Survey of Integrated Reporting in Japan 2019

Integrated Reporting Center of Excellence KPMG in Japan

March 2020

home.kpmg/jp Message from global thought leaders

he corporate community in Japan is to be congratulated for its Also important to determining materiality, and important in their embrace of integrated reporting. I have written about this on my own right, are the risks and opportunities the company sees to column on orbes.com in the article hat he orld Can Learn value creation over the short, medium, and longterm, and the rom he Japanese perience In Integrated“ eporting. In 200 outlook the company has about the challenges and uncertainties it there were only 2 Japanese companies issuing an integrated” faces to its strategy, business model, and longterm performance. report y 20 this number had grown to , a compound annual Again, Japan ranked third to last. Clearly Japanese companies need growth rate of percent. f the 2,2 companies in the irst to improve here. Section of the okyo Stock change, 2 issued integrated In terms of performance, the etent to which the company has reports and they counted for percent of total market achieved its strategic obectives and how wellplaced it is to continue capitaliation of this group. hile data on the number of to do so in the future, Japan ranked last. It s score was .0 companies practicing integrated reporting by country are compared to secondtolast rail and .S.’ tied at .. his is a incomplete, it is likely the no country has shown the same level of serious problem. ow can a company that is performing well for its enthusiasm for integrated reporting as Japan. his is especially shareholders and other stakeholders get their support if it isn t noteworthy since this is being done on a completely voluntary telling them how they are ailure to do so will result in all ’ basis, although the Japan Stewardship Code and the Japan stakeholders assuming that its performance is poorer than it really Corporate Governance Code have clearly played an important role. is. If performance is poor, the company needs to be candid about it nfortunately, the uality of integrated reporting in Japan does not so it can get input from its shareholders and other stakeholders match is uality. In collaboration with Michael P. Krus and Carlos about how to improve it. Solano I did an analysis of the uality of integrated reporting in 0 he one component on which Japan had a fairly good ranking, sith countries. n a scale of 0.0 to .0, Japan ranked third to last with a and ust below average, was strategy and resource allocation the score of . (average was .2) with rail at .22 and the .S. last company s strategic obectives and how it is allocating its resources— at 0.. ur analysis focused on what we consider to be the critical to achieve’ them. his is a strength that companies can build on. components for producing a highuality integrated report. he way to do so, and the foundation of integrated reporting, is for his starts with materiality, the environmental, social, and the board of directors to publish a Statement of Purpose (he governance (SG) issues that are important to longterm value Statement). As I wrote in he Statement“ f Purpose And hat creation from both a risk and opportunity perspective. Japan ranked ou eed o” o, he board“ of a company should publish an third on this component. Good guidance here is provided by the annual onetotwo” “page Statement of Purpose that clearly Sustainability Accounting Standards oard (SAS), for which I was articulates the company s‘ purpose to profitably ’achieve a solution the ounding Chairman. he importance of SAS s work is evident for society. It specifies within’ that purpose the few stakeholders from the 20 letter, A undamental eshaping of’ inance, that most critical to longterm value creation and sustainability. hile Larry ink, Chairman “ C of lackock, wrote to Cs. e” many, if not most, companies have mission and vision statements, stated, lackock believes that the Sustainability Accounting almost none of them are signed by the board of directors. ermes Standards“ oard (SAS) provides a clear set of standards for uity wnership Services has published a useful Guidance” reporting sustainability information across a wide range of issues. “ ” ocument for boards of directors on what the content of he Japanese companies also need to recognie that the SG issues Statement” should be. “ that are material will change over time. Some that have been will no ” he Statement then becomes the basis for a company s strategy longer be and some that aren t will become so. In ynamic Materiality and allocation process and the time frames it uses to evaluate’ its and Core Materiality A Primer’ or Companies and“ Investors, impact on all stakeholders. he company then needs to publish an I summarie the results of an important paper by homas Kuh,” integrated report in which it eplains its progress on accomplishing Andre Shepley, Greg ala, and Michael lowers of ruvalue Labs. its purpose. hey show how material topics change over time. et they also show that there are three that have been important for the past 0 Just as Japanese companies have shown leadership on integrated years GG emissions, labor practices, and business ethics. reporting, they can now do so on the even newer idea of he “ Japanese— companies should be reporting on all three of these, in Statement. his will improve their integrated reporting. It will also ” addition to those that are material for their particular industry. encourage companies all over the world to publish he Statement as well. Japan and the world will be a better place“ for this. ” etermining the material issues of today and which might become so tomorrow is informed by strong stakeholder engagement in obert G. ccles which the company seeks to understand the epectations of all of its stakeholders and how best to respond to them. he company isiting Professor of Management Practice then needs to engage in an open dialogue with its key Sad usiness School stakeholders. Japan ranked third to last on this component. niversity of ford

Japanese businesses, like those in other capital markets, are facing disclosures to provide meaningful signals to the financial markets. a new decade with increasingly uncertainty created by climate It all starts with good data and controls which are the building change, geopolitical tensions and harsh business conditions. he blocks of good information which is needed to navigate the value of a company today is largely made up of unaccounted challenges ahead. intangibles. Just as the value of those intangibles can increase his is an important moment for Japanese businesses to lead the rapidly, it can be destroyed in seconds. way by setting the standard for good reporting. he uality of Investors want confidence that the companies are managing not integrating reporting needs to improve rapidly and provide only what s on the balance sheet but all the resources and meaningful insights to investors and other stakeholders. e look relationships’ that its business model depends on to create value. forward to the progress in Japan. Mario Abela At the CS, we are working on proects to integrate nonfinancial information in business decisionmaking by improving irector, edefining alue governance and risk management and driving purposedriven orld usiness Council for Sustainable evelopment (CS)

01 Message from global thought leaders

© 2020 KPMG AZSA LLC, a limited liability audit corporation incorporated under the Japanese Certified Public Accountants Law and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Message from global thought leaders Introduction Contents he corporate community in Japan is to be congratulated for its Also important to determining materiality, and important in their e are very grateful to be able to provide this Survey of embrace of integrated reporting. I have written about this on my own right, are the risks and opportunities the company sees to Integrated eporting in Japan again this year. his is the sith column on orbes.com in the article hat he orld Can Learn value creation over the short, medium, and longterm, and the survey report since we began issuing it in 20, and we are rom he Japanese perience In Integrated“ eporting. In 200 outlook the company has about the challenges and uncertainties it 0 Message from global thought leaders there were only 2 Japanese companies issuing an integrated” faces to its strategy, business model, and longterm performance. gratified that they have been received with great interest by report y 20 this number had grown to , a compound annual Again, Japan ranked third to last. Clearly Japanese companies need many people both in and outside of Japan. 02 Introduction growth rate of percent. f the 2,2 companies in the irst to improve here. Many Japanese corporate leaders are anious about the effect Section of the okyo Stock change, 2 issued integrated In terms of performance, the etent to which the company has reports and they counted for percent of total market that disruptive innovation could have on eisting businesses, achieved its strategic obectives and how wellplaced it is to continue 03 About the survey capitaliation of this group. hile data on the number of and yet they are committed to making changes where they can. to do so in the future, Japan ranked last. It s score was .0 companies practicing integrated reporting by country are At the same time, many corporate leaders of leading global compared to secondtolast rail and .S.’ tied at .. his is a 04 Recommendations incomplete, it is likely the no country has shown the same level of serious problem. ow can a company that is performing well for its firms view these disruptions as opportunities for reform. hey enthusiasm for integrated reporting as Japan. his is especially shareholders and other stakeholders get their support if it isn t have been uick to put into practice a resilient management as 05 Key Findings noteworthy since this is being done on a completely voluntary telling them how they are ailure to do so will result in all ’ they epeditiously devise and implement strategies, leading to basis, although the Japan Stewardship Code and the Japan stakeholders assuming that its performance is poorer than it really real results. 07 Materiality Corporate Governance Code have clearly played an important role. is. If performance is poor, the company needs to be candid about it nfortunately, the uality of integrated reporting in Japan does not so it can get input from its shareholders and other stakeholders In these highly uncertain times, in which the business 09 Risks and opportunities match is uality. In collaboration with Michael P. Krus and Carlos about how to improve it. environment can change dramatically in an instant, we believe Solano I did an analysis of the uality of integrated reporting in 0 that companies need to eplain themselves in a way that 11 Strategies and resource allocation he one component on which Japan had a fairly good ranking, sith countries. n a scale of 0.0 to .0, Japan ranked third to last with a and ust below average, was strategy and resource allocation the demonstrates their resolve and determination, clearly conveying score of . (average was .2) with rail at .22 and the .S. last 13 Capital costs and financial strategy company s strategic obectives and how it is allocating its resources— how they plan to overcome the challenges they face. at 0.. ur analysis focused on what we consider to be the critical to achieve’ them. his is a strength that companies can build on. components for producing a highuality integrated report. In March 20, the inancial Services Agency released the 15 Performance he way to do so, and the foundation of integrated reporting, is for his starts with materiality, the environmental, social, and Principles for the isclosure of arrative Information. he the board of directors to publish a Statement of Purpose (he 17 Outlook governance (SG) issues that are important to longterm value Principles aim to augment narrative information by including Statement). As I wrote in he Statement“ f Purpose And hat creation from both a risk and opportunity perspective. Japan ranked many of the elements normally reuired in integrated reports in ou eed o” o, he board“ of a company should publish an 19 Governance third on this component. Good guidance here is provided by the annual onetotwo” “page Statement of Purpose that clearly the information provided in securities reports. his will encourage Sustainability Accounting Standards oard (SAS), for which I was articulates the company s‘ purpose to profitably ’achieve a solution constructive dialogue between investors and companies. 21 Basic Information the ounding Chairman. he importance of SAS s work is evident for society. It specifies within’ that purpose the few stakeholders from the 20 letter, A undamental eshaping of’ inance, that ialogue between people holding different values sometimes most critical to longterm value creation and sustainability. hile Larry ink, Chairman “ C of lackock, wrote to Cs. e” many, if not most, companies have mission and vision statements, has the power to overcome difficulties. ighuality dialogue SPOTLIGHT stated, lackock believes that the Sustainability Accounting almost none of them are signed by the board of directors. ermes with investors gives companies insights and can provide hints Standards“ oard (SAS) provides a clear set of standards for uity wnership Services has published a useful Guidance” that lead to breakthroughs on new fronts. his kind of reporting sustainability information across a wide range of issues. “ 24 Dawn of Digital Reporting 2.0 ” ocument for boards of directors on what the content of he highuality dialogue can only happen if companies take a “ ” ” “ Japanese companies also need to recognie that the SG issues Statement should be. holistic view of their history, their current situation, and their 25 Board of Directors advocating that are material will change over time. Some that have been will no ” Statement of Purpose he Statement then becomes the basis for a company s strategy vision for the future. his view allows them to tell a story that “ ” longer be and some that aren t will become so. In ynamic Materiality and allocation process and the time frames it uses to evaluate’ its makes their path forward clear and credible. Human capital directly linked and Core Materiality A Primer’ or Companies and“ Investors, 26 impact on all stakeholders. he company then needs to publish an to corporate value I summarie the results of an important paper by homas Kuh,” integrated report in which it eplains its progress on accomplishing Integrated thinking is essential for creating such a story. Andre Shepley, Greg ala, and Michael lowers of ruvalue Labs. its purpose. Companies need to consider the various types of value they 27 Expectations for consistency between hey show how material topics change over time. et they also provide, including profit and sustainability in business and standards for non-financial information show that there are three that have been important for the past 0 Just as Japanese companies have shown leadership on integrated years GG emissions, labor practices, and business ethics. reporting, they can now do so on the even newer idea of he contribution to society, in an integrated manner. hen, they Ensuring faith in non-financial information “ Japanese— companies should be reporting on all three of these, in Statement. his will improve their integrated reporting. It will also should determine the vision and strategies that will maimie ” Climate-related disclosure premised on an addition to those that are material for their particular industry. encourage companies all over the world to publish he Statement their performance, and describe this in their reports. assessment of financial impact as well. Japan and the world will be a better place“ for this. ” etermining the material issues of today and which might become e are confident that integrated reporting helps companies so tomorrow is informed by strong stakeholder engagement in obert G. ccles translate the various issues they face into improvements in which the company seeks to understand the epectations of all of medium and longterm value. KPMG Japan will continue to 2 List of ikkei 22 companies its stakeholders and how best to respond to them. he company isiting Professor of Management Practice fulfill our purpose, Inspire Confidence, mpower Change, then needs to engage in an open dialogue with its key Sad usiness School “ ” 2 List of Japanese Companies Issuing stakeholders. Japan ranked third to last on this component. niversity of ford by supporting companies confront the apparent and the Integrated eport in 20 underlying issues. Afterword Japanese businesses, like those in other capital markets, are facing disclosures to provide meaningful signals to the financial markets. I hope this report will be useful to all who are striving to survive 2 Survey eam About KPMG Japan a new decade with increasingly uncertainty created by climate It all starts with good data and controls which are the building these highly uncertain times. Integrated eporting Co change, geopolitical tensions and harsh business conditions. he blocks of good information which is needed to navigate the value of a company today is largely made up of unaccounted challenges ahead. intangibles. Just as the value of those intangibles can increase his is an important moment for Japanese businesses to lead the rapidly, it can be destroyed in seconds. way by setting the standard for good reporting. he uality of About the Report s Title Investors want confidence that the companies are managing not integrating reporting needs to improve rapidly and provide ’ only what s on the balance sheet but all the resources and meaningful insights to investors and other stakeholders. e look his report has been published as Survey of Integrated relationships’ that its business model depends on to create value. forward to the progress in Japan. eports in Japan for five years, since 20, but we Mario Abela oshihiro tsuka have now changed the title to Survey of Integrated At the CS, we are working on proects to integrate eporting in Japan because the survey now covers nonfinancial information in business decisionmaking by improving irector, edefining alue Lead partner, narrative information in securities reports, as well as governance and risk management and driving purposedriven orld usiness Council for Sustainable evelopment (CS) KPMG Japan integrated reports. Integrated eporting Center of cellence

01 Message from global thought leaders Introduction 02

Starting this year, we have included both securities reports and integrated reports in the scope of the survey.

Purpose and background Scope

he KPMG Japan Integrated eporting Center of cellence or the first time this year, the survey covers all 22 companies (Co) believes that the voluntary efforts of companies that making up the ikkei 22 Inde (hereafter, ikkei 22 “ issue integrated reports help to raise value by enhancing companies see page 2). In the survey of integrated reports, dialogue between companies and investors. o raise the we reviewed the out of those ikkei 22 companies that competitiveness of Japanese companies, it is vital to highlight issue integrated reports, and in the comparison of disclosure in achievements and challenges in this realm. his is why we securities reports and integrated reports, we covered all of the have continued to survey disclosure trends in integrated ikkei 22 companies. reports by Japanese companies since 20. o ensure continuity with the surveys of the past five years, he Japanese Cabinet ffice rdinance on the isclosure of which covered integrated reports only, the survey of basic Corporate Affairs was revised in 20 as part of efforts to information on integrated reports (pages 22) covers the respond to the recommendations in ealiing a irtuous Cycle reports of all companies ( companies in total see pages “ in the Capital Market, a report released by the inancial 20) included in the List of Japanese Companies Issuing ” System Council s orking Group on Corporate isclosure in Selfeclared Integrated eports in 20, which is issued by ’ 20. In addition, the inancial Services Agency (SA) the Corporate alue eporting Lab. published Principles for the isclosure of arrative Information. hese efforts helped to augment information disclosure in securities reports. Methodology

Accordingly, in this survey we not only continued to study and analye integrated reports themselves, but also surveyed the Survey items were selected in consideration of the elements narrative information provided within securities reports, of content that are epected to appear in corporate reports and comparing it to the status of disclosure in integrated reports. their significance for investors, who are assumed to be the primary readers, with reference to the standards, reports, Given that the Principles for the isclosure of arrative documents and other publications shown below. Information and the revised Cabinet ffice rdinance on the isclosure of Corporate Affairs went into force at the start of All the members of the survey team determined the report the fiscal year ending in March 2020, this survey aims to evaluation criteria together, and then a single researcher was assigned to each company and thoroughly read that company s ascertain conditions prior to that. Going forward, we plan to ’ carry out fiedpoint observations of changes in disclosure in integrated report and securities report to confirm the content. integrated reports and securities reports over a threeyear hereafter, the entire survey team discussed, summaried and period, including this year. compiled the results of the analysis and recommendations.

