M I T S U I . O S K . . I L N E S M O L R E P O R T 2 0 2 2 MOL REPORT 2022 Year ended March 31, 2022 Supporting and Changing the World from the Blue Oceans Since our founding more than 130 years ago, we have taken on new business challenges by making use of the oceans and establishing bonds with countries, companies, and people around the world. Now, we are beginning ambitious new initiatives. MOL will realize transport that is safe, economical, and environment-friendly, introduce trailblaz- ing marine transport technologies, and take on the challenge of expanding new business fields in growth regions. Our overriding goal is to transform from a full-line marine transport company into a social infra- structure group centered on marine transport. We will continue taking on the challenge of further evolution aimed at achieving a sustainable future. MOL Group Corporate Mission From the blue oceans, we sustain people’s lives and ensure a prosperous future. MOL Group Vision We will develop a variety of social infrastructure businesses in addition to traditional shipping businesses, and will meet the evolving social needs including environmental conservation, with innovative technology and services. MOL group aims to be a strong and resilient corporate group that provides new value to all stakeholders and grows globally. Offshore Businesses Logistics Business Offshore Wind Power Generation-Related Businesses Transforming into a Social Infrastructure Group Centered on Marine Transport We are developing a broad spectrum of social infrastructure businesses by leveraging the expertise and networks we have developed through our core business of marine transport. By extending our business domain, we will become a corporate group that helps address and solve a wider range of social issues than ever before. Terminal Business Clean Energy Businesses Real Property Business MOL REPORT 2022 1 CONTENTS 04 A Message from the CEO 30 Overview of Operations by Business Headquarters Dry Bulk Business 36 Expanding Our Boundaries Energy Business Product Transport & Real Property Business 40 Sustainability Strategy 12 Rolling Plan (Management Plan) 24 A Message from the CFO 60 Dialogue between the Chairman and an Outside Director Upon Publication of MOL REPORT 2022 Having experienced the booming emerging economies of the 2000s and two structural reforms of its businesses in the 2010s, the MOL Group is presently in the process of dramatically changing its corporate profile. This transformation is being advanced and led by the CEO, who took office in April 2021. In the same month, the MOL Group revised its corporate mission, long-term vision, values, and action guidelines to reflect society’s current expectations. We have prepared MOL Report 2022 to provide an easy-to-understand explanation of our goal—which is to become a social infrastructure group centered on marine transport—and the type of value that we will create by realizing this goal. Accordingly, we have included explanations that are more detailed and specific based on Rolling Plan 2022 and the MOL Sustainability Plan, which were announced in April 2022. We have also provided an overview of initiatives to enhance the effectiveness of governance in recent years and the benefits of these initiatives. We sincerely hope this report serves as a tool that deepens dialogue with shareholders, investors, and other stakeholders, thereby enabling management to receive better feedback and further enhancing disclosure. Investor Relations Team, MOL Report 2022 Scope of the Report The MOL Group, comprising Mitsui O.S.K. Lines, Ltd., 373 consolidated subsidiaries, 127 equity-method affiliates, and other affiliated companies (If the subject of activities or data are limited, this is indicated by notes in the report.) Forward-Looking Statements This report contains forward-looking statements concerning MOL’s future plans, strategies, and performance. These statements represent assumptions and beliefs based on information currently available* and are not historical facts. Furthermore, forward-looking statements are subject to a number of risks and uncertainties that include, but are not limited to, economic conditions, worldwide competition in the shipping industry, customer demand, foreign currency exchange rates, bunker prices, tax laws, and other regulations. MOL therefore cautions readers that actual results may differ materially from these predictions. * As of the end August 2022, unless otherwise specified SECTION 01 Value Creation Story 04 A Message from the CEO 10 Value Creation Model SECTION 02 Rolling Plan (Management Plan) 12 Review of the Management Plans 14 Rolling Plan 2022 24 A Message from the CFO 28 Business Overview 30 Overview of Operations by Business Headquarters 36 Special Feature: Expanding Our Boundaries Case 1 Taking on the Challenge of the Overseas Real Property Business through DAIBIRU Case 2 Participating in the Carbon Business SECTION 03 Sustainability Strategy 40 Sustainability Initiatives 41 A Message from the Chief Environment and Sustainability Officer (CESO) 42 Safety & Value 46 Environment 50 Human & Community 54 Innovation 58 Governance SECTION 04 Corporate Governance 60 Dialogue between the Chairman and an Outside Director 64 Board of Directors and Audit & Supervisory Board Members 66 Corporate Governance 72 Risk Management SECTION 05 Financial and Corporate Information 78 Financial and Non-Financial Highlights 80 The MOL Group’s Global Network / History of the MOL Group 81 Information Disclosure and External Recognition 82 Glossary (In alphabetical order) 83 Shareholder Information Underlined words in this report are explained in the Glossary on page 82. Vessel on the Cover The cover photograph shows a service operation vessel (SOV) specially designed to support the maintenance of offshore wind farms. While SOVs have become widely used in Europe, this is the first newbuild SOV of its kind in Asia. With accommodation for up to 90 personnel, the vessel is equipped with a dynamic positioning system that maintains a constant distance between the vessel and an offshore wind turbine. Also, the vessel has a special gangway that enables technicians to safely transfer from the vessel to an offshore wind turbine. After completion in March 2022, the vessel was char- tered on a long-term basis to Ørsted A/S, the world’s largest offshore wind farm operator, and is now engaged in supporting operations and maintenance at the 900 MW Greater Changhua Wind Farms in Taiwan. 2 3 Index for Reverse Lookup of Topics in the Guidance for Collaborative Value Creation1 Values P4–9, P41, P512 Business Model P4–9, P28–39, P803 Sustainability and Growth P4–9, P12–59, P76–774 Strategy P4–9, P12–35, P40–595 Growth (Performance) and Key Performance Indicators (KPIs) P11–13, P15, P19, P24–26, P42, P46, P50, P54, P58, P70, P78–796 Governance P58–77Referenced Guidelines• “Integrated Reporting Framework,” IFRS Foundation• “Guidance for Collaborative Value Creation,” Ministry of Economy, Trade and IndustrySpecial FeatureMITSUI O.S.K. LINES MOL REPORT 2022 A Message from the CEO With “a social infrastructure group centered on marine transport” as its slogan, the MOL Group will realize its comprehensive strength to advance bold initiatives for global growth. Takeshi Hashimoto President & CEO Fiscal 2021 Summary Having Achieved Record Profits, Entering a New Growth Phase Fiscal 2021, ended March 31, 2022, provided many opportuni- emerging benefits of structural reforms implemented to date. ties to think about our social mission. Due to logistics disrup- For example, the April 2021 establishment of MOL Drybulk tion, sending and receiving essential goods in a timely manner Ltd. has enabled the Headquarters of Dry Bulk Business to remained challenging in various locations worldwide. Although provide one-stop services and improve profitability. Similarly, this was not an issue we could resolve on our own, we regretted adjustment of tonnage volume and rationalization of vessel being unable to fully meet our core role as a shipping company. allocation have greatly enhanced the profitability of the car was no choice but preferring to avoid these initiatives when- progressed greatly. Based on the recognition that if climate ever possible. However, since announcing MOL Group change continues at the current rate the whole world will Environmental Vision 2.1 in June 2021 and clearly explaining be in deep trouble, there is a growing awareness within the to internal and external stakeholders the direction in which Company of thinking together with customers about the we must proceed, I feel that the mindset of Group officers and best solutions and encouraging initiatives that make both employees has transformed. Understanding of the need to our businesses and those of customers sustainable. earnestly tackle climate change countermeasures has The overriding purpose of a company is to continue providing carrier business. Admittedly, a large contribution is being “Cruising Speed” of ONE and the Group’s Target Profit Scale society with value through business activities. A revision of our made by equity in earnings of affiliates from Ocean Network corporate mission in fiscal 2021 rededicated us to the fulfill- Express Pte. Ltd. (ONE), which is responsible for the contain- ment of our social mission. Given the strain being felt around ership business. Nonetheless, I am extremely happy to report the world due to shortages of goods and soaring prices, we that, even if the contribution from ONE is excluded, we are ahead must continue providing services in ways that facilitate day-to- of schedule in reaching the medium-term profit targets set in Aiming to Stably Generate Profits on a Scale Commensurate with Accumulated Shareholders’ Equity day life and economic activities. fiscal 2017, when we introduced rolling management plans. The MOL Group’s shareholders’ equity has grown dramatically To stably realize profits of ¥200.0 billion, we will require As for our business performance, meanwhile, we were In addition, we steadily progressed in realizing the thanks to favorable performances over the past two fiscal ONE to continue making solid contributions even after con- able to achieve record profits, posting ordinary profit of ¥721.7 Environmental Strategy set out as a priority in Rolling Plan years. If the Group performs as expected in fiscal 2022, share- tainer freight rates have normalized. Assuming that ONE’s billion. As a result, fiscal 2021 proved to be a very fruitful year 2021. Reducing greenhouse gas (GHG) emissions is certain to holders’ equity will reach approximately ¥2.0 trillion in the sales range is between ¥2.0 trillion and ¥3.0 trillion, we would in which our financial position improved markedly. Analysis of require new capital investment and the use of expensive fuels. near future. I believe that, having been entrusted with the like to get the company on track to achieve a profit margin of our business performance tends to focus on the historically The extra costs inevitably associated with such environmental capital of shareholders, we have a responsibility to pursue as between 5.0% and 10.0%. If this is realized, ONE’s profits are high freight rates enjoyed by the containership business. initiatives previously led some Group personnel to adopt a a minimum target a return of about 10.0% of shareholders’ likely to trend between about ¥100.0 billion and ¥300.0 billion, However, our performance is also attributable to the steadily stance of fulfilling the minimum requirements when there equity, or in other words, profits of roughly ¥200.0 billion. which means that MOL can expect to record equity in earnings 4 5 MITSUI O.S.K. LINES MOL REPORT 2022Value Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate InformationCorporate Governance A Message from the CEO of affiliates of between roughly ¥30.0 billion and ¥100.0 billion. offshore, real estate, and logistics businesses. Our immediate to roles in upstream and downstream supply chain fields will warehousing, real estate, and logistics. This approach is also In addition, we will steadily solidify marine transport business, goal is to establish these profit levels so that we can realize open up a wider range of earning opportunities for us. In the related to the Regional Strategy that I will explain shortly. In other than containerships, that each generates profits in the profits of ¥100.0 billion or more even in unfavorable conditions marine transport business, in order to meet the needs of particular, plans call for growing businesses in partnership tens of billions of yen, such as dry bulkers, tankers, car carri- and profits in excess of ¥200.0 billion when business in vola- customers, we need to propose optimal transport methods with conglomerates and state-owned enterprises in India, ers, and LNG carriers. We will also create non-marine trans- tile markets perform well. port business with these levels of profits, including the Rolling Plan Progress and Future Direction (1) Reforming Our Business Portfolio to Build a More Sustainable, Stable Corporate Entity While the absolute amounts of profits are of course one focus, businesses mainly based on long-term contracts have rela- the stability of business performance is also important. In tively low profit margins but generate stable cash flows over reducing the degree to which market conditions impact busi- the long term. Therefore, by growing such businesses so that ness performance and creating a structure that can consis- they account for a greater share of profits, we will mitigate tently generate stable profits, reform of our business portfolio performance fluctuations in our marine transport businesses is unavoidable. With this in mind, we have included in Rolling as a whole. Further, as the third pillar of our approach, we Plan 2022 a Portfolio Strategy that targets raising the profits will increase the relative weight in our business portfolio of of non-marine transport businesses—mainly offshore, logis- domains such as logistics and real estate, whose perfor- tics, real estate, and projects related to the offshore wind mances are affected by factors that are completely different based on an in-depth understanding of the customer’s entire China, and Southeast Asia. Nothing is written in stone to the business. In the process, we will gain a detailed and extensive effect that these entities only seek business relationships with knowledge of the cargo being transported, the related indus- MOL that are limited to transport. Since such countries have tries, and the structures of businesses in the supply chain certain barriers to entry and business relationships with local beyond the marine transport field. Historically, supply chain companies cannot be created overnight, we will establish a functions have gradually become specialized and discrete. business model that makes the most of the favorable reputa- However, I feel that there is scope for optimization of these tion we have cultivated so far in terms of reliability, techno- functions through the provision of more-integrated services logical capabilities, and safety to venture into the joint that extend beyond MOL’s mainstay marine transport field operation of an array of businesses that are not limited to encompass upstream and downstream fields, such as to marine transport. Rolling Plan Progress and Future Direction (2) Evolving Businesses by Combining Environmental and Regional Strategies In addition to the Portfolio Strategy, the Environmental and With this investment, we will expand our low- and zero- Regional strategies will be important drivers of business emission energy businesses, including the offshore wind power generation business—from fiscal 2021’s result of from those that affect the performances of marine transport development going