Materiality & Metrics and Targets

1. Process of identifying Material Issues

We have defined the material issues our group must address to realize the sustainable society we aim for. We engaged in extensive discussions to determine what material issues we should tackle throughout our entire supply chain—from the development, procurement, manufacturing, and sales of our core product, compact construction machinery, to the construction sites where our products operate, and finally to product disposal. 

To identify key issues based on both global trends and stakeholder expectations, as well as their importance to management, we compared them against global requirements and guidelines such as the SDGs, GRI, and ISO 26000. Through such discussions and deliberations, we have identified what we can currently achieve, what remains unachieved, and new initiatives requiring focus going forward. We have extracted candidate material issues that our group should address both now and over the medium to long term. 

For the candidate material issues identified, we established priorities using a two-axis approach: the horizontal axis representing the importance from a management perspective for our Group's medium- to long-term business, and the vertical axis representing the importance from a stakeholder perspective. We incorporated opinions from external experts and, through repeated discussions within the project team, identified these as material issues. The importance from the stakeholder perspective was determined by considering requests and expectations directed at our company from end users, suppliers, customers, employees, the environment, local communities, municipalities, investors, and others. 

2. Identified Material Issues

We are currently re-evaluating materiality. Previously, materiality was considered on non-consolidated basis for the home office, but this time it is on a consolidated basis.

The evaluation results will be available by the end of October, so I will submit the manuscript that should be included here around mid-November.

Climate Change

1. CO2 emissions from products: 30% reduction by FY2030 (compared to FY2010)

We recognize that addressing climate change, specifically reducing CO2 emissions, is one of the most pressing issues requiring our highest priority. The goals we have set this time cannot be achieved solely through improving the performance and fuel efficiency of conventional diesel-engine construction machinery; the widespread adoption of battery-powered construction machinery is an absolute prerequisite.

While we launched a 2-ton class lithium-ion battery-powered mini excavator in July 2021, electrification in the construction machinery market is progressing at a pace significantly slower than initially anticipated.

However, rising environmental awareness may accelerate adoption through shifts in customer mindset, strengthened public subsidies, or tighter regulations. We view this “transition risk” as an opportunity for business development. We are actively engaged in product development to expand our battery-powered construction equipment lineup.

Following the currently sold 2-ton class model, we are testing prototypes of 1.5-ton and 3.5-ton class machines in the market. Note that CO2 emissions from products are calculated based on Scope 3, Category 11 (use of sold products).

2. CO2 emissions from factories in Japan: 50% reduction by FY2030 (compared to FY 2015)

Alongside reducing CO2 emissions from our products, we believe reducing CO2 emissions from our factories is also a fundamental responsibility as a manufacturer. Since electricity use accounts for the overwhelming majority of CO2 emissions at our factories, we are tackling this through the following three pillars:

• Energy conservation: Improve the efficiency of electricity use, including activities by the Energy Conservation Promotion Committee established in 2010
• Energy creation: Generate electricity using solar panels installed on the factory roof
• Renewable energy: Switch 100% of the electricity used in the factories in Japan to renewable energy
• Our Home Office Factory has been procuring 100% renewable energy since November 2021, and our Aoki Factory has been doing so since June 2023 (when the building was handed over).

Occupational Safety and Health

3. Occupational accidents resulting in absence from work for one day or more: Zero cases, every year

Our company upholds the principle that “Safety First” in our Code of Conduct. We have consistently worked to maintain and improve a safe and healthy workplace environment, including through the collaboration between the Safety and Health Committee and employees to prevent occupational accidents and incidents.

This time, we have renewed our commitment to this principle as one of our global ESG challenges and set the goal of zero occupational accidents. We believe that creating a workplace where every employee can work with peace of mind is essential for the company's sustainable growth.

Human Resource Development

4. Training hours per person: Disclose actual results annually

Our company upholds “Respect for Humanity” in our Code of Conduct, recognizing human resources as our greatest management asset and human capital. Business development centers on people, and employee growth directly contributes to corporate growth.

We have reaffirmed the importance of human resource development and selected training hours as an indicator for employee education and training. Moving forward, we will continue to provide high-quality learning opportunities for our employees and actively invest in human capital.

Work-Life Balance

5. Ratio of employees taking parental leave (by gender): Disclose actual results annually

Parental leave is a system where companies support childcare, a vital life event. Society demands workplaces foster environments where both men and women can easily take parental leave. Taking parental leave provides an opportunity to strengthen family bonds and reevaluate one's work-life balance, highlighting the need for men as well as women to take this leave.

Simultaneously, it contributes to strengthening management capabilities in the workplace through measures like job rotation. Our company will support diverse ways of working for employees through the promotion of work-life balance.

Child Labor

6. Collection rate of agreement forms for our CSR procurement policy: 95% or more, every year

To maximize the impact of our sustainability initiatives, partnerships with our suppliers—who are key stakeholders in our production activities—are essential, not just for our company. We strongly recognize the need to consider and address our environmental and social impact and responsibility across the entire supply chain, which led us to establish our CSR Procurement Policy. We aim to work together with our suppliers to contribute to solving global ESG challenges.

DE＆I

7. Ratio of female managers to female staff: Same as the ratio of male managers to male staff by FY2030

8. Employment rate for persons with disabilities: Disclose actual results annually

9. Ratio of local staff in management positions in subsidiaries: Disclose actual results annually

For our company, Diversity, Equity & Inclusion (DE&I) is considered a critical issue on par with climate change. We strongly recognize the need to prevent homogenization and rigidity, and to incorporate diverse values and developmental potential, both in management and at the operational level. We aim to create a workplace where employees with diverse backgrounds—including women, those with foreign roots, and employees with disabilities—can thrive.

As part of our efforts to reflect diverse voices, we are prioritizing increasing the proportion of female employees and developing female managers. Recognizing the reality and reflecting on the past—where the construction machinery industry saw very few female applicants, resulting in male-dominated companies—we are expanding female recruitment as an entry point.

To achieve this, we are advancing initiatives to create factories that are easier for everyone to work in, safer, and more efficient. This includes introducing labor-saving and automated equipment into production sites and improving production processes. We are committed to steadily developing human resources so that women hired as new graduates or mid-career hires can be promoted to management positions in the future, aiming to correct the imbalance over the medium to long term.

Furthermore, as part of promoting gender diversity on the Board of Directors, we appointed female directors at the shareholder meetings held in May 2023 and May 2024, resulting in a Board composition of 9 male directors and 2 female directors.

Furthermore, considering that overseas sales currently account for over 95% of our revenue, we have established the local ratio of managers at overseas subsidiaries as a target metric. This aims to incorporate local perspectives into management and expand local employment.