ensure quality from the very start of development
down through component logistics and production

 onstruction of a new final vehicle inspection
C
facility (partially operational as of August 2022)

Fully check past issues in development, production, and suppliers
Identify changes in new parts and systems and prevent issues before they occur

Swift response to quality issues

 larify the quality responsibilities of the Project General
C
Managers in charge of product development and enhancetheir authority
 tricter development process where meeting criteria of eachS
quality gate (checkpoint) is given top priority

1

1. We will deliver long-lasting products that our customers can use with peace of mind.
2. We will continually improve our products and services by always listening closely to our customers’ voice.
3. W
 e will be a good corporate citizen in all markets where we do business by ensuring compliance withall internal rules, local laws, regulations and social norms.

Quality Caravan
The Quality Caravan is a two-month internal event beginning in November of each year. Since its inception in 2018, thisevent has sought to build a culture encouraging all employees to take the customer’s perspective and put quality firstthrough learning about the current state of SUBARU’s quality. Panels are displayed to explain the details of quality defects
and the comments received from customers. In FYE March 2023, its fifth year, the Quality Caravan was themed on changing
mindsets and changing behavior with regard to quality through an understanding of the customer connections that lie
beyond the work that we do. Information was gathered from dealerships and the Customer Support Department, whichhave close relationships with customers, and a dramatized video was created to show how customers were affected by theactual problems that occurred.
In a questionnaire conducted after the event, participant comments included that their actions had shifted toward agreater awareness about not only avoiding defects but also providing peace of mind to customers. We believe thatcomments like these have led to the practice of continually improving our products and services by always listening closely
to our customers’ voice, as stated in SUBARU’s Quality Policy.

The FAST Quality Improvement Team for the North American Market

Innate Quality Enhancement

3

Quality Policy At SUBARU, quality is our highest priority as we earn the trust of our customers.

Early detection of defect trends based on analysis using AI
Direct gathering of quality data via telematics systemsE arly determination of the scope of affected parts withtraceability systemsN ew QA Lab facility for enhancing our capability toinvestigate defects

In January 2021, we launched “FAST” in the U.S. to strengthen our quality assurance system in North America, a major
market for the SUBARU Group. In the North American market, which constitutes an enormous amount of both SUBARU
vehicles sold and owned, our most important task is to quickly and accurately ascertain information and improve the speedof our quality improvement actions.
FAST is a cross-national and cross-organizational team consisting of personnel from each of SUBARU’s divisions andheadquarters, as well as from Subaru of America, Inc., Subaru Canada, Inc., and North America subsidiaries (North America
Subaru, Inc., Subaru Research & Development,Inc.) Furthermore, we are strengthening cooperation between SUBARU and
our U.S. production base (Subaru of Indiana Automotive, Inc.) to improve quality through all-SUBARU initiatives. At its
inception, FAST consisted of 42, and has gradually increased in team size. As of March 31, 2023, a total of 77 people,
including 61 people assigned from SUBARU, are working on quality improvement activities as part of the FAST team.

Canadian dealerships(Subaru Canada, Inc.)

FAST

Servicefunction

U.S. dealerships(Subaru ofAmerica, Inc.)

Subaru Research &Development, Inc.

North American
Subaru, Inc.

Servicefunction

Development
units

Qualityassurance units

SUBARU
Strongercollaboration
Strongercollaboration

Qualityassurance units

Productionunits

Development
units
Subaru of Indiana Automotive, Inc.
Production
units

Thorough Implementation of a Quality-First Mindset and Reinforcementof Organizational Efforts and Structure

Redefine goalsQ uality awareness, reflection activities

In April 2019, Quality Policy revised for the
first time in 25 yearsF ull revision of the quality manualQ uality Caravan eventsC ompany-wide efforts to prevent lessons learnedin the past from fading away

36 Integrated Report 2023

 einforcement of organizationalR
structureN orth American quality team FAST

Since the launch of the FAST team, the number of defects and buybacks, which had been an issue in the North American
market, has steadily declined. Going forward, we will work to accelerate resolution of quality issues, including those of ourbusiness partners, through participation in external manufacturing quality improvement activities at Subaru of Indiana
Automotive, Inc. and by expanding our local parts survey function.

Integrated Report 2023

37

Value Creation Story

QA Lab
The QA (Quality Assurance) Lab is a new facility at the Oizumi Plant within our Gunma Plant. At this facility, we investigate
the causes of defects in parts returned from the market. The QA Lab was established to serve three purposes: 1 To
accelerate the process of determining defect causes, 2 To perform independent investigations separately from thedepartments and business partners that had been investigating defects, serving an audit function, and 3 To create ahuman resource development function to support entities requesting investigations so that they can use analysis devices
and conduct their own analyses. Full-scale lab activities began in April 2022, and we are working to install the latest
equipment to enhance its functionality.

BEFORE
Parts return

Investigation
requestResult sharing

Countermeasureformulation

Countermeasures

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

processes at undercarriage using a lowered floor to reduce theburden on inspectors, and a wide conveyor that moves across theentire floor so that inspectors can concentrate on inspection
without walking from place to place. These standard inspectionlines offer flexibility and expandability to accommodate BEV*
production, and will be passed on to the dedicated BEV line at the
Oizumi Plant, which is currently under construction.
In addition, we operate a training facility equipped with thesame facilities as the standard inspection line to enhance ourvarious training programs for inspectors (including inspector
candidates).
We are also taking actions to share digital data from final
vehicle inspections with other functions, including development,
manufacturing, and services, to help improve quality.			
* Battery electric vehicle

Markets
Quality assurance
departments

Supplier/Specialized
departments

Quality Assurance
Division

Designdepartments

Quality is at the foundation of the SUBARU brand,
and we will continue to deepen our quality
enhancement efforts.

AFTER
Parts return

Investigation
requestResult sharing

Countermeasureformulation

Markets3

Primary
investigation
QA Lab1

Root cause
analysis

2
Continued
investigation
Supplier/Specialized
departments

New Final Vehicle Inspection Building
At the Gunma Plant, we are working to strengthen and restructure
quality assurance at the plants on its premises. After thoroughly
analyzing the inspection process, which differed from one
production line to another, a unified standard inspection line wasestablished to enable ease of inspection and create anenvironment allowing inspectors to focus on the inspection
process. In August 2022, the No. 5 Final Vehicle Inspection
Building at the Yajima Plant began operations, and in August
2023, the No. 3 Final Vehicle Inspection Building began
operations, both featuring these unified standard inspection lines.
Specific features of these inspection lines include standardized
lighting facilitating easier detection of abnormalities, inspection

38 Integrated Report 2023

Auditing

Designdepartments

Countermeasures

Our efforts in quality enhancement, a top priority since 2018, havebeen showing results. These include a steady decline in the number ofOsamu Eriguchi
recalls and vehicles affected, as well as total costs related to productSenior Vice President
quality. During these efforts, we have also thoroughly instilled a
Chief Quality Officer (CQO)
Company-wide quality-first awareness, firmly imprinting quality as
part of SUBARU’s DNA. Still, today’s automobiles feature increasingly
larger and complex control systems, requiring unprecedentedly high levels of quality. In addition, weare committed to “Monozukuri Innovation,” announced in August 2023, which calls for higher density indevelopment, manufacturing, and the supply chain, and we intend to firmly root our quality enhancement
within these innovation efforts so as to continue providing reliable quality to our customers.
Furthermore, all of our functions will work together to resolve customer concerns and improvecustomer satisfaction in the area of after-sales service as well. When addressing defects, we will quickly
take measures from several angles, including supplying repair parts to the market and reducing repair
times, in addition to improving our production lines. In this way, we will take efforts as a unified SUBARU toeliminate customer concerns as quickly as possible.
In addition, every year on October 26, we conduct Company-wide efforts to prevent lessons learnedin the past from fading away. In these activities, all employees consider the cause of improper final vehicle
inspections and what actions they should take if such an incident were to occur in their own work. In
FYE March 2023, these activities included a presentation on the new final vehicle inspection buildings.
Presentations to all employees also included positive comments from inspectors looking back on the leadup to the new inspections, saying they wanted to transform the overall Company from their position at the
final vehicle inspection site. These annual efforts are part of our work to dig deep and determine the root
causes behind improper final vehicle inspection and bring about substantial corporate culture reforms.
Quality is at the very foundations of the SUBARU brand. Our goal is making SUBARU a brand that ourcustomers will choose for its quality, even in the age of electrification.