forward. With regard to the Environmental power generation business, and evolve our existing marine approximately ¥14.0 billion to between ¥60.0 billion and ¥80.0 businesses. We will become a corporate group that can gen- Strategy, given current overall social trends, demand for transport businesses by developing a fleet that uses alterna- billion by fiscal 2035. erate consistent profits by building a well-balanced business goods and services that address environmental issues is likely tive fuels to reduce our GHG emissions. In this way, we will be A feature of marine transport, which is the Group’s core portfolio based on three major pillars: high-risk, high-return to increase in various fields, including renewable energy and able to continue providing services that are both socially business, is the significant performance volatility caused by marine transport; long-term stable marine transport; and environmental protection. Accordingly, MOL aims to seize the sustainable and the preferred choice of customers. fluctuations in economic and market conditions. Among our non-marine transport, such as real estate, warehousing, and business opportunities stemming from such demand. As part Next, I will turn to our Regional Strategy. Traditionally, marine transport businesses, this volatility is particularly offshore businesses. pronounced in such areas as containerships, dry bulkers, With our sights set on establishing the aforementioned of these efforts, in fiscal 2021 we embarked upon our first our sales organization has been vertically divided according investment in the offshore wind power generation business, a to vessel type. In this business model, for instance, the car tankers, and car carriers. Given the robust profitability of business portfolio structure, in January 2022 we implemented business field that has a strong affinity with our knowledge of carrier business is run by the Car Carrier Division, while the these businesses when they are doing well and our social tender offers for DAIBIRU CORPORATION and Utoc mission to support global economic activities, these busi- Corporation, which were listed subsidiaries, and then made nesses will remain core businesses. On the other hand, them into wholly owned subsidiaries. Both of these compa- offshore operations. This business is in a field that companies LNG carrier business is run by the LNG Carrier Division, with from various peripheral industries, such as electric utilities each division located in the Tokyo Head Office and developing and engineering, are endeavoring to enter with an eye on the separate operations around the world. This way of organizing among the same marine transport businesses, the LNG nies have long histories and have established strong positions market’s growth potential, but we believe that there are sure businesses has certain advantages in terms of promoting carrier business, the methanol carrier business, and other in their respective business fields. I am confident that the companies will be able to achieve even greater growth by incorporating MOL’s network and global business experience and, if required, MOL’s capital strength. Particularly in Asia, which is a target region of our Regional Strategy, we antici- pate burgeoning demand for the real estate services offered by DAIBIRU and the heavy goods transport services that are Utoc’s specialty. By capturing demand for these services, we intend to maximize both companies’ growth potential. In addition, as we continue developing in fields beyond traditional business models, the extension of our roles in supply chains from existing roles in the marine transport field to be business opportunities that a marine transport company expertise and efficiency. However, even if one division works can capture by utilizing its personnel and expertise. Specific hard and manages to establish a business relationship with a areas in which we could establish businesses include the major customer in one country, other divisions may be focus- installation and maintenance of power generation facilities ing efforts on another country with higher priority for them. or the acquisition of floating offshore wind power generation Consequently, the Group may not fully utilize painstakingly facilities to enter into the power generation business. We want established bridgeheads. Therefore, I want to build a structure to actively develop such business opportunities because their that can spread the benefits of such hard-won positions across realization will both address social issues and increase our the organization. Although our development of this type of growth potential. organization is still incomplete, over the past few years Further, Rolling Plan 2022 earmarks an additional ¥360.0 we have been introducing a system whereby the Corporate billion for environmental investment over the next three fiscal Marketing Division, chief executive representatives, and chief years—up significantly from that of the previous Rolling Plan. country representatives take a more comprehensive approach 6 7 MITSUI O.S.K. LINES MOL REPORT 2022Value Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate InformationCorporate Governance A Message from the CEO realize our Regional Strategy of jointly operating a range of businesses by becoming the trusted partner of local compa- nies in each country. The first reason why we have chosen India as a target is the scale of the country’s market. There is ample scope to establish similar structures in countries such as Indonesia, where we have been engaged in businesses for many years, and the Philippines, which is a major supplier of crew mem- bers. Given the resources that need to be committed, how- ever, we wanted to begin by tackling a large-scale market. A second reason for selecting India is that, while various barri- ers to entry remain, once business foundations have been established and become entrenched in the country and its market, we will be able to leverage this position to expand other businesses. As we have a track record of doing business with Indian customers in the fields of tankers and LNG carri- ers, we want to extend these business activities to include car carriers and dry bulkers. We are not yet at the stage of being able to set specific targets for sales and profits, but the goal is to quickly grow operations to a scale where 30 to 40 India- based vessels are continuously transporting cargo to the country. If this endeavor is successful, we will introduce the model to the markets of other countries and regions, includ- ing Southeast Asia, China, Brazil, and Africa. to regions that are not restricted by the divisional boundaries. By advancing this approach even further and implementing initiatives ahead of those for other regions, we are developing an “India model” (→ page 21). In fiscal 2022, we have appointed to the new position of executive officer in charge of South Asia and the Middle East an Indian officer who is conver- sant with local conditions and delegated authority on matters related to regional business development to this officer. We are initiating this type of structural change because the cre- ation of a system in which the officer with regional responsibil- ity is given discretion and flexibility is essential if we are to Reinforcement of the Management Resources for Growth Strategy Implementation Pursuing the Human Resource Management and M&As Needed for a New MOL In realizing the Portfolio, Environmental, and Regional strate- identify but very difficult to accomplish. Nonetheless, I believe gies that I have explained so far, the Group must strengthen that the issue of diversity and inclusion is a challenge that the in-house management resources. We are placing particular Group must overcome if it is to survive as a sustainable corpo- emphasis on finding and securing personnel and ensuring that rate group going forward. each employee fully realizes their potential. With its business Also, M&As are a powerful way of simultaneously acquiring fields continuing to expand, the Group must establish a work- personnel and businesses. In selecting partners, we will focus force that accounts for an even greater range of skill sets and on acquiring companies that operate in environmental business aptitudes. Further, since the scope of our businesses is global, fields—particularly in the fields of renewable energy and alter- proceeding with Japanese personnel alone would be impracti- native fuels—but which lack the funds and personnel needed cal. In other words, we need the capabilities of local personnel for further growth. Combining the resources of such companies who are thoroughly familiar with each region’s values and with our funds and personnel will enable us to grow together. business practices. The current management of the Company’s When searching for such partners both domestically and inter- organization is still being conducted by a Japanese senior nationally, we will focus on finding groups of people with whom management team in Tokyo. Consequently, the promotion of we have an affinity and compatibility that makes us want to diversity and inclusion is an urgent task. This task is easy to work and grow businesses with them. Social Sustainability and MOL Seeking the Business Sustainability Essential for a Company Engaged in Social Infrastructure Projects The word “sustainability” can be interpreted in several ways. The pursuit of sustainability and profitability tend to be I view the achievement of sustainability as meaning that we seen as mutually exclusive, but I believe that we can view the are able to continue pursuing our fundamental purpose as a matter in a more unified way. In April 2022, the Group social infrastructure provider, which is to bring capital and announced the MOL Sustainability Plan. In light of changes personnel together to build platforms and create new value. in the Company’s business environment and in society as a Throughout its history, the marine transport industry has whole, we have analyzed and reviewed our previously estab- been at the mercy of market fluctuations and has experienced lished Sustainability Issues (Materiality) and set out specific many significant successes and failures. A business is not key performance indicators (KPIs) and action plans for each sustainable if a failure can result in severe damage that Sustainability Issue. When starting new businesses, we will makes continuation of the business impossible. As a company select and pursue initiatives in fields that are truly useful to engaged in social infrastructure business, we would like to and needed by society. If we can make a positive impact on the focus on sure-footedly conducting appropriate operations to structural challenges of society while earning returns through ensure our continued provision of value to society over time such efforts, I think we can say that we are making a signifi- frames of 10 to 20 years. I do not think an approach of con- cant contribution to sustainability. stantly seeking the next boom is desirable. In Conclusion Aligning Business Development with Future Global Trends Globally, the outlook is extremely unpredictable. At present, conclusion that the only way to tackle and resolve them is for geopolitical issues represent a huge risk, but even if peace is the world to work in unison. With this in mind, we must pursue restored, issues such as climate change, food shortages, and management strategies focused on developing businesses that demographic imbalances remain unsolved. The unfolding of enable the world’s seven or eight billion people to prosper events will bring progress and setbacks, and at times the world together in peaceful, safe environments. may become even more divided. Although there are likely to be I would like to ask our shareholders and other stakehold- many twists and turns, I feel that thinking about pandemics and ers for their continued support and understanding. other difficult global issues inevitably brings us back to the Market-oriented shipping, long-term stable shipping, and non-marine transport businesses. By combining these three pillars in a balanced manner, we aim to become a corporate entity that can consistently generate stable profits. 8 9 MITSUI O.S.K. LINES MOL REPORT 2022Value Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate InformationCorporate Governance Value Creation Model Input Input The MOL Group’s Capital Financial Capital Financial base that underpins reliable performance of long-term contracts, some of which cover periods of more than 20 years Stable cash flows generated from a diverse portfolio of vessel types and businesses Manufactured Capital Diverse fleet of approximately 800 vessels Sales and ship management offices in 41 countries and regions Intellectual Capital In-depth understanding of vessel operations and cargo handling as well as advanced maritime skills Broad knowledge of vessels backed by extensive experience Strong commitment to innovation of the marine transport business and a wide range of expertise as a base Project management capabilities for discovering needs and commercial- izing ideas Human Capital Highly diverse land-based personnel and crew members numbering around 14,000 Personnel who share the MOL CHARTS values Social and Relationship Capital History and track record stretching back more than 130 years Customer networks and partnerships in Japan and overseas Presence in maritime clusters around the world Natural Capital Natural environment that sustains business continuity Our Activities Output Outcome Outcome Fiscal 2021 Fiscal 2021 Fiscal 2021 Business Fields Advancing various social infrastructure businesses centered on marine transport P28 Offshore Terminal Real Property Logistics Marine Transport Offshore Wind Power Generation-Related and Clean Energy Short- to Medium-Term Action Plans Rolling Plan 2022 MOL Sustainability Plan P14 P40 Long-Term Guiding Principle New MOL Group Corporate Mission From the blue oceans, we sustain people’s lives and ensure a prosperous future. Code of Conduct P51 Reinvestment and the accumulation of knowledge Marine Transport Business MOL voyages Approx. 3,100 (Excluding time charter-out voyages) Offshore Businesses 4 FSRUs 7 FPSOs 1 Powership Logistics Business The MOL Group’s marine cargo volume Approx. 180,000 TEU The MOL Group’s air cargo volume Approx. 60,000 tons Terminal Business Cargo volume of MOL Group terminals in Japan and overseas Approx. 7.7 million TEU Real Property Business Total floor area of DAIBIRU-owned properties Approx. 