MATERIALITY

OUR FOUR MATERIAL ISSUES

The Noritsu Koki Group has been working to address the rapid and dramatic social changes that have occurred over the past decade or so, and strives to create businesses that are indispensable and can serve as part of the infrastructure of society. To respond to increasingly serious social and global environmental challenges, we have identified four material issues that we believe we must address in order to continue to fulfill our Mission of delivering “Prosperity for society and people,” and as such, are working to integrate sustainability into our business operations.

In identifying the material issues, we evaluated social and environmental issues that the Group should consider from the perspectives of “priority to stakeholders” and “priority to our businesses.”

	Social Issues	Assessment Background
01 Shaping the future and making a positive contribution to creating a prosperous society and enriching people’s lives by manufacturing products that society needs	Culture and community development Health and well-being promotion Research and development for greater innovation Provision of safe, high-quality products	Contributing to the realization of a better future society by providing products and services that the world needs has been the social mission of the Group, which is rooted in manufacturing, from the day it was founded. We work to provide safe, high-quality products, and at the same time,make strategic R&D investments aimed at creating new technologies and products in order to supply new value to people’s lives.
02 Enhancing our supply chain framework to make it more environmentally and socially responsible	Appropriate chemical management processes Action on climate change Use of more sustainable resources Respect for human rights Strengthening of supply chain management	Climate change due to global warming is causing extreme weather events such as drought and floods. It is having a significant impact on the lives of people around the world and diverse ecosystems. Respecting the human rights of the people who are impacted by business activities is an important responsibility of companies. Responding to climate change and considering the human rights of stakeholders is essential for the Group to be able to continue its business operations. As such, we will implement measures to address climate change, as well as environmental initiatives that look at the entire lifecycle of the products we supply to customers. In addition, we will work to establish a supply chain that takes social issues, including human rights, into account based on the Group Procurement Policy and the Group Human Rights Policy.
03 Creating inclusive workplaces where diversity is respected and all employees can thrive and contribute with a futureoriented mindset	Recruitment and training of great talent No discrimination, no harassment and respect for diversity	For the Noritsu Koki Group, human resources are the driving force of sustainable growth. To realize our Mission of delivering “Prosperity for society and people,” it is important that all Group employees have open minds and work with a proactive and future-oriented attitude and approach. To ensure that, we will attract talented people, maintain systems to support their success, respect the values and individuality of every employee, and take measures to prevent harassment and discrimination. By doing so, we will foster a vibrant organizational culture in which all employees can dedicate themselves to their work and contribute with a future-oriented mindset.
04 Enhancing our sound corporate governance structure to achieve sustainable growth	Establishment of a transparent corporate governance structure Anti-corruption Ensuring information security Preventive measures against infectious diseases	Enhancing corporate governance is a key management priority that we should continue to promote in order to ensure the Noritsu Koki Group’s sound development. At Noritsu Koki, we will work to increase the effectiveness of the Board of Directors, speed up decision-making, and establish highly transparent management. For risks that could hinder the sustainable growth of the Group, we will identify the critical risks related to our businesses, and work to appropriately manage those risks and reduce their impact. In addition, from the standpoint of business continuity, every employee is required to act responsibly with a focus on compliance. By making all directors and employees of the Group aware of the Noritsu Koki Group Code of Conduct, which specifies the conduct expected of them, we will build a corporate culture in which compliance is given top priority.

Environmental
Social
Governance

MATERIALITY ACTION PLAN AND PROGRESS

To take action on the material issues, we developed a Materiality Action Plan that sets annual targets, and are promoting the plan throughout the Group. The progress of the action plan is managed based on the Group’s sustainability promotion framework.

