2024 CHIYODA REPORT Editorial Policy CHIYODA REPORT 2024 is a communication tool to inform all stakeholders, including shareholders, investors, business partners, customers, directors, employees, and society, of the Chiyoda Group’s management policies, business strategies, financial status, corporate values, growth potential, and activities toward realizing a sustainable global society. We continuously strive to improve the quality of information contained in the report to strengthen stakeholder awareness of the Chiyoda Group. Disclaimer CHIYODA REPORT 2024 is forward-looking, compiled from information available at the time of release, and actual results may differ materially from statements made within it. CONTENTS Refer to the following website for further information on the Chiyoda Group. https://www.chiyodacorp.com/en/ Grow as a fully integrated engineering company aiming for harmony between energy and the environment while contributing to a healthy, prosperous and sustainable society through our profound engineering expertise and systematically developed technology. Enriching Society through Engineering Value Purpose Mission 1 Purpose / Mission The Story of Our Purpose 2 Message from the CEO 6 History of Transformation and Growth 8 Our Strengths 10 Chiyoda Group’s Value Creation Process 12 Frontline Stories Materiality Leading to Sustainable Growth 18 Materiality 20 Materiality Roundtable Discussion 26 Society with Reduced Environmental Impact 28 Prosperous and Healthy Lifestyle 30 Human Resources that are a Driving Force for Transformation 32 Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation 34 Human Resources Addressing Social Issues Autonomously 36 Equitable and Fair Corporate Management Foundation Underpinning Sustainable Growth 40 Chiyoda DX STORY 42 Corporate Governance 48 Risk Management 49 Safety Management 50 Intellectual Property Data Section 54 Key ESG Data 56 Eleven-Year Summary 58 Corporate Information 1 Message from the CEO *Chief Sustainability Officer Koji Ota Representative Director, President & CEO, CSO* With Chiyoda’s purpose of ‘Enriching Society through With Chiyoda’s purpose of ‘Enriching Society through Engineering Value, Engineering Value,’ we will diversify our business portfolio, we will diversify our business portfolio, achieve financial independence, and aim for sustainable growth. achieve financial independence, and aim for sustainable growth. The Mission of Management My name is Koji Ota, and I became President of Chiyoda in April 2024. In the five years covered by our Medium-term Management Plan up to fiscal 2023, ‘Chiyoda’s Revitalization Plan - Initiatives for Revitalization and the Future,’ we worked on order-securing strategies that align with our resources, the enhancement of risk management and our project execution capa- bilities, promoting aspects such as development and increased sophistication among our human resources, and strengthening our business founda- tion. I believe our revitalization efforts have borne fruit to a certain extent. However, we still have issues that we must con- tinue to address, namely diversifying our business portfolio and achieving financial independence. The business environment is undergoing significant changes both in Japan and overseas. As top man- agement, I believe it is our mission to establish a solid foundation for future growth by grasping these changes as new business opportunities to achieve sustainable growth. The Chiyoda Group’s strengths are technological expertise, problem-solving capabil- ities, integrative ability and social implementation capabilities, and by combining them, we can trans- form our structure to achieve well-balanced income in a variety of fields, leading to more stable manage- ment and restored financial strength. I will personally lead all of our employees in this endeavor. Working Towards More Stable Management The results for the fiscal year ended March 2024 showed a loss as a result of financial processes such as recording reserves to cover the costs necessary to execute a major US project due to the legal restructuring of our joint venture partner. In order to achieve stable management and growth, I believe it is important to further strengthen our risk management, including by carefully selecting areas and projects to work on and improving our approaches. Up to now, receiving orders for and executing large-scale overseas EPC* projects has been central to Chiyoda’s management. This management structure has resulted in highly volatile profitability because large-scale overseas EPC projects take years to go from order receipt to construction com- pletion and it is difficult to foresee with certainty the changes that will occur during this time, meaning changes that are larger than anticipated have a sig- nificant effect on management. To eliminate this imbalance and achieve more stable management, we must create a more balanced portfolio that includes medium- and small-scale projects and proj- ects in Japan. Large-scale overseas EPC projects are also becoming larger, longer and more complex, increasing the risks associated with cost fluctua- tions. As a result, it is more important than ever that we re-examine the lump-sum fixed price contracts that have been the standard up to this point and review the ideal risk-return balance with customers and the structure of our contracts. This will not be easy, but I intend to work persistently to obtain the understanding of our customers. This is also a shared structural challenge among engineering com- panies, and activities across the engineering industry have begun with the aim of raising industry stan- dards while gaining the understanding of the country and government. In terms of measures to achieve stable manage- ment and our vision for a Chiyoda Group that can take on new challenges, we are also reviewing our Medium-term Management Plan, with an announce- ment planned for spring 2025. * EPC: Engineering, Procurement and Construction Redefining Materiality Leading to Sustainable Growth With the Chiyoda Group’s Purpose of ‘Enriching Society through Engineering Value,’ we have redefined important sustainability issues to work on over the medium to long term as materiality issues. This has clarified the social issues to be addressed through our businesses, but also serves as a guide for strengthening our management foundation to sup- port sustainable growth. Five Redefined Materiality Issues Society with Reduced Environmental Impact Prosperous and Healthy Lifestyle Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation Human Resources Addressing Social Issues Autonomously Equitable and Fair Corporate Management 1 2 3 4 5 2 3 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose Message from the CEO Contributing to ‘Society with Reduced Environmental Impact’ The Chiyoda Group published ‘Legacy for the 21st Century’ in 1972, advocating for ‘Energy and Environment in Harmony’ and declaring its commit- ment to resolve energy- and environment-related challenges through engineering and technological development. It has continued on this path in the more than 50 years that have followed. As climate change grows more serious around the world, becoming a major social issue, the Chiyoda Group has a duty to face up to climate change and contrib- ute to the realization of a society with reduced environmental impact. Accordingly, we are proceed- ing with efforts to reduce environmental impact in various fields. In terms of hydrogen, which is attracting attention as a decarbonized source of energy, our efforts include work on a large-scale water electrolysis system in collaboration with the Toyota Motor Corporation and work towards the social implementa- tion of SPERA Hydrogen™* technology. With the need to expand adoption of renewable energy, we are currently executing the construction of energy management systems and battery energy storage system facilities. CCS technology, which separates and captures carbon dioxide (CO2) and stores it underground, is being applied to the construction of the world’s largest LNG plant in Qatar, leading to more environmentally friendly LNG plants. Industry-academia-government collaborations are also moving forward, including demonstration testing of carbon dioxide capture and utilization (CCU) technology. * SPERA Hydrogen™: Reacts toluene with hydrogen to convert it into the liquid organic hydrogen carrier methylcyclohexane (MCH), enabling storage and transportation of hydrogen at ambient temperature and pressure. Aiming for ‘Prosperous and Healthy Lifestyle’ In life science fields, the Chiyoda Group was an early mover as an engineering company construct- ing facilities for pharmaceuticals, starting in 1963. Since then, we have designed and constructed facil- ities related to pharmaceutical manufacturing and research for wide-ranging modalities, from small molecule drugs to biopharmaceuticals. We are also contributing in terms of manufacturing technology, such as by taking continuous production technology and advanced analysis technology cultivated in the petroleum and chemical fields and introducing and implementing it in the pharmaceutical field. We have also started to offer digital solutions ser- vices that support the realization of safe, secure and sustainable plant operation and maintenance (O&M) by combining digital AI technology with maintenance. Becoming a Corporate Group Rich in ‘Human Resources Addressing Social Issues Autonomously,’ with an ‘Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation’ To take on diverse social issues amidst significant changes in the business environment, we must fur- ther develop our strengths and adapt to business transformation. A key driver in achieving this is an organizational culture in which diverse human resources are free to play an active role and an adap- tive mindset as the foundation for developing human resources, an engineering company’s greatest asset. Following the implementation of Chiyoda’s Revitalization Plan, we have worked to reinforce our human resources by proactively building a strong human capital base. In the future, we will continuously enhance the well-being of both the organization and our human resources in order to build an organiza- tional culture that enables diverse human resources to challenge value creation and develop human resources who continue to take on social issues with pride and ambition. Accelerating the Chiyoda DX STORY to Enhance Profitability and Business Management Sophistication Promoting DX is indispensable in order to enhance the sophistication of our human resources, and we are advancing the Chiyoda DX STORY in order to accelerate companywide digital transformation and transform employees’ mindsets. While proceeding with the transformation of the Chiyoda Group on the twin fronts of corporate DX and project DX, we are also working to develop and reinforce digital human resources to be a driving force for transformation. We will aim to build a companywide business execution platform and implement more sophisticated business manage- ment and governance. Aiming to Enhance Sustainable Corporate Value by Realizing Our Purpose The Chiyoda Group’s Purpose of ‘Enriching Society through Engineering Value’ embodies our strong will to be a Company that creates a sustainable and prosperous future for the Earth and its inhabitants by bringing together the Group’s strengths, such as technological expertise, problem-solving capabilities, integrative ability and social implementation capabili- ties, and demonstrating integrity and passion as we take on the challenge of engineering together with society, our customers, and our partners. There are many issues to be resolved in order to realize a sustainable society, such as the creation of a carbon-neutral society. The core value of an engi- neering company encompasses nurturing, connecting and implementing wide-ranging elemental technolo- gies, and in today’s world with so many social issues to be solved, there is a strong need for engineering expertise to bring new solutions and systems to society. With the engineering expertise the Chiyoda Group has built up as a core, continuing to provide solutions in line with changes in the times is both our mission and essential to enhancing sustainable cor- porate value. In advancing our business, it is important that we implement highly transparent corporate management based on fair norms. I want to work to see us ensure transparent management and deepen understanding of Chiyoda in order to enhance corporate value. With our purpose and our redefined materiality issues as guides, we will continue our progress toward sustain- able growth. Thank you for your understanding and contin- ued support. Koji Ota Representative Director, President & CEO, CSO 4 5 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose 1950 1960 1970 1980 1990 2000 2010 2020 2023 0 600,000 500,000 400,000 300,000 200,000 100,000 History of Transformation and Growth A History of Transformation, Growth and Enriching Society through Engineering Value Foundation of Chiyoda Revenue (Millions of yen) History of initiatives for innovation in environmental technologies Publishing of ‘Legacy for the 21st Century’ and advocating ‘Energy and Environment in Harmony’ Commencement of full-scale environmental conservation efforts Contributing to Post-war Industrial Recovery and High Economic Growth in Japan Mitsubishi Grassroots Oil Refinery Social Challenges Engineering Expertise • A change in energy policy from coal to oil, marking the beginning of the oil era • Rapid growth fueled by the development of heavy chemical industries 1960 Focus Our First Grassroots Oil Refinery We were awarded a contract for the construction of all three phases of the Mizushima Oil Refinery, our first grassroots oil refinery project, by Mitsubishi Oil Co., Ltd. The project involved the construction of a new large-scale refinery prior to trade liberalization, including petroleum refining equipment, utility facilities such as power generation facilities and ancillary facilities, such as crude oil reception and product shipment amenities. • Actively participating in the oil and petrochemical industries through engineering • Constructing and renovating domestic refineries and petrochemical plants 1948–1970 Founding Expanding Oil and Petrochemical Businesses and Companywide Internationalization 1971–1990 Initial Transformation Social Challenges Engineering Expertise Petromin-Mobil Yanbu Refinery, Saudi Arabia • Increasing focus on securing a stable supply of oil and diversifying energy sources following two oil crises • Yen appreciation triggered by Plaza accord 1984 Focus Construction of a Mega-large Grassroots Oil Refinery in Saudi Arabia Chiyoda contributed to the stable supply of petroleum products worldwide through the construction of a mega-large crude oil refinery in Saudi Arabia, with a processing capacity of 250,000 barrels per day, for a joint venture between Petromin Corporation and Mobil Corporation (now ExxonMobil). • Contributing to a stable supply of oil and petroleum products through the construction of overseas oil and petrochemical plants 1972 Creating and Expanding New Business Fields Towards Carbon Neutrality (FY) Dehydrogenation Plant at Kawasaki Waterfront 2019– 3rd Transformation Towards Sustainable Growth Expanding the LNG Business LNG Plants 3 & 4 for Qatargas Operating Co Ltd. Social Challenges Engineering Expertise • Increasing global demand for LNG to address climate change and preserve the environment 2004 Focus The World’s Largest LNG Plant in Qatar We contributed to the economic development of gas producing countries and a stable supply of energy around the world including Japan, and a stable supply of energy around the world, through an EPC contract for two of the largest LNG plants in the world (as of 2004), with an annual production capacity of 7.8 million tons per annum, for Qatar Gas II (70% owned by QatarEnergy and 30% by ExxonMobil). We continue participating in larger, increasingly complex EPC LNG projects around the globe. • Contributing to a stable supply of LNG through the construction of large-scale overseas LNG plants • Expanding into new fields such as renewable energy 1991–2018 2nd Transformation * Chiyoda Corporation, Mitsubishi Corporation, Mitsui & Co., Ltd., and Nippon Yusen Kabushiki Kaisha (NYK Line) formed the Advanced Hydrogen Energy Chain Association for Technology Development (AHEAD), a research associ- ation for next-generation energy chain technology, subsidized by the New Energy and Industrial Technology Development Organization (NEDO). Social Challenges Engineering Expertise • Accelerating initiatives in decarbonization and carbon neutral fields such as hydrogen • Expanding into fields other than energy, such as DX and life sciences 2020 Focus The World’s First Global Hydrogen Supply Chain Demonstration Project We have successfully completed the world’s first global hydrogen supply chain demonstration project* for the large-scale storage and transportation of hydrogen in December 2020. Social implementation plans are progressing, with the goal of achieving large-scale commercialization in the late 2020s. • Accelerating the transition towards decarbonization and carbon neutrality • Innovating AI and digital technology • Reinforcing life science technologies Development of the proprietary technology SPERA Hydrogen™ Technological development contributing to realizing carbon neutrality • Commercialization of SPERA Hydrogen™ • Development of new ammonia produc- tion and decomposition technology • Development of new CO2 separation, recovery, and utilization technologies 2011 2019 6 7 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose Case Studies Having completed our first LNG plant in Abu Dhabi in 1976, we have consolidated our position as a leading global EPC LNG plant construction company, combining our engineering expertise, technological prowess and project execution capabilities to consistently deliver reliable, larger and increasingly complex LNG plants exceeding customer expectations. As a reliable and clean energy source towards achieving a decarbonized society, the hydrogen market is anticipated to expand rapidly. We are collaborating with Toyota Motor Corporation in the development of a large-scale water electrolysis system, integrating Toyota’s fuel cell technology for water electrolysis cell stacks with our process plant design and construction technology for large-scale plants, to meet increasing global hydrogen demand. A Leading Global EPC LNG Plant Construction Company Development of a Large-scale Water Electrolysis System Courtesy of QatarEnergy 01 02 Large-scale Water Electrolysis System (Smart scalable engineering by Chiyoda Corporation) Building a System for the Commercial Production of Domestic Vaccines 03 In January 2023, we completed the construction of a vac- cine drug substance production facility for Shionogi & Co., Ltd. Japan’s vaccine supply system had been dependent on imports, and the construction of a new domestic plant for vaccine manufacturing was a national project of signifi- cant importance to society. The first production line was completed just eight months after construction com- menced, and the second production line and ancillary equipment were also delivered on schedule, exemplifying the Chiyoda Group’s technical capabilities and its profi- ciency in managing and executing projects. Vaccine Production Facility Chiyoda has completed the construction of a 1 Barrel per Day (BD) synthetic fuels demonstration plant for ENEOS Corporation. Using hydrogen and CO2 as raw materials, this facility will contribute to the establishment of early-stage technology for synthetic fuel production, with the aim of achieving the social implementation of carbon-neutral fuel production technology. Completion of a 1 Barrel per Day Synthetic Fuels Demonstration Plant 04 Our Strengths Based on our founding philosophy of ‘Serving Society through Technology,’ we continue to apply our unique competi- tive strengths as an integrated engineering company to sustain growth and fulfill our new purpose of ‘Enriching Society through Engineering Value.’ Integrative Aptitude Integrating Diverse Technologies to Provide Optimal Solutions We integrate diverse technologies and apply our engineering and project execution expertise to provide optimal solutions for the delivery of increasingly large, complex and sophisticated indus- trial facilities to customers. Trust Successful Long-term Customer Working Relationships We continue to foster successful long-term working relationships with customers and partners worldwide, based on a ‘One Team’ culture of transparency, honesty and mutual respect, and applying our techno- logical expertise to deliver solutions surpassing customer expectations. Problem-Solving Capabilities A Valuable Partner Providing Optimal Solutions Consistent with our founding philosophy of ‘Serving Society through Technology,’ we combine state-of-the-art technology with engineering expertise and project execution excellence to deliver optimal solutions that conquer the challenges faced by customers and modern society. We continue to work collabora- tively with customers and partners to provide optimal solutions to the increasingly complex challenges faced by the interna- tional community. Project Execution Capabilities Working as ‘ONE TEAM’ using Digital Technology Working under a ‘Relationship’ philosophy to ensure honesty and transparency in a ‘One Team’ project execution culture and focusing on ‘Best for Project’ outcomes, we continue enhancing our project execution capabilities through the optimization of business processes via the Chiyoda DX STORY (Companywide DX) and through design standardization, human resource devel- opment, expansion of the use of overseas design bases and external expertise. Quality and Safety Safely Delivering Reliable State-of-the-art Industrial Facilities that Exceed Customer Quality and Commercial Expectations We have a track record of successfully delivering state-of- the-art industrial facilities, meeting our strategic safety objective of zero project accidents or environ- mental incidents, and exceeding customer quality expectations for reliability and operability. A Global Enterprise A Global Presence having Successfully Delivered Industrial Facilities to Customers in over 60 Countries Worldwide We are a leading fully integrated global engineering, procurement and construction (EPC) enterprise with a track record of successfully delivering world class, cutting edge industrial facilities in over 60 countries worldwide. Technological Expertise and DX Enhanced Technological Capabilities through Strict Self-refinement and Accelerating DX Transformation The value of engineering encom- passes nurturing, connecting and implementing technologies to meet the needs of customers, industry and society in general. We continue enhancing our technological capabil- ities through strict self-refinement and accelerating the Chiyoda DX STORY (Companywide DX) while upholding our tradition of valuing technology and developing techni- cally proficient engineers. Chiyoda Group Strengths Trust A Global Enterprise Technological Expertise and DX Quality and Safety Integrative Aptitude Project Execution Capabilities Problem- Solving Capabilities Overall Image of Synthetic Fuels Demonstration Plant (Image Courtesy of ENEOS Corporation) CO2 Supply Facility Synthetic Gas Production Facility FT Process Facility Direct Air Capture Facility Hydrogen Production Facility Productization Productization Petrol Jet Fuels Light Fuel Oil Synthetic Synthetic Crude Crude Oil Oil Synthetic Synthetic Fuels Fuels 8 9 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose Chiyoda Group’s Value Creation Process As an integrated engineering company with a commanding presence in the global energy supply industry, the Chiyoda Group applies engineering expertise and technological proficiency to deliver optimum solutions to customers as we address society’s modern challenges. Our vision to enrich society evolves with its ever-changing needs and we will con- tinue creating value that leverages our accumulated strengths and collaborating with stakeholders who share our vision to engineer new value and implement innovative solutions in a society with increasingly diverse and complex challenges. Business Strategies Leveraging Our Strengths Hydrogen Energy Management Strengths Priority business areas Mega- trends Opportunities Securing stable energy supplies Securing stable supplies of advanced materials Establishing circular economies Momentum towards carbon neutral society Expectation of an advanced medicines Building strong industrial foundations Materiality issues for sustainable growth Materiality Issue 3 Organizational Culture that enables Diverse Human Resources to Challenge Value Creation Materiality Issue 4 Human Resources addressing Social Issues Autonomously Materiality Issue 5 Equitable and Fair Corporate Management Materiality Issue 1 Society with Reduced Environmental Impact Materiality Issue 2 Prosperous and Healthy Lifestyle Life Science O&M-X Solutions Low Carbon and Carbon Recycling Addressing materiality issues through business Vision of the Future Social Implementation Value Creation Enriching Society through Engineering Value Chiyoda Group’s Purpose A Global Enterprise Trust Technological Expertise and DX Integrative Aptitude Quality and Safety Project Execution Capabilities Problem- solving Capabilities Realizing the Chiyoda Group’s Purpose A sustainable and prosperous future for the Earth and its inhabitants Engineering Value Minimization of environmental impact and stable supply of energy Widespread implementation of renewable energy, optimization of distributed power sources, local production and consumption of energy Realizing prosperous and healthy lifestyles for the global population Early implementation of hydrogen and carbon recycling technologies Stable supplies of metals and advanced materials necessary for decarbonization Contributing to sustainable, safe and secure business activities Global multipolarization Geopolitical risks Climate change Demographic changes Discontinuous innovation 10 11 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose Frontline Stories introduce our initiatives guided by the materiality of ‘Society with Reduced Environmental Impact’ and ‘Prosperous and Healthy Lifestyle.’ 3D Model Image of Completed Plant, Courtesy of QatarEnergy This project involves the construction of a large-scale LNG plant unlike any other in the world. As a result, unexpected chal- lenges occur, and risk identification and mitigation become complex and meticu- lous. Nevertheless, we never cut corners. In addition to large-scale CCS equip- ment, we also proposed exhaust heat recovery systems that use exhaust heat from gas turbines to reduce CO2 emissions from the combustion furnace. Our propos- als that exceed customer expectations were able to contribute to increased energy utilization efficiency. Having materials and equipment continu- ously transported from countries around the world, 24 hours a day, 365 days a year, is a huge job. However, it is rewarding to work with people from various countries. Introducing the integrated digital project management system Chiyoda AWP*1 and steel material management utilizing RFID*2 has significantly improved work efficiency. Reducing the amount of surplus material has achieved significant cost savings and also leads to a reduction in environmental impact. *1 AWP: Advanced Work Packaging *2 RFID: Radio Frequency Identification In Qatar, summer temperatures can exceed 45℃. During construction work in harsh environments, reaching daily targets while continuing to put the health of our staff first presents challenges. Everyone involved in the project adopts the shared mottos of ‘One Team,’ ‘One Step Further’ and ‘Zero Incidents & Defects’ as we engage in engi- neering and work towards completion. I believe that Chiyoda’s raison d’être is to continue meeting the needs of society and our customers, such as providing stable energy supplies and reducing environmental impact. Kotaro Takeshima Lead Rotating Equipment Engineer NFE Project Team Ryo Kinokuni Warehouse Manager NFE Project Team Yuji Suzuki Area Superintendent NFE Project Team Chiyoda is carrying out the construction of an NFE*1 LNG production facility project in Qatar. The facility is the world’s largest LNG plants, comprising four LNG trains with production capacities of 8 million tons per annum. The introduction of large-scale CCS*2 and exhaust heat recovery systems are expected to reduce CO2 emissions during operation by 25% compared to conven- tional LNG plants of comparable size. Through this project, we are taking on the challenge of resolving social issues such as providing a stable LNG supply and reducing CO2 emissions. *1 NFE: North Field East *2 CCS: CO2 capture and storage A Stable Supply of Liquefied Natural Gas (LNG) and More Environmentally Friendly LNG Plants Society with Reduced Environmental Impact 1 Determining how to cultivate, inte- grate and socially implement various technologies with the aim of build- ing hydrogen supply chains is an opportunity for an integrated engi- neering company like Chiyoda to shine. We are working to meet customers’ needs based on their business environment, their use case, and the quantity of hydrogen required. I hope to see us promote a highly open stance regarding technologi- cal development for all clean energy. Satoshi Morikami General Manager, Technology Development Department, Frontier Business Division Our strength is the expertise we have accumulated by handling various types of energy, from fossil fuels to renewable energy. The expertise acquired from handling large quanti- ties of hydrogen at oil refineries will prove extremely useful in future busi- ness expansion, including EPC for experimental and demonstration test- ing equipment for making synthetic fuel from hydrogen and CO2, and for methane production. Ito Kenichi Energy Project Operations Division The LOHC-MCH* system is one of our strengths, and we are aiming to achieve the commercial implementation of hydrogen supply chains using this system in the 2020s. We are working with Toyota Motor Corporation to develop large-scale water electrolysis systems for making hydrogen from water, leveraging our respective strengths in the advancement of engineering. I hope to see us further expand ‘co-creation’ initiatives in the future. As the world shifts to clean energy, as an integrated engineering company, our mission is to deliver solutions by combining technologies in the optimal manner to meet our customers’ needs. This also leads to the realization of Chiyoda’s purpose, ‘Enriching Society through Engineering Value.’ * LOHC: Liquid organic hydrogen carriers, MCH: Methylcyclohexane Yasuhiro Inoue General Manager, Hydrogen Business Department, Frontier Business Division Wind power plant Water electrolysis system Hydrogenation plant Oil refinery / chemical plant Hydrogen Electricity Solar power plant Factory Commercial facility Commercial facility Large scale storage tanks Tanker Port Distributed community Urban community Hydrogen station Hydrogen station Thermal power generation Dehydrogenation plant Factory Establishing long-term, sustainable, high-volume hydrogen supply chains for use in wide-ranging fields is crucial to realizing a hydrogen society. Chiyoda is taking on the challenge of building supply chains to produce, transport, store and use hydrogen. Engineering the Future of Green Energy with Hydrogen Our Vision for a Future Hydrogen Community —A society capable of producing, transporting, storing and using hydrogen in wide-ranging fields Society with Reduced Environmental Impact 2 12 13 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose The Battery Energy Storage System for North Toyotomi Electric Power Substation Expanding Renewable Energy with One of the World’s Largest Battery Energy Storage Systems In April 2023, the Battery Energy Storage System for North Toyotomi Electric Power Substation commenced commercial operation in the town of Toyotomi, Hokkaido. It is one of the world’s largest battery energy storage systems and was built by Chiyoda over a period of five years. This project has contributed to widespread use of energy from natural sources and regional revitalization. Building on this achievement, we have received orders for the construction of several large-scale battery energy storage systems and will continue contributing to the widespread use of renewable energy. The Battery Energy Storage System for North Toyotomi Electric Power Substation can store 720,000 kWh, which is equivalent to about 10,000 electric vehicles, making it the largest system in Japan and among the top five in the world. It was the first time that Chiyoda and the battery energy storage manufacturer had attempted to create a large-scale battery energy storage system, but we had a track record in all of the fields involved, including building, battery energy storage, power and handling of hazardous materials. By bringing together expertise and technologies, then demonstrating the power of engineering to achieve social implementation, we felt more than capable of rising to the challenge. Customers were concerned about the number of fires that had occurred overseas involving stationary storage batteries holding large amounts of energy. We worked with battery energy storage manufacturers and construction companies to build a full-scale building inside a test facility and perform full fire control tests. This enabled everyone involved to be confident about safety while also enhancing trust from customers and creating a sense of unity among the parties involved. Hiroshi Suzuki Project Manager Yoshinobu Ashie Assistant Project Manager The construction site is in an extremely cold region. When the snow stopped work, Chiyoda’s veteran supervisor started shoveling snow himself and I immediately followed suit. Upon observing this, construction workers also joined in the snow clearing. All project participants acted as ‘One Team,’ promoting ‘co-creation’ and conquering challenges. Kokichi Suzuki Project Engineer & Acting 3rd Generation Site Manager This facility was a national project and gained significant attention as a demonstration of a new age for regional revitalization in which using wind as an energy resource can also revitalize com- munities. As the project neared completion, we guided more than 600 visitors from about 120 organizations around the facility, including gov- ernment officials, local government leaders and electricity company executives. Yasumasa Okushima Assistant Project Manager & Acting Site Manager In the plant bio-foundry field, we are involved in industry-academia-government collaboration to develop technology that can create and extract certain proteins using genetically modified plants. There is no foundation for demonstrating large-scale production systems using this plant-based ‘bio-manufacturing’ in Japan, and its industrial application is a challenge. To help resolve this issue, we are building demonstration equipment in unused space in our Koyasu Research Park, with operation planned to begin in spring 2025. Technology has value when it is implemented in society and serves a purpose, and we will use the strengths and expertise accumulated in our EPC business to help achieve the social implementation of useful technologies. With CDMO, we are looking at both the growing cellular medicine product market as part of regenerative medicine and the already-mature macromolecular medicine market as we prepare for the future. The route to be taken differs each time, depending on the microorganisms and cells used at the start of each process and the end result produced, and we are expanding our technical consulting to put forward pro- posals in line with customers’ objectives. We hope to create a business model that monetizes the entire process, from develop- ment to construction. When astronaut Koichi Wakata was working on cell cultures in the International Space Station, I was also doing the same experi- ments in my previous position. Chiyoda developed and provided experimental equipment used in that project and other life science experiments, and I joined the Company in 2020 to help take on the chal- lenge of social implementation. In addition to securing profits in our current businesses, we aim to nurture seeds for future growth. With the ability to build on the foundations of academia as our strength, we aim to have the intelligence and capabilities to always respond to new developments and what the world needs most, achieving the implementation of technologies that con- tribute to society. Naoko Nishida Section Leader, Bio & Pharmaceutical Technology Development Section, Life Science Business Department Yoshiko Nomi Deputy Section Leader, Bio & Pharmaceutical Business Section, Life Science Business Department Yuzuru Ito Associate Fellow, Frontier Business Division Professor, University of Tsukuba (Developmental Biology, Cell Biology) Society with Reduced Environmental Impact 3 Chiyoda has engaged in engineering design, procurement and construction (EPC) in the pharmaceutical field since 1963, achieving stable profits. Building on this experience and expertise to contribute to ‘Prosperous and Healthy Lifestyles’ for people around the world, we strive to be a high value-added biology and life science solution provider. As new businesses, we are accelerating bio-foundries and contract development and manufacturing organization (CDMO) initiatives for polymer medicine and cell therapy. The Challenge for New Businesses to Become High Value-Added Biology and Life Science Solution Providers Prosperous and Healthy Lifestyle 14 15 Chiyoda Corporation CHIYODA REPORT 2024 The Story of Our Purpose The Story of Our Purpose Materiality Leading to Sustainable Growth In this section, we introduce our materiality issues and initiatives crucial to realizing the sustainable growth of the Chiyoda Group and a sustainable society. CONTENTS 18 Materiality 20 Materiality Roundtable Discussion 26 Society with Reduced Environmental Impact 28 Prosperous and Healthy Lifestyle 30 Human Resources that are a Driving Force for Transformation 32 Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation 34 Human Resources Addressing Social Issues Autonomously 36 Equitable and Fair Corporate Management 16 17 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Issue Identification Process Materiality We re-evaluated important social issues to be addressed in the medium to long term and redefined major sustainability- related issues, referred to as materiality issues, to cover a broader scope. In addition to clarifying the social issues to address through our business, this also serves as guidance for strengthening our management foundation in support of sustainable growth. We have identified five materiality issues connected to the areas of E (environment), S (social) and 1 Analysis from the Perspectives of Both Social and Business Impact Materiality Analysis Importance to Chiyoda Low Low Medium Medium High High Importance to Stakeholders Step1 Business Areas and Identifying Issues Step2 Identifying Materiality Issues Step3 Determination of Materiality Issues When identifying materiality issues, an interdepartmental working group was formed inside the Company. Issues that the Company must promote were clarified through a comprehensive process of comparison between our business areas, GRI standards and the SDGs while also referring to opinions from external experts. From the issues clarified in Step 1, themes of high importance were identified as materiality issues by following the 3 steps below. 1 Analysis from the perspectives of both social and business impact 2 Selection of common themes raised as themes of high importance by stakeholders evaluating the Company 3 Assessment of opportunities and risks for our business related to each key theme Identification of important issues in Step 2 was followed by discussion and careful examination by the Sustainability Committee. Upon approval at a Board of Directors’ Meeting, these issues were defined as materiality issues. 2 Selection of Common Themes Raised as Themes of High Importance by Stakeholders Evaluating the Company 3 Assessment of Opportunities and Risks for our Business Related to Each Key Theme A Sustainable and Prosperous Future for the Earth and Its Inhabitants High Impact Moderate Impact Low Impact No Impact Risks Opportunities Selected Themes of High Importance (Grouping) 1 • Inhibition of climate change by reducing GHG emissions • Securing a stable supply of clean energy • Building a circular value chain 2 • Contributing to peoples’ healthy lives by providing life science solutions • Building a sustainable industrial base • Respecting the human rights of all people 3 • Promoting diversity and inclusion • Reforming organization culture • Further enhancing health management base • Ensuring sound management and labor relations 4 • Establishing specialized & basic education to support the ability to carry out work • Implementing robust development of professional human resources who play key roles in our business • Developing digital human resources 5 • Demonstrating fair, equitable behavior with dignity • Promoting fair trade and appropriate information disclosure • Ensuring thorough risk management of supply chain • Ensuring thorough compliance and risk management Purpose Enriching Society through Engineering Value Materiality E (Environment) S (Social) S (Social) G (Governance) Society with Society with Reduced Environmental Impact Reduced Environmental Impact Prosperous and Healthy Lifestyle Prosperous and Healthy Lifestyle Organizational Culture that Organizational Culture that Enables Diverse Human Resources Enables Diverse Human Resources to Challenge Value Creation to Challenge Value Creation Human Resources Addressing Human Resources Addressing Social Issues Autonomously Social Issues Autonomously Equitable and Equitable and Fair Corporate Management Fair Corporate Management Key Themes • Mitigate climate change by reducing GHG* emissions • Stable supply of clean energy • Establish a circular value chain * Greenhouse gas • Contribute to the healthy lives of people by providing life science solutions • Build sustainable industrial fundamentals • Respect human rights • Promote diversity and inclusion • Transform organizational culture • Further enhance health management infrastructure • Robust labor-management relations • Establish specialized & basic education to support business performance • Implement training to develop key professional human resources • Develop digital human resources • Equitable, fair and respectful behavior • Promote fair trade and appropriate disclosure of information • Stringent and comprehensive supply chain risk management • Stringent and comprehensive compliance and risk management Initiative • Lead the decarbonization of LNG and contribute to energy security • Contribute to a carbon neutral society through CCUS and hydrogen technology • Contribute to the stable supply of renewable energy through battery energy storage, renewable energy facilities and VPP • Contribute to advanced medicines through continuous synthesis technology and business investment • Realize the transformation of plant O&M • Contribute to the stable supply of materials that are key to realizing a decarbonized society • Conduct business with consideration for human rights • Develop and expand key players who accept the challenge of business transformation by further expanding our company’s strengths with an Adaptive Mindset • Build a sustainable cycle in which human resources and organizations work as ‘One Team’ to achieve ‘Well-Being’ and accept the challenge of creating value to embody our new purpose • Prevent damage to corporate value due to compliance issues by engaging in equita- ble, fair and respectful behavior G (governance). Based on these redefined materiality issues, the Chiyoda Group will leverage its technological exper- tise, problem-solving capabilities, integrative ability and social implementation capabilities, strengths accumulated as an integrated engineering company, to achieve our purpose of ‘Enriching Society through Engineering Value’ and enhance corporate value. 