KOBELCO Group Integrated Report 2020 Contents Introduction The KOBELCO Group’s Editorial Policy Disclaimer Regarding Forward-Looking Statements Business Foundation The KOBELCO Group places importance on dialogue with all of This Integrated Report contains forward-looking statements 2 Group Corporate Philosophy its stakeholders. For this reason, the Group has been publishing about the Company’s forecasts, beliefs, expectations, aims, and integrated reports since fiscal 2018. The aim of the report is to strategies. These forward-looking statements are based on the 57 Environmental Management and 4 Framework for Sustainability Management provide a comprehensive understanding of the economic and Company’s judgments and assumptions using currently avail- Reduction of CO2 Emissions social value created by the Group through its management able information, and these forecasts may differ substantially 6 Value Creation Process strategies, business activities, social activities, and environmen- from actual results due to a variety of factors that may change 68 Management and Development of tal activities. over time, such as uncertainties within its judgments and 8 History of the KOBELCO Group Human Resources We hope that this report will lead to a greater understanding assumptions, future business operations, and changes in condi- among all of our stakeholders of our endeavor to restore the tions inside and outside the Group. Kobe Steel assumes no 10 Next 100 Project 71 Health and Safety trust that was lost by our quality misconduct, and our efforts to responsibility for revising these forward-looking statements or 72 Communication with Stakeholders sustain growth through sustainability management. other content in this report. Below is a list of factors that may contribute to these uncer- 74 Initiatives in Response to Integrated Report 2020 Production Process tainties and changes. This is not a complete list of such factors. The KOBELCO Group’s Value Creation the Novel Coronavirus Pandemic 1. In August 2018, the Group issued its first integrated report, Integrated Report 2018. Externally, we notified stakeholders · Changes in economic conditions, demand, and prices in 12 Message from the President and CEO 75 Risk Management about the issuance of the report at financial results briefings major markets and other small meetings. In-house, we used digital signage · Political situations in major markets and regulations, 76 Progress of Measures to Prevent Recurrence 18 Special Feature: KOBELCO’s Mission Story and the intranet to inform employees about the report. including trade regulations Using the Group’s Collective Strengths of the Quality Misconduct 2. We asked analysts, institutional investors, Group employees, · Fluctuations in foreign exchange rates · Availability and prices of raw materials to Reduce CO2 Emissions and other internal and external stakeholders to give their frank 78 Quality assessments and opinions of Integrated Report 2019. · Products and services, price strategies of competitors, business developments including alliances and M&A 24 Roundtable Talk Among 80 Compliance 3. The Integrated Report Editorial Subcommittee under the CSR Three Independent Directors Committee wrote a draft of the report, with cooperation from · Changes in strategies of partners with ties to the Company. 82 Directors head office departments and business divisions, in light of the 29 Message from the Newly Appointed aforementioned assessments and opinions. Scope of Reporting Independent Director 86 Corporate Governance 4. We prepared Integrated Report 2020 based on discussions In principle, this Integrated Report covers the activities of Kobe with the management team at meetings of such committees Steel and its domestic and overseas Group companies. 30 Message from the CFO as the CSR Committee. Period of Reporting 34 Outline of the Fiscal 2016–Fiscal 2020 Referenced Guidelines This Integrated Report covers fiscal 2019, from April 1, 2019 to Group Medium-Term Management Plan Corporate Data · Sustainability Reporting Standards of the Global Reporting March 31, 2020. However, when necessary, this Integrated Initiative (GRI) Report refers to fiscal years before and after the period. 36 Mission Story 94 10-Year Financial and Non-Financial Data · ISO 26000 (Guidance on social responsibility) In fiscal 2020, Kobe Steel reorganized the Iron & Steel 37 Materials Businesses 96 Results by Operating Segment · International Integrated Reporting Framework of the Inter- Business and the Aluminum & Copper Business into two new national Integrated Reporting Council (IIRC) business divisions, the Steel & Aluminum Business and the 41 Machinery Businesses 98 Global Locations of the KOBELCO Group · Guidance for Integrated Corporate Disclosure and Company- Advanced Materials Business, to focus on materials and parts, Investor Dialogues for Collaborative Value Creation of the Ministry respectively. 