Integrated Report 2023

39

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Cultivating Human Resources

Human Capital Management to Become a Company “Delivering Happiness to All”
In the rapidly changing business environment, the SUBARU Group is committed to human capital management with theapproach that the human resources that drive our operations are the foundation of our competitiveness and sustainable growth.
We believe that creating competitiveness comes from linking the growth of the individual, in which people think and act on theirown initiative in response to various changes, to the growth of the organization. To achieve this, we have been taking a range of actions
focused on encouraging autonomy, polishing individual ability, and building empathy, under priority themes such as human resource
development and corporate culture reforms, with the goal of building human resources who will lead the future of SUBARU.
In order to be a powerful driver of the impending wave of vehicle electrification, we will use our new management structure tofurther deepen these efforts and build an environment where these innovation leaders, who will bring about Monozukuri innovationand value creation, can fully demonstrate their abilities. By linking the growth of the individual to the growth of the organization inthis way, we will continuously strive toward our vision of becoming a company “delivering happiness to all.”

Becoming a company“Delivering Happiness to All”
VisionProviding “Enjoyment
and Peace of Mind”
Monozukuri
Innovation

Value
Creation

Expected
benefits

Boosting employee engagement

Measures initiative

Empowerment of diverse
human resources

Creating a vibrantworking environment

Human resource developmentencouraging autonomy
and taking on challenges

Diversity Management

Health Management

Empowerment of female employees
Mid-career/highly-specialized humanresources
Promotion of non-Japanese employeesE mployment of people with disabilities
Empowerment of senior citizen
employees

Health checkups and guidance

Reskilling and upskilling
Career interviews
Open-call job rotation
Assessment and remuneration
Selection of young talent

SUBARU promotes various initiatives where the ideal employee is defined as someone who continues to take on new
challenges independently based on their affinity with SUBARU’s philosophy. In these initiatives, we encourage employees toautonomously develop their capabilities and take on challenges, supporting the growth of the individual.

(1) Building resonance through the SUBARU Vision
Awareness Program
In our SUBARU Vision Awareness Program conducted for all
employees, we aim to create a strong organization in which diverse
employees work as one toward a unified vision through autonomous
demonstration of their respective outstanding abilities.
The program uses videos and mutual discussion amongcolleagues in the same workplace to encourage participants toconsider SUBARU’s vision to become a company “Delivering
Happiness to All” and to understand how their daily work isconnected to the happiness of SUBARU’s customers. At the same
A SUBARU Vision Awareness Program sessiontime, the program aims to build resonance with SUBARU’s vision andto encourage each employee to act autonomously. According to theresults of a survey of participants conducted in FYE March 2023, approximately 70% of employees said that the program waseffective in creating a deeper understanding about “delivering happiness to all.” Based on these results, in FYE March 2024,
we will further encourage a sense of ownership and autonomous action among employees that will boost resonance to evenhigher levels.

(2) Supporting employees’ autonomous career development and encouraging growth of the individual

Growth of the individual
and the organization

Autonomous skill development

Human resource development polishing individual ability andencouraging autonomy and taking on challenges

Mental healthcare
Hybrid work, work style reform
Improving health literacy

We employ a multi-pronged approach to supporting our employees’ career development. In individual career planning, acareer design sheet is used to visualize future career goals based on self-understanding, including one’s own experience, skills,
and strengths. Each individual’s thoughts and ideas about their career are then shared with the workplace through careerinterviews with supervisors. Based on the shared career plan, supervisors provide tailored support to each individual, creatinga system that allows employees to develop their careers autonomously. In addition, we offer age-based career planningtraining, in which participants learn optimal career planning methods and tackle questions about their own careers from a
broad range of perspectives through interaction with employees of around the same age. Another program is career
management training, in which participants learn the essential mindset and skills required of supervisors when they conduct
career interviews.
An annual PDCA cycle is used to evolve each of these initiatives. For example, in a survey conducted after an age-based
career planning training program, many participants commented that it offered valuable time to assess their careers and that it
helped clarify how to create a career vision and determine where they need to work on going forward. These comments
informed our decision to enhance our activities here, including gradually expanding the age ranges covered by this program.

(3) Knowing the outside world to spur challenge with an accurate sense of urgency
Corporate Culture Reforms
Vision Awareness Program

Dialogue with the President

Employee attitudes survey

Improving productivity, workplace improvement activities

PolicyPolishingindividual ability

Encouraging
autonomyD ialogue with leaders at other companies

Building
empathy

In order for SUBARU to maintain its growth going forward, we believe it is essential for each individual to know the outsidecompany, take on challenges proactively with an accurate sense of urgency, and lead the organization.
As part of our efforts to help individuals know the outside world, leaders in corporate management from outside SUBARU
were invited to deliver lectures to our own leaders (managers and section leaders) in FYE March 2023 on the theme of“Leadership for Survival into the Future.” These management leaders from a total of seven companies delivered lectures
expanding participants’ horizons and helping them think independently about how to demonstrate their own leadership inthese rapidly changing and uncertain age.
In our efforts to cultivate and generate managerial talent, each selected employee participates in external courses
according to the issues they face and the skills they wish to develop, and by applying the knowledge and inspiration gained

Cultivating human resources for sustainable growth

40 Integrated Report 2023

Integrated Report 2023

41

Value Creation Storyfrom outside to their work within the Company, they develop their ability to lead SUBARU into the future. We also offer
elective external open lectures for all employees, actively providing opportunities for them to learn about the outside world sothat many employees can engage in their work with a broader perspective.

(4) Providing career choices through open-call job rotation
SUBARU introduced an open-call job rotation system in FYE March 2022 as a scheme to support employees in the career plans
they have developed for themselves. Under this system, employees voluntarily apply for open positions offered by eachdepartment, and if conditions are met for both sides, the employee is transferred. More than 100 employees have taken
advantage of this system to capture new career opportunities. As of FYE March 2023, we have launched a new initiative
offering open-call recruitment to young employees for positions that involve overseas assignment. This has helped launch
career development overseas for our motivated talent.

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Diversity Management for Long-lasting Growth
The SUBARU Group aims to continue creating the unique value provided by the SUBARU brand. To achieve this goal, SUBARU
employees with a diverse range of individual characteristics and values need to be able to fully utilize their own unique talents
and to be encouraged to create innovation. This is why SUBARU respects diversity in the form of gender, nationality, culture, andlifestyle, and strives to create a positive workplace environment for everyone. SUBARU is committed to empowered and fulfilling
careers with respect to human resource diversity, including for women, mid-career hires, people with disabilities, non-Japaneseemployees, and LGBTQ+ individuals. To this end, in January 2015, SUBARU established the Diversity Promotion Office, and has
been expanding systems, assigning the right people to the right positions, cultivating human resources, and promoting them tomanagement positions.

Promoting active roles for female employees(Comments from open-call job rotation users)
The system allowed me to utilize my cultivated skills in new areas, creating a feeling of broader career options.
 he ability to take a new job in a completely different area has allowed me to take on new challenges and grow asTa person.

Upskilling Engineers for New Value Creation
The creation of new technological value is essential for SUBARU to continuously meet customers’ expectations, which
fluctuate with the market. SUBARU is actively working to upskill its engineers, a process adding new technical skills
required in the era of the electric car to the technical skills cultivated in internal combustion engines and reinforcing
technical skills that embody the SUBARU-ness.
In particular, given that areas related to software will determine how well a company generates technological value,
we launched the Software Human Resource Development Project within our engineering department in FYE March 2023.
This project aims to cultivate human resources capable of developing software that will innovatively enhance the value of
automobiles.
Specifically within this project, we launched a training program for acquiring software skills at different levels in October
2022. This training program has two major course branches, one for new employees and one for existing employees. In eachof these branches, courses are offered at the introductory, beginner, intermediate, and advanced levels.
All of the approximately 170 new employees who joined the engineering department in FYE March 2023 havecompleted the beginner level of the training program for new employees. Approximately 10 participants have advanced
to the advanced level and are continuing their training.
In the training for existing employees, an introductory level course on software literacy was conducted for all of theapproximately 4,000 engineering department employees. Currently, approximately 200 of these employees are taking the
beginner level course.
In addition, in order to utilize the skills acquired in these training programs in practice and link them to the creation oftechnological value, we are also studying and implementing the optimal allocation of human resources.