18 19 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Working to Bring Enrichment to Society Koji Ota President, CEO and CSO Chika Honda Business Innovation Department Yuki Nakamura Life Science Project Department Mitsuhiro Yamazaki Gas & LNG Process Engineering Department Shun Hanawa Energy and Environmental Project Department Asako Tezuka IT Management Department Hiroshi Kitazawa Project GX Strategy & Development Department Materiality Roundtable Discussion The Chiyoda Group formulated its purpose of ‘Enriching Society through Engineering Value’ in August 2023. Based on this new purpose, we have also redefined the materiality issues that we seek to address. In this roundtable discussion with Chiyoda President Koji Ota, young and mid-career employees exchanged views on how we can realize our purpose through efforts related to these materiality issues. Realizing Our Purpose through Materiality Initiatives Ota For many years, the Chiyoda Group had a stated mis- sion of ‘Energy and Environment in Harmony’ and sought to achieve this goal by shifting focus from coal and oil to LNG in the advancement of its business. However, in recent years our mission has expanded beyond the scope of ‘Energy and Environment in Harmony.’ In consideration of this, we formu- lated our new purpose in 2023 as a guiding light to once again share a common direction encompassing the entire Group. We have redefined five materiality issues to address in order to realize our new purpose: ‘Society with Reduced Environmental Impact’ under E (environment), ‘Prosperous and Healthy Lifestyle,’ ‘Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation’ and ‘Human Resources Addressing Social Issues Autonomously’ under S (social), and ‘Equitable and Fair Corporate Management’ under G (governance). I look forward to today’s discussion with young and mid- career employees, including hearing about everyone’s vision of our purpose, ‘Enriching Society through Engineering Value,’ and how we can achieve it through our materiality initiatives. Purpose Enriching Society through Engineering Value Materiality E (Environment) S (Social) G (Governance) Society with Reduced Environmental Impact Prosperous and Healthy Lifestyle Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation Human Resources Addressing Social Issues Autonomously Equitable and Fair Corporate Management Yamazaki The meaning of ‘Enriching Society through Engineering Value’ changes with the times, but I think the transition to a decarbonized society is a big part of it today. My current work is related to CCS*1, which involves capturing and storing CO2 emitted from plants. Through realizing a ‘Society with Reduced Environmental Impact,’ I hope to con- tribute to the transition to a decarbonized society. In working towards decarbonization, while there is a broad target of reaching carbon neutrality by 2050, setting out concrete steps to achieve that is a difficult issue, even for our customers. Against this backdrop, engineering companies are expected to find and propose the optimal solution among limitless options. The CCS projects that I am working on are currently at the FS*2 and FEED*3 stages, and I hope that correctly evaluating the feasibility of projects through early-stage studies, then putting forward proposals that are optimal for customers’ proj- ects as a whole, not just the individual plants for which the Chiyoda Group is responsible, can enhance practicality and achieve the steady completion of plants, thereby leading to the resolution of materiality issues. While it may be indirect, I hope to contribute to the realization of ‘Enriching Society through Engineering Value’ by putting importance on broad perspectives while guiding our customers’ projects to success. *1 Carbon Capture and Storage : Technology used to capture and store CO2 emitted from plants *2 Feasibility Study : Creation of a conceptual design and evaluation of the practical and commercial viability or otherwise of businesses from various perspectives *3 Front End Engineering Design : Basic engineering carried out after the conceptual design and FS, comprises studies covering technical issues and estimation of rough investment cost 20 21 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Honda At the Frontier Business Division, I’m currently working on the creation of new businesses that can lead to realizing a ‘Society with Reduced Environmental Impact,’ including VPP*4 and chemical heat pumps. Ensuring that decarbonization initiatives can be feasible as busi- nesses is also important from my perspective. Initiatives to reduce the burden on the environment are required but bring with them significant costs. Businesses need to pursue profitability in addition to contributing to society, and reducing the burden on the environment must lead to the creation of value, rather than simply being an additional cost. When moving projects forward, I constantly think about setting out a path that makes the transition to decarbonization viable from a business perspec- tive, including the extent and duration of resulting costs and the avenues for commercialization. This is not simple in projects without a precedent. However, I hope to leverage our strengths as an integrated engineering company that uses wide-ranging technologies not limited to one particular area, constantly seeking the optimal solution as we move towards social implementation alongside our customers. *4 Virtual Power Plant: Trades value based on power adjustment capacity, contributing to a stable power supply balance Hanawa Like Mr. Yamazaki, I am involved in CCS projects. I feel that customers find it difficult to formulate concrete approaches that enable them to achieve their targets. Our customers are seeking to set out more concrete paths themselves, and it is important that we correctly understand their priority areas. From this foundation, leveraging our deep understanding of elemental technologies, we can optimize seemingly contradictory elements such as processes, costs and resources, in consid- eration of our customers’ position in society and the broader social landscape in addition to our customers’ own wishes. This is a strength that the Chiyoda Group has built up as an integrated engineering company, having worked on plant EPC*5 for many years. I feel a strong desire from customers for us to demonstrate these strengths, particularly when proceeding through the steps leading up to social implementation, such as FS and FEED. I hope to achieve enrichment for our customers by consider- ing the optimal overall approach for them, then engineering the specific path to achieve their targets. *5 Engineering, Procurement and Construction Kitazawa I am currently working on cost estimation for a project in North America. In terms of business transformation, I think this project can become a role model that reduces the risk of projects. In EPC, ascer- taining risks is the most important issue. North America, in particular, is a region with numerous opportunities but also significant risks. The proj- ect that I am currently working on has complex, intertwined risks, so we are carrying out thorough identification of risk areas and establishing countermeasures for each of them as we create cost estimates. This method of identifying risks and formulating countermeasures could be a role model for future projects in North America, but also provide a gen- eral basis for risk management in EPC, regardless of region or business area. In addition, as a basis to support new business creation and expansion, my current work plays an important role in securing profitabil- ity in existing businesses, and I hope to come up with optimal solutions while contributing to the realization of our purpose. Materiality Roundtable Discussion Nakamura My work at the Life Science Project Department involves pharmaceutical plants. I interpret ‘Enriching Society through Engineering Value’ broadly and believe it refers to what people and the environment seek to achieve happiness. In that context, I believe that the Life Science Business can contribute to the realization of a ‘Prosperous and Healthy Lifestyle,’ which is one of those needs. I was previously engaged in EPC for LNG and ethylene plants and it was rewarding to provide various prod- ucts to wide-ranging users through the materials created, albeit indirectly. While pharmaceutical plants are smaller-scale than gas and chemical plants because they manufacture medication for patients with specific conditions, the fact that products made in plants that Chiyoda built go directly to end users is one thing I find very appealing. I was involved in constructing a vaccine constituent production facility in 2021 and am currently working on the construction of a pharmaceutical plant that manufactures therapeutic drugs. These projects have huge social significance in terms of strengthening economic security and con- tributing to safety and peace of mind for patients suffering from illnesses. The concept of strengthening domestic pharmaceutical supply chains has gained prominence in recent years, and the pharmaceutical market is also a core field of business in which the Chiyoda Group has leveraged its expertise from the petroleum and chemical fields to build up an extensive track record. By carrying out and completing reliable construction without delays, I aim to contribute to addressing materiality issues and to Chiyoda’s growth, working with a strong sense of mission day by day. Tezuka I am involved in corporate DX initiatives as part of the CDO Office.*6 I believe that I can contribute to realizing an ‘Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation’ and ‘Human Resources Addressing Social Issues Autonomously.’ I imagine that everyone participating in today’s roundtable discussion has estab- lished some idea of their own career path and who they want to become over the course of their career with Chiyoda. However, I feel that the Company does not have sufficient documentation and tools setting out clear career options, meaning the environment does not currently enable employees to be autonomous in their own careers. To resolve this issue, we at the CDO Office are currently working to promote talent management. Specifically, we are aiming to expand employees’ careers and range of possibilities through a system that consolidates information such as work experience and project histories for all employees and by visualizing talent career and development paths. From a company perspective, this can also identify gaps between our current status and strategic human resource development and allocation that aligns with business plans. I will continue these efforts to work together and create an ideal environment in which each employee’s hopes for their career match the type of human resources sought by the Company. *6 An organization operating under the Chief Digital Officer that aims to transform business processes, improve project execution capabilities and accelerate implementation of Companywide DX initiatives Ota As companies’ social responsibilities have come under greater scrutiny in recent years, the issues faced by our cus- tomers have become more complex. As a result, it is more difficult for customers to come up with solutions alone. Against this backdrop, as everyone has described, we are expected to rationalize customer requirements and utilize wide-ranging technologies and expertise to propose feasible solutions. As an integrated engineering company, this is one of the Chiyoda Group’s major strengths. With issues becoming more complex and with wide-ranging elements to consider and fields to cover, in order to put forward optimal solutions, it is important to actively make use of external partnerships in addition to those within the Company as we put proposals to customers. Moving forward, I hope to see everyone take ownership of customers’ issues and work to find solutions. In addition, while DX and human resource development may not appear directly related to our business at first glance, they are actually crucial. These initiatives, including developing talent capable of making the type of proposals described earlier and creating an environment where employees are encouraged to take on new challenges, form a foundation that will significantly impact the Chiyoda Group as a whole. In terms of human resource development, in particular, we are focusing on the appropri- ate allocation of human resources with the aim of enabling each employee to build up wide-ranging experience and enhance the Company’s response capabilities. As a result of actively transferring human resources across business fields in recent years, I feel that we have also expanded the Company’s scope. Moving forward, we will advance human resource development and allo- cation that takes a Companywide perspective, including transforming our awareness, in order to further leverage Chiyoda’s strengths. 22 23 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Working to Realize Our Vision Honda My current vision for myself is to contribute to the Company by achieving profit- ability in the new business I am working on. Working in fields without precedent means that trial and error is required for the establishment of national systems and the social implementation of new technologies. As a result, it is not possible to produce instant results, and we have gone through the process step by step. However, in recent years, it has come to be a business that is focused on in internal liaison meetings and the Medium-term Management Plan, and there are signs that commercialization is advanc- ing. Taking encouragement from this, I hope to overcome the first hurdle of achieving profitability, then expand this business field in the future. To achieve our targets, in addition to more in-depth work on technologies, I will focus on enhancing collaboration with related departments and strengthening our organization. Tezuka From the perspective of someone working in a corporate division, I want to make the Chiyoda Group a place where employees experience high levels of satisfaction and happiness in their work. This also applies to our current corporate DX efforts, includ- ing talent management, which I believe will ultimately lead to greater satisfaction and happiness for employees. The Chiyoda Group’s DX initiatives are currently at the stage of digitization aiming to break away from paper and digitization through shifting to electronic business processes, but my next target is to take the next step and achieve digital trans- formation that transforms the business processes themselves. Moving forward, I will strive to further enhance collaboration with business departments and transform busi- ness processes to align with their needs. Yamazaki As a counterpoint to those like Ms. Honda, who are working to provide new value in new businesses through trial and error, I have experienced fields such as CCS where the national government decided to provide subsidies, leading to ready demand and orders from customers. I experienced the difficulty of creating a market by oneself and the fact that our order- based business is easily affected by fluctuations in demand and customer trends. This is also true in my department, where engineering work centered on LNG was the mainstream before CCS-related work suddenly accelerated. Significant time and effort are required for the Company to create a market, but ascertaining the balance of risks and returns is also important when selecting large projects in markets with established demand. Against this backdrop, I feel that we need to think about our vision once again, including the markets that the Chiyoda Group will take on moving forward and the way in which it will do so. At the same time, the Chiyoda Group has a track record of responding flexibly, even to sudden demand, and I think this ability to respond to changes in the environment is our biggest strength. That type of flexibility will also be important in realizing our vision. As a mid-career employee, I hope to be actively involved in fostering human resources who can respond with agility to any situation. Kitazawa I had the opportunity to take part in a debate about what EPC should be in the future. The focus was on whether we should continue to pursue large projects or concentrate on medium-sized projects that can be completed in less time to enable younger employees to build up experience. Each approach has upsides and downsides, and the business environment around us is undergoing significant change, so I think we need to once again discuss what EPC should be like, including aspects other than project size. Beyond EPC, in order to set out a Companywide vision, it is important to thoroughly discuss what the Chiyoda Group’s core business is and clarify the areas that can be changed and those that should be maintained. As a guide for the whole Company to move in a united direction, mid-career employees such as myself must also take the initia- tive in considering these matters. Materiality Roundtable Discussion Nakamura As an order-based business, contractors such as the Chiyoda Group tend to always end up in a weak position relative to customers. In Japan, in particular, I feel that the attitude of always following customers’ instructions and requirements is deeply rooted in the Chiyoda Group. In addition to this situation, with costs rising due to soaring material and labor costs in recent years, I see risk-return balancing negotiations with customers to reflect these increases as the biggest issue facing con- tractors. In order to secure profits commensurate with the value provided by the Chiyoda Group and create better working environments for our employees, I believe that being able to exchange opinions with customers on an equal footing and building partnerships based on understanding is the ideal scenario. To do this, providing value that customers recognize is an absolute prerequisite. In the pharmaceutical plant projects I am currently working on, too, I will not be bound by conventional roles and will actively propose ways to enhance productivity, reduce costs and further improve quality. Hanawa I also think that being on an equal footing with customers and exchanging opinions as we proceed with the work is the ideal situation. I feel that the relationship with our customers is relatively equal during the FS stage, and we are able to have discussions on the same level in many cases. If we can establish a trusting relation- ship during the initial stages before the specifications are determined, like during FS, I think this can lead to the preservation of that equal relationship during FEED and EPC. In an FS project that I worked on in 2023, the customer was impressed by the value that the Chiyoda Group provided and stated that they would be delighted to also proceed to FEED together. Establishing such partnerships with cus- tomers in the initial stages of more projects will lead to improved profitability. While FS and FEED projects are smaller in scale than EPC, the risk is low, so I believe there is merit in considering a method of building up profits by providing good value in isolated FS and FEED projects without it necessarily having to lead to an EPC contract in the end. Ota Mr. Kitazawa spoke about what EPC should be, and I am aware of the extremely important role that EPC plays in secur- ing profits as a foundation for growth, as the creation of new businesses takes time. In addition, as we expand our engineering to even more fields in the future with new businesses, leveraging the experience and expertise that we have built up in EPC to put forward proposals that take procurement and construction into consideration ought to be a major strength of the Chiyoda Group. However, securing EPC orders does not have to be the goal of every project. Up to this point, we have pursued EPC as a business model that leads to the greatest profits, however, risks are currently growing larger and the time when we must reconsider whether this is the optimal choice is coming. By putting our engineering know-how refined through EPC to use in new ways, we should try establishing a new business model based on building up profits over the long term, rather than single large-profit projects. To do this, as Mr. Nakamura and Mr. Hanawa mentioned, we should move from being contractors who make things upon request to being part of partnerships. We are actually starting to try this approach of participating in projects as partners to our customers in life sciences, where we have invested in a pharmaceutical Contract Development and Manufacturing Organization (CDMO) project. As everyone has said today, the Chiyoda Group has a significant role to play in opening up a path for problem-solving that can help to achieve our customers’ visions, and there is no doubt that we can provide value. However, the form that this value takes must be determined by making our purpose even more concrete and be based on the vision of everyone at the Chiyoda Group. I hope to see the talent upon whom the future depends have debates considering every possibility. We will continue to actively create these forums for discussion, and I look forward to seeing everyone work together to consider and set out a vision for the Chiyoda Group in order to realize our purpose. 