710,000 m2 Offshore Wind Power Generation- Related Businesses and Clean Energy Businesses Involvement in offshore wind, wave power, tidal power, and ocean thermal energy conversion (OTEC) generation Financial Capital Ordinary profit ¥721.7 billion Free cash flow +¥200.1 billion Rating and Investment Information, Inc. (R&I) issuer rating Regaining of a rating within the “A” class (A-) Manufactured Capital Newbuild vessels completed 29 (Including four vessels related to environment- friendly and emission-free businesses) Appointment of four new chief country representatives, including in Kenya Intellectual and Human Capital New graduate hires 58 Mid-career hires 24 Technical personnel 71 Sea-based employees 434 Social and Relationship Capital Participation in the World Economic Forum (Davos Forum) Commencement of improvement of initiatives for chartered vessel owners Natural Capital CO2 emissions reduction -1,025,000 tons (Scope 1, compared with pre-pandemic level) • Initiatives to restore the natural environment in Mauritius (→page 53) • Launch of a blue carbon project (→page 38) Realization of the MOL Group Vision Achievement of the fiscal 2027 management indicators established in Rolling Plan 2022 Ordinary profit ¥200.0 billion ROE 9.0–10.0% Achievement of targets established in the MOL Sustainability Plan 10 MITSUI O.S.K. LINES 11 MOL REPORT 2022 Review of the Management Plans —Achievements since Introducing the Rolling Plan Progress since Introducing the Rolling Plan In fiscal 2017, we stopped using medium-term management 2027 profit targets was within sight, and we realized the portfo- plans, replacing them with a rolling management plan. First, lio reform and stronger market resilience initially sought. As we set out a 10-Year Vision. We then created a plan by back- such, we have decided that Rolling Plan 2022 will be the last casting from this vision and revised the plan by checking prog- management plan focused on the fiscal 2027 targets. By the ress each year. By fiscal 2021, after revising the plan in this way beginning of fiscal 2023, we will prepare a new management five times, we achieved the financial strength targets that were plan targeting a vision for fiscal 2035. set for fiscal 2027. Moreover, the prospect of reaching the fiscal Targets When the Rolling Plan Was Introduced (Rolling Plan 2017) Fiscal 2021 Results Fiscal 2027 Targets in Rolling Plan 2022 Ordinary profit (medium term) Ordinary profit (fiscal 2027) ROE (medium term) Net gearing ratio (medium term) Net gearing ratio (long term) ¥80.0 billion–¥100.0 billion ¥150.0 billion–¥200.0 billion 8.0–12.0% 2.0 times 1.0 time ¥721.7 billion 76.5% 0.71 time Concluded that achievement of fiscal 2027 profit targets likely ¥200.0 billion 9.0–10.0% <1.0 time Rolling Plan 2022—A Bridge to the Next Management Plan Strong performances in fiscal 2020 and fiscal 2021 have mark- have decided to spend fiscal 2022 formulating a robust man- management options. In addition, we must meet society’s which reflects new realities. In the meantime, we will continue ever-increasing expectations of companies in relation to decar- fiscal 2021’s forward-looking measures and integrate them bonization and other issues. Under these circumstances, we with the initiatives of the new plan. Management Plan Initiatives for Sustainability Issues Portfolio Strategy Environmental Strategy Regional Strategy Digital Transformation (DX) Enhancement of Organizational Strength Key Components of the Management Plan Rolling Plan 2021 Tender offers for DAIBIRU and Utoc Establishment of MOL Drybulk Rolling Plan 2022 MOL Sustainability Plan Focusing on non-shipping businesses as well MOL Group Environmental Vision 2.1 Creating a new model in India for business advancement in priority regions and introducing the model to other regions Preparing a DX vision Formulating a medium- to long-term human resource plan Next Management Plan Plan with fiscal 2035 (in approximately 10 years) as a new target year edly improved MOL’s financial position, investment capacity, and agement plan that is not an extension of our previous plan and (¥ billion) Achievements since Introducing the Rolling Plan Revenues / Ordinary Profit Gearing Ratio / Net Gearing Ratio / Equity Ratio Profit (Loss) Attributable to Owners of Parent per Share / Cash Dividends per Share / Dividend Payout Ratio Fiscal 2021 Ordinary Profit ¥721.7 billion End of fiscal 2021 Equity Ratio Fiscal 2021 47.4% Cash Dividends per Share ¥400.00 18/3 19/3 20/3 21/3 22/3 0 –200 18/3 19/3 20/3 21/3 22/3 (¥ billion) 2,000 (¥ billion) (Times) 721.7 800 2.50 1,500 1,000 500 0 1,269.3 18/3 19/3 20/3 21/3 22/3 240 160 80 0 2.00 1.50 1.00 0.50 0 Revenues (left) Ordinary profit (right) Gearing ratio (left) Net gearing ratio (left) Equity ratio (right) Cash Flows Fiscal 2021 Free Cash Flow ¥200.1 billion ROA / ROE Fiscal 2021 ROE 350 100 0 –100 –200 Includes investment in establishment of ONE 307.6 200.1 –107.4 18/3 19/3 20/3 21/3 22/3 (%) 80 40 30 20 10 0 –10 18/3 19/3 20/3 21/3 22/3 Cash flows from operating activities Cash flows from investing activities Free cash flow ROA (Based on ordinary profit) ROE Ordinary Profit (Loss) by Business Segment 47.4 (%) 50 40 30 0.78 20 0.71 10 (¥) 2,500 400 200 0 1,970.16 400 20.3 (%) 60 40 20 0 Profit (loss) attributable to owners of parent per share (left) Cash dividends per share applicable to the year (left) Dividend payout ratio (right) Note: Figures have been calculated based on the numbers of shares following a stock consolidation executed on October 1, 2017, and a stock split executed on April 1, 2022. Credit Ratings As of March 31, 2022 76.5% JCR A (Stable) R&I R&I Credit Rating (Issuer Rating) 76.5 30.2 AAA + AA - + A - + BBB - + BB - MOL: A- (Stable) 2017 2018 2019 2020 2021 2022 JCR JCR Credit Rating (Long-Term Issuer Rating) AAA + AA - + A - + BBB - + BB - MOL: A (Stable) 2017 2018 2019 2020 2021 2022 133.6 5.4 102.6 29.7 -4.2 721.7 662.9 19.8 43.2 -4.4 31.4 8.7 13.6 15.4 -6.3 38.5 7.7 21.1 21.9 -12.2 55.0 10.8 6.7 25.4 12.0 18/3 19/3 20/3 21/3 22/3 (¥ billion) 800 150 100 50 0 -50 12 13 Dry Bulk Business Energy and Offshore Transport Business Product Transport Business Associated businesses / Others / Adjustment MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Rolling Plan 2022 Theme and the Three Growth Strategies of Rolling Plan 2022 Under the theme of “Integrating the MOL Group’s strengths to Under the Environmental Strategy, we will accelerate the Rolling Plan 2022: Investment Plan Given our increased investment capacity, between fiscal 2022 and 2024 from the prior ¥200.0 billion between fiscal 2021 to fiscal achieve growth globally,” Rolling Plan 2022 sets out three initiatives set forth in MOL Group Environmental Vision 2.1. fiscal 2024 in terms of cash outflows, we plan to invest ¥1.0 trillion, 2023 in Rolling Plan 2021, we will explore M&A opportunities, growth strategies—Portfolio, Environmental, and Regional. Meanwhile, the Regional Strategy will involve establishing a which includes ¥730.0 billion of newly earmarked investments. particularly among the non-shipping businesses in line with our The Portfolio Strategy calls for strengthening of non-shipping stronger presence in priority countries and regions by adopt- As well as significantly increasing our three-year environ- three growth strategies. businesses to improve the stability of the Group’s profits. ing an “India model” (→pages 16 to 21). mental investment to ¥530.0 billion between fiscal 2022 to fiscal Rolling Plan 2020 Rolling Plan 2021 Rolling Plan 2022 Returning to a growth trajectory Solidifying the foundations of growth based on an environmental strategy Integrating the MOL Group’s strengths to achieve growth globally Supported by an improved financial position, we will step up investment with the aim of investing ¥1.9 trillion*1 between fiscal 2022 and fiscal 2027, including new investment of ¥1.6 trillion. Portfolio Strategy Strengthen non-shipping businesses, including the offshore, offshore wind power generation-related, logistics, and real property businesses Environmental Strategy Accelerate environmental investment while continuing the initiatives set out in MOL Group Environmental Vision 2.1 Regional Strategy Acquire large-scale projects not limited to transport and with a focus on Asia by demon- strating the MOL Group’s collective strength *1 Cumulative amount of investment cash outflows for the six years from fiscal 2022 to fiscal 2027 Initiatives Based on Both Rolling Plan 2022 and the MOL Sustainability Plan In fiscal 2022, we reorganized existing initiatives for businesses, we prepared the chart below to clearly delineate Breakdown of Investment from Fiscal 2022 to Fiscal 2024 (¥ billion) Investments Determined as of March 31, 2022 New Investments Planned for FY2022–FY2024 Environmental Investment 170.0 360.0 Expected Internal Rate of Return Details Subtotal 530.0 Of which, introduction of vessels that use alternative fuels Of which, expansion of low- and zero-emission energy businesses Business Expansion, Asset Augmentation, and M&As Total Investment 90.0 245.0 335.0 5.0% 80.0 115.0 195.0 >5.0% 100.0 270.0 370.0 730.0 470.0 >8.0% 1,000.0 • LNG-fueled dry bulkers, LNG-fueled car carriers, etc. • Vessels that use next-generation fuels (development and ordering) • New LNG carriers, LPG carriers, ammonia carriers, etc. • Offshore wind power generation and related businesses • Investment in Group companies • Replacement of existing fleet Rolling Plan 2022: Profit Plan and Cash Flow Forecast Against the backdrop of a booming containership market, in to ¥145.0 billion range from fiscal 2023 through fiscal 2024. fiscal 2022 we are expecting a high level of ordinary profit, Thereafter, we will realize recurring profit of ¥200.0 billion by second only to that of fiscal 2021. At the end of July 2022, we fiscal 2027, based mainly on growth in the LNG carrier, off- upwardly revised the ordinary profit forecast to ¥710.0 billion, shore, car carrier, and real property businesses coupled with a compared with a forecast of ¥525.0 billion issued at the end of recovery in the containership business. In addition, we will seek Sustainability Issues (Materiality) to formulate the MOL the relationships between the MOL Sustainability Plan and April 2022. However, given the anticipated normalization of an overall balance between investing cash flows and operating Sustainability Plan—a more concrete plan that specifies KPIs Rolling Plan 2022. The MOL Group will promote both plans logistics as well as the delivery of a large number of new con- cash flows, thereby exercising financial discipline even while and action plans (→page 40). In addition, to emphasize our in tandem. commitment to addressing social issues through our n a l P y t i l i b a n a t s u S L O M i Safety & Value P42 Provide added value through safe transportation and our social infrastructure business Creating value and growing as a com- pany that helps address social issues Environment P46 Conservation for marine and global environment MOL Group Environmental Vision 2.1 Human & Community P50 Contributing to the growth and development of people and communities Innovation P54 Innovation for development in marine technology Governance P58 Governance and compliance to support businesses Profit, Investment, and Financial Plan Environmental Strategy Focusing on non-shipping businesses as well Portfolio Strategy Regional Strategy Enhancing organiza- tional strength and advancing work-style reforms DX Advancing sales activities based on the Regional Strategy Organizational strength: Medium- to long-term human resource plan Safety: Crew training plan 2 2 0 2 n a l P g n i l l o R Adding DX as a foundation that enables the three strate- gies, enhances organizational strength, and promotes work-style reforms Governance: Revision of Basic Policy tainerships, we are targeting ordinary profit in the ¥140.0 billion actively investing (→page 24). FY2021 Actual*2 FY2022 Forecast FY2023 Forecast FY2024 Forecast FY2027 Target (¥ billion) Profit Targets Ordinary profit Dry Bulk Business Energy Business Product Transport & Real Property Business Associated Businesses Others and adjustments (corporate and eliminations) ROE (%) Cash Flows Cash flows from operating activities Cash flows from investing activities Of which, investment Asset disposal and liquidation 721.7 43.2 19.8 672.9 -2.3 -11.8 76.5 307.6 107.4 Free cash flow 200.1 Financial Target (Fiscal year-end) 525.0 (As of announcement on April 30, 2022) 140.0 145.0 30.0 22.0 477.0 -0.5 -3.5 35.0 32.0 41.0 70.0 0 -3.0 24.0 48.0 75.5 0.5 -3.0 7–8 200.0 24.0 63.0 113.0 4.0 -4.0 9–10 FY2022–FY2024 Cumulative FY2022–FY2027 Cumulative 820.0 880.0 1,000.0 -120.0 -60.0 1,570.0 1,630.0 1,930.0 -300.0 -60.0 Net gearing ratio (Times) 0.71 — — 0.8 <1.00 *2 Fiscal 2021 results by segment have been converted to reflect business headquarters as of fiscal 2022. 14 15 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Rolling Plan 2022 Portfolio Strategy Transforming into a more stable profit structure by expanding non-shipping businesses whose profits and losses fluctuate depending on factors different from those of the shipping market Portfolio Strategy—Basic Aims Under Rolling Plan 2022, in addition to advancing our As for alternative energy sources such as hydrogen and traditional core shipping business, we aim to strengthen ammonia, we will not only develop businesses targeting future non-shipping businesses and grow their profits from the fiscal transport demand but also explore investment opportunities 2021 level of approximately ¥14.0 billion to between ¥60.0 upstream in the supply chain, thereby achieving multifaceted billion and ¥80.0 billion by fiscal 2035. By strengthening busi- expansion of our portfolio. ness fields with market characteristics that differ from the Also, we aim to strengthen the structural resilience of the volatility of the shipping market, the MOL Group will diversify shipping business even further so that it generates stable its portfolio and accumulate stable profits. profits while minimizing the impact of market conditions. The real property business and the logistics business were To this end, we will achieve an appropriate balance between bolstered by the inclusion of DAIBIRU CORPORATION and Utoc highly volatile businesses—such as the dry bulk, car carrier, Corporation in the MOL Group as wholly owned subsidiaries in and containership businesses—and businesses with stable fiscal 2022 and fiscal 2021, respectively. earnings and high market resilience such as the LNG carrier The Group will give both subsidiaries central roles in its business. non-shipping businesses, which the Group will expand by In accordance with our investment plan, we will achieve utilizing management resources even more effectively. In targets through continued aggressive investment in the offshore business, the Group will step up investment in non-shipping business fields. As part of these initiatives, non-transport businesses that it has been advancing for some the MOL Group will invest at least ¥100.0 billion in the real time, such as FSRUs, LNG-to-Powerships, and Carbon property business between fiscal 2022 and fiscal 2024. The Capture, Utilization, and Storage (CCUS). Meanwhile, the Group will further capitalize on its global network to augment offshore wind power generation business and related busi- DAIBIRU’s overseas business development. At the same time, nesses are proactively marketing in Japan and overseas to the shipping business will proactively invest, including invest- capture demand related to the trend toward decarbonization. ment to introduce vessels that use alternative fuels. Shipping Non-Shipping Fiscal 2021 Achievements • Steadily advanced investments in LNG carriers, LPG carriers, and ammonia carriers, which belong to low-carbon businesses • Decided to invest in Waterfront Shipping Limited, a shipping subsidiary of Methanex Corporation, which is the world’s leading producer of methanol • Concluded our first contract for investment in an offshore wind power generation project • Implemented tender offers for DAIBIRU and Utoc as investments in the real property business and logistics business, respectively Fiscal 2022 Strategy • Continue pursuing investment opportunities not only in relation to transport demand for alternative energy stemming from the trend toward low- carbon and decarbonization initiatives but also in the upstream fields of alternative energy supply chains • Continue to invest aggressively in the offshore, offshore wind power generation, logistics, and real property businesses, with new investment of at least ¥100.0 billion in the real property business Examples of Initiatives Tender Offers for DAIBIRU and Utoc and the Introduction of Group Executive Officers On November 30, 2021, MOL announced tender offers for position of Group executive officer, which is a Head Office DAIBIRU and Utoc, and both companies had become wholly executive officer position. The Group companies in question owned subsidiaries by April 2022. While both companies have are DAIBIRU, Utoc, MOL Drybulk