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Management for Sustainability
Governance
Management Implementation Framework for Sustainability
NEC’s management for sustainability is driven by the Corporate Strategy and Sustainability Promotion Division, which promotes corporate strategy, IR and communications, and works in close collaboration with the corporate organizations of NEC Corporation and its subsidiaries around the world including departments responsible for people management, general affairs, people and organizational development, risk and compliance, management information systems, environment, customer service, quality assurance, and procurement, as well as business divisions and subsidiaries around the world (see diagram at right). We also undertake initiatives in collaboration with business partners.
Important matters for promoting management for sustainability are discussed by corporate officers and managers of related divisions via the Executive Committee led by the CEO, the Business Strategy Committee led by the CFO, and the Risk Control and Compliance Committee led by the CRO. Matters discussed or approved by these entities are periodically reported to the Board of Directors via the officer in charge of sustainability promotion. The Board then monitors the progress of these matters. The NEC Way and Basic Principles on Management for Sustainability, as well as the ESG-based priority management themes, or materiality, described below, are representative examples of matters that have been resolved by executives following dialogue with stakeholders and reported to the Board of Directors. Further, the implementation of initiatives related to organizational and people development, based on practical implementation of the NEC Way, and the implementation of priority management themes from an ESG perspective—materiality—are clearly stated in the job descriptions of all internal executive officers. These elements have also been incorporated into the KPIs used to evaluate the performance of executive officers to promote sustainability initiatives. For example, KPIs for evaluating the performance of the Corporate Officer in charge of the Environment include the results of external evaluations of the Company.
The CFO and officers involved in sustainability promotion established the NEC Sustainability Advisory Committee in fiscal 2022 to consult with external sustainability experts.
Larger viewStrategy
Basic Principles on Management for Sustainability
Guided by the NEC Way, NEC aims to realize a sustainable society where everyone has the chance to reach their full potential. NEC’s management approach entails conducting dialogues and co-creation with many different stakeholders while advancing business activities that help address social issues. Moreover, in addition to ensuring rigorous compliance with laws, regulations, and sound corporate ethics, NEC also proactively lowers risks attendant on activities that have potentially negative effects on society or the environment.
NEC has identified its priority management themes from an ESG perspective—materiality—in accordance with the following Basic Principles on Management for Sustainability. Addressing these themes is central to minimizing risk and maximizing the value we provide, which in turn will contribute to improving financial performance and helping to achieve the Sustainable Development Goals (SDGs).
Basic Principles on Management for Sustainability
Contribute to Solving Social Issues through Our Business
As part of its Purpose, NEC declares its intention to create the social values of safety, security, fairness and efficiency through its business activities. The SDGs pledge to “leave no one behind ” is aligned with the NEC Purpose, “to promote a more sustainable world where everyone has the chance to reach their full potential.”
In order to fulfill its Purpose, NEC has put together NEC 2030VISION as a compass to indicate the direction and path for the Company to follow.
Strengthen Risk Management and Enforce Compliance
In order to act in accordance with its Principles, which advocate for “uncompromising integrity and respect for human rights,” NEC makes sure to conduct its business activities with the highest priority given to thorough risk management and compliance that is mindful not only of employees but also of customers and society. Moreover, the opening statement to the NEC Group Code of Conduct calls for everyone in NEC group to act in good faith based on high ethical standards. In 2005, NEC became a signatory to the United Nations Global Compact, which requires corporate activities to be conducted based on the Ten Principles of the UN Global Compact, pertaining to the four fields of human rights, labour, the environment, and anti-corruption. As part of this effort, NEC conducts regular self-assessments of its activities to ensure it stays true to this requirement.
Promote Communication with Stakeholders
Dialogue and co-creation with a variety of stakeholders are important processes for learning about the issues that matter to our customers and society, about what is expected of us, and for building relationships of trust.
Our commitment to promoting dialogue and co-creation with stakeholders is embedded in the concept of “Orchestrating” as stated in our Purpose, “Orchestrating a brighter world,” within the NEC Way. This commitment also helps fulfill the requirements of SDG 17, “Partnerships for the goals.”
The NEC Way is a common set of values that form the basis of how the entire NEC Group conducts itself. The NEC Way comprises four elements—the “Purpose” and “Principles” represent why and how we conduct business as a company, while the “Code of Values” and “Code of Conduct” embody the values and behaviors that all members of the NEC Group must demonstrate.
We promote activities that ensure each executive and employee of NEC Group is aware of the NEC Way, understands it deeply, and has a mindset in line with it. The activities provide them an opportunity to reflect on their work style, fulfill the roles and responsibilities of their position, and set yearly goals to bring impactful results.