At SUBARU, we believe the empowerment of women is important to our sustainable growth. It is based on this belief that we
support female employees in their pursuit of career development and in their efforts to balance work and childcare as two key
issues. We also provide health support to ensure that female employees can sustain their careers through various life events.
Regarding support for career development, we place special emphasis on nurturing female managers. We have set a goalof doubling the number of female managers by 2025 compared to 2021. In FYE March 2023, we implemented various initiatives
aimed at supporting female employees aspiring to become managers. These initiatives included the promotion of the
Women's Leadership Program (WLP), which provides guidance and education tailored to each employee, organizing diverse
training programs to help individuals shape their own career paths, andestablishing a training system that includes dialogue sessions withfemale executives through an executive forum aimed at further
enhancing the contributions of female managers. We have also worked
to create a culture and workplace environment that promotes the active
participation of women through initiatives such as unconscious bias
training targeting managerial staff. As a result of these initiatives, as ofApril 2023, we have 31 women among the 1,095 managerial positions,representing an increase of approximately 1.3 times from the 24 female
managers in 2021.

An executive forum session

To support balancing work and childcare, we have introduced a work-from-home system from FYE March 2022 and abolishedcore hours in the flex-time system to facilitate flexible work styles for diverse human resources so that they can balance rewarding
work and fulfilling lives. In addition, for employees in direct departments, we introduced an early-morning childcare service by
qualified nursery teachers using in-house facilities in FYE March 2020. In FYE March 2023, we have expanded this to cover nights
and late nights in our efforts to help balance work and childcare.
Another initiative is the Women’s Empowerment Working 4’s Project, launched in FYE March 2023 under the leadership ofwomen working in our manufacturing department. This project’s goal is to bring about what is needed for women to shine much
more brightly, and includes improving facilities and holding round-tablediscussions.
For our future development, we recognize that it is necessary to
make improvements in the two issue areas of work styles and corporate
culture. To this end, we will further correct long working hours andencourage male employees to take childcare leave, as well as further
raise awareness in the workplace and among managers through various
training programs, and promote active roles for female employees.
A Women’s Empowerment Working 4’s Project session

A software training class for new employees (beginner level)

42 Integrated Report 2023

Integrated Report 2023

43

Value Creation Story

Foundations Supporting Value Creation

Commentary on Strategy

Corporate Data

Boosting Employee Engagement and Reforming Corporate Culture for a More Robust Foundation

Strengthening mid-career recruitment
SUBARU has been actively promoting mid-career recruitment in recent years to respond to changes in the businessenvironment and achieve sustainable growth. There were 4,161 mid-career hires working as regular employees (approximately
24% of all regular employees) as of the end of March 2023, and 175 of them were in management positions (approximately
16% of all managers).
In addition, at the SUBARU Lab AI development base established in Shibuya, Tokyo in December 2020, we are working toenable smooth and targeted hiring of human resources required for AI development. As of April 2023, 13 employees play
active roles in this area within SUBARU.

Promoting employment of people with disabilities
In accordance with the April 2023 Human Resources Department Policy on Employment of People with Disabilities, the
SUBARU Group strives to create workplace environments in which people with disabilities can truly shine. Under this policy, we
are working to improve understanding among employees to ensure that those with diverse personalities, regardless ofwhether they have disabilities, can work with peace of mind and excel in the workplace. This is achieved through training
regarding the employment of persons with disabilities provided within SUBARU and our Group companies.
In FYE March 2023, our specified subsidiary SUBARU BLOOM Co., Ltd., thelargest employer of people with disabilities in Gunma Prefecture, received
recognition for its long-standing contributions with the Gunma Prefecture Governor'sAward as an excellent company for employing people with disabilities. As of June
2023, SUBARU BLOOM has 82 employees with disabilities on its roster.
As a result of various initiatives, as of June 2023, the SUBARU Group has 326
employees with disabilities, and the percentage of employees with disabilities(including at our special subsidiary company and affiliated companies) is 2.47%.

SUBARU conducts the Employee Attitudes Survey to assess changes in employee awareness and the workplace environment using
objective data, and utilizes its results as a KPI for the evaluation of the Company’s efforts. Survey results are also used to identify
issues and formulate countermeasures at each workplace, and are utilized in personnel policies and corporate culture reform
efforts. Evaluation results become part of our PDCA cycle as we work to become a company “Delivering Happiness to All.”
Employee engagement is a rating in the Employee Attitudes Survey that reflects fulfillment from work and pride in thecompany. We are implementing various initiatives aimed at boosting this rating to 70% by 2025. This indicator has also beenused in qualitative (non-financial) evaluation for executive compensation since FYE March 2023. In the FYE March 2023 survey,
employee engagement results showed a downward trend (from 50% to 47%), due in part to instability in the global economy
and social conditions.
Various Initiatives Aimed at an Employee Engagement Rating of 70% by 2025

Employeeengagement

Results of the Employee Attitudes
Survey Percentage of those who feel both pride in the company
and fulfillment from their work
Target for 2025(%)
80

Fulfillment fromwork

Pride in thecompany

Management by supervisors andinterpersonal relations
Opportunities for improving abilities

Identifying withthe corporate philosophy
Keeping up with changes at SUBARU

70%

70
60

49

50
40

46

42

50

50

47

2020

2021

2022

30
2017

2018

2019

2025 (Year)

Implementation of Various Measures Related to both “Fulfillment from Work” and “Pride in the Company”
Initiatives to boost engagement

A supervisor checking work

Senior executive management

Management level

General employees

Promoting Non-Japanese Employees

Message from the President

Facilitation and coaching training

SUBARU Vision Awareness Program

The SUBARU Group hires human resources best suited to the policies and business activities of each location, regardless of
their nationality. SUBARU employs 88 non-Japanese employees as of the end of March 2023. There are three non-Japaneseemployees in managerial posts at IT, engineering, and manufacturing departments. In our manufacturing department, where
there are a number of non-Japanese employees employees, work instructions for our processes are translated into fivelanguages to facilitate communication and support active roles for our non-Japanese colleagues.

Executive engagement declaration (includes KPIs)
Use of employee engagement index improvementfor director compensation evaluations

 ompany-wide disclosure of Employee Attitudes
C
Survey results and employee engagement rating bydepartment/office (planned) nhance understanding of SUBARU through TeamE
Window*

Ongoing communication of future strategy

Career interviews

Activities in cooperation with labor unions

Dialogue with the President

Visualization within the talent management system

Workplace environments, etc.
Health management

Initiatives for the LGBTQ+ community
The SUBARU Group’s Human Rights Policy prohibits discrimination based on gender, gender identity, expression, and sexual
orientation. To ensure that all employees have a proper understanding of sexual diversity, we conduct employee awarenessactivities and increase the number of allies (LGBTQ supporters) throughout the year.
In FYE March 2022, we set up an external hotline employees can use to consult about LGBT-related issues. In addition, theDiversity Promotion Office regularly holds opinion exchanges with members of the LGBTQ+ community to help provide themwith a workplace offering peace of mind. At our internal LGBTQ+ seminars, participants have the opportunity to hear
unfiltered comments from people identifying as LGBTQ+, learning about the attitudes and knowledge needed to support
them. In addition, as part of activities to increase the number of people who have an understanding of LGBTQ+ issues, we arerecruiting internal allies to share information on related events and improve understanding within the Company. In FYE March
2024, as a member of the LGBT-Ally Project, we will work to support the community while interacting with other companies,
including through the Tokyo Rainbow Pride event.

