Materiality

Materiality supporting Asset Assembler model

We will aim for MSV by using sustainability activities centered on initiatives on materiality that support Asset Assembler model.

Nippon Paint Holdings is pursuing MSV as its sole mission and believes, first and foremost, that the fulfillment of obligations to customers, suppliers, employees, society, and others is the major premise for accomplishing this goal. Initiatives for key sustainability issues (materiality), identified in 2020 from a global perspective, require the fulfillment of our obligations and a direct linkage to our businesses, such as identifying new business opportunities and tapping into new markets. Furthermore, these initiatives are also expected to prevent expenses from increasing and reduce business risks by complying with future laws and regulations while responding to supply chain issues ahead of competitors.
Nippon Paint Group continues to use initiatives that are directly linked with business activities and based on a thorough understanding of materiality-related risks and opportunities from a medium- to long-term perspective. In accordance with Asset Assembler model, we are linking these initiatives to the creation of innovations that support the growth of existing businesses. We believe that these initiatives to achieve MSV will result in revenue growth and higher expectations for our value (maximization of EPS/PER).

The materiality identification process

We identified materiality by creating a list of material issues which society requires us to address. This process included international ESG guidelines such as the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) as well as items required by ESG research organizations. We then performed a quantitative evaluation of the issues and verified their significance from two perspectives: the level of importance to stakeholders and the level of importance to Nippon Paint Group’s businesses. In addition, we used external experts to receive objective viewpoints and held discussions with our partner companies around the world to identify material issues associated with our business model and the business environment. These issues were then designated as our materiality.
For more information about our framework for sustainability initiatives and the identification of KPIs, see “Sustainability Strategy”

*Further information about ESG Management system is available here.

Materiality map

Relevant SDGs

Materiality	Relevant SDGs	Explanation of Materiality
Climate Change		The impact of climate change on our daily lives is increasing each year. The Group is doing its part to mitigate the impact of climate change by reducing greenhouse gas emissions while minimizing the business risk posed by the changing climate conditions.
Resources and Environment		The sustainability of our business depends on the effective use of water, energy, and other resources and the prevention of environmental pollution. The Group applies measures in these areas throughout its product lifecycles.
Diversity & Inclusion		Respecting the people around us and embracing diverse values are essential for sustainable business growth. The Group respects human rights and emphasizes the importance of diversity in its employees and all individuals involved in our business operations.
Safe People and Operations		As a chemicals manufacturer, we are constantly assessing the potentially major risks to health and occupational hazards associated with handling chemical substances. We conduct capital investment and education to ensure the utmost safety and to minimize the risks to our employees and all people involved in our businesses.
Growth with Communities		We generate sustaining growth for our business investing in communities through our value chain, expanding our markets, strengthening our brand, and maintaining positive relations with local communities.
Innovation for a Sustainable Future		Today’s society is facing a growing number of problems that cannot be fully solved with methods used in the past. We are actively engaging in partnerships to enhance our ability to generate innovative solutions.

