KDDI Sustainable Action

Under the KDDI Group Mission Statement of "achieving a truly connected society," KDDI works to solve social issues as an infrastructure company that underpins the information that serves as the basis for society.
In May 2019, we announced KDDI's target SDGs in conjunction with the medium-term management plan (April 2019 –March 2022).
In May 2020, KDDI formulated "KDDI Sustainable Action"—KDDI's initiatives for the SDGs aimed at 2030. In consideration of the social issues and the business sectors KDDI can contribute to as a telecommunications operator, we revised KDDI's target SDGs into eight social fields.
Because I am both the Executive Officer of Sustainability and a financial officer, from both financial and non-financial perspectives, I work to strengthen sustainability management, aim to enhance corporate value, and return social value, environmental value, and financial value to all stakeholders.

Strengthening the Corporate Governance Framework

KDDI proactively adheres to the Corporate Governance Code and practices the KDDI Group Philosophy, the foundation of its corporate activities, even as business areas continue diversifying through initiatives in non-telecommunication fields.
In addition, under the Corporate Governance Code that was revised in June 2021, initiatives for issues surrounding sustainability have grown in importance. KDDI directly holds meetings with institutional investors on the topics of governance and sustainability as a part of its proactive approach toward communication with stakeholders to ensure their voices will be reflected in management.

Environmental Measures Centered on Climate Change Action

The accelerating momentum to address environmental issues is demonstrated by the Paris Agreement, the Sustainable Development Goals (SDGs), the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), the EU Taxonomy, and the Taskforce on Nature-related Financial Disclosures (TNFD), which was launched in June 2021. Through our core ICT operations, we contribute to improvements in work efficiency and reductions in the movement of people, helping to reduce CO2 in society overall. However, these benefits are countered by the rather large environmental impact caused by the energy consumption of telecommunications equipment proportionate to the volume of telecommunications. Even considering that situation, KDDI declared it will lower the environmental burden of society using ICT with the aim of achieving zero CO2 emissions by 2050.
Moreover, we expressed our support for the TCFD recommendations in April 2021 and, in July, raised our CO2 emissions reduction target for FY2030 to a 50% reduction compared with FY2019.
Going forward, we will work even harder to implement climate change action initiative that also cover the supply chain.

Transforming into a Company that Puts Human Resources First

As the productive population declines in Japan, it is imperative that companies provide attractive work environments that enable diverse work styles (times, places, employment types, etc.) so that employees can use their various skills to the fullest, with the ultimate aim of sustaining their growth as businesses and contributing to society.
KDDI will continue to promote respect for diversity and build an organization that accommodates various personalities and abilities.
In addition, KDDI aims to transform into a company that puts human resources first by placing personnel training at the base of management. To this end, we are promoting three transformations by "introducing KDDI Version Job Style Personnel System," "realizing Declaration of KDDI New Work Styles," and "leveraging internal DX" to enhance employees' capabilities and productivity.

Initiatives for Issues Related to Human Rights

In the ICT industry, we face many potential human rights issues, including rights to privacy and freedom of expression, as well as requests from government authorities to disclose customer data for legitimate purposes. We will continue our efforts to identify and address human rights issues in our business activities while regularly holding relevant discussions with stakeholders and furthering understanding among employees of the KDDI Code of Business Conduct and the KDDI Group Human Rights Policy. In March 2020,
we evaluated the impact on human rights in our overall business activities, and we will continue to highlight risks and opportunities in KDDI's businesses, take appropriate action, and continually monitor the effectiveness of those actions to improve even more.
Going forward, we will continue contributing to the sustainable growth of society and working to solve social issues and the SDGs while highly valuing communication with our stakeholders.

KDDI formulated KDDI Sustainable Action—KDDI's initiatives for the SDGs aimed at 2030 with a determination to continue working to solve various social issues through business going forward.
By "Connecting and protecting lives," "Connecting day-to-day lives," and "Connecting hearts and minds" while using 5G, IoT and other technologies, the Company will continue aiming to help solve social issues through business with its partners, achieve sustainable growth with society, and further enhance corporate value.

