Sustainability

Materiality

ESG Policy

PHC Group is committed to the long-term sustainability of our business. Our mission is to contribute to the health of society through our diligent efforts to create healthcare solutions that have a positive impact and improve the lives of people, and we recognize that this positive impact can be achieved through dedicating ourselves to high standards in ESG issues.

We have identified 11 key ESG issues (or materiality topics) where we believe we can make a direct impact as a global business, and corresponding key performance indicators (or KPIs) for each topic. PHC Group will link our ESG activities with the goals outlined in our mid-term plan, or “Value Creation Plan,” and report on how our businesses are contributing to the sustainable development of society.

Mission Mid-Term Plan

Process for Identifying PHC Group Materiality Topics

In late 2022, PHC Group formed an internal committee, headed by our COO and CSO and including leaders from each of our global business divisions, regions, and corporate functions, to help shape our shared ESG strategy.

STEP1

Identification of materiality universe

We developed a comprehensive list of potential ESG issues to consider addressing as a company, based on respected global sustainability standards and indices including the GRI (Global Reporting Initiative), SASB (Sustainability Accounting Standards Board), SDGs, and International Organization for Standardization (ISO26000).
STEP2

Materiality assessment

We evaluated the list of potential materiality topics based on two factors: importance for society and external stakeholders, and importance for PHC Group to realize our mission and achieve our stated business goals. To weigh these factors, we surveyed and interviewed customers, suppliers, business partners, and employees to collect insights on which topics most resonated with our stakeholders.

We also held internal workshops in each business division and corporate function globally. We combined feedback from surveys, interviews, and workshops to narrow the list of potential materiality topics to a final short list of topics that are highly relevant to PHC Group’s business and on which we can make a direct impact.
STEP3

Target setting

We conducted external research of industry trends and reviewed internal data from across our businesses to identify priority issues on our short list for which to set targets. We then collaborated closely with each of our business divisions and corporate functions to align on specific, measurable, time-bound targets.
STEP4

Adoption

After approval by PHC Group’s Management Committee, we presented our ESG policy, materiality topics, KPIs, and targets to the Board of Directors for formal approval and adoption by PHC Group.

ESG Matrix	Materiality	KPI	Targets^*1	FY23 Actual, Progress	Fiscal Year 2024 Actual, Progress;
Environment	Climate Change^*2	Scope 1 & 2 CO₂ emission reduction	Carbon neutral by 2040 42% reduction (vs. 2023) by 2030	Scope 1: 15,861 tCO2e (base value) Scope 2: 35,304 tCO2 (base value)	Scope 1 & 2: 50,259 tCO₂e vs. base year: -1.8% (-906 tCO₂e)
	Climate Change^*2	Scope 3 CO₂ emission reduction	25% reduction (vs. 2023) by 2030	Scope 3: 793,687 tCO2 (base value)	Scope 3: 804,771 tCO2e vs. base year: +1.4％（+11,084 tCO2e）
	Preservation of Natural Resources	Percentage of reduction of water withdrawal at production sites / labs on a per revenue basis	15% reduction (vs. 2023) by 2030	1.2 m³/million JPY (base value)	1.1 m³/million JPY vs. base year: -8% (-0.1 m³/million JPY)
		Percentage of reduction of packaging material on a per revenue basis	10% reduction (vs. 2023) by 2030	12.8 kg/million JPY (base value)	10.4 kg/million JPY vs. base year: -19% (-2.4 kg/million JPY)
		Percentage of reduction of waste generated at production sites / labs on a per revenue basis	20% reduction (vs. 2023) by 2030	17.0 kg/million JPY (base value)	16.6 kg/million JPY vs. base year: -2% (-0.4 kg/million JPY)
	Circularity	Percentage of total waste recycled at production sites / labs (excluding thermal recycling)	90% by 2030	46%	50%
	Circularity	Percentage of recycled content in plastic packaging materials	10% by 2030	0%	2.2%
Social	Creating Healthcare Innovation that Supports Business Development	Number of new patent applications (including design and utility models)	-	155	164
		Number of registered patents (including design and utility models)	-	4,306	4160
		Number of new products and services launched	-	93	55
		Sales in growth fields (Advanced Therapy Development, Digital Health, Personalized Testing and Diagnostic)	86.0 bn JPY by 2025	41.0 bn JPY	39.4 bn JPY
	Product Excellence	Number of warning letters issued (e.g., FDA warning letter)	0	0 (achieved)	0 (achieved)
	Product Excellence	Number of recalls issued	-	2	3
	Enhancement of Supply Chain Management	Percentage of response rate to PHC Group supplier survey^*3	95%	95% (achieved)	95% (achieved)
	Expanded Access	Consolidated sales in emerging and developing markets	-	49.3 bn JPY	56.2 bn JPY
	People & Culture	Ratio of gender diversity at manager level or above	Female ratio: 30% or higher by 2030	-^*5	24.3%
		Employee Engagement Score: increase from the previous year	1 point+ improvement vs. PY	62 YoY -1pt	67 YoY +5pt (achieved)
		Enhanced employee learning and skill development	-	PHC Academy Skill Database	PHC Academy (Next Generation) Sikill Databese
Governance	Trengthening Corporate Governance	Percentage of nationality diversity of the Board of Directors	-	25％	30%
		Board effectiveness assessment	1/year	1 (achieved)	1 (achieved)
		Number of meetings with institutional investors and securities analysts	-	95	106
	Risk Management	Number of Enterprise Risk Management Committee meetings	2/year	Kick-off held	4 (achieved)
	Risk Management	Percentage of employees taking compliance training (e.g., code of conduct, insider trading)	100%	100% (achieved)	100% (achieved)
	Cybersecurity	Percentage of employees who participate in information security and data protection training	100%	100% (achieved)	100% (achieved)
		Biannual vendor security reviews - percentage of critical vendors reviewed^*4	100%	100% (achieved)	100% (achieved)
		Number of PHC Group Cybersecurity Committee meetings	4+/year	4 (achieved)	4 (achieved)

*1KPIs for which it is difficult to set appropriate targets are displayed as “-”. Targets for items under discussion will be disclosed as soon as they are set.
*2Greenhouse gas (GHG) emissions categories are based on the GHG Protocol as outlined below:
Scope 1: Direct emissions from the company through the combustion of fuel, etc.
Scope 2: Indirect emissions as a byproduct of energy generation such as the above or purchased electricity
Scope 3: Indirect emissions other than under Scope 2 (purchased products or services, transportation, disposal of sold products, etc.)
*3This covers the major suppliers for materials procurement in each business unit.
*4From the viewpoint of information security, the scope applicable to ISMS certification within Japan became included in fiscal year 2023. In fiscal year 2024, it has been expanded to cover the entire PHC Group.
*5The ratio of female managers (on a consolidated basis) for fiscal year 2023 has not yet been compiled, so it is omitted from this chart.

SDGs Matrix

The matrix shows how the materiality topics that PHC Group has chosen are related to the 169 goals of SDGs, a widely adopted global framework of sustainability targets.

SDGs Matrix (PDF)

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