Identification of Key Sustainability Issues

Materiality at the IINO Group

The external environment surrounding the Shipping Business and Real Estate Business has undergone significant change, and the social demands that are important to society and stakeholders are evolving on a daily basis.

The IINO Group has identified its materiality (key sustainability issues) as ensuring safety and security as action to prevent accidents such as oil spills and have a significant impact on local communities and the environment, and accidents involving tenants and construction-related personnel, initiatives to create a decarbonized society as action on climate change and the reduction of greenhouse gases (GHGs), and biodiversity initiatives as action to preserve ecosystems and prevent pollution.

In addition, with the expectation that companies take action on respect for human rights not only internally but across the supply chain, the IINO Group recognizes its social responsibility as a global company to respect the human rights of all people and also views action on respect for human rights as a key issue.

Furthermore, in integrating specific aspects of materiality with management policies, we recognize the importance of engaging in companywide discussion (highly transparent management) on what social issues to overcome in light of dialogue with stakeholders and having the organizational capacity to take action on those issues (workplace environments in which various people can work, both on sea and on land, and an organization made up of a highly diverse workforce).

Materiality Issue Identification Process

Step.01 Identify social issues: To recognize social issues that relate to our business, we extracted a list of 40 social issues by referring to general social issues (Charter of Corporate Behavior, SDGs), issues unique to Japan (revised Corporate Governance Code), and issues unique to the industry (SASB). Step.02 Gathering feedback from stakeholders: We compiled information on the social issues that are important to stakeholders based on dialogue with each stakeholder (customers, business partners, shareholders, financial institutions, officers, and employees, etc.) and individual questionnaires. Step.03 Internal discussion and evaluation: Members of the Board of Directors discussed and evaluated the compiled social issues based on four perspectives, namely (1) degree of impact on society, (2) degree of impact on business, (3) level of importance, and (4) the Company's response status. Step.04 Determining the goals to be tackled by the Company: Nine social issues identified through discussion and evaluation were set as goals to be tackled by the Company. They were arranged into four groups based on their characteristics, and materiality categories were determined for these groups. Step.05 Determining the appropriateness of the goals: The opinions of stakeholders were again summarized, and the appropriateness of the determined goals was discussed and evaluated by the Board of Directors.