Smile Up Project

Responses to new work styles

Wages

Welfare and benefits* Team Window: An initiative for building a more robust organization by conveying information and facilitating discussion among members representing all departments

Survey participation was strong, with 97% of all regular employees responding in FYE March 2023. Our analysis of the FYEMarch 2023 survey suggests that the impact of temporary factors such as poor performance due to unstable operating
conditions during the COVID-19 pandemic and uncertainty about future market conditions led to the lower overall score.
Based on these results, in FYE March 2024, we will work toward greater employee understanding by providing timely and easyto-understand information on SUBARU‘s future strategies and on its management, as well as by creating opportunities for
dialogue, as part of our efforts to eliminate uncertainty about the future.

Response rate of questionnaires

100%
95%

91%

95%

2021

2022

2019

2020

80
70

62

60

60

97%

90%

90%
85%

94%

2023

70
56

54

(FYE March)

64

50
40
30
20
10
0

Bronze certification in the PRIDE Index

44 Integrated Report 2023

External consultation service informational cards distributed to employees

Communication,
Open culture
2019

2020

2021

Work-life
balance2022

2023

Opportunities
for improving
ability

Empathy forthe corporate
philosophy

Workworthwhile

Pride inthe Company

Integrated Report 2023

45

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Six Priority Areas for CSR

We envision becoming a company “Delivering happiness to all.” To achieve this vision, we have adopted
the Six Priority Areas for CSR and will promote initiatives based on the SUBARU Global Sustainability
Policy and to fulfill our corporate social responsibilities, thereby providing “Enjoyment and Peace ofMind” to our customers and other stakeholders. The SUBARU Group aspires to be a truly global
company with sustainable growth driven by each and every one of its employees, and to contribute to
the realization of an enjoyable and sustainable society.

SUBARU Global Sustainability Policy
Until recently, the SUBARU Group promoted various initiatives in line with its CSR Policy, revised in June 2009. However, tocope with changes in the social environment and in relationships with our stakeholders, we established the “SUBARU
Global Sustainability Policy” in April 2020 as a guideline to be shared by all Group employees on a global basis.
This Policy is applied to Subaru Corporation and all its subsidiaries.

SUBARU Global Sustainability Policy

SUBARU Group’s Six Priority Areas for CSR

We, the SUBARU Group, are committed to sustainable business practices designed to promote harmony between people, society andthe environment in the following ways:

Process of Identifying the Six Priority Areas for CSR

1.	Through our business activities, we will contribute to the resolution of various social issues, including the protection of the global
environment, and to the creation of a sustainable society.

The SUBARU Group promotes CSR initiatives in the Six Priority Areas for CSR: People-oriented Car Culture, Resonance andCoexistence, Peace of Mind, Diversity, Environment, and Compliance.
To select the priority areas, the SUBARU Group first identified 41 CSR priority topics for which social needs were high andthen conducted a questionnaire among experts and investors in North America and Japan. The responses and opinions we
received were used in an assessment and exploration of these areas from two perspectives: areas in which we can engage thecommunity by leveraging our business strengths, and areas related to the demands of society. As a result, the SUBARU Group
selected People-oriented Car Culture, Resonance and Coexistence, Peace of Mind, and Diversity as the four areas where
SUBARU could engage our communities by leveraging our business strengths, and Peace of Mind, Diversity, Environment, andCompliance as the four areas where the SUBARU Group could work to meet the demands of society.
Peace of Mind and Diversity appear in both categories, because Peace of Mind is an area in which society’s needs and thestrengths of the SUBARU Group’s business coincide, while Diversity refers not only to diversity in the community, but also todiversity in a broad sense, including in the products that the SUBARU Group offers to customers.

In August 2023, SUBARU announced new management policy. Its priority areas in this policy are fundamentally
unchanged. Based on the SUBARU Global Sustainability Policy, SUBARU will pursue value creation on a Groupwide and global basis with the goal of becoming a company “delivering happiness to all.” We will also promote
initiatives in the Six Priority Areas for CSR, recognizing issues of importance to society and the SUBARU Group,with the aim of creating greater social value and economic value.
Reflecting SUBARU Group’s Six Priority Areas for CSR in Management

2.	Respecting the quality and originality of our products, we will continue to provide SUBARU’s unique value using advanced
technologies, and enrich the lives of all those involved with the SUBARU Group.
3.	As a good corporate citizen in the international community, we respect human rights, diverse values and individuality, and treat all
stakeholders with sincerity in every interaction.
4.	We strive to maintain and advance the workplace environment so that employees can work safely in peace, and with a senseof satisfaction.
5.	We respect international rules and the laws and regulations of each country and region, as well as local culture and customs,
and pursue fair and transparent corporate governance.
6.	We make use of dialogue with stakeholders to make management decisions, and disclose corporate information in a timely andproper manner.

Six Priority Areas for CSR: Visions for 2025 and Relevant SDGs
The Sustainable Development Goals (SDGs) for 2030 are development goals for achieving a sustainable future, and the
SUBARU Group recognizes the importance of responding to these goals.
By clarifying visions for 2025 regarding the Group’s Six Priority Areas for CSR, SUBARU will reinforce its efforts in eachpriority area and make positive contributions toward achieving the SDGs. Specifically, we acknowledge that the SUBARUGroup’s initiative to achieve a goal of zero fatal traffic accidents* in 2030 contributes to Target 3.6 of the SDGs: “By 2020, halve
the number of global deaths and injuries from road traffic accidents.”*Zero fatal traffic accidents among occupants of SUBARU vehicles and people involved in collisions with SUBARU vehicles, including pedestrians and cyclists.

SUBARU Group

SUBARU

Six Priority Areas for CSR
People-oriented
Car Culture

Executive Management
Board Meeting

Reflection
in management

Priorities specific
to SUBARU

Board of Directors

Resonance andCoexistence

Visions for 2025

Relevant SDGs

SUBARU believes that a car is more than just a means of transport.

make the car a partner that enriches people’s lives and minds, whilecherishing the human emotions of “Enjoyment and Peace of Mind.”

Information disclosure
Board of Directors
and dialogue

Society’s
expectations

Resonance andCoexistence

SUBARU will become a company that is trusted by, and resonatesand coexists with, both individual customers and society as a wholeby engaging seriously with their voices through greater person-toperson communication.

Become a company that is widely trusted by, resonatesand coexists with society.

Peace of Mind

SUBARU will become a company that provides all stakeholders withthe utmost peace of mind.

Become a company that provides the utmost peace ofmind to all stakeholders.

Diversity

The SUBARUu Group’s approach to promoting diversity has two key
elements: offering products that respect diverse forms of market
value, and respecting and reflecting the diverse values of all those
who work for the SUBARU Group.

Promote businesses that create diverse forms of market
values while respecting the diverse values of all people.

Stakeholders

Diversity
Areas related to thedemands of society
Priority areas selected from issues
regarded as critical by experts andinvestors in North America and Japan

Compliance

SUBARU Global Sustainability Policy

46 Integrated Report 2023

Basic Concepts

People-oriented SUBARU will foster a sustainable mobility culture by providing
Become a company that enriches people’s lives andcustomers with added value in the form of products and services which minds as a partner.
Car Culture

Priority areas selected from thebusiness strategy perspective

Peace of Mind

Environment

Six Priority Areas for CSR

Areas in which the Company can
engage communities byleveraging its business strengths

Environment

In order to pass on “The earth, the sky and nature,” SUBARU’s fields
Cherish and protect the global environment—The earth,of business, to future generations, we provide utmost care to thethe sky and nature—through Group-wide activities.
environment with our company-wide activities.

Compliance

SUBARU will become a company that operates in accordance withlaws, regulations, and societal norms, ensuring that our focus oncompliance as a priority permeates throughout and is practiced by
all those who work for the SUBARU Group.

Act in good faith and become a company that is trusted
by and resonates with society.