Ltd., MOL Chemical Tankers been members of the MOL Group for many years, they were Pte. Ltd., and MOL Information Systems, Ltd. By placing these also listed in the First Section of the Tokyo Stock Exchange. Group companies on the same level as the Head Office sales Consequently, their positions in the MOL Group’s management divisions, the new system will enable prompt decision- making, strategy have been somewhat marginal until now. Making both thereby strengthening the management of the Group. companies wholly owned subsidiaries will enable the Group to In addition to the aforementioned Group executive officer optimize the allocation of management resources in line with system, the MOL Group will take wide-ranging measures to its management strategy. In addition, DAIBIRU and Utoc will strengthen its business management. For example, the Group be able to grow globally by capitalizing on the networks of the will increase the organic links between its management strat- Group and capturing the latent needs of its customers. egies and those of Group companies to facilitate cohesive In April 2022, a new system was introduced that appoints Groupwide drives toward the targets of Rolling Plan 2022 the presidents of the Group’s five core companies to the and the MOL Sustainability Plan. Concerted Initiative Focused on Offshore Wind Power Generation-Related Businesses The supply chain for offshore wind power generation, which is in Akita Prefecture. In Taiwan, we are engaged in a business attracting attention as a promising alternative power source that charters out special-purpose service operation vessels that can support decarbonization efforts, comprises many (SOVs)*2 used in the maintenance of wind turbines. Other fields where the MOL Group can leverage its experience in initiatives being realized by Group companies include the marine transport and offshore businesses. Specific fields provision of Japan’s first crew training program to use a include the transport of materials and equipment, power- dynamic positioning system*3 simulator, the rollout of a ser- cable laying, wind turbine installation, power generation, vice that trains non-Japanese maintenance technicians, and equipment maintenance, and personnel recruitment and preparation for participation in a power transmission cable- training. As for the offshore wind power generation business, laying business. which is the core of the supply chain, we began investing and Although all in their early stages at this point, the afore- participating in and dispatched a director to a working off- mentioned initiatives will become the businesses that give shore wind power generation project in Taiwan in 2021. The concrete form to our Portfolio and Environmental strategies. aim of our foray into this segment of the supply chain is to For this reason, the MOL Group will advance a concerted rapidly acquire knowledge of the overall operational manage- effort to develop these fledgling businesses into mainstays ment and profit structures of the offshore wind power genera- that help realize the fiscal 2035 targets set out for non- tion business that we can use in further development going shipping fields in Rolling Plan 2022. forward. In addition, we have already established a joint ven- ture with a major partner in Japan with a view to participation in power generation projects. In peripheral fields, we have acquired a stake in a com- pany that operates five self-elevating platform (SEP) ves- sels,*1 which install power generation equipment. The company is currently involved in work off the coast of Noshiro *1 SEP vessels are special vessels that extend four legs to the seabed to enable the conduct of installation work for wind power generation equipment in stable conditions. *2 SOVs have extensive accommodation for maintenance technicians working on the multiple wind turbines that make up an offshore wind farm, allowing technicians to stay on-site for extended periods. *3 Dynamic positioning systems automatically calculate external forces such as wind, wave, swell, and tidal currents to maintain a vessel at a fixed point or navigate a set route with precision. These systems are indispensable for vessels that exactly maintain their position at fixed points, such as cable-laying ships, offshore wind power-related special-purpose vessels, and seabed oil field- related offshore vessels. Main Initiatives Power-cable laying Operation of cable-laying ships capable of laying power transmission lines Photo courtesy of Kokusai Cable Ship Co., Ltd. Maintenance First company in Asia to own and charter out SOVs for the maintenance of offshore wind turbines Installation of power generation equipment Acquisition of a stake in a company that operates five SEP vessels, which are used for the installa- tion of offshore power generation equipment Crew training Ownership of a dynamic positioning system simulator and provision of advanced training for crews Photo courtesy of MOL Marine & Engineering Co., Ltd. Power generation Participation in a company that operates a fixed-bottom offshore wind farm off the northwest coast of Taiwan with a capacity of 128 MW Non-Japanese person- nel training and employment Planning to launch a business in the Philippines that utilizes our expertise in crew member training to develop non-Japanese personnel to work in the field of offshore wind power generation 16 17 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Rolling Plan 2022 Environmental Strategy In line with MOL Group Environmental Vision 2.1, tackle industry- leading decarbonization initiatives and seize new business opportunities in the alternative energy field The naming and launching ceremony of the ASAHI, the world’s first pure battery tanker Environmental Strategy—Basic Aims Formulated in June 2021, MOL Group Environmental Vision position since fiscal 2020 to systematically develop our fleet. 2.1 establishes three medium- to long-term targets: deploy For the time being, the majority of our newbuild orders will net zero emissions oceangoing vessels in the 2020s; reduce be for LNG-fueled vessels. However, given that ammonia is GHG emissions intensity by approximately 45.0% by 2035 expected to be used as a next-generation fuel, the Company (compared with 2019); and achieve net zero GHG emissions will participate in the technological development of ammonia- for the entire Group by 2050. To achieve these targets, the fueled vessels and actively work toward the early introduction Group is steadily implementing various initiatives. Of the of such vessels and expansion of the fleet. cumulative total investment of ¥1.0 trillion projected for the As well as fuel conversion, we will work on multiple fronts three-year period from fiscal 2022 to fiscal 2024 under Rolling to realize a GHG emission reduction road map. Depending Plan 2022, ¥530.0 billion has been earmarked for investments on the characteristics of each vessel type, we will introduce in vessels that use alternative fuels as well as in low-carbon energy-saving technologies that use wind as propulsion, such and decarbonization initiatives. These investments represent as the Wind Challenger hard sail system (→page 56) and increases in terms of both scale and share compared with Rotor Sail, and other energy-saving devices. Rolling Plan 2021, which called for the allocation to low- Worldwide, the Group’s low- and zero-emission energy carbon and decarbonization initiatives of ¥205.0 billion relative businesses will contribute to society’s low-carbon and decar- to a total investment of ¥450.0 billion. bonization initiatives. At the same time, these businesses will We will proactively invest to introduce vessels that use compensate for the decline in demand for the transport of oil alternative fuels and achieve the medium- to long-term goals and coal by expanding the Group’s fleet of LNG and ammonia of MOL Group Environmental Vision 2.1. Issues remain to be carriers, which are likely to see growth in transport demand, addressed, such as how to overcome the combined impact and by moving forward with investments in the offshore wind of a hike in shipbuilding costs—which is accompanying the power generation business and in peripheral fields. current increases in the prices of steel and other materials— Lowering carbon and decarbonization is a common global and the additional costs associated with the introduction of challenge as well as a challenge for customers with whom we vessels that use alternative fuels. Nonetheless, we will take have built long-standing relationships. By becoming a solution advantage of the significant improvement in our financial provider and partner, we will capture new business opportunities. Introduction of Vessels That Use Alternative Fuels Expansion of Low- and Zero-Emission Energy Businesses Announced MOL Group Environmental Vision 2.1 Fiscal 2021 Achievements • Prepared a GHG emission reduction road map • Introduced internal carbon pricing (ICP) for deci- • Steadily invested in LNG carriers, LPG carriers, sions on new investments and ammonia carriers • Ordered seven new LNG-fueled vessels Fiscal 2022 Strategy • Continue placing orders for new LNG-fueled ves- sels despite the current upward trend in shipbuild- ing costs • Begin using a plan-do-check-act cycle to achieve a GHG emission intensity reduction target of 1.4% per year in the period through 2030 • Continue investing in LNG carriers, LPG carriers, ammonia carriers, and offshore wind power generation-related businesses • Develop ammonia-fueled ammonia carriers For details on initiatives related to the Environmental Strategy, please see “Conservation for Marine and Global Environment” (→pages 46 to 49). Examples of Initiatives Introduction of ICP In fiscal 2021, MOL began the use of ICP as a means of advanc- ing a transition plan based on MOL Group Environmental Examples of ICP Use ICP has been used in investment projects such as LNG-fueled Vision 2.1. In anticipation of future carbon taxes, emissions vessels and the Wind Challenger hard sail system and had a trading, and other charges, fixed monetary amounts per ton of positive effect on decision-making. While low-carbon and CO2 emissions are set as internal carbon prices, which are decarbonization initiatives usually incur additional costs, ICP used as economic indicators when making investment deci- shortens envisioned return on investment periods by convert- sions (CO2 cost: US$60 per ton from 2023 to 2039 and US$140 ing CO2 emission reductions into monetary benefits, thereby per ton beginning from 2040). Required to be applied to all encouraging investment. investment projects related to the oceangoing marine trans- port business, the internal carbon prices have already been used in decisions on and in the practical management of more than 10 investments since the introduction of this system. Realization of a 5.0% Reduction in Fuel Consumption by the End of 2024 through Operating Efficiency In April 2022, the Environment & Sustainability Strategy installation of energy-saving equipment, and propeller Division formed a dedicated team that is tasked with further replacement. In all of the aforementioned initiatives, the key enhancing operating efficiency and comprises personnel with will be the visualization and utilization of vast amounts of data experience in ship operations, technical personnel, and sea- from respective operating vessels, which is being conducted by based employees. the FOCUS project (→page 56). Through collaboration with Akishima Laboratories (Mitsui We have already begun this initiative for approximately Zosen) Inc. and MOL Techno-Trade, Ltd., and the utilization of 180 operating vessels, and we plan to extend it to cover 500 EcoMOL Inc., which was established in the Philippines in May operating vessels. Serving as the nucleus of the initiative, the 2022, MOL is aiming for a total improvement in fuel efficiency of dedicated team will coordinate with related parties to reduce 5.0%. We will achieve 3.0% of this improvement through mea- GHG emissions and operating costs by beginning with the sures for intangible aspects of operational practices, mainly advancement of fuel consumption reduction measures that focused on realizing rigorously efficient operations through the will be immediately beneficial. optimization of routing and power output. The remaining 2.0% will be realized through hardware-related measures, including the use of low-friction hull paint, effective hull maintenance, Ammonia, Hydrogen, and Methanation Initiatives While promoting the introduction of LNG-fueled vessels as a feasible means of lowering GHG emissions right now, we are conducting extensive studies on ammonia, hydrogen, and other promising candidates for the decarbonized fuels of the future. LNG Batteries Advantage • Existing onshore infrastruc- ture usable Challenges • Methane slip countermeasures • Development of fuel supply infrastructure MOL’s main initiatives • Service commencement of an LNG-fueled tugboat and LNG- bunkering vessels • LNG-fueled ferry under construction • LNG-fueled oceangoing vessels already ordered Liquefied Synthetic Methane Advantage • LNG infrastructure usable Challenges • Methane slip countermeasures • Improvement of synthetic methane production efficiency MOL’s main initiatives • Methanation project • Active involvement in carbon capture and utilization/storage projects Methanol and Synthetic Methanol Advantage • Existing onshore infrastruc- ture usable MOL’s main initiative • Active involvement in the Advantages • Already in practical use on small vessels Challenge • No onboard CO2 emissions • Increasing capacities and reducing the weight and size of batteries MOL’s main initiatives • Completion of an electric tanker • Considering development for commercial oceangoing vessels Ammonia Advantages • No onboard CO2 emissions • MOL’s proven track record in the marine transport of ammonia Challenges • Establishment of fuel supply infrastructure • Countermeasures for nitrous oxide (N2O) and toxicity MOL’s main initiatives • Exploring upstream investments • Participation in a study of the fuel supply business in Singapore • Considering securing an ammonia- fueled engine and then launching inaugural vessel in the mid-2020s Liquefied Hydrogen Advantage • No onboard CO2 emissions MOL’s main initiatives • Participation in a study of the fuel supply business in Singapore • Considering the launch of inaugu- ral vessel in the 2020s Challenges • Toxicity countermeasures • Improvement of synthetic efficiency Biodiesel methanol-fueled methanol tanker business Challenge Advantages • Already commercialized as a vessel fuel MOL’s main initiative • Advancement of preparations for Challenge • Existing facilities usable • Increasing supply capacity regular use • Engine development, fuel cell improvement, measures for ultra-low temperatures, and establishment of fuel supply infrastructure 18 19 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Rolling Plan 2022 Regional Strategy Focusing on Asia but without being limited to transport, take advantage of the MOL Group’s collective strength to acquire large-scale projects The product tanker LILAC VICTORIA, which began providing India-based services for Indian customers in fiscal 2022 Regional Strategy—Basic Aims Having positioned the Regional Strategy as one of its core business divisions. Focusing on India, we will use these capa- growth strategies since the preparation of Rolling Plan 2021, bilities to acquire large-scale projects in South Asia and the the MOL Group has sought to acquire large-scale projects Middle East. by taking advantage of its collective strength and focused The Group has also strengthened its global network in on Asia, without being limited to transport. The goal is to countries and regions other than India. In 2016, we introduced increase