Standards, reports and other used as references

International Integrated eporting Council (20), International Ministry of conomy, rade and Industry (20), Guidance for ・ ‘ ・ ‘ Integrated eporting ramework Integrated Corporate isclosure and CompanyInvestor ialogues ’ for Collaborative alue Creation inancial Services Agency (20), Principles for the isclosure of ’ ・ ‘ arrative Information inancial System Council (20), eport of the orking Group on ’ ・ ‘ Corporate isclosure inancial Services Agency (20), eference casebook of good ’ ・ ‘ practices on the disclosure of narrative information inancial Services Agency (20), Public comment on revised draft of ’ ・ ‘ Cabinet ffice rdinance on the isclosure of Corporate Affairs inancial Services Agency (20), Guidelines for Investor and ’ ・ ‘ Company ngagement obert G. ccles, Michael P. Krus, Carlos Solano (20), ’ ・ A Comparative Analysis of Integrated eporting in en Countries okyo Stock change (20), Corporate Governance Code ‘ ’ ・ ‘ ’ ACCA (20), Insights into integrated reporting .0 okyo Stock change (20), Stewardship Code ・ ‘ ・ ‘ ’ he driver for authenticity ’

03 About the survey

Starting this year, we have included both securities reports and integrated reports in the scope of the survey. Aim for a comprehensive report that contributes to constructive dialogue between investors and companies

Purpose and background Scope Communicate a story he KPMG Japan Integrated eporting Center of cellence or the first time this year, the survey covers all 22 companies (Co) believes that the voluntary efforts of companies that making up the ikkei 22 Inde (hereafter, ikkei 22 1 “ What are the pieces management needs to convey a value creation story? issue integrated reports help to raise value by enhancing companies see page 2). In the survey of integrated reports, dialogue between companies and investors. o raise the we reviewed the out of those ikkei 22 companies that ith each year of this survey, we found a growing the overall report. ithout access to the information that competitiveness of Japanese companies, it is vital to highlight issue integrated reports, and in the comparison of disclosure in number of corporate leaders issuing messages that forms the pieces needed to tell the story, the reader achievements and challenges in this realm. his is why we securities reports and integrated reports, we covered all of the convey their thinking in a vibrant way. Management is cannot gain a good understanding. Conversely, readers have continued to survey disclosure trends in integrated ikkei 22 companies. beginning to speak out, in accordance with their may feel that any information that is not clearly related to reports by Japanese companies since 20. responsibilities, about their organiation s goals, the story is ust noise. o ensure continuity with the surveys of the past five years, ’ the initiatives they are pursuing to achieve those goals, It is vital to show the links between the information he Japanese Cabinet ffice rdinance on the isclosure of which covered integrated reports only, the survey of basic and the value creation story behind them. that shapes the value creation story, and also to eplain Corporate Affairs was revised in 20 as part of efforts to information on integrated reports (pages 22) covers the et very few reports adeuately convey the validity and it in the right order so that the reader arrives at respond to the recommendations in ealiing a irtuous Cycle reports of all companies ( companies in total see pages feasibility of the management s story throughout an accurate understanding. “ ’ in the Capital Market, a report released by the inancial 20) included in the List of Japanese Companies Issuing ” System Council s orking Group on Corporate isclosure in Selfeclared Integrated eports in 20, which is issued by ’ 20. In addition, the inancial Services Agency (SA) the Corporate alue eporting Lab. published Principles for the isclosure of arrative Information. Convey nonfinancial information with material financial impacts hese efforts helped to augment information disclosure in securities reports. Methodology 2 Why discuss materiality, and why include non-financial information? Accordingly, in this survey we not only continued to study and Survey items were selected in consideration of the elements analye integrated reports themselves, but also surveyed the A growing number of companies mention materiality, sustainability of a company s business model ’ narrative information provided within securities reports, of content that are epected to appear in corporate reports and a core issue when discussing their value creation story. hat changes in the business environment does comparing it to the status of disclosure in integrated reports. their significance for investors, who are assumed to be the owever, many companies still point to priority themes the management team anticipate as they work to achieve primary readers, with reference to the standards, reports, where they try to contribute to the resolution of social the company s goals, and what do they think is critical to ’ Given that the Principles for the isclosure of arrative documents and other publications shown below. issues as material issues. sustain their business in these conditions Information and the revised Cabinet ffice rdinance on the hese companies need to be talking not about the social Material nonfinancial information with maor financial isclosure of Corporate Affairs went into force at the start of All the members of the survey team determined the report issues that they are trying to resolve, but the obstacles impact is the key to epressing this specifically. his is the fiscal year ending in March 2020, this survey aims to evaluation criteria together, and then a single researcher was preventing them from realiing economic value, even as precisely the kind of information that companies should assigned to each company and thoroughly read that company s they are helping to resolve social problems in other convey to ensure constructive dialogue with investors ascertain conditions prior to that. Going forward, we plan to ’ — integrated report and securities report to confirm the content. words, what factors could have a maor impact on the seeking to assess a company s sustainability. carry out fiedpoint observations of changes in disclosure in ’ integrated reports and securities reports over a threeyear hereafter, the entire survey team discussed, summaried and period, including this year. compiled the results of the analysis and recommendations. 3 Share the underlying story across all mediums Standards, reports and other used as references Strengthen affiliations within companies and avoid inconsistencies between reporting mediums International Integrated eporting Council (20), International Ministry of conomy, rade and Industry (20), Guidance for ・ ‘ ・ ‘ Integrated eporting ramework Integrated Corporate isclosure and CompanyInvestor ialogues Companies are trying to significantly enrich the narrative various reporting needs and reuirements. owever, ’ for Collaborative alue Creation information in their securities reports in response to the if the value creation story that underlies everything is not inancial Services Agency (20), Principles for the isclosure of ’ ・ ‘ revisions to the Cabinet ffice rdinance on the consistently epressed in all reports, the reader will arrative Information inancial System Council (20), eport of the orking Group on ’ ・ ‘ isclosure of Corporate Affairs in 20 and the Principles naturally be skeptical about its validity and feasibility. Corporate isclosure inancial Services Agency (20), eference casebook of good ’ ・ ‘ for the isclosure of arrative Information. Investors are he time has come for companies to share a consistent practices on the disclosure of narrative information inancial Services Agency (20), Public comment on revised draft of ’ ・ ‘ trying to use the information in securities reports to make story by strengthening the affiliations between Cabinet ffice rdinance on the isclosure of Corporate Affairs inancial Services Agency (20), Guidelines for Investor and ’ comparisons that can inform their investment decisions, departments, and to take steps tailored to the role and ・ ‘ Company ngagement obert G. ccles, Michael P. Krus, Carlos Solano (20), and they will continue to value integrated reports as a readers of each type of media being used. ’ ・ A Comparative Analysis of Integrated eporting in en Countries medium in which companies step forward to share the hese efforts will pay off by promoting dialogue between okyo Stock change (20), Corporate Governance Code ‘ ’ ・ ‘ ’ ACCA (20), Insights into integrated reporting .0 story of how they will create value into the future. investors and companies and earning the company greater okyo Stock change (20), Stewardship Code ・ ‘ ・ ‘ ’ he driver for authenticity Companies often assign responsibility for the preparation trust from investors. ’ of reports to different departments in order to meet a

03 About the survey ecommendations 04

hat factors affect the sustainability of a business model Materiality in integrated reporting business model. Moreover, Companies that eplain refers to the importance of factors that only a handful of companies eplain

Materiality could have a significant effect on the how the oard of irectors is materiality in terms of business model and the results it proactively involved in the materiality the sustainability of their delivers. he oard of irectors should assessment process. business models assess the importance of each material he SA s Principles for the ’ issue to ensure that materiality plays a isclosure of arrative Information role in management decisionmaking. state that securities reports should Although of the companies use materiality as a means of reviewed refer to materiality in their evaluating whether the information is integrated reports, only discuss it important for investors in making Materiality in terms of the sustainability of their investment decisions. P.07 35% ▶

Material issues bring risks and opportunities into focus isks and opportunities hen it comes to material issues, how specify the likelihood, the timeline should risks be managed once they are and the impact if the risk and Companies that eplain identified and how is value created opportunities materialie. risks and opportunities from opportunities he consideration At first glance, securities reports in connection with its to these uestions will lead to the appear to have more information than materiality assessment development of the company s most integrated reports on risk information. ’ optimal strategies. owever, going forward, information hile of companies discuss risks on risk and opportunities should be and opportunities in integrated reports, considered from the perspective of only 22 of companies eplain the whether it is useful to the reader. Risks and connection to its materiality opportunities assessment. nly a few companies P.0 9 22% ▶ Strategies and resource allocation hat are the goals, and how will they be achieved Strategies are the roadmaps for a understand the overall management company to realie its vision for the strategy. In addition to describing Companies that future. hey are critical for the ongoing the strategy, laying out how the report nonfinancial creation of value in the medium and company assesses progress on long term and must account for both reaching those indicators is essential. uantitative targets risks and opportunities. his applies to both nonfinancial and Although of companies provide financial indicators. financial uantitative targets, only 2 of companies reporting nonfinancial Strategies and resource uantitative targets. allocation isclosing indicators in securities P.11 26% ▶ reports is important in helping readers

05 Key indings

eporting both progress and outlook for strategic targets hat factors affect the sustainability of a business model Integrated reporting epects to include can be epected to improve. Many Materiality in integrated reporting business model. Moreover, Companies that eplain not only achievements or progress companies add reasons for Companies that eplain refers to the importance of factors that only a handful of companies eplain Performance toward strategic targets, but also to the ups and downs in performance, Materiality could have a significant effect on the how the oard of irectors is materiality in terms of the impact of their current discuss the outlook for those targets. but only eplain their current business model and the results it proactively involved in the materiality the sustainability of their iscussions of progress based on the performance as part of the process of performance on their short, delivers. he oard of irectors should assessment process. business models correlation between current results and achieving medium and longterm medium and longterm assess the importance of each material he SA s Principles for the ’ medium and longterm targets enable strategic targets. issue to ensure that materiality plays a isclosure of arrative Information strategic targets the reader to assess the feasibility of Specifying nonfinancial indicators that role in management decisionmaking. state that securities reports should the company s aspiration to create affect financial performance and Although of the companies use materiality as a means of ’ value. ven when performance is analying the results based on these reviewed refer to materiality in their evaluating whether the information is worsening, the report can eplain that trends in securities reports makes integrated reports, only discuss it important for investors in making Materiality this is a temporary stall and conditions them more persuasive. Performance in terms of the sustainability of their investment decisions. P.07 35% P.15 48% ▶ ▶

Material issues bring risks and opportunities into focus Awareness of issues with a maor impact and uncertainties isks and opportunities hen it comes to material issues, how specify the likelihood, the timeline In integrated reporting, companies are only a few companies provide a Among those companies should risks be managed once they are and the impact if the risk and Companies that eplain epected to eplain the maor issues timeline alongside this information. identified and how is value created opportunities materialie. risks and opportunities and uncertainties they foresee to In securities reports, companies that including outlook, those utlook from opportunities he consideration At first glance, securities reports in connection with its confront as they pursue their lay out their outlook for the business that eplain how their to these uestions will lead to the appear to have more information than materiality assessment strategies, as well as to describe the environment, which are the premises outlook is related to their development of the company s most integrated reports on risk information. potential effects on the value creation for materiality assessment and ’ materiality assessment optimal strategies. owever, going forward, information story. he percentage of companies strategies, will give readers a better hile of companies discuss risks on risk and opportunities should be eplaining the outlook was . understanding of where those and opportunities in integrated reports, considered from the perspective of owever, only 20 eplain how their companies are heading. only 22 of companies eplain the whether it is useful to the reader. outlook which should be the premise Risks and connection to its materiality opportunities for their materiality assessments, are Outlook assessment. nly a few companies P.0 9 22% related to material issues. In addition, P.17 20% ▶ ▶

Strategies and resource allocation etermining the path to value creation, and supporting it hat are the goals, and how will they be achieved Governance reuires that systems and on the ualities reuired of a C, the Strategies are the roadmaps for a understand the overall management mechanisms supporting improved person responsible for the future of Companies that eplain company to realie its vision for the strategy. In addition to describing Companies that Governance value over the short, medium and long value creation. the ualities they look future. hey are critical for the ongoing the strategy, laying out how the report nonfinancial term are built, and then run effectively. hile progress has been made in creation of value in the medium and company assesses progress on for in a C uantitative targets Integrated reporting should eplain this. governance reform, we still see long term and must account for both reaching those indicators is essential. he ualities of a C are one boilerplate descriptions. In securities risks and opportunities. his applies to both nonfinancial and important element, but only 0 of report, companies should lay out the Although of companies provide financial indicators. companies specify this. he goals that connection between the governance financial uantitative targets, only 2 companies want to achieve should system and strategic targets and of companies reporting nonfinancial Strategies and resource include not ust issues to grapple with provide eplanations based on their uantitative targets. allocation in the short term, but medium and own business s characteristics. Governance isclosing indicators in securities P.11 % ’ P.19 % 26 longterm targets as well. Given this, 10 ▶ ▶ reports is important in helping readers companies should eplain their thinking

05 Key indings Key indings 06

Explain materiality in terms of Involve the Board of Directors 1 sustainability of business model 2 in assessing materiality

he percentage of companies referring to materiality f the companies which identified material issues rose to . owever, the breakdown reveals that in terms of their business model s sustainability, ’ 2 of these companies, analyed material issues to 2 mentioned the involvement of its oard of identify key areas in which they could resolve social irectors in assessing materiality. owever, for issues. nly of companies identified material half of those companies, their involvement is limited issues in terms of the sustainability of their business to approving or confirming the results of “ ” models (igure ). the materiality assessment (igure 2). Materiality in integrated reporting should describe the Materiality assessment is made from the perspective of issues the companies identified as potentially affecting the impact on the sustainability of a company s ’ the sustainability of their business model, considering business model, based on the outlook on the potential the potential changes in the future business changes in the business environment. or this reason, environment. eaders want to knowthe medium and materiality assessment should form the basis for a longterm strategies that take into account the material company s strategic decisionmaking and resource ’ issues the company has identified. allocation. ence the oard of irectors should be involved in this process. Analying and eplaining the issues epected to have a high impact on the company s medium and longterm he oard of irectors view on material issues is ’ ’ value creation, rather than only identifying areas which fundamental to the company s value creation story. ’ contribute to society, will lead to a more constructive Including this in the report fosters a deeper dialogue with investors. understanding of how the company identify issues and creates sustainable value.

Figure 2 Figure 1 Board of Directors involvement Materiality in the materiality assessment’ process

ot described escription on ot described Proactively assesses issues affecting materiality the sustainability (0) () 2 of business model 2 () (2)

escribed escription as escribed Approves or an area which can confirms help resolve assessment social issues 2 results () (2) 2 () 2 ()

n companies n2 companies ikkei 22 companies which issue integrated reports Companies that describe materiality in terms of the sustainability of their business model ( ) umber of companies ( ) umber of companies

Good practice Describing the involvement of the Board of Directors in materiality assessment

07 Materiality

Augmenting narrative information in securities reports Explain materiality in terms of Involve the Board of Directors 1 sustainability of business model 2 in assessing materiality Include materiality perspective in securities reports he percentage of companies referring to materiality f the companies which identified material issues rose to . owever, the breakdown reveals that in terms of their business model s sustainability, ’ 2 of these companies, analyed material issues to 2 mentioned the involvement of its oard of As more and more companies attempt to eplain reported will also differ. owever, all communication identify key areas in which they could resolve social irectors in assessing materiality. owever, for materiality in their integrated reports, it seems that a channels should share the same value creation story, issues. nly of companies identified material half of those companies, their involvement is limited number of them view integrated reporting as an as well as a common understanding of materiality issues in terms of the sustainability of their business to approving or confirming the results of opportunity to assess materiality. owever, only that forms the foundation of the company s value “ ” ’ models (igure ). the materiality assessment (igure 2). of the companies provide information on materiality in creation story. he SA s Principles for the isclosure ’ their securities reports, of which describe of arrative Information epects that descriptions Materiality in integrated reporting should describe the Materiality assessment is made from the perspective of material issues as factors that could affect the must reflect the company s understanding of what is ’ issues the companies identified as potentially affecting the impact on the sustainability of a company s sustainability of their business model (igure ). material, always keeping in mind the interest of ’ the sustainability of their business model, considering business model, based on the outlook on the potential investors investment decision making. he results of epending on the media used for reporting, ’ the potential changes in the future business changes in the business environment. or this reason, materiality assessments should also be included in the content or focus information which should be environment. eaders want to knowthe medium and materiality assessment should form the basis for a the securities reports. longterm strategies that take into account the material company s strategic decisionmaking and resource ’ issues the company has identified. allocation. ence the oard of irectors should be involved in this process. Figure 1-1 Materiality Analying and eplaining the issues epected to have a high impact on the company s medium and longterm he oard of irectors view on material issues is ’ ’ Securities reports Integrated reports value creation, rather than only identifying areas which fundamental to the company s value creation story. ’ contribute to society, will lead to a more constructive Including this in the report fosters a deeper ot described escription on issues ot described o integrated report escription on issues dialogue with investors. understanding of how the company identify issues and affecting the sustainability affecting the sustainability (200) of business model of business model creates sustainable value. 22 () (0) (0) 2 (2) Figure 2 Figure 1 Board of Directors involvement Materiality ’ in the materiality assessment process escribed escribed escription as an escription as an area which can area which can help resolve ot described escription on ot described Proactively assesses help resolve 0 social issues issues affecting materiality (2) social issues () the sustainability 2 () (0) () 2 of business model 2 () () (2) n22 companies companies included in the ikkei 22 Inde

Figure 2-1 Description of Board of Directors involvement in materiality assessment process escribed escription as escribed Approves or ’ an area which can confirms help resolve assessment social issues 2 results Securities reports Integrated reports () (2) 2 () 2 () ot described Proactively assesses ot described Proactively assesses materiality materiality () () 0 (0) 2 () n companies n2 companies ikkei 22 companies which issue integrated reports Companies that describe materiality in terms of the sustainability of their business model ( ) umber of companies ( ) umber of companies escribed Approves or escribed Approves or confirms confirms assessment assessment results 2 results () (2) Good practice Describing the involvement of the Board of Directors in materiality assessment () 2 ()

ne integrated report indicates that, in the materiality he report also mentions the company s plans to regularly ’ assessment process, the relevance of the company s review material issues based on the progress of ’ n companies n2 companies material issues was considered at a management meeting business plans on related issues and the change in the social Companies that describe materiality in terms Companies that describe materiality in terms and the board meeting. and environmental changes. of the sustainability of their business model of the sustainability of their business model ( ) umber of companies

07 Materiality Materiality 08

Explain risks and opportunities to Explain management awareness 1 show correlation with material issues 2 of risks and countermeasures

f the companies surveyed, eplain risks and f those companies that discuss risks and opportunities opportunities in their integrated report, but only in their integrated report, eplain how they 22 of those discuss risks and opportunities manage risk, but most only describe their systems and in terms of how they relate to the results of the mechanisms. Less than 20 of companies mentioned materiality assessment (igure ). the likelihood that these risks could materialie, the timeframe, and the impact that would have if they did his is likely due to the low percentage of companies materialie (igure 2). who assess materiality in terms of the sustainability of their business model. Since materiality, on the one If readers are able to understand not only the risk hand, and risks and opportunities, on the other, are management system and method, but risk responses, assessed in two separate processes, they cannot be they will be able to determine whether that company is discussed in an interlinked manner. effectively managing risk. Companies must analye the material issues they face ake, for eample, a company that has categoried key as they pursue their purpose, and then address the risks risks into strategic risks and operational risks, assessed and opportunities resulting from the uncertainties that the likelihood that these risks will occur, the time frame this analysis identifies. It is important to tell readers a and their potential level of impact, and then presented story in which purpose, decisions about materiality, and countermeasures tailored to these specific risks. he risks and opportunities are linked together. reader will conclude that it is highly likely that the management of this company is proactively and properly managing risk.