24 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth 25 Materiality Leading to Sustainable Growth Society with Reduced Environmental Impact Early Realization of a Hydrogen-Based Society Development of a Large-scale Water Electrolysis System To adapt to the rapidly expanding hydrogen production markets both inside and outside Japan, we signed a basic agreement on cooperation with Toyota Motor Corporation, which has an extensive track record in the area of fuel cells, in February 2024 for the joint development of a large-scale electrolysis system and the building of a strategic partnership. The production and mass production technologies for electrolysis cell stacks using the fuel cell technology held by Toyota and the processing plant design technologies and large-scale plant construction technologies held by Chiyoda will be brought together and optimized to create the conditions necessary for green hydrogen production, including reducing the costs, increasing the production efficiency, and stabilizing the quality of the electrolysis system. The introduction of an electrolysis system in the Hydrogen Park at Toyota Motor Corporation’s Honsha Plant will start in fiscal 2025, and it will be expanded in the future to the 10 MW class and used for verification and development. Using SPERA HydrogenTM Technology with Imported Hydrogen in a Dehydrogenation Demonstration Project in Port of Singapore Area In June 2024, we began the demonstration operation of technology to fill large fuel cell vehicles with imported hydrogen at the Port of Singapore. The demonstration operation is being performed jointly with Singapore’s Nanyang Technological University and PSA Singapore. MCH imported from overseas is temporarily stored in above-ground tanks and hydrogen is extracted using compacted dehydrogenation skids provided by Chiyoda. The extracted hydrogen is then refined before being used to fill fuel cell vehicles. This demonstration operation earned us a good reputation with the Singaporean gov- ernment as a hydrogen carrier due to the characteristics of our MCH, and was the first hydrogen utilization project in Singapore using our SPERA HydrogenTM technology. Going forward, we will continue contributing to the acceleration of hydrogen use in Singapore and the realization of low-carbon societies worldwide as part of decarbonization efforts for a sustainable future. Illustration of the jointly developed electrolysis system Electrolysis Equipment (Highly integrated water electrolysis stack group produced by Toyota Motor Corporation) Compacted dehydrogenation skids for large fuel cell vehicles provided by Chiyoda Large-scale Water Electrolysis System (Smart scalable engineering by Chiyoda Corporation) Contributing to Realizing Carbon Neutrality Building the World’s First Production and Supply Chain for Sustainable Polyester Fibers Made From CO2 There is a need for development of carbon recycling technology to collect CO2 and utilize it effectively as a resource. The Roadmap for Carbon Recycling Technologies formulated by the Ministry of Economy, Trade and Industry in 2019 also puts forth a policy of reducing emissions of CO2 into the atmosphere by using CO2 as a material or fuel. In 2020, under contract by NEDO, the Company began developing world-leading technology for production of para-xylene from CO2.Through co-creation projects with various partners, we succeeded in producing and extracting para-xylene in 2023, and in 2024 we built a supply chain of seven companies in five countries for the production of polyester with CCU technology in a project owned by Goldwin Inc. CO2-based polyester made with this technology has been adopted for purposes such as use in part of the Japanese climb- ing team’s uniforms. Through this initiative, we are actively promoting decarbonization in the materials field with the aim of realizing a zero-carbon society as quickly as possible. Contributing to Stable Supplies of Renewable Energy Chiyoda Awarded Engineering, Procurement and Construction Contract for Large-scale Battery Energy Storage Facility for Nijio Co., Ltd. Chiyoda was awarded an engineering, procurement and construction contract for a large-scale battery energy storage facility being built in Oita City, Oita Prefecture by Nijio Co., Ltd., a wholly owned subsidiary of Tokyo Gas Co., Ltd. Construction is currently underway. Chiyoda’s ‘safety in design’ expertise, optimization experience in previously constructing one of the world’s largest battery energy storage facilities, and project management capabilities, were key factors for the award of the contract. Chiyoda will continue to focus on energy storage facility EPC projects as the center of our energy management field, utilizing BESS as a distributed energy resource (DER) for Virtual Power Plants (VPP) to deliver solutions to power generation companies and related stakeholders. We will continue pro- moting the use of renewable energy towards a decarbonized society, enhancing power resilience during disasters and establishing an economic power system. Prepared by Chiyoda based on Google Maps and GSI map data Competition uniforms made from CO2-based polyester for the Japanese climbing team 26 27 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Prosperous and Healthy Lifestyle Contributing to Stable Supply of Key Materials for Realizing a Carbon Neutral Society Toward a Stable Supply of Copper: A Construction Project for a Copper Smelting Plant in Indonesia Chiyoda has been carrying out EPC work for one of the world’s largest single-line copper smelting plants in the East Java province of Indonesia since 2021. On September 23, 2024, a production launching event was held and attended by then-President Joko Widodo on behalf of the Indonesian government. Copper has outstanding conductivity compared to other metals and is used in electrical components in areas such as wiring, storage batteries, motors and electric vehicles (EVs). Demand is expected to grow further in future. In addition to energy-related projects such as those related to oil, petrochemicals, LNG and gas treatment, Chiyoda has worked on projects in a wide range of other fields in Indonesia. Through this project, we are contributing to the expansion of supplies of copper resources needed for a carbon neutral society and the development of the Indonesian economy. The Chiyoda Group will continue to contribute to stable supplies of copper and other key materials for realizing a carbon neutral society. Courtesy of P.T. Freeport Indonesia The production launching event (center: then-President Joko Widodo) Courtesy of PT. Freeport Indonesia Contribution to Advanced Medicine Chiyoda Awarded an Engineering, Procurement and Construction Contract for a New Biopharmaceutical Active Pharmaceutical Ingredient (API) Manufacturing Plant in Japan for AGC, Inc. Chiyoda was awarded an engineering, procurement and con- struction contract by AGC, Inc. for production facilities for a biomedical CDMO* to be built in AGC’s Yokohama Technical Center. Work is currently underway. The project has been selected by the Japanese Ministry of Economy, Trade and Industry (METI) as part of its ‘Developing Biopharmaceutical Manufacturing Sites to Strengthen Vaccines Production’ program. Through the execution of this project supporting the development and manufacturing capabilities of domestic bio- pharmaceutical products, which currently rely on overseas CDMOs, Chiyoda continues contributing to the realization of a sustainable society. * Contract Development & Manufacturing Organization, a company that performs contracted production of products such as pharmaceuticals and acts as a contractor and agent in the development of production methods. Contributing to People’s Health Participation in a Demonstration Experiment for a Platform to Supply iPS Cells Chiyoda participated in the second phase of a demonstration experiment for a platform to supply iPS cells from iD4. In Phase 1 of the demonstration experiment, a series of processes were completed on the platform, from the production of iPS cells for a single disease to the provision of iPS cells to pharmaceutical companies, and the business’ feasibility was confirmed. In phase 2, we will pursue further specificity by building a database of iPS cells and optimizing distribution channels by leverag- ing our experience and expertise in the cell field. By contributing to the building of this platform, Chiyoda aims to promote industrial utilization of iPS cells for the development of medical treatments. The new biopharmaceutical CDMO development and manufacturing facility at AGC’s Yokohama Technical Center (conceptual image of completed facility) Overview of the Platform Company Name : iD4 (iPSC Delivery on Demand for Drug Discovery) Representative : Toshio Fujimoto. Representative Director Date Established : August 3, 2020 Scope of business : 1. Acquisition and management of cells and cell-related data from medical institutions, etc. 2. Provision of the following services using human-derived cells and cell-related data: i) Sales of iPS cells, differentiated cells etc. ii) Contract processing services iii) Drug discovery support services using processed cells iv) Sales of rights to use cell-associated data 3. Development of data platforms utilizing cellular ancillary data 4. Promotion of industrial utilization of processed cells Overview of the Platform (Japanese Only) 28 29 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Overview of Human Resource Management The key drivers of honing our engineering capabilities and endeavoring to transform our business are an organizational culture that enables diverse personnel to work freely without constraints and our human resources, the Group’s greatest asset. We believe that improving the well-being of our organizations and personnel amplifies the value we provide to society and our stakeholders, and the provision of that value further amplifies the well-being of our organizations and personnel. Advancing Human Resources (HRO System) The Company has implemented Human Resource Management in which Human Resources Officers (HROs) for each job category carry out various duties under the Chief Human Resources Officer (CHRO) in a Companywide system linked with our businesses. The HROs guide our employees along their career paths through dialog with the employees themselves, as well as with supervisors and division directors. They play a pivotal role in the Company’s human resource development, over- seeing transfers, role assignments, evaluations, raises, and promotions in line with employees’ career goals and our business strategies. Human Resources that are a Driving Force for Transformation HRO-Cx Hirotami Kubo General Manager, Human Resources Development HRO-Ex Taichiro Shogaki General Manager, Refinery, Petrochem & New Energy Process Eng. Department HRO-Px Shimpei Saito General Manager, SQEI Department CHRO Masaki Kumagai Senior Vice President, CHRO & CDO HRO-Bx Takayuki Ochiai General Manager, Operation Management Department, Frontier Business Division Striving for Business Transformation through the Capabilities of Our Human Resources and Organizations with an Adaptive Mindset The Group’s most valuable asset is our human resources, and effective management in this area is a key competitive advantage. It is with this in mind that we have worked on human resources development to increase our engineering capabilities. To utilize the strengths we have developed thus far to adapt agilely, expand our field of contribution from infrastructure to the entire scope of social issues, and achieve our vision for the Chiyoda Group, we have adopted an Adaptive Mindset in addition to increasing our project execution capabilities and organizational management capabilities in the specialized areas designated in our Human Resources Development Goals. In fiscal 2023, we built a talent management system as a platform enabling each employee’s career plan and their progress on it to be shared between the employee themselves, their supervisor, and their HRO. This has enabled employees to design their own careers autonomously through dialog with their supervisor and HRO and track their progress as they gain experience. Companies and organizations support employees in achieving their career plan through development strategies combining Off-JT and OJT. We will continue building a culture where motivated employees can challenge themselves, strongly encouraging employees in their efforts to grow, and devel- oping measures and systems for thorough evaluations of professionals in every role. These initiatives will see diverse employees agilely honing their engineering capabilities to transform our businesses in a wide range of fields. CHRO Message Human Resource Management KPIs To promote steady transformation of our organization culture, we have introduced an organizational culture survey to visualize and improve on issues and the culture in our organizations. The results of our organizational culture survey are used as critical KPIs in our human resource management. Metrics with a positive response rate of 65% or higher in the survey are considered strengths of the Company. Measurement Category Index (Results of Organizational Culture Survey) FY2023 Result* FY2024 Target A Fluid Organizational Culture with Mutual Respect and Continuous Challenge Rate of utilization of employees in the workplace Positive response rate: 66% Positive response rate: 65% or higher Human Resources Challenging Social Issues with Pride and Ambition Rate of employee engagement Positive response rate: 64% * Including senior employees working at the Company through our system for continuing employment Human Resources Development Goals From fiscal 2024, we have launched our new Adaptive Mindset, through which we seek to utilize the strengths we have developed thus far to adapt agilely and expand our field of contribution from infrastructure to the entire scope of social issues, based on the goal of increasing our business execution abilities and organizational management capabilities in the specialized areas designated in the Human Resources Development Goals we established in March 2020. To address the increasingly diverse and complicated issues in society, we will agilely adapt our mindset and continuously take on challenges with pride and ambition to increase our engineering capabilities. By creating an environment where each employee autonomously designs their career through dialog with their HRO and supervi- sor and gains a wide range of experience in global fields, we are developing employees with adaptive mindsets. Key to Well-Being Value Circulation Image A Fluid Organizational Culture with Mutual Respect and Continuous Challenge • Organizational development initiatives for diversified values • Implementation and education of generational change of organizational manag- ers leading organizational reform • Promotion and education of diversity and inclusion • Further enhancement of health management • Robust labor-management relations Human Resources Tackling Social Issues with Pride and Ambition • Educational transfer to nurture key personnel based on career paths supported by HROs • Maximize performance of seniors • Establish fundamental / specialized training for business execution abilities • Develop digital human resources Society / Stakeholders Health Well-Being to Amplify Value Value Circulation Value Circulation through our Business through our Business Relationship with Society Human Resources / Organization Organizational Culture Financial Independence Career Autonomy Basic Attitude Professionalism as standard Accelerating growth and enhancing our ‘Business Execution Abilities’ Early appointment and development of human resources with ‘Organizational Management Capabilities’ Business Execution Abilities Organizational Management Capabilities • Awareness & improvement as a professional • Humbleness & communication skills • Independence & determination to take on challenges • Ability to set & complete tasks • Customer oriented with a bird’s-eye view • Ability to respond to changes • Ability to contribute to organization • Ability to combine digital technologies with value creation • Expertise • Capability to unite as ‘One Team’ • Capability to embrace & make the most of diversity • Capability to improve & develop human resources / organization Human Resources Categories (Roles) • Ex: Engineering professional roles These employees have exceptional knowledge of specialized engineering fields. • Bx: Business incubation roles These employees explore new businesses and innovate. • Px: Project management roles These employees play a central role in winning and executing projects. • Cx: Corporate professional roles These employees support each organization and project and steadily execute corporate functions. • Dedicated Positions These employees provide independent support to ensure smooth operations in a wide range of organizations within the Company. Career Development (Growth) Dialog HROs Managers Organizational Organizational Management Capabilities Management Capabilities Business Execution Business Execution Abilities Abilities Cx Px Bx Ex Dedicated Dedicated Positions Positions ‘Adaptive mindset’ Maximize and nurture strength and flexibility to expand fields of contribution from infrastructure to social issues Flexi bility and E xpan sion Strengths Strengths 30 31 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Organizational Culture that Enables Diverse Human Resources to Challenge Value Creation Transformation of Organizational Culture Generational Change of Managers We have established an upper limit for the term of each position, after which managers alternate, which can include transfers. Our measures to replace department and section managers who have been in their roles for too long are progressing according to plan, and we expect to completely resolve this stagnation within fiscal 2024. From December 2023, we have established succession plans for all positions from department manager upward, have begun initiatives to identify new candidates, and are replacing these managers according to our plans. Moreover, decisions for promotions to positions from section manager upward are made regardless of age. Candidates are selected from a wide range of cross-divisional perspectives, including HROs’ perspectives. This has seen young leaders emerge, with managers leading a department in their 30s or running a Group company in their 40s. We are continuously identifying new managers to revitalize our organizations. Long-standing managers in department or section manager roles Initiatives to Transform Our Organizational Culture Through Our Organizational Culture Survey From fiscal 2024, we aim to revise some of the metrics in our individual assessments of the managers of our organizations, including executives, set conduct goals related to the transformation of our organizational culture, and establish PDCA cycles. Diversity and Inclusion (D&I) In addition to realizing an organizational culture where diverse qualities are respected and each employee can thrive and demonstrate their capabilities, entrenching D&I is essential in order to achieve our purpose. Advancement of Women Supporting the advancement of women is one key theme. For fiscal 2024, we have formulated our third General Business Autonomous Action Plan (April 1, 2024 to March 31, 2028) under the Act on the Promotion of Women’s Active Engagement in Professional Life and are working with a focus on measures to encourage women to continue their careers and strengthen- ing hiring of women with the aim of achieving our numerical target of a 15% ratio of women in career-track roles. In addition, the percentage of male employees taking child care leave was 65.2% in fiscal 2023, above the Japanese govern- ment’s 2025 target for private sector companies, which is set at 50%.