Relationship between Material Sustainability Issues and KDDI Sustainable Action

We have identified six material sustainability issues among the numerous issues we face in relation to our business activities. We have set KPIs for each issue and regularly check our progress.
The relationship between the material sustainability issues and the eight social issue categories defined under KDDI Sustainable Action is explained in the table below. Promoting initiatives for the material sustainability issues will also lead to contributions to the SDGs.

Sustainability Report 2021

The COVID-19 Pandemic Has Brought Fundamental ESG Trends to the Fore

Saishoji
KDDI formulated KDDI Sustainable Action in May 2020, publicly presenting its effort to enhance initiatives for social issues as a corporation.
However, because the scope of the initiatives span a wide range, they have not progressed to the point where all the activities are visualized and quantified to publicly present the correlation with enhancing corporate value.
Although society has changed a lot due in part to the COVID-19 pandemic, the most significant change I felt was the sharp turn in the capital market from prioritizing shareholders to prioritizing stakeholders. I felt that it has become necessary to incorporate carbon neutrality and other ESG goals into management and rationally visualize those activities.

Konno
ABeam Consulting's Digital ESG was conceived in 2017. ESG and sustainability have broken free of the framework of social contributions, we have worked in line with the idea that they should be incorporated into business management. The first company to introduce Digital ESG was Eisai Co., Ltd. in 2019.
I feel that rapidly increasing attention is being paid to what kind of impact ESG achievements and effects have on enhancing corporate value. Should profits be prioritized or shareholders, or should employees or the company's assets be protected, or should emphasis be placed on maintaining some economic activities? Amid the COVID-19 pandemic, a major change occurred in values, and we recognize the fundamental ESG trends received a huge boost.
I often hear that Japanese companies are behind on ESG goals. However, after studying the current situation of Japanese companies, I see that the public appeal of some various activities is insufficient and that the public do not know how management determines which ESG elements to incorporate into management issues. These two points have created an unfortunate situation. Japanese companies have the potential of rapidly growing investment and public opinion in ESG if they can overcome the situation.

Saishoji
I also feel that Japanese companies haven't raised enough awareness of the fact that they have imbued their strength of "coexisting with society" into their corporate value.

There is a strong correlation between enhancing corporate value and engraining the KDDI Philosophy, including eco-friendliness, R&D and promoting the advancement of female employees.

Saishoji
Regarding co-existing with society, KDDI has the KDDI Group Philosophy, which outlines the policies, values, and code of conduct for employees. The Company aims to contribute to society and become a company that is beloved and trusted by all stakeholders, including customers and their cooperating partners. The philosophy is incorporated into the employees' daily corporate activities.
After receiving the suggestion from you, Ms. Konno, we worked to visualize the relationship between enhancing corporate value and promoting a wide range of non-financial initiatives, including activities related to the KDDI Group Philosophy, with an emphasis on enhancing IR disclosure as a trial.

Konno
While it is positioned as a trial, we cooperated with various divisions with unlimited scope, gathering abundant data on 215 ESG indicators from over 20 departments and conducting an analysis.
Looking at 45 indicators that showed promising correlations in line with KDDI's materiality, we realized that we were able to identify indicators that impact enhancing corporate value in fields that KDDI focuses its efforts on. We also saw that the more that the aforementioned the KDDI Group Philosophy becomes engrained in the frontline as an overarching purpose, the more that corporate value increases.
As the "correlation between greenhouse gas emission intensity and PBR" was highlighted in the full-year financial results presentation, the results showing that environmental initiatives help enhance corporate value are impressive. Among the many companies that incur costs responding to regulations, it is rare that a company actually conducts tests proving that environmental initiatives enhance corporate value.

Saishoji
As a result of this analysis, I was impressed by the discovery of the correlation between R&D expenses and PBR. We have focused our efforts on basic research as well as commercial research and development with an emphasis on business.

Konno
Even when verifying companies in the TOPIX 100 with a PBR over 1, we see a correlation between R&D expenses and PBR.
However, although a correlation emerges at these TOPIX 100 companies after six to 12 years, KDDI saw an impact on enhancing corporate value in a shorter time frame of just two to four years.
We recognize that the judgment criteria that management uses in its decision making or the development stance on the frontlines contribute to corporate value.

Saishoji
Also, the results showed that raising the percentage of female employees leads to higher corporate value, and we reconfirmed the importance of incorporating the wide perspectives of diverse human resources.