business opportunities by developing Group company a system of chief country / regional representatives, who are businesses as well as new businesses through the utilization now working in 25 countries and regions. Further, to support of relationships that MOL has built with customers, partners, new initiatives in each country and region, the Head Office’s and other stakeholders around the world. Corporate Marketing Division has been playing a central role In fiscal 2021, we identified Asia—where growth is in the implementation of the “lead sprints” system (→page expected—as the most important region for us. In particular, 21) since fiscal 2021. This system is enabling us to expedite we actively developed businesses in India, focusing on the decision-making and thereby cater appropriately to customer energy field. Given that Asia is integral to the advancement of needs in each country and region. our Regional Strategy, we further strengthened our business In the same way that we identified India as a priority execution capabilities in the region in fiscal 2022. Based on a country, we will select additional priority countries and west–east division of the region comprising Asia, the Middle regions, which will then become focuses of our Regional East, and Oceania, we have established new executive officer Strategy going forward. In selecting countries and regions, we positions dedicated to the promotion of sales in East Asia, will comprehensively consider growth potential and market Southeast Asia, Oceania, and the South Asia–Middle East size in light of macroeconomic indicators as well as the his- region, respectively. To the latter region, we have appointed torical foundations that we have built up over many years. Ajay Singh, a managing executive officer who is well versed Our investment plan establishes cumulative M&A budgets in local conditions. of ¥100.0 billion for fiscal 2022 through fiscal 2024 and ¥300.0 Under the strong leadership of regional executive officers, billion for fiscal 2022 through fiscal 2027. Accordingly, we will we will accurately grasp changing customer needs and estab- actively utilize M&As as a means of expanding businesses lish capabilities for offering solutions based on organic col- in regions. laboration among local sales bases, Group companies, and Examples of Initiatives India Model: Supporting the Regional Strategy Coordination among the regional executive officer, chief country representatives, and the Corporate Marketing Division In 2015, with the aim of accurately catering to customer customers. These achievements are an example of realizing needs, at four bases worldwide we established chief executive new business by discovering customer needs through the representatives who oversee regions. Since then, we have initiative of a local office and by providing support from a Head been strengthening Groupwide intra-regional collaboration. In Office sales division. 2016, we introduced chief country / regional representatives Under Rolling Plan 2022, we have further strengthened to countries where we wanted to concentrate sales efforts and such efforts by introducing a system whereby the Head Office then began offering comprehensive transport solutions that and the regional base work in tandem to advance respective reflected the circumstances in each country and region. Also, businesses in India. For each business, a joint task force is in fiscal 2021 we appointed chief country representatives in established by the Head Office sales divisions and the regional the United States, Russia, the Netherlands, and Kenya. executive officer / chief executive representative of South Asia In addition, in order to support the development of new and the Middle East region. businesses in each region, through the “lead sprints” system, Until now, each Head Office sales division has had its own we encourage the use of not only the existing customer net- overseas bases and conducted sales and business activities works of the Head Office sales divisions but also the newly on a divisional basis. In India, however, the provision of infor- established networks that have been built by the chief execu- mation on each business in the country is focused on the tive representatives and chief country / regional representa- regional executive officer / chief executive representative, who tives. In this way, we support the multifaceted search for leads the Regional Strategy from a cross-business viewpoint. potential opportunities that match the Regional Strategy This “India model” is an experimental initiative for us. outlined in Rolling Plan 2021 and Rolling Plan 2022. Through a process of trial and error, we will create better In Rolling Plan 2021, the Regional Strategy identified Asia systems that suit both sales divisions and regional bases. as the Group’s highest priority region. Accordingly, placing If the India model proves successful, we plan to introduce particular emphasis on developing businesses in India, we it to other priority countries and regions. won new contracts for VLCCs and LPG carriers for Indian Existing Project Promotion System Submit for discussion and/or report India Model Share information, consult, and make decisions Submit for discussion and/or report Executive Committee Executive Committee Regional Executive Officer Executive Officer in charge of Iron Ore & Coal Carrier Division Executive Officer in charge of Car Carrier Division Others… Iron Ore & Coal Carrier Division Car Carrier Division Others… Chief Executive Representative / Chief Country Representative Introducing projects Moderate information sharing Iron Ore & Coal Carrier Division’s local subsidiary Car Carrier Division’s local subsidiary Other Division’s local subsidiary Executive Officer in charge of Iron Ore & Coal Carrier Division Regional Executive Officer Executive Officer in charge of Car Carrier Division Iron Ore & Coal Carrier Division Chief Executive Representative / Chief Country Representative Car Carrier Division Iron Ore & Coal Carrier Division’s local subsidiary Car Carrier Division’s local subsidiary Iron Ore & Coal Carrier Task Force Car Carrier Task Force Projects Led by Head Office Business Divisions Projects Initiated by Regional Sales Organizations Note: The above diagram is a model, and the business divisions and task forces in the diagram have only been included as illustrative examples. Fiscal 2021 Achievements • Concluded contracts with customers in China for six new LNG carriers • Significantly increased shipments of electric vehicles (EVs) from China to Europe • Introduced four vessels, namely Very Large Crude Carriers (VLCCs) and LPG carriers, for customers in India • Introduced the “lead sprints” system to expedite Head Office decision-making • Divide Asia into two regions, establish the position of regional executive officer / chief executive representa- tive; appoint an employee who is from India and conversant with local conditions as the executive officer responsible for the South Asia–Middle East region • Use India as the model for building new collaborative capabilities between the Head Office and regional sales Fiscal 2022 Strategy organizations (→page 21) • Laterally introduce initiatives from India to other target countries • Formulate and advance a Regional Strategy in Japan, focusing particular efforts on fields where there are overlaps with the Environmental Strategy • Appropriately adapt to changes in the Russia–Ukraine situation The function of regional lines (regional executive officers / chief executive repre- For respective projects, regional lines (regional executive officers / chief executive sentatives / chief country representatives) in the promotion of projects was limited representatives / chief country representatives) form task forces with respective to referrals to respective sales divisions. The prioritization of projects was also left sales divisions and related local subsidiaries, and projects are advanced jointly. to the discretion of the sales divisions. Decisions to recommend projects are made under the leadership of the regional executive officer based on a Groupwide perspective. “Lead Sprints” System One of the key measures of the Regional Strategy initiated by are in line with management policies, even in a rapidly chang- Rolling Plan 2021, the “lead sprints” system began operating ing business environment. as a forum for accelerating discussions on the direction of In the first half of fiscal 2022, the executive officers, chief potential new projects. Separated from the existing bottom-up executive representatives, and chief country representatives decision-making process that begins from the Head Office in charge of North America, Europe and Africa, and Asia business divisions, the “lead sprints” system allows the senior discussed 40 potential target projects that were considered management team to monitor projects soon after they have promising by the officers and representatives in charge of begun deliberations and check the direction of initiatives. Our each region from a Companywide perspective. The CEO and aim is to enable regional executives—namely, regional execu- other members of the senior management team then joined tive officers / chief executive representatives and chief country representatives—to unerringly secure promising projects that the discussions and narrowed down the projects, selecting a list of 10 projects on which resource investment will focus. 20 21 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Rolling Plan 2022 Enhancement of Organizational Strength, Work-Style Reforms, and Safety Digital Transformation (DX) Enhancement of Organizational Strength: Launch of a Human Resource Plan DX Vision Workshop Rolling Plan 2022 calls on MOL to establish a new human Resources Division. This newly established division plans In the second half of fiscal 2022, we plan to announce the MOL of DX. Based on the new vision, the Group will step up the resource plan. As one of the pillars of the Company’s next human resource policies for the worldwide recruitment of DX Vision, which will establish a framework for our long-term pace of existing DX initiatives. management plan, the new human resource plan will indicate sea-based employees, who fulfill a fundamental role in the DX strategy. To lay the foundations for this vision, in June 2022 the basic strategies for measures aimed at strengthening the Group’s businesses by ensuring safe operation. Group’s human resource base from a medium- to long-term With a view to clarifying the wide range of needs in rela- perspective. tion to human resource policy and formulating a new human We have already taken some human resource measures. resource plan, the Chief Human Resource Officer—a position In fiscal 2021, we reassigned 66 personnel to business fields that was created in April 2022—has been holding discussions such as the low-carbon and decarbonization fields, which are with domestic Group companies and the Head Office sales priority investment targets. Also, we increased the hiring divisions. Going forward, we will incorporate into the human of technical personnel and other experienced personnel, resource plan the appointment and promotion of personnel in we held a two-day workshop attended by 40 participants, including Executive Committee members up to the rank of CEO, and selected members from each division, the DX Co-Creation Unit, and external partners. We began by dis- cussing the MOL Group’s long-term target profile based on the future vision of the Company and the industry. Backcasting from this profile, we then determined what is required of DX and prepared a draft of the MOL DX Vision recruiting 24 personnel in fiscal 2021. accordance with the principle of the right person for the right accordingly. After conducting additional in-depth discussions A workshop tasked with preparing the MOL DX Vision As for fiscal 2022, we are hiring more personnel to job, including employees working at Group companies and in manage proactive investment initiatives. In particular, we have overseas businesses. Other focuses of the plan will be the revised the frequency of our mid-career hiring, and began strengthening of support for career development so that recruiting experienced personnel year-round from fiscal 2022. employees can fully realize their potential and the provision In the April 2022 reassignment of senior management of work-style options that cater to employees’ diverse needs. team members, three non-Head Office personnel were By increasing its appeal to talented personnel and appointed as division general managers. One of these general increasing their engagement, the Group will achieve enhance- managers is a non-Japanese employee from a MOL Group ment of organizational strength. company who has been appointed to head the Global Maritime Work-Style Reform For details on work-style reform initiatives, please see “Work-Style Reforms Maximizing Job Satisfaction, Employee-Friendliness, and Group Performance” (→page 51). that involve a wide range of employees, we will formulate a final version of the vision, which will guide the advancement DX of Business Strategies Cater to customer needs by upgrading the data management of initiatives that are realizing the Portfolio, Environmental, and Regional strategies DX of Work Styles Consolidate and make freely available information dispersed throughout the Group and further standardize and automate operations to improve productivity DX of Organizations Further develop and deploy DX talent Improve service quality and cost competitiveness through the consolidation of organizations by function Safety Corporate Governance For details on safety initiatives, please see “Safety Levels” (→pages 43 to 44) and “Initiatives in Partnership with Chartered Vessel Owners” (→page 77). Basic Strategies and Organizational Changes Specific Initiatives Fiscal 2021 Achievements • Established and promoted MOL CHARTS • Established a diverse new management team* and created Group executive officer positions to strengthen Group management • Commercialized three projects that were proposed using the MOL Group Employee Proposal System • Continued in-house activities led by the WAKASHIO Accident Preventive Measure Task Force Fiscal 2022 Strategy • Continue work-style reforms (promote telecommuting while preparing plans for office renovations based on a reevaluation of office work) • Add numerical targets to realize further diversity in the organization • Revise the entire Group’s medium- to long-term target profile as an organization and based on this establish a new human resource plan • Begin preparing a crew member training plan in anticipation of more vessels managed or assigned crew members by the Group • Conduct a Groupwide reform of initiatives for chartered vessel shipowners * Appointed one non-Japanese executive officer and one non-Japanese general manager and increased the number of female general managers (including an associate executive officer) at the Head Office from one to three In conjunction with the initiatives focused on the Sustainability Issue of “Governance and Compliance to Support Businesses,” the MOL Group will continue tackling the enhancement of governance as a priority management task (→pages 58 to 77). Basic Strategies and Organizational Changes Specific Initiatives Fiscal 2021 Achievements • Established and convened four meetings of the Corporate Governance Council • Revised the executive director remuneration system • Established the Crisis Control Headquarters to implement crisis countermeasures • Submitted a report pursuant to Japan’s revised Corporate Governance Code • Implemented tender offers to resolve the issue of parent–subsidiary listings Fiscal 2022 Strategy • Revise our Corporate Governance Policy • Review the Groupwide risk management frame- work