* Aiming to reach at least 75% by fiscal 2027, we will con- tinue to create even better working environments by enhancing support for employees’ work-life balance, regardless of gender. * Target sourced from Children’s Future Strategy Policy (Cabinet Decision on June 13, 2023) KPIs for the Advancement of Women Index FY2023 Result FY2027 Target Ratio of Women in Career-track Roles 13% 15% Rate of Childcare Leave Taken by Male Employees 65.2% 75% or higher Mid-career Hiring In order to achieve our vision for 2030, it is essential to secure human resources with diverse experience and skills, not only in the business areas we have focused on thus far but in dif- ferent fields too. We are actively recruiting mid-career hires through mea- sures such as direct recruiting and referrals with a plan to achieve a roughly 50-50 ratio between new graduates and mid-career hires. Ratio of Mid-career Hires in FY2023 (Relative to New Graduates Hired) • FY2021 • FY2022 • FY2023 • FY2024 (forecast) Not long-standing Long-standing 29, 16% 153, 84% 19, 11% 155, 89% 8, 5% 169, 95% 100% Stagnation expected to be fully eliminated in FY2024 52.2% Mid-career hires New graduates Results of attendance survey • Attendance rate (management) • Did understanding and agreement with the need for women’s advancement increase? One numerical target in our third General Business Autonomous Action Plan under the Act on the Promotion of Women’s Active Engagement in Professional Life is 100% attendance of D&I training. In fiscal 2024, we invited Atsuko Muraki, former Vice Minister of Health, Labour and Welfare, to give a presentation entitled Promoting D&I: Why the Advancement of Women is Needed. This was an opportunity for our personnel to gain a more in-depth understanding of why D&I needs to be promoted, the effects of promoting it, and the need for the advancement of women. From left: Masakazu Sakakida (Chairman of the Board), Atsuko Muraki, Masaki Kumagai (CHRO) Attended Did not attend Increased significantly / Increased Did not increase much / Did not increase at all 9% 5% 91% 95% D&I Training Reason for transferring to Chiyoda Corporation I wanted to be involved in life-saving medicine, something essential to humanity. In my previous role, I worked in devel- opment for a precision device manufacturer, but I was drawn to Chiyoda’s Life Science Business because it allows people from unrelated industries to take on challenges in medicine and it would enable me to be involved in research and development of technology that would be used in society. A classmate from university also worked here and the good people and friendly company culture appealed to me, so I decided to work here. Working on a team with diverse backgrounds Many of the people in my organization are mid-career hires. I’ve learned a lot by working in an organization where the team has such diverse backgrounds. During discussions, there are so many perspectives that differ from my own, and each way of working or speaking introduces me to diverse ways of thinking, which I can tell has been beneficial for me. That diversity means that it can be difficult to set a unified direction for the organization, but we understand and respect each other’s backgrounds and try to see each other’s point of view as we go about our work. Taking on new challenges through study funded by the Company During my first year, I took the entrance examination for Tsukuba University. I studied there in my second year and gained a Ph.D. in bioengineering. This was partly because Ph.D.s are needed in the pharmaceutical industry and also because I was inspired by the depth of understanding that the Ph.D. holders in my organization had in their respective fields of expertise. I wanted the opportunity to engage in discussions in an academic setting too. People in my life gave me positive advice about points like where to study, and I ended up giving it a try right after I was hired. It was hard balancing it with my work, but in addition to gaining specialized knowledge, I was able to identify unconscious habits in my thinking and develop the ways of thinking and viewpoints that are needed in order to work in new businesses. Interview with Mid-career Hire Sakiko Takeuchi Bio & Pharmaceutical Business Section, Life Sciences Business Department Mid-career hires and diverse talent driving our operations I work in a role where I recruit mid-career hires and employees with disabilities. The hiring market is becoming intensely competitive, and we are devising and executing new measures to handle these conditions. I myself was also hired mid-career in 2023. There are so many positives about the Company, such as the high level of expertise and pride that each employee has and the freedom of our organizational culture, and I am inspired every day. In my previous role, I worked in HR and was involved in training. At Chiyoda, after talking to my supervisor about my duties and career, I decided to do something where I could use my past experience while trying something new and expanding the scope of my HR career, and ended up in my current role. I can see that the Company has a culture where employees who ask to try something are given the chance to do it, and an environment that encourages that. I will continue working on strengthening our framework to promote those positives so that we will be chosen by employees with diverse backgrounds and those employees will have active careers here. Interview with Recruiter Riho Kimata Group Leader, Recruitment Group, Human Resources Development Section, Human Resources Development Survey conducted Results shared (presentations for each division) Action plan formulated (conduct goals set) Action plan executed 32 33 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth An exchange of opinions between engineers and a fellow, discussing Chiyoda’s engineers and their technological expertise. About Chiyoda’s technological expertise Matsukawa Chiyoda’s projects are Unique and Temporary. In order to accomplish new things like nothing else in the world in a limited time, we need to use a variety of technologies in specialized fields and adapt to rapid changes. I feel that Chiyoda has a wealth of personnel who are equipped for that. Shiozaki I think that technical capabilities are not about knowing how but about knowing why. I think that technical capabilities come from understanding the principles and the reasons written in the manuals. If you understand the basics properly, you can apply them. All of the fellows we’ve had have embod- ied this, and every day I’m reminded of the importance of engineers. Asano I think that bringing specialists with diverse skills together is the source of Chiyoda’s technological expertise. That was one of the reasons why I began working here. I feel like a lot of people here have their own expertise as the base and then they’re interested in other fields and show an understanding of those too. I feel like that goes back to the principle of knowing why. Matsukawa One type of plant project we often work on is integration. We purchase various parts of technologies and integrate them to create a facility to perform the overall function. A technical issue that tends to occur there is the boundaries between those components. I think there can be cases where our engineers need to solve issues that may be outside their area of expertise, and to do that there needs to be a discussion across those boundaries. The joy and sense of fulfillment from demonstrating technological expertise Matsukawa Every good design or analysis report covers a scenario and is written persuasively. Those are the kinds of reports I want to write. I think that kind of work is fulfilling. I want to become so knowledgeable that I can under- stand the results of analyses that I didn’t do. Shiozaki I often feel fulfilled when I troubleshoot an issue and solve it. And when I accurately identify a customer’s concerns and provide the right expla- nation to satisfy them, I feel a sense of accomplishment for having demon- strated my capabilities as an engineer. Asano It’s troubleshooting for me too. When I was at an overseas site, there was a sudden issue. The engineers from each division instantly under- stood what was happening from what the customer was saying and we accurately connected the dots right away and came up with an explanation that would satisfy the customer. It made me realize the level of expertise and teamwork these employees had, and how that enabled them to earn the trust of their customers. When executing a project, you have stakeholders with different areas of expertise. In order for all of them to achieve their objectives, everyone has to be on the same page and overcome difficulties together. I was grateful for that experience. Honing technological expertise Matsukawa Experience is extremely important. We have an unspoken, guid- ing policy that you need to understand the technology yourself and not leave it to others, and I feel like we often have the opportunity for things to be entrusted to us. We’ve failed many times, but those experiences are valuable. Asano My failures when I was young fuel me too. In recent years I’ve been in a position where I’m supervising others, and it’s made me realize how much resolve it must have taken for my supervisors back then to let me handle things myself instead of giving it to them. Thanks to them, those struggles and the frustration of those failures were learning experiences for me. When I first started working here, I thought that honing technological expertise was done by sitting at a desk and studying, but lately I’ve been feeling that that study is basically window dressing. I think updating your technical knowledge is a major premise of being an engineer, and the capabilities you demonstrate by doing so form your technological expertise. Shiozaki I feel the same way. When I served customers in Qatar, answering difficult questions taught me quite a lot. The most important thing in order to increase your technological expertise and grow is having an interest in things, intellectual curiosity and an inquiring mind, and being able to enjoy that. Matsukawa A strength of Chiyoda employees is our international mind, which we developed whether we liked it or not. I was surprised to meet engineers with a variety of styles overseas. It was like an international engineering tourna- ment and it showed me how important it is to demonstrate the skills you have. No matter what field you’re in, you’ll do fine as long as you have your own area of expertise. I want young people to have a little courage and savor the excitement of showing your skills overseas. I want to keep developing that experience and gain a presence and value as an international contractor. Working to solve the next generation of social issues Matsukawa The next generation of social issues includes hydrogen and decarbonization. I think those are areas where our technological expertise will be useful. Chiyoda has focused on reducing environmental impact and the need for that is taking on a whole new dimension. When you add in quality, cost, and time, that’s four measures, which means that both project management and engineering will become more complex. Chiyoda has a culture where engineers with various areas of expertise come together to bridge the gaps between their specialties, and I think those are the optimal conditions for working on this. Speaking with you two, who aren’t from the same generation as me, your ear- nest efforts to improve your technological expertise came through loud and clear. This has been a very valuable experience. Thank you. Engineer Dialog Human Resources Development Human Resources Development Measures to Develop Key Personnel for Our Businesses We are working to develop human resources with the business execution abilities and organizational management capabilities required for each role according to our Basic Human Resources Development Goals. Coordination between experience gained on the job and training to supplement employees’ work is ideal for this development, and we are rolling out human resources devel- opment measures with this aim. Additionally, to link our human resources development mea- sures with the improvement of business execution abilities, we are carrying out initiatives to systematize representative career paths and reflect them in transfer plans (regular trans- fers) with development in mind. We have built a talent management system as a digital platform to support these measures, and have created a plat- form where each employee’s career plan and their progress on it can be shared between the employee themselves, their supervisor, and their HRO. This enables employees to track their own career progress while gaining experience, and enables the Company to systematically develop key personnel for our businesses. System for Enhancing Business Execution Abilities We are further developing the expertise and unique strengths of our human resources and their ability to independently identify and resolve social issues (‘set and complete tasks.’) Expertise In April 2022, we established a system for appointing employees with outstanding expertise as fellows. Three fellows are appointed at present. In addition to leading our business strategies, fellows serve as role models. We aim to further develop and expand our fellows in future, and have identified 21 potential candidates. Ability to Set & Complete Tasks From fiscal 2021, we have been rolling out training to strengthen our employees’ ability to set and complete tasks, particularly employees in their early 30s who play a central role in our organization. The number of employees attending our training is growing steadily (32 employees in fiscal 2021 to 50 in fiscal 2022 to 100 in fiscal 2023). Initiatives to Enhance Organizational Management Capabilities Equipping employees with organizational management capabilities early is important in order to strengthen organizational management capabilities. From the time an employee is a group leader in charge of other employees, we assign them to work to improve their organi- zational skills, such as drafting and executing organizational goals in line with our management strategies and business strategies and training their team through dialog. These are also themes in development such as training, with a focus on practical training. Execution of Organizational Operations At Chiyoda, employees and their supervisors set goals together based on the employee’s career aspirations. Throughout the designated period, each employee in the division has opportunities for dialog about their progress. From the time the current human resources system was launched in April 2021, the entirety of our organizations has focused on building systems for developing human resources. Approaching each employee’s career from various angles enables appro- priate training, and dialog between employees and their supervisors provides practical opportunities for the managers of organizations to increase their orga- nizational management capabilities. Human Resources Addressing Social Issues Autonomously • Goals that lead to growth are set • Acceptance of evaluations Strongly agree / Agree / Somewhat agree Slightly disagree / Disagree Agree with evaluation / Somewhat agree with evaluation Disagree with evaluation / Completely disagree with evaluation 10% 90% 15% 85% Employee Survey Results Related to Goal-setting and Evaluations Talent Management System Career design and progress of development Coordination between Off-JT and OJT Visualization of experience and skills Transfers and placement to assign the optimal staff to the optimal roles Keisuke Matsukawa Fellow Tokyo Institute of Technology Special Professor, Graduate School of Environment and Society Yuya Asano Civil Engineering Section, Civil Engineering Department Tetsu Shiozaki Process Technology and Control Section, Gas & LNG Process Engineering Department 34 35 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Equitable and Fair Corporate Management Compliance The Chiyoda Group has a Group-wide compliance framework comprising a Chief Compliance Officer (CCO), who oversees all compliance matters, and Compliance Officers (COs) who oversee compliance for each division and each Group company. Under the direction and supervision of the CCO, the COs execute various compliance measures while regularly assessing compli- ance risks and selecting key risks to address. They also draft specific preventive measures such as education and training for Group executives and employees and carry out monitoring, improve awareness and knowledge about the importance of compliance, and establish internal whistleblowing systems in an effort to ensure early detection and correction of compliance violations. CSR Basic Policy 1 2 3 4 5 A Reliable Company We strive to be a reliable company to our customers and all our stakeholders by providing world-class technologies and knowledge. Environmental Initiatives We will work to remain an invaluable company to society by utilizing refined technologies to promote harmony between the global environment and economic and social activities. Social Contributions Through our engineering business in Japan and overseas, we contribute to local communities and address global issues in ways including human resources development, technology transfer and environmental protection. Respect for Human Rights We are dedicated to respecting the human rights of all people. We will create a corporate culture where the diversity, individuality and character of employees are respected, where people are motivated to do their best, and of which employees and their families are proud. Commitment to Fairness We are dedicated to achieving even greater transparency and stability by conducting our operations fairly in accordance with the highest ethi- cal standards. Compliance Initiatives Tailored to Risks The Group works to increase our executives’ and employees’ awareness and knowledge of compliance and carries out multi- faceted initiatives pertaining to high risks and specific matters in the Group’s business operations that we have identified in risk analyses, including requests to our supply chain. These initiatives are revised and improved regularly. Main Initiatives Details of Initiatives Improving Awareness and Knowledge of Executives and Employees about Compliance • Establishing and disseminating Code of Conduct and Guidebook on Conduct of Executives and Employees to provide clear standards for the judgments and conduct of Group executives and employees • E-learning on compliance (in Japanese and English) for all executives and employees, including those at Group companies inside and outside Japan (once a year) • Publishing of email magazine about compliance (monthly) Prevention of Bribery of Foreign Officials • Establishment and dissemination of Chiyoda Group Basic Policy on Prevention of Bribery • Establishment and dissemination of internal regulations • Establishment and enforcement of prior application procedures for high-risk activities (providing benefits to public officials, designation of third parties as a point of contact with public officials) • Holding bribery prevention seminars (in Japanese and English, once a year) Prevention of Cartels • Establishment and dissemination of internal regulations • Establishment and enforcement of compliance checking procedures for high-risk activities (participation in bidding for projects) • Holding cartel and collusion prevention seminars (in Japanese and English, once a year) Prevention of Human Rights Violations • Establishment and dissemination of Human Rights Policy • Building of sustainability promotion framework • Execution of human rights due diligence • Holding business and human rights seminars (in Japanese and English, once a year) • Conducting audits of overseas construction sites Harassment Prevention • Establishment and dissemination of internal regulations • Holding harassment prevention seminars (in Japanese and English, once a year) Internal Whistleblowing System We have introduced a Group-wide internal whistleblowing system so that issues such as illegal or unauthorized activities and human rights violations including harassment can be detected early, corrected, and prevented from reoccurring. In addition to establishing internal contact points and external contact points such as an attorney’s office and dedicated external reporting service, we have established contact points in local languages for overseas Group companies. We also communicate about our internal whistle- blowing system by distributing Internal Whistleblowing Cards (in Japanese and English), containing the details of our internal and external contact points for whistleblowing, to all employees, including those at Group companies inside and outside Japan. • Whistleblowing reports for the Group (reports received by the Group-wide contact points in fiscal 2023) Please refer to our website for details on our compliance initiatives. https://www.chiyodacorp.com/en/csr/risk-management/compliance/initiatives.html * No reports or occurrences of serious violations, such as bribery or cartel behavior. Legal violations* 4 Violations of internal rules 10 Power harassment (including consultations, canceled items, and other concerns) 29 Sexual harassment and pregnancy discrimination 1 Workplace environment issues 20 Other consultations 17 Total: 81 Under the CSR Basic Policy established in 2006, in addition to complying with laws and regulations, the Group has endeav- ored to promote and thoroughly implement compliance measures while responding to stakeholders’ expectations as a corporate citizen, and has promoted sincere, equitable and fair corporate management at all times as a member of society. I think that in order to create new value and realize sound, sustainable growth amid a business environment that is changing at a dizzying speed, not only must we comply with laws and regulations, fostering awareness of compliance based on a strong sense of corporate ethics will increase the trust of all of our stakeholders and lay the foundations for sound growth. In order to continue to be a company that earns the trust and approval of society, it is important that each employee in the Group properly understands their social role and responsibilities. To clarify those roles and responsibilities, the Group has established the Chiyoda Group Code of Conduct, and will continue fostering an organizational culture of transparency in its corporate environment, realizing sound management of the Company, and maintaining the trust of society and the growth of our organizations. The Group will continue endeavoring to increase the awareness and knowledge of compliance among all of its execu- tives and further enhance, strengthen, and entrench highly effective compliance measures to earn the trust of all of our stakeholders. CCO Message Atsushi Deguchi Representative Director, Executive Vice President, CFO & CCO 36 37 Chiyoda Corporation CHIYODA REPORT 2024 Materiality Leading to Sustainable Growth Materiality Leading to Sustainable Growth Foundation Underpinning Sustainable Growth In this section, we describe Chiyoda Corporation’s management structure for sustain- able growth and other specific initiatives. CONTENTS 40 Chiyoda DX STORY 42 Corporate Governance 48 Risk Management 49 Safety Management 50 Intellectual Property 38 39 Chiyoda Corporation CHIYODA REPORT 2024 Under the Chiyoda DX STORY, our initiative to accelerate DX throughout the Company, the development of DX Core Human Resources will drive our transformation as we promote digital transformation in the Group and the industry to realize our purpose, ‘Enriching Society through Engineering Value.’ Vision of the Chiyoda DX STORY We are working to build an environment where all employees will carry out corporate operations and projects on the same data platform to visualize and structure information. This will enable understanding of information, expeditious decision-making, automation of business processes and more stringent governance. * A method in which multiple specialized engineering and device procurement processes are carried out simultaneously, shortening the working time so that the plant is completed by the deadline requested by the customer. The Driving Force of Our Transformation Human resources are the driving force of transformation. Our DX Core Human Resources are handling the entire transformation of our operations from planning to execution, collaborating with internal and external parties to implement DX and foster a DX-oriented mindset among both themselves and the Company as a whole. By carrying out each cycle from planning to production, we aim to develop and enhance our DX Core Human Resources to accelerate and expand our transformation. Chiyoda DX STORY (Accelerating Companywide DX) Planning DX Core Human Resources identify business issues and make plans Design DX Core Human Resources involve others to reinforce plans to achieve business transformation Development DX Core Human Resources acquire external expert support to prepare the environment, and execute the plan Implementation DX Core Human Resources utilize a developed environment and expand it companywide, resulting in more DX Core Human Resources Planning Employees’ DX mindset is fostered such that DX penetrates and is expanded and realized companywide Management DX Core Human Resources All Employees External experts (Sler, etc.) Planning / Proposal Business Design Support Investment Decisions Personnel Involvement Personnel Involvement Development Support Practice / Penetration Support Personnel Involvement DX Core Human Resources (200 by 2030) Planning / Proposal Investment Decisions Identify Area of Improvement / Devise Solutions Experience the Effect Experience the Effect Identify Areas of Improvement / Devise Solutions Enterprise Business Management Integrate all operations with digital transformation and ERP for rapid revenue forecasting and risk management Resource Management Align business strategy, order planning and assignment for adequate resource availability and maximum profit Talent Management Align personal career paths and business contribution for strategic human resource development Project Management and Construction Management Visualize the links and forecast of project execution information for proactive project management Procurement of Equipment and Materials Effectively share information throughout the project supply chain to ensure the supply of materials and equipment to sites Engineering Execution Visualize impacts of design on project execution plan to optimize and streamline concurrent engineering* Prompt management decision making and elaborate governance based on up-to-date structured data Companywide Business Execution Platform Employees work on the platform, allowing for prompt checks and access to up-to-date information anytime, anywhere. Management Corporate Management Platform / Corporate DX Digital EPC Platform / Project DX Companywide Companywide Analysis Analysis Corporate DX Project DX Projects and Plans Department Managers Financial Accounting Projects and Contracts Financial Accounting Receiving Order Contracts Quantity Costs and Liabilities Contracts Human Resources Placing Order Contracts Human Resources Plans and Results of Operations and Assignments Concept Video for the Chiyoda DX STORY Concept Video for Chiyoda Corporation DX - YouTube Progress of the Chiyoda DX STORY Through the Chiyoda DX STORY, transformation of operations is being developed and implemented both inside and outside the Company. Our DX Core Human Resources (Digital Officers (DOs) / Evangelists), who are the driving force of our transformation, share specific examples and progress, and key players in the organizations working on our transformation share their expectations and outcomes. DOs / Evangelists Key Players in Organization • Operations such as creation of meeting minutes and translation used to take hours, but now drafts can be created instantaneously, making opera- tions more efficient. • I used generative AI to get ideas. It helped me with the creative thought process and showed me a variety of perspectives. • I think that if generative AI provides answers based on internal information and its accumulated knowledge in future, it will enable effective use of the Company’s knowledge, which will improve the execution of our operations and make us more competitive. Users’ Expectations and Comments Theme Internal Utilization of Generative AI In November 2022, OpenAI, Inc. attracted an enormous amount of attention with the release of ChatGPT, and there was a sense throughout the Company that the utilization of this tool would transform our operations. We built an internal environment conducive to safe and secure use of generative AI and provided a Chiyoda-specific generative AI tool so that employees here could learn about the characteristics and capa- bilities of this technology and the potential it has to transform our operations. We are deploying it in Group companies in Japan and are making preparations for it to be used at overseas Group companies too. We are working on initiatives to further utilize generative AI to improve the efficiency of operations throughout the Group and contribute to the creation of ideas. Masataka Itakura AI Engineering Section, Technology Development Department Theme Collaboration in Project Supply Chains We are working to introduce a new platform called a Supply Chain Collaboration Platform (SCCP). In the requirement definition phase, we are discussing operations and applications with those who will be involved in each task, and then we will enter the design phase where we decide on the specific requirements of operations and systems. We will build an environment where data dependent on external parties, like purchasing, process management and delivery information, can be registered exter- nally, and will centralize communication about operations on one platform. The aim of this initiative is to improve the efficiency and accuracy of operations while also enabling communications about procurement operations based on centralized data. Sachiko Matsushita Section 3, Procurement Department I can see that the SCCP will have signifi- cant results and effects for our procure- ment operations as it will enable skillful handling of powerful DX functions to update our work practices, through which we will remain highly competitive and con- tinue to contribute to society. The ideas of many people in the Company are being used in the creation of the SCCP’s func- tions, and we are expecting to build even greater win-win relationships with our stakeholders and achieve high-quality results from our operations quickly. Michimasa Hattori General Manager, Procurement Department Theme DX for Engineering Execution We are building a platform that will be used to send and receive engineering data. This platform will enable the sending and receiving of engineering data to be visualized so that the progress and status can be seen in real time. As engineering processes are executed concurrently during a project and various information needs to be sent and received to produce a more feasible design, this platform will enable engineers to see the knock-on effect that their designs will have on other designs in real time, enabling optimal decision-making. It will also enable data to be sent and received digitally, so that compatibility can be con- firmed efficiently. Takeshi Yamada Engineering Innovation Team, Technology and Engineering Division This platform enables engineering infor- mation to flow downstream, allowing the engineering workflow and the status of tasks to be visualized in real time so that the right resources can be allocated for each task at the optimal time. Using the same platform for all projects will enable us to build a base of structured data and information on how the data is con- nected, and the use of AI in future will result in major advancements in our engi- neering operations. Ryuichi Kaida Assistant to Division Director, Technology and Engineering Division Theme Resource Management Thus far, each business division has sent project information and the resource data required for execution in a different Excel format, so since the previous fiscal year, we have been gradually building systems for batch management and sharing of this information. As a result, when dealing with business environments that are difficult to forecast, the platform is used to create future resource predictions that the whole of the Company is able to correctly understand, enabling measures to be taken quickly. We are continually improving the systems through ongoing dis- cussions with parties such as the IT Department and each department in charge to enable information to be gathered and management decisions to be made more quickly through the use of this system. Tatsuro Akiyama Corporate Planning Section, Corporate Planning Department Hiroyuki Takahashi General Manager, Corporate Planning Department The Integrated Strategy Committee has been creating and visualizing data, which has proven immensely effective, so we request that this resource management initiative be continued. Human resources are the greatest asset of an engineering company, so to get the greatest value possible from them, we ask the corporate side, too, to carry out DX with a view to improving efficiency of operations through- out the Company. Concept Video for Project DX Digital EPC Platform Concept Movie of Digital EPC Platform - YouTube Digital Cockpit Concept Movie of Digital Cockpit - YouTube 40 41 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth Foundation Underpinning Sustainable Growth Corporate Governance Basic Principles Chiyoda’s vision is one of management that maintains the trust and empathy of all its stakeholders, including shareholders, cus- tomers, business partners, creditors, employees, and local communities. This philosophy is the basis of our corporate activities and we continue to strengthen Chiyoda’s business foundations, ensuring sound and transparent operations to realize sustainable growth over the medium to long term. We will also continue to strengthen corporate governance and reinforce our internal control system as material issues. • Governance Structure (as of July 31, 2024) Organizational Structure Company with Audit & Supervisory Committee Executive Officer System Yes Number of Directors, Number of Whom are Outside Directors (Independent Directors) 12 5 (5) Term of Office of Director (Excluding members of the Audit & Supervisory Committee) One year Number of Audit & Supervisory Committee Members, Number of Whom are Outside Directors 3 2 Number of Board of Directors’ Meetings Held (fiscal 2023) 17 Number of Audit & Supervisory Committee Meetings Held (fiscal 2023) 18 Remuneration System for Directors and Audit & Supervisory Committee members • Directors (excluding those who are Audit & Supervisory Committee members): Base remuneration (according to roles and responsibilities and based on individual assessments), performance-linked remuneration (reflecting the Company’s business performance each term), and performance-based stock compensation (linked to the Company’s medium- to long-term business performance improvements) • Directors who are Audit & Supervisory Committee members: Base remuneration (according to roles and responsibilities) Note: Remuneration for Outside Directors consists solely of base remuneration in accordance with roles and responsibilities. Overview of Corporate Governance Structure Chiyoda is a company with an Audit & Supervisory Committee composed mainly of Outside Directors. Chiyoda operates a system whereby Directors who are Audit & Supervisory Committee members have voting rights at Board of Directors’ meetings and are involved in the nomination of Representative Directors and overall business execution decision-making (excluding decision-making responsibilities delegated to the Directors). Chiyoda has appointed five Outside Directors to ensure objective and neutral monitoring of its management functions. Chiyoda has improved objectivity and transparency and ensured the appropriateness of its processes for appointing Directors and determining Director remuneration through involvement of Independent Outside Directors and full-time Audit & Supervisory Committee members in decision-making, fulfilling a similar role to a voluntary nomination and remuneration committee. Committee Composition and Roles / Responsibilities Board of Directors • 12 Directors, including Audit & Supervisory Committee members. Monthly Board meetings. • Important management matters are determined and business execution is monitored. Appropriate decision-making and management supervision is ensured based on the objective and neutral perspectives of the Outside Directors. • Matters to be decided include management plans, important matters regarding human resources and major investments and loans. Executive Committee • Chiyoda has established an Executive Committee, composed of a quorum of half of the Representative Directors concurrently serving as Executive Officers, Executives at Senior Vice President level and above, and Division Directors, to enable prompt decision-making by acting as an advisory body to the President, who is responsible for business execution. • The Committee decides matters regarding business execution adopted by a resolution of the Board of Directors and prior deliberation of matters to be decided by the Board of Directors, and reports to the President, who is responsible for Chiyoda’s business execution. Audit & Supervisory Committee • Three members (one of whom is full time) consisting of two independent officers and two members with extensive finance and accounting expertise. • The Committee conducts audits on the overall business execution of Directors. • To strengthen its auditing activities, a dedicated staff member is assigned to assist the Audit & Supervisory Committee in the execution of its duties. Compliance with the Corporate Governance Code In compliance with the Corporate Governance Code of the Tokyo Stock Exchange, Chiyoda has formulated a Corporate Governance Policy, detail- ing its basic views and guidelines on corporate governance and promotes initiatives to strengthen corporate governance. Please refer to the following for further information on corporate governance. Corporate Governance Policy (Japanese) https://www.chiyodacorp.com/about/20240101_CGP_1.pdf Corporate Governance Report https://www.chiyodacorp.com/about/20240805_CGR_E.pdf Basic Policy on Internal Control System https://www.chiyodacorp.com/about/20240328_internal_control_E.pdf Development and Management of the Internal Control System In accordance with laws and regulations, Chiyoda manages an internal control system to ensure appropriate execution of operations. Chiyoda established an Internal Control Committee to coordinate and summarize member opinions and proposals. At the end of the term, or when required, the Internal Control Committee proposes internal control improvements to the President. The President, through the Executive Committee, reviews proposals from the Internal Control Committee and the Board of Directors makes decisions on the internal control system as required. To enhance the framework for compliance with laws and regulations, Chiyoda has established the position of CCO (Chief Compliance Officer) and a Compliance Committee. • Corporate Governance and Internal Control System Appoint / Dismiss Submit / Report Appoint / Dismiss Report / Statement of opinions Audit / Report Report Report Appoint Control / Supervise Audit Internal audit Financial audit Submit / Report Cooperate Cooperate / Report Cooperate Appoint / Dismiss Business Execution Divisions Board of Directors Accounting Auditors Internal Audit Division Group Companies President Executive Committee Internal Control Committee SQEI Management Committee Sustainability Committee CCO Compliance Committee 42 43 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth General Meeting of Shareholders Appoint Report Instruct Report Instruct Submit / Report Instruct Consult / Report Audit & Supervisory Committee Report Instruct Foundation Underpinning Sustainable Growth Corporate Governance Board of Directors Chiyoda’s Board of Directors is composed of nine Directors and three Directors who are Audit & Supervisory Committee members, thus ensuring balance and diversity through a combination of Outside Directors with experience in their fields of expertise and Directors with specialist skills and knowledge. Name Position and title Skills and experience Management Finance / Accounting Legal affairs, compliance and risk management Overseas experience Project experience and technical expertise Sustainability Masakazu Sakakida Director, Chairman of the Board Koji Ota Representative Director, President & CEO*1, CSO*2 Hiroyuki Shimizu Director, Senior Executive Vice President & CWO*3 Atsushi Deguchi Representative Director, Executive Vice President & CFO*4 and CCO*5 Naoki Kobayashi Representative Director, Executive Vice President Takuya Kuga Director Ryo Matsukawa Outside Director*6 Yutaka Kunigo Outside Director*6 Shoko Kuroki Outside Director*6 Shuhei Watanabe Director (Full-Time Audit and Supervisory Committee Member) Hisashi Ito Outside Director*6 (Audit and Supervisory Committee Member) Yumiko Matsuo Outside Director*6 (Audit & Supervisory Committee Member) Evaluation of the Effectiveness of the Board of Directors Chiyoda evaluates the effectiveness of the Board of Directors annually. Improvements and issues are discussed at Board of Directors’ meetings to further enhance effectiveness. • Enhancing the Effectiveness of the Board of Directors in Fiscal 2023 Process • A questionnaire on the effectiveness of the Board of Directors was provided to all Directors (including Audit & Supervisory Committee members) • Improvements compared to previous evaluations were confirmed • Opinions on the current fiscal year’s evaluation and on further improvements to the Board’s effectiveness were exchanged • Results and issues going forward were confirmed by the Board of Directors Questionnaires Main Items 1. Composition and Management of the Board of Directors 2. Management and Business Strategies 3. Business Ethics and Risk Management 4. Performance Monitoring and Management Evaluation 5. Dialogue with Shareholders Evaluation of Effectiveness and Initiatives Going ForwardIn fiscal 2023, the Board of Directors shared information appropriately with Directors, including Outside Directors, and engaged in active discussions. In addition, it was confirmed that the Board of Directors is supervising the proper establishment and operation of internal control systems required for the Group. In fiscal 2024, the Company will aim to enhance management from a long-term perspective and deepen sustainability. It will also strive to further invigorate and enhance deliberations among the Board of Directors in order to further increase corporate value by transforming its business portfolio, promoting the implementation of this transformation, and establishing a stable earnings base. Furthermore, discussions on items that have been identified as requiring enhancement will be deepened, and efforts will be made to further improve the functions of the Board of Directors. As of October 1, 2024 *1 Chief Executive Officer *2 Chief Sustainability Officer *3 Chief Wellness Officer *4 Chief Financial Officer *5 Chief Compliance Officer *6 Independent Director in accordance with Rule 436-2 of the Tokyo Stock Exchange Securities Listing Regulations Director Remuneration System Basic Policy and Approval at the General Meeting of Shareholders Chiyoda’s Director remuneration system was approved at the 93rd Ordinary General Meeting of Shareholders held on June 23, 2021, based on its purpose of enhancing Director awareness of the importance of contributing to improvements in business performance and corporate value over the medium to long term. Revisions to the Director Remuneration System The following revisions were made to the remuneration system for Directors, not including those Directors who are Audit & Supervisory Committee members. • ‘Base remuneration’ reflects an individual’s job responsibilities and individual performance. • ‘Remuneration for acquiring treasury stock’ has been abolished in favor of ‘performance-based stock compensation.’ Process • Chiyoda’s system of Director remuneration (excluding Audit and Supervisory Committee members) strengthens links with perfor- mance, shares value with shareholders and increases motivation to improve business results. The system consists of base remuneration (corresponding to roles and responsibilities and linked to individual performance evaluation), performance-linked remuneration (corresponding to results in each term, based on quantitative factors such as net income attributable to owners of the parent and shareholder dividends) and performance-based stock compensation (linked to long-term corporate value improve- ment). The total remuneration in each category is notified to shareholders. Director remuneration is determined by the Board of Directors based on factors such as internal remuneration standards, within the framework of total remuneration determined at the General Meeting of Shareholders. • Individual performance evaluations reflected in remuneration are discussed between Representative Directors, including management content and economic conditions. To enhance objectivity and transparency and ensure the appropriateness of decision-making, the opinions of Independent Outside Directors and full-time Audit & Supervisory Committee members are also considered. The structure of the remuneration system is also reviewed by the Board of Directors as required. • Details of the Director Remuneration System Position Classification Remuneration Principles Overview of Remuneration System Directors (Excluding Those who are Audit & Supervisory Committee Members) Base remuneration Linked to job duties and annual individual performance evaluations No greater than ¥290 million per annum (no greater than ¥30 million per annum for Outside Directors) Performance-linked remuneration Linked to the year’s business results, taking into consideration quantitative factors such as net profit and dividends attributable to the parent’s shareholders Performance-based stock compensation Linked to medium- to long-term business performance improvement • The maximum cash contribution by the Company shall be ¥70 million per annum. • The maximum number of shares to be delivered to Directors, the proceeds of which will be paid to Directors, shall not be greater than 240,000 shares per annum. * The initial eligible period is the three fiscal years from the year ending March 31, 2022, to the year ending March 31, 2024 Audit & Supervisory Committee Members Base remuneration Linked to job duties No greater than ¥60 million per annum • Outside Director Activities / Reasons for Appointment Classification Name Outside Director Activities / Reasons for Appointment Outside Director Ryo Matsukawa Mr. Matsukawa’s role is to supervise the Company’s management objectively and professionally based on his exten- sive knowledge and experience in the plant engineering industry and corporate management. He attended all Board of Directors’ meetings (17) in fiscal 2023 and provided comments ensuring appropriateness of decision-making. He fulfilled his role by providing suggestions, advice and other comments from a multifaceted and expert perspective on all aspects of Company management. Outside Director Yutaka Kunigo Mr. Kunigo’s role is to supervise the Company’s management objectively and professionally based on his extensive knowledge and experience in the energy industry and corporate management. He attended all Board of Directors’ meetings (17) in fiscal 2023 and provided comments ensuring appropriateness of decision-making. He fulfilled his role by providing suggestions, advice and other comments from a multifaceted and expert perspective on all aspects of Company management. Outside Director Shoko Kuroki Ms. Kuroki has been appointed as an Outside Director in the expectation that she will contribute to the oversight of the management of the Company from an objective and professional standpoint as an Outside Director by drawing on her extensive knowledge and experience in the areas of ESG, accounting and finance. Outside Director (Audit & Supervisory Committee Member) Hisashi Ito Mr. Ito’s role is to apply his extensive overseas and corporate management experience to objectively audit and super- vise Company management from a multifaceted perspective. He attended all Board of Directors’ meetings (17) and Audit and Supervisory Committee meetings (18) during fiscal 2023 and provided comments ensuring appropriateness of decision-making. He fulfilled his role by using his knowledge of financial accounting to make proposals and provide advice regarding all aspects of Company management. Outside Director (Audit & Supervisory Committee Member) Yumiko Matsuo Ms. Matsuo has knowledge and experience as a lawyer and has been appointed as an Outside Director in the expec- tation that she will strengthen the Company’s legal and compliance resources and governance management by auditing and supervising the management team from objective perspectives with her high level of expertise. 44 45 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth Foundation Underpinning Sustainable Growth Corporate Governance Directors and Audit & Supervisory Committee Members 1981: Joined Mitsubishi Corporation (Heavy Machinery Department) 2001: Mitsubishi International Corporation, New York, USA 2006: General Manager, Plant & Heavy Machinery Unit, Plant & Industrial Machinery Business Division of Mitsubishi Corporation 2012: General Manager for Group Strategy Planning, Machinery Group CEO Office, and Group CIO*1, Machinery Group of Mitsubishi Corporation 2013: Senior Vice President, Chairman & Managing Director, Mitsubishi Corporation India Private Ltd., and Deputy Regional CEO, Asia & Oceania (Southwest Asia) (New Delhi) 2017: Executive Vice President, Corporate Functional Officer, Chief Compliance Officer and Officer, Emergency Crisis Management Headquarters of Mitsubishi Corporation 2021: Director of Mitsubishi Corporation Representative Director, Chairman of the Board, CEO and CWO of the Company 2022: Representative Officer, Chairman, President & CEO, CSO and CWO of the Company (current position) 2024: Chairman of the Board (current position) Masakazu Sakakida Chairman of the Board 1989: Joined Mitsubishi Corporation (Heavy Machinery Dept.) 2012: General Manager, Smart Community Business Integration Unit, Environment & Infrastructure Business Division of Mitsubishi Corporation 2013: General Manager, Environment Energy Business Unit, Environment & Infrastructure Business Division of Mitsubishi Corporation 2015: Director, Lithium Energy Japan 2018: Director, Executive Vice President, Lithium Energy Japan 2019: Senior Vice President, Division COO, Plant Engineering Division of Mitsubishi Corporation 2022: Executive Vice President, Group CEO, Industrial Infrastructure Group, Division COO, Plant Engineering Div. of Mitsubishi Corporation Director of the Company 2023: Executive Vice President, Group CEO, Industrial Infrastructure Group of Mitsubishi Corporation 2024: President & CEO, CSO of the Company (current position) Koji Ota Representative Director, President & CEO, CSO 1984: Joined the Company 2016: Vice President, Deputy Division Director of Gas & LNG Project Operations No.1 of the Company 2019: Senior Vice President, Energy Business Operations and Division Director of Energy Project Operations Division of the Company 2021: Executive Vice President, Energy Business Operations, Division Director of Energy Project Operations Division of the Company 2024: Senior Executive Vice President, Operations Director of Energy Project Operations Division & CWO of the Company (current position) Hiroyuki Shimizu Director, Senior Executive Vice President & CWO 1991: Joined The Bank of Tokyo Ltd. (now MUFG Bank, Ltd.) 2016: President of Bank of Tokyo-Mitsubishi UFJ Turkey A.S. (now MUFG Bank Turkey A.S.) 2018: President, MUFG Bank Turkey A.S. 2019: Managing Director, Head of Corporate Banking Division 1, Corporate Banking Group 1, MUFG Bank, Ltd. 2020: Executive Officer, Managing Director of Corporate Planning Department (Special Assignment), MUFG Bank, Ltd. 2021: Executive Officer, Regional Executive, MUFG Bank of India and Sri Lanka 2023: Representative Director, Executive Vice President, CFO, CCO and Division Director of the Finance & Accounting Division of the Company (current position) Atsushi Deguchi Representative Director, Executive Vice President, CFO & CCO 1998: Joined Mitsubishi Corporation (Heavy Machinery Department) 2012: Executive Vice President, General Manager of Rio de Janeiro Branch, Mitsubishi Corporation (Brazil) 2016: General Manager, Plant Projects Department, Mitsubishi Corporation 2018: General Manager, Infrastructure & Industrial Projects Department, Mitsubishi Corporation 2019: General Manager, Chiyoda Turnaround and Growth Management Office, Plant Engineering Division, Mitsubishi Corporation 2020: Assistant to Division Director, Strategy & Risk Integration Division of the Company 2021: Vice President, Strategy & Risk Integration Division and Assistant to Division Director, Technology & Engineering Division of the Company 2023: Senior Vice President, Division Director of Strategy & Risk Integration Division of the Company 2024: Representative Director, Executive Vice President Division Director of Strategy & Risk Integration Division of the Company (current position) Naoki Kobayashi Representative Director, Executive Vice President 1986: Joined Mitsubishi Corporation (General Machinery Dept.) 1997: Vice President, MC Realty, Inc. 2008: President and Representative Director, Diamond Realty Management Inc. 2009: President and Chief Executive Officer, Mitsubishi Crop. -UBS Realty Inc. 2013: General Manager, Strategic Planning Office, Real Estate Development and Construction Division of Mitsubishi Corporation 2017: Senior Vice President, Division COO, Real Estate Business Division of Mitsubishi Corporation 2019: Senior Vice President, Division COO, Urban Infrastructure Division and General Manager, Urban Development Group CEO Office of Mitsubishi Corporation 2022: Executive Vice President, Group CEO, Urban Development Group of Mitsubishi Corporation Outside Director, Mitsubishi HC Capital Inc. 2024: Executive Vice President, Group CEO, Urban Development & Infrastructure Group of Mitsubishi Corporation(current position) Director of the Company (current position) Takuya Kuga Director 1979: Joined Tokyo Shibaura Electric Co., Ltd. (currently Toshiba Corporation) 2007: General Manager, Technology Management Div., Toshiba Corporation Power Systems Company 2011: General Manager, Fuchu Complex, Toshiba Corporation Power Systems Company 2013: Executive Quality Leader, Toshiba Corporation Power Systems Company 2014: Representative Director, President and Chief Executive Officer, Toshiba Plant Systems & Services Corporation 2021: Outside Director of the Company (current position) Ryo Matsukawa Outside Director*2 Executive Officers Vice President Executive Vice President Atsushi Deguchi (CFO & CCO) Naoki Kobayashi Tetsuya Konno Keio Naruko Masami Tamura Katsuhiko Jogan Yuzo Masuda Kimiho Sakurai Masato Matsubara Nobutaka Nagahashi Toshiyuki Ito President Koji Ota (CEO & CSO) Senior Executive Vice President Hiroyuki Shimizu (CWO) Senior Vice President Norimasa Matsuoka Masaki Kumagai (CHRO*3 & CDO*4) Toshiaki Saito Takayuki Naito Daiki Kasugahara *3 CHRO…Chief Human Resources Officer *4 CDO…Chief Digital Officer *1 Chief Information Officer *2 Outside Director as stipulated in Article 2, Item 15 of the Companies Act (five Outside Directors are Independent Directors) 1977: Joined Tokyo Gas Co., Ltd. 2010: Managing Executive Officer, Chief Executive of Resources Business Division of Tokyo Gas Co., Ltd. 2013: Director, Managing Executive Officer, Chief Executive of Energy Production Division of Tokyo Gas Co., Ltd. 2014: Representative Director, Vice President, Executive Officer, Chief Executive of Energy Solution Division of Tokyo Gas Co., Ltd. 2015: Representative Director, Vice President, Executive Officer responsible for Power Business Planning Department, Business Renovation Project Department, and Sales Innovation Project Department of Tokyo Gas Co., Ltd. 2016: Representative Director, Vice President, Executive Officer responsible for Power Business Control Department, Chief Executive of Energy Production Division responsible for Power Business Planning Department of Tokyo Gas Co., Ltd. 2017: Director and Chairman, Tokyo Gas Engineering Solutions Corporation 2020: Outside Director, Nippon Paper Industries Co., Ltd. (current position) 2022: Outside Director, Ise Chemicals Corporation (current position) Outside Director of the Company (current position) Yutaka Kunigo Outside Director*2 1987: Joined Mitsubishi Trust and Banking Corporation (currently Mitsubishi UFJ Trust and Banking Corporation) 2017: Director, Corporate Officer, General Manager of General Affairs and Accounting Headquarters (CFO / CHRO) of JASTEC Co., Ltd. 2019: Assistant to CAO, Fuji Oil Holdings Inc. Outside Director, IX Knowledge Inc. (current position) 2021: Outside Director, C’BON COSMETICS Co., Ltd. 2022: Professor, Faculty of Economics, Teikyo University (current position) 2023: Outside Director, Osaki Electric Co., Ltd. (current position) 2024: Outside Director, Park24 Co., Ltd. (current position) Outside Director of the Company (current position) Shoko Kuroki Outside Director*2 1991: Joined Mitsubishi Corporation (Energy Administration Department) 2013: Department Manager, MC Group Business Infrastructure Support Office and Team Leader, Planning & HR Team of Corporate Division, Mitsubishi Corporation 2014: General Manager, Business Administration Department, Metal One Corporation 2016: General Manager, Corporate Accounting Department, Metal One Corporation 2018: Chief Financial Officer, Latin America and Caribbean Region, Mitsubishi Corporation and Chief Financial Officer, Mitsubishi Corporation do Brasil S.A. 2021: Board Director, Senior Managing Executive Officer, Mitsubishi Corporation Life Sciences Limited 2023: Director of the Company (Full-Time Audit and Supervisory Member) (current position) Shuhei Watanabe Director Full-Time Audit and Supervisory Committee Member 1983: Joined The Mitsubishi Trust and Banking Corporation (currently Mitsubishi UFJ Trust and Banking Corporation) 2005: General Manager, Money Market Activities Division, Mitsubishi Trust and Banking Corporation 2010: General Manager, London Branch, Mitsubishi UFJ Trust and Banking Corporation Executive Officer, Mitsubishi UFJ Trust and Banking Corporation 2012: Managing Executive Officer, Mitsubishi UFJ Trust and Banking Corporation 2013: Managing Director, Mitsubishi UFJ Trust and Banking Corporation 2015: Senior Managing Director (Representative Director) and CIO, Mitsubishi UFJ Trust and Banking Corporation 2016: Representative Director, Senior Managing Executive Officer and CIO 2017: Representative Director, President, The Master Trust Bank of Japan, Ltd. 2019: Representative Director and Chairman, Mitsubishi UFJ Trust Systems Co., Ltd. 2020: Outside Director (Audit & Supervisory Committee Member) of the Company (current position) 2023: Advisor, Mitsubishi UFJ Trust Systems (current position) Hisashi Ito Outside Director Audit and Supervisory Committee Member*2 1990: Registered as a lawyer (Daini Tokyo Bar Association) Joined Anderson Mori & Rabinowitz (currently Anderson Mori & Tomotsune) 1995: Admitted to practice of law in the State of New York, United States of America 1997: Joined Hirakawa, Sato & Kobayashi (currently City-Yuwa Partners) 2010: Registered as a lawyer (Kanagawa Bar Association) Joined Minato International Law Office (current position) 2016: Outside Director, SDS Biotech K.K. 2018: Outside Director, Triumfield Holdings Co., Ltd. (current position) 2020: Outside Director (Audit & Supervisory Committee Member), Kawasumi Laboratories, Inc. (currently SB-Kawasumi Laboratories, Inc.) 2020: Outside Director (Audit & Supervisory Committee Member), Transaction Co., Ltd. (current position) 2022: Outside Director (Audit & Supervisory Committee Member), Sigmakoki Co., Ltd. (current position) 2024: Outside Director (Audit & Supervisory Committee Member) of the Company (current position) Yumiko Matsuo Outside Director Audit and Supervisory Committee Member*2 46 47 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth Foundation Underpinning Sustainable Growth • Project Risk Management Structure Risk Management Basic Principles The Chiyoda Group continues to enhance the sophistication of its risk management and project execution systems to minimize future uncertainties and losses (risks) and maximize opportunities (returns). We recognize that risk management is a continuous process that the entire organization must address, and are building, executing, and improving appropriate risk management frame- works with the aim of continuously improving our corporate value. Risk Management System The Chiyoda Group continuously enhances the reporting, informing and consulting processes (known as the ‘Ho-Ren-So’ principle in Japanese business culture) as part of company regulations and harness employee feedback from regular risk management workshops organized to raise risk awareness and instill a risk-conscious culture throughout the Group. The Strategy & Risk Integration Division serves support and check functions covering Companywide management and regarding each division within the Company, and promotes risk management on a Companywide basis. It also assumes the role of a ‘control tower’ in project management, centrally managing project risk identification and mitigation and providing management support throughout every stage of a project from estimating and prior negotiations to execution, completion, and delivery. • Risk Management System Safety Management Reactive stage: Responsibility for safety is not assumed and accidents are perceived as something that will eventually occur Dependent stage: Safety is expected as long as rules are followed Independent stage: Responsibility for safety is assumed and the actions of each individual are believed to make a difference Interdependent stage: Responsibility is accepted and teams proactively work to realize a culture of safety by the team, believing that ‘no accidents is an achievable goal’ Interdependent stage Independent stage Dependent stage Reactive stage Construction and safety-related issues Natural instinct Directions of supervisors Individual-centered approach Team-centered approach Respond only to accidents that have occurred Adhere only to laws and regulations and the directions of supervisors Act voluntarily based on one’s knowledge and experience Act with consideration for one’s peers Basic Principles The Chiyoda Group is aware that contributing to the development of a sustainable society is the starting point of our business activities, and is working to promote SQE (safety, quality and environment) management under our Corporate SQE Policy so that everyone employed by the Group demonstrates leader- ship and works together with stakeholders to meet the requirements of our customers and society. C-Safe Program All executives and employees in the Chiyoda Group continuously receive education and training that incorporates C-Safe, our pro- prietary safety program, and attend with a sense of responsibility and self-awareness. In 2020, we adopted the DuPont Sustainable Solutions Bradley Curve™, identifying four stages of safety culture maturity, with a view to assessing safety on construction sites and, by combining this approach with our C-Safe Program, we are currently advancing from the independent stage to the interdependent stage. To meet our ‘duty of care’ obligations as a responsible employer, and recognizing that the health of employees is a key determinant of productivity, we have also initiated programs to maintain the physical and mental health of all Group personnel, focusing on improving our working environment and promoting a supportive management culture. The C-Safe manage- ment system is specifically designed to address the challenges and complexities of health and safety management on construction sites. With a strong focus on leadership, commitment and employee involvement, the program provides a foundation for a safe, healthy working environment by going further than merely addressing compliance to legislation, rules and regulations. Through the proactive involvement of all directors in leading improvements of working habits and employees changing unsatisfactory ingrained methods of work- ing, C-Safe requires all Group personnel to consciously contemplate what actions we should demonstrate, tolerate and reward. Safety Performance As stated in the Chiyoda Group’s SQE policy, we believe that ‘safety is the first priority’ and ‘every incident is preventable,’ and we relentlessly pursue zero accidents and incidents in the workplace, while instilling a ‘learner mindset’ on all our construction sites. The graph on the right illustrates the Chiyoda Group’s safety performance over the five calendar years up to 2023 and we continue to monitor LTIR*1 and TRIR*2 on domestic and overseas construction sites as key safety indicators. *1 Lost time incident rate, number of victims (work absence, including fatal cases) / total number of hours worked x 200,000 *2 Total recordable incident rate, number of victims (includes death, work absence, work restriction, medical treatment) / total number of hours worked x 200,000 Environment Day On the UN’s World Environment Day, the Chiyoda Group’s offices and construction sites in Japan and overseas held various events to share information about the importance of land restoration in order to raise awareness about environmental protection and inspire people to take action, and the Group will continue its efforts to spread the