Analysis initiatives garner acclaim internally and externally Aiming to evolve ESG management under the next medium-term management plan

Konno
Although there had been an influx of different ESG-related guidelines, a trend toward unification has emerged. Accordingly, the trend is progressing in a visible way, such as whether to quantitatively assess the impact on corporate value and how to convert the impact into a financial amount and reflect it in accounting.
Through this trial, we realized ample data is readily available, and I imagine KDDI will move onto the stage of deciding how to utilize this data going forward.

Saishoji
A major accomplishment of this Digital ESG initiative was centralizing the data that had been scattered about. I think it is important that we continuously organize and analyze the data. However, I feel that one issue is that because we disclose financial data on a consolidated basis in line with IFRS, when conducting ESG initiatives Groupwide, how should we collect information on that. And considering the different industries they span, that is a cause for concern.

Konno
The companies are located in different countries and regions and operate in different industries. I feel some very big issues are how much should be asked of companies using a universal ESG ruler and how should this standard be managed.
In addition, as for business management, what the data revealed is not all that is true. The key is to recognize how aligned and interconnected the data is with the KDDI Group Philosophy, strategies, policies, and initiatives, and to then leverage that. Regardless of the extent to which we quantified the value in ESG, it is important to figure out how we should utilize and analyze the data. Relying solely on the data and external index rankings would be moving in the wrong direction.

Saishoji
At many of the recent meetings with institutional investors, much of the time spent on dialogue is dominated by ESG topics, and I really feel that the initiatives are being probed. Disclosure of the results of this analysis, as well as the content itself, received very high praise from the institutional investors. Internally too, the departments who participated in the analysis are saying that they too could feel the significance of their operations and the value they provide through Digital ESG.
And now that we are formulating a new medium-term management plan, we are discussing the setting of targets aimed at achieving true ESG management and establishing the mechanisms for that. We do not see these initiatives as temporary. We strive to continuously utilize and develop them. Thank you very much for speaking with me today.

Konno
Thank you.

KDDI's Commitment: Tackling the Global Issue of Climate Change

Disclosure Based on the TCFD Framework

In line with the TCFD recommendations, we strive to proactively disclose information based on the disclosure framework for "governance," "strategies," "risk management," and "indicators and targets."

Governance

Strategies

Risk Management

Indicators and Targets

Transforming into a Company that Puts Human Resources First

From fiscal 2020, under the Declaration of New Work Styles, KDDI promoted further work style reforms with the aim of transforming into a company that puts human resources first. To encourage a fundamental transformation of mindsets and behavior away from conventional work styles and shift to highly productive work styles, we improved work environments, including by promoting DX, and formulated a new vision of work styles under KDDI Version Job Style Personnel System.

KDDI Version Job Style Personnel System

The KDDI Version Job Style Personnel System was introduced in August 2020. The system creates and nurtures professionals by adopting job categories that clarify the scope of work duties and providing direct feedback to employees based on their accomplishments, endeavors, and abilities.
While maintaining its center in the telecommunications business, KDDI is expanding its new business fields, which also expands the fields in which employees can be active. All employees leverage the experience they cultivated in the existing telecommunications business and aim to actively acquire skills that can be used in new fields and become professionals who can be useful externally.

Training Diverse Human Resources and Realizing Rewarding Work Environments

Regarding diversity and inclusion, which are indispensable to sustainable corporate growth, we declared "embracing diversity" as part of the KDDI Group Philosophy and are working to foster understanding internally.

Expanding Employment Opportunities and Advancement of Persons with Disabilities

A special KDDI subsidiary was established in 2008 to promote self-sufficiency and the flourishing of employees with disabilities. KDDI Challenged Corporation aims to expand and create work duties and occupations, such as operating cafes at three stores, to provide an environment where many types of people can work. To expand the employment of persons with mental disabilities, which was mandated in fiscal 2018, we conduct training prior to hiring in order to gain a better understanding of their particular characteristics. We continue to expand the scope of work duties and focus on developing various occupations to enable these employees to thrive and tap into their full potential in areas where they excel. Furthermore, KDDI's employment rate for persons with disabilities is 2.50% [1] (as of June 2021), surpassing the legally mandated rate of 2.30%.

• [1]

  Including KDDI Challenged (special subsidiary) and KDDI Engineering.

