Nippon Yusen Kabushiki Kaisha Nippon Yusen Striding Forward NYK Report 2015 with New Momentum Nippon Yusen Kabushiki Kaisha NYK Report 2015 Financial, Social, and Environmental Performance 2015 Glossary Yield management A management method based on improving profitability by selling products at the optimal time and price in light of demand forecasts Businesses with stable The Terminal Division and the logistics segment in the Global Logistics Business; long-term chartered vessels, including freight rates LNG carriers and the offshore business, and the car transportation business in the Bulk Shipping Business; and the real estate business Contract logistics A business that concludes contracts with customers directly for the provision of comprehensive logistics services, including warehousing, logistics processing, and distribution management Shuttle tanker A shuttle tanker, often called a ‘floating pipeline’, loads crude oil from floating production, storage, and offloading (FPSO) units in deepwater fields and then transports the oil to crude oil storage units or petroleum storage stations on land Hub-and-spoke A system in which cargo is concentrated in a central port, or hub, for transport to final destinations, or spokes. This operations system is more efficient than direct transport between producing countries and final destinations. Ballast voyages When vessels sail without cargo Ballast water Seawater carried by vessels to maintain their balance. Normally, tanks at the bottom of vessels take on ballast water at unloading ports and release it at loading ports. Forwarder A business that provides door-to-door international logistics services and undertakes processing required for transport by sea, air, and land as well as import and export customs clearance Chartered vessels Vessels chartered (leased) from other companies 3M Muda: Non-value-adding activities Mura: Unevenness in production or work activities Muri: Excessive burdens EPC Engineering, Procurement, and Construction Under an EPC contract, the contractor designs the vessel, procures the necessary materials, and builds the unit. FPSO Floating Production, Storage, and Offloading unit An FPSO unit is a ship-shaped offshore installation that produces crude oil by separating solids, water, and gases from liquid drawn from reservoirs beneath the seabed and storing it until it is offloaded into shuttle tankers or export tankers. FSO Floating Storage and Offloading System An FSO system is a vessel designed to receive crude oil produced from nearby subsea wells and to store the oil until it can be offloaded onto a shuttle tanker and transported ashore. FSRU Floating Storage and RegasificationU nit An FSRU is a floating facility for the storage and regasification of LNG. ISO9001 International standards for quality management systems, which organisations can use to ensure that their quality assurance for products and services caters to the needs of customers and markets. KNOT Knutsen NYK Offshore Tankers AS An NYK Group company: the world’s second-largest owner and operator of crude-oil shuttle tankers NOx (Nitrogen oxide) Toxic substance that has been identified as a key element of photochemical smog, which pollutes the air and causes acid rain RORO Roll-on, Roll-off vessel This is a vessel similar to a ferry that has a ramp way and a vehicle deck that enables vehicles to move on and off under their own power, allowing direct loading without the use of cranes. SIMS Ship Information Management System SOx (Sulphur oxide) Toxic substance that has been identified as one of the causes of air pollution and acid rain VPAS Vessel Performance Analysis System VPAS analyses the performance of the entire fleet under NYK’s operation. NYK Group Mission Statement Basic Philosophy Through safe and dependable monohakobi (transport), we contribute to the betterment of societies throughout the world as a comprehensive global-logistics enterprise offering ocean, land, and air transportation. Management Policy Together with Our Customers Together with Society Through the use of our extensive skill and expertise and by As a good corporate citizen, we positively take on the tough issues considering each business site to be of utmost importance, we that challenge our society, such as concerns involving the preser- always work to create new value so that our customers will vation of our natural environment, as we work for the betterment of consider us a trusted and reliable partner. the world that we inhabit. Together with Our Shareholders and Investors Together with All Staff Members in the NYK Group We aim to enhance our corporate value by being financially As a global enterprise that has the utmost respect for diversity in responsible and by conducting business activities in an