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Management for Sustainability
Governance
Management Framework for Sustainability
At NEC, we promote management for sustainability under a corporate governance framework that clearly separates oversight and execution.
Roles of Management
Oversight by the Board of Directors
The Board of Directors oversees the implementation of materiality initiatives and responses to sustainability issues by receiving reports from the Chief Financial Officer (CFO), who is in charge of promoting sustainability, and other officers involved in sustainability promotion (hereinafter referred to as “officers involved in sustainability promotion”). These reports are based on matters discussed or approved by the executive bodies described in “Execution Framework” below.
Execution Framework
The CFO and officers involved in sustainability promotion work together to address sustainability issues centered on materiality, using appropriate committees for discussion and deliberation depending on the topic. Opportunities are mainly addressed through the CEO-led Executive Committee and the CFO-led Business Strategy Committee, while risks are handled through the Risk Control and Compliance Committee led by the Chief Risk and Compliance Officer (CRCO). In addition, the CFO and officers involved in sustainability promotion have established the NEC Sustainability Advisory Committee, which consults with external experts. This committee engages in objective and expert discussions on NEC’s sustainability policies and initiatives in light of the latest trends, helping the Company clarify its direction and make improvements in a rapidly changing and uncertain environment.
The Corporate Strategy and Sustainability Promotion Division, composed of departments responsible for corporate strategy, IR, and communications, works in close collaboration with the corporate organizations of NEC and its subsidiaries, including departments responsible for people management, general affairs, people and organizational development, risk and compliance, management information systems, environment, customer satisfaction, quality assurance, and procurement, under the leadership of the corporate officer in charge of promoting sustainability, to advance management for sustainability. Additionally, NEC is advancing initiatives in collaboration with our suppliers.
Materiality and Sustainability-Related Performance Indicators and Remuneration for Directors
The implementation of materiality initiatives is clearly defined in the job descriptions of internal directors as “Companywide Organizational and Talent Development Based on the NEC Way” and “Priority Management Themes from an ESG Perspective—Materiality.” These responsibilities are also incorporated into the performance evaluation of KPIs of officers involved in sustainability promotion to clarify accountability and enhance effectiveness. Additionally, engagement scores are used as a bonus calculation metric for Corporate SVPs and above (excluding outside directors)
Larger viewParticipation in International Initiatives
NEC takes part in a variety of initiatives in pursuit of its goal of helping to achieve the SDGs and creating a sustainable society.
Dialogue and Co-creation with Our Stakeholders
Customers’ and society’s values are constantly changing. To supply products and services that deliver real value, NEC needs to incorporate processes for dialogue and co-creation with stakeholders into its corporate activities.
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. The following page includes examples of the main dialogue and co-creation initiatives that we conducted in fiscal year 2025.
Strategy
Approach and Initiatives for Management for Sustainability
Since its founding in 1899, NEC has continued to grow by contributing to the realization of a more prosperous society through the provision of mission-critical systems that support infrastructure using information and communication technology (ICT). We remain committed to thorough compliance and aim to maintain and strengthen the trust we have built by meeting the expectations of diverse stakeholders within society. At the same time, we strive to maximize long-term profits through the creation of social value, as stated in our Purpose.
Guided by our Purpose, we identify key management issues with significant impacts, both risks and opportunities, in the areas of environment, people, and finance as materiality and work actively to address them.
Our 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.
Basic Principles on Management for Sustainability
To maintain and strengthen trust with diverse stakeholders and maximize long-term profit through the creation of social value, NEC implements materiality initiatives based on the following three basic policies of sustainability management, as guided by the NEC Way.
1. 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.
2. 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.
3. 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 ConductApproach to Materiality
NEC identified its materiality by evaluating environmental and human-related issues, listed based on global guidelines such as ISO 26000, GRI Standards, the UN Global Compact, SDGs, and SASB, for their level of impact across NEC’ s value chain and their financial implications. To determine these materiality items, NEC engages in dialogue with experts from various fields and stakeholder representatives, using their input to validate and refine the direction of its initiatives.
Materiality is determined under the oversight of the Board of Directors during the formulation of the Mid-term Management Plan and is reviewed annually in response to changes in the Company’s business environment and evolving societal expectations.
In Mid-term Management Plan 2025, NEC has identified five “Growth Materiality” areas aimed at value creation, opportunity generation, and increasing growth rates, as well as seven “Fundamental Materiality” areas focused on risk reduction and sustained growth.
Through its efforts in these areas of materiality, NEC aims to meet the expectations of various stakeholders, including employees, business partners, and customers, and maintain inclusion in ESG indices, which reflect trust from society and capital markets.