Promoting the Active Role of Senior Workers

KDDI has adopted systems that help its employees aged 50 years or older to play an active role in the workplace. We have established a post-retirement re-employment program for employees who have reached the mandatory retirement age of 60 and satisfy certain requirements, encouraging them to work as non-regular employees until age 65 at the latest. This system employs open recruiting, allowing the employees to select their desired job type and activity while creating a mechanism for former full-time employees to make full use of their skills and experience in various workplaces.
For employees nearing retirement age, we also hold seminars that inspire them to think about their life and work styles after 60. To create an environment to help senior employees further broaden their field of activities, since fiscal 2019 we have offered internal open recruiting opportunities and supported career development for employees aged 50 years or older.

Professional Advancement of Women

We strive to establish an environment and create a climate where diverse human resources can use their individual strengths to perform to the best of their abilities. We are focusing on cultivating female leaders, raising awareness while changing the behavior of management and improving the working environment, so that women can become ambitious to build their own career and continue to work even while going through major life events, like giving birth and raising children.
In addition, KDDI has set the following targets related to the professional advancement of women up to fiscal 2022 for the introduction, implementation, and entrenchment of the new personnel system.

Targets

1 Percentage of women in upper management candidate training: at least 20%
2 Promoting women to core management positions: at least 200
3 Percentage of newly hired female graduates:at least 30%

Actions

• Train upper management candidates KDDI has set a target of at least 20% of women participating in the management team training program and is expanding opportunities for training that lead to hiring in higher positions.
• Cultivate leaders consistently through the Female Line Manager Program
• Hold seminars for female students

By achieving our targets related to higher positions, core management positions, and hiring, we will continue supporting the formation of a pipeline for the professional advancement of women.

Cultivating and Promoting Female Leaders

Cultivating Women (outside the company): Cross-Industry Forums

We encourage female employees to get motivated, raise their self-awareness and viewpoints as a leader, and further enhance their leader qualities through participation in various opportunities for personal exchanges. The opportunities include the "Eijo College" that aims to create a management model for female sales representatives, "J-Win" for development of female leaders, "the International Conference for Women in Business" where approximately 800 women gather from Japan and abroad to achieve self-growth, and "the Lead the Jibun Camp" designed for a person to lay the foundation as an innovative leader.

Cultivating Women (inside the company): Female Line Manager Program

Between fiscal 2016 and fiscal 2020, we conducted the Female Line Manager Program, which aims to establish a career path that leads officers and line managers to target female employees, currently just below section manager, as candidates for general manager positions.
Selected managerial candidates had the opportunity to participate in "Mind Up Seminars," where they learned the skills necessary for leadership and adjusted their mindsets. In addition, we helped them develop leadership skills and grow further as leaders by promoting dialogue with female executive role models within the Company. We are continuously providing e-learning for all line managers, including male managers, to raise awareness of the necessity and method for cultivating female managers as we work to reform mindsets within the Company.
From fiscal 2021 on, we will continue focusing on promoting KDDI Version Job Style Personnel System, which is now in full force.
We will also continue implementing systems focused on each employee's ambitions and individuality to ensure life events do not cause work disruptions.

FY2020 Results

• [1]

  The status of KPIs with a target set to achieve by FY2021 and beyond are indicated as "Still under way" across the board, including those progressing according to the FY2020 plan.

• [2]

  Number of mobile connections: Number of activated SIM cards (GSMA's "Mobile connections, including licensed cellular IoT") We have revised upward the FY2021 target.

• [3]

  Adaptive learning: The provision of study materials and learning methods optimized for each individual, based on each student's level of understanding and progress.

• [4]

  Includes KDDI Challenged (special subsidiary) and KDDI Engineering

• [5]

  The CO2 emissions are calculated using the emission factors furnished by electric utility operators. (Emissions from heat, steam and hot and chilled water consumption are included.)

FY2021 Targets

• [1]

  Number of mobile connections: Number of activated SIM cards (GSMA's "Mobile connections, including licensed cellular IoT")

• [2]

  Adaptive learning: The provision of study materials and learning methods optimized for each individual, based on each student's level of understanding and progress.

• [3]

  Includes KDDI Challenged (special subsidiary) and KDDI Engineering