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Materiality

In April 2022, we formulated the "The CITIZEN Group Vision 2030" by organizing and backcasting the social issues to be addressed by The CITIZEN Group leading up to 2030 from the perspectives of a sustainable society and a digital society.

In order to realize The CITIZEN Group Vision 2030, we have identified five materiality issues by organizing The CITIZEN Group's materiality issues (important issues for the sustainable enhancement of corporate value) from both internal and external perspectives in terms of business activities and business infrastructure, based on a consideration of the mid- to long-term environmental changes and megatrends.

The CITIZEN Group Vision 2030 and the Identifying of Materiality
Figure

Materiality Identification Process

  1. Step 1: Identification of Social Issues

    Identify social issues based on the mid to long-term social trends, the company's direction, ESG external assessments, reviews, etc.

    • * Reference: SDGs, macro trends in environmental, social, and economic fields, FTSE, MSCI, GRI Standards, ISO 26000, etc.
  2. Step 2: Materiality Assessment of the Social Issues

    Assess the impact on society and the importance of the materiality to the company, and make assumptions about the proposed materiality.

  3. Step 3: Assess the Appropriateness of the Proposed Materiality

    After checking with external experts and a discussion by the Sustainability Committee, reconsider the materiality plan in light of the relevant measures for each business.

  4. Step 4: Identification of the Materiality

    Materiality is identified by the Management Committee and Board of Directors after reaffirmation by the Sustainability Committee.

Figure

Materiality Identified

  • Responding to climate change and contributing to a recycling-oriented society
  • Contributing to a high quality of life
  • Providing solutions in the industrial sector
  • Enhancing job satisfaction and developing human resources
  • Fulfillment of social responsibility

Materiality Opportunities, Risks, and Measures

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E
S
G 		Materiality Opportunity / risk Classification Main measures to be taken in terms of business activities / business infrastructure Applicable businesses
E Responding to Climate Change and Contributing to a Recycling-Oriented Society
13 14 15
Opportunity
  • Expanding demand for products and services that contribute to energy and resource conservation and productivity improvement
  • Progress of CASE
Risk
  • Wind and flood damage at business sites
  • Increased energy costs
  • Dependence on specific industries and customers
  • Violation of laws and regulations concerning the chemical substances contained in products
 Responding to Climate Change
[Business activities]
  • Supply parts for eco-cars (EVs and HVs), sale of LEDs for lighting, etc.
[Business foundation]
  • Reduction of CO2 emissions, expansion of introduction of renewable energy, etc.
 Watches and Clocks
Machine Tools
Devices
Electronics
Others
Contribution to a Recycling-Oriented Society
[Business activities]
  • Sales of photovoltaic and mechanical watches that can be used for a long time
  • Expansion of products using LFV and friction bonding technology, etc.
[Business foundation]
  • Reduction of water consumption, promotion of recycling, management of hazardous chemicals, reduction of packaging materials, etc.
S Contribution to Quality of Life
3 4 5
Opportunity
  • Shift from mechanical to passionate value
  • Shift from treatment to preventive care
Risk
  • Smartwatch proliferation
  • Increased competition in the healthcare market
  • Regulatory changes for medical devices
  • Leakage of personal information
 Contribution to diverse lifestyles
[Business activities]
  • Customized watches and services
  • Personalized experience, loT platforms, etc.
 Watches and Clocks
Devices
Electronics
Others
[Business activities]
  • Providing LCD devices for digital cameras, head-mounted displays, etc.
Contribution to medical and healthcare
[Business activities]
  • Sales of UVC modules with a high bactericidal effect, specimen-holding plates for bacterial analysis, etc.
  • Providing thermometers and blood pressure monitors that are easy for anyone to use
  • Providing digital health care services, "health appointments," etc.
Providing solutions in the industrial sector
08 09
Opportunity
  • Factory automation / labor saving / automation / digitalization
  • Expanding demand for products/services that contribute to manufacturing management efficiency
  • Advancement of CASE
  • Diffusion of next-generation telecommunications infrastructure
Risk
  • Loss of business opportunities
  • Decline in competitiveness
  • Entry of competitors from other industries using digital technology as a weapon
 Provide labor-saving and automation solutions
[Business activities]
  • Use and provision of "Machines, digital technology, and technology to use," etc.
[Column]
 Machine Tools
Devices
Electronics
Others
Contribution to next-generation communication technology
[Business activities]
  • Provide time reference information to institutions requiring accurate time information, etc.
  • Development and sales of sensing devices (teleoperated robots, etc.)
Contribution to Mobility
[Business activities]
  • Development and sales of lasers for EV vehicle signal lights, etc.
  • Supply of components for advanced braking systems, communication systems, sensors, etc.
Improving Job Satisfaction and Developing Human Resources
4 5 08
Opportunity
  • Increase employee engagement
  • Driving DX / innovation
Risk
  • Outflow of human resources
  • Deterioration of business performance
 Improvement of Job Satisfaction
[Business foundation]
  • Implement measures to improve employee engagement, provide training opportunities, etc.
 Watches and Clocks
Machine Tools
Devices
Electronics
Others
Human Resource Development
[Business foundation]
  • Developing human resources to promote change within the group, strengthening group collaboration in the development of management human resources, etc.
Diversity and Inclusion
[Business foundation]
  • Systematic training and promotion of female management candidates, encouraging male employees to take childcare leave, etc.
G Fulfillment of Social Responsibility
12 16 17
Opportunity
  • Realization of the sustainable factory concept
  • Compliance with major customers' terms and conditions
Risk
  • Damage to corporate value
  • Reputation
  • Weakening of the management base
 Strengthen Risk Management
[Business foundation]
  • Update and operation of the Group's material risks, etc.
 Watches and Clocks
Machine Tools
Devices
Electronics
Others
Quality Compliance
[Business foundation]
  • Activities to disseminate the Quality Code of Conduct, etc.
Respect for Human Rights and Labor Practices
[Business foundation]
  • Implementation of human rights due diligence, etc.
Promoting Sustainable Procurement
[Business foundation]
  • CSR procurement, green procurement, responsible mineral procurement, etc.

