Identification of Material Issues

Under a Corporate Philosophy of “We will meet people’s needs for energy without fail, and play our part for the sustainable development of Japan and the rest of the world,” the J-POWER Group has worked to improve its corporate value by contributing to the achievement of an affluent society through its business activities.

To further improve our corporate value, we identified social issues of importance to the J-POWER Group, and, taking into consideration factors including the interests of stakeholders, relationships with our Corporate Philosophy, and impacts on our business, identified five issues that are material for us: supply of energy, response to climate change, respect for people, engagement with local communities, and enhancement of our business foundation.

In addition to making the identified material issues well-known within the Group, we will integrate them into our business strategy, will formulate goals and KPIs for each issue, and will make contributions to achieve the SDGs through our initiatives.

Meanings of material issues

Material Issues		Contributions to SDGs
Supply of energy	The J-POWER Group’s corporate philosophy states, “We will meet people’s needs for energy without fail, and play our part in the sustainable development of Japan and the rest of the world.” As such, the supply of energy is not only the Company’s main goal but also the cornerstone for addressing a number of social issues.
Response to climate change	Energy supply and climate change response are social issues that cannot be taken into consideration separately in light of the growing global concern over climate change. The J-POWER Group aims to balance stable energy supply and adaptability to climate change by leveraging its technological capabilities.
Respect for people	As the activities of the J-POWER Group are supported by our employees and other human resources, we will create an environment in which they can play an active role. We will also proactively address related social issues such as diversity and human rights.
Engagement with local communities	Large-scale energy supply projects have an impact on local communities and the environment. They are only possible with the understanding of local residents. Therefore, we will work to preserve the local environment and build relationships of trust with local communities.
Enhancement of our business foundation	We will work to ensure corporate governance and compliance as we strengthen our earnings and financial base so that we can solve social issues and increase corporate value through our business activities.

Identification process

Under our Corporate Philosophy of “We will meet people’s needs for energy without fail, and play our part in the sustainable development of Japan and the rest of the world,” the J-POWER Group has contributed to the achievement of an affluent society through its business activities. In 2021, we identified social issues that are important to the Group, and have identified five material issues, taking into consideration the interests of our stakeholders, the relation with our Corporate Philosophy, and the impact on our business. After preparing a materiality proposal based on third-party opinions, the Sustainability Promotion Committee and the Executive Committee discuss it, and then the Board of Directors makes a resolution. We have decided to set targets (KPIs) for 2022 and further disclose actual results in 2023, as well as to add five material issues as non-financial indicators to the evaluation indexes for executive compensation (performance-linked remuneration). By strengthening ESG management while applying PDCA cycle of initiatives of material issues, we will work to enhance our corporate value over the medium- to long-term.

Identification of social issues: We identified socially important issues, with reference to the SDGs, key ESG issues, global trends, international standards such as ISO 26000 and the GRI Standards, etc.
Preparation of opinions on material issues: From the identified social issues, we wrote up opinions on material issues, taking into account the interests of stakeholders, the relationship with our Corporate Philosophy, the impact on the J-POWER Group’s business, and so on, with third-party opinions factored in as well.
Identification of material issues: Following discussions by the Sustainability Promotion Board and the Executive Committee, the Board of Direc- tors made a determination of material issues.

Risks and Opportunities

Identifying Social Issues and Needs	Main Business Environment Challenges and the Associated Risks and Opportunities		Material Issues
	Risks	Opportunities	Supply of energy Response to climate change Respect for people Engagement with local communities Enhancement of our business foundation
Power resilience
Stable operation of electric facilities Being prepared for natural disasters Protecting the local environment	Facility accidents from natural disasters Difficulty in procuring fuel (soaring resource prices, supply shortages, geopolitical risks)	Investment in aging facilities Investment in network facilities
Changes in the business environment
Changes in the electric power business system Changes in society’s perception of nuclear power	Revenue fluctuations due to changes in market value Decreasing electricity sales Delay in starting operations at Ohma Nuclear Power Plant	Strengthen revenue and financial base Overseas business development Promote safe nuclear power generation business
Climate change
Development of renewable energies Exploration of CO2-free hydrogen CO2 reduction, Carbon Capture Storage (CCS) promotion	Profit deterioration due to CO2 emissions regulations Difficulties in implementing CCS in society Difficulties in securing suitable land for renewable energy	Development of CO2-free hydrogen Development of CO2-free power sources Network enhancement
Transition to a digital society
Digital transformation (DX), cybersecurity	Cyber attacks Delayed use of digital technologies	Improve productivity by upgrading equipment maintenance Strengthen IT risk system, improve IT literacy
Domestic population decline, depopulation
Human resource development Regional revitalization	Difficulty in maintaining technological capabilities Less workers in rural areas	Use of diverse human resources Improve productivity through streamlining work
Growing interest in ESG
Corporate Governance Enforcement of compliance Improved information disclosure	Decline in reputation Increased difficulty in raising funds	Attract ESG investment Strengthen governance Strengthen compliance