Corporate Value Formula and Materiality
Evolution of the Materiality Identification Process
1. Fiscal Year 2019—Identifying NEC’s Materiality
Referring to the aforementioned 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 identified 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 officially determined through dialogue with external experts and based on the report to the Board of Directors.
Identification Process for Fiscal Year 2019 Materiality
2. Fiscal Year 2021— Re-identifying 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 Year 2021
3. Fiscal Year 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 identified 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.
4. Fiscal Year 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, since fiscal year 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 and 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.
5. Fiscal Year 2025—Launch of NEC’s Materiality Re-identification Project
In fiscal year 2025, NEC launched an internal project with the aim of identifying the risks and opportunities—along with their social and financial impacts—for the next Mid-term Management Plan starting in fiscal year 2027, more clearly than ever before, and incorporating them into our management strategy. This project involves re-identifying materiality by evaluating environmental and human impacts, financial implications, risks, and opportunities, while also seeking input from various stakeholders, including the NEC Sustainability Advisory Committee.
Initiatives to Address Growth Materiality
- A Society That Enables Well-being through the Digitalization of Government and Financial Institutions
We will build an infrastructure that enables highly transparent and fair use of government and financial services and ensures that said services are customer-centered and tailored to the needs of each individual through the use of extremely reliable digital technology.
- Stress-free Communication with Low Environmental Impact
We will enable a wide range of entities—from individuals to businesses and government agencies— to make extensive use of information, leading to richer and brighter lives for everyone, anywhere, at all times by implementing high-speed, high-capacity, low-latency telecommunications environments that support enhanced access to information, new DX services, and disaster prevention. - Transforming Society and Industry with the Power of Digital Technology
We will promote digital transformation in both society and industry by leveraging our technological strengths in AI, biometrics, and security, as well as our abundant expertise in human resources in areas such as cloud services, agile development, and data science.
- Living Freely in Our New Era of Healthcare and Life Science
We will achieve advanced personalized treatment, comprehensive medical services, and lifestyle support, promoting new business development with AI and image recognition technology. - Driving Carbon Neutrality for Our Customers and Society
Leveraging our knowledge and experience in reducing our own CO2 emissions, we will contribute to carbon neutrality throughout society by digitally supporting our customers’ decarbonization efforts, including initiatives within manufacturing supply chains.
Targets and progress of Growth Materiality are identical to those of the growth businesses under Mid-term Management Plan 2025.
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 across the Group 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 NEC’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 (ISC2) 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:
- Ensure that AI is utilized appropriately by NEC, customers, and partners
- Continue to develop advanced technology and talent to further promote AI utilization, with respect for human rights as the highest priority
- 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.
Risk Management
Sustainability-related risks at NEC are managed as part of the companywide risk management framework, with each system manager and business manager overseeing their respective areas. These risks are regularly monitored by the Risk Control and Compliance Committee.
The companywide risk management items, “Cybersecurity,” “Respect for Human Rights,” “Occurrence of Serious Misconduct,” and “Human Capital Management,” have been designated as “Fundamental Materiality” due to their significant impact on both society and NEC’s financial performance. They are categorized as: “Security to Maximize ICT Possibilities,” “Provision and Utilization of AI with Respect for Human Rights as the Highest Priority (AI and Human Rights),” “Compliance as a Social Value Innovator,” and “Diverse Human Resource Development and Cultural Transformation,” respectively.
For opportunity creation, in addition to initiatives under Fundamental Materiality, NEC also monitors progress on “Growth Materiality” as part of the progress tracking for Mid-term Management Plan 2025. Furthermore, NEC positions itself as the initial client (“client zero”), meaning it first addresses risk reduction internally. The know-how gained through this internal implementation is then applied in services offered to clients, turning risk mitigation into a source of business opportunities. For example, in the area of cybersecurity, NEC leverages the experience and knowledge gained from practicing security management internally to offer services that support clients in managing security risks.
Metrics and Targets
In Mid-term Management Plan 2025, NEC has established KPIs for fiscal year 2026 as benchmarks to measure progress on materiality. Results and challenges are reviewed annually, and additional measures or revisions to targets are considered as needed.
The KPIs for each materiality item in fiscal year 2026 and the results of initiatives implemented in fiscal year 2025 are as follows. For “Supply Chain Sustainability,” the achievement rate was 87% as of the end of fiscal 2025, once again surpassing the fiscal year 2026 KPI target of 75%, as it did in the previous fiscal year. This figure may fluctuate as it is based on procurement value. NEC will therefore continue working to ensure the target is achieved by the end of fiscal year 2026 as well.