and establish a system that responds to increasing country risks more appropriately • Continue risk mapping • Introduce and utilize a risk assessment system 22 23 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information A Message from the CFO We are committed to improving both our financial position and making the necessary investments for environmental initiatives and growth. Hisashi Umemura Managing Executive Officer Chief Financial Officer (CFO) Fiscal 2021 Review In fiscal 2021, ended March 31, 2022, MOL broke its net income Fiscal 2021 was also a year in which we used operating record for the first time since fiscal 2007 by posting profit cash flows of more than ¥300.0 billion, which included divi- attributable to owners of parent of ¥708.8 billion. This perfor- dends from the containership operating company Ocean mance was supported by high containership freight rates, a Network Express Pte. Ltd. (ONE), to implement a range of good dry bulker market particularly on small- and medium- forward-looking investments in line with the strategies of our sized vessels, and a recovery in car carrier cargo volume. management plan. We initiated tender offers for DAIBIRU These market conditions were brought about the global dis- CORPORATION and Utoc Corporation with the aim of making ruption to supply chains triggered by the COVID-19 pandemic. them wholly owned subsidiaries and invested in LNG carriers While we are not happy about this situation, in fiscal 2021 we for which new contracts had been concluded. With respect to achieved the financial targets that we had been pursuing since shareholder returns, we were able to reward shareholders for the introduction of the Rolling Plan in fiscal 2017. These their long-standing support by paying a dividend of ¥1,200.00 achievements included significant improvement in the equity per share (before the stock split). ratio from 27.6% at the end of fiscal 2020 to 47.4%; the regain- ing of an “A” crediting rating from R&I; and a net gearing ratio below 1.0 time. Cash Flows (¥ billion) 400 320 240 160 80 0 -80 -160 -240 98.3 -2.4 -100.8 2017 55.2 -143.0 -198.3* 2018 100.7 98.8 -6.5 -107.2 44.2 -54.6 307.6 200.1 -107.4 2019 2020 2021 (FY) Cash flows from operating activities Cash flows from investing activities Free cash flow * Includes investment in establishment of ONE 24 Investment Policy and Cash Allocation from Fiscal 2022 Onward With the dramatic improvement in our financial position, as countries and regions, we must ensure that our financial base CFO I am very much aware of the significant responsibility will hold firm even if certain risk events actualize. I bear in regard to the effective utilization of accumulated Conducting business management with an emphasis on shareholders’ equity to further enhance corporate value. financial discipline, for the time being we will set an upper Themed on “Integrating the MOL Group’s strengths to achieve limit of 1.0 time for the net gearing ratio, a level that was once growth globally,” Rolling Plan 2022 calls for corporate value our target. In addition, vessels chartered from shipowners, enhancement through the investment of ¥1.9 trillion between whose main business is the ownership of vessels, are integral fiscal 2022 and fiscal 2027 in order to increase future corpo- to marine transport. For this reason, roughly 500 of the rate value. Through these investments, we will work to facili- approximately 800 vessels in our fleet are chartered vessels. tate the stable achievement of ordinary profit of ¥200.0 billion Pursuant with Japan’s accounting standards, most chartered and return on equity (ROE) of 10.0%, which is above our per- vessels are not recognized in our balance sheet. Nonetheless, ceived cost of capital. Moreover, the investments will curb the with the aim of further increasing transparency from the volatility that characterizes marine transport, which stems viewpoint of investors, we will take medium-term measures from exposure to cyclical market conditions. to improve disclosure methods and other matters related to Specifically, we will invest in three main areas: the intro- such chartered vessels. duction of vessels that use alternative fuels; the expansion As for investment criteria, we employ a system that uses of low- and zero-emission energy businesses; and the expan- past market performance as the basis for forecasting the sion of business range and assets including M&As. In all of maximum potential loss for each project. With respect to an these areas, we are advancing many projects that are either investment amount, cost of equity is applied to the maximum industry leading or one step beyond the existing business potential loss amount, and cost of debt is applied to the domain of our full-line marine transport. As they have been remaining amount (→page 27). The system prevents the selected with an eye on leveraging accumulated expertise and Company as a whole from taking on too much risk while experience as well as relationships with major partners, these ensuring each investment project has a certain spread over projects will provide significant opportunities for us to elevate the assumed amounts of equity and debt. Further, even with corporate value. On the other hand, given that such projects respect to chartered vessels for which the balance sheet is are in fields characterized by high levels of difficulty and not actually used, the system employs the same approach to uncertainty compared with our well-established businesses in apply an appropriate cost of capital to investments. By accu- conventional marine transport and that we are tackling more mulating assets in accordance with this system, we ensure projects in India, Southeast Asia, and other emerging returns commensurate with the cost of capital. Total Investment Environmental investment Of which, introduction of vessels that use alternative fuels Of which, expansion of low- and zero-emission energy businesses Business expansion, asset expansion, and M&As Asset Disposal and Liquidation Cash Flows from Investing Activities Cash Flows from Operating Activities Free Cash Flow Financial Target Net Gearing Ratio (at end of respective periods) FY2022–FY2024 Forecast 1,000 530 335 195 470 -120 880 820 -60 0.8 FY2025–FY2027 Forecast FY2022–FY2027 Cumulative Total (¥ billion) 930 — — — — -180 750 750 0 <1.0 1,930 — — — — -300 1,630 1,570 -60 — (Times) 25 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information A Message from the CFO Approach to Shareholder Returns As one of the world’s leading providers of marine transport the overall direction of business management has been estab- and social infrastructure, we give first priority to the creation lished, we aim to spend fiscal 2022 preparing a new manage- of additional economic and social value through the active ment plan that looks ahead to 2035. To this end, we will reinvestment of internal reserves. On the other hand, reward- continue heightening the accuracy of our analysis of the long- ing shareholders directly through dividends and other means term business environment in light of decarbonization trends is also important. Our profit plan issued at the beginning of and the increasingly complex current international situation. fiscal 2022 includes a dividend forecast based on a dividend Based on our conclusions, we will conduct a more-detailed payout ratio of 25.0%. While some investors have expressed examination of individual investment projects and the outlook appreciation of a raised dividend payout ratio when profits for capital requirements. Therefore, we would be extremely are expected to remain at fiscal 2021’s high level, others have grateful for a little more time to discuss shareholder returns expressed dissatisfaction because, despite an improved finan- so that we can present a cohesive policy in this regard. cial position, the Company has yet to reach the average divi- In closing, I would like to ask our shareholders, investors, dend payout ratio of the Tokyo Stock Exchange’s Prime and financial institutions for their continued support. Market. In our view, we have entered a new phase. Although Approach to Cross-Shareholdings MOL holds shares in other companies for the purpose of maintaining and strengthening relationships with companies with which it has close cooperative business relationships and for the purpose of enhancing the growth and corporate value of the Company over the medium to long term. Once a year, a detailed examination of each listed stock held by the Company is conducted with respect to the appropriateness of the reason for holding the shares and profitability in light of the cost of capital. If an adequate reason for holding the shares cannot be identified, the Company’s policy is to gradually reduce the holdings of said shares. The fiscal 2022 examination of 47 stocks, equivalent to approximately ¥56.0 billion, which were owned by the Company as of March 31, 2022, determined that a portion equivalent to approximately ¥8.0 bil- lion was to be subject to reduction. The Company will proceed with the disposal of the shares while ascertaining the effect on the market and giving due consideration to relationships with other parties. Cross-Shareholdings: Number and as a Percentage of Net Assets (Stocks) Disposal of Cross-Shareholdings by Fiscal Year (%) (¥ million) 190 (67) 15.1 185 (65) 14.3 173 (57) 8.0 166 (51) 8.8 200 150 100 50 0 20 15 10 5 0 163 (47) 4.7 16,000 12,000 8,000 4,000 0 2017 2018 2019 2020 2021 (FY) Number of stocks held (number of listed stocks in parentheses) (left) Cross-shareholdings as percentage of net assets (right) Note: Deemed shareholdings not included from fiscal 2019 onward 11,767 7,016 5,210 670 2017 936 2018 2019 2020 2021 (FY) 26 Risk Management for Business Investments In fiscal 2014, we introduced a management approach that we now call Asset Risk Control but which until recently we referred to as Total Risk Control. Based on this approach, we have avoided excessive investment while accumulating invest- ment projects that promise to generate returns commensurate with the cost of capital. 1 Framework of Asset Risk Control Asset Risk Control is a marine transport industry adapta- every six months, and the results are compared with tion of the risk management methods widely used by shareholders’ equity, reported to the Board of Directors, financial institutions. Scenarios that envision stresses (low and audited. When Asset Risk Control was first introduced, freight rates, weak vessel sales & purchase market) are the framework was simple and mainly covered marine applied to the entire fleet at the same time and run for a transport market risk and vessel sales market risk. certain length of time to calculate maximum potential Subsequent revisions have broadened the scope of the losses. The risks are managed so that the total loss is not framework to include country risk, customer credit risk, excessive compared with shareholders’ equity. Basically, and Group company business risk, for a more appropriate this identifies the total exposure to risk taken based on the measurement of risk exposure. standard criteria that all debt can be repaid if all owned vessels were to be sold. Under this framework, a Capesize bulker will be assessed as having low risk exposure if it has a long-term contract or a low book value (if owned) or charter rate (if chartered). Conversely, the same Capesize bulker will be assessed as having high risk exposure if it is subject to a short-term market or a high book value (if owned) or charter rate (if chartered). Additionally, we take into account the dispersion effect where the freight and charter market for each kind of ship fluctuate at different times. Companywide risk exposure is calculated once Asset Risk Control Consolidated balance sheet Debt Assets Net assets Deemed assets in vessels, including chartered vessels Convert to total risk amount (= maximum potential loss) Restraining the risk amount so it does not become excessive in comparison with shareholders’ equity 2 Asset Risk Control and Consistent Standards for New Investment Decisions When Asset Risk Control was first introduced, the lack of approach, investment projects that consume a large amount direct linkage between the system and the profitability of Companywide investment leeway (remaining amount of benchmarks that the Company uses to make new invest- risks that can be added) naturally face high hurdle rates, ment decisions was an issue. Through subsequent revi- and projects that require fewer resources face lower sions, the framework has been improved so that the funding hurdles to approval. The framework ultimately leads to costs in profitability assessments vary depending on the an overall portfolio that balances risks against returns. size of risk exposure, which is calculated based on the Further, the framework helps secure a certain level of ROE current concepts of the Asset Risk Control system. In other by only adopting individual investment projects with a cer- words, internal evaluations of ship investment projects now tain spread over the specific weighted average cost of capi- take into consideration the maximum potential loss in line tal based on a deemed ratio of equity cost to debt cost. In with the amount of risk associated with the ship and apply addition, as the rapid accumulation of shareholders’ equity equity cost for this portion, while debt cost is applied in the accompanying a favorable fiscal 2021 performance has risk-free portion. In this way, the higher the risk associated resulted in additional scope for the assumption of risk, the with a ship, the higher the funding cost associated with it, Company will aggressively pursue investment projects that and the investment is not approved unless profitability is contribute to growth. sufficiently high to compensate for this risk. Based on this Internal Funding Cost Based on Size of Risk High-Risk Ships (no long-term contract, high ship building costs, etc.) Low-Risk Ships (with long-term contract, low ship building costs, etc.) Amount for which cost of debt is applied (risk-free portion) Amount for which cost of equity is applied Amount for which cost of debt is applied (risk-free portion) Amount for which cost of equity is applied Investment amount (deemed amount used if chartered vessel) Convert to risk exposure (= maximum potential loss) Breakdown of invested amount by types of funding costs applied for profit assessment Investment amount (deemed amount used if chartered vessel) Convert to risk exposure (= maximum potential loss) Breakdown of invested amount by types of funding costs applied for profit assessment V a l u e C r e a t i o n S t o r y i S u s t a n a b i l i t y S t r a t e g y C o r p o r a t e G o v e r n a n c e i F n a n c i a l a n d C o r p o r a t e I n f o r m a t i o n 27 MITSUI O.S.K. LINES MOL REPORT 2022Rolling Plan (Management Plan) Business Overview Business Headquarters Breakdown Dry Bulk Business ∙ Dry Bulk Business (Iron ore and coal carriers, Small and medium-sized bulkers, Page 30 Wood chip carriers, Multipurpose cargo ships) Energy Business Page 32 ∙ Tanker Business (Crude oil tankers, ∙ LNG Carrier Business Product tankers, Chemical tankers, ∙ Offshore Businesses Methanol tankers, Ammonia tankers, ∙ Steaming Coal Carrier Business LPG tankers) ∙ Carbon Business Product Transport & Real Property Business ∙ Car Carrier Business ∙ Ferries and Coastal RoRo Ship Business Page 34 ∙ Containership Business ∙ Terminal Business ∙ Logistics Business ∙ Real Property Business Associated Businesses ∙ Cruise Ship Business ∙ Trading Business ∙ Tugboat Business etc. Others and Head Office Wave power generation business, Tidal power generation business) ∙ Clean Energy Business (Ocean thermal energy conversion business, Breakdown of Fiscal 2021 Revenues by