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At Hitachi, we work with our customers towards creating a sustainable society by utilizing data and technology, and focus on Social Innovation Business that supports people’s quality of life. After experiencing the management crisis in the wake of the Lehman Shock, Hitachi focused on Social Innovation Business as our single purpose, to solve social issues together with our customers through unique technologies that combine our strengths in IT, OT, and Products; and we have since continued to reform our business portfolio to become a global leader in bringing transformation to society.
Under our Mid-term Management Plan 2024, which started in 2022, we are committed to ensuring sustainable growth. To realize a sustainable society, we must expand our Social Innovation Business in various fields and create economic, environmental, and social value through three transformation drivers - Digital, Green, and Connective - that have significant impact on society and industry. For economic value, we aim to achieve growth in Earnings Per Share and Cash Flow Per Share by increasing the ratio of the Lumada*1 business globally, which is a customer co- creation framework of a Social Innovation Business that leverages digital technologies. For environmental value, we aim to contribute to an annual reduction of 100 million metric tons of CO2 emissions as a Group, through cross- sector collaboration. As for social value, we will respect the planetary boundaries and aim to improve people’s well-being, with Powering Good as a guiding principle to our activities.
As we shift into a sustainable growth mode, Powering Good is like a guiding principle for Hitachi, that I hold dear, and which goes hand in hand with the slogan, Inspire the Next. For example, I believe that the rapid evolution of generative AI will require us humans to improve our ability to discern what is good. As we constantly take actions and take on new challenges, and inspire the world through our Social Innovation Business (Inspire the Next) to make progress, we must never forget the ability to tell what is good, or in other words, the guiding principle of Powering Good.
Regarding our approach on “good,” to respect planetary boundaries, we have set ourselves a goal to achieve carbon neutrality across our value chain by fiscal year 2050, under the Hitachi Environmental Innovation 2050, a set of long-term environmental targets. We would like to bring value to our customers and society through implementing initiatives at our own business sites (factories and offices) and by significantly growing our decarbonization business that contributes to the reduction of CO2 emissions through collaborative creation with our customers and partners.
As for well-being, we are committed to influencing and contributing towards creating a sustainable society, to ensure health and wellbeing for all and to sustain a thriving world for everyone. By making further progress in our internal and external efforts, it is our vision to support a 100 year lifespan through innovation.
Securing global human capital is a critical topic for us as we strive to realize social innovation on a global scale.
Hitachi has a global network and a strong foundation for providing solutions and products to customers around the world. In recent years, we’ve had the pleasure to welcome many new talented people from ABB’s power grids business and GlobalLogic through Mergers & Acquisitions (M&A). Bringing together the capabilities of this diverse group of people with different backgrounds and expertise, and working together as One Hitachi, enables us to understand the needs and issues of our customers around the world, and to innovate to realize a sustainable society.
I believe that human capital is the source of Hitachi’s strength. In order to provide new value to customers and society as One Hitachi and to pursue transformation and growth, we have set three important goals under the Mid-term Management Plan 2024: (1) Acquisition and development of digital talent; (2) Promotion of Diversity, Equity and Inclusion (DEI); and (3) Increase employee engagement. Through our M&A, we have strengthened our digital capability by leveraging on GlobalLogic’s recruitment and development methods, while also broadening our DEI and harnessing the diverse talents. In addition, our employee engagement score has also improved. We aim to achieve even greater heights, so that our employees will have a growth mindset as One Hitachi.
In developing our Mid-term Management Plan 2024, we envisioned how the earth, society, and people living in the year 2050 would look like and our aspirations on how we want it to look like; taking a back casting approach, we identified what we need to do today, as well as what we need to address in the medium to long term. To promote sustainable management, we identified six materiality topics and set relevant targets against each. Progress against these targets and new initiatives are discussed in the Senior Executive Committee and the Board of Directors meetings.
Evolution of governance is essential to sustainable management. The members of our Board of Directors are indispensable in bringing important issues to light and we had countless discussions in formulating the Mid-term Management Plan 2024. We will develop our sustainable management further, through continuous discussions with our Board members under the sustainable growth mode.
Also, in order to improve corporate value through more robust sustainability management, we amended the executive compensation system in April 2023, and introduced new evaluation criteria on sustainability based on our materiality. To grow sustainably as a company, we must be recognized as a sustainable company. It is important that we keep our eyes on the future and contribute to society over the medium to long term and give back to our stakeholders. The amendment reflects our strong desire to share this intention at the management level. By implementing such mechanism, we aim to further advance our sustainable management.
Hitachi’s more than 110-year history is a series of solving social issues, built together with customers and stakeholders. As a company that promotes Social Innovation Business, Hitachi values dialogue and collaboration with a diverse range of stakeholders, including customers, shareholders/investors, governments, municipalities, academia, and research institutions. We receive a great deal of input from young people who will lead the next generation in particular, as they are highly environmentally and health-conscious.
These stakeholders are also innovation partners for Hitachi with whom we work together to solve social issues. Nowadays, many of our customers are taking on the challenge of solving social issues. Therefore, I feel like we are in an environment where we can truly engage in Social Innovation Business, and it is very encouraging to see the birth of new Social Innovation Businesses as we work diligently together with our customers to solve social issues.
To meet our stakeholders’ expectations, Hitachi will continue to grow and deliver innovation to our customers around the world and society, with our diverse team full of talent working together across business domains and areas of responsibility, with a One Hitachi mindset.
President & CEO
The Hitachi Group is a multinational enterprise with a global network of operations, an extraordinarily wide range of products, and a century of know-how and capabilities spanning many different industries. As Chief Sustainability Officer, my overarching mission is to leverage and align these strengths in ways that enable the Group to effectively tackle the big issues confronting the world today.