Goals of Material Issues（KPIs）

The progress of our material Issues is documented in the integrated report.

Supply of energy

Action Initiatives	Goals (KPIs)
Stable operation of electric facilities	Electricity Sales: Achieve initial fiscal year forecasts
Preparation for/and response to natural disasters	Appropriate review of BCP based on the latest knowledge Expanded facility measures and crisis management system (including education and training)
Strengthening of cybersecurity	Zero major security incidents

Response to climate change

Action Initiatives	Goals (KPIs)
Reduction of greenhouse gases	CO2 reduction from the domestic power generation business (compared to FY2013) Reduction of 9.2 million tons by FY2025 Reduction of 46% (22.5 million tons) by 2030
Development of renewable energy	Increase the electric power generated from domestic renewable energy by 4.0 billion kWh/year by FY2030(Compared to FY2022)
Steady promotion of the Ohma Nuclear Power Plant Project, with safety as a major prerequisite	Promotion of the CO2-free Ohma Nuclear Power Plant Project on the basis of safety
Pursuit of the possibility of CO2-free hydrogen	Promotion of green and blue hydrogen production and utilization technologies in Japan and overseas

Respect for people

Action Initiatives	Goals (KPIs)
Respect for human rights	Formulation of a Human Rights Policy and promote initiatives Promotion of human rights due diligence based on Basic Policy on Human Rights. Completion of the review within FY2024.
Human resource development	Fostering human resources who can take on various management issues through the creation of a workplace that promotes continuous innovation
Assurance of occupational health and safety	Eliminate major disasters (zero fatalities or serious injuries) Maintain and improve high uptake rate of thorough medical check-ups (over 90%) Employee satisfaction surveys
Promotion of diversity	Number of female employees with senior roles:At least three times the number in FY2021 (24 employees) by 2030 Appointment of foreign nationals to senior roles:Increase from FY2021 (147 employees) by 2030 in line with expanded overseas business Number of mid-career hires among employees with senior roles At least 1.5 times the number in FY2021 (110 employees) by 2030 Percentage of female employees among new hires:20% or more Percentage of employees taking childcare leave: 100%

Engagement with local communities

Action Initiatives	Goals (KPIs)
Preservation of local environment	Zero serious violations of environmental laws and agreements Effective utilization rate of industrial waste: Approx. 97%
Creation of relationships of trust with local communities	Active participation in local contribution activities

Enhancement of our business foundation

Action Initiatives	Goals (KPIs)
Enforcement of corporate governance	Continuous efforts to identify issues and improve them through annual evaluation of the effectiveness of the Board of Directors
Enforcement of compliance	Strengthening efforts through the J-POWER Group Compliance Action Committee via compliance activity reports, understanding the issues, and incident analysis
Strengthening of our revenue and financial base	Consolidated ordinary profit 90 billion yen or more in FY2023 Consolidated equity ratio: 30% or more in FY2023 FY2026 Consolidated ordinary profit: Approx. 90 billion yen ROE: Approx. 5%　Performing assets ROIC: Approx. 3.5%

Linking Officers’ Compensation

From the viewpoint of sustainability management, the Board of Directors decided to introduce five material issues including response to climate change as non-financial targets for the evaluation of performance-linked compensation.

The variable portion of the compensation amounts to approximately 30% of the total, and the system is designed to determine performance-linked remuneration in terms of both financial and non-financial aspects.

The payment percentage for performance-linked remuneration in FY2023　is described in the integrated report.

P.96 J-POWER Group Integrated Report 2024