Business Headquarters*1 Associated Businesses and Others 4.8% etc. Dry Bulk Business 28.4% Breakdown of Fiscal 2021 Operating Profit by Business Headquarters*1 Dry Bulk Business 5.9% ¥1,269.3 billion Product Transport & Real Property Business 43.6% Energy Business 23.2% Product Transport & Real Property Business 93.2% *1 Figures have been converted to reflect business headquarters as of fiscal 2022. ¥721.7 billion Energy Business 2.7% Fleet Sizes of the Major Shipping Companies*2 (Numbers of vessels, all vessel types) (Number of vessels) 1,500 1,200 900 600 300 0 797 China COSCO NYK MOL APM- Maersk Oldendorff MSC CMA-CGM BW “K” Line Hapag-Lloyd Navios Sovcomflot *2 Prepared by MOL based on information disclosed by respective companies Our Business Fields Marine Transport Business Offshore Businesses Logistics Business Terminal Business Real Property Business Offshore Wind Power Generation-Related Businesses Clean Energy Businesses V a l u e C r e a t i o n S t o r y C o r p o r a t e G o v e r n a n c e Comprising dry bulkers, tankers, LNG carriers, car carriers, containerships, and other types of vessels, MOL’s fleet is one of the largest in the world. We provide stable and high-quality marine transport services worldwide for resources, intermediate goods, finished products, and many other types of cargo by utilizing extensive experience and expertise acquired over more than 130 years. Leveraging experience garnered in the energy transport field, we are concentrating investment on not only conventional marine transport but also offshore businesses with strong growth potential, including FPSOs, FSRUs, and Powerships. MOL will extend its business fields and play additional roles in energy value chains and help meet the world’s demand for energy. Our network of 229 bases in 27 countries and regions around the world provides a varied menu of services catering to many different logistics needs. We offer marine, air, and land transport that includes customs clearance, inspection, and warehouse man- agement as well consolidated transport and heavy goods transport. In Japan, MOL has a comprehensive terminal business. As well as operating container terminals at the country’s five major ports—Tokyo, Yokohama, Nagoya, Osaka, and Kobe—we provide stevedore services for car carriers and other cargo vessels nation- wide. Overseas, we also operate seven container terminals in the United States, Vietnam, Thailand, and the Netherlands. With DAIBIRU CORPORATION at its core, this business manages numerous premium office buildings, mainly in Tokyo and Osaka. In addition, by combining expertise accu- mulated domestically with the Group’s resources, the business is developing projects overseas and has launched forays into the markets of Vietnam and Australia. As its characteristics and market cycles differ from those of marine transport business, the business curbs volatility in the Group’s performance and stabilizes earnings. We are fostering and moving forward with these projects to create future earnings mainstays. The Group will draw on the expertise and resources it has acquired during many years of operating marine transport and offshore businesses to not only establish an offshore wind power generation business but also develop a wide range of upstream and downstream peripheral businesses engaged in such areas as the transport of equipment and material, installation, maintenance, and power-cable laying. The Group will contribute to the reduction of society’s overall GHG emissions by devel- oping mainly ocean-related power generation projects, such as wave power, tidal power, and ocean thermal energy conversion (OTEC) generation. Moreover, we are developing and conserving mangrove forests to create negative emission sources. (→pages 38 and 45) 28 MITSUI O.S.K. LINES MOL REPORT 2022 29 Rolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Overview of Operations by Business Headquarters Dry Bulk Business Fiscal 2021 Achievements • Increased profits by capturing shipping market due to strong demand in major economies as they recovered from the effect of the COVID-19 pandemic, particularly in China • Worked with customers to advance biomass transport and other environment-related businesses and to advance initiatives for the decarbonization and carbon reduction of dry bulkers, which included the introduction of LNG fuel, the Wind Challenger hard sail system, and Rotor Sail • Established capabilities for providing customers with one-stop solutions for a wide variety of vessel types and transport through the launch of MOL Drybulk Ltd. in April 2021 Position and Main Differentiating Factors ∙ Across a broad customer base, the capture of new transport demand resulting from changes in industrial structures accompanying decarbonization ∙ Mobilization of comprehensive expertise and experience to consider, offer, and implement transport solutions encompassing commercial, operational, technical, and legal requirements ∙ Proactive business development in growth regions and fields Market Environment Analysis ∙ Growing demand for transport modes that help reduce GHG emissions ∙ Steady cargo movements in Asia, centered on China and Southeast Asia in the east and extending to India in the west; decarbonization and electrifica- tion (biomass and nonferrous raw materials); infrastructure (steel products and cement); food; and raw materials for paper manufacturing ∙ As a result of the disruption in marine logistics, increasing preference for ship- ping companies that have the ability to stably supply multipurpose cargo ships ∙ Increasing quality requirements for vessels among major resource-related companies based outside Japan ∙ Accelerated inflation, particularly in energy and food prices, the impact of monetary tightening on the real economy, and a resulting decline in cargo movements ∙ Decrease in demand for coal and potential impairment of the value of heavy oil-fueled vessels accompanying a faster-than-expected energy transition s e i t i n u t r o p p O s k s i R Business Strategies ∙ Position MOL Drybulk at the center of a drive to capture a wide variety of trans- port demand ∙ Expand overseas customer base, particularly in Asia ∙ Advance environmental strategies (introduce LNG-fueled vessels and vessels equipped with the Wind Challenger hard sail system) ∙ Pursue customer convenience through digitalization ∙ Cater to diverse transport needs by leveraging comprehensive transport management capabilities ∙ Rigorously improve vessel quality in line with customer requirements Highlights Fleet Breakdown by Vessel Type Multipurpose cargo ships 53 vessels 283 vessels (As of March 31, 2022) Wood chip carriers 42 vessels Revenues and Ordinary Profit (Loss) (¥ billion) (¥ billion) 360.7 43.2 450 300 277.1 12.0 150 0 222.0 –4.2 2019 2020 2021 Revenues (left) Ordinary profit (loss) (right) 60 40 20 0 –20 (FY) Capesize bulkers 79 vessels Small- and medium-sized bulkers 109 vessels Panamax 33 vessels Handymax 47 vessels Handysize 29 vessels MANAGEMENT MESSAGE Expanding Businesses by Capitalizing on the Strengths of MOL’s Dry Bulk Business MOL’s dry bulk business should utilize its three overall In India, where strong economic growth is expected in the coming years, and in China, where a policy shift to increasing imports of raw materials is expected, we will acquire business strengths. The first strength is a broad customer base, while by making full use of our existing local expertise and, on the second is comprehensive transport management capabili- occasion, by forming partnerships with local companies. ties. Our comprehensive experience in meeting customer Although established only a year ago, MOL Drybulk needs has resulted in the development of know-how related has already become an organization with powerful sales to marine transport contracts, operational and technical capabilities that is well suited to capturing growth in Asia. expertise, knowledge of fleet expansion strategy, and insight We established the company to create a single point of contact that extends from macroeconomic and financial conditions capable of dealing with any type of business consultation from through to the situations of the particular industries to which customers. Going forward, the company will improve its ser- customers belong. Changes in the customers’ business envi- vices even further. ronments will lead to the diversification of demand for marine transport, but the Company will further strengthen its ability to propose solutions that meet customer needs by leveraging Advancing Initiatives to Improve Vessel Quality As I mentioned, major overseas customers want extremely accumulated comprehensive transport management capabili- high levels of vessel and transport quality. Conversely, the ties. The third strength is our fleet portfolio. We will make the extent to which marine transport providers can meet these most of the strength that stems from having a diverse range expectations has become a differentiating factor. Focusing on of vessel types, which is the result of the strategic develop- both tangible and intangible factors and aiming to heighten ment of the fleet. quality of vessels—regardless of whether they are owned or On the other hand, we will carry out fleet development in chartered—we will embark upon a Groupwide effort that anticipation of transport demand. Until the early 2010s, we includes collaboration with shipowner partners. expanded the fleet based on supply-side conditions rather than specific cargo demand. In other words, we assumed that vessel supply–demand would tighten due to the rise of China’s econ- omy and the limitations on shipbuilding capacity. By focusing more on the specific and potential demand of customers going forward, we will develop the fleet in line with predictable trends. Meeting Customers’ Decarbonization Needs Going forward, customers are likely to have an even greater need for decarbonized marine transport. We are catering to this demand in a wide range of ways. For example, we are advancing measures for the introduction of large LNG-fueled vessels. Also, we are installing wind propulsion assistance systems on a variety of vessel types, such as the Wind Challenger hard sail system, Rotor Sail, and Delta Sails that are attached to cargo handling cranes. In addition, we are pursuing the introduction of biofuel and e-methanol fuel, which is not derived from fossil fuels. We will actively propose effective combinations of these measures to our customers. Capturing Growth in Asia Transport demand related to food—needed by a growing population—infrastructure, decarbonization, and electrifica- tion will continue to rise, especially in Asia. In addition to an Asia-centered regional strategy, the Headquarters of Dry Bulk Business’s key strategies will be a trade strategy that effi- ciently combines this diverse demand and a partner strategy that entails working with customers and other partners who have strengths in their respective fields and regions. We will cater to a wide range of customer needs based on our comprehensive transport management capabilities. Toshinobu Shinoda Senior Managing Executive Officer Director General of Headquarters of Dry Bulk Business 30 31 31 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Overview of Operations by Business Headquarters Energy Business Fiscal 2021 Achievements • Accumulated new long-term contracts in the LNG carrier business, which is expected to contribute to profit stability going forward • Expanded the LPG carrier business, mainly through transport to India • Tackled initiatives in new areas, such as offshore wind power generation and CCUS Position and Main Differentiating Factors ∙ Broad business foundations that include the world’s largest LNG carrier fleet as well as the development of related businesses in the value chain that includes FSRUs and Powerships ∙ Achievement of successes in new fields, such as offshore wind power generation, CCUS, and hydrogen, by utilizing business development and execution capabilities cultivated during a history of taking on many challenging projects ∙ World-leading levels of safe operation management, which support existing businesses, and frontline capabilities that make it possible Market Environment Analysis cargoes resulting from energy transformation triggered by decarbonization s ∙ Emergence of new business opportunities, such as an increase in new e i t i n u t r o p p O ∙ Emergence of new resource trade due to geopolitical factors s ∙ Increase in geopolitical credit risk and the formation of economic blocs k s i R ∙ Possibility of an end to the mass consumption of energy and a contraction in resource transport over the long term Business Strategies ∙ Capture demand for the transport of LNG, which is becoming increasingly important as a transition energy ∙ Earn premiums through initiatives in areas beyond conventional transport, such as FPSOs, FSRUs, Powerships, and bunkering vessels ∙ Expand new businesses and decarbonization businesses, including the transport of clean ammonia, the transport of liquefied CO2, and wind power generation-related businesses ∙ Strengthen our presence and business foundations in regions where energy demand is expected to grow, such as India and China Highlights Coastal ships (excluding coastal RoRo ships) 30 vessels Fleet Breakdown by Vessel Type SEP vessels 5 vessels Steaming coal carriers 36 vessels Offshore businesses 15 vessels FPSO 7 vessels LNG-to-Powerships 1 vessel FSUs and FSRUs 4 vessels Subsea support vessels 3 vessels 356 vessels (As of March 31, 2022) LNG bunkering vessels 2 vessels Tankers 171 vessels Crude oil tankers 37 vessels Product tankers 14 vessels Chemical tankers 83 vessels Methanol tankers 22 vessels Ammonia tankers 2 vessels LPG tankers 13 vessels LNG carriers*1 97 vessels *1 Including ethane carriers Revenues*2 and Ordinary Profit (¥ billion) (¥ billion) 400 300 289.3 25.4 29.7 278.8 294.0 200 100 0 19.8 2019 2020 2021 40 30 20 10 0 (FY) Revenues (left) Ordinary profit (right) *2 Large parts of LNG carriers and offshore businesses are managed through equity-method affiliates, and the revenues of these parts have not been included in the consolidated revenues above. MANAGEMENT MESSAGE Building New Businesses by Capitalizing on Experience Acquired while Tackling Diverse Challenges over Many Years A distinctive feature of the Headquarters of Energy Business is New Organization In April 2022, the Headquarters of Energy Business abolished the traditional separation of operations into departments and introduced a new system based on units. To enable and its high percentage of medium- to long-term contracts. In fiscal increase the combinations of existing expertise that are 2021, we acquired numerous medium- to long-term contracts needed when creating new businesses, we are eliminating mainly related to LNG, demand for which is growing due to its organizational boundaries and realizing an agile and flexible role as a transition energy. For example, we secured contracts organization that draws on diverse personnel to form the in relation to six LNG carriers for China National Offshore Oil teams best suited to respective projects. Of course, revamping Corporation (CNOOC). These contracts promise to contribute an organization does not change its nature overnight. With stably to profits for more than 10 years after the commence- this in mind, I have put myself at the forefront of initiatives to ment of the project. Also, in India, which is one of our priority remove organizational barriers. regions, we established local subsidiary Sakura Energy Transport Private Limited in October 2021. With a focus on the LPG carrier business, we will expand the business by venturing Businesses in Russia Since the outbreak of war, we have expressed our concern into fields to which only an Indian company