Materiality, Risk, Opportunity, and ESG Agenda

Materiality	Risks	Opportunities	ESG Agenda
Climate Change	Enforcement/change of policies and legal regulations such as introduction of a carbon tax Impact on production and shipment from extreme weather, such as typhoons and heavy rainfalls, that are becoming increasingly common in recent years Changes in customer behavior toward transition to a decarbonized society	Expand the market for environmental products, such as products contributing to decarbonization Develop new businesses through research and development	Reduce greenhouse gas emissions Identify risks and opportunities
Resources and Environment	Impact on business activities from depletion of energy and water resources Tightening regulations on wastes and increase of waste disposal cost Changes in customer needs related to raw materials	Expand the market for environmental products Enhance competitiveness by advancing recycling technologies, improving resource efficiency, and utilizing diverse raw materials	Efficiently reuse waste and use energy, manage water usage volume and environmental pollutants, engage in product stewardship
Diversity & Inclusion	Difficulty securing human resources that satisfy diversity requirements with a decrease in the university graduated population Slowing of business activities that reflect diversity in customer needs	Secure diverse and competent human resource talent as a global company Create wealth for companies, workers, and local communities by creating diverse and inclusive organizations	Increase the percentage of female managers Raise employee engagement
Safe People and Operations	Significant impact on operations if a major accident occurs at a production site Impact on safety assurance due to changes in manufacturing processes accompanying substantial increases in production	Improve worksite safety and hygiene by sharing best practices and education plans from around the world Improve employee motivation and company competitiveness for acquiring human resource talent	Enhance security and disaster prevention (eliminate fire accidents) Prevent occupational accidents and fatal accidents
Growth with Communities	Significant damage to the corporate brand if the company is not perceived as a corporate citizen by local communities Damage to the public image of the paint industry caused by inadequate activities oriented toward the local community	Raise public awareness of the corporate brand through value chain investment in communities Promote healthy community growth through social contribution activities to increase the positive public view of our Group	Establish strategies for social contribution Strategically develop activities for social contribution
Innovation for a Sustainable Future	Significant hindering to future corporate earnings owing to inability to generate innovation due to slow response to new markets	Expand market for products that contribute to controlling and adapting to climate change Offer products and services that address social issues, contribute significantly to society, and help boost corporate earnings in the long term	Promote collaboration among industries Develop products that provide solutions for social issues

Progress & Further Plan of Materiality

Released March 16, 2022

Materiality (Relevant SDGs)

Progress

Further plan

Climate change

Progress

Endorsed the TCFD final report recommendations and commenced disclosure in accordance with the framework Calculated the potential financial impact of a carbon tax Agreed global target for GHG emissions reduction*1 via each partner company developing targets that meet or exceed local government targets Calculated Scope 3 GHG emissions*2

Further plan

Identify each partner company's top climate change risks and opportunities (high level scan) and potential actions Identify each partner company's carbon reduction action plans and develop consolidated group view (H1 2022) Agree objectives for common priority focus areas (e.g. energy efficiency, renewable electricity sourcing, vehicle fleet replacement) and implement

Resources and environment

Progress

Developed and disclose global policy statement for resources and environment (e.g. waste and effective use of resources, water)

Further plan

Identify each partner company's top resources and environment impacts, improvement priorities, and performance measures Agree common priority focus areas (e.g. waste reduction) and objectives for 2022/2023 and implement

Safe people and operations

Progress

Developed global policy statement for safe people and operations (e.g. occupational safety and health)

Further plan

Identify each partner company's top safety risks, improvement priorities, and performance measures Agree common priority focus areas (e.g. fire and fatality prevention) and objectives for 2022/2023 and implement

Diversity & Inclusion

Progress

Confirmed the difference of the situation by each country and region Disclosed the educational programs on a global basis

Further plan

Formulation of human rights policy Implementation of human rights risk assessment Global data aggregation for the human capital management disclosure

Growth with communities

Progress

Established "NIPPON PAINT Group Global Outreach Program" as common framework followed NIPSEA CSR NIPSEA established the concept "Colouring Lives" to have a bigger impact for the whole CSR activities as a group

Further plan

Promote quantification of activities Promote CSR activities and data aggregation under the NIPSEA's concept "Colouring Lives" globally

Innovation for a sustainable future

Progress

Aggregated the sustainable products globally in 2021 Developed the Anti-Viral Paint Products across the group Promoted open innovation with several 3rd parties Initiatives regarding Chemicals of concern/LCA*3 in some companies

Further plan

Define the sustainable product Develop and implement Green Design Review*4 Formulate strategy and roadmap Strengthen the control of Chemicals of concern Develop and leverage LCA*3 capability

*1: Scope1 & 2; intensity basis
*2: Disclosed Scope 3 GHG emissions from our operations in Japan in the Integrated Report
*3: Life Cycle Assessment: A method of quantifying the environmental impacts across the entire life cycle of a product
*4: Our unique framework that integrates the sustainability perspective in product development