Approach to Management for Sustainability

Since its founding in 1899, the NEC Group has continued to grow by contributing to the realization of a more prosperous society by supporting infrastructure through the use of information and communication technology (ICT).
In recent years, the external environment has changed significantly, including the acceleration of climate change, heightened geopolitical risks, and the rapid spread of AI. Under such circumstances, the NEC Group believes that, in order to fulfill its Purpose, it should contribute to improving societal resilience while earning the trust of diverse stakeholders that constitute society, with the aim of realizing a sustainable society.
Based on this approach, the NEC Group will prioritize the following and seek to maximize long-term profit and corporate value.

Management Framework for Sustainability

At the NEC Group, we promote management for sustainability under a corporate governance framework that clearly separates oversight and execution.

1. Roles of Board of Directors and Management

1.1 Oversight by the Board of Directors

The Board of Directors oversees the implementation of materiality (management issues of high importance to be prioritized by the NEC Group) and responses to sustainability-related issues by receiving reports, at least once a year, from the Chief Financial Officer (CFO), who is the corporate officer in charge of sustainability promotion, and other officers involved in promoting initiatives addressing sustainability-related risks and opportunities (hereinafter referred to as “officers involved in sustainability promotion”). These reports are based on issues discussed or approved by the executive bodies described in “1.2. Execution Framework” below.

In addition, the NEC Group positions sustainability and ESG (insight into diverse values related to women, foreign nationals, disabilities, etc.; experience as a leader of ESG activities; or specialized insight into ESG management) as one of the career skills that it particularly expects of Directors, and regularly confirms the level of fulfillment for the Board of Directors as a whole.

In fiscal year 2026, the Board of Directors redefined its approach to management for sustainability for the Mid-term Management Plan 2030 period. In addition, the Board of Directors and the Audit Committee discussed the approach to the materiality assessment for re-identifying materiality.

1.2.Execution Framework

The CFO and officers involved in sustainability promotion work together to discuss and deliberate on sustainabilityrelated risks and opportunities in appropriate committees depending on the topic. Opportunities are mainly addressed through the Executive Committee led by the Representative Executive Officer and President and the Business Strategy Committee led by the CFO, 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 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 the management’s direction and make improvements in a rapidly changing and uncertain environment.

The Corporate Strategy and Sustainability Promotion Division, overseen by the CFO and composed of departments responsible for corporate strategy, IR, and others, works in close collaboration with the corporate organizations of NEC and its subsidiaries, including departments responsible for people and human resources development, general affairs, legal affairs, risk and compliance, management information systems, and communications, as well as the business segments and divisions responsible for sustainability-related operations, such as AI, security, environment, CS (customer satisfaction), quality assurance, and procurement, to advance management for sustainability. Additionally, the NEC Group is advancing initiatives in collaboration with our suppliers. In fiscal year 2026, sustainability-related “risks” were discussed multiple times at the Risk Control and Compliance Committee, and sustainability-related “opportunities” were discussed at the Executive Committee and the Business Strategy Committee in the form of monitoring the Mid-term Management Plan 2025.

2.Materiality and Sustainability-Related Performance Indicators and Remuneration for Directors

The “Company-wide Organizational and Talent Development Based on the NEC Way” and the “Implementation of Materiality Initiatives” are clearly stated in the job descriptions of internal directors, and engagement scores are used as a bonus calculation metric for Corporate SVPs and above (excluding outside directors). In addition, during the Mid-term Management Plan 2030 period, the KPIs of the corporate officers in charge of each materiality will be linked to the KPIs for the relevant materiality.

Participation in International Initiatives

The Company 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.

Approach and Initiatives for Management for Sustainability

1. Basic Principles on Management for Sustainability

To maintain and strengthen trust with diverse stakeholders and maximize long-term profit and corporate value through the creation of social value, the NEC Group adopts the following three items based on the NEC Way as basic policies of sustainability management.