Figure 1 Figure 2 Risks and opportunities (including only risks) Details of risks and opportunities

ot described escription connected isk management to materiality methodopportunity 22 () 22 () creation method (0)

Impact (2) escribed escription of risks and opportunities, but reasoning is not Likelihood (0) clear () () ime frame ()

n companies n companies Companies in the ikkei 22 that issue integrated reports Companies that describe risks and opportunities

( ) umber of companies ( ) umber of companies

Good practice Management discusses risks and opportunities in value creation story

09 isks and opportunities

Augmenting narrative information in securities reports Explain risks and opportunities to Explain management awareness 1 show correlation with material issues 2 of risks and countermeasures isclose basic information so that the likelihood of financial risks f the companies surveyed, eplain risks and f those companies that discuss risks and opportunities opportunities in their integrated report, but only in their integrated report, eplain how they and their potential impact can be measured 22 of those discuss risks and opportunities manage risk, but most only describe their systems and in terms of how they relate to the results of the mechanisms. Less than 20 of companies mentioned materiality assessment (igure ). the likelihood that these risks could materialie, the ighteen percent of the companies surveyed owever, information on the fundamental risks that described the impact in their integrated report, while could cause changes to accounting estimates and timeframe, and the impact that would have if they did “ ” his is likely due to the low percentage of companies 2 did so in securities reports (igure 2). Securities information that is helpful in predicting future cash materialie (igure 2). who assess materiality in terms of the sustainability of reports provided more information on risks than flow would be useful for readers. integrated reports, but there are several points related their business model. Since materiality, on the one If readers are able to understand not only the risk In this respect, the information provided on risks in to uality that need improvement. hand, and risks and opportunities, on the other, are management system and method, but risk responses, integrated reports may be minimal, but it includes assessed in two separate processes, they cannot be they will be able to determine whether that company is or eample, simply stating that a risk can affect information that is helpful to readers that is not being “ discussed in an interlinked manner. effectively managing risk. financial conditions and operation results does not provided in securities reports. oth securities reports ” give the reader enough information to measure the and integrated reports are mediums that provide Companies must analye the material issues they face ake, for eample, a company that has categoried key likelihood of occurrence and the impact it would have. information indispensable to investor decisions on as they pursue their purpose, and then address the risks risks into strategic risks and operational risks, assessed Moreover, accounting estimates that can have a maor corporate value. If the goal is the same, the two kinds and opportunities resulting from the uncertainties that the likelihood that these risks will occur, the time frame effect on financial conditions and business results of reports should be consistent. this analysis identifies. It is important to tell readers a and their potential level of impact, and then presented may be important risks to managers with a story in which purpose, decisions about materiality, and countermeasures tailored to these specific risks. he responsibility for reaching earnings targets. risks and opportunities are linked together. reader will conclude that it is highly likely that the management of this company is proactively and properly managing risk. Figure 1-1 Risks and opportunities (including only risks)

Securities reports Integrated reports Figure 1 Figure 2 ot described o integrated Risks and opportunities (including only risks) Details of risks and opportunities report 22 (0) () ot described escription connected isk management to materiality methodopportunity escribed escribed 22 () 22 () creation method (0) Impact 00 0 (2) (22) () escribed escription of risks and opportunities, but reasoning is not Likelihood (0) clear n22 companies companies included in the ikkei 22 Inde () () ime frame () Figure 2-1 Details of risks and opportunities

n companies n companies Securities reports Integrated reports Companies in the ikkei 22 that issue integrated reports Companies that describe risks and opportunities

( ) umber of companies ( ) umber of companies Impact 2 () Impact (2)

isk management isk management methodopportunity (2) methodopportunity creation method 2 creation metho Good practice Management discusses risks and opportunities in value creation story (0) Likelihood (2) Likelihood (0)

ime frame () ime frame ()

n22 companies n companies Companies that describe risks and opportunities Companies that describe risks and opportunities

( ) umber of companies

09 isks and opportunities isks and opportunities 10

Consistently describe Describe measures to achieve 1 the company s vision and 2 strategies, and specific targets the path it will’ take to achieve it

A holistic view in corporate management is needed to ightysi percent of companies provide financial targets increase profitability over the long term and continue to in integrated reports, but only 2 reveal uantitative provide social value. nonfinancial targets (igures 2 and ). In this survey of the companies describe their Providing specific targets is a sign of a strong mediumterm business plans in their integrated report, commitment to achieving those targets, and it is the but only argue this with a description of their starting point for a better understanding of a company s longterm strategy (igure ). strategies. Listing targets not only for financial ’ information, but also for nonfinancial aspects that have hen companies eplain their longterm strategies, but a significant effect on sustainable growth, and eplaining without clarifying their role and relationship with the their correlation with financial performance, is to deepen mediumterm business plan, readers cannot get a clear understanding of a company s sustainability. sense of the company s precise vision in the long term. ’ A company has to consider’ matters that are less In addition, companies should eplain the specific steps likely to yield tangible results in the short and medium they are taking to achieve their targets in a succinct way. term and must instead be addressed over a longer evertheless, of companies lack a description of timespan, such as development and , their strategies broken down by each line of business in order to achieve its vision. Moreover, the longer the (igure ). In addition, only of companies lay out the perspective, the greater impact the company s business relationship between the value driver and strategies and activities will have. ’ clarify their approach to resource allocation (igure ). Management should identify the stakeholders that have Ideally, companies should base the information they a maor impact on sustainable value creation and speak provide not only on strategies, but on specific measures, convincingly from a more panoramic viewpoint about their approach to resource allocation, and indicators that their vision and the path to achieving it. can convey their progress toward achieving their vision.

Figure 2 Figure 3 Figure 1 Quantitative financial Quantitative financial Medium-term business plan (three years or less) targets targets

ot ot ot described () described described escribed escribed (2) (2) 2 ith longterm (0) () strategy escribed () Figure 5 Figure 4 Relationship between ithout strategic targets and longterm Strategies, by business value drivers () strategy ot ot described described (0) escribed 2 escribed () 2 () n companies () () Companies in the ikkei 22 that issue integrated reports n companies ( ) umber of companies ( ) umber of companies

Good practice Describing vision for the future and strategies based on integrated thinking

ne report provides future visions not only for profit, but for Corporate social responsibility is, in essence, effectively the impact the company will have on stakeholders in society. employing the resources provided by society and proving his report specifies the resources needed to achieve these useful and valuable to society on an ongoing basis. visions and the methods for procuring these resources as his is a good eample of how CS initiatives, which have longterm strategies and a mediumterm business plan, tended to be considered separately from the main business, which is a milestone in that effort. should now be seen in an integrated manner using integrated — thinking and incorporated in a company s vision. — ’

11 Strategies and resource allocation

Augmenting narrative information in securities reports Consistently describe Describe measures to achieve 1 the company s vision and 2 strategies, and specific targets the path it will’ take to achieve it plain management strategy in a multifaceted way A holistic view in corporate management is needed to ightysi percent of companies provide financial targets increase profitability over the long term and continue to in integrated reports, but only 2 reveal uantitative provide social value. nonfinancial targets (igures 2 and ). his survey found that of companies described as a mediumterm plan laying out the steps, should In this survey of the companies describe their Providing specific targets is a sign of a strong their mediumterm business plans (spanning up to describe these longterm strategies and mediumterm mediumterm business plans in their integrated report, commitment to achieving those targets, and it is the three years) in their securities reports, but only of business plans in their securities reports. but only argue this with a description of their starting point for a better understanding of a company s those included an eplanation of longterm strategies ’ Moreover, an eplanation of specific measures by longterm strategy (igure ). strategies. Listing targets not only for financial (igure ). Moreover, only 2 of all companies information, but also for nonfinancial aspects that have business and region, along with the scale of hen companies eplain their longterm strategies, but described their strategies by business in their a significant effect on sustainable growth, and eplaining investment and targets, will foster better without clarifying their role and relationship with the securities reports (igure ). their correlation with financial performance, is to deepen understanding of a company s medium and mediumterm business plan, readers cannot get a clear ’ understanding of a company s sustainability. Companies that have clear longterm targets as well longterm strategies. sense of the company s precise vision in the long term. ’ as longterm strategies to achieve these goals, as well A company has to consider’ matters that are less In addition, companies should eplain the specific steps likely to yield tangible results in the short and medium they are taking to achieve their targets in a succinct way. term and must instead be addressed over a longer evertheless, of companies lack a description of timespan, such as development and , their strategies broken down by each line of business Figure 1-1 Medium-term business plan (three years or less) in order to achieve its vision. Moreover, the longer the (igure ). In addition, only of companies lay out the perspective, the greater impact the company s business relationship between the value driver and strategies and Securities reports Integrated reports activities will have. ’ clarify their approach to resource allocation (igure ). ot described ot described o integrated report Management should identify the stakeholders that have Ideally, companies should base the information they () ith longterm 22 (0) a maor impact on sustainable value creation and speak strategy ith longterm provide not only on strategies, but on specific measures, () convincingly from a more panoramic viewpoint about strategy their approach to resource allocation, and indicators that () their vision and the path to achieving it. 2 () can convey their progress toward achieving their vision. escribed escribed ithout longterm ithout longterm strategy strategy Figure 2 Figure 3 (22) () Figure 1 Quantitative financial Quantitative financial () (0) Medium-term business plan (three years or less) targets targets

ot ot ot described () described described Figure 2-1 Quantitative financial targets Figure 3-1 Quantitative non-financial targets escribed escribed (2) (2) 2 Securities reports Integrated reports Securities reports Integrated reports ith longterm (0) () strategy ot described ot described o integrated ot described ot described o integrated report report Figure 5 0 escribed () () (2) 22 (0) () (2) 22 (0) Figure 4 Relationship between ithout strategic targets and longterm Strategies, by business value drivers escribed escribed escribed escribed () strategy ot ot described described 0 2 2 (0) () (0) () () escribed 2 escribed () 2 () n companies () () Companies in the ikkei 22 that issue integrated reports n companies Figure 5-1 Relationship between strategic ( ) umber of companies ( ) umber of companies Figure 4-1 Strategies, by business targets and value drivers

Securities reports Integrated reports Securities reports Integrated reports ot described ot described o integrated ot described ot described o integrated report report Good practice Describing vision for the future and strategies based on integrated thinking 22 (0) 22 (0) () () (22) () ne report provides future visions not only for profit, but for Corporate social responsibility is, in essence, effectively the impact the company will have on stakeholders in society. employing the resources provided by society and proving escribed escribed escribed escribed his report specifies the resources needed to achieve these useful and valuable to society on an ongoing basis. 2 2 visions and the methods for procuring these resources as () () () () his is a good eample of how CS initiatives, which have longterm strategies and a mediumterm business plan, tended to be considered separately from the main business, which is a milestone in that effort. should now be seen in an integrated manner using integrated — n22 companies companies included in the ikkei 22 Inde thinking and incorporated in a company s vision. — ’ ( ) umber of companies

11 Strategies and resource allocation Strategies and resource allocation 12

Provide indicators for capital costs Describe policy for fund 1 and the reasoning behind them 2 procurement and allocation

Indicators that monitor the appropriate cycle of the An eamination of the reports for descriptions of funds needed for strategy implementation (such as funding policy and methods found that of ), and targets, as well as eplanations of progress companies mention some sort of policy on securing on these, are useful information that helps readers financial resources (igure 2). Many of these assess the feasibility of management strategies. companies describe their target ratio and their methods for financing (igure ). In integrated reports, of companies provide some kind of indicators and targets for these indicators. hen it comes to policy for allocation of funds owever, only 2 of companies overall eplain the generated in business, of companies eplain how reasons that led them to set these targets, with they use their funds (igure ). Most companies references to capital costs. his is still low (igure ). describe policy on shareholder returns, with the net most common being growth investments (igure ). Management strategies are more persuasive if they owever, in many cases, the companies eplain include indicators whose feasibility is backed up from shareholder returns or investment plans separately a financial perspective, together with targets and the without giving the reader an overall picture (a balanced rationales behind them. Moreover, eplanations of the view) of their fund allocation policy. perception of the company s capital costs, based on business risks, are essential.’ Companies should clearly specify their overall policies for capital distribution, such as growth investments, Companies that develop multiple businesses may find cash on hand and shareholder returns, based on the it effective to describe the thinking behind their capital lifecycle of their businesses and their optimal capital costs, broken down by business. structure, and show how the policies reinforce the Adeuate communication can lead to more effective feasibility of their management strategies. management of capital costs, thus leading to reductions in these costs. Figure 3 Figure 2 Content of explanation Funding methods of funding methods

uture Figure 1 ot () eplained ratio level Targets for earning power and capital efficiency plained unding method () (0) ating indicating ot included planation of rationale () funding capacity (0) behind targetsetting ther () based on capital costs 22 () () n companies n companies 2 Companies that eplain funding methods

Figure 5 Figure 4 Content of explanation of Policy on fund allocation how funds are allocated Included Shareholder o eplanation of ot returns 2 (2) rationale behind eplained Growth targetsetting plained () investments (20) 0 () () usiness (00) funds 2 (2) epayment of interestbearing 2 (2) liabilities ther n companies n companies () Companies in the ikkei 22 that issue integrated reports n00 companies Companies that eplain ( ) umber of companies ( ) umber of companies their policies on fund allocation

Good practice Explanations of company-wide initiatives on capital efficiency and financial policy corroborate the feasibility of strategies ne company specifies an indicator for capital costs as one of the understands the importance of capital costs and that this indicators it uses to assess performance related to management mindset has spread down companywide. strategies and shows the specific targets and the etent to Moreover, it also includes an eplanation of efforts to achieve which they have been achieved along a timeline. his report balance in capital allocation, such as capital investment, conveys a strong commitment to the company s strategies. ’ growth investment and shareholder returns, thereby ensuring he report also provides indicators by business and targets that the company s policy for achieving its strategies is broken down by division, which indicates that management conveyed to the reader.’

13 Capital costs and financial strategy

Augmenting narrative information in securities reports Provide indicators for capital costs Describe policy for fund 1 and the reasoning behind them 2 procurement and allocation Include the content of a C s message in the securities report Indicators that monitor the appropriate cycle of the An eamination of the reports for descriptions of ’ funds needed for strategy implementation (such as funding policy and methods found that of and encourage understanding of management strategy and financial strategy ), and targets, as well as eplanations of progress companies mention some sort of policy on securing he Principles for the isclosure of arrative often eplained in the C s message, but if it can be on these, are useful information that helps readers financial resources (igure 2). Many of these ’ assess the feasibility of management strategies. companies describe their target ratio and their Information, released by the SA in March 20, asks included in securities reports while ensuring methods for financing (igure ). that companies provide information on the source of consistency, corporate leaders can eplain their In integrated reports, of companies provide some capital and their definition of and approach to capital thinking on financial strategies based on capital costs kind of indicators and targets for these indicators. hen it comes to policy for allocation of funds costs in securities reports. and deepen dialogue with investors. owever, only 2 of companies overall eplain the generated in business, of companies eplain how reasons that led them to set these targets, with they use their funds (igure ). Most companies Management s awareness of funding methods and A succinct eplanation of policies related to fund ’ references to capital costs. his is still low (igure ). describe policy on shareholder returns, with the net the main applications of funds are indispensable allocation is also a useful response to criticism of most common being growth investments (igure ). Management strategies are more persuasive if they information for investors assessing the feasibility of Japanese companies that have high internal reserves. owever, in many cases, the companies eplain include indicators whose feasibility is backed up from management strategies. In integrated reports, this is shareholder returns or investment plans separately a financial perspective, together with targets and the without giving the reader an overall picture (a balanced rationales behind them. Moreover, eplanations of the view) of their fund allocation policy. Figure 1-1 Targets for earning power and capital efficiency perception of the company s capital costs, based on business risks, are essential.’ Companies should clearly specify their overall policies for capital distribution, such as growth investments, Securities reports Integrated reports Companies that develop multiple businesses may find planation of rationale planation of rationale cash on hand and shareholder returns, based on the o integrated it effective to describe the thinking behind their capital ot included behind targetsetting ot included behind targetsetting lifecycle of their businesses and their optimal capital based on capital costs report based on capital costs costs, broken down by business. ( ) 2 structure, and show how the policies reinforce the (2) () 22 (0) 2 () Adeuate communication can lead to more effective feasibility of their management strategies. management of capital costs, thus leading to o eplanation of o eplanation of reductions in these costs. Figure 3 Included Included Figure 2 rationale behind rationale behind Content of explanation targetsetting targetsetting Funding methods of funding methods (2) (0) (20) () ot uture Figure 1 ratio level () eplained n22 companies Targets for earning power and capital efficiency plained unding companies included in the ikkei 22 Inde method () (0) ating indicating funding capacity (0) Figure 3-1 Content of explanation ot included planation of rationale () behind targetsetting Figure 2-1 Funding methods of funding methods ther () based on capital costs 22 () () n companies n companies Securities reports Integrated reports Securities reports Integrated reports 2 Companies that eplain funding methods o unding unding Figure 5 integrated 22 (0) method (2) method () Figure 4 Content of explanation of report Policy on fund allocation how funds are allocated uture uture 22(0) () Included ratio level ratio level Shareholder Included Included o eplanation of ot returns 2 (2) ot ot ating indicating ating indicating rationale behind eplained funding capacity 2 (2) funding capacity (0) Growth included 0 included 2 targetsetting plained () () () investments 0 (20) ther 0 () ther () 0 () () usiness (0) 22 (00) funds 2 (2) (0) epayment of n companies ※ n companies※ interestbearing 2 (2) n22 companies Companies that eplain funding methods liabilities companies included in the ikkei 22 Inde ※ ther n companies n companies () Figure 5 Content of explanation of Companies in the ikkei 22 that issue integrated reports n00 companies Figure 4-1 Policy on fund allocation how funds are allocated Companies that eplain ( ) umber of companies ( ) umber of companies their policies on fund allocation Securities reports Integrated reports Securities reports Integrated reports o 22 (0) Shareholder Shareholder Good practice Explanations of company-wide initiatives on capital efficiency integrated returns () returns 2 (2) report Shareholder Shareholder and financial policy corroborate the feasibility of strategies returns () returns () ne company specifies an indicator for capital costs as one of the understands the importance of capital costs and that this Included Included usiness usiness () 2 (2) indicators it uses to assess performance related to management ot ot funds funds mindset has spread down companywide. ncluded included strategies and shows the specific targets and the etent to epayment of epayment of Moreover, it also includes an eplanation of efforts to achieve (00) (00) interestbearing () interestbearing 2(2) which they have been achieved along a timeline. his report liabilities liabilities balance in capital allocation, such as capital investment, (2) () conveys a strong commitment to the company s strategies. ther ther ’ growth investment and shareholder returns, thereby ensuring () () he report also provides indicators by business and targets that the company s policy for achieving its strategies is n22 companies n00 companies broken down by division, which indicates that management conveyed to the reader.’ companies included in the ikkei 22 Inde Companies that eplain funding methods ( ) umber of companies