Every year we hold NEC Way Day on July 17, the day of our founding (or if that day is a holiday, we hold it the day before or after). The event provides a chance for everyone to once again reflect upon the NEC Way and discuss and deepen our understanding of what social value NEC can create as a group as well as what kind of future we should try to create through its practice.
Purpose
The NEC Group’s purpose is to collaborate with various stakeholders to create the social values of safety, security, fairness and efficiency, while striving to enable people to live and live abundantly. In doing so, we will aim to realize a sustainable society that enables each individual to achieve their full potential and also overcomes global environmental issues such as climate change.
This approach is aligned with the aspiration of the SDGs to “leave no one behind.” Furthermore, information and communications technology (ICT) could potentially help in addressing many different issues. For this reason, we believe that we can contribute significantly to all of the targets set out in the SDGs by drawing on our leadingedge technologies in such fields as biometrics, AI, and 5G and our competence in R&D and implementation as we engage in dialogue and co-creation with a range of stakeholders.
Principles
The NEC Group acts in line with the following three principles.
- The Founding Spirit of “Better Products, Better Services”
The NEC Group will not stop at achieving its best at a certain point in time, but rather continue indefinitely to pursue improvements to provide better products and services for customers and society. - Uncompromising Integrity and Respect for Human Rights
This expresses the NEC Group’s spirit of uncompromising integrity (high sense of ethical standards, including compliance) throughout the overall organization in order to remain trusted by society as a Social Value Innovator, and its commitment to respecting human rights. - Relentless Pursuit of Innovation
The pursuit of innovation is the driving power behind the NEC Group’s activities. This innovation goes beyond technology development. It involves working with various stakeholders to pursue improvement in the Company and society, from yesterday to today, and on to tomorrow.
Code of Values and Code of Conduct
NEC has set out the Code of Values, which motivates the active and autonomous behavior that everyone from officers to employees should take individually to create social value.
In addition, the NEC Group Code of Conduct is a set of specific guidelines that summarize the concept of integrity presented in the Principles. Every one of these guidelines must be upheld in order to achieve NEC’s Purpose.
Code of ConductOur Journey toward Management for Sustainability
NEC’s story starts in 1899, when the Company was established as Japan’s first joint venture with a foreign company.
Founder Kunihiko Iwadare created a company aiming to provide customers with world-class products, and to take responsibility for them through after-sales services. With these goals in mind, NEC began providing telecommunications equipment such as telephones and switching systems under the motto, “Better Products, Better Services.”
Later, in the 1950s, the Company began working on the development of computers. In 1977, at the INTELCOM 77 international communications expo held in Atlanta, then-chairman of NEC Koji Kobayashi presented a new concept, “C&C,” referring to the integration of computers and communications.
At that time, President Kobayashi talked about NEC’s vision for C&C, as follows:
Vision for C&C
“If I am asked about my vision for communications in the future, I can see a world where any and all individuals are able to communicate with each other at any time, at any place on the earth, in the early days of the next century. Assuming that this comes true, all technology, communications, computers, and televisions will be, and should be, integrated. And, therefore, it is important to help developing countries to be able to participate in such a world telecommunications system.”
This vision has been technologically realized today in our age of widespread computers, mobile phones, and the internet. The ambition to enable people around the world to be able to connect anytime, anywhere, and with anyone aligns with the aspiration of the SDGs adopted by 193 United Nations member countries in 2015 to “leave no one behind.” The issue is now being addressed throughout the world.
As the value expected of NEC by customers and society changed from tangible technologies and products to the intangible creation of value, in 2013 NEC responded under Mid-term Management Plan 2015 by declaring its intention to transform into a Social Value Innovator, creating value for society. The following year, in 2014, NEC announced its brand statement, “Orchestrating a brighter world.” In 2019, NEC marked its 120th anniversary by reorganizing the structure of the NEC Way, which was then over 10 years old. On this occasion, it reflected the changes and demands of society and reformed the NEC Way to guide the actions of each individual, from officers to employees. Announced in April 2020 following a resolution by the Board of Directors, the NEC Way presents the connections between the Company’s Purpose, its Principles and each individual in a clear, simple way.
Approach to Materiality
“Materiality” refers to priority management themes from an ESG perspective. NEC identifies materiality from the perspective of risks and opportunities, referring to global guidelines in considering the impact of our materiality on both NEC and society through dialogue with experts and stakeholder representatives in various fields.