Integrated Report 2023

47

Value Creation Story

Foundations Supporting Value Creation

Commentary on Strategy

Corporate Data

Activities in the Six Priority Areas for CSR in Relation to SDGs
Six Priority
Areas

Relevant
Stakeholders

Vision/KPIs(FYE March 2026–FYE March 2031)

Initiatives

ThemesFYE March 2021

FYE March 2022

FYE March 2023

FYE March 2024

FYE March 2025

Enjoyment ofdriving a car

Evolution of SUBARU Global Platform and Integration with Intelligent Technology(Achieving safe and enjoyable driving with peace of mind like a skilled driver)

Providingenjoyment ofcustomization

Development of high-quality accessories matched with new models

FYE March 2026

Customers
Enhancing thebrand image

Proposing new formsof mobility
Localcommunities

Disseminating car
cultureSix Priority
Areas

Promotion of marketing activities that match the characteristics of each market
Promotion of motorsports and continuation of awareness-raising activities
Advancement of Subaru’s “Dynamic x Solid”
design identity to “bolder” expression“Designing experiences” with a focus on resonance with customers
under the vision of “Earth-tainment: Enjoying the Earth Together”

Proposing new forms of mobility andresearching technology unique to SUBARUTechnology development toward realization

Customers

Business
partners

Coexistence and mutual
prosperity with business partners

Resonance andCoexistence

Utilizing diverse
human resources

Employees

Creating a safe
workingenvironment

Creation of a safe and rewarding workplace environment, building of a brand that is loved by employees
Continuation of production operations and maintenance of employment at each site

11.2

Business
partners

Efforts in cooperation
with business partners

Customers

Providing a wide
range of products

Customers
KPI• Continue satisfaction surveys.
(Improve customer
satisfaction.)• Enhance connection withcustomers through theInternet of Things (IoT).
(MySubaru, the nextgeneration system,
telematics)

11.2

Popularizing vehicles
that reduce
environmental impact

Environment

Governments

Business to help
reduce environmental
impactBusiness
partners

Environmental activities
in cooperation withbusiness partners

Peace of
Mind

Securing andimproving quality

Placing of the highest priority on quality by implementing quality caravans and providing education for fostering
quality awareness
Collaboration with business partners
Optimization of the span of management in manufacturing departments

5.5
5.5.2

8.5

Incorporation of feedback on diverse market needs
Design parts that can be used in multiple vehicle models

Development and sale of EVs (BEVs and SHEVs)
BEV development

Launch of Solterra, global rollout and sales expansion of BEVs

Energy conservation investment and effective utilization of facilities

Efficient parts storage and transportation

Cherish and protect the global
environment—the earth, thesky and nature—throughGroup-wide activities.
KPI• Reduce CO2 emissions by
60% regarding plants andoffices (Scope 1 and 2) fromFYE March 2017 levels by FYEMarch 2036 (total volume
basis).
• In 2030, aim for 50% of
SUBARU global sales to be BEVs.
• Apply electrification
technologies to all SUBARU
vehicles produced and soldworldwide by the first half ofthe 2030s.
• Formulate a resource
circulation strategy including
secondary batteries.

13.1
13.2

12.2
12.5

Promotion of retailers’ continuous efforts for energy saving, water quality conservation, and recycling

Reinforcement of security and export control initiatives

In-house educationand dissemination

Promotion of compliance from the perspective of the SUBARU Group
Establishment, dissemination, and management ofinternal rules and manuals on laws and regulations

Act in good faith and become
a company that is trusted byand resonates with society.

Prevention of harassment

Strengthening product supply capacity (parts center capacity increase plans/parts supply system improvements)

Improvement of quality in all processes, from product planning to production, sales, and service

KPI ouble the number of female•Dmanagers by 2025 compared
to 2021.
•T he number of participants incareer development training•A chieve the legally prescribed
employment rate for persons
with disabilities.
•A chieve 100% in thereemployment rate of seniorcitizens wanting to work.

Compliance training

Governments

Establishment of a timely and efficient supply system of spare parts and accessories

Promotion of initiatives to produce vehicles of choice in terms of quality as well

Promote businesses thatcreate diverse forms of market
value while respecting thediverse values of all people.

Optimization of logistics and complete knockdown (CKD) costs

Ensuring comprehensive
export control

Implementing and sustaining EyeSight test rides (awareness-raising for advanced safety technology), etc.

Global penetration of maintenance system with high and consistent quality

Relevant
SDGs

Enhancement of the understanding of employees, promotion of cooperation with U.S. minority organizations

Establishment and maintenance of an environmental management system

Continuous enhancement of crash safety

Promotion of accurate, high-quality inspection and maintenance

CSR surveys, awareness-raising, and stronger CSR initiatives in the supply chain with business partners

Promotion of lighter, electric, and biofuel aircraft

Contributing to local communities through stronger cooperation with nonprofit organizations (NPOs)

Developing autonomous flight control systems (collision avoidance technology, fault-tolerant system improvements)

Improving inspection
and maintenancequality

Diverse work styles: Labor management to back up work-life balance and support for hybrid work leading to
improved productivity

Continuation of conservation efforts in cooperation with governments

Contribution and relationship-building through sporting activities

Expanding enhanced safety functions since FYE March 2021

Customers

Examination and promotion of a workplace environment that pays due consideration to minorities in society

Introduction of hydroelectricity and green electricity

17.16

Adoption of Advanced Automatic Collision Notification (AACN) system and expansion of its functions

Establishing andstrengthening a
reliable product supply
systemOperation of the human resources system for senior employees

Introduction of solar power generation for self-consumption

Advancement of Advanced Driver Assistance System (ADAS)

Contributing to safe
driving

Six Priority Areas for CSR

Creating workplaces where female employees in direct departments can thrive
and play an active role

Establishing appropriate disposal schemes for EV batteries

Community support activities during disasters and pandemics

Improving safetyfunctionsFYE March 2026

Expansion of the sale of EVs (including models with e-BOXER)

Become a company that is
widely trusted by, resonatesand coexists with society.

Reinforcement of community exchange and partnership activities

Revitalizing
relationships withlocal communitiesFYE March 2025

Acquiring new knowledge through proactively recruiting external human resources

Promote diverse
work styles

Utilization of athletic teams, boosting of employee morale

Local
communitiesFYE March 2024

Compliance with the legally prescribed employment rate for persons with disabilities

Diversity

Efficient vehicle maintenance by utilizing IT and digital transformation (DX)

Reinforcement of efforts for occupational health and safety, improvement of plant environments

FYE March 2023

Promotion of active roles for non-Japanese human resources

Employees

KPI• Continue customer
satisfaction surveys.
(Improve customer
evaluation results.)

Enhancing the maintenance system for promoting EVs

Enhancing and strengthening the SUBARU Group’s telecommuting environment

Childcare support for female
employees in direct departments

Operation of the human resources
system for senior employees

9.1

Enhancement of customer loyalty

Building of relationships with business partners with CSR surveys, awareness-raising, and from CSR perspectives

FYE March 2022

Review of the human resources system for senior employees

Become a company thatenriches people’s lives andminds as a partner.

Providing products and services contributing to prosperous lifestyles

Establishing a newmaintenance system

FYE March 2021

Expanding the number of female managers

Dissemination of SUBARU’s manufacturing practice and its endeavors for “Enjoyment and Peace of Mind”

Development of a maintenance system for EVs

Vision/KPIs(FYE March 2026–FYE March 2031)

Initiatives

ThemesPromoting active roles
for female employees

Utilizing digital technologies to strengthen relationships with customers

Strengthening
relationships withcustomers

Relevant
Stakeholders

Expansion of the lineup of high-performance, value-added items
Promotion of the brand strategy (SUBARU, the Beloved Brand: More than a Car Company)

People-oriented
Car Culture

Six Priority Areas for CSR

Relevant
SDGs

Compliance
Become a company thatprovides the utmost peace ofmind to all stakeholders.
KPI• Achieve a goal of zero fatal
traffic accidents* in 2030.
*Zero fatal traffic accidents
among occupants of SUBARU
vehicles and people involvedin collisions with SUBARU
vehicles, including pedestrians
and cyclists.
• Improve impact energy
absorption ability to 1.4 times.