13 Capital costs and financial strategy Capital costs and financial strategy 14

Can the value created be explained Explain correlation between medium- and 1 using financial indicators alone? 2 long-term targets and results, and communicate progress

e see many eamples of companies that ambitiously At , a relatively high percentage of companies eplain proclaim their contributions to the sustainability not only of the reasons for ups and downs in results in their integrated their company, but also of society, in their medium and reports, showing a commitment to eplaining the longterm strategies, established based on their own circumstances leading to their current results (igure ). strengths and characteristics. he etent to which social owever, only of companies eplain the position of value creation has been achieved must be demonstrated current results on the path to achieving their medium and using uniue indicators that do not rely only on financial longterm strategic targets and the correlation (igure ). figures. If companies are working to achieve strategic Analying current results and eplaining how this targets from a more medium to longterm perspective, it will affect the forecasts for the achievement of targets is more meaningful to provide results that cannot be for medium and longterm value creation can help depicted using shortterm financial indicators. the reader understand that even a deterioration owever, only of companies use financial and in results is a temporary slump on the company s path to nonfinancial indicators to eplain the etent to future advancements. ’ which strategic targets have been achieved, he relevance of strategic targets may have to be and of companies eplain this using financial reassessed if outlook for the business environment indicators alone (igure ). change significantly from the point that targets are set. Moreover, only 2 of companies eplain the reasons ven in such cases, eplanations of progress made that they chose the performance indicators reported toward targets would be useful information. (igure 2). In particular, providing nonfinancial indicators together with an eplanation of why these indicators were chosen helps readers understand the impact that these Figure 3 indicators have on longterm financial results. Explanation of reasons for ups and downs in results

Figure 1 Integrated report inancial indicators only Figure 2 Performance indicators () used to explain extent Reasons for choosing ot eplained onfinancial of achievement performance plained indicators only of strategies indicators 2 () () () ot eplained oth financial and oth nonfinancial indicators financial () and n companies () nonfinancial () Figure 4 Impact of current results on achievement of nly strategic targets financial (2) plained ot eplained 2 plained (2) 2 nly () nonfinancial 2 () ()

n companies Companies in the ikkei 22 that issue integrated reports n companies ( ) umber of companies ( ) umber of companies

Good practice Explaining the financial value created by achieving non-financial target

ne company selects material issues that affect value creation, Listing indicators in this way and eplaining the progress identifies nonfinancial information useful in addressing made so far makes it easier for the reader to understand related risks and opportunities, and then provides targets for the logic behind the initiatives taken to achieve each indicator. he company also identifies the financial value the medium and longterm targets, and it also makes created by achieving these nonfinancial targets, and whether for a more persuasive story about the value creation the they contribute to the milestones used to assess current company aspires to achieve. progress on its longterm vision.

15 Performance

Augmenting narrative information in securities reports Can the value created be explained Explain correlation between medium- and 1 using financial indicators alone? 2 long-term targets and results, and communicate progress Provide useful nonfinancial performance in securities reports, as well e see many eamples of companies that ambitiously At , a relatively high percentage of companies eplain proclaim their contributions to the sustainability not only of the reasons for ups and downs in results in their integrated their company, but also of society, in their medium and reports, showing a commitment to eplaining the longterm strategies, established based on their own circumstances leading to their current results (igure ). Integrated reports must eplain the analysis of business performance while taking trends in strengths and characteristics. he etent to which social owever, only of companies eplain the position of financial performance in that fiscal year, and indeed nonfinancial indicators into account. of companies eplain the reasons behind both value creation has been achieved must be demonstrated current results on the path to achieving their medium and inancial results are naturally weighed heavily as ups and downs in results (igure ). Moreover, of using uniue indicators that do not rely only on financial longterm strategic targets and the correlation (igure ). indicators for assessing management results, but an figures. If companies are working to achieve strategic those companies that eplain the reasons for these Analying current results and eplaining how this assessment of performance based on nonfinancial targets from a more medium to longterm perspective, it ups and downs, use only financial indicators to will affect the forecasts for the achievement of targets indicators is useful information in assessing current is more meaningful to provide results that cannot be eplain these changes, but only use both financial for medium and longterm value creation can help corporate value. An eplanation based on trends in depicted using shortterm financial indicators. and nonfinancial indicators. the reader understand that even a deterioration nonfinancial indicators that affect sales and costs will owever, only of companies use financial and in results is a temporary slump on the company s path to Companies that eplain ups and downs using both help to improve the persuasiveness of the analyses of nonfinancial indicators to eplain the etent to future advancements. ’ financial and nonfinancial indicators designate business performance in securities reports. which strategic targets have been achieved, he relevance of strategic targets may have to be nonfinancial factors that affect results, and analye and of companies eplain this using financial reassessed if outlook for the business environment indicators alone (igure ). change significantly from the point that targets are set. Moreover, only 2 of companies eplain the reasons ven in such cases, eplanations of progress made Figure 1-1 Performance indicators used to explain Figure 2-1 Reasons for choosing that they chose the performance indicators reported toward targets would be useful information. extent of achievement of strategies performance indicators (igure 2). In particular, providing nonfinancial indicators together with an eplanation of why these indicators were chosen helps readers understand the impact that these Figure 3 Securities reports Integrated report Securities reports Integrated report indicators have on longterm financial results. Explanation of reasons for ups and downs in results o integrated nly nly report Figure 1 inancial indicators only financial financial 2 Integrated report 22 (0) Figure 2 () (2) Performance indicators () used to explain extent Reasons for choosing ot eplained onfinancial of achievement performance plained indicators only oth oth of strategies indicators 2 financial financial plained plained () () and and nonfinancial () nonfinancial () () 0 ot eplained oth financial and (22) (2) oth nonfinancial indicators ot ot financial () and n companies () eplained eplained () nly nly nonfinancial nonfinancial nonfinancial 2 0 Figure 4 () () (20) () Impact of current results on achievement of nly strategic targets financial plained Figure 3-1 Explanation of reasons for ups Figure 4-1 Impact of current results on (2) and downs in results achievement of strategic targets ot eplained 2 plained (2) 2 Securities reports Securities reports Integrated report inancial indicators only nly () nonfinancial 2 () () () o integrated ot report eplained onfinancial indicators only n companies plained 0 (0) 22 (0) Companies in the ikkei 22 that issue integrated reports n companies 2 (2) ( ) umber of companies ( ) umber of companies oth financial and () nonfinancial indicators (2) Integrated report plained plained inancial indicators only o integrated () Good practice Explaining the financial value created by achieving non-financial target report () () onfinancial indicators only ot ot ne company selects material issues that affect value creation, Listing indicators in this way and eplaining the progress 22 plained eplained eplained (0) 0 () identifies nonfinancial information useful in addressing made so far makes it easier for the reader to understand oth financial and ot nonfinancial indicators (2) () related risks and opportunities, and then provides targets for the logic behind the initiatives taken to achieve eplained () each indicator. he company also identifies the financial value the medium and longterm targets, and it also makes () 20 created by achieving these nonfinancial targets, and whether for a more persuasive story about the value creation the () they contribute to the milestones used to assess current company aspires to achieve. n22 companies progress on its longterm vision. Companies in the ikkei 22 that issue integrated reports ( ) umber of companies

15 Performance Performance 16

Clearly show the timeframe Link outlook to the value 1 for outlook 2 creation story

his survey showed that of companies eplain f the companies eplaining their outlook of the their outlook in their integrated report, but only of business environment, 20 of companies eplain how companies refer to their timeframe (igure ). those outlooks are related to materiality assessments, and of companies eplain how they are related to If the outlook for the business environment on which their strategy (igure 2). the value creation story is premised are not eplained, it is difficult for the reader to understand where the story he reports show that many companies consider their came from, and this impairs its reliability. ven if outlook strategies based on outlook of the business for the business environment are eplained, without a environment, when crafting their mediumterm narrative based on a timeframe, the traectory for business plan. owever, few companies eplain why achieving this value creation story remains vague. their materiality assessment arrived at a particular result. utlook of the business environment become Companies in the same industry and in similar business increasingly uncertain the longer the timeframe is. environments will probably not show maor differences hen eplaining outlook, it becomes easier to convey in the results of their materiality assessments. owever, management s intentions if the timeframe for these although they may arrive at the same assessment ’ outlooks is laid out. his helps to give the reader an results, individual companies outlooka still differ ’ accurate understanding. depending on their corporate philosophies, strengths and past traectories. Companies can tell a more compelling value creation story if they discuss why they arrived at their materiality assessment results and why they devised such strategies by linking it to their outlook.

Figure 1 Figure 2 Outlook Outlook linked to materiality and strategies

ot eplained eferences to ot eplained timeframe 2 (2) () (0)

Linked to strategies plained plained () () o references to Linked to timeframe strategies and materiality (2) 0 () (2) (0) 20 Linked to (2) materiality () n companies n2 companies Companies in the ikkei 22 that issue integrated reports Companies that eplain forecasts

( ) umber of companies ( ) umber of companies

Good practice Awareness of environmental change in short, medium and long term and explanation of corresponding outlook

ne company s report describes its thinking about mediumterm business plans, and the shortterm perspective environmental ’changes and eplains their resulting outlook in in eplanations of business strategies for each fiscal year. terms of short, medium and longterm timeframes. his sort of treatment makes it easy to understand the he president s message eplains changes in the business outlook that are the basis for companies implementation of environment anticipated’ in the different timeframes and business plans in the short, medium and’ longterm, specific initiatives from a longterm perspective, resulting in a highly persuasive value creation story. the mediumterm perspective in the eplanation of

17 utlook

Augmenting narrative information in securities reports Clearly show the timeframe Link outlook to the value 1 for outlook 2 creation story Augment eplanations of managers perceptions of business environment his survey showed that of companies eplain f the companies eplaining their outlook of the ’ their outlook in their integrated report, but only of business environment, 20 of companies eplain how nly of companies describe their outlook but management s perceptions of those companies refer to their timeframe (igure ). those outlooks are related to materiality assessments, ’ and of companies eplain how they are related to for the business environment in their description of environments and the impact they have on how the If the outlook for the business environment on which their strategy (igure 2). management policies and strategies in their manage the company. the value creation story is premised are not eplained, it securities reports (igure ). he SA s Principles for the isclosure of arrative is difficult for the reader to understand where the story he reports show that many companies consider their ’ came from, and this impairs its reliability. ven if outlook strategies based on outlook of the business Companies should lay out their outlook for factors in Information calls for companies to eplain the business environment that could affect them, management s perceptions of the environment in for the business environment are eplained, without a environment, when crafting their mediumterm ’ narrative based on a timeframe, the traectory for business plan. owever, few companies eplain why such as disruptive innovation, aging population, which they operate together with a connection to the and consumption ta increases, and then substance of the company s business in their achieving this value creation story remains vague. their materiality assessment arrived at a particular result. ’ eplain how these factors will affect their value descriptions of management policies and strategies. utlook of the business environment become Companies in the same industry and in similar business creation and strategies. his clearly indicates that management is epected to increasingly uncertain the longer the timeframe is. environments will probably not show maor differences eplain the business environment more fully even in Moreover, readers want to see not only what hen eplaining outlook, it becomes easier to convey in the results of their materiality assessments. owever, securities reports. management s intentions if the timeframe for these although they may arrive at the same assessment kind of business environments affect companies, ’ outlooks is laid out. his helps to give the reader an results, individual companies outlooka still differ ’ accurate understanding. depending on their corporate philosophies, strengths Figure 1-1 Forecasts and past traectories. Companies can tell a more compelling value creation Securities reports Integrated reports story if they discuss why they arrived at their materiality assessment results and why they devised such ot eplained ot o integrated strategies by linking it to their outlook. eplained report (2) eferences to eferences to timeframe timeframe 2 22 (0) Figure 1 Figure 2 2 () () (2) Outlook Outlook linked to materiality and strategies

plained o references to plained o references to ot eplained eferences to ot eplained timeframe timeframe timeframe 2 () (0) 2 (2) () (2) () (0)

Linked to strategies plained plained () n22 companies companies included in the ikkei 22 Inde () o references to Linked to timeframe strategies and Figure 2-1 Outlook linked to materiality and strategies materiality (2) 0 () (2) (0) 20 Linked to (2) Securities reports Integrated reports materiality ot eplained ot eplained () n companies n2 companies Companies in the ikkei 22 that issue integrated reports Companies that eplain forecasts () (0)

( ) umber of companies ( ) umber of companies Linked to strategies Linked to plained strategies plained () Good practice Awareness of environmental change in short, medium and long term () () () Linked to and explanation of corresponding outlook strategies and () Linked to () materiality strategies and ne company s report describes its thinking about mediumterm business plans, and the shortterm perspective materiality (2) 20 ’ (2) environmental changes and eplains their resulting outlook in in eplanations of business strategies for each fiscal year. () Linked to materiality terms of short, medium and longterm timeframes. Linked to his sort of treatment makes it easy to understand the materiality () he president s message eplains changes in the business outlook that are the basis for companies implementation of 0 (0) environment anticipated’ in the different timeframes and business plans in the short, medium and’ longterm, n companies n2 companies Companies that eplain forecasts Companies that eplain forecasts specific initiatives from a longterm perspective, resulting in a highly persuasive value creation story. the mediumterm perspective in the eplanation of ( ) umber of companies

17 utlook utlook 18

Explain policy for selecting and dismissing CEO, Explain the issues identified in board 1 and compensation system as mechanism 2 evaluation and status of response supporting strategic implementation

he C is a company s top eecutive, with responsibility escribing the appropriate function and effectiveness ’ for its sustainable growth. As such, one of the most of the board of directors, which support medium and important roles of the board of directors is to use obective, longterm growth in corporate value, helps to present timely and transparent procedures to appropriately select a the mechanisms needed to achieve the purpose. person who can make bold management decisions suited to changes in the environment as the C. In integrated reports, of companies state that they carry out evaluations using uestionnaires and interviews he survey showed that 0 of companies eplain the and note the freuency of these evaluations. ualities they reuire in their Cs and of companies In contrast, only of companies note the evaluation eplain their process for removing a C, which are both low items, and even fewer companies describe the (igures and 2). response to identified issues and the results of the ifty percent of companies eplain their evaluation and response to issues identified in the past (igure ). calculation methods for the elements making up Conveying effectiveness of the boards means more compensation for directors, which should function as than simply describing the oard composition and sound incentives for achieving sustainable growth. regular reviews being conducted. Companies should ortytwo percent of companies eplain the percentage of eplain the correlation between strategic goals and each element in compensation overall (igure ). board evaluation and then lay out the ongoing escribing the specific reuirements and ualities reuired processes followed to improve issues that have been of Cs and the highly transparent procedures for identified and reinforce strengths. selecting and removing Cs leads to a solid eplanation In addition, describing the status of evaluations of the strategy implementation system. escribing a performed by eternal organiations can enhance rational compensation scheme also helps to present the the transparency and obectivity of the incentivelinked system for improving medium and effectiveness evaluations. longterm corporate value and reflects integrated thinking about the compensation system s design. ’ Figure 4 Figure 1 Figure 2 Content of explanation of board evaluation Qualities required of Procedure for CEO dismissing CEO valuation method () ot ot eplained eplained plained plained reuency of evaluations (0) 0 () 0 () () () valuator (internal) 2 (0)

n companies valuator Companies in the ikkei 22 that issue integrated reports (eternal) 2 () Figure 3 valuation () Content of explanation of director compensation items

Issues 0 () lements of identified compensation () valuation and calculation Policies on addressing issues identified () methods for elements 0 () of compensation esults of response to lements as percentage of issues identified in the past () compensation overall 2 () n companies n companies ( ) umber of companies ( ) umber of companies

Good practice Laying out current conditions and future course, even when certain initiatives are still merely under consideration

ne integrated report eplains the status and progress on all ven if it is difficult to address all points that could improve matters reuiring disclosure in the corporate governance code. corporate governance in the short term, an eplanation of the It is notable that the report provides information not only on direction of such efforts would show that a company is the initiatives the company has already carried out, but also actively committed to improving corporate governance and eplains the status and direction of initiatives which are still being in dialogue with investors. under consideration.