open, the workplace and the spirit of challenge, we emphasise the honest, and transparent fashion. development of employee talents so that all staff members can take pride in their work and eventually fulfil their dreams. NYK Group Values [Integrity, Innovation, and Intensity (3I’s)] The NYK Group Values were established in January 2007 to instill the outlook and approach that we need in order to achieve our NYK Group Mission Statement. The NYK Group Values are put into action through the day-to-day operations of each Group employee, and they, pass on the spirit of the NYK Group to the next generation. Integrity Be respectful and considerate to your customers and colleagues. Stay warm, cordial, courteous, and caring. Innovation Intensity Continually think of new ideas for improvement, Carry through with and accomplish your tasks. even when conditions appear satisfactory. Never give up. Overcome challenges. Remain Remain open to betterment. motivated. NIPPON YUSEN KABUSHIKI KAISHA NYK Report 2015 01 Contents Insights we are particularly keen to share Corporate Value Enhancement Automotive Logistics Business— P.06 To Our Stakeholders P.16 P.34 Processes Outshining Competitors Worldwide Having assumed the position of president from Here we outline day-to-day value creation The NYK Group’s automotive logistics business Yasumi Kudo, Tadaaki Naito explains his processes that help us remain customers’ first has established unrivalled competitive superior- overriding strategies for the NYK Group choice despite fierce competition. ity as a provider of comprehensive logistics going forward. services for finished automobiles. This section shows how the business will cater to custom- ers’ ever more diverse and complex needs. Dialogue with the Outside P.50 Business Review P.64 ESG Review P.78 Directors Officers responsible for each business explain in The NYK Group pursues CSR initiatives as an The two outside directors talk frankly about their their own words the strategies prepared based important facet of differentiation. Here, we expectations of the NYK Group as it strides on the medium-term management plan and the feature one of our strengths—the disclosure of forward with new momentum. progress businesses are making as a result. environment, society, and governance (ESG) data. Editorial Policy for NYK Report 2015 The NYK Report 2015 is an integrated report Website that combines financial information, such as General business activities business results, reviews of operations, and Corporate website future strategies, with general non-financial http://www.nyk.com/english/ information about corporate social responsibility (CSR) activities and other initiatives. This report aims to further understanding among as many Financial information Non-financial information stakeholders as possible that the NYK Group Website section: Website section: not only pursues earnings but also tackles a “Investor Relations” “CSR” wide range of issues relating to the environment, http://www.nyk.com/english/ir/ http://www.nyk.com/english/csr/ society, and governance to contribute to the realisation of a sustainable society. Further, please use this report in conjunction with the NYK Report (PDF (full version)) NYK Group’s website, which includes information that is more comprehensive and detailed. This report has been edited with reference to version 1.0 of the International Integrated Reporting Framework, which the International Publications NYK Report (Booklet (digest version)) Integrated Reporting Council issued in December 2013. IR Fact Book 02 NIPPON YUSEN KABUSHIKI KAISHA NYK Report 2015 Contents Message to Stakeholders Message to Stakeholders ESG Review (Sustainability & Governance) To Our Stakeholders Tireless Commitment and Evolution 04 A Message from the Chairman 64 ESG Highlights 06 To Our Stakeholders 66 Environment 71 Safety Our Value, Our Process 74 Human Capital Development Corporate Value Enhancement Processes 76 Social Contribution Activities 78 Dialogue with the Outside Directors 14 The NYK Group’s Value 82 Corporate Governance 16 Corporate Value Enhancement Processes 90 Directors, Audit and Supervisory Board Members, 18 Business Conditions and Megatrends Our Process Our Value, and Corporate Officers 19 Management Tasks (Materiality) 92 Independent Directors and 20 The NYK Group’s Value and Strengths Audit and Supervisory Board Members 32 Medium-Term Management Plan ‘More Than Shipping 2018’ Performance Information 34 Special Feature: Financial and Non-Financial Review Automotive Logistics Business—Outshining Competitors Worldwide 94 10-Year Summary 96 Management’s Discussion and Analysis 44 An Interview with the Chief Financial Officer 102 Operating Risks Business Review 108 Summary of CSR Activities in Fiscal 2014 and Long-Term