Under the Furukawa Electric Group Purpose, we are implementing initiatives aimed at achieving Vision 2030, with the goal of realizing sustainable growth and enhancing the Group’s corporate value over the medium to long term. We have also established this fundamental approach as the Furukawa Electric Group Basic Policy on Sustainability.

The Group has established the Sustainability Committee to consolidate discussions on sustainability within Furukawa Electric Group and further enhance the quality and speed of implementation thereof. Sustainability Committee, chaired by the President, vice-chaired by the General Manager of Strategy Division, and composed of members of top management, deliberates on issues on sustainability within Furukawa Electric Group, including sustainability-related basic policy, basic matters on material issues related to revenue opportunities and risks, and disclosure of basic information related to sustainability; checks on progress on such matters; and submits proposals and reports to the Board of Directors. The Corporate Sustainability Office serves as the secretariat, and the committee will generally meet twice a year. As risk-related material issues are closely related to management strategy risks of Furukawa Electric Group, they are therefore handled in collaboration with Risk Management Committee.

The status of operations related to sustainability, including climate change, human capital, and intellectual property, is reported and shared to the Board of Directors on a quarterly basis. The agenda for the Sustainability Committee and the Management Committee is set based on, amongst other things, the results of the evaluation of the effectiveness of the Board of Directors and feedback from shareholders and institutional investors.

In the Company’s executive remuneration system, we have introduced ESG-linked remuneration for Directors, etc., other than Outside Directors, with the aim of more directly reflecting the results of initiatives toward ESG-related matters.

The elements of remuneration include base salary, short-term performance-linked remuneration (individual), short-term performance-linked remuneration (company level), ESG-linked remuneration, and medium-to-long-term performance-linked remuneration. The ESG-linked remuneration is based on the achievement status of sustainability targets in the material issues of the Group. When the total of the standard remuneration levels set for each remuneration element is 100%, the proportion of the ESG-linked remuneration to the total remuneration is set at 2-3% depending on the post.

In FY2024, the evaluation item was set as the achievement of FY2023 targets concerning “GHG emissions reduction rate (Scopes 1&2)”—a 21.2% reduction compared with FY2017. The evaluation metrics used to determine ESG-linked remuneration are periodically confirmed and reviewed by the Nominating/Compensation Committee. From FY2025, the “employee engagement score” will be added to the evaluation items.

In the 2025 Medium-term Plan, the Group has set sustainability indicators (KPIs) and sustainability targets for FY2025 to realize our ideal state in FY2025 in each material issue.

The handling status of material issues on revenue opportunities and risks and the progress on sustainability indicators are reported and shared to the Board of Directors and Sustainability Committee semiannually. In addition, the General Manager of Corporate Sustainability Office regularly (twice a year in principle) holds a dialogue on the progress of material issues and sustainability indicators, the validity of sustainability indicators and targets, and other issues with each division in charge, and encourages a division that is not expected to meet the target to set and implement handling measures and improvement measures.

We have also steadily advanced initiatives to integrate sustainability-related opportunities and risks into the Group’s overall management strategy and enterprise risk management.

We established the Business Portfolio Review Committee as an organization to promote the transformation of the business portfolio with an emphasis on capital efficiency since FY2022. Business Portfolio Review Committee, composed of the General Manager of Strategy Division (chaired), the General Manager of Finance & Accounting Division (vice-chaired), and the General Manager of Global Marketing Sales Division. This committee deliberates key matters related to the transformation of our business portfolio, including the positioning of each business under the 2025 Medium-Term Plan, and reports or makes proposals to the Management Committee. The General Manager of Corporate Planning Department serves as the secretariat/organizer, and the committee generally meets three times a year.

In order to promote management that emphasizes capital efficiency, we have introduced return on invested capital (ROIC) and Furukawa Value Added (FVA^*) as management indicators to evaluate each business starting in 2022. Toward optimizing the business portfolio, we assess the current positioning of each business based on growth potential (average sales growth rate) and profitability (ROIC spread), and further consider future growth potential, competitiveness, and carbon efficiency (GHG emissions per unit of sales) to swiftly take necessary actions, such as exploring growth opportunities (including M&A) and determining whether or not to withdraw from certain businesses. Furthermore, to calculate the cost of FVA for each business, we have also incorporated ESG factors such as “climate change” and “human rights and labor practices” in addition to financial factors. FVA of each business is reviewed and revised annually and reported to the Management Committee, where it is utilized for business portfolio optimization and allocation of management resources.

As for the Group-wide risk management, we have established the Risk Management Committee, which comprises senior management as members, with the President as chair and the General Manager of the Risk Management Division as vice chair. The committee is structured to deliberate on, supervise and promote risk management, internal control and compliance. Each department responsible for risk items, including those identified as risk-related material issues, submits a semi-annual report to the Risk Management Committee outlining its annual action plans and actual activities. The Risk Management Committee evaluates whether appropriate risk controls are being implemented and provides guidance as necessary.