19 Governance

Augmenting narrative information in securities reports Explain policy for selecting and dismissing CEO, Explain the issues identified in board 1 and compensation system as mechanism 2 evaluation and status of response supporting strategic implementation plain governance with consideration for the link he C is a company s top eecutive, with responsibility escribing the appropriate function and effectiveness ’ for its sustainable growth. As such, one of the most of the board of directors, which support medium and to medium and longterm visions and strategies important roles of the board of directors is to use obective, longterm growth in corporate value, helps to present timely and transparent procedures to appropriately select a the mechanisms needed to achieve the purpose. planations of corporate governance in securities growth and improving corporate value for the medium person who can make bold management decisions suited reports often include more details than integrated and long term. to changes in the environment as the C. In integrated reports, of companies state that they reports on certain points. At the same time, many carry out evaluations using uestionnaires and interviews Going forward, companies should augment their he survey showed that 0 of companies eplain the only repeat boilerplate descriptions used before, and note the freuency of these evaluations. eplanations of governance to include its links to ualities they reuire in their Cs and of companies In contrast, only of companies note the evaluation and there is insufficient information on how medium and longterm strategies. eplain their process for removing a C, which are both low items, and even fewer companies describe the governance is connected to achieving sustainable (igures and 2). response to identified issues and the results of the ifty percent of companies eplain their evaluation and response to issues identified in the past (igure ). calculation methods for the elements making up Conveying effectiveness of the boards means more Figure 1-1 Qualities required of CEO Figure 2-1 Procedure for removing CEO compensation for directors, which should function as than simply describing the oard composition and sound incentives for achieving sustainable growth. regular reviews being conducted. Companies should Securities reports Integrated reports Securities reports Integrated reports ortytwo percent of companies eplain the percentage of eplain the correlation between strategic goals and each element in compensation overall (igure ). board evaluation and then lay out the ongoing o integrated o integrated report report escribing the specific reuirements and ualities reuired processes followed to improve issues that have been of Cs and the highly transparent procedures for identified and reinforce strengths. 22 (0) 22 (0) selecting and removing Cs leads to a solid eplanation In addition, describing the status of evaluations of the strategy implementation system. escribing a performed by eternal organiations can enhance plained plained plained plained rational compensation scheme also helps to present the the transparency and obectivity of the incentivelinked system for improving medium and effectiveness evaluations. 2 longterm corporate value and reflects integrated thinking () () () () about the compensation system s design. ot ot ot ot ’ eplained eplained eplained eplained Figure 4 Figure 1 Figure 2 Content of explanation of board evaluation 0 Qualities required of Procedure for (22) () (2) () CEO dismissing CEO

valuation () method Figure 3-1 Content of explanation of Figure 4-1 Content of explanation of ot ot eplained eplained director compensation board evaluation plained plained reuency of evaluations (0) 0 () 0 () () () valuator (internal) 2 (0) Securities reports Securities reports n companies valuator valuation ethod () Companies in the ikkei 22 that issue integrated reports (eternal) 2 () lements of compensation (2) reuency of evaluations 0 (2) Figure 3 valuation valuator (internal) (20) items () Content of explanation of director compensation valuation and calculation valuator (eternal) () methods for elements () Issues 0 () of compensation lements of identified valuation items () compensation () Issues identified (0) valuation and calculation Policies on addressing () lements as percentage of methods for elements issues identified compensation overall 0 () Policies on addressing 0 () issues identified () of compensation esults of response to esults of response to () lements as percentage of issues identified in the past () issues identified in the past compensation overall 2 () n companies n companies ( ) umber of companies ( ) umber of companies Integrated reports Integrated reports

valuation ethod () lements of reuency of evaluations compensation () (0) valuator (internal) (0) Good practice Laying out current conditions and future course, even when certain initiatives are valuation and calculation valuator (eternal) 20 () still merely under consideration methods for elements () of compensation valuation items 2 () ne integrated report eplains the status and progress on all ven if it is difficult to address all points that could improve Issues identified () lements as percentage of matters reuiring disclosure in the corporate governance code. corporate governance in the short term, an eplanation of the 2 () Policies on addressing compensation overall issues identified 2 () It is notable that the report provides information not only on direction of such efforts would show that a company is esults of response to issues identified in the past 2 () the initiatives the company has already carried out, but also actively committed to improving corporate governance and eplains the status and direction of initiatives which are still being in dialogue with investors. n22 companies companies included in the ikkei 22 Inde under consideration. ( ) umber of companies

19 Governance Governance 20

About the Issuing Companies

Number of Japanese companies issuing Listing market of issuing companies self-declared integrated reports As in other years, companies listed on the irst Section of the In 20, companies issued an integrated report, up S led growth in the number of issuances, accounting for companies from 20. his was the ninth straight year of , or , of all issuing companies. growth surpassing 20. his is an indication that constructive dialogue between companies and investors is developing, and that the need for and use of integrated reports as a tool in this dialogue is progressing. nlisted ■ (2) K companies ■ () JJASAMothers ＋ The number of companies (2) () ■ () issuing integrated reports in 2019 Second Section of the S ■ () () irst Section of the S (As of September 0, 20) (2) (22) () companies () () () () (2) ()

200 20 202 20 20 20 20 20 20 20 20 20 20 Source List of Japanese Companies Issuing Selfeclared Integrated eports 20, n n n Corporate“ alue eporting Lab ” companies companies companies

Percentage of issuing companies in the Sales of issuing companies First Section of the TSE (total market capitalization, number of companies)

he total market capitaliation of the companies that A survey of the sales of the issuing companies listed on the issued an integrated report accounts for of the market irst Section of the S showed that of those capitaliation of the 2,2 companies listed on the irst companies had sales of JP 00 billion or more. his Section of the S as of ecember , 20, an increase supports the finding that large companies are increasingly from in the previous year. issuing integrated reports. wentytwo percent of those listed companies ( out of 2,2 companies) issued an integrated report, and it would appear that larger companies account for many of those. nder JP 0 billion (2) Percentage of total Percentage of issuing market capitalization companies JP 0 billion to under JP 00 billion ver JP trillion 2 () ver JP 00 billion (2) JP 2 trillion 22 () () () JP 00 billion to JP 00 billion to under JP 00 billion under JP trillion nJP trillion (2,2 companies) n2,2 companies (20) () As of ecember , 20 n companies

21 asic Information ( ) umber of companies

About the Issuing Companies

Number of Japanese companies issuing Listing market of issuing companies Industries of issuing companies self-declared integrated reports As in other years, companies listed on the irst Section of the he highest number of issuing companies came from the y industry, the insurance sector had the highest percentage of In 20, companies issued an integrated report, up S led growth in the number of issuances, accounting for electric euipment sector for the fifth year in a row, up by issuance, at , followed by the air transport industry (), companies from 20. his was the ninth straight year of , or , of all issuing companies. over the previous year to companies. he banking sector pharmaceuticals () and the marine transport industry (). had the highest number of firsttime issuers this year, at 2, growth surpassing 20. he warehousingtransport industry had no companies issuing with many of those being regional banks. he number of reports through last year, but saw its first issuing companies this his is an indication that constructive dialogue between firsttime issuers in the machinery industry was 0, and 2 year. As a result, all industrial sectors now have companies companies and investors is developing, and that the companies are also increasing their report issuance. need for and use of integrated reports as a tool in this issuing integrated reports. dialogue is progressing. nlisted companies ■ (2) 51 Percentage within industry K Increase in 20 ■ companies () () n companies (listed on the irst Section of the S as of September 0, 20) JJASAMothers ＋ The number of companies (2) () ■ () issuing integrated reports 35 companies in 2019 Second Section of the S ■ irst Section () () (0) of the S (As of September 0, 20) 25 companies (2) (22) () companies (2) () () () () (2) () lectric euipment Chemicals Machinery Construction Pharmaceuticals holesale anking oods etail Services communication Information and euipment ransportation gas and power lectric eal estate products ther clay products stone and Glass services financial ther metals onferrous transport Land Insurance euipment Precision mechanical futures commodity Securities and products etile Steel Metal products Pulp and paper transport Marine products ubber products coal and Petroleum Mining transport Air agriculture and forestry isheries ransport arehousing 200 20 202 20 20 20 20 20 20 20 20 20 20 Source List of Japanese Companies Issuing Selfeclared Integrated eports 20, n n n Corporate“ alue eporting Lab ” companies companies companies

Percentage of issuing companies in the Sales of issuing companies First Section of the TSE (total market capitalization, number of companies) Index attributes of issuing companies

he total market capitaliation of the companies that A survey of the sales of the issuing companies listed on the he percentage of issuing companies making up the ikkei 22 rose 2 percentage points over the previous year to and issued an integrated report accounts for of the market irst Section of the S showed that of those and the JP ikkei 00 has steadily increased year by year. he rose percentage points to 0 for the JP ikkei 00. capitaliation of the 2,2 companies listed on the irst companies had sales of JP 00 billion or more. his percentage of companies in the ikkei 22 that issued reports Section of the S as of ecember , 20, an increase supports the finding that large companies are increasingly from in the previous year. issuing integrated reports. Nikkei 225 component percentage n22 companies JPX Nikkei 400 component percentage n00 companies wentytwo percent of those listed companies ( out of 2,2 companies) issued an integrated report, and it would appear that larger companies account for many of those. nder JP 0 billion (2) Percentage of total Percentage of issuing 0 market capitalization companies JP 0 billion to (2) () () () (2) (2) under JP 00 billion ver JP trillion 2 20 20 20 20 20 20 () ver JP 00 billion (2) JP 2 trillion 22 Number of issuing companies () () () JP 00 billion to JP 00 billion to Past comparative data in this survey is based on the number of companies issuing reports at the eference he number of issuing under JP 00 billion under JP trillion time of each survey (ecluding luctuations in the umber of Companies Issuing Selfeclared companies at the time of the survey Integrated eports in Japan ). “ (as of ecember ) ” herefore, the number of companies issuing reports in past surveys diverged from the number of 20 companies nJP trillion (2,2 companies) n2,2 companies (20) () companies issuing based on the latest survey of the Corporate alue eporting Lab. 20 companies As of ecember , 20 n companies

21 asic Information ( ) umber of companies ( ) umber of companies asic Information 22

About the Issuing Companies

Title of reports Page volume

he number of companies using the title integrated report he average number of pages decreased slightly over the increased by over the previous year to“ 2, setting another” previous year to pages. owever, there were fewer reports alltime high, as in the previous year. his is likely the result of of 0 pages or less, showing a trend toward reports that are an ongoing trend for companies that had issued reports in the to 0 pages long, rather than a simplification of reports. past under a different name to change the name to integrated report and the large number of companies issuing integrated“ reports” for the first time to use the name integrated report. Average Average Average “ ” KPMG believes that greater awareness of integrated reporting 0 2 among management and investors eplains the increased use pages pages pages 5% 6% 6% 2 of the title integrated report. ■ pages or more “ ” 14% 12% 12% to 20 pages ■ to 0 pages ■ Integrated eport ( ) to 0 pages 258 ■ companies 33% 37% 38% 0 pages of less Company name ■ () eport (2) “ ” Annual eport () n0 companies cluding four companies out of Corporate eport () () 20 42% 40% 36% that only issue Increase in 20 an nglish version A title including and two companies n0 companies CS (2) that issue only an “ ” cluding four companies 6% 6% 8% ML version thers () () out of that only issue 20 20 20 an nglish version n n n0 companies companies companies

nglish only Issuance of English version Japanese only () As in 20, over 0 of companies published their reports Japanese in both Japanese and nglish. () and nglish () n companies ata on the issuance of nglish versions is current as of the end of January 2020.

Timing of issuance (Japanese version) Timing of issuance (English version)

Most companies issued their report si months after their As in other years, the greatest number of companies issued fiscal year ended. here was a trend for more companies to Japanese and nglish versions at the same time. his is a take more time to issue the reports so that they could sign that companies are trying to provide information augment the content, but there are still issues remaining in euitably to readers both in and outside Japan. terms of timeliness. 125 companies n0 companies 158 n companies cluding four companies Companies issuing (119) companies out both Japanese and of that only (137) nglish reports (87) issue an nglish (0) (81) version

() (2) (2) (2) (2) () () ()

month 2 month month month month month month month months or later Simultaneous month 2 month month month months or later After fiscal yearend After issuance of Japanese version

23 asic Information ( ) umber of companies

About the Issuing Companies

Title of reports Page volume awn of igital eporting 2.0 “ ” he number of companies using the title integrated report he average number of pages decreased slightly over the increased by over the previous year to“ 2, setting another” previous year to pages. owever, there were fewer reports Much progress has been made with digital reporting as well. he Global eporting Initiative (GI) and alltime high, as in the previous year. his is likely the result of of 0 pages or less, showing a trend toward reports that are (corporate reports utiliing digital technology) in the Climate isclosure Standards oard (CS) released an ongoing trend for companies that had issued reports in the to 0 pages long, rather than a simplification of reports. financial reporting field, with technology playing a taonomies premised on the use of L, and past under a different name to change the name to integrated larger role in corporate reporting every year. hanks several companies provide digital reporting using report and the large number of companies issuing integrated“ to a growing need for nonfinancial information in these. here are similar developments at the reports” for the first time to use the name integrated report. Average Average Average corporate assessments in recent years and advances Sustainability Accounting Standards oard (SAS), “ ” in technology such as big data and machine learning, and various standard organiations are pursuing digital KPMG believes that greater awareness of integrated reporting 0 2 we are likely standing at the start of a new era, which reporting based on these frameworks. among management and investors eplains the increased use pages pages pages 5% 6% 6% 2 we have dubbed igital echnology 2.0. of the title integrated report. ■ pages or more “ ” owever, the standard organiations release their “ ” 14% 12% 12% to 20 pages In this brief article, I consider advances in digital own taonomies, and their definitions of matters for ■ to 0 pages reporting from three perspectives. disclosure are not necessarily consistent across the ■ Integrated eport ( ) to 0 pages standards. or this reason, neither the companies 258 ■ companies 33% 37% 38% 0 pages of less First perspective nor the data users can maimie the benefits of Company name ■ () digital reporting. eport (2) Digitization and automation of report preparation “ ” esolving this reuires that the vocabulary for Annual eport () n0 companies cluding four Improving efficiency via automation is a perennial nonfinancial information be standardied at the same companies out of issue for companies. Automating computer level as financial accounting. e anticipate progress () 20 Corporate eport () 42% 40% 36% that only issue operations through obotic Process Automation in forming consensus among stakeholders, including Increase in 20 an nglish version A title including and two companies (PA) has been getting attention in recent years as those organiations that set standards for n0 companies CS (2) that issue only an one solution to this. sing PA to automate the nonfinancial reporting. “ ” cluding four companies 6% 6% 8% ML version routine, repetitive operations for preparing reports, out of that only issue thers () () 20 20 20 such as downloading information from the backbone an nglish version n n n0 Third perspective companies companies companies system, compiling large amounts of data and Trends in evaluating companies using AI technology transcribing figures, can reduce work time. owever, the real obstacle to automation is that data Sophisticated tet mining functions that use AI are nglish only is partially optimied for each system, rather than making it possible to collect information on companies Issuance of English version Japanese only optimied for the company overall. from vast amounts of tet data available on the Internet and assess companies with that information. () his can be resolved with data management that As in 20, over 0 of companies published their reports Japanese ensures interoperability of data across different A uants management company based in the K has in both Japanese and nglish. () and nglish systems. Introducing a mechanism for managing data launched a service in which it uses AI to automatically for disclosure, called a disclosure management assess information on companies that it compiles system (MS), can align the data compilation, from news media sites that are updated daily, in () n companies accumulation, analysis and reporting process to addition to data from multiple SG assessment ata on the issuance of improve the efficiency of operations. institutions, and uses the results to provide an SG nglish versions is current as of the end of January 2020. score for companies. ven in Japan, there are Second perspective corporate assessment sites that use an AIpowered Integrated digital reporting, including evaluation system to automatically analye non-financial information information released by companies on their websites Timing of issuance (Japanese version) Timing of issuance (English version) and calculate an SG score. In financial reporting, information is digitied and tags hese corporate evaluations using AI technology are Most companies issued their report si months after their As in other years, the greatest number of companies issued are added so that computers can discriminate still in their early days, but there is certainly a chance fiscal year ended. here was a trend for more companies to Japanese and nglish versions at the same time. his is a between the data, as with I in securities that empirical research on the correlation with take more time to issue the reports so that they could sign that companies are trying to provide information reports. his results in a mechanism that offers ease corporate value and further technological progress augment the content, but there are still issues remaining in euitably to readers both in and outside Japan. of access for all. y designating the tag for the will firmly establish this as a new method for terms of timeliness. 125 information, they want, users can obtain corporate corporate assessment. companies n0 companies 158 n companies data and freely compare and compile data. (119) cluding four companies Companies issuing I think that when we have a world like this igital companies out (137) both Japanese and his access to financial information is supported by eporting 2.0, the approach to corporate reporting of that only nglish reports financial accounting, a gauge for evaluating and the roles of people involved in it will change (87) issue an nglish (0) “ ” (81) version companies that is become increasingly standardied significantly. At that point, we will know that we have globally, and the technology etensible usiness arrived in an era in which putting integrated thinking eport Language (L), which is for sharing into practice significantly affects corporate value. () (2) financial information electronically. In recent years, (2) Katsunao ikiba (2) there have been signs of progress similar to that in () (2) () () the financial field in the nonfinancial reporting field,

month 2 month month month month month month month months or later Simultaneous month 2 month month month months or later After fiscal yearend After issuance of Japanese version

23 asic Information ( ) umber of companies SPLIG 24

oard of irectors advocating Statement of Purpose “ ” Many Japanese companies value the spirit behind their he Statement of Purpose should have the founding and their company s creed, and this is no following elements doubt one of the main factors’ behind the success of () a clear statement of the company s purpose (2) many of the world s longestlived companies. owever, measures to harmonie social accountabilities’ and the can Japanese companies’ eplain this enough and obtain company s own commercial success () identification understanding of stakeholders’ that are critical to longterm value Many shareholders are increasing their investments in creation and sustainability () a clear eplanation of why companies that are able to achieve sustainable value by those stakeholders are critical and () the timeframe the making social contributions. Companies need to eplain, company uses in evaluating its strategy and longterm from a position of management responsibility, how they capital allocation choices. look at resolving issues shared by society overall and It is essential that the board epress a clear their approach to contributions, as well as how these commitment in light of the responsibilities entrusted to perceptions are reflected in devising and pursuing their them. aving all directors sign the Statement is longterm strategies. meaningful. Professor obert ccles, who has written many books, If the company s purpose is laid out in integrated including he Integrated eporting Movement, reports in this way,’ readers can depict the various recommends that a company s board take responsibility obectives set by the company, the sustainable creation for concisely summing up a Statement’ of Purpose in a of social value and the link with those results over few pages of the integrated report in order to both a longterm timeframe. improve the uality of the integrated report and promote action that contributes to a sustainable society. oshiko Shibasaka

uman capital directly linked to corporate value

here is general agreement that human capital is one of Going forward, the revisions will be finalied, with the most important factors affecting corporate value. reference to the comments that the SC received, but owever, there is still room for improvement in reports companies will have to report information that they on human capital. deem material. he information reuested is epected to be as“ follows” rameworks supporting voluntary reports, such as IIC, SAS and GI have positioned human capital as the key () the number and types of employees (fulltime, element and encouraged eplanations. Moreover, there parttime, seasonal, etc.) (2) indicators of stable are many references to human assets even in employment (such as turnover) () annual training time integrated reports. owever,“ even if human” capital is per employee () human capital productivity () discussed in integrated reports, it is often limited to an information on measures taken to hire and promote eplanation of measures. talented employees and () targets related to human “ ” capital, progress toward achieving these goals, and rom about 20, the Conference of Institutional management s actions. Investors (CII), a group of institutional investors in ’ the S, and uman Capital Management Coalition Going forward, companies will be epected to report on (CM Coalition) have been actively issuing papers with the strengths of their human capital and their specific recommendations to the S Securities and change indicators for these strengths, in light of their correlation Commission (SC) that the disclosure of information with sustainable improvement to corporate value. on human capital be augmented and pointing to the oshiko Shibasaka responsibility of oards of irectors in enhancing human capital. In August 20, the SC proposed revisions to rules to reuire companies to report not only the number of SC website employees, as the rules currently mandate, but provide or those browsing additional information on human capital, which has a online, please click the code maor impact on corporate value.