As part of the financial strategies in Mid-term Management Plan 2025, the Company has identified seven priority management themes and is implementing initiatives to address them to strengthen the non-financial foundation that encompasses ESG and underpins the sustainable growth of the NEC Group and society.
In fiscal 2024, NEC has further clarified its approach to increasing corporate value by addressing ESG issues in an integrated manner to both reduce risks and generate growth and opportunities. It positioned the seven priority management themes as its “Fundamental Materiality” with the objective of reducing risk and increasing the NEC Group’s growth rate. The social and environmental themes to be created by the growth businesses in Mid-Term Management Plan 2025 have been organized into five themes as “Growth Materiality” to create growth/opportunities and improve the growth rate.
The matrix below shows the positioning and objectives of NEC’s Growth Materiality and Fundamental Materiality through the lens of its formula for calculating corporate value. NEC will promote businesses with significant social, environmental and economic value by addressing its Fundamental Materiality and Growth Materiality while aiming for continuous inclusion in major ESG indices.
The job descriptions of internal executive officers clearly task them with addressing materiality, which is also a component of the key performance indicators used to evaluate the performance and effectiveness of the Corporate Officer in charge of the Environment and other officers involved in sustainability promotion. In addition, NEC will employ evaluations and feedback from various stakeholders obtained through ESG surveys, direct dialogue and other channels to structure a robust and resilient financial and non-financial base over the medium to long term.
Corporate Value Formula and Materiality
Evolution of the Definition Process
NEC defined its materiality in fiscal 2019 with reference to global guidelines including ISO 26000, the GRI Standards, the principles of the UN Global Compact, the SDGs and the SASB Materiality Map through dialogue with experts in various fields and with representative stakeholders, and reviews it as necessary.
Currently, NEC’s materiality consists of “Fundamental Materiality” (redefined in fiscal 2022 when it formulated Mid-term Management Plan 2025) and “Growth Materiality” to create growth/opportunities and improve the growth rate (organized in fiscal 2024 by the growth businesses in Mid-Term Management Plan 2025).
Fiscal 2019—Defining NEC’s Materiality
With reference to global guidelines and taking into consideration the characteristics of NEC’s business, the Company identified social issues and surveyed employees about the importance of both opportunities and risks to them, and plotted a materiality map with impact on NEC and impact on society as the axes. It also highlighted both positive and negative issues with a high level of impact on both NEC and society and provisionally identified these issues as the Company’s materiality—themes that NEC should tackle with a high priority. Finally NEC formally defined its materiality in consultation with external experts.
NEC set non-financial indicators to measure the progress of its materiality initiatives, aiming to best quantify outcomes in terms of the level of positive value provided to society. The materiality indexes were also determined through dialogue with external experts and based on the report to the Board of Directors.
Definition Process for Fiscal 2019 Materiality
Fiscal 2021—Redefining NEC’s Materiality
In 2020, NEC revised the NEC Way. As the three themes of “dialogue and co-creation with our stakeholders,” “innovation management,” and “governance and compliance” were incorporated into the NEC Way, the six remaining themes were designated as NEC’s materiality. They were determined based on the report to the Board of Directors.
Materiality Reset in Fiscal 2021
Fiscal 2022 – Reviewing NEC’s Materiality in Formulating Mid-term Management Plan 2025
NEC reviewed its materiality in light of changes in the business environment and social demand. Managers of growth businesses under Mid-term Management Plan 2025 attended workshops to examine the social and environmental value created by their businesses. Through dialogue with external experts, materiality was defined according to the following criteria.
- Non-financial (ESG/future financial) management themes that have a significant positive or negative impact on society and the environment, as well as on the NEC Group
- Themes where progress can be measured or visualized from a social or environmental perspective
As a result, NEC decided to exclude the two themes categorized under “2020 Growth Focus to Create Social Value,” which are both business themes, and to continue to work on the four themes categorized under “Sustainable Growth Enablers.” Furthermore, at the aforementioned workshops, managers of growth businesses stated that “corporate governance,” “supply chain sustainability,” and “compliance” were also essential themes for promoting businesses with high social and public value, and for gaining the trust of society. Accordingly, the seven themes were reported to the Board of Directors as materiality for Mid-term Management Plan 2025.
Fiscal 2024: Studies to Review Materiality
NEC believes that in addition to reducing risk, ESG drives the generation of growth and opportunities. As such, NEC expects to increase corporate value by integrating and managing these two aspects of ESG.
