As societal challenges that need to be addressed such as climate change and human rights issues become increasingly diverse and complex, it is essential for companies to address these issues through their core business activities. In response to drastic changes in the external environment, policies, laws, and regulations are being developed, international initiatives are being created, and the flow of private-sector funds and the behavior of investors are undergoing major changes. Specifically, in addition to addressing climate change, we are now in an era in which non-financial initiatives have a significant impact on corporate value, such as whether a governance structure is set in place to respond to a rapidly changing business environment and whether employees, who are responsible for maintaining and improving competitiveness, are provided with appropriate training. We believe that insufficient commitment to sustainability is detrimental to a company, while the active pursuit of sustainability is essential for mid- to long-term growth. In addition, damage to ecosystem services and the natural environment, which are prerequisites for a company’s existence, will directly affect company operations and indirectly affect its supply chain, posing a significant risk to the company. Therefore, we believe that working to address societal challenges constitutes both risk management as well as the pursuit of business opportunities.

Based on our corporate philosophy, The Three Corporate Principles, we have been promoting our sustainability efforts by setting forth our commitment to creating sustainable corporate value in Midterm Corporate Strategy 2012, and simultaneously generating economic, societal, and environmental value in Midterm Corporate Strategy 2018. Also, in 2016 we identified our Key Sustainability Issues that must be proactively addressed to ensure sustainable growth. Meanwhile, six years have passed since the formulation of our Key Sustainability Issues, and expectations for companies, including measures to address climate change, have increased, while the societal challenges to be addressed have also changed. Midterm Corporate Strategy 2024, announced in May of this year, aims for the continuous creation of significant shared value, or “MCSV” in order to address societal challenges. In line with this, we have redefined our Key Sustainability Issues as eight material issues (Materiality) , a set of crucial societal issues that we will prioritize through our business activities. This redefinition focused on three points: fulfilling our responsibility to provide a stable supply of energy to support the transition to a decarbonized society; promoting businesses that respect human rights as a company that helps to enrich society; and providing a solid foundation, including human resource and organizational development as the bedrock of these efforts.

Among the initiatives based on our Materiality, I will address in detail the following: (1)Contributing to Decarbonized Societies, (2)Addressing Regional Issues and Growing Together with Local Communities, and (3)Fostering Vibrant Workplaces that Maximize the Potential of a Diverse Workforce as representative examples.

MC has identified “Contributing to Decarbonized Societies” as a material issue for realizing a carbon neutral society. In October 2021, in our “Roadmap to a Carbon Neutral Society,” we have formulated mediumand long-term GHG emissions reduction targets aligned with the Paris Agreement: to halve emissions by FY2030 (FY2020 baseline) and to achieve net-zero emissions by 2050. In addition, in the Midterm Corporate Strategy 2024, we also laid out a range of measures toward achieving international objectives, such as those of the Sustainable Development Goals (SDGs) and the Paris Agreement, while fulfilling our mandate to meet the demand for energy. Under the MC Climate Taxonomy concept, each of our businesses is classified based on climate-related transition risks and opportunities, and in accordance with such classification, the following four mechanisms are implemented: 1.5°C scenario analysis, Transform Discussion, Investment Planning in accordance with GHG Reduction Plans, and the Evaluation of New Investment Using Assumptions Under Decarbonization Scenario. By promoting these mechanisms, we aim to contribute to the realization of decarbonized societies through the steady decarbonization and strengthening resilience of our business portfolio and advancing EX (energy transformation) on a global scale.

In addition, since the realization of a carbon neutral society requires GHG reductions not only by MC but throughout the value chain as well, we are committed to becoming a decarbonization solution provider by understanding the emissions reduction needs of industries, consumers, and communities. We will also continue to diligently consider the calculation and disclosure of our Scope 3 emissions (Category 11 (use of sold products), which accounts for the majority of our Scope 3 emissions), which investors and other stakeholders are increasingly requesting us to disclose.

Based on the recognition that building relationships with communities is essential for the successful execution of our business, we have also identified “Addressing Regional Issues and Growing Together with Local Communities” as another of our material issues. In addressing this issue, we conduct our business based on relationships of trust with diverse stakeholders, regions, and communities. Specifically, we strive to minimize negative impacts on local communities, including respecting the rights of indigenous peoples, in addition to sharing prosperity together with local communities through job creation, promoting community development, and procuring materials from local communities through our business.

MC has achieved sustainable growth together with society through its business by anticipating the needs of the times and actively taking on the challenge of addressing societal challenges as a player in individual businesses and the industries built from them. What has supported this growth are human resources with high aspirations for addressing societal challenges, foresight to anticipate the times and derive new value, execution skills to quickly materialize concepts by involving stakeholders beyond national and industry boundaries, and high moral and ethical standards based on the spirit of the Three Corporate Principles. Our human resources have created value by conceiving and executing optimal solutions for a wide range of social, industrial, and customer issues from a proactive and global perspective. MC therefore views human resources as a source of value creation, or human capital, and has been and will continue to actively invest in them.

In order to continue creating the MCSV that we strive for, MC must continue to be a dynamic, spirited and vibrant organization with a diverse range of human resources, with diverse values and backgrounds, as well as a diverse range of experiences and abilities from many industries that meet with each other through organic connections. Therefore, we have defined one of our material issues as “Fostering Vibrant Workplaces That Maximize the Potential of a Diverse Workforce,” and have established the three pillars that constitute our human resource policies: HR Strategy, Strengthen Engagement, and Data Utilization.

In this way, we will maintain and enhance our corporate value over the mid- to long term by utilizing our Materiality as a guideline for the creation of MC Shared Value, incorporate the issues into our business strategies and policies, and having each and every employee put them into practice within his or her own workplace.