In the Value Creation Plan 2027, PHC Group defined the growth areas of our business, clarified the pillars that will drive future business growth, and declared our commitment strengthening our approach to sustainability. Today, the entire Group is working together to drive the role of sustainability as a core component to Group management.

Sustainability Structure & Governance

PHC Group has established a Sustainability Committee, which operates under the oversight of the Board of Directors. The committee, chaired by the President and CEO, who also serves as Representative Director, and comprised of the executive officer responsible for sustainability (vice chair), CxOs, and business unit heads, meets quarterly. Heads of corporate functions at the holding company and sustainability team leaders of each business unit attend as observers, creating a structure that allows insights from the field to be reflected in deliberations.

The objectives of the committee are to discuss and examine the Group’s overall sustainability-related strategies and measures before Board of Directors and Executive Committee meetings, determine concrete processes and share the latest external knowledge concerning sustainability and ESG so that decisions can be made from a management perspective. Priority areas for the committee include ensuring business continuity and competitiveness, promoting initiatives that will contribute to Group growth, ensuring compliance, enhancing customer responsiveness, and improving ESG evaluations.

The Sustainability Committee is responsible for identifying PHC Group materiality topics, determining the related key performance indicators (KPIs) and targets, evaluating performance, providing improvement instructions, and monitoring. Additionally, the committee oversees group-wide sustainability initiatives, including compliance with new regulations and guidelines, and conducts discussions and deliberations related to sustainability matters and decision-making.

Beginning in fiscal year 2026, the committee established topic-specific subcommittees, including the Environmental Subcommittee and the Human Rights Subcommittee. These subcommittees perform more detailed monitoring of key topics that should be addressed across the Group, promote topic-specific measures, and report the results to the Sustainability Committee.

Sustainability Management Structure Chart

Decisions made by the Sustainability Committee are directed to the Sustainability Team, which includes representatives from each business unit and corporate function across PHC Group. This team oversees the implementation of initiatives to achieve sustainability targets and advances other sustainability-related activities, forming a group-wide framework for sustainability management. Matters reported, discussed, and deliberated in the Sustainability Committee are submitted and reported to the Executive Committee and the Board of Directors in accordance with internal regulations. Based on these reports, the Board of Directors manages and oversees the appropriateness, effectiveness, and risks of sustainability initiatives. In fiscal year 2025, the committee submitted sustainability reports to the Board three times, and on one such occasion, the Board resolved to approve two agenda items: updating the Group’s human rights policy and setting the Group’s 2050 net zero greenhouse gas (GHG) emissions target.

Sustainability Risk Management

To address sustainability-related risks to PHC Group’s business, the Sustainability and Risk Management Departments collaborate closely to conduct risk assessments, taking into account changes in both internal and external environments. Specifically, sustainability-related risks and opportunities are identified, assessed, and managed through the following process.

Identification and assessment

The Sustainability Committee and its subordinate subcommittees periodically identify, review, and assess sustainability-related risks and opportunities based on the Group’s management strategies and business environment, taking into account changes in the business environment such as regulatory trends, market conditions, and stakeholder expectations. In performing such assessments, response priorities are set by considering the degree of impact on business and the likelihood of occurrence.

Risk assessment by topic

For topics deemed to be of high importance, the Sustainability Committee conducts risk assessments covering the entire value chain. Regarding climate change, GHG emissions including supply chain emissions are calculated and risks are assessed based on scenario analysis. With regard to human rights, human rights due diligence activities are performed across the Group’s value chain. In light of regulatory developments in Europe, PHC Group is progressing its due diligence efforts regarding battery-related products.

Integration with Group-wide risks

The Sustainability Committee evaluates identified risks and corresponding countermeasures and manages them in coordination with the Risk Management Committee. Sustainability-related risks determined to be of high importance Group-wide are managed by integrating them into key risks addressed by the Risk Management Committee. To address key topics including human rights due diligence and responses to European regulations, the Sustainability and Risk Management departments have formed a joint project team to drive an integrated approach from risk identification through the development of countermeasures.

Co-Creation Across Regions: Global ESG Workshop

PHC Group’s sustainability initiatives are driven not by the unilateral leadership of its Japan-based holding company, but through collaboration across regions and functions with global members, including those in Europe, a region at the forefront of ESG. In February 2026, members from relevant head office functions and global Group companies gathered, both in person at our Tokyo headquarters and online, for an ESG workshop featuring an external lecturer to discuss the identification and assessment of double materiality.

During the workshop, participants shared information on European ESG disclosure regulations (CSRD and ESRS), trends concerning the Sustainability Standards Board of Japan, how investors view the relationship between sustainability and financial impact, effects of sustainability activities on business, and best practices from other companies. Rather than being bound by conventional methods, the participants discussed and adopted whatever approaches were appropriate at the time, and the PHC Group value of “Respect & Collaboration” was reflected in the implementation of the workshop.

Workshop participants shared challenges with common themes. For instance, successful ESG initiatives depend on collaboration among multiple departments, and the definition, quality, and central management of data are keys to future action. At the same time, participants shared the view that ESG is directly linked to investor trust, business continuity, and the competitiveness required to remain a preferred choice among customers, and that it supports the creation of long-term corporate value. This type of dialogue among internal stakeholders from different regions, businesses, and functions helps to support and shape PHC Group’s sustainability strategy. Insights gained through these discussions are also contributing to the Group’s assessment of double materiality for the next mid-term management plan.