Therefore, in order to clarify the themes for generating growth and opportunities, in fiscal 2024, the social and environmental themes to be created by the growth businesses in Mid-Term Management Plan 2025 have been organized into “Growth Materiality” to create growth/opportunities and improve the growth rate. In addition, the seven priority management themes have been positioned as “Fundamental Materiality” with the goal of reducing risk and improving the NEC Group’s growth rate. NEC will further strengthen management that integrates financial and non-financial issues, centered on its Growth Materiality and Fundamental Materiality.
Initiatives to Address Growth Materiality
- Achieving a well-being society through the digitisation of government and finance
(Digital Government/Digital Finance) - Realising a society that connects with people and the environment without stress (5G)
- Realising social and industrial change through the power of digital technology (NEC BluStellar)
- Realising a new world of healthcare and life sciences where everyone can live as they are
- Carbon Neutral Business
Initiatives to Address Fundamental Materiality
Environmental Action with a Particular Focus on Climate Change (Decarbonization)
NEC is contributing to the reduction of greenhouse gases worldwide by reducing CO2 emissions from its own business activities to net zero and working with its suppliers to reduce CO2 emissions throughout the supply chain.
In 2022, NEC signed The Climate Pledge, declaring that it will achieve net zero CO2 emissions throughout its supply chain (Scope 1, 2 and 3) by 2040. In addition, in April 2024, NEC’s upgraded targets of “reducing Scope 1, Scope 2, and Scope 3 by more than 50% (compared to fiscal 2021)” by fiscal 2031 were also validated under SBTi’s Corporate Net-Zero Standard. Furthermore, by providing solutions to prepare for the risks of weather-related disasters such as floods and droughts, NEC is contributing to climate change adaptation measures for customers and society.
Security to Maximize ICT Possibilities
NEC aims to minimize the effects of major security incidents by ensuring that it enhances cybersecurity measures while also strengthening information security, and provide products, systems and services that incorporate security measures and case studies taken from the NEC Group’s own information security practices as a reference to realize a secure information society.
Moreover, one of its responsibilities regarding social infrastructure is reinforcing the development of information security professionals to protect the information assets entrusted to us by our customers and business partners as well as the Group’s own information assets.
As part of this effort, NEC is increasing the number of people recognized as Certified Information Systems Security Professionals by the International Information System Security Certification Consortium (ISC)2 of the United States.
Furthermore, in using the knowledge it has gained from working on security measures NEC is acting as its own “first client” to help strengthen its customers’ security measures.
Provision and Utilization of AI with Respect for Human Rights as the Highest Priority (AI and Human Rights)
In accordance with the NEC Group AI and Human Rights Principles, NEC is committed to the following three initiatives:
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Ensure that all products and services are implemented and utilized by NEC, customers, and partners appropriately
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Continue to develop advanced technology and talent to further promote AI utilization, with respect for human rights as the highest priority
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Promote engagement and collaboration with a range of stakeholders in using AI
In addition, NEC applies this policy with the objective of strengthening AI governance based on trends in laws and regulations in and outside Japan, and maintaining dialogue with various stakeholders.
Diverse Human Resource Development and Cultural Transformation
Based on the NEC Way and NEC’s HR Policy, “transformation of people and culture” is a tenet of Mid-term Management Plan 2025.
NEC will accelerate diversity, which is the source of innovation, and implement workstyle reforms that support the working styles of diverse talent.
Corporate Governance Aiming to Continuously Create Social Value and Maximize Corporate Value
To continuously create social value and maximize corporate value, NEC promotes corporate governance based on the following basic policies.
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Assurance of transparent and sound management
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Realization of prompt decision-making and business execution
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Clarification of accountability
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Timely, appropriate and fair disclosure of information
Supply Chain Sustainability through Collaboration and Co-creation with Suppliers
NEC endeavors to work not only within NEC itself, but also through collaboration and co-creation with suppliers to conduct business while giving full attention to its impacts on the environment and society as a whole. We believe this enables us to gain the trust of society and contribute to the creation of sustainable social value.
NEC will continue to promote activities to ensure that all suppliers are aware of the Guidelines for Responsible Business Conduct in Supply Chains and submit declarations pledging to uphold its contents.
Compliance as a Company That Creates Social Value
In order for NEC to continue to be a company society trusts as a Social Value Innovator, it must uphold its Principle of “uncompromising integrity and respect for human rights.” Above all, the practice of compliance is an essential factor in earning the trust of society as a Social Value Innovator.
All officers and employees have signed the Statement of Agreement for the NEC Group Code of Conduct. Each and every one of us recognizes compliance as a personal matter and acts in accordance with the code every day.