Value Creation Process and Materiality｜Fuyo Lease Group's CSV

Fuyo Lease Group’s Value Creation Process

The Fuyo Lease Group's value creation process, which emphasizes CSV (Creating Shared Value: the simultaneous realization of corporate value and social value) management, is to achieve sustainable profit growth while solving social issues in the areas of “environment” and “society and people” through business in various domains. To achieve the vision for 2030 under this process, the Medium-Term Management Plan Fuyo Shared Value 2026 concentrates investment of management resources on the growth drivers selected from the multiple business domains the Group possesses and is engaged with emphasis on organizational and structural support for sustainable value creation, such as human resource investment and DX, and building partnerships with customers.

Fuyo Lease Group’s vision for 2030: “Contributing to the realization of a prosperous society and sustainable growth” SUSTAINABLE DEVELOPMENT GOALS Energy environment: Globally contribute to the realization of a decarbonized society through domestic and international energy-related businesses, Circular economy: Become a platform for a circular economy and contribute to the realization of resource circulation through business, BPO /ICT: A leading company that creates time for customers to create value through “Business Process Services (BPS).” Mobility, Real Estate, and Aviation: Solutions that contribute to solving social issues in areas such as vehicles, logistics, real estate, and aircraft. Providers, Healthcare: We support the maximization of the value of management resources of medical and nursing care providers and contribute to improving the quality of medical and nursing care in Japan. Human Capital: Employees with diverse qualities, talents, and charms leverage their strengths. In order to achieve these six goals, we have developed a medium-term management plan, Fuyo Shared Value 2026 (Sustainable growth through the simultaneous realization of economic value and solving social issues through human growth and dialogue). has been formulated. This strategy aims to realize CSV by treating financial goals (corporate value) and non-financial goals (social value) as equally important. In addition, through organizations and systems that support sustainable value creation, transformation of growth drivers (energy environment, circular economy, BPO/ICT, mobility, healthcare) through human resources investment and DX, and performance zones, we will achieve sustainable profit growth and financial Improving soundness, maintaining and improving capital efficiency, and resolving social issues (environment, society, and people) are defined as social values that should be realized. These are also relevant to customers as they create value through partnerships. Corresponds to SDG 17, “Strengthen the means of implementation and revitalize global partnerships for sustainable development.”

Materiality

We have identified materiality as an important item in relation to the key elements of the value creation process of environment, society and people, organizational and structural support for sustainable value creation and value creation through partnerships. Non-financial KPI and targets for fiscal 2026, the final year of the medium-term management plan, have been set for each materiality issue, and we monitor progress while moving forward on each materiality issue.

Identifying Materiality

STEP 1 Determining a vision for 2030: Based on our CSV approach, we discussed and determined a vision of how we want each business area in each domain to be in 2030, taking into account what the world will be like in 10 years’ time.

STEP 2 Considering important issues: While drawing up the medium-term management plan, we specified the 2030 Vision of each business domain and, back casting from this, identified important issues where there are strong needs to create social value and business opportunities.

STEP 3 Discussions in each domain and at management level: During discussions^* on drawing up the medium-term management plan, we positioned non-financial issues with equal weighting to financial issues and discussed the suitability of each non-financial issue while taking into account a long-term strategy.

*

Discussions were carried out in a multi-layered manner throughout fiscal 2021, with outside directors taking part in discussions over several occasions.

STEP 4 Setting non-financial KPI: As KPIs to monitor the progress of each important issue, we have set appropriate indicators and goals in alignment with the Medium-Term Management Plan Fuyo Shared Value 2026.

STEP 5 Discussion and approval at the Board of Directors: Discussed by the Board of Directors and approved by the Board of Directors based on the opinions of outside directors.

Materiality for Fuyo Lease Group

The Materiality identification process shown above identified eight material issues to be addressed through our new Medium-Term Management Plan Fuyo Shared Value 2026.

1.

Contribution to the realization of a decarbonized society
2.

Contribution to the realization of a circular society
3.

Delivery of reassurance by ensuring health and welfare
4.

Creation of new value creation time
5.

Strategic human resources development
6.

Diversity and inclusion
7.

Health and productivity management, work-life balance
8.

