Material Issues and Primary Measures

Identification of Material Issues

S.T. Group aims to achieve sustainable growth and improve corporate value by contributing to the sustainability of the environment and society. We identified material issues for the environment, society, and our corporate group with the following steps, amid the significant changes of the times toward sustainability.

Identified material issues and Primary Measures

Material Issues	Issues	Measures (for solving issues and helping completing strategies)	KPIs (indicators for evaluating the progress of measures for solving issues)
Shifting the focus from existing businesses to growth businesses	Strengthening the profitability of existing business	Adding high value based on our portfolio strategy	Rate of improvement in operating income in the existing business domain
	Entering new markets	Nurturing new businesses in the BtoB market	Sales in the BtoB business
		Establishing a foundation for growth in the ASEAN market	Completing preparations for entering new markets, establishing sales channels, and operating business in the markets
		Developing foundations for creating new businesses and entering new fields	Launching business in a new domain
Responding to changes in consumer preferences and purchasing behavior	Generating new products and new businesses for the new era	Enhancing the development of functional materials	Disclosing subject technologies and research outcomes, including patents
	Responding to changes in buying behavior (diversifying preferences and lifestyles) through digital transformation (DX)	Improving marketing ROI by utilizing digital technologies ● Cementing the cooperation in marketing and communication ● Measurement of the effects of marketing communication	Rate of improvement in ROAS based on MMM*
		Product development based on digital technologies	Utilization of AI in marketing processes
Creating a system for co-creation of value and securing human resources	Creating an organization capable of innovation and securing human resources	Strengthening human capital that can trigger changes (DE&I, recruitment, education, and evaluation systems)	Situation of development of next-generation leaders Ratio of female managers
		Training of personnel for companywide DX and improvement of digital skills of employees	Ratio of DX promotors
		Realization of a working environment in which employees can feel their jobs are worthwhile (work-life balance (WLB), safety, and peace of mind)	Worthwhileness of jobs, satisfaction level about WLB, performance exertion level
		Education for promoting employees to understand human rights and the policy for occupational safety and health	Status of education (formulation of execution plans, production of teaching materials, video streaming, etc.)
	Improvement in labor productivity and creation of innovative work through the utilization of IT and AI	To improve the efficiency of business operations by utilizing AI for the purpose of achieving innovation and developing a dedicated environment	Improvement of the efficiency of business operations based on AI
	Establishment of a sustainable supply chain	Reduction of the CSR risk in the supply chain ● To hold briefing sessions so that suppliers will understand our “procurement policy” and “responsible procurement guidelines of the S.T. Group” ● To conduct SAQ for checking each supplier’s response to and compliance with our guidelines	Ratio of suppliers that have attended our briefing session Ratio of suppliers that have undergone SAQ
	Establishment of a sustainable supply chain	Assessing geopolitical risks, transportation risks, etc. and improving procurement activities for stable procurement (including procurement from multiple suppliers)	Status of regular risk assessment Status of implementation of measures against risks
Promoting environmental protection activities	Request for and realization of decarbonization	Management and reduction of GHG emissions	Rate of reduction of GHG emissions (Scopes 1 and 2) To grasp GHG emissions (Scope 3)
Promoting environmental protection activities	Addressing resource depletion and the circular economy	Promoting the environmentally friendly design (3R) of products for saving resources and plastics	Achievement rate of environmentally friendly design standards (ratio of products with the “Minnade-Eco” label)
Promoting clean, fair, and honest corporate governance as a true public company	Building a resilient management foundation	Enterprise risk management (ERM) ● Identification and assessment of major risks ● Monitoring of the specified 11 major risks	Status of identification and assessment of major risks Status of monitoring of the specified 11 major risks
		Prevention of risks and swift response to risks ● Development of systems for managing BCP and BCM ● Prevention of incidents and swift response to incidents	Monitoring of the status of application of the written basic policy for BCM Status of production of a manual for incident management
		Further revision of the management structure for improving quality management in a sustainable manner	Status of formulation of a quality policy Status of development of a management system based on the policy (a quality assurance committee)
		Rigorous management of compliance and business ethics ● To educate employees so that they will understand the compliance with laws ● To develop guidelines regarding improper transactions, such as bribery	Status of education for deepening the understanding of laws and regulations that are likely to be violated Status of formulation of guidelines regarding improper transactions, such as bribery
	Enhancement of the supervision function of the management	Improvement in transparency and effectiveness of business administration ● Implementation of measures for solving the issues assessed by the board of directors (effectiveness) ● Development of a process for appointing directors (skill matrix) ● Enrichment of a succession plan for executives	Status of implementation of measures for solving the issues assessed by the board of directors Status of development of a process for appointing directors (skill matrix) Status of production of succession plans for female executives and others

* MMM = Marketing Mix Modeling, which is a method for statistically analyzing and visualizing how much various marketing measures, including TV commercials, digital ads, and price promotion, have contributed to the outcomes of business, such as sales and the number of contracts