Materiality		Our actions	Goals for 2023	2023 Results	Goals for 2024	Reference
Contributing to society and the community through business operations	01 Shaping the future and making a positive contribution to creating a prosperous society and enriching people`s lives by manufacturing products that society needs	1 Strengthening and promoting quality management	Monitor Group response to customers concerns about quality problems	Monitored Group response to customers concerns about quality problems (based on reporting standards of each Group company) Conducted quality audits based on annual plans (manufacturing bases)	Monitor response to customers Conduct quality audits	Quality Management
		2 Investing in R&D to create new technologies and value	R&D investment of ¥4.0 billion	Invested ¥3.9 billion in R&D	R&D investment of ¥4.1 billion Hold discussions for setting KPIs	-
		3 Promoting activities that support cultural development and local communities with links to our businesses	-	Promoted activities that support cultural development and local communities with links to our businesses	Carry out each Group company plan	Supporting Cultural Development And Local Communities
	02 Enhancing our supply chain framework to make it more environmentally and socially responsible	4 Delivering environmentally responsible products	Make efforts to be environmentally conscious throughout the entire lifecycle of products based on the plan	Reduced use of virgin plastic in products and packaging materials (Teibow, AlphaTheta and JLab) Reduced use of organic solvents by reviewing materials and the production process (Teibow) Developed products with an energy-saving mode (AlphaTheta) Developed a new Bluetooth chipset that saves energy and helps conserve resources, and integrated it into products (JLab)	Develop environmentally responsible products with consideration for product lifecycles Hold discussions for setting KPIs (including calculating volume of plastic used)	Delivering Environmentally Responsible Products
		5 Reducing greenhouse gas emissions (Scope 1, 2 and 3)	37% reduction in Scope 1 and 2 greenhouse gas emissions by 2030 (compared with 2019) Implement a greenhouse gas emission reduction plan	Reduced greenhouse gas emissions Started calculation of Scope 3 emissions	Calculate Scope 3 emissions (discuss targets) Review 2030 targets (Scope 1 and 2) Formulate and implement Scope 1 and 2 reduction plan Review TCFD scenario	Responding to Climate Change
		6 Establishing our supply chain management framework and promoting risk mitigation	Inform all key suppliers about the Noritsu Koki Group Procurement Policy	Informed all key suppliers about our procurement policy Conducted supply chain audits of contract manufacturers through a quality audit framework Conducted human rights risk evaluation (Tier 1 suppliers)	Formulate a procurement guideline Establish a system to ensure supplier compliance Carry out human rights due diligence Confirm the non-procurement of conflict minerals and set policy	Responsible Procurement Respecting Human Rights
Establishing a robust corporate foundation	03 Creating inclusive workplaces where diversity is respected and all employees can thrive and contribute with a future-oriented mindset	7 Creating a safe and healthy work environment	Monitor the promotion of health and productivity management and address issues based on the results	Monitored the promotion of health and productivity management and addressed issues	Monitor occupational health and safety (Teibow) Monitor KPIs for health and productivity management tailored to each Group company and respond to issues	Human Resource Management
		8 Improving initiatives for developing talent, skills, a proactive mindset and leadership skills of employees at all levels	Provide an average of 22.4 hours of training per employee per year	Provided an average of 18 hours of training per employee per year	Provide an average of 22.3 hours of training per employee per year Establish training systems	Human Resource Management
		9 Respecting diverse values and promoting flexible workstyles	Conduct human rights training (once a year or more) Monitor the promotion of diverse and flexible workstyles and address issues based on the results	Conducted human rights training (at least once a year at all Group companies*) Revised human rights policy Conducted human rights risk assessment (the Group) Monitored the promotion of diverse and flexible ways of working and addressed issues based on the results	Conduct human rights training Further investigate the results of the human rights risk assessment (the Group) Monitor KPIs for workstyles tailored to each Group company and respond to issues	Respecting Human Rights Human Resource Management
	04 Enhancing our sound corporate governance structure to achieve sustainable growth	10 Enhancing the effectiveness of Board of Directors Promoting stakeholder engagement	Address issues based on the 2022 assessment results and continue to assess Board effectiveness	Assessed Board effectiveness and addressed issues	Continue to assess Board effectiveness and address issues Expand opportunities for engagement with shareholders and investors Enhance information disclosure	Corporate Governance
		11 Strengthening risk management system and promoting risk response measures	Reviewed the initiatives of the Materiality Action Plan and classified provision of information security training under action 12	Clarified risks related to the Group and each Group company, and formulated countermeasures Conducted drills based on BCPs at each Group company	Conduct a risk assessment, and consider/promote response measures to issues Review and strengthen BCPs	Risk Management
		12 Cultivating an ethical corporate culture based on a code of conduct Responding to ESG-related laws and regulations	Provide information security training once a year or more	Provided information security training (at least once a year at all Group companies) Provided compliance training (participation rate: 100%)	Formulate and review various policies Provide training (compliance training, information security training, etc.) Operate a hotline Monitor and respond to ESG-related laws and regulations	Compliance

＊All executives and employees at NKC, Teibow, AlphaTheta including part-time, temporary staffs and contractors (only permanent employees at soliton, Taibo and JLab, excludes long-term absentees at Teibow)

MATERIALITY ASSESSMENT PROCESS

We have identified our materialities by conducting our materiality assessment based on the following processes with cross group cooperation and the help of external advisory experts.

STEP 01Identify potential social issues and impacts

Working to incorporate diverse stakeholder expectations, we used 11 different globally-recognised sustainability standards such as ESG disclosure guidelines, evaluation criteria provided by ESG evaluation agencies, and codes of conduct. We performed an analysis on sector-specific material issues and identified 31 potential social issues that impact our business in order to define our materiality.

*1 GRI Standards, SASB Standards
*2 DJSI (RobecoSAM), FTSE, MSCI
*3 SDGs, ISO26000, Ten Principles of the UNGC, OECD Guidelines for Multinational Enterprises
*4 World Economic Forum（WEF）“Measuring Stakeholder Capitalism”, “Resolving Societal Issues Through Innovation — Listings of Societal Issues” FOR CO-CREATING THE FUTURE

STEP 02Assess and prioritize material topics

The 31 social issues selected in Step 1 were evaluated and weighted using a scoring method, incorporating the views of stakeholders and Group businesses, and prioritized according to the following criteria.

1)Stakeholder Input: assessment based on the relative interests and importance of stakeholders by external advisory experts and scholars.
2)Business Impact and Values: reassessing the evaluation scores provided by our 4 major group businesses based on the business impact and values of the Noritsu Koki Group.

As a result, we identified 15 social issues that matter the most to our business and stakeholders.

ZOOM UP

STEP 03Define materiality

The 15 potential social topics selected in Step 2 were clustered into groups on the basis of our MVV and business model. We refined a list of core corporate material issues that could highly affect our business.
Having had insightful feedback from external advisory experts and far-reaching discussions with senior management including our CEO, we integrated them into 4 significant material topics that need to be addressed and worked on as a group.

STEP 04Determine and disclose the materiality

We designed a materiality matrix and validated the credibility of the identified 4 material issues. Approved by the Board of Directors, we finally defined them as the Noritsu Koki Group’s materialities.

MATERIALITY FRAMEWORK