Value creation through partnerships

Targets and Results of Materiality (Creation of Social Value through Business Activities)

Environment

1.Contribution to the realization of a decarbonized society

Non-Financial KPI	FY2023 Results	FY2026 Targets
CO₂ emissions reduction contribution	330,000 t-CO₂ / year^*1	500,000 t-CO₂
Amount invested in promoting decarbonization^*2	¥151.3 billion	Total of ¥300.0 billion over five years
Renewable energy power generation capacity	705MW^*1	1,000MW
Percentage of Group vehicles that are EVs or FCVs (percentage held by Fuyo Auto Lease)	1.0%	30%
Amount of financing handled for the promotion of decarbonization^*3	¥13.5 billion	5-year cumulative total ¥ 15.0 billion

2.Contributing to the realization of a circular society

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Percentage of returned items that are reused or recycled^*4	100%	100%
Percentage of materials / chemicals contained in waste plastics (from returned items) that are recycled^*4	45.3%	100%

Society and people

3.Delivery of reassurance by ensuring health and welfare

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Number of new rooms provided at elderly care homes	763 rooms	5-year cumulative total 1,330rooms
Management support-related financing in medical and welfare markets^*5	¥22.9 billion	¥56.0 billion

4.Creation of new value creation time

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Work hours saved by our customers	+490,000 hours	+1 million hours compared to FY2021

Organizational and structural support for sustainable value creation

5.Strategic human resources development

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Human resource development-related expenses (non-consolidated)	249%	300% compared to FY2021
	Cost per person^*6 ¥212,590	300% compared to FY2021

6.Diversity and inclusion

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Percentage of female employees in management positions (non-consolidated)	32.2%	35%
Percentage of eligible male employees who have taken childcare leave^*7 (non-consolidated)	108.3%	100%

7.Health and productivity management, work-life balance

Non-Financial KPI	FY2023 Results	FY2026 Targets
Percentage of employees aged 35 or over who have had a health examination (non-consolidated)	100%	100%
Rate of taking annual paid leave (non-consolidated)	93.3%	90%
Rate of taking the +Friday system (non-consolidated)	88.7%	No quantitative target
Percentage of improvement in engagement indicators^*8 (consolidated)	3.47	No quantitative target

Value creation through partnerships

8.Value creation through partnerships

Non-Financial KPI	FY2023 Results	FY2026 Targets	Relevant SDGs
Investment in venture companies that have technologies and services that will create new social value	Investment Record JSH Co., Ltd. EV Motors Japan Co., Ltd. Japan Wind Tunnel Manufacturing Inc. H.I.F. Co., Ltd. Folofly Inc.	No quantitative target

*1

The Company has evaluated the accuracy of its calculations of its contribution to CO₂ reduction and its renewable energy generation capacity, and as a result has determined that these have been calculated accurately based on our calculation criteria(*). To assist in this determination, we have asked a third party (Ernst & Young ShinNihon LLC) to conduct agreed-upon procedures (the “procedures”) in accordance with the Professional Guidelines 4440 “Practical Guidelines on the Agreed-upon Procedures” of the Japanese Institute of Certified Public Accountants. Said procedures involve the third party to conduct the procedures agreed upon with the Company and to report the results to us, and do not constitute audits, reviews or other such assurance services.
(*) Calculation criteria:
[Contribution to CO₂ reduction]
Accounting rules established by the Company to calculate the amount of CO₂ estimated to have been reduced by providing facilities and services that contribute to decarbonization (investment in renewable energy projects, project financing, etc., and conversion of customer-owned vehicles to EVs and FCVs, ESCO projects).
[Renewable energy generation capacity]
Accounting rules established by the Company to calculate generation capacity based on equity ratios and loan percentages, applied to investment in renewable energy projects, project financing etc.,
*2

Applies to investments in renewable energy facilities, energy-saving facilities, electric vehicles (including charging equipment), batteries, hydrogen and ammonia-related facilities, CO₂ separation and recovery technologies (CCUS, DAC), circular-related facilities, ZEB / Green buildings, SAF and start-up companies.
*3

Covers the Fuyo 100% Renewable Electricity Declaration Support Program, the Fuyo Zero Carbon City Support Program and the Fuyo Circular Economy Lease
*4

Applies to leased (rental) assets returned to the Hachioji Technical Center of FGL Circular Network Co., Ltd.
*5

The balance of operating assets for financing related to FPS Medical (factoring for medical and nursing care receivables by Accretive) and business succession.
*6

Human resource development-related expenses include training-related expenses (cost of conducting training, costs related to outside courses, etc.) and cost of incentives for self-development (costs related to the cafeteria plan and subsidies for obtaining certifications, etc.). They also include an estimate of expenses attributable to the fiscal year under review out of all expenses related to the training center located in Toyosu, newly established during the fiscal year under review (including lease rent, depreciation expenses for furniture and fixtures, construction and installation costs associated with the new establishment, etc.). Human resource development-related costs are divided by the average number of employees during the period under review (covering core employees, career-track employees, operations employees, temporary employees and contract employees who are eligible to receive cafeteria plan self-development points) to calculate the per-person human resource development-related cost.
*7

Childcare leave taken percentage is calculated as the ratio of the number of employees who took childcare leave during the relevant fiscal year to the number of employees eligible for childcare leave during the relevant fiscal year (number of people who had a child within the fiscal year).
*8

This is a measure of the average response value to eight items on an employee awareness survey, including job satisfaction, providing value to society, growth and others. Survey results cover 14 companies in Japan out of the Group’s main companies.