Employees/
Local
Communities

Protecting humanrights of workers

Maintenance and improvement of the workplace environment by promoting work style reforms and complying with
the Labor Standards Act
Implementing conflict mineral surveys
Establishment anddissemination of our
Human Rights Policy,
implementation ofdue diligence

3.6

Business
partners

Maintaining fairrelationships

Promoting initiatives to respect human rights

KPI• Promote initiatives to respecthuman rights based on the
Human Rights Policy;
Communicate the policy
throughout the entire
supply chain.
• Strengthen CSR procurement
management.
• Provide compliance and legal
trainings.

8.7
8.8

16.5
16.5.2

CSR surveys, awareness-raising, and stronger CSR initiatives in the supply chain with business partners
Promotion of fair trade on a continuous basis
Appropriate management of software license

Note: Development of products (vehicles) is based on a premise that they are equipped with the latest technologies yet affordably priced at the same time.

Continuation and reinforcement of activities of the health and safety committees

Employees

Creating a safe
workplace

Maintenance and enhancement of workplace health and safety, and promotion of a more comfortableworkplace environment
Formulation andimplementation of plans forhealth promotion initiatives

Reinforcement of health promotion efforts

Secure and create employment

Local
communities

Contributing tosafety of local
communities

Governments

Contributing to safe
lives of people

Promotion of plant
environment improvement

Promotion of a sense of trust regarding stable operations

Implementing community safety awareness activities
Reduction of environmental impact and prevention of pollution

48 Integrated Report 2023

Contribution to the creation of a society in which people’s lives and property are protected and people can enjoy
peace of mind

Integrated Report 2023

49

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Environment ~Climate change~

Declaration of Support for the TCFD Recommendations

Strategy

SUBARU recognizes that climate change is one of the most pressing global
issues, and has been working to disclose information on climate change. In
April 2023, it has declared support for the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD). For more information
on SUBARU’s disclosure of the TCFD’s recommended items, please see our
TCFD Content Index (https://www.subaru.co.jp/en/csr/tcfd/).

SUBARU recognizes that climate change action is one of the most critical issues to address. To address climate change-relatedtransition risks in policy and regulation, technology, markets, and other items, dedicated departments at SUBARU work to identify
uncertain climate change-related risks.

Main Risks Identified (Bolded items are identified as highly important risks related to the strategic reorganization of SUBARU’s production system)
Climate-related Risks

Business
Managementin GeneralIn the event that more rigorous climate change targets are set in various countries, SUBARU’s business could
be significantly affected.

Products

If SUBARU fails to meet fuel economy regulations imposed in various countries, the Company could incur
additional costs or losses related to negative incentives, such as fines or non-penal fines for legal violation,and credit purchase for unmet standards. Also, some of our products could fail to satisfy certain fuel economy
standards, resulting in restrained sales opportunities.

Production
Phase

SUBARU could incur rising costs due to fossil fuel use, not only because of geopolitical factors associated withpetroleum etc., but also carbon taxes, emission quotas, and other government policies and regulations.

Products

To promote electrification, it is crucial to ensure profitability for the entire product cycle ranging fromprocurement and use to disposal. Thus, it is essential to involve SUBARU’s upstream and downstream partners
in exerting efforts toward this end. Failure to do this could render the Company unable to meet the
profitability goal for the entire product life cycle.

Production
Phase

If use of renewable energy does not grow as expected, SUBARU could face slower progress in achieving its Scope 1
and 2 emissions reduction goals.

Marketrisk

Products

At present, it is difficult to predict technological progress and price optimization for electrification, which will
likely cause a substantial gap with the real state of market needs. In such a situation, SUBARU could incur
unnecessary and excessive R&D costs while facing a decline in customer satisfaction, resulting in unexpected
losses and reduced sales opportunities as well as hampered advancement of the Company’s electrification
efforts.
In addition, SUBARU views electrification as a steady medium- to long-term trend, and also anticipates thepossibility of its swift and sweeping penetration of the market at some stage. SUBARU could be unpreparedfor such prospect in terms of technology and timely product lineups, and thus suffer from a resultant loss of
product sales opportunities.

Reputationalrisk

Business
Managementin General

If SUBARU fails to implement adequate initiatives to achieve low-carbon/zero-carbon outcomes, its brandvalue could be harmed, which could affect the Company’s sales and recruiting ability. Capital costs could also
rise, due to increased difficulty in obtaining financing from investors.

Management System
Regulatory
risk

Transition risk

SUBARU has established the Environment Committee, which discusses measures from broad and medium- to long-term
perspectives that accommodate environmental standards required by future societies, and evaluates the progress of related
implementations and achievements. Management of climate change-related activities is included in the responsibilities of ourenvironmental management structure. Environmental risks and opportunities associated with climate change are assessed andmonitored at the Environment Committee. After discussion at the Sustainability Committee, major issues become the subject ofproposals and deliberations at the Board of Directors and the Executive Meeting, while particularly significant matters are subject
to deliberation within the Board of Directors before decisions are made.
In addition, in order to contribute to the realization of a decarbonized society through the reduction of CO₂ emissions throughout
the life cycle of our business activities, SUBARU holds monthly CN Promotion Meetings, bringing together departments
representing the five areas of “product use,” “materials and components,” “transportation,” “disposal,” and “manufacturing.” Inthese CN Promotion Meetings, members from each area worked together and shared information, formulated a master planfrom a medium- to long-term perspective, and took actions to visualize and mitigate emissions in each area in the interest ofachieving carbon neutrality by 2050. These efforts are overseen by the Environment Committee.

Main Risks Identified

Technology
risk

Governance Structure for Climate Change

気候変動関連のガバナンス体制
Board of Directors
Executive Management Board Meeting(Presided over by the chairperson: President and Representative Director)

Sustainability Committee
Physical risk

(Chaired by the President and Representative Director)

Environment Committee(Chaired by the Executive Officer in charge of the Sustainability
Division appointed by the Board of Directors)

Production & Environment
Subcommittee

Global Warming Prevention
Working GroupAcutephysical risk
Chronic
physical risk

Business
Managementin General

As an impact of climate change, extreme torrential rain will frequently cause floods in various locations, which could
pose risks of SUBARU’s operations being affected by disrupted supply of raw materials and submerged factories.
There is a possibility that SUBARU might suffer from shortages of natural resources used for tires and metal resources,
such as materials for automotive batteries used in electrification technologies.

Domestic Affiliated Companies‘
Environment SubcommitteeSubcommittee
Sales and Service Environment
Subcommittee

Main Opportunities Identified

Logistics Environment
Subcommittee
CN Promotion Meeting

Climate-related Opportunities

Product Use
Materials and Components

Market opportunity

If SUBARU advances its efforts to make products more environmentally friendly as planned and global climate change
mitigation/adaptation efforts progress adequately, the Company will be able to maintain its key markets while at the same timepotentially expanding in markets receptive to its offer of “Enjoyment and Peace of Mind.” In addition, through contributing toaddressing climate change issues, SUBARU could increase its brand value, thereby enhancing its sales and recruiting ability.
This could make it easier for the Company to obtain financing from investors, thereby lowering capital costs.

Energy source opportunity

Regarding energy use during the production phase, by transitioning to renewable energy while at the same time giving
due consideration to cost-effectiveness, SUBARU could overcome the risk of being exposed to price fluctuations involvedin energy derived from fossil fuels, thereby preventing future cost increases.

Transportation
Disposal
Manufacturing

50 Integrated Report 2023

Main Opportunities Identified

Note: T he risks and opportunities described above are based on past facts and currently available information, and may change significantly due to such factors as future
economic trends and the business environment facing SUBARU. The opportunities described represent those for SUBARU’s products to contribute to climate change
adaptation and do not anticipate climate change-related deterioration.

Integrated Report 2023

51

Value Creation Story

SUBARU explores climate change-related countermeasures in consideration of a variety of scenarios, including its own scenario
assuming carbon neutrality by 2050 (equivalent to the 1.5°C scenario), based on climate change-related policy trends in various
countries and information published by the International Energy Agency and other organizations. This exploration also incorporates
risks and opportunities recognized with respect to sustainable business activities. As an example measure, SUBARU has developed
an electrification strategy* that considers multiple scenarios, including one in which the percentage of electric vehicles sold in themarket increases significantly, as well as one in which the market penetration of electric vehicles increases modestly.
We are also advancing BCP*1 measures against flooding during torrential rainfall as a means of adapting to climate change. Thisaction is in consideration of the risk of increasingly severe natural disasters due to a lack of progress in addressing climate change.

