Fujikura Group Integrated Report

The contents of Fujikura Group Integrated Report 2024 impressed me with the steady progress on the corporate reforms advanced through past management crises and the Fujikura Group’s journey toward being an organization that continually creates corporate value. I am delighted that this report also reflects the integration of various long-term targets and includes reporting based on the TCFD Framework, which I commented on last year.

The report successfully communicates how important the technological strengths of the Fujikura Group and the human resources development which supports those strengths are to the future growth strategy. The year before last, Chief Technology Officer (CTO) was established as a new position to oversee the formulation and implementation of all strategies relating to technology and development, switching business execution to a triumvirate structure with a CEO, CTO, and CFO. The policy of consistently linking competitive advantages to commercialization is clearly described in this year’s report. I was especially impressed that the messages from both the CEO and the CTO emphasize the importance of leveraging Fujikura’s advanced technological strengths to create value for customers through the development of new businesses and new products.

The Financial Strategy section shows that Fujikura is maintaining ROE at a high level and increasing cash flow. From these, we also understand that it is steadily strengthening the financial base. I can discern the Group’s decisions to invest capital judiciously while maintaining capital investment and R&D at a certain level to lay the foundation for growth. Nevertheless, even though strengthening corporate governance was one of the key measures in 100-Day Operational Turnaround Plan formulated in 2020, improprieties by top management of America Fujikura Ltd. (AFL), a consolidated U.S. subsidiary, were discovered last year. Although this was a severe blow to the Fujikura Group, they succeeded in sharing the sense of urgency caused by these improprieties as a matter that everyone in the entire organization in Japan and the U.S. should take to heart and this is leading to further Group governance reforms.

The four points below are recommendations for improving future Integrated Reports and expanding initiatives:

• This time, a double-page spread on Business Model and Various Types of Driving Force Capital was added for the first time. While I think this provided an easily understandable overview of the six types of capital that are the sources for corporate activities, I felt that it did not incorporate important elements that are strengths for the Fujikura Group. For example, the strength of possessing both the technological product development capabilities to create products with the world-class competitiveness emphasized by the CEO, Mr. Okada, and the CTO, Mr. Banno, and technological capabilities in manufacturing that provide a manufacturing advantage, as a set, is not included among the types of capital. Moreover, the numerous core technologies Fujikura possesses, which the CTO, Mr. Banno has stressed as important, are also not expressed. In my view, adding these elements would make this a persuasive page with a clear message.
• Four plans are explained in the two-page spread on the Roadmap to Medium and Long-term Growth of the Fujikura Group: The 2020 Mid-term Management Plan, Structural Reform under the 100-Day Plan, the 2025 Mid-term Management Plan, and Beyond 2025. While I think this is beneficial for understanding the history of Fujikura Group businesses, past management plans and plans that are currently being implemented are mixed together, making it difficult to discern the contents at a glance. I think it would be good to consider clever ways to color-code past and future, specify when the plans were formulated, and provide other such details. I would also like to see the results listed for the targets in past plans that have already ended.
• The report explains the new GREEN PLUS system to certify products and services which address environmental and social problems. The aim of contributing to solving social problems through the company’s products and services is laudable and is an initiative I definitely want Fujikura to pursue. I would like Fujikura to disclose the GREEN PLUS certification standards in addition to touting the benefits of this system. Providing an overview explaining environmentally friendly products which considers the relationship to the existing Green products as well, would likely highlight product characteristics. It is difficult for outsiders to understand the relationship to Beyond 2025, a plan to create businesses that contribute to carbon neutrality, so I recommend explaining this.
• Sustainability management is not addressed as an organizational framework despite the fact that it is clearly specified as a direction to pursue. It is presented as a final improvement measure. Fujikura is putting effort into support for building careers as part of human resource development and the training system is divided into grade-specific and non-grade-specific training, but it does not contain the elements relating to sustainability. The same thing can be said about the skill matrix for directors and corporate officers. The number of companies adding sustainability to the criteria for determining director compensation is also increasing steadily. I think Fujikura needs to consider what form of organization will steadily advance sustainability management.

Viewed as a whole, I feel that this report more strongly communicates the position of the Fujikura Group in focusing on sustainability management. The structure positioning the Basic Policy on Sustainability Management immediately after the Message from the CEO and followed by Financial Highlights and Non-financial Highlights conveys this awareness of the focus. The Non-financial Highlights are important as indicators to explain sustainability management. As Mr. Meguro, an outside director, pointed out, much of the non-financial information is information that affects finances in the future, and I understand that this sort of mindset is being shared among management. Sustainability initiatives are already regarded as part of financial information, as defined by the International Sustainability Standards Board (ISSB) in Sustainability-related Financial Information.

2025 is an important year in which we will consider the next Mid-term Management Plan. I look forward to seeing the Fujikura Group integrate its strategies for enhancing corporate value and sustainability by setting targets and KPIs based on the results of the Materiality review of sustainability issues it is currently working on to steadily advance group-wide initiatives.

Hiro Motoki
President,
E-Square Inc.

Thank you for your valuable opinion on the Fujikura Group Integrated Report.

The Fujikura Group intends to incorporate sustainability management in our management strategy. We take your opinion on this report seriously and will continue to endeavor to improve the report and expand initiatives. We will review Materiality as management strategy and set targets and KPIs aimed at formulation of the next Mid-term Management Plan in FY2025, and will integrate enhancement of corporate value and sustainability strategy. We will continue to solicit opinions and requests to enable us to produce an even better report.

Toru Hamasuna
Corporate Officer
Head of the Corporate Strategy Unit