message about the importance of the environment. Refer to our website for details on our Corporate SQE Policy. https://www.chiyodacorp.com/en/about/policy/#corporate Source: DuPont Bradley Curve™ 48 49 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth Relevant Divisions Strategy & Risk Integration Division (Integrated Risk Management) Refined Data Management Reinforce business foundation Determine order-securing strategies supported by financial and human resource capabilities Implement strategic human resource management Promptly identify areas requiring improvement through joint efforts with relevant divisions Develop a framework that facilitates the timely reporting of areas in need of improvement to management Assess projects from take-up and identify, analyze, evaluate, and formulate measures for risk management at the proposal submission stage Develop an execution structure for projects upon securing their orders Monitor, analyze, evaluate, and formulate measures, and visualize the profitability and development process of ongoing projects Establish best practices and utilize lessons learned from completed projects Energy Project Operations Global Environment & Green Energy Project Operations Frontier Business HR & DX Business Development Technology & Engineering Project Procurement & Logistics Construction Legal & Corporate Affairs Finance & Accounting Management Support Project Risk Management Audit / Report Manage / Guide / Support Report / Consult Submit / Report Control / Supervise Management assistant President & CEO Business Execution Divisions Strategy & Risk Integration Division Group Companies Executive Committee (President / CFO / Division Director, etc.) Internal Control Committee SQEI Management Committee Sustainability Committee Audit & Supervisory Committee Appoint CCO Compliance Committee Instruct Consult / Report Board of Directors Instruct Submit / Report Instruct Report 0.1 0.2 0.3 LTIR TRIR 0.20 0.22 0.01 0.04 0.10 0.01 0.14 0.20 0.02 0.01 2023 2022 2021 2020 2019 0 • TRIR / LTIR at Overseas and Domestic Sites (Year) Planting Trees for the Future by Chiyoda Philippines Corporation Alignment & Alignment & Cooperation Cooperation Foundation Underpinning Sustainable Growth Basic Principles Chiyoda protects our intellectual property (IP) to fuel our position ahead of the competition. We also implement rigorous measures to protect the IP of others to avoid infringements. Chiyoda’s Technology Landscape Chiyoda’s IP is our technical prowess, and we have established Chiyoda’s Technology Landscape to transform tacit knowledge into explicit knowledge and map IP for value creation. As an integrated engineering company, we socially implement systems that combine our own internal technologies and external technologies owned by others to accumulate IP in the form of technological expertise and technology packages. We classify our IP into three categories: (1) Own Technology (proprietary technology), (2) Key Capability (technology owned by others, mastered through licensing agreements, etc.) and (3) Key Technology (technologies owned by others). We map these categories across our six business domains into Chiyoda’s Technology Landscape, shared within Chiyoda to promote value creation, such as proposing solutions to customers, building co-creation schemes with others and formulating technology development strategies. Intellectual Property Hiroshi Oinaka (Patent Attorney) Intellectual Property Section Leader, Corporate Planning Department The Intellectual Property Section of the Corporate Planning Department coordinated Chiyoda’s Technology Landscape with the cooperation of each department. Chiyoda’s Technology Landscape made us realize how diverse and competitive the Company’s intellectual property is. We are also using it to visualize methods for managing intellectual property in R&D and business development, which is becoming increasingly complex. I believe that the visualization of intellectual property management methods is another foundational element of ‘Enriching Society through Engineering Value.’ Employee Message Organizational Structure The IP Section is part of the Corporate Planning Department, which consolidates our Companywide business and technology strategies. It formulates and implements IP strategy aligned with business and technology strategies. The IP Section visualizes and organizes our IP, and that of others, related to new businesses, using methods such as IP land- scaping to identify technologies for development and partnering. The IP Section also collaborates with business and technology divisions to extract inventions and organize our patent portfolio, and implements stringent and comprehensive IP investigations prior to developing a new business to mitigate the risk of infringing the IP rights of others. The IP Section also conducts IP Due Diligence (IP DD) for the Value Innovation Department prior to investing in start-up com- panies and conducts IP strategy development for new businesses adopted in the in-house entrepreneurship program. Patent Portfolio Chiyoda conducts business worldwide and applies for patents across the globe, currently holding patents in 64 countries and regions. 2020–2023 2016–2019 2012–2015 0 25 50 75 100 • Percentage of Filed Patent Applications Related to New / Existing Businesses in Four-year Periods % • Countries and Regions in Which Chiyoda Holds Patents (as of May 2024) New Businesses Existing Businesses IP DD for Investment and Development of IP Strategy for New Businesses Front-end Support President Energy Project Operations Division Global Environment & Green Energy Project Operations Division Technology & Engineering Division Frontier Business Division IP Manager IP Manager IP Manager IP Manager Strategy & Risk Integration Division Intellectual Property Section Corporate Planning Department Value Innovation Department Main Divisions Proposing Inventions Development and Execution of IP Strategy aligned with Business and Technology Strategy Azumi Furuichi Intellectual Property Section, Corporate Planning Department I transferred from the Pharmaceutical Project Section to the Intellectual Property Section in September 2023. Each day, I utilize my experience in the engineering, procurement and construction (EPC) business in my initiatives to visualize the know-how and technology (intellectual property) our EPC business has developed, transform tacit knowledge into explicit knowledge and acquire rights. Other work of mine includes elements such as investigating how we can utilize the know-how and technology we have developed as we expand our new businesses and what technology we should acquire in future. During my investigations, I communicate with each business department and use IP landscaping methods. I aim to continue working together with each business department on these intellectual property activities so that we can fully utilize the Company’s intellectual property as a tool for ‘Enriching Society through Engineering Value.’ Employee Message Accumulating IP Our IP = Technological Prowess Transforming Knowledge and Mapping IP Value Creation Utilizing IP Promoting Common Understanding and Facilitating Prompt Discussions within the Company Integrating Individual Technologies, Proposing Solutions to Customers Building Co-creation Schemes with Others Understanding our Technology and Formulating Technology Development Strategies IP Examples: Technological Expertise, Technology Packages IR Rights Key Technology (Technology owned by others) Categorizing IP Mapping IP for Business Domains Own Technology (Proprietary Technology) Key Capability (Technology owned by others, mastered through licensing agreements, etc.) Low Carbon and Carbon Recycling O&M-X Solutions Life Sciences Hydrogen Energy Management 50 51 Chiyoda Corporation CHIYODA REPORT 2024 Foundation Underpinning Sustainable Growth Foundation Underpinning Sustainable Growth Data Section In this section, we provide key data on the Chiyoda Group, financial results over the past 11 years and ESG initiatives. CONTENTS 54 Key ESG Data 56 Eleven-Year Summary 58 Corporate Information 53 52 Chiyoda Corporation CHIYODA REPORT 2024 Key ESG Data Environmental Initiatives KPI Unit 2020/3 2021/3 2022/3 2023/3 2024/3 Compliance-related Actions Number of employees receiving compliance training (new recruits, mid-career hires, and executives and associate executives) Persons 114 114 83 123 106 Number of employees receiving compliance training (overseas assignment, site managers at field offices, export control, and bribery prevention) Persons 248 422 1,254 1,788 3,303 Number of companywide employees attending seminars held by external instructors*3 Persons 711 2,021 1,235 1,921 – Number of employees receiving compliance training via e-learning Persons 5,704 5,189 5,179 5,289 5,064 Number of reports submitted under the Compliance Consultation and Whistleblowing System Cases 98 93 108 64 81 Initiatives for Business Continuity Business continuity plan (BCP) training Times 0 1 0 2 2 Actions for Information Security Number of serious information security-related incidents Cases 0 0 0 0 0 Governance-related Data Number of outside directors Persons 5 4 4 4 4 *3 Starting in fiscal 2023, the number of companywide employees attending seminars held by external instructors is included in the number of employees attending compliance training. We strive to remain a Company that is indispensable to society by fully leveraging highly-refined technologies and aiming to achieve harmony with the Earth and economic and social activity. KPI Unit 2020/3 2021/3 2022/3 2023/3 2024/3 CO2 emissions*1 Scope 1 t-CO2 – 52,942 60,395 86,336 89,218 Scope 2 t-CO2 – 16,870 8,843 7,293 5,779 Scope 1 + 2*2 t-CO2 – 69,812 69,238 93,629 94,997 Environmental Data for Domestic Construction Sites Industrial waste disposal quantity (excluding sludge) Tons 22,223 13,549 16,577 9,905 3,108 Final landfill disposal quantity (excluding sludge and incinerated ash) Tons 1,464 1,432 828 787 472 CO2 emissions Tons-CO2 4,642 – – – – Industrial waste recycling rate (excluding sludge) % 92.8 89.7 95.0 92.1 84.8 Electronic manifest penetration rate % 90.8 90.2 99.0 99.5 76.3 Adoption of environmental proposals Cases 236 237 132 138 116 Environmental Data for Overseas Construction Sites Industrial waste disposal quantity Tons 6,868 4,097 3,841 12,207 23,184 Final landfill disposal quantity (excluding recyclable resources and incinerated ash) Tons 4,624 3,075 1,976 4,873 5,480 CO2 emissions Tons-CO2 56,970 – – – – Industrial waste recycling rate % 17.0 3.5 5.6 49.5 75.5 Adoption of environmental proposals Cases 111 150 98 59 52 Environmental Data for Chiyoda Group Company Offices Power consumption 1,000 kWh 9,313 8,294 8,426 8,415 9,043 Energy consumption kl 3,018 2,678 2,754 2,807 2,953 CO2 emissions Tons-CO2 5,685 – – – – Chilled water consumption 1,000 m3 15.2 9.8 11.3 17.0 12.9 Steam consumption GJ 4,633 4,849 5,428 5,434 4,480 Cold water consumption MG 13,785 10,865 10,938 11,880 12,648 Waste disposal volume Tons 281 214 147 208 285 Waste recycling rate % 96.5 92.9 89.7 88.2 94.7 Printing paper consumed Tons 70 43 25 23 19 *1 CO2 emissions have been presented by scope since 2020. Chiyoda Group offices include overseas Group companies. *2 Chiyoda Global Headquarters and Koyasu Office & Research Park are included in domestic office category (Tokyo Office is not included). Joint Venture ratio is applied to overseas construction sites. Governance Initiatives We always conduct business in a fair, sustainable manner based on high ethical standards, and strive to enhance transparency and stability. KPI Unit 2020/3 2021/3 2022/3 2023/3 2024/3 Employee Status Average years of service Years 12.7 14.2 14.2 12.2 13.3 Average age of employees Years 41.3 41.2 41.4 41.8 42.2 Turnover rate excluding retirement % 4.7 2.9 3.6 3.3 5.3 Employee Diversity Ratio of female employees among new recruits % 27 31 21 24 20 Number of female employees among new recruits Persons 14 11 7 10 11 Ratio of mid-career employment % 16.1 36.7 59.1 66.1 52.2 Ratio of women among all employees % 16 16 17 17 16 Average years of service of female employees Years 9.0 9.4 9.6 9.6 10.1 Number of women in management positions Persons 28 28 54 90 17 Ratio of women in management positions % 3.8 3.7 6.3 8.3 3.5 Ratio of employment of persons with disabilities % 1.7 1.7 1.6 1.6 2.1 Number of non-Japanese employees Persons 73 77 71 78 76 Employee Support Number of employees taking childcare leave Persons 28 43 50 68 56 Number of employees taking sick / injured childcare leave Persons 23 18 4 6 8 Number of employees taking nursing care leave Persons 10 10 5 4 6 Number of employees taking temporary retirement for nursing care Persons 1 0 0 0 2 Number of employees working reduced hours for childcare Persons 27 24 31 39 46 Number of employees dispatched for on-site training / on-site instruction Persons 47 24 25 30 50 Volunteer Activities Number of employees participating in reconstruction assistance Persons 9 0 0 0 14 Number of employees participating in cleanup activities (around Chiyoda Global Headquarters and Koyasu Office) Persons 120 25 8 12 122 Number of vaccines donated through the collection of plastic bottle caps under ECOCAP Program Vaccines 278 207 184 210 228 Number of school lunches donated through TABLE FOR TWO Lunches 1,557 1,386 1,288 1,285 1,370 Note 1: Employees of the Company who are seconded to other companies were previously not included in the total number of employees, however, starting in fiscal 2023, employees of the Company who are sec- onded to other companies are included in the total, and employees of other companies seconded to the Company are not included. Note 2: Starting in fiscal 2023, targets for management position totals have been changed from GL / section manager level and above (C2 positions and above) as stated in the Action Plan to Promote Women’s Advancement to supervisory positions in line with Japan’s Labor Standards Act (C1 positions and above). Social Initiatives We strive to contribute to local communities through human resource development and environmental protection in our businesses. We also respect the diversity and individuality of our employees, and aim to create a corporate culture that is comfortable and rewarding to work in and which employees and their families are proud to be part of. 54 55 Chiyoda Corporation CHIYODA REPORT 2024 Data Section Data Section Eleven-Year Summary Chiyoda Corporation and Consolidated Subsidiaries Millions of yen (excluding key ratios) 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 2021/3 2022/3 2023/3 2024/3 Results for the Year Revenue 446,147 480,979 611,548 603,745 510,873 341,952 385,925 315,393 311,115 430,163 505,981 Gross Profit (Loss) 41,462 45,651 41,520 38,223 8,618 (181,148) 42,823 20,061 22,794 32,709 (157) SG&A Expenses 20,383 24,185 25,505 22,543 20,948 18,647 16,033 13,046 12,249 14,592 14,849 Operating Income (Loss) 21,079 21,466 16,015 15,680 (12,330) (199,795) 26,789 7,015 10,545 18,116 (15,006) Ordinary Income (Loss) 22,837 22,271 16,205 (3,080) (10,100) (192,998) 18,644 8,462 11,431 20,322 (5,461) Net Income (Loss) Attributable to Owners of the Parent 13,447 11,029 3,375 (41,116) 6,445 (214,948) 12,177 7,993 (12,629) 15,187 (15,831) Financial Position at Year-End Current Assets 409,096 444,578 455,030 425,244 374,470 326,929 360,387 305,891 372,682 382,958 404,359 Current Liabilities 261,679 294,339 311,106 301,182 247,847 392,505 319,878 244,657 350,675 356,256 412,156 Total Assets 475,288 515,839 528,219 461,331 420,337 352,341 385,051 329,583 395,396 406,588 426,967 Interest-Bearing Debt 11,305 11,010 10,348 10,211 10,000 15,989 35,871 45,747 45,621 29,090 23,600 Net Assets 198,031 208,405 202,128 157,125 159,418 (59,154) 24,943 36,747 15,761 22,310 6,077 Shareholders’ Equity 196,411 206,395 200,166 155,339 157,557 (60,114) 24,423 36,399 15,654 22,180 4,858 Cash Flows Cash Flows from Operating Activities (17,177) (24,145) 55,526 (4,375) (34,115) (37,941) (32,217) (20,806) (25,591) 44,157 62,747 Cash Flows from Investing Activities (16,796) (5,444) (26,750) 10,433 (1,428) 778 (7,828) (2,250) (3,787) 7,889 (1,567) Cash Flows from Financing Activities (5,249) (4,569) (3,942) (2,693) (1,468) 4,020 89,200 9,478 (4,197) (17,057) (5,851) Cash and Cash Equivalents, at End of Year 145,303 113,246 136,919 138,889 101,767 68,306 115,932 98,738 69,099 106,682 166,208 Key Ratios Gross Profit (Loss) Margin (%) 9.3 9.5 6.8 6.3 1.7 (53.0) 11.1 6.4 7.3 7.6 (0.0) Return on Assets (ROA) (%) 5.0 4.5 3.1 (0.6) (2.3) (50.0) 5.1 2.4 3.2 5.1 (1.3) Return on Equity (ROE) (%) 7.0 5.5 1.7 (23.1) 4.1 (441.2) (68.2) 26.3 (48.5) 80.3 (117.1) Shareholders’ Equity Ratio (%) 41.3 40.0 37.9 33.7 37.5 (17.1) 6.3 11.0 4.0 5.5 1.1 Current Ratio (%) 156.3 151.0 146.3 141.2 153.0 83.3 112.7 125.0 106.3 107.5 98.1 Debt Equity Ratio (DER) (Times) 0.06 0.05 0.05 0.07 0.06 (0.27) 1.47 1.26 2.91 1.31 4.86 Earnings Per Share (EPS) (Yen) 51.91 42.58 13.03 (158.76) 24.89 (830.02) 40.94 22.76 (56.88) 50.54 (69.22) Book-value Per Share (BPS) (Yen) 758.31 796.89 772.89 599.83 608.41 (232.13) (182.07) (143.94) (218.11) (201.02) (275.91) Dividend Per Common Share (Yen) 16 13 10 6 7.5 – – – – – – Common Dividend Payout Ratio (%) 30.8 30.5 76.7 38.7 30.1 – – – – – – Dividend Per Type A Preferred Share* (Yen) – 20.78 – – – Price Earnings Ratio (PER) (%) 25.6 24.1 63.3 (4.5) 40.3 (0.3) 5.2 21.0 (8.3) 7.7 (5.8) * Type A Preferred Shares were issued in July 2019. 56 57 Chiyoda Corporation CHIYODA REPORT 2024 Data Section Data Section Company Profile Company Name Chiyoda Corporation Established January 20, 1948 Paid-In Capital ¥15,014 million Number of Employees 3,496 (consolidated and equity-method affiliates) Business Activities Integrated engineering business Main Offices Chiyoda Global Headquarters Koyasu Office & Research Park Project Experience In over 60 countries Stock Information Fiscal Year April 1 to March 31 of the following year Ordinary General Meeting of Shareholders June Number of Authorized Shares Common Stock 1,500,000,000 Type A Preferred Shares 175,000,000 Number of Issued and Outstanding Shares Common Stock 260,324,529 (1 unit = 100 shares) Type A Preferred Shares 175,000,000 (1 unit = 1 share) Number of Shareholders Common Stock 41,237 Type A Preferred Shares 1 Listing of Shares Tokyo Stock Exchange, Standard Market Stock Transaction Unit 100 shares Corporate Information (As of March 31, 2024) Major Shareholders 1. Common Stock (10 Largest Shareholders) Shareholder Number of Shares Owned (Thousands of Shares) Ratio of Shares Owned (%) Mitsubishi Corporation 86,931 33.46 MUFG Bank, Ltd. 9,033 3.47 Chiyoda Employee Shareholding Association 4,737 1.82 The Mitsubishi UFJ Trust & Banking Corp. 3,874 1.49 SSBTC CLIENT OMNIBUS ACCOUNT 2,641 1.01 JP MORGAN CHASE BANK 385781 2,139 0.82 Chiyoda Kyoeikai 2,102 0.80 The Tokyo Tanshi Co., Ltd. 2,100 0.80 Ueda Yagi Tanshi Co., Ltd. 2,092 0.80 Meiji Yasuda Life Insurance Company 2,039 0.78 2. Type A Preferred Shares Shareholder Number of Shares Owned (Thousands of Shares) Ratio of Shares Owned (%) Mitsubishi Corporation 175,000 100% Breakdown of Shareholders Number of Issued and Outstanding Common Shares 260,324,529 Individuals and others 41.4% Securities companies 1.8% Other corporations 38.4% Financial institutions 7.4% Foreign investors 11.0% Inquiries Chiyoda Corporation IR, PR & Sustainability Advanced Section, Corporate Services Department Minatomirai Grand Central Tower 4-6-2, Minatomirai, Nishi-ku, Yokohama 220-8765, Japan Inquiries https://www.chiyodacorp.com/en/contact/index.php Chiyoda Corporation joined the UN Global Compact in 2012, declaring its commitment to 10 universal principles in the following four areas: human rights, labor, the environment, and anti-corruption. Guided also by the spirit of CSR Value, we are promoting initiatives in each of these four areas. Sales base Engineering center Procurement center Project execution base Operation support base Chiyoda International Corporation Chiyoda Corporation (Shanghai) Chiyoda Human Resources International (Pte.) Limited Chiyoda Philippines Corporation PT. Chiyoda International Indonesia Abu Dhabi Office Chiyoda Corporation Netherlands B.V. The Netherlands Italy Saudi Arabia Qatar UAE Myanmar Singapore Philippines China Japan USA Indonesia Australia Milan Representative Office Chiyoda Petrostar Ltd. Middle East Headquarters Doha Office Chiyoda Almana Engineering LLC Chiyoda & Public Works Co., Ltd. Chiyoda Oceania Pty. Ltd. Chiyoda Global Headquarters Chiyoda’s Global Network (Major Overseas Subsidiaries and Offices) Major Subsidiaries and Affiliated Companies Engineering Chiyoda X-ONE Engineering Corporation (CXO) Services: Comprehensive engineering business (planning, engineering design, procurement, construction, commissioning, maintenance) and insurance business (non-life insurance and life insurance agency business) related to industrial equipment, etc. https://cxo.chiyodacorp.com/english/ Digital TIS Chiyoda Systems Inc. Services: Consulting, development, and operation for integrated IT systems https://www.tc-systems.co.jp/english/ PlantStream Inc. Services: Development and sales of ‘PlantStreamTM’ https://plantstream 3d.com/ Business Support Chiyoda U-Tech Co., Ltd. Services: Technical consulting in energy and environmental fields, engineer staffing, and outsourcing services https://www.utc-yokohama.com/english/ Arrow Business Consulting Corporation Services: Consulting for finance and accounting 58 59 Chiyoda Corporation CHIYODA REPORT 2024 Data Section Data Section Printed in Japan Chiyoda Global Headquarters Minatomirai Grand Central Tower, 4-6-2, Minatomirai, Nishi-ku, Yokohama, Kanagawa, Japan https://www.chiyodacorp.com/en/