Approach to Sustainability-related Risks and Opportunities (Materiality)

Based on this basic policy, the NEC Group identified environmental and social issues based on global guidelines such as ISO 26000, GRI Standards, the UN Global Compact, SDGs, and SASB. By assessing the impact of these issues across the NEC Group’s value chain and the existence and level of risks and opportunities they present to the NEC Group’s finances, the NEC Group identified and responded to management issues of high importance to be prioritized by the NEC Group (hereinafter referred to as “materiality”). In addition, 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 reviewed annually under the oversight of the Board of Directors in response to changes in the Company’s business environment and evolving societal expectations, and is also reevaluated during the formulation of the Mid-term Management Plan, which serves as the timing for reviewing the corporate strategy.

Identification Process for Materiality

1. Materiality identification process through the Mid-term Management Plan 2025 period

2. Materiality during the Mid-term Management Plan 2030 period

In practicing the Vision for Creating Social Value “Empower Humanity—Delivering innovation and peace of mind” through Innovation, Well-being, Resilience, and Integrity, we assessed issues in which the latest themes such as AI were added to the conventional materialities in terms of impact on the environment and society and financial risks nd opportunities, and determined their importance.

With respect to the impact on the environment and society, in addition to the company-wide risk management standards, we estimate impact based on the scale and scope of impact, likelihood of occurrence, and remediability after risk occurrence, while the impact of financial risks is aligned with the company-wide risk management standards. In addition, the impact of financial opportunities was assessed in the formulation process of the Mid-term Management Plan 2030. Based on these assessments, we classify management issues that we determined to be of high importance to the NEC Group into the following three categories:

In addition, in this identification process, we refer to global guidelines and disclosure standards that we have referenced previously. Further, as in the past, after engaging in dialogue with experts in various fields and representatives of stakeholders, we confirmed the rationality and appropriateness of the evaluation criteria and prioritization.

For management issues identified by the NEC Group as highly important, we categorize each issue from the perspective of the corporate value formula as contributing more to opportunity creation and growth enhancement or to risk reduction. Issues for which both impact on the environment and society and financial risks and opportunities are high (Quadrant A), “AI and Human Rights,” “Security,” “AI and Employment,” and “I&D” (listed by abbreviation) are positioned as contributing primarily to opportunity creation and growth enhancement. On the other hand, “Privacy” (also listed by abbreviation), which also has a high impact on the environment, society, and financial risks and opportunities, is positioned as contributing primarily to risk reduction and growth enhancement. In addition, issues for which either one of these factors is significant (Quadrants B and C) are also categorized as contributing primarily to risk reduction and growth enhancement.

3. Management issues (materialities) determined to be of high importance to the NEC Group

Sustainability-related risks at the NEC Group are managed as part of the company-wide 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.

In the Mid-term Management Plan 2030, as part of company-wide risk management, the corporate officers in charge of sustainability promotion and the responsible departments, acting as the lead, will promote initiatives for each materiality to avoid and reduce sustainability-related risks for the NEC Group. With respect to the creation of business opportunities, business divisions are responsible for this. In addition, through initiatives to provide customers with the track record and know-how accumulated by mastering the latest technologies in-house as the initial client (“Client Zero”), which we have strengthened during the Mid-term Management Plan 2025 period, we aim to link these to the creation of major opportunities, and will continue such initiatives.

Risk Management During the Mid-term Management Plan 2025 Period

The items promoted as company-wide 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 the risks they present to the company’s own finances.
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, and initiatives for risk avoidance and reduction were promoted.

For opportunity creation, in addition to initiatives under “Fundamental Materiality,” NEC also monitored progress on “Growth Materiality” as part of the progress tracking for Mid-term Management Plan 2025. In addition, we advanced the provision of know-how to customers from the Client Zero implementation track record. 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 During the New Mid-term Management Plan Period

For the materiality during the Mid-term Management Plan 2030 period, we have set the desired state and KPIs as follows. We will focus on initiatives toward practicing our Purpose and realizing the Vision for Creating Social Value: Empower Humanity—Delivering innovation and peace of mind.

Materiality During the Mid-term Management Plan 2025 Period, Metrics and Targets, and Results