25 SPLIG

oard of irectors advocating Statement of Purpose pectations for consistency between standards “ ” for nonfinancial information Many Japanese companies value the spirit behind their he Statement of Purpose should have the Corporate eporting ialogue (C), convened by the he numerous standards and frameworks for founding and their company s creed, and this is no following elements International Integrated eporting Council (IIC) with the nonfinancial information has led to confusion among doubt one of the main factors’ behind the success of () a clear statement of the company s purpose (2) aim of supporting more comparable integrated corporate not only to the report preparers, but also to the users. many of the world s longestlived companies. owever, measures to harmonie social accountabilities’ and the reporting, launched a 2 year proect called the etter his has led to calls for greater consistency and can Japanese companies’ eplain this enough and obtain company s own commercial success () identification Alignment Proect (the Proect) in ovember 20. unification among the standards and frameworks. understanding ’ As a result, apart from the etter Alignment Proect, of stakeholders that are critical to longterm value he Proect will release a report every year, and has many other proects comparing various standards have Many shareholders are increasing their investments in creation and sustainability () a clear eplanation of why issued the first report in September 20. he firstyear also been launched. companies that are able to achieve sustainable value by those stakeholders are critical and () the timeframe the report focused on the comparison between the making social contributions. Companies need to eplain, company uses in evaluating its strategy and longterm standards issued by the organiations participating in he etter Alignment Proect is currently considering from a position of management responsibility, how they capital allocation choices. the C that set standards on nonfinancial information the agenda for the second year, based on observations look at resolving issues shared by society overall and It is essential that the board epress a clear (CP, CS, GI, IIC, SAS) with the disclosure made in the first year s report. e hope that the IIC their approach to contributions, as well as how these ’ commitment in light of the responsibilities entrusted to principles, recommended disclosures and illustrative will eercise even greater leadership and make rapid perceptions are reflected in devising and pursuing their them. aving all directors sign the Statement is eample metrics issued by the ask orce on progress in considering ways to ensure consistency longterm strategies. meaningful. Climaterelated inancial isclosures (C). he first and further understanding of the characteristics of the Professor obert ccles, who has written many books, year report also reflected the comments received in the various standards. If the company s purpose is laid out in integrated including he Integrated eporting Movement, consultation held in 20 as well as the results of the reports in this way,’ readers can depict the various orie akahashi recommends that a company s board take responsibility roundtable discussions held in 2 cities around the ’ obectives set by the company, the sustainable creation for concisely summing up a Statement of Purpose in a world, including okyo. C website of social value and the link with those results over few pages of the integrated report in order to both a longterm timeframe. hese results pointed to an overall consistency and or those browsing improve the uality of the integrated report and promote compatibility among the standards and frameworks. online, please click action that contributes to a sustainable society. oshiko Shibasaka the code

nsuring faith in nonfinancial information uman capital directly linked to corporate value As SG investment picks up, the market s need for ointly released A buyer s guide to assurance on here is general agreement that human capital is one of Going forward, the revisions will be finalied, with nonfinancial information is increasing. ’ nonfinancial information.“ ’ the most important factors affecting corporate value. reference to the comments that the SC received, but ” owever, there is still room for improvement in reports companies will have to report information that they In March 20, the SA released its Principles for the his guide eplains the basic matters that companies on human capital. deem material. he information reuested is epected isclosure of arrative Information. As a result of the should understand in terms of nonfinancial information to be as“ follows” revisions to the Cabinet rdinance, reforms in the assurance services and the issues that should be rameworks supporting voluntary reports, such as IIC, disclosure of nonfinancial information in securities considered to accurately assess assurance operations. SAS and GI have positioned human capital as the key () the number and types of employees (fulltime, reports are underway. hese revisions reuire more he guide also describes the process involved in element and encouraged eplanations. Moreover, there parttime, seasonal, etc.) (2) indicators of stable descriptions of management s awareness of company providing comprehensive assurance for the report are many references to human assets even in employment (such as turnover) () annual training time strategies, the business environment’ and results, as overall, which includes validation of internal controls “ ” integrated reports. owever, even if human capital is per employee () human capital productivity () well as business and other risks. related to information compilation, validation of specific discussed in integrated reports, it is often limited to an information on measures taken to hire and promote KPIs, assurance of KPIs overall including completeness, At the same time, the uestionnaire Survey for und eplanation of measures. talented employees and () targets related to human and assurance of specific narrative information. “ ” capital, progress toward achieving these goals, and Management rganiations on SG Investment, the rom about 20, the Conference of Institutional management s actions. results of which were released by MI in ecember At the same time, this guide points out many issues Investors (CII), a group of institutional investors in ’ 20, showed that of respondents use SG with the assurance of nonfinancial information. the S, and uman Capital Management Coalition Going forward, companies will be epected to report on information in making investment decisions, but felt hat said, there is a general public consensus emerging (CM Coalition) have been actively issuing papers with the strengths of their human capital and their specific that companies disclosure of information on SG was that SG is an essential element in creating sustainable recommendations to the S Securities and change indicators for these strengths, in light of their correlation inadeuate and ’impeded their investment decisions. value, and thus disclosure of nonfinancial information Commission (SC) that the disclosure of information with sustainable improvement to corporate value. and assurance services will steadily progress through he disclosure of nonfinancial information will continue on human capital be augmented and pointing to the trial and error. oshiko Shibasaka to improve in terms of both uality and uantity, but as responsibility of oards of irectors in enhancing its effectiveness increases, investors will demand human capital. iromasa iinaya greater reliability. In August 20, the SC proposed revisions to rules to In ovember 20, the orld usiness Council for reuire companies to report not only the number of SC website CS website Sustainable evelopment (CS) and the Institute of employees, as the rules currently mandate, but provide or those browsing or those browsing Chartered Accounting in ngland and ales (ICA) additional information on human capital, which has a online, please click online, please click the code the code maor impact on corporate value.

25 SPLIG SPLIG 26

Climaterelated disclosure premised on an assessment of financial impact

he ask orce on Climaterelated inancial information for investors. ncouraged by these initiatives, isclosure (C) released its final report on the we epect that more companies will disclose climate disclosure of financial information related to climate changerelated information going forward. change in June 20, over two years ago. Japan, or most companies, it is clear that climate change where over 200 companies and institutions approved risks should be seen as a management issue, similar the C, is C s biggest supporter. ’ to other material risks. CS departments and f the companies in the ikkei 22 Inde covered in environmental departments have long pursued our survey on integrated reporting, 02 companies are activities addressing climate change, but now they the supporters of C (as of ecember , 20). must elevate this issue and coordinate with departments in charge of finance and risk A survey of disclosure by these companies in line management to take action. Management is taking with C recommendations showed that of the central role in these initiatives, with boards of companies mentioned in their integrated report that directors providing supervision. As such, we epect they support C and of companies disclosed companies to build appropriate governance and make some kind of information in line with C a companywide commitment to stakeholders. recommendations. he information most commonly disclosed in line with C recommendations was Management must take responsibility to sincerely climaterelated risk and opportunities, at . convey information that helps people assess the financial impact, such as information on governance fforts to address climate change risks are picking up of climaterelated risks and opportunities, the validity speed markedly. In Japan, MI released the C of the forecasted scenarios, and the effectiveness of guidance in ecember 20, and established a C the decisionmaking process. Consortium by leaders in industry and academia in 20. he Consortium then released green Shuni Kato, Sumika ashimoto investment guidance on the use of climaterelated

Figure 1 Figure 2 Companies in the Nikkei 225 Disclosure in line with TCFD recommendations (by content) that are supporters of TCFD in integrated reports (as of December 31, 2019) n02 companies Companies in the ikkei 22 () that pledged support for C oes not support (As of ecember , 20) (2) () () 0 2 oes support () 2 2 2 (0) 2 2 2 (2) (2) 20 (2) (2) (2) (2) (20) (02)

Indicators Governance Strategy Risk management and targets Impact of climaterelated risks and and risks climaterelated of Impact Management Process for identifying and assessing assessing and identifying for Process for Processes managing notedtoare processes ow the left climaterelated assessing for Metrics oard isclosure in line with inwith line isclosure limaterelated risks and opportunities opportunities and risks limaterelated risk management risk overall into integrated risksand opportunities risks and and opportunities Climaterelated risks and opportunities opportunities and risks Climaterelated GG emissions by scope targets against performance Support for C for Support opportunities on strategy on strategy opportunities risks climaterelated risks. climaterelated and opportunities risks climaterelated managing and resilience its and that have been identified been have that argets to manage climaterelated climaterelated manage to argets C recommendations C n22 companies ’ companies included in the ikkei 22 Inde c of s oversight ’ s role in assessing assessing in s role C website

or those browsing online, please click the code

( ) umber of companies

27 SPLIG

AAS CPAI Kirin oldings Company,Limited SC oldings Co.,Ltd. A C.,L. Kobe Steel, Ltd. SCM C.,L. AGC Inc. KMAS L. SIK PS CPAI Ainomoto Co.,Inc. KAMI LIGS CPAI Sekisui ouse, Ltd. ALPS ALPI C., L. KICA MILA, IC. Seven i oldings Co.,Ltd. AMAA LIGS C.,L. KA CPAI SIMIZ CPAI AA LIGS IC. KAA C.,L. Shintsu Chemical Co.,Ltd. Climaterelated disclosure premised Aoora ank,Ltd. KCA CPAI Shinsei ank, Limited Asahi Group oldings, Ltd. Kyowa Kirin Co.,Ltd. Shionogi Co.,Ltd. on an assessment of financial impact ASAI KASI CPAI M, Inc. Shiseido Company,Limited Astellas Pharma Inc. Marubeni Corporation Showa enko K.K. AAI AMC oldings Inc. Maruha ichiro Corporation SK Perfect JSA oldings Inc. he ask orce on Climaterelated inancial information for investors. ncouraged by these initiatives, IGS CPAI MAI GP C.,L. Softank Group Corp. isclosure (C) released its final report on the we epect that more companies will disclose climate CA IC. MASI SCIIS C.,L. Soit Corporation disclosure of financial information related to climate changerelated information going forward. CASI CMP C.,L. Mada Motor Corporation Sompo oldings, Inc. Central Japan ailway Company Meii oldings Co., Ltd. S CPAI change in June 20, over two years ago. Japan, or most companies, it is clear that climate change where over 200 companies and institutions approved Chubu lectric Power Company,Inc. MIA MISMI Inc. Sony inancial oldings Inc. risks should be seen as a management issue, similar CGAI PAMACICAL C.,L. Mitsubishi Chemical oldings Corporation SA CPAI the C, is C s biggest supporter. ’ to other material risks. CS departments and Citien atch Co., Ltd. Mitsubishi Corporation SMC CPAI f the companies in the ikkei 22 Inde covered in environmental departments have long pursued CMSS oldings Corporation Mitsubishi lectric Corporation SMIM CMICAL CMPA,LIMI Mitsubishi state Company,Limited our survey on integrated reporting, 02 companies are activities addressing climate change, but now they Concordia inancial Group,Ltd. SMIM CPAI Credit Saison Co.,Ltd. Mitsubishi eavy Industries, Ltd. Sumitomo ainippon Pharma Co., Ltd. the supporters of C (as of ecember , 20). must elevate this issue and coordinate with CyberAgent, Inc. Mitsubishi Logistics Corporation Sumitomo lectric Industries, Ltd. departments in charge of finance and risk MISISI MAIALS CPAI A survey of disclosure by these companies in line ai ippon Printing Co.,Ltd. SMIM A ISIS, L. management to take action. Management is taking aiichi Life oldings,Inc. MISISI MS CPAI Sumitomo Metal Mining Co.,Ltd. with C recommendations showed that of the central role in these initiatives, with boards of AIICI SAK CMPA,LIMI Mitsubishi J inancial Group,Inc. Sumitomo Mitsui inancial Group, Inc. companies mentioned in their integrated report that MISI C.,L. directors providing supervision. As such, we epect AIKI ISIS, L. Sumitomo Mitsui rust oldings,Inc. they support C and of companies disclosed AIA S IS C.,L. Mitsui Chemicals,Inc. Sumitomo saka Cement Co.,Ltd. companies to build appropriate governance and make some kind of information in line with C aiwa Securities Group Inc. Mitsui S oldings Co., Ltd. Sumitomo ealty evelopment Co.,Ltd. a companywide commitment to stakeholders. eA Co.,Ltd. Mitsui udosan Co.,Ltd. SZKI M CPAI recommendations. he information most commonly Mitsui Mining Smelting Company,Limited disclosed in line with C recommendations was Management must take responsibility to sincerely enka Company Limited oldings,Inc. S CPAI Mitsui .S.K. Lines,Ltd. AII CM CPAI climaterelated risk and opportunities, at . convey information that helps people assess the S GP IC. Miuho inancial Group, Inc. AISI CPAI financial impact, such as information on governance IC Corporation MSA Insurance Group oldings, Inc. AI C., L. fforts to address climate change risks are picking up C Corporation of climaterelated risks and opportunities, the validity A LIGS C.,L. AKAA LIGS IC. GK ISLAS, L. speed markedly. In Japan, MI released the C ast Japan ailway Company akashimaya Company, Limited of the forecasted scenarios, and the effectiveness of oods Ltd. guidance in ecember 20, and established a C AA CPAI akeda Pharmaceutical Company Limited the decisionmaking process. ICII CPAI Consortium by leaders in industry and academia isai Co.,Ltd. K CPAI IK CPAI amilyMart Co., Ltd. IJI LIMI in 20. he Consortium then released green Shuni Kato, Sumika ashimoto ippon lectric Glass Co.,Ltd. AC CPAI M CPAI investment guidance on the use of climaterelated IPP PSS C.,L. AS AILIG C.,L. he Chiba ank, Ltd. IPP KAAK C.,L. JI LCIC C.,L. he Japan Steel orks, Ltd. ippon Light Metal oldings Company,Ltd. JIILM oldings Corporation he Kansai lectric Power Company,Inc. ippon Paper Industries Co.,Ltd. Figure 1 Figure 2 uikura Ltd. SIZKA AK, L. ippon Sheet Glass Company,Limited Companies in the Nikkei 225 Disclosure in line with TCFD recommendations JIS LIMI he okohama ubber Company,Limited (by content) IPP SL CPAI that are supporters of TCFD in integrated reports ukuoka inancial Group,Inc. AILA C.,L. (as of December 31, 2019) IPP SISA KAISA, L. urukawa lectric Co., Ltd. C.,L. n02 companies IPP LGAP LP GS uasa Corporation oho Zinc Co.,Ltd. Companies in the ikkei 22 CPAI ASK Corporation KAI CA C.,L. () that pledged support for C ippon usen Kabushiki Kaisha oes not support (As of ecember , 20) I MS, L. issan Chemical Corporation okio Marine oldings, Inc. itachi Construction Machinery Co.,Ltd. ISSA M C.,L. okuyama Corporation (2) itachi Zosen Corporation ISSI SI GP IC. okyo lectric Power Co. oldings,Inc. itachi, Ltd. isshinbo oldings Inc. okyo lectron Limited () A M C.,L. I K CPAI K GAS C.,L. () Idemitsu Kosan Co.,Ltd. omura oldings, Inc. okyo atemono Co.,Ltd. 0 2 II Corporation K CPAI SK Ltd. oes support () 2 2 2 (0) 2 2 2 IP CPAI CPAI okyu udosan oldings Corporation (2) (2) 20 (2) (2) (2) Isetan Mitsukoshi oldings Ltd. AA CPAI PPA PIIG C.,L. (2) (20) ISZ MS LIMI CM,IC. A ISIS, IC. (02) IC Corporation AASI CPAI S CPAI J. AILIG Co.,Ltd. dakyu lectric ailway Co.,Ltd. L. JAPA PS LIGS Co.,Ltd. i oldings Corporation oyo Seikan Group oldings, Ltd. Indicators Governance Strategy Risk management and targets JAPA ACC IC. ki lectric Industry Company,Limited C.,L. Impact of climaterelated risks and and risks climaterelated of Impact Management Process for identifying and assessing assessing and identifying for Process for Processes managing notedtoare processes ow the left climaterelated assessing for Metrics oard isclosure in line with inwith line isclosure limaterelated risks and opportunities opportunities and risks limaterelated risk management risk overall into integrated risksand opportunities risks and and opportunities Climaterelated risks and opportunities opportunities and risks Climaterelated GG emissions by scope targets against performance Support for C for Support opportunities on strategy on strategy opportunities risks climaterelated risks. climaterelated and opportunities risks climaterelated managing and resilience its and that have been identified been have that argets to manage climaterelated climaterelated manage to argets C recommendations C J oldings, Inc. KMA Corporation A M CPAI n22 companies JGC LIGS CPAI LMPS CPAI A SS CPAI ’ companies included in the ikkei 22 Inde c of s oversight JK Corporation M Corporation rend Micro Incorporated JG oldings, Inc. SAKA GAS C.,L. be Industries,Ltd. ’ s role in assessing assessing in s role KAJIMA CPAI tsuka oldings Co.,Ltd. IIKA L. C website Kao Corporation PACIIC MALS C.,L. est Japan ailway Company Kawasaki eavy Industries, Ltd. Panasonic Corporation AMAA CPAI or those browsing akuten,Inc. online, please click Kawasaki Kisen Kaisha, Ltd. amaha Motor Co.,Ltd. the code KI CPAI ecruit oldings Co.,Ltd. AMA LIGS C.,L. Keio Corporation esona oldings, Inc. ASKAA lectric Corporation Keisei lectric ailway Co.,Ltd. IC CMPA,L. okogawa lectric Corporation ( ) umber of companies KIKKMA CPAI SAPP LIGS LIMI Z oldings Corporation