[Column] Supporting Digital Transformation in the Manufacturing Industry – alkapplysolution

Amid the digital transformation affecting various industries, including manufacturing, The CITIZEN Group has taken proactive steps to adapt. One of its companies, CITIZEN Machinery, specializes in making precision machinery. They recognize the value of connecting machines, using the internet, and incorporating user-friendly technology to enhance their tools. They've introduced a digital product line called "alkapplysolution," which includes 11 different products and services.

For instance, they offer a service called "aleart live2," which uses the internet to monitor how machines perform in real-time. This ensures that the machines are operating safely and efficiently. They also have a web platform called "alkart site," where people can access information like user manuals, e-learning materials for training, software tools, and the latest techniques for using the machines effectively.

These solutions have been embraced by various industries, such as automotive, semiconductor, and medical equipment manufacturing, since the 1990s. The solutions have evolved over time to overcome challenges faced on the production floor. They are well-equipped to assist companies in adapting to economic changes and foster better work practices for their employees.I believe The CITIZEN Group is making consistent strides in addressing the important issues identified last year.

First, with regards to goal setting, which was a concern raised last year, the Group has taken swift action by sharing its Human Resource Development Roadmap and Health Management Roadmap in this fiscal year. This proactive approach to advancing the initiative and expanding shared information is highly appreciated.

In addressing the materiality issue of "responding to climate change," the Group conducted a scenario analysis to identify key risks and opportunities related to climate change for 2022. Additionally, they have performed a financial impact analysis for 2023. Their accurate response to external requests in this area is commendable.

We have high expectations for their continued efforts to promote sustainability across the entire supply chain. As a Key Performance Indicator (KPI) for advancing sustainable procurement, The CITIZEN Group has committed to increasing the reach of Supplier Assessment Questionnaires (SAQs) and briefings. We anticipate that they will engage in further activities to achieve their objectives in this area.

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Comments from Experts

I believe The CITIZEN Group is making consistent strides in addressing the important issues identified last year.

First, with regards to goal setting, which was a concern raised last year, the Group has taken swift action by sharing its Human Resource Development Roadmap and Health Management Roadmap in this fiscal year. This proactive approach to advancing the initiative and expanding shared information is highly appreciated.

In addressing the materiality issue of "responding to climate change," the Group conducted a scenario analysis to identify key risks and opportunities related to climate change for 2022. Additionally, they have performed a financial impact analysis for 2023. Their accurate response to external requests in this area is commendable.

We have high expectations for their continued efforts to promote sustainability across the entire supply chain. As a Key Performance Indicator (KPI) for advancing sustainable procurement, The CITIZEN Group has committed to increasing the reach of Supplier Assessment Questionnaires (SAQs) and briefings. We anticipate that they will engage in further activities to achieve their objectives in this area.

D.F.F. Co.
Director
Kazuya Ozawa

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