Commentary on Strategy

In order to contribute to a decarbonized society, SUBARU has set long-term goals (long-term vision) for 2050 and mediumterm goals (milestones) regarding products (Scope 3) and plants and offices (Scope 1 and 2). These medium-term goals arereviewed as necessary according to the business environment, which is experiencing rapid, disruptive changes.

Category

Target Year

Examples of scenarios and their risks/measures
Example scenario risksof particular importance

Risk of limited sales
opportunities due to
products not meetingcertain fuel efficiency
standards
Penetration of BEVs

Increasing severity ofnatural disasters

Products

Businessmanagement

Corporate Data

Metrics and Targets*1 BCP: Business continuity plan

ScenarioFoundations Supporting Value Creation

Goal
2

Reduce average well-to-wheel* CO2 emissions from new vehicles (in operation) by 90%
or more compared to 2010 levels*3

2050
Measures

Products
Scope 3

Early 2030s
2030 uilding a production system that can dynamically adapt theBproduction ratio between BEVs, hybrids, and ICE vehicles,
keeping a close eye on environmental regulations and market
trendsRisk of market needdiverging fromelectrification technology

 stablishing an eight-model BEV lineup by the end of 2028 withE
400,000 BEVs sold in the U.S.

Risk of operations being
affected by disrupted
supply of raw materials andsubmerged factories as aresult of frequent flooding
in various locations fromextreme torrential rain

 aking measures against flooding by installing rainwaterTcollection tanks and strengthening drainage capacity*Electrification Strategy
https://www.subaru.co.jp/en/outline/about/policy/index.html

Plants and offices
Scope 1 and 2

Apply electrification technologies*4 to all SUBARU vehicles*5 produced and soldworldwide
Aim for 50% of global sales to be BEVs

FYE March 2051

Achieve carbon neutrality

FYE March 2026

Reduce CO2 emissions by 60% compared with FYE March 2017 (total volume basis)*2 Well-to-Wheel: Approach to calculating emissions including the emissions produced by the generation of electricity to be used by EVs and other vehicles.
*3 R educe total CO2 emissions calculated based on the fuel efficiency (notified value) of all SUBARU automobiles sold across the world by 90% or more compared2010 levels by 2050. Changes in the sales quantity due to changes in the market environment shall be taken into consideration, while minor changes in running
distance shall not.
*4 Refers to the technology used to foster the use of electricity for EVs, HEVs, and others.
*5 Excluding models supplied by OEMs.

SUBARU is naturally working to improve the fuel efficiency of gasoline-powered vehicles while turning its attention to
expanding its lineup of EV models, especially the development and supply of BEVs. We believe it will be especially
important to steadily promote the expansion of the above initiatives in order to reduce the amount of CO2 emitted fromautomobiles. The percentage of SUBARU’s EVs as a share of global sales in FYE March 2023 was 5.7%. However, we willgrow our earnings base in the BEV era by strengthening our supply capacity for EVs, including the start of in-house BEV
production in the mid-2020s in conjunction with the reorganization of our domestic production system, the launch of thenext-generation e-BOXER, and the addition of dedicated BEV production lines in the late 2020s. As we do this, we will work
to ensure a high level of financial soundness, taking actions in a sustainable structure toward our stated goal of aiming for
50% of SUBARU global sales to be BEVs in 2030.
Results and future plan of percentage of EVs sold (retail sales basis)

Risk Management
It is essential for the SUBARU Group to strategically conduct risk management while building a more robust managementfoundation and securing longevity of its business. We therefore believe it is important to create a SUBARU Group that has an
infrastructure that is resilient to risk to enhance our corporate value.
To address climate change-related transition risks, dedicated departments at SUBARU gather information from a wide rangeof sources and work to identify uncertain climate change-related risks from future projections. For the physical risks associatedwith climate change, the Risk Management and Compliance Office plays a pivotal role in establishing regulations in responseto these operational risks as part of the BCP*1 system. During emergencies, the office centrally collects Group-wide information,
establishing a system to manage company-wide responses.
Some items related to climate change are proposed and discussed at bodies like the Board of Directors and the Executive
Meeting, and particularly significant matters are subject to deliberation within the Board of Directors before decisions are made.

52 Integrated Report 2023(%)
50

Aim for 50% of
global sales to be BEVs

40
30

• Adding dedicated BEV production line
• Starting in-house BEV production• Equipping with next-generation e-BOXER
and other

20
10
0

2018

2019

2020

2021

2022

2030

Integrated Report 2023

53

Value Creation Story

The majority of the SUBARU Group’s CO2 emissions come from the use of the products it sells, and the SUBARU Group’s

Commentary on Strategy

Foundations Supporting Value Creation

CO2 Emissions (Scope 3)

direct CO2 emissions (Scope 1 and 2) constitute a marginal portion of total emissions when including Scope 3. However, weGreenhouse Gas Emissions (t-CO2)

believe that making proactive efforts to diminish direct emissions will encourage the entire SUBARU value chain to work as
a team and in greater earnest. Therefore, we are reducing our CO2 emissions by using renewable energy and upgrading tohighly efficient machinery and equipment with the aim of achieving carbon neutrality in 2050.
For our medium-term goal for plants and offices (Scope 1 and 2), has been raised to reducing CO2 emissions by 60% in
FYE March 2036 versus FYE March 2017.
Scope 1: Direct emissions of greenhouse gases from a company’s own facilities.
Scope 2: Indirect emissions of greenhouse gases from the use of purchased or acquired electricity, heat, and/or steam
supplied by another company.
Scope 3: All indirect emissions other than Scope 1 and 2 emissions, including those arising from the procurement of
raw materials, transport, product use, and the disposal process, as well as arising from employee commuting,business travel, etc.

CO2 Emissions (Scope 1, 2)(t-CO 2)

Corporate Data

CategoryFYE March 2019

FYE March 2020

FYE March 2021

FYE March 2022

FYE March 2023

1,703,682

1,992,046

1,583,247

1,430,501

1,726,493

1

Purchased goods and services

2

Capital goods

372,211413,287

282,713

260,566

402,9153

Fuel- and energy-related activities
not included in Scope 1 or Scope2

102,022103,772

91,851

89,627

95,352

4

Transport and delivery (upstream)

658,268

737,817

601,167

506,604

426,929

5

Waste generated in operations

31,98432,09526,44624,88828,733

6

Business travel

4,446

4,554

4,689

4,798

4,878

7

Employee commuting

13,506

13,835

14,245

14,576

14,818

8

Leased assets (upstream)

N/A

N/A

N/A

N/A

N/A

9

Transportation, distribution, andsales (downstream)

13,283

6,049

3,893

4,750

5,842

10

Processing of sold products

N/A

N/A

N/A

N/A

N/A

11

Use of sold products

33,298,769

34,029,045

27,455,302

23,102,609

27,453,385

12End-of-life treatment of soldproducts

556,139

575,107484,440

413,368

480,917

13

Leased assets (downstream)

2,394

2,463

1,998

2,065

1,984

14

Franchises

N/A

N/A

N/A

N/A

N/A

15

Investments

N/A

N/A

N/A

N/A

N/A

800,000
600,000
400,000

327,706

323,834

305,698

250,569

218,512228,273

200,000
0

Scope1

268,461

265,049

277,034

242,710

241,687

264,961

2017

2019

2020

2021

2022

2023 (FYE March)

Scope2

Scope:SUBARU: SUBARU CORPORATIONGroup companies in Japan: 52 domestic consolidated subsidiaries(including 33 SUBARU domestic dealerships that are consolidated subsidiaries)
Group companies overseas: Subaru of Indiana Automotive, Inc., Subaru of America, Inc., Subaru of Canada, Inc., Subaru Research & Development, Inc.