27 SPLIG List of ikkei 22 companies 28

AA IC. evelopment ank of Japan Inc. IP CPAI KI oldings,Inc. C Capital Solutions Limited SAKA GAS C.,L. Sumitomo akelite Company,Limited IAIM C., L. AAS CPAI eerials Corporation ISKIC.,L. Kyosan lectric Manufacturing C Corporation SG Corporation SMIM CMICAL ohoku lectric Power Company,Inc. Co.,Ltd. CMPA,LIMI A C.,L. IC Corporation Isetan Mitsukoshi oldings Ltd. C etworks System Integration tsuka oldings Co.,Ltd. KAI CA C.,L. Kyoto niversity Corporation SMIM CPAI A inancial Service Co.,Ltd. KS Co. Ltd. I ,L. Pan Pacific International oldings Corp. KAI IKA C.,L. KA CPAI et ne Systems Co.,Ltd. Sumitomo ainippon Pharma Co., Ltd. A Mall Co.,Ltd. SKI C.,L. IC Corporation Panasonic Corporation okai okyo inancial oldings, Inc. Kyowa Kirin Co.,Ltd. GK ISLAS, L. Sumitomo orestry Co.,Ltd. AGC Inc. yo GP LIGS,IC. IC C.,L. PAC C.,L. okio Marine oldings, Inc. KK CPAI GK SPAK PLG C.,L. SMIM A ISIS, L. AS CPAI AM JAPA LIGS Co.,Ltd. IC echnoSolutions Corporation PACA CSCI okyo Century Corporation Kyushu lectric Power Company,Inc. oods Ltd. C.,L. SMIM LI ISAC AI A IC. J oldings Inc. IAAI CPAI K M CPAI ・ Kyushu ailway Company K SPIG C.,L. PIG CPAI CMPA AI Co.,Ltd. ast ippon pressway Company J. AILIG Co.,Ltd. okyo lectric Power Co. Limited Sumitomo Metal Mining Co.,Ltd. AISI SIKI C.,L. JACCS C.,L. Lawson,Inc. ICIC CPAI PLA IS LIGS IC. oldings,Inc. AA CPAI Sumitomo Mitsui Construction Co.,Ltd. Ainomoto Co.,Inc. Japan Airlines Co.,Ltd. LPALAC2 CPAI ichiIko Pharmaceutical Co.,Ltd. Prima Meat Packers, Ltd. K GAS C.,L. AA oods Industry,Inc. Sumitomo Mitsui inancial Group, Inc. Alfresa oldings Corporation Japan Asia Group Limited LIC Corporation ICII CPAI PwC Japan Group okyo Kiraboshi inancial Group,Inc. cho lectronics Industry Co,.Ltd. Sumitomo Mitsui rust oldings,Inc. ALPS ALPI C., L. Japan change Group, Inc. Lion Corporation I CZAI Co.,Ltd. AI KG C.,L. K KA KG C.,L. isai Co.,Ltd. Sumitomo saka Cement Co.,Ltd. AMIA LIGS C.,L. Japan Petroleum ploration Co.,Ltd. LIIL Group Corporation I K CPAI akuten,Inc. okyo atemono Co.,Ltd. lectric Power evelopment Co.,Ltd. Sumitomo iko Company Limited AMS IC. JAPA PS AK Co.,Ltd. MAM CPAI ihon nisys, Ltd. ecruit oldings Co.,Ltd. K CSCI C.,L. amilyMart Co., Ltd. Sumitomo ubber Industries, Ltd. AA LIGS IC. JAPA PS LIGS Co.,Ltd. Marubeni Corporation IIGAA ISI esona oldings, Inc. K CPAI ACL CPAI Sun Messe Co.,Ltd. AS IAA Corporation JAPA PS ISAC Co.,Ltd. Maruha ichiro Corporation IKKIS C.,L. IC CMPA,L. okyu udosan oldings Corporation ISC Ltd. SZK C.,L. AIS CPAI JC Pharmaceuticals Co.,Ltd. MAI GP C.,L. IKK C.,L. M Co., Ltd. M CMPA,L. P CPAI SZKI M CPAI AKI oldings Inc. JL Ltd. MASA SAG Co.,Ltd. IK CPAI AL LIGS Co., Ltd. PC CPAI reund Corporation SSM CPAI Aoora ank,Ltd. J oldings, Inc. Maell oldings, Ltd. IPP CMIC CPAI S..CPAI PPA MS C.,L. JI CPAI oldings,Inc. AAA CPAI JGC LIGS CPAI Mebuki inancial Group,Inc. IPP CMIPA C.,L. SAKAA I CPAI PPA PIIG C.,L. JI LCIC C.,L. AA L. Asahi Group oldings, Ltd. JIL MILLS, IC. MIPAL LIGS ippon lectric Glass Co.,Ltd. Sangetsu Corporation P ISIS,LIMI JI IL LIGS IC. CPAI AI KG C.,L. Asahi oldings,Inc. Joshin enki Co.,Ltd. IPP GAS C.,L. SAG C.,L. A ISIS, IC. ui Pharma Co.,Ltd. MGMILK S A Co.,Ltd. aikisha Ltd. ASAI KASI CPAI JSP Corporation IPP KAAK C.,L. Sanken lectric Co.,Ltd. orishima Pump Mfg.Co.,Ltd. JICC C.,L. MISA CPAI AISI CPAI ASKA Pharmaceutical Co.,Ltd. JS CPAI ippon Life Insurance Company Sanki ngineering Co.,Ltd. SIA CPAI JIILM oldings Corporation Meii oldings Co., Ltd. AIS PAMACICAL Astellas Pharma Inc. JK Corporation IPP PAI LIGS C.,L. SA PAMACICAL C.,L. SIA C CPAI Meii asuda Life Insurance LIGS C., L. uikura Ltd. ippon Paper Industries Co.,Ltd. Sanwa oldings Corporation S CPAI AACS S C.,L. JKI CPAI Company AI IPP SAS CPAI JIA KAK IC. IPP PILLA PACKIG C.,L. SA KI C.,L. L. Abil Corporation JCK Corporation Menicon Co.,Ltd. AI C., L. JIC C.,L. ippon Sheet Glass Company,Limited SAPP LIGS LIMI CSCI C.,L. AAI AMC oldings Inc. JG oldings, Inc. MAA Co.,Ltd. AKAA CMPA L. JIS GAL LIMI ippon Shinyaku Co.,Ltd. SA LIGS CPAI KI SIZ K.K. enesse oldings, Inc. KAGA LCICS C.,L. MI ISI AKAA LIGS IC. JIS LIMI IPP SKAI C.,L. SAAI PAMACICAL C.,L. KAS K.K. IC CAMA IC. KAGM C.,L. MIA MISMI Inc. akara Leben C.,L. ukuoka inancial Group,Inc. ippon Signal Company,Limited SI oldings, Inc. C.,L. IGS CPAI KAJIMA CPAI Miraca oldings Inc. akasago hermal ngineering Co.,Ltd. KSIMA GALILI C.L. IPP SL CPAI SS oldings,Inc. A GSI C.,L. ISIS, L. KAK PAMACICAL C.,L. MISAA MS C., L. akeda Pharmaceutical Company unai Soken oldings Incorporated IPP LGAP LP SC oldings Co.,Ltd. A SK C.I. AKI Corporation KAAM C.,L. Mitsubishi Chemical oldings Limited KAA C.,L. CPAI CPAI Calbee,Inc. KAK C.,L. Corporation SCSK Corporation AKAKA CPAI ippon usen Kabushiki Kaisha A ISIS urukawa lectric Co., Ltd. Mitsubishi Corporation SGA SAMM LIGS IC. K CPAI CA IC. KAMAS CPAI CPAI uyo General Lease Co.,Ltd. ishimatsu Construction Co.,Ltd. CAPCM C.,L. KAMAS LCICS L. Mitsubishi state Company,Limited SI LIGS IC. echnoPro oldings,Inc. issan Chemical Corporation A M CPAI GiG orks Inc. MISISI GAS CMICAL SIKAGAK CPAI IJI LIMI Carlit oldings Co., Ltd. Kanro Inc. A SS CPAI CMPA,IC. issha Co., Ltd. GS uasa Corporation SIK PS CPAI M CPAI CASI CMP C.,L. KASAI PAI C.,L. S C C.,L. Mitsubishi eavy Industries, Ltd. ISSI SI GP IC. GZ LIMI SIK LIGS CPAI Gaia Corporation Chiba niversity Kao Corporation SAKIM CAI C. MISISI MAIALS isshinbo oldings Inc. .I.S. Co.,Ltd. Sekisui Chemical Co.,Ltd. he ank, Ltd. Chubu lectric Power Company,Inc. Kawasaki eavy Industries, Ltd. CPAI SMA C. 2 AILIG CPAI ISSI S LIGS C.,L. CGAI PAMACICAL C.,L. Kawasaki Kisen Kaisha, Ltd. Sekisui ouse, Ltd. he Chiba ank, Ltd. Mitsubishi Paper Mills Limited itori oldings Co., Ltd. ACJ Corporation AK LIGS SSKAI C.,L. he aiichi Life Insurance Company, CK Corporation KI CPAI Mitsubishi esearch Institute,Inc. be Industries,Ltd. ICPA I SKI C.,L. Limited CMK CPAI Keihanshin uilding Co.,Ltd. SPI LIGS C.,L. ankyu anshin oldings,Inc. Mitsubishi anabe Pharma I K CPAI LAC, Inc. Seven i oldings Co.,Ltd. he ukui ank, Ltd. CMA IC. Kewpie Corporation Corporation I.CAM CPAI AA C.,L. MA Co.,Ltd. he urukawa attery Co.,Ltd. Concordia inancial Group,Ltd. K eochem Co.,Ltd. Mitsubishi J inancial Group,Inc. Seven ank,Ltd. IA PAP C.,L. omura oldings, Inc. I AS L. SG LIGS C.,L. he Gunma ank, Ltd. CSM G LIGS Kirin oldings Company,Limited Mitsubishi J Lease inance niversity of sukuba itachi Capital Corporation Co.,Ltd. omura eal state oldings,Inc. he achiuni ank, Ltd. CMPA,LIMI KI CPAI Sharp Corporation itachi Chemical Company,Ltd. omura esearch Institute, Ltd. IS KI CyberAgent, Inc. MISI C.,L. Shikoku lectric Power Company,Inc. he iroshima ank, Ltd. KIZ CPAI SI IC. itachi Construction Machinery Co.,Ltd. Mitsui Chemicals,Inc. IAK C., LIMI he yakugo ank, Ltd. ai ippon Printing Co.,Ltd. KAASI PAMACICAL Shimadu Corporation itachi ighechnologies Corporation IZ CPAI SMIA ISI ai ippon oryo Company,Limited C.,L. Mitsui S oldings Co., Ltd. SIMIZ CPAI JAPA L IL C., L. itachi Metals, Ltd. S nited Kaiun Kaisha, Ltd. ACAL LIGS CP. AII CPAI Kobe Steel, Ltd. Mitsui udosan Co.,Ltd. Shin ippon Air echnologies Co.,Ltd. he Juroku ank, Ltd. itachi ransport System, Ltd. SK Ltd. est Japan ailway Company aicel Corporation Kobe niversity Mitsui Mining Smelting Shintsu Chemical Co.,Ltd. he Kansai lectric Power Company,Inc. itachi Zosen Corporation Company,Limited CPAI AMAA KI C.,L. AIA C.,L. KKSAI PLP PAP C.,L. Shinsei ank, Limited IPP A C.,L. itachi, Ltd. Mitsui .S.K. Lines,Ltd. AA CPAI AMAA CPAI AIK C.,L. KMAS L. Shionogi Co.,Ltd. ISSI ILLI GP,L. itotsubashi niversity MISISK LIGS Co.,Ltd. CM,IC. amaha Motor Co.,Ltd. aiichi Life oldings,Inc. KMI C.,L. Shiseido Company,Limited he Sanin Godo ank, Ltd. odogaya Chemical Co.,Ltd. Mitsuuroko Group oldings Co.,Ltd. AASI CPAI AK C.,L. AIICI SAK CMPA,LIMI KC IC. Showa enko K.K. SIGA AK, L. okkaido lectric Power Company,Inc. Miuho inancial Group, Inc. AA IC. ASKAA lectric Corporation AIK CPAI KICA MILA, IC. SKLAK LIGS C., L. SIMA AK,L. okuetsu Corporation Miuho Leasing Company,Limited i oldings Corporation ASAA CMICAL C.,L. AIKI ISIS, L. Konoike ransport Co.,Ltd. Sodick Co.,Ltd. SIZKA AK, L. okuriku lectric Power Company Mochida Pharmaceutical Co.,Ltd. KASA SCIIS GP IC. KK AP Inc. aio Paper Corporation KS Corporation Softank Corp. he niversity of okyo A M C.,L. Mone Group, Inc. KAAMA ISI KK Corporation AI S CSCI KA CPAI SG SCI SICS C.,L. IS Inc. C.,L. IA, Ltd. Morinaga Milk Industry Co.,Ltd. ki lectric Industry Co., Ltd. okogawa lectric Corporation Kumagai Gumi Co., Ltd. Soit Corporation A CPAI AIA S IS C.,L. ouse oods Group Inc. MSA Insurance Group oldings, Inc. KMA CPAI Z CPAI KAA C.,L. Solaseed Air Inc. AGSI C.,L. aiwa Securities Group Inc. ulic Co., Ltd. Murata Manufacturing Co., Ltd. LMPS CPAI SIA LIGS C.,L. Kurimoto, Ltd. Sompo oldings, Inc. ISIMA CPAI enka Company Limited II C.,L. abtesco Corporation M Corporation Z oldings Corporation Kurita ater Industries Ltd. S CPAI A CPAI S CPAI II Corporation AGASC., L. PAMACICAL C.,L. Z CPAI K Corporation Sony inancial oldings Inc. Co.,Ltd. entsu Group Inc. II KAI KAISA, L. ankai lectric ailway Co.,Ltd. I CPAI KCA CPAI SA CPAI GAS C.,L.