Risks, Opportunities and Major Initiatives for Materiality in FY2023

Category	Materiality	Risks and Opportunities	Major Initiatives
Environment Protecting the global environment with the introduction of new equipment, technologies, and fuels and the utilization of DX	Achieving a decarbonized society Active introduction of new equipment and technologies Utilization of renewable energy Proactively adopting energy-saving technologies KPI GHG Reduction Ratio	(Risks) Accelerated obsolescence of owned assets and intellectual capital, such as know-how Changes to maritime cargo movement due to decarbonization, resulting in reduced cargo volume Extreme weather interfering with navigation or building safety (Opportunities) Providing eco-friendly services to customers at a reasonable price Taking various environmental regulations in advance and working with customers to implement new technologies Capturing the demand for new maritime cargo movements generated from the introduction of non-fossil fuels	Construction and delivery of vessels equipped with dual-fuel main engines Installing rotor sails that harness the propulsive forces of the wind on VLGC equipped with dual-fuel main engines and dry bulk carriers, and introduction of a route optimization system Collaborating with startups to comply with CII Formulating a roadmap towards a decarbonized society Completing the environmentally-friendly seven-story wooden office building in Dallas, U.S. Conducting GHG observations with the National Institute for Environmental Studies (Installing atmospheric monitoring equipment on our VLCC) Conducting demonstration tests of biodiesel fuels Consideration of carbon credits Compliance with the EU-ETS emissions trading scheme within the EU region Procurement of stable and long-term environmental value from Akita Sarukawa Solar Power Plant Procurement of J-Credit from domestic forests for greenhouse gas reduction Introduction and launch of internal carbon price (ICP) with the aim of promoting decarbonization investment
	Reducing air pollution and waste Using low-sulfur fuels Reducing plastic use,Promoting the 3Rs		Installation of high-performance water producing equipment on VLCCs for reducing plastics Installation of an automatic PET bottle collecting machine in Hibiya Fort Tower
	Preserving biodiversity Introducing ballast water treatment equipment Forest development		Installation of ballast water treatment equipment Entering into a forest development agreement with Saitama Prefecture Preparation for information disclosure in line with TNFD recommendations Supporting the "Blue Economy Project to nurture a rich sea" in Shunan City, Yamaguchi Prefecture
Social Providing safety and security to each stakeholder Securing diverse human resources and utilizing them as human capital Respect for human rights Collaboration with the supply chains	Safety and security Developing safe workplace environments Preventing accidents Promoting action on human rights, including throughout the supply chain KPI Number of Serious Accidents	(Risks) Severe negative impact on the local community due to accidents Decline in corporate competitiveness due to inability to respond to human capital diversification and development Accidents occurring due to human error in connection with deteriorating labor environment Loss of credibility and possible spillover to management risks due to human rights violations occurring not only internally but in the supply chains (Opportunities) Ability to provide even more stable services by reducing the accident incidence rate, contributing to improved customer satisfaction Improved productivity due to the accumulation of human capital Developing a resilient organization through the active exchange of diverse human resources	Having the Safety and Environment Committee perform a detailed examination of various measures formulated to prevent accidents Implementing drills to confirm the effectiveness of response measures when accidents occur Formulating business continuity plans (BCP) based on scenarios of major earthquakes and the spread of infectious diseases Arranging voyage schedules to reduce the workload of seafarers
	Strengthening diversity and human capital Promoting the diversity of human resources and developing an environment that accepts diverse human resources Cultivating and strengthening human capital KPI Percentage of female employees in career-track positions Childcare Leave Utilization Rate Number of Employees with Short-term Overseas Training / Expatriate Experience		Hiring, cultivating, and enhancing diverse human resources (foreigners, mid-career workers, and female employees) Internally training seafarers for domestic vessel crew members Formulating a social contribution policy Conducting an engagement survey for our employees
	Action on Human Rights Promoting action on human rights, including throughout the supply chain KPI Human rights training attendance rate		Establishing the working group that spans the company Supporting the UN Global Compact Establishment of IINO Group Sustainability Policy Formulating a human rights policy Implementing human rights due diligence Formulating the Procurement Policy and Supplier Code of Conduct Conducting supplier survey about human rights Making a declaration concerning the UK's Modern Slavery Act Establishing external whistleblower system Conducting human rights training to our group employees
Governance Enhancing governance and pursuing management transparency	Compliance Including Anti-Corruption Preventing corruption, dealing with antisocial forces, complying with antitrust laws	(Risks) Scandals and loss of public trust due to inadequate functioning of governance and internal control Unexpected losses from excessive risk taking or loss of opportunity to enhance corporate value due to excessive risk avoidance (Opportunities) Putting into practice management accounting from the perspective of each stakeholder through enhanced governance Appropriately managing risks and returns and implementing investment to enhance corporate value	Formulating an anti-corruption policy Conducting training on insider trading regulations and harassment prevention workshops Establishing competition law compliance policy
	Developing more sophisticated risk management Developing a system for appropriate risk taking		The Board of Directors, the Risk Management Committee, and the Management Audit Office, which is the internal audit department, jointly manage risks. Holding Investment and Loan Committee meetings
	Enhancing corporate governance Strengthening internal control Establishing a management structure for addressing each ESG issue		Appoint an independent outside director as chair of the Nomination and Remuneration Committee Introduced performance-based compensation based on CDP scores and bonuses that take into account the occurrence of serious accidents to the existing executive compensation system. The effectiveness survey conducted by a third-party questionnaire from the perspective of further enhancing the independence and objectivity of the evaluation Increase in number of directors with the appointment of two female directors Shorten the term of office of Directors (from two years to one year)

Materiality Matrix

Regarding social issues that are related to the businesses of the IINO Group, based on dialogue with stakeholders and individual questionnaires, we have summarized the social issues that are important to stakeholders, and discussed and evaluated those issues at the Board of Directors meetings based on their level of impact on and importance to society and the IINO Group's businesses, and from the perspective of the status of the Company's response. Nine of these social issues were identified as targets to be tackled by the IINO Group and plotted based on their level of impact. Permanent materiality, safety and security are positioned at the highest level outside the bounds of the matrix, indicating that the IINO Group has declared "ensuring safety" as part of its corporate philosophy and reflecting its strong determination to put the greatest emphasis on safety and security among the values it provides to stakeholders through the Shipping and Real Estate businesses.

Related Information

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