Material Issues for Sustainability

The Nitto Group has identified material issues for sustainability in order to simultaneously solve social issues and create economic value. Two criteria were used for selection: whether it is for “co-creating value through innovation,” which is achieved through products and services, and whether it is for “enhancing management quality for co-creating value,” which is made possible by reinforcing the management foundations. In addressing these, we begin by recognizing risks and opportunities associated with each issue and feed them back to business plans.

Identification Process

Co-creating Value through Innovation (Issues to be Addressed through Products and Services)

Initiatives taken spontaneously through businesses designed to “simultaneously solve social issues and create economic value”

step 1	Making a list of social issues (Social issues as business opportunities)	From among major documents on SDGs compiled by governments, academic societies, NPOs, and businesses, we have sorted out issues that are deemed to be socially important and compiled them in a list. We then selected issues that are relevant to us from the perspective of business opportunities after taking into account our business domains and the future course of our business.
step 2	Materiality assessment	For each of the social issues selected in Step 1, we assessed their materiality for society at large and the company over a 10-year period. Social materiality= How seriously and rapidly the extent of their impact is expanding (high growth potential of the relevant market) Nitto Group’s materiality= How possible it is for Nitto Group to provide products/services that tap into its strengths
step 3	Determining material issues	Based on the assessment results in Step 2, we identified “social issues whose relevant market offers high growth potential and is easy for the Nitto Group to gain an advantageous position” as material issues for sustainability for the Nitto Group.

step
1

Making a list of social issues
(Social issues as
business
opportunities)

From among major documents on SDGs compiled by governments, academic societies, NPOs, and businesses, we have sorted out issues that are deemed to be socially important and compiled them in a list. We then selected issues that are relevant to us from the perspective of business opportunities after taking into account our business domains and the future course of our business.

step
2

Materiality
assessment

For each of the social issues selected in Step 1, we assessed their materiality for society at large and the company over a 10-year period.

Social materiality=: How seriously and rapidly the extent of their impact is expanding (high growth potential of the relevant market)
Nitto Group’s materiality=: How possible it is for Nitto Group to provide products/services that tap into its strengths

step
3

Determining
material issues

Based on the assessment results in Step 2, we identified “social issues whose relevant market offers high growth potential and is easy for the Nitto Group to gain an advantageous position” as material issues for sustainability for the Nitto Group.

Enhancing Management Process for Co-creating Value
(Issues to be Addressed by Reinforcing the Business Foundations)

A prerequisite to “simultaneously solve social issues and create economic value,” which is addressed in response to requests from stakeholders

step 1	Making a list of requests from stakeholders (Requests from economic, environmental, and social aspects)	The “GRI Standards” issued by the Global Reporting Initiative (GRI) were used to select and make a list of requests from stakeholders.
step 2	Materiality assessment	For each of the requests from stakeholders selected in Step 1, we assessed their materiality for society at large and our company over a 10-year period. Social materiality= Breadth of stakeholders that make the requests Nitto Group’s materiality= Magnitude of impact on the Nitto Group and compatibility with its policies
step 3	Determining material issues	Based on the assessment results in Step 2, we identified “social issues whose solution is requested by a broad range of stakeholders and that have major impact on the Nitto Group” as material issues for sustainability for the Nitto Group.

step
1

Making a list of requests from stakeholders
(Requests from economic, environmental, and social aspects)

The “GRI Standards” issued by the Global Reporting Initiative (GRI) were used to select and make a list of requests from stakeholders.

step
2

Materiality assessment

For each of the requests from stakeholders selected in Step 1, we assessed their materiality for society at large and our company over a 10-year period.

Social materiality=: Breadth of stakeholders that make the requests
Nitto Group’s materiality=: Magnitude of impact on the Nitto Group and compatibility with its policies

step
3

Determining material issues

Based on the assessment results in Step 2, we identified “social issues whose solution is requested by a broad range of stakeholders and that have major impact on the Nitto Group” as material issues for sustainability for the Nitto Group.

Risks and Opportunities

Co-Creating Value through Innovation

Material Issues for Sustainability	Risks	Opportunities
Development of infrastructure for intelligent society Reduction in traffic jams/accidents Providing public transportation services for vulnerable road users	Lowering of products’ competitive edge as new alternative technologies for digital devices emerge and the company’s technologies become commoditized Increase in responsibilities as a result of the company’s products, etc. playing key roles in ensuring safety of traffic systems	Increase in demand for components, devices, and materials for sensors, semiconductors, telecommunication infrastructure, etc. as IoT and digitalization advance Increase in demand for products that improve traffic flow and the safety level of automobiles
Promotion and spread of renewable energy and energy conservation Promotion of cyclic use of plastics, metals, water, carbon, and other materials Prevention of air, water, and soil pollution	Increase in difficulty in sales of existing products as environmental regulations for chemical substances, plastics, etc. are tightened Decrease in order volume in case of falling behind competitors in addressing the need for eco-friendly products Lowering of trust in the company over the long term in case of failure to meet expectations of the market/customers with regard to environmental measures, such as the shift to organic-solvent-free products and bio-plastics	Increase in demand for technologies/products for cyclic use of various resources/materials as global environmental issues, such as climate change, global warming, and water shortages, worsen Increase in demand for technologies/products that contribute to separation, removal, purification or otherwise, of hazardous substances in air, water, soil, etc.
Support for health and longevity (lifestyle-related diseases, non-infectious diseases) Providing healthcare and long-term care services to all Control of infectious diseases on a global scale	Increase in the company’s cost and risk in case of extended period and/or greater expenses of developing nucleic acid medicine and other pharmaceutical products Lowering of the company’s competitive edge and growth potential in case of failure to meet unmet medical needs Increase in social responsibilities, such as prevention of harm to patients due to quality problems, adverse reactions, etc.	Increase in demand for products that realize good health and longevity in forms such as detection of disease symptoms, early diagnosis, and caring for the elderly and supporting their independence Increase in demand for easy-to-use pharmaceuticals, medical materials, and nursing care products for home care, self-medication, etc. Increase in demand for products that improve QOL and prevent disease progression

Enhancing Management Process for Co-Creating Value

Material Issues for Sustainability	Risks	Opportunities
Recruitment/development of employees Diversity & inclusion	Increase in difficulty in maintaining stable business operations due to shortages of employees in case of failure to recruit/develop human resources Decrease in competitive edge due to inability to respond to rapid changes in the business environment in case of insufficient diversity	Creation of innovations and enhancement of long-term growth potential made possible by novel ideas offered by diverse and capable human resources
Enhancement of safety and quality of products Improvement of workplace environment Respect for human rights in supply chains	Occurrence of recalls, lawsuits, etc. due to quality problems and harm to health through use of products Personal damage and shut-downs due to work-related accidents Damage to the company's reputation as seen by customers, society at large, and shareholders due to occurrence of human rights issues and other scandals in the supply chain	Increase in competitive edge through the supply of safe products, which reassure customers and win strong support from them
Reduction in CO² emissions Efficient use of energy, raw materials, water and other resources Emissions-reduction of pollutants and hazardous substances	Shut-downs due to tighter regulations in case of continued use of raw materials and energy sources with high environmental impact Shut-downs due to increased cost and difficulty in procurement of specific raw materials that may face depletion in the future as consumption of them increases globally Increase in the cost for compliance and difficulty in obtaining operational licenses in case of air pollution during production process and delay in reducing emissions of hazardous substances	Increase in long-term growth potential and competitive edge due to increased productivity and lower costs made possible by production process with high environmental efficiency