Basic Principles on Management for Sustainability

NEC aims to realize a sustainable society where everyone has the chance to reach their full potential. Our 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 conducting rigorous compliance with laws, regulations, and sound corporate ethics, we also proactively lower risks attendant on activities that have potentially negative effects on society or the environment.

Guided by the NEC Way, NEC promotes management for sustainability in accordance with the following Basic Principles on Management for Sustainability. In addition, we have identified our priority management themes from an ESG perspective—materiality. Addressing these themes is central to minimizing risk and maximizing the value we provide, which in turn will contribute to improving future financial performance and achieving the Sustainable Development Goals (SDGs).

(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 that “no one will be left 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 our Purpose, we have put together the NEC 2030VISION as a compass to indicate the direction and path for NEC to follow. By following the NEC 2030VISION, not only will we improve our financial performance, but we will also manage and create businesses that generate positive social and environmental impacts.

(2) Strengthen Risk Management and Enforce Compliance

In order to act in accordance with our Principles, which advocate for “uncompromising integrity and respect for human rights,” we make sure to conduct our 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 us 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 “orchestration” as stated in our Purpose, “Orchestrating a brighter world,” within the NEC Way. This commitment also helps fulfill SDG 17, “Partnerships for the goals.”

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 the U.S. city of 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:

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 our tangible technologies and products to the intangible creation of value, in 2013, we responded under the Mid-term Management Plan 2015 by declaring our intention to transform into a Social Value Innovator, creating value for society. The following year, in 2014, we announced our brand statement, “Orchestrating a brighter world.” In 2019, we marked our 120th anniversary by reorganizing the structure of the NEC Way, now over 10 years old. On this occasion, we reflected the changes and demands of society and reformed it 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.

Management Implementation Framework for Sustainability

NEC’s management for sustainability is promoted through close collaboration among corporate organizations such as the Corporate Strategy, IR, Human Resources, General Affairs, Human Resource Development, Compliance, Management Information Systems, Environment, Customer Service, Quality Assurance, Procurement, and Communications divisions, as well as business divisions, and Group companies around the world (see table at right). We also undertake initiatives in collaboration with business partners.

Key matters for promoting management for sustainability are discussed by corporate officers and managers of related divisions via the Executive Committee, the Business Progress Committee and the Risk Control and Compliance Committee. 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 these matters after they are reported. Further, Companywide organizational development and human resource development, based on practical implementation of the NEC Way, and efforts to address priority management themes from an ESG perspective—materiality—are clearly stated in the job descriptions of all internal directors. These factors have also been incorporated into the key performance indicators used to evaluate officers. In such ways, we are advancing sustainability initiatives.

The CFO and the officers in charge of promoting sustainability have established the Sustainability Advisory Committee to consult with external sustainability experts.

Approach to Materiality

“Materiality” refers to priority management themes from an ESG perspective. We identify 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 themto strengthen the non-financial foundation that encompasses ESG and underpins the sustainable growth of the Company 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 Company’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 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.

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 we review it as necessary.

Currently, our materiality consists of “Fundamental Materiality” (redefined in fiscal 2022 when we 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.)

Initiatives to Address Growth Materiality

A Society That Enables Well-being through the Digitalization of Government and Financial Institutions (DG/DF)

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 (Global 5G)

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 (Core DX)

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.

Details of Initiatives for 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 cyber security 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:

In addition, NEC applies this policy with the objective of strengthening AI governance based on trends in laws and regulations in Japan and abroad, and maintaining dialogue with various stakeholders

Diverse Human Resource Development and Cultural Transformation

Based on the NEC Way and our 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

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.

Identifying Sustainability-related Risks and Opportunities

KPIs for Initiatives to Address Materiality, and Results for Fiscal 2024