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Fujikura Group CSR

Third-party Opinion/ Response

Third-party opinion

Hiro Motoki, President, E-Square Inc.

Hiro Motoki
President,
E-Square Inc.

This is the second year the Fujikura Group has published an Integrated Report. I have confirmed that this year’s report has responded to all of the several points I recommended last year. The content of the value creation story is especially persuasive. It provides concrete examples of initiatives aimed at creating “Mirai” (future) communities to show what the strength of the Fujikura Group’s DNA is that exists in its three competitive superiorities: Long-term relationships of trust, technological capabilities (R&D), and ability to respond to changes in society.
The report also includes messages from the five external directors this year. They write about awareness of issues and the problems that should be addressed in the future from the perspective of each director’s expertise. These messages also enable readers to peer inside and get a glimpse of the lively debates that take place in Board of Directors meetings and the open corporate culture.

In my third party opinion this year, I evaluated the report from the five perspectives particularly focused on in the Guiding Principles and Content Elements of the International <IR> Framework published by the International Integrated Reporting Council (IIRC) to help raise the Integrated Report to an even higher level of perfection.

1.Materiality (Importance)
Disclosure is focused on events that have a material impact on the ability of an organization to create value over the short, medium, and long term. This report provides a simple explanation of the process for specifying the four focus areas (issues of materiality), the CSR priority measures, and the sustainable development goals (SDGs) to focus on. However, it did not address the process by which issues were identified that led to the designation of materiality itself, how the order of priority for risks and opportunities was determined, or the role of management in specifying these. Materiality is a central element of management in the Integrated Report and is a central theme that should be addressed, so a clear explanation of this would be desirable.

2.Risks and Opportunities
Incorporating content that explains what specific risks and opportunities impact the ability to create value over the short, medium, and long term, and what initiatives are being undertaken in response to those would be valuable. In the Integrated Report, there is an analysis of the environment from the dual perspectives of migration risk and physical risk as risks specifically related to climate change based on TCFD (Task Force on Climate-related Disclosures), and an explanation of the risk management structure is also provided. I also recommend providing an overview of the main risks and opportunities inherent in issues and megatrends relating to the environment and society as a whole, an evaluation of the potential for the main risks and opportunities to materialize, and how these risks and opportunities impact the corporate strategy, business model, and KPI.

3.Strategy and Resource Allocation
An explanation of the short, medium, and long-term strategic goals, the current and future strategies and resource allocation plans to achieve those, and how progress on achieving these will be monitored and measured over the short, medium, and long-term would be desirable. This report meticulously explains these points and presents goals to achieve in fiscal 2020 for four management indicators (net sales, operating margin, ROE, and D/E ratio) as the management strategy for value creation. It also shows how the company selects business areas to achieve those goals. Since the report also provides monitoring indicators (EPS and ROIC) for achieving those goals, explaining how these relate to the management indicators mentioned above would probably make it easier to understand.

4.Performance (Results)
Including an explanation of the extent to which the strategic goals were achieved during the period and what the outcome was with respect to the impact on capital would be good. The financial results and plans for the performance of each internal company are presented in this report, and four years of ESG performance data are disclosed on the company’s website. In the future, I think it would be good to state the progress on achieving goals, the relationship between current performance with the short, medium, and long-term strategic goals of the organization, and provide references from related pages in the report.

5.Outlook (Forecast)
An explanation of which issues and uncertainties the company has a high probability of confronting directly in executing the strategy, and the potential impact this would have on the resulting business model and future performance is necessary. These points are explained in detail in the message from the president in this report. I clearly understood the four market areas the company anticipates in the future, the company’s view on value creation, and the concrete possibilities for the company to make even greater technological contributions in the current severe business environment and in sowing the seeds of growth for the future. Adding an explanation of important issues and uncertainties that could materialize in the future and how the company would respond to those would enable Fujikura to communicate its own corporate outlook more clearly, and would deepen the understanding of stakeholders.

The Fujikura Group has declared its participation in initiatives that are focused on globally for the first time by becoming a member of the RE100 and declaring support for the Task Force on Climate-related Disclosures (TCFD). Its efforts in response to ESG investment have also been successful, and it continues to be chosen as a component of the GPIF (Government Pension Investment Fund) index. Rapid changes in the business environment such as actions by the global community to realize a carbon-free society are anticipated in the future and I hope that the Fujikura Group continues to be a pacesetter among companies.

Hiro Motoki,
President
E-Square Inc.

Response

Takashi Takizawa, Senior Vice President, Member of the Board

Takashi Takizawa
Senior Vice President, Member of the Board

The dramatic changes in the ESG (environment, social, governance) business environment surrounding the Fujikura Group are continuing and the focus of institutional investors and other stakeholders on corporate ESG activities is growing stronger. In 2016, we formulated the Fujikura Group Long-term Environmental Vision 2050 as our long-term vision for responding to climate change and are undertaking four challenges aimed at minimizing our environmental burden with our sights set on 2050. Fujikura is contributing to mitigation of climate risks through our declaration of support for TCFD and becoming a member of the RE100.

This is also the fourth year of the 2020 Mid-term Business Plan for the Fujikura Group and I think it is necessary for all officers and employees to work to improve the Fujikura brand in order to achieve the plan goals. The Fujikura brand represents the total collective value that our customers, shareholders, and employees, who are important stakeholders, feel that Fujikura provides. We are pursuing various initiatives to improve brand power.

Hiro Motoki provided a third-party opinion from his broad perspective as an expert, and appraised concrete examples of initiatives aimed at creating “Mirai” (future) communities as the strength of the DNA of the Fujikura Group. This was the first attempt to include messages from external directors for the Fujikura Group. I would like to continue internal discussion of our value creation model, understand our strengths and competitive superiorities, and tie this into sustainable growth.

Mr. Motoki also provided suggestions on 1) Materiality (Importance), 2) Risks and Opportunities, 3) Strategy and Resource Allocation, 4) Performance (Results), and 5) Outlook (Forecast) as the issues for this fiscal year. The Fujikura Group CSR Committee will take each of his suggestions seriously in considering initiatives.

The Fujikura Group regards its corporate philosophy of creating value for customers and contributing to society through “tsunagu” technologies as our constant mission. We will continue to respond actively to climate change and other ESG issues and fulfill our social responsibilities as a corporate group in the future to achieve sustainable corporate development and realize a sustainable society.

Takashi Takizawa,
Senior Vice President, Member of the Board

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