I am responsible for assessing the Group’s impact on the environment and society and making decisions on appropriate actions to take, to make sure to meet the needs of the present without compromising the ability of future generations to meet their own needs. However, to successfully implement these actions, the Group will need to transform on a deep, structural level. Therefore, part of my job is to firmly integrate sustainability into our business models, operations, and decision-making. People are the critical element of this transformation, of course, so leadership and engagement are vital to encourage all members of the Group to be part of this journey.
Sustainability is not a new concept for Hitachi—it is rooted in the Company’s corporate philosophy and identity. Sustainability is also a central element of our Mid-term Management Plan 2024, which focuses on sustainable growth while respecting planetary boundaries and enhancing people’s wellbeing. The key to the realization of the plan is our Social Innovation Business and to offer practical solutions for environmental and societal issues that impact the sustainability of our planet.
Today, customers increasingly want to work with companies that are committed to sustainability rather than purely financial performance. Investors, too, are using environmental, social and corporate governance (ESG) criteria when choosing where to put their money. Young people especially, prefer to work for companies that have a broader purpose. We see these trends as opportunities for Hitachi to attract customers, investors and talent, and to contribute to sustainable economic growth in every country where we operate.
To demonstrate Hitachi’s strong commitment to sustainability with transparency, we worked closely with various stakeholders, NGOs, and other external organizations and identified six issues that are critical for the Group’s future—namely: the environment; resilience; safety and security; quality of life; business with integrity; and diversity, equity and inclusion (DEI). In this process, we examined current and prospective business opportunities and assessed impacts for stakeholders.
Thanks to the dedicated efforts of the Group’s employees around the world, we have been making steady progress toward achieving the targets. On our decarbonization efforts, for example, we are aiming to achieve carbon neutrality within our business sites by fiscal 2030. Our target for the current Mid-term Management Plan is to reduce this by 50% against the base year of 2010 by fiscal 2024, and our current projection shows that we are expecting to reach 64% of CO2 emission reductions. On the other hand, we are also working with our customers to reduce the society’s CO2 emissions through Social Innovation Business. In fiscal 2022, we were able to contribute to approximately 126 million metric tons of avoided emissions against our target of 100 million metric tons.
On circular economy, we are on track to achieve our target of reduction rate in water use per unit by 24%, by fiscal 2024 compared with the base year 2010. As part of our efforts to promote a circular economy, we’re also aiming to virtually eliminate waste sent to landfill by fiscal 2030 and apply eco-design to all newly developed products by fiscal 2024. Hitachi registered 357 new products using this approach in fiscal 2022, which will significantly reduce the environmental impact throughout the product life cycle.
Turning to human capital, we set ourselves the target of increasing our digital talent to 97,000 people group-wide by fiscal 2024 (excluding Hitachi Astemo), recognizing that digital capabilities are not only important to the Hitachi Group but for society in general. Thanks to Hitachi’s acquisition of GlobalLogic, a leading digital engineering services company, we have been able to grow and will continue to strengthen our digital capabilities.
DEI is also at the core of our sustainability strategy, and we will drive our efforts to strengthen sustainability management going forward. For example, we have been strengthening diversity in our senior management layer and this is indicated by the percentages of female and non-Japanese executive and corporate officers. In fiscal 2022, women and non- Japanese nationals appointed to these positions reached 11% and 20% respectively, making headway toward our targets of 30% by fiscal 2030.
More importantly, however, we have been making diversity an integral part of our workplace by giving every member an active role to play. Reflecting this approach, our employee engagement score in fiscal 2022 surpassed the target we set for fiscal 2024. Diversity can generate new ideas, but for people to have a platform for voicing those ideas and creating solutions, measures must also be in place to ensure equity and inclusion. In other words, the interplay between all three components of DEI is the key to unlocking innovation and the potential of human capital.
As a group-wide voluntary initiative, our Hitachi Voice of Youth Programme provides opportunities for young employees to talk about sustainability with peers across different businesses, regions, and with our leadership team. I have had numerous conversations with the participants, and I am very excited about how these young people are bringing new energy and passion to the Group from the bottom up.
I believe that Hitachi will have a greater opportunity to rapidly evolve by leveraging its collective capabilities, know-how, technologies, and diversity in ways that provide valuable solutions for people throughout society. By having all our businesses around the world join forces as One Hitachi, every member of the Group can play an active and a vital role and make a difference.
Lastly, we regard external evaluations as important feedback for strengthening sustainability management. Hitachi has been selected for various ESG indices and was ranked as a “leader” (AA) in the MSCI ESG Ratings in 2023. MSCI gave Hitachi high marks for its sustainability initiatives, such as compliance training and disclosure of R&D investments to create green value. In addition, in 2022, Hitachi was selected as a CDP A list company (the highest rating) in the areas of Climate Change and Water Security. Moreover, Hitachi also received CDP’s Supplier Engagement Leader (the highest rating for supplier engagement) for its efforts to achieve a net-zero society, including reductions in CO2 emissions throughout its value chain, and we are very proud of these achievements.
While the Hitachi Group is a vast global enterprise with leading-edge technologies and expertise, given the scale of the problems facing the world today, we understand the necessity for external collaboration. Therefore, we are actively seeking out opportunities to work with governments, academia, organizations, and companies, including customers, suppliers, and even our competitors. Our sustainability initiatives are directly related to 13 of the UN Sustainable Development Goals, but we intend to contribute to the achievement of all 17 goals by expanding our activities through these partnerships.
I look forward to working alongside our stakeholders as we pursue this ambitious endeavor in the years ahead.
Senior Vice President and Executive Officer,
Chief Sustainability Officer,
General Manager of Sustainability Group, and CDEIO