29 List of Japanese Companies Issuing Integrated eport in 20

AA IC. evelopment ank of Japan Inc. IP CPAI KI oldings,Inc. C Capital Solutions Limited SAKA GAS C.,L. Sumitomo akelite Company,Limited IAIM C., L. AAS CPAI eerials Corporation ISKIC.,L. Kyosan lectric Manufacturing C Corporation SG Corporation SMIM CMICAL ohoku lectric Power Company,Inc. Co.,Ltd. CMPA,LIMI A C.,L. IC Corporation Isetan Mitsukoshi oldings Ltd. C etworks System Integration tsuka oldings Co.,Ltd. KAI CA C.,L. Kyoto niversity Corporation SMIM CPAI A inancial Service Co.,Ltd. KS Co. Ltd. I ,L. Pan Pacific International oldings Corp. KAI IKA C.,L. KA CPAI et ne Systems Co.,Ltd. Sumitomo ainippon Pharma Co., Ltd. A Mall Co.,Ltd. SKI C.,L. IC Corporation Panasonic Corporation okai okyo inancial oldings, Inc. Kyowa Kirin Co.,Ltd. GK ISLAS, L. Sumitomo orestry Co.,Ltd. AGC Inc. yo GP LIGS,IC. IC C.,L. PAC C.,L. okio Marine oldings, Inc. KK CPAI GK SPAK PLG C.,L. SMIM A ISIS, L. AS CPAI AM JAPA LIGS Co.,Ltd. IC echnoSolutions Corporation PACA CSCI okyo Century Corporation Kyushu lectric Power Company,Inc. oods Ltd. C.,L. SMIM LI ISAC AI A IC. J oldings Inc. IAAI CPAI K M CPAI CMPA ・ Kyushu ailway Company K SPIG C.,L. PIG CPAI CMPA AI Co.,Ltd. ast ippon pressway Company J. AILIG Co.,Ltd. okyo lectric Power Co. Sumitomo Metal Mining Co.,Ltd. Limited Lawson,Inc. ICIC CPAI PLA IS LIGS IC. Sumitomo Metal Mining Co.,Ltd. oldings,Inc. AISI SIKI C.,L. JACCS C.,L. Lawson,Inc. PLA IS LIGS IC. oldings,Inc. Sumitomo Mitsui Construction Co.,Ltd. AA CPAI LPALAC2 CPAI ichiIko Pharmaceutical Co.,Ltd. Prima Meat Packers, Ltd. Sumitomo Mitsui Construction Co.,Ltd. K GAS C.,L. Ainomoto Co.,Inc. Japan Airlines Co.,Ltd. LPALAC2 CPAI Prima Meat Packers, Ltd. K GAS C.,L. Sumitomo Mitsui inancial Group, Inc. AA oods Industry,Inc. LIC Corporation ICII CPAI PwC Japan Group Sumitomo Mitsui inancial Group, Inc. okyo Kiraboshi inancial Group,Inc. Alfresa oldings Corporation Japan Asia Group Limited LIC Corporation PwC Japan Group okyo Kiraboshi inancial Group,Inc. Sumitomo Mitsui rust oldings,Inc. cho lectronics Industry Co,.Ltd. Lion Corporation I CZAI Co.,Ltd. AI KG C.,L. Sumitomo Mitsui rust oldings,Inc. K KA KG C.,L. ALPS ALPI C., L. Japan change Group, Inc. Lion Corporation AI KG C.,L. K KA KG C.,L. Sumitomo saka Cement Co.,Ltd. isai Co.,Ltd. LIIL Group Corporation I K CPAI akuten,Inc. Sumitomo saka Cement Co.,Ltd. okyo atemono Co.,Ltd. AMIA LIGS C.,L. Japan Petroleum ploration Co.,Ltd. LIIL Group Corporation akuten,Inc. okyo atemono Co.,Ltd. Sumitomo iko Company Limited lectric Power evelopment Co.,Ltd. MAM CPAI ihon nisys, Ltd. ecruit oldings Co.,Ltd. Sumitomo iko Company Limited K CSCI C.,L. AMS IC. JAPA PS AK Co.,Ltd. MAM CPAI ecruit oldings Co.,Ltd. K CSCI C.,L. Sumitomo ubber Industries, Ltd. amilyMart Co., Ltd. Marubeni Corporation IIGAA ISI esona oldings, Inc. Sumitomo ubber Industries, Ltd. K CPAI AA LIGS IC. JAPA PS LIGS Co.,Ltd. Marubeni Corporation esona oldings, Inc. K CPAI Sun Messe Co.,Ltd. ACL CPAI Maruha ichiro Corporation IKKIS C.,L. IC CMPA,L. Sun Messe Co.,Ltd. okyu udosan oldings Corporation AS IAA Corporation JAPA PS ISAC Co.,Ltd. Maruha ichiro Corporation IC CMPA,L. okyu udosan oldings Corporation SZK C.,L. ISC Ltd. IKK C.,L. M Co., Ltd. SZK C.,L. M CMPA,L. AIS CPAI JC Pharmaceuticals Co.,Ltd. MAI GP C.,L. IKK C.,L. M Co., Ltd. M CMPA,L. SZKI M CPAI P CPAI IK CPAI AL LIGS Co., Ltd. SZKI M CPAI PC CPAI AKI oldings Inc. JL Ltd. MASA SAG Co.,Ltd. IK CPAI AL LIGS Co., Ltd. PC CPAI SSM CPAI reund Corporation IPP CMIC CPAI S..CPAI SSM CPAI PPA MS C.,L. Aoora ank,Ltd. J oldings, Inc. Maell oldings, Ltd. IPP CMIC CPAI S..CPAI PPA MS C.,L. oldings,Inc. JI CPAI IPP CMIPA C.,L. SAKAA I CPAI oldings,Inc. PPA PIIG C.,L. AAA CPAI JGC LIGS CPAI Mebuki inancial Group,Inc. IPP CMIPA C.,L. SAKAA I CPAI PPA PIIG C.,L. AA L. JI LCIC C.,L. ippon lectric Glass Co.,Ltd. Sangetsu Corporation AA L. P ISIS,LIMI Asahi Group oldings, Ltd. JIL MILLS, IC. MIPAL LIGS ippon lectric Glass Co.,Ltd. Sangetsu Corporation P ISIS,LIMI AI KG C.,L. JI IL LIGS IC. CPAI IPP GAS C.,L. SAG C.,L. AI KG C.,L. A ISIS, IC. Asahi oldings,Inc. Joshin enki Co.,Ltd. IPP GAS C.,L. SAG C.,L. A ISIS, IC. aikisha Ltd. ui Pharma Co.,Ltd. MGMILK S A Co.,Ltd. IPP KAAK C.,L. Sanken lectric Co.,Ltd. aikisha Ltd. orishima Pump Mfg.Co.,Ltd. ASAI KASI CPAI JSP Corporation IPP KAAK C.,L. Sanken lectric Co.,Ltd. orishima Pump Mfg.Co.,Ltd. AISI CPAI JICC C.,L. MISA CPAI ippon Life Insurance Company Sanki ngineering Co.,Ltd. AISI CPAI SIA CPAI ASKA Pharmaceutical Co.,Ltd. JS CPAI ippon Life Insurance Company Sanki ngineering Co.,Ltd. SIA CPAI Meii oldings Co., Ltd. AIS PAMACICAL JIILM oldings Corporation IPP PAI LIGS C.,L. SA PAMACICAL C.,L. AIS PAMACICAL SIA C CPAI Astellas Pharma Inc. JK Corporation LIGS C., L. SIA C CPAI Meii asuda Life Insurance LIGS C., L. uikura Ltd. ippon Paper Industries Co.,Ltd. Sanwa oldings Corporation S CPAI AACS S C.,L. JKI CPAI Company AI IPP SAS CPAI JIA KAK IC. IPP PILLA PACKIG C.,L. SA KI C.,L. L. Abil Corporation JCK Corporation Menicon Co.,Ltd. AI C., L. JIC C.,L. ippon Sheet Glass Company,Limited SAPP LIGS LIMI CSCI C.,L. AAI AMC oldings Inc. JG oldings, Inc. MAA Co.,Ltd. AKAA CMPA L. JIS GAL LIMI ippon Shinyaku Co.,Ltd. SA LIGS CPAI KI SIZ K.K. enesse oldings, Inc. KAGA LCICS C.,L. MI ISI AKAA LIGS IC. JIS LIMI IPP SKAI C.,L. SAAI PAMACICAL C.,L. KAS K.K. IC CAMA IC. KAGM C.,L. MIA MISMI Inc. akara Leben C.,L. ukuoka inancial Group,Inc. ippon Signal Company,Limited SI oldings, Inc. C.,L. IGS CPAI KAJIMA CPAI Miraca oldings Inc. akasago hermal ngineering Co.,Ltd. KSIMA GALILI C.L. IPP SL CPAI SS oldings,Inc. A GSI C.,L. ISIS, L. KAK PAMACICAL C.,L. MISAA MS C., L. akeda Pharmaceutical Company unai Soken oldings Incorporated IPP LGAP LP SC oldings Co.,Ltd. A SK C.I. AKI Corporation KAAM C.,L. IPP LGAP LP SC oldings Co.,Ltd. Limited A SK Mitsubishi Chemical oldings CPAI CPAI KAA C.,L. CPAI SCSK Corporation CPAI Calbee,Inc. KAK C.,L. Corporation SCSK Corporation AKAKA CPAI ippon usen Kabushiki Kaisha A ISIS urukawa lectric Co., Ltd. SGA SAMM LIGS IC. A ISIS CA IC. KAMAS CPAI Mitsubishi Corporation K CPAI CPAI ishimatsu Construction Co.,Ltd. CPAI uyo General Lease Co.,Ltd. SI LIGS IC. CAPCM C.,L. KAMAS LCICS L. Mitsubishi state Company,Limited echnoPro oldings,Inc. A M CPAI issan Chemical Corporation A M CPAI GiG orks Inc. SIKAGAK CPAI Carlit oldings Co., Ltd. Kanro Inc. MISISI GAS CMICAL IJI LIMI A SS CPAI issha Co., Ltd. A SS CPAI GS uasa Corporation CMPA,IC. SIK PS CPAI CASI CMP C.,L. KASAI PAI C.,L. M CPAI S C C.,L. ISSI SI GP IC. S C C.,L. GZ LIMI Mitsubishi eavy Industries, Ltd. SIK LIGS CPAI Chiba niversity Kao Corporation Gaia Corporation SAKIM CAI C. isshinbo oldings Inc. SAKIM CAI C. .I.S. Co.,Ltd. MISISI MAIALS Sekisui Chemical Co.,Ltd. Chubu lectric Power Company,Inc. Kawasaki eavy Industries, Ltd. he ank, Ltd. SMA C. CPAI ISSI S LIGS C.,L. SMA C. 2 AILIG CPAI Sekisui ouse, Ltd. CGAI PAMACICAL C.,L. Kawasaki Kisen Kaisha, Ltd. he Chiba ank, Ltd. ACJ Corporation Mitsubishi Paper Mills Limited itori oldings Co., Ltd. ACJ Corporation AK LIGS SSKAI C.,L. CK Corporation KI CPAI he aiichi Life Insurance Company, be Industries,Ltd. ICPA Mitsubishi esearch Institute,Inc. I SKI C.,L. be Industries,Ltd. SPI LIGS C.,L. Limited CMK CPAI Keihanshin uilding Co.,Ltd. LAC, Inc. ankyu anshin oldings,Inc. Mitsubishi anabe Pharma I K CPAI LAC, Inc. Seven i oldings Co.,Ltd. he ukui ank, Ltd. CMA IC. Kewpie Corporation Corporation I.CAM CPAI AA C.,L. MA Co.,Ltd. I.CAM CPAI Seven ank,Ltd. he urukawa attery Co.,Ltd. Concordia inancial Group,Ltd. K eochem Co.,Ltd. Mitsubishi J inancial Group,Inc. I AS L. IA PAP C.,L. omura oldings, Inc. I AS L. SG LIGS C.,L. he Gunma ank, Ltd. CSM G LIGS Kirin oldings Company,Limited Mitsubishi J Lease inance niversity of sukuba itachi Capital Corporation omura eal state oldings,Inc. niversity of sukuba CMPA,LIMI Co.,Ltd. Sharp Corporation he achiuni ank, Ltd. KI CPAI IS KI itachi Chemical Company,Ltd. omura esearch Institute, Ltd. IS KI CyberAgent, Inc. MISI C.,L. Shikoku lectric Power Company,Inc. he iroshima ank, Ltd. KIZ CPAI SI IC. itachi Construction Machinery Co.,Ltd. IAK C., LIMI SI IC. ai ippon Printing Co.,Ltd. Mitsui Chemicals,Inc. Shimadu Corporation he yakugo ank, Ltd. KAASI PAMACICAL SMIA ISI itachi ighechnologies Corporation IZ CPAI SMIA ISI ai ippon oryo Company,Limited C.,L. Mitsui S oldings Co., Ltd. SIMIZ CPAI JAPA L IL C., L. ACAL LIGS CP. itachi Metals, Ltd. S nited Kaiun Kaisha, Ltd. ACAL LIGS CP. AII CPAI Kobe Steel, Ltd. Mitsui udosan Co.,Ltd. Shin ippon Air echnologies Co.,Ltd. he Juroku ank, Ltd. est Japan ailway Company itachi ransport System, Ltd. SK Ltd. est Japan ailway Company aicel Corporation Kobe niversity Mitsui Mining Smelting Shintsu Chemical Co.,Ltd. he Kansai lectric Power Company,Inc. AMAA KI C.,L. itachi Zosen Corporation Company,Limited CPAI AMAA KI C.,L. AIA C.,L. KKSAI PLP PAP C.,L. Shinsei ank, Limited IPP A C.,L. AMAA CPAI itachi, Ltd. Mitsui .S.K. Lines,Ltd. AA CPAI AMAA CPAI AIK C.,L. KMAS L. Shionogi Co.,Ltd. ISSI ILLI GP,L. amaha Motor Co.,Ltd. itotsubashi niversity MISISK LIGS Co.,Ltd. CM,IC. amaha Motor Co.,Ltd. aiichi Life oldings,Inc. KMI C.,L. Shiseido Company,Limited he Sanin Godo ank, Ltd. AK C.,L. odogaya Chemical Co.,Ltd. Mitsuuroko Group oldings Co.,Ltd. AASI CPAI AK C.,L. AIICI SAK CMPA,LIMI KC IC. Showa enko K.K. SIGA AK, L. ASKAA lectric Corporation okkaido lectric Power Company,Inc. Miuho inancial Group, Inc. AA IC. ASKAA lectric Corporation AIK CPAI KICA MILA, IC. SKLAK LIGS C., L. SIMA AK,L. ASAA CMICAL C.,L. okuetsu Corporation Miuho Leasing Company,Limited i oldings Corporation ASAA CMICAL C.,L. AIKI ISIS, L. Konoike ransport Co.,Ltd. Sodick Co.,Ltd. SIZKA AK, L. KK AP Inc. okuriku lectric Power Company Mochida Pharmaceutical Co.,Ltd. KASA SCIIS GP IC. KK AP Inc. aio Paper Corporation KS Corporation Softank Corp. he niversity of okyo KK Corporation A M C.,L. Mone Group, Inc. KAAMA ISI KK Corporation AI S CSCI KA CPAI SG SCI SICS C.,L. IS Inc. okogawa lectric Corporation C.,L. IA, Ltd. Morinaga Milk Industry Co.,Ltd. ki lectric Industry Co., Ltd. okogawa lectric Corporation Kumagai Gumi Co., Ltd. Soit Corporation A CPAI Z CPAI AIA S IS C.,L. ouse oods Group Inc. MSA Insurance Group oldings, Inc. KMA CPAI Z CPAI KAA C.,L. Solaseed Air Inc. AGSI C.,L. SIA LIGS C.,L. aiwa Securities Group Inc. ulic Co., Ltd. Murata Manufacturing Co., Ltd. LMPS CPAI SIA LIGS C.,L. Kurimoto, Ltd. Sompo oldings, Inc. ISIMA CPAI Z oldings Corporation enka Company Limited II C.,L. abtesco Corporation M Corporation Z oldings Corporation Kurita ater Industries Ltd. S CPAI A CPAI Z CPAI S CPAI II Corporation AGASC., L. PAMACICAL C.,L. Z CPAI K Corporation Sony inancial oldings Inc. Co.,Ltd. entsu Group Inc. II KAI KAISA, L. ankai lectric ailway Co.,Ltd. I CPAI KCA CPAI SA CPAI GAS C.,L.

29 List of Japanese Companies Issuing Integrated eport in 20 List of Japanese Companies Issuing Integrated eport in 20 30

In the five years through 20, we continuously observed trends in integrated reporting in Japan. In preparing for the survey of 20 reports, with over 00 Japanese companies epected to issue an integrated report, we once again discussed the role that this survey should play. As Professor ccles mentioned at the beginning of this report ( Message from global thought leaders on “ ” page ), in a paper on a survey comparing the uality of integrated reporting in 0 countries, released in March 20, the uality of Japan s representative ’ integrated reports was categoried as low and this was a maor catalyst for “ ”— this discussion. As a result, we concluded that clarifying whether reports had narratives based on the relationship with corporate value a characteristic of integrated — reports and described actual conditions in a way that ensured consistency in — the overall report is our contribution and role in not only improving the uality of integrated reports, but also raising the sustainable value of companies. Accordingly, we revised the survey items and methods. he survey covered the companies included in the ikkei 22. Instead of assigning individual survey team members to read the same sections in all the reports, we adopted a method whereby each team member thoroughly read reports of a company. epeated discussions to redress gaps in each member s assessments and the sharing of information on points that the ’ members noticed made this a process that was essential to the survey. ith nonfinancial elements accounting for 0 or more of a company s ’ market value, we have seen institutional changes ensuring that nonfinancial information that is directly related to corporate value is included in securities reports. e are confident that initiatives to be introduced in the fiscal year ending March 2020 will help to improve the uality of corporate reporting and achieve a fair and transparent market. o this end, we think that we need to have a good grasp of conditions before the reforms, and for that reason we also surveyed the content of the securities reports of the ikkei 22 companies. Integrated reports and securities reports use different means of epression, but since companies are single entities, the two types of repots should always be telling the same underlying story throughout. eports should show the result of this kind of integrated thinking in order to demonstrate how companies will utilie the finite resources entrusted to them by society and fulfill the responsibilities they have been entrusted with. e are grateful that this survey has been useful to so many people over the years. he range of feedback that we have received has been encouraging, and we are deeply grateful. e look forward to being in dialogue with the readers of this survey report.

March 2020 KPMG Japan Integrated eporting Center of cellence

31 Afterword

iroto amane oshiko Shibasaka omokau Sekiguchi Sakurako htsuki Kiyoo Kamiyama In the five years through 20, we continuously observed trends in integrated Koichiro Saio eruya Saruta Kyoichi Seishi orie akahashi iromasa iinaya reporting in Japan. In preparing for the survey of 20 reports, with over 00 Sumika ashimoto Katsunao ikiba Shinichiro Akasaka Keiko Kodama Mai amashita Japanese companies epected to issue an integrated report, we once again omonori oshida uka tsubo Shotaro Kanatani Satoshi Gohara iroki Chihara discussed the role that this survey should play. As Professor ccles mentioned uki Ito Kaoru Mamiya esearch eam, Knowledge Center at the beginning of this report ( Message from global thought leaders on “ ” page ), in a paper on a survey comparing the uality of integrated reporting in 0 countries, released in March 20, the uality of Japan s representative ’ Support members integrated reports was categoried as low and this was a maor catalyst for “ ”— this discussion. aisuke Ikadai Shuni Kato Kaori Kobayashi Akane Komatsubara Chika oumi As a result, we concluded that clarifying whether reports had narratives based on the relationship with corporate value a characteristic of integrated — reports and described actual conditions in a way that ensured consistency in — the overall report is our contribution and role in not only improving the uality of integrated reports, but also raising the sustainable value of companies. Accordingly, we revised the survey items and methods. he survey covered the companies included in the ikkei 22. Instead of In response to the growing demand for the better business reporting that the assigning individual survey team members to read the same sections in all the integrated report represents, the Co was formed in 202 by professionals across reports, we adopted a method whereby each team member thoroughly read member firms of KPMG in Japan. reports of a company. epeated discussions to redress gaps in each Making full use of KPMG s research epertise in corporate reporting and its practical member s assessments and the sharing of information on points that the ’ ’ members noticed made this a process that was essential to the survey. eperience, the Co seeks to contribute to the reliability and transparency of capital markets and support better communication between companies and capital markets ith nonfinancial elements accounting for 0 or more of a company s ’ by contributing to the advancement of corporate reporting. market value, we have seen institutional changes ensuring that nonfinancial information that is directly related to corporate value is included in securities reports. e are confident that initiatives to be introduced in the fiscal year ending March 2020 will help to improve the uality of corporate reporting and achieve a fair and transparent market. o this end, we think that we need to Our website Email Magazine have a good grasp of conditions before the reforms, and for that reason we also surveyed the content of the securities reports of the ikkei 22 companies. he KPMG Japan Integrated eporting he KPMG Japan Integrated eporting ebsite contains recent trends, mail Magaine reports in a timely Integrated reports and securities reports use different means of epression, commentary, and seminar information manner on recent trends, commentary, and others. and seminars information related to but since companies are single entities, the two types of repots should always integrated reporting (in Japanese only). be telling the same underlying story throughout. eports should show the If you would like to receive the email result of this kind of integrated thinking in order to demonstrate how magaine, please subscribe from the companies will utilie the finite resources entrusted to them by society and page below. fulfill the responsibilities they have been entrusted with. KPMG Japan Integrated Reporting website Email magazine subscription page e are grateful that this survey has been useful to so many people over the home.kpmg/jp/integrated-reporting home.kpmg/jp/mail-magazine years. he range of feedback that we have received has been encouraging, and we are deeply grateful. e look forward to being in dialogue with the readers of this survey report.

March 2020 KPMG Japan Integrated eporting Center of cellence

31 Afterword Survey eamAbout KPMG Japan Integrated eporting Co 32

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