44 Electric Power Business 100 Corporate Data of Economy, Trade and Industry 47 Technical Development 50 Distinctive Technologies, Products, and Services by Customer Domain KOBELCO Group Integrated Report 2020 1 Introduction Group Corporate Philosophy KOBELCO Group’s New Corporate Philosophy In May 2020, we established a new corporate philosophy of the KOBELCO Group by adding two new statements consisting of KOBELCO’s View of the Future and KOBELCO’s Mission to the Core Values of KOBELCO and Six Pledges of KOBELCO. This new Group Corporate Philosophy forms the basis for all business activities undertaken by the KOBELCO Group serving as an anchor for all employees of the KOBELCO Group in making decisions. Based on the Group Corporate Philosophy, the KOBELCO Group promotes sustainability management. With the trust placed in it by all stakeholders, including shareholders, investors, customers, suppliers, local communities and Group employees, Kobe Steel aims to sustain growth while contributing to the environment and society through its business activities. 2 KOBELCO Group Integrated Report 2020 KOBELCO Group Integrated Report 2020 3 Introduction Framework for Sustainability Management KOBELCO’s Mission KOBELCO’s View of the Future Our mission is to provide solutions to We envision a world in which people, the needs of society, by making the now and in the future, can fulfill their best use of the talents of our employees hopes and dreams while enjoying safe, and our technologies. secure, and prosperous lives. Promotion of Sustainability Management Based on the Group Corporate Philosophy KOBELCO’s assets and strengths lie in the various talents Our technologies, products, and services are not only Sustainability management is an ongoing topic for the KOBELCO Group looking ahead toward the next medium- of each employee as well as in its diverse technologies for those who live in the present, but also for future that support our broad range of businesses. We have generations. term management plan. The KOBELCO Group promotes sustainability management based on the Group Corporate cultivated these advantages in an effort to meet the needs KOBELCO sees a sustainable, beautiful, and flourishing of the times. Philosophy, identifying key management issues and classifying them into two categories: (1) a value creation area that world in the future, with safety and security in people’s contributes to the growth of business, and (2) a management foundation area that prevents erosion of corporate value. We continue to take on the challenge of transcending lives. Such a future will give rise to value that creates new organizational boundaries and conventional thinking to conveniences and comfort and help people fulfill their solve increasingly complex issues, while supporting the hopes and dreams. foundations of society. Key management issues are Key Issues to Address Promotion Tools divided into a value creation area Promotion of and a management foundation area, business Social Issues to be Solved through management SDGs both of which are addressed Core Businesses with awareness 17 global goals and of SDGs based on the Group Corporate Create new value by providing products and 169 targets Philosophy. services through R&D and manufacturing Offensive / Business Value creation area Group Corporate Philosophy * Newly formulated in May 2020 Prerequisites for Continued Existence • KOBELCO’s View of the Future Convey the lessons learned from the quality Information disclosure ESG External • KOBELCO’s Mission Defensive / Functions and misconduct. Fulfill various new social responsi- Assessments • Core Values of KOBELCO Governance bilities in addition to complying with laws and Use of assessments regulations and adhering to corporate ethics Objective evaluation of • Six Pledges of KOBELCO Management foundation area Group activities Men and Women Framework for Promoting Sustainability Management Organizational Relationship of the CSR Committee In promoting sustainability management, priority issues are addressed through a management cycle that centers on the Compliance Committee Executive Council and the CSR Committee. While proactively disclosing information and utilizing promotion tools, such as Consult ESG external assessments and SDGs, Kobe Steel has put into place a system that allows the Board of Directors to monitor Board of Directors Advisory Committees Nomination & Compensation Committee sustainability management. Advise Quality Management Committee Supervise The CSR Committee’s Structure and Functions President & CEO Chair (person in charge): Hajime Nagara, Director, Senior Managing