Source: The calculation method for SUBARU Scope 3 emissions has been revised in reference to the Basic Guidelines on Accounting for Greenhouse Gas Emissions

SUBARU calculates CO2 emissions based on the Act on Promotion of Global Warming Countermeasures. However, emission factors for electricity at Groupthroughout the Supply Chain Ver. 2.3 (December 2017) by the Ministry of the Environment and the Ministry of Economy, Trade and Industry; the Emissions

companies overseas are based on the most recent country-specific CO2 emission intensities for all power sources published annually by the International

Unit Value Database Ver. 3.0 by the Ministry of the Environment Database of emissions unit values; and SUBARU’s life-cycle assessment (LCA) calculation

Energy Agency (IEA). Consolidation of data from the Group’s domestic companies into the scope of subsidiaries with 99% certainty of Scope 1 and Scope
2 emissions (percentage based on number of employees). Due to errors in the electricity consumption of some Group companies in Japan, results forprevious fiscal years have been revised.

standards.
	In Category 11 (Use of sold products), emissions were previously calculated on a tank-to-wheel basis, but starting in FYE March 2023, emissions have been
calculated on a well-to-wheel basis, and emissions during BEV use are also included in calculations. Revisions have been made to reflect this in data fromprevious fiscal years.
	In addition, for Category 3 (Fuel- and energy-related activities not included in Scope 1 or Scope 2,) due to errors in the electricity consumption of someGroup companies in Japan, results for previous fiscal years have been revised.

For other environmental data, please visit:https://www.subaru.co.jp/en/csr/environment/

54 Integrated Report 2023

Integrated Report 2023

55

Value Creation Story

Commentary on Strategy

Foundations Supporting Value Creation

Corporate Data

Risk Management

Our Approach

Risks Associated with Business Activities

SUBARU Group is undertaking risk management as one of its key priority management issues, not only to address emergency
situations when they arise but also to deal with various risks that have a serious impact on daily corporate activities, as well as
to minimize damage when risks emerge.
The automotive industry is ushering in a major transformation, which only occurs once in a century. The SUBARU Group,
which operates businesses globally, is aiming to enhance the resilience of its management infrastructure by ensuring thesustainability of its businesses by quickly tackling changes in world affairs. At the same time, the Group must boost its
measures to minimize its human, social and economic losses. Amid this environment, it is essential to strategically conduct risk
management throughout the group to conduct business activities. We therefore believe it is important to create a SUBARUGroup that has an infrastructure that is resilient to risk to enhance our corporate value.

At the SUBARU Group, we extract and identify key risks associated with our business activities and consider measures tocombat them. The major business risks are listed below. Please note that this is not an exhaustive list of all risks relating
to the SUBARU Group.

17 Risks Affecting Business Activities
Risks relating to fluctuationsin the economic and financial environment
Economic trends in major markets

Financial markets fluctuations

Political, regulatory and legal proceduresin various countries that impact business activities

Exchange rate fluctuations

Change in raw material costs

Impact of disasters, war, terrorism, infections, etc.

Management System

Risks relating to industry and business activities

To prevent the emergence and expansion of risks to the SUBARU Group, the CRMO (Chief Risk Management Officer) appointed
by the Board of Directors leads risk management and compliance activities, reporting their status to the Board of Directors.
As a system to promote risk management, SUBARU has appointed risk management officers (job grade of Chief
General Managers) for each department and established the Risk Management & Compliance Committee. This committee
is chaired by the CRMO, and its vice-chairperson is the Vice President in charge of the duties of the Risk Management
Group, comprised of the Risk Management & Compliance Office and the Legal Department. At this committee, members
deliberate, discuss, make decisions, and exchange/ communicate information on important matters.
The CRMO leads corporate Group-wide efforts to enhance risk management with professional support from experts incorporate departments, such as the Risk Management & Compliance Office and the Legal Department. In this leadershiprole, the CRMO works closely with the Corporate Planning Department, which performs division-encompassing functions,as well as different divisions and companies. The Audit Department audits execution of tasks by each division andsubsidiary in a planned manner.
Risk Management System

Formation
Normalsituation

President and CEO

Emergency
situation

Offices/plants supervision
Companies supervision

Risk Management& Compliance Committee

CRMO• Formulatecompany-wide policies• Supervise risk
management situations• Address company-wideissues• Formulate action
Risk
guidelines
management• Understand and report
officers
the implementation
situation
Risk
Management • Operate committee
meetings&
Compliance • Support activities at
Officeindividual departments(secretariat)

Special Emergency Response Headquarters:

Financing related

Chief Risk Management Officer

for immediate responseto the most critical situations

IT system/Cybersecurity

Risk Management &Compliance Office

President and CEO, CRMO,
Risk Management & Compliance Office,risk management officer and other officers
in the relevant department(CRMO)

Information sharing/
reporting

Determine which
response headquarters
should be set up
according to the situation

Departmental risk
management officers
General managers, company presidents,
officers in charge of common departments,
etc.

Emergency Response Headquarters:

for responseto critical situations
CRMO, Risk Management &Compliance Office, related officers

Cooperation
Departmental Response Headquarters:

for independent response toincidents by the related department
Each department
Dealerships, affiliatedcompanies, customers

Risk management officer

Responsible persons in individual departments

Board of Directors

Group companies related
Legal services
Cooperation between
offices/plants
Management decision support
Safety/health/personnel protection
Executives support
Stakeholder communication
Market related
Supply chain management
Technical conformity support
Quality assessment support
Decision as to whether or not
to suspend production lines

Normal situation

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Risks arising from national regulations
and other events affecting business activities

Emergency situation

Focus on specific businesses and markets

Intellectual property infringement

Respect for human rights

Changes in the demand andcompetitive environment in the market

Cyber security

Secure and train human resources

Responsibility related to products, sales and services

Compliance

Climate change

Supply chain disruptions

Stakeholder communication

Impact on business performance or financial standing

Message fromthe CRMOWe recognize the importance of executing a business
continuity plan (BCP) as a critical priority to enhancethe effectiveness of risk mitigation activities.

The automotive industry is facing a once-in-a-century period of significant transformation, coupledwith a business environment that is changing at a dizzying pace. The SUBARU Group is also exposed
to various risks, and we consider the implementation of our BCP as a crucial management issue. In
recent years, we have faced an unprecedented and challenging business environment characterized bydisruptions in the supply chain due to risk factors such as semiconductor shortages, natural disasters,
Katsuyuki Mizuma
and the COVID-19 pandemic. In light of these circumstances, we have actively pursued various
Chief Financial Officer (CFO) and Chief
Risk Management Officer (CRMO)
initiatives to reduce our risk. For example, we have introduced systems that enhance the visibility of
information, even for the production facilities of secondary and tertiary suppliers with whom we do nothave direct transactions. This allows us to quickly comprehend the state of the supply chain in case of emergencies. We have also enhanced ourrisk management by strengthening collaboration with our business partners, which includes expanding our executive team within procurement
departments to increase opportunities for top-level coordination. In addition to reinforcing our supply chain management structure, we arewitnessing a recovery in automobile production volume due to cross-company initiatives such as transitioning to alternative semiconductors,
revising product specifications, and reallocating components between vehicle models and plants. Since some of the components we procure
from our business partners, including those affected by semiconductor shortages, still face supply risks, we recognize the ongoing need fora united effort across the organization, with a strong focus on our procurement, manufacturing, and development departments. At the sametime, we have gained practical risk management capabilities through this experience.
Moreover, the increasing global prevalence of cyberattacks has emerged as a threat to the entire supply chain, and as a result, we are
actively enhancing our cybersecurity measures. The Risk Management and Compliance Committee, consisting of vice presidents in charge ofdifferent departments, has embarked on a review of our Group-wide Risk Map. This revision, conducted from a holistic company perspective,
considers the significant shifts in the business environment in recent years and prioritizes issues according to the likelihood of occurrence andmagnitude of impact. At present, every committee member is actively fostering a thorough comprehension of the risk landscape confronting
the SUBARU Group. Each department is proactively advancing risk management, encompassing response measures for significant disasters andgeopolitical risks. For risks that cannot be resolved by a single department, the Risk Management and Compliance Office serves as a facilitator,
promoting cross-organizational activities.
Going forward, we will both encourage each department to think actively about risk management as well as undertake cross-organizational
initiatives to further enhance risk mitigation activities.
Integrated Report 2023

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