can gain access, over the Russia–Ukraine situation and our hope that the such as the challenging field of coastal river transport. The efforts underway among all parties concerned for a peaceful Headquarters of Energy Business has been identified as the solution will come to a conclusion as quickly as possible. Our largest growth segment in Rolling Plan 2022. By thoroughly Russia-related businesses, such as the Sakhalin II Project managing the construction of new vessels, training crew mem- and the Yamal LNG Project, have been affected by higher war bers, and ship management after delivery, we will first steadily premiums and difficulties in procuring vessel components and increase earnings through the contracts we have acquired. assigning Russian crew members. However, the projects in Meanwhile, considering the external environment and the which we are engaged and our charterers (customers) are not needs of society and customers from a medium- to long-term subject to sanctions. At this juncture, we believe our responsi- point of view, the era of the mass consumption and transport bility is to continue fulfilling contracts and provide transport of energy is likely to change as a result of trends toward services to those in Japan and other countries who depend on decarbonization and carbon reduction. As well as steadily energy for their day-to-day lives. As prolongation of the war or increasing earnings in the new business fields that are a widening of the scope of sanctions could change the situa- currently emerging, such as offshore wind power generation, tion, we will pay close attention to developments. the transport of liquefied CO2, and the transport of clean ammonia, we believe that the potential business opportunities beyond these business fields are countless. In the LNG field, we are already expanding businesses by entering downstream areas of the value chain, including FSRU and Powership busi- nesses, both of which grew out of the LNG carrier business. Similarly, in the field of clean energy we aim to participate in the upstream and downstream areas of value chains and supply chains. Unlike simple marine transport, these businesses require expertise in realizing projects through research on the laws, environmental regulations, and tax systems of each country. Nonetheless, taking on bold initia- tives in fields that others have avoided due to inherent difficulties is part of the history and DNA of the Headquarters of Energy Business. Therefore, we will be able to build business models that are unique to us. We will capture new trends in energy to realize long-term growth. Kenta Matsuzaka Director, Senior Managing Executive Officer Director General of Headquarters of Energy Business 32 33 33 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Overview of Operations by Business Headquarters Product Transport & Real Property Business Fiscal 2021 Achievements • Recorded a significant rise in profits from the containership business due to favorable market driven by growth in transport demand accompanying increased global consumption of goods • Saw a rapid improvement in the business performance of the car carrier business thanks to a recovery in demand for the production and marine transport of automobiles, which had been lackluster due to the COVID-19 pandemic • Accumulated robust profits in the terminal & logistics and real property businesses Position and Main Differentiating Factors • Ongoing investment in vessels with excellent environmental performance • Containership business portfolio centered on highly profitable trans-Pacific routes • Pursuit of synergy benefits based on a diverse group of businesses that includes containerships, terminals, logistics, ferries, car carriers, and real estate Market Environment Analysis s e i t i n u t r o p p O s k s i R • Increase in product transport demand accompanying a growing world population • Normalization of product manufacturing due to recovery from the COVID-19 pandemic, as typified by automobiles • Positive effect on the global economy and product demand as a result of the enhanced purchasing power of resource-rich countries • Decline in cargo movements due to prolongation of the Russia–Ukraine situation • Global economic slowdown caused by inflation and soaring resource prices • Formation of economic blocs as a result of an increase in the local manufac- turing of products for local consumption Business Strategies • Accelerate measures to reduce the environmental impact of transport, such as the steady replacement of the existing fleet with LNG-fueled vessels • Adjust ship allocation and rebuild ser- vices to cater to changes in the car seaborne trade • Capture the logistics demand of the customers of other business headquarters • Utilize DX to enhance customer services and operational efficiency Highlights Fleet Breakdown by Vessel Type Ferries and coastal RoRo ships 15 vessels Car carriers 93 vessels 155 vessels (As of March 31, 2022) Containerships*1 47 vessels *1 All containerships are chartered to and operated by ONE. Revenues*2*3 and Ordinary Profit*3 (¥ billion) (¥ billion) 800 600 400 200 0 515.1 434.7 672.9 554.2 113.9 17.3 2019 2020 2021 (FY) Revenues Ordinary profit *2 ONE, which is responsible for the management of the containership business, is an equity-method affiliate. Therefore, the revenues of ONE have not been included above. *3 Figures have been converted to reflect business headquarters as of fiscal 2022. MANAGEMENT MESSAGE Supported by Market Conditions and a Recovery in Cargo Movements, Posted Unprecedented Profits in Fiscal 2021, Mainly in the Containership Business Throughout fiscal 2021, the strong demand in the container- To steadily grow businesses despite such potential adversity, we view “networks” as a key word. Although the Headquarters of Product Transport & Real Property Business has a diverse business portfolio encompassing container- ship market of the previous fiscal year continued. As a result, ships, terminal & logistics, ferries, car carriers, and real equity in earnings of affiliates from Ocean Network Express estate, the realization of synergies is, at first glance, often Pte. Ltd. (ONE), which operates the containership business, assumed to be difficult. However, by building broad networks, drove MOL’s profits above their previous record high, achieved each business will be able to not only expand its services but during a boom in marine transport in the mid-2000s. As for also interact with other businesses in the division and thereby fiscal 2022, due to an economic downturn caused by global gain access to customers, tap their demand, and offer them inflation and other factors, we forecast that the containership differentiated solutions and services. As for the real property market will enter an adjustment phase in the middle of the business, which was added to the business headquarters in fiscal year. fiscal 2022 as a consequence of DAIBIRU CORPORATION The car carrier business also recovered strongly. The becoming a wholly owned subsidiary of MOL, we will utilize as direct cause of this recovery was a tightening of the market foundations the customer trust and advanced capabilities in due to fleet size reductions implemented by MOL and other management and maintenance that DAIBIRU has cultivated shipping companies until fiscal 2021 and a subsequent recov- over many years while making full use of the MOL Group’s ery in transport demand. However, the base level of profits networks to identify and develop new areas for growth. For was also raised by the progress of a regional strategy in China example, we will move forward with initiatives in fields where and India, various structural reforms, and improvements in we have previously not had extensive involvement, including the efficiency of ship allocation. real estate development in emerging countries, particularly In the ferry business, although the business environment Asian countries, and logistics-related real estate. in the passenger sector remained challenging amid the To effectively utilize networks and realize the ambitious COVID-19 pandemic, demand for freight transport was resil- initiatives that I mentioned, we must encourage lively com- ient. Consequently, business results were around the break- munication within the business headquarters and enable each even point. employee to think outside the box without feeling constrained The combination of the aforementioned performances of by organizational frameworks. As director general, my mission the containership and car carrier businesses together with is to help build such a culture in the business headquarters. By leveraging the global networks of its businesses, the business headquarters will unearth new customer demand and deliver services that MOL is uniquely qualified to realize. Hirotoshi Ushioku Senior Managing Executive Officer Director General of Headquarters of Product Transport & Real Property Business solid contributions to profits from the terminal & logistics and real property businesses resulted in the Headquarters of Product Transport & Real Property Business as a whole achieving excellent business results in the fiscal year. Pursuing Synergies among Businesses by Thinking Outside the Box Looking to the future from our current position of strength, we face a range of risks and uncertainties. In the short term, potential causes for concern include a slowdown of the global economy, which has achieved a steep recovery since the easing of restrictions associated with the COVID-19 pandemic; an increase in the turmoil resulting from the Russia–Ukraine situation; a sharp depreciation of the yen; and a hike in energy prices. Factors that could have negative long-term impacts are the possibility of surplus shipping capacity due to a rush to build new vessels, higher operating costs stemming from the introduction of the European Union Emissions Trading System and other environmental regulations, concerns about the establishment of a market oligopoly as European shipping companies acquire logistics companies, lower container cargo movements accompanying a decline in demand for goods, and the formation of economic blocs as a result of an increase in the local manufacturing of products for local consumption. 34 35 35 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Special Feature Expanding Our Boundaries: Case 1 Taking on the Challenge of the Overseas Real Property Business through DAIBIRU In April 2022, MOL completed a tender offer for DAIBIRU CORPORATION, making it a wholly owned subsidiary. By further leveraging its networks and financial base, the MOL Group endeavors to strengthen the real property business—one of the segments of high priority in Rolling Plan 2022—and aims to expand this business in overseas markets with promising growth. Background photograph: The DAIBIRU-owned Saigon Tower in Ho Chi Minh City, Vietnam Hanoi Ho Chi Minh City Sydney The Story behind Our Overseas Expansion In 1923, DAIBIRU was established for the joint construction of a market, the company turned its attention to Vietnam. In addi- new office building by Osaka Shosen Kaisha (O.S.K. Line), which tion to a range of elements such as growth potential, cultural was a predecessor of MOL, and partner companies. DAIBIRU affinity with Japan, and political stability, the primary factors subsequently became the owner and manager of numerous leading to the decision to launch a business in Vietnam were prestigious office buildings, primarily in Osaka and Tokyo. MOL’s local contacts, many years of business experience in the Although its business had been stable for many years, the country, and a wealth of local insights. company began to confront a domestic market that lacked However, it was also true that there were voices of concern growth potential due to Japan’s declining population. from some DAIBIRU employees, as they had never even Against this backdrop, in the late 2000s we welcomed a thought about overseas business, leaving aside the first desti- new president from MOL who initiated expansions into over- nation being Vietnam, a developing country. Back in the days seas markets. The decision was made to ride the wave of eco- when information was rather limited, Vietnam was an nomic upswing overseas, since demand for office space closely unknown, distant country. I remember how the employee follows economic growth. At the time, China was leading eco- assigned to take charge of the new overseas business nomic growth, but as many companies had already entered this described that feeling as a strange mix of hope and anxiety. Advancing Initiatives in Ho Chi Minh City and Becoming a Successful Overseas Business In 2007, we began traveling to Vietnam to explore potential and maintenance in an integrated manner. Whereas many projects. Aiming to acquire properties by directly obtaining buildings in Vietnam deteriorate significantly soon after com- local information and developing networks, in April 2011 we pletion, the former owner of Saigon Tower, who had a strong rented a space in MOL’s Ho Chi Minh City office and set up a attachment to the building, chose to sell it to DAIBIRU largely new representative office staffed by an employee posted from due to the company’s impressive track record of maintaining Japan and a locally hired employee. I later took over the posi- and improving the quality of properties in Japan through tion and was put in charge of this fledgling overseas business. painstaking management. Thanks to the support from many different quarters, we Of course, replicating the level of management realized acquired our first overseas property, Saigon Tower, from in Japan in another country was not easy. We acquired Saigon a Hong Kong-based owner in January 2012. Tower through acquiring a local company which owned the In Japan and overseas, recent years have seen a growing building. Our relationship with this company revealed signifi- trend toward specialization in the real estate industry. It is cant differences in approaches to cleaning and security common for property owners to outsource external service between Japan and Vietnam. After weekly meetings with the providers to liaise with tenants and manage properties. The executives of the local company, we walked together through basic approach of DAIBIRU is, in contrast, to utilize its own the building from top to bottom, inspected the cleanliness resources and those of its group companies to handle devel- and condition of each area, and repeatedly communicated opment, leasing, lease management, property management, the standards that we sought. The cumulative effect of such minor measures produced positive changes. Gradually, the extremely happy to have been able to demonstrate that this management standards we were aiming for became widely business model also works overseas. understood, and the local company began to spontaneously Recently, there has not only been an increase in our suggest improvements. Today, Saigon Tower is known as one export of practices from Japan but also in the introduction of of the best office buildings in Ho Chi Minh City, maintaining best practices from overseas to domestic businesses. We are a high occupancy rate, and being principally occupied by currently in the process of introducing a new elevator man- Western tenants. agement system which has not yet been adopted in Japan to In the 10 years since the establishment of our first over- our overseas properties. Further, through contact with local seas office, we have entered the real estate markets of Hanoi tenants and businesses, the overseas business provides and Sydney and invested approximately ¥40.0 billion. What opportunities to experience firsthand and remain abreast of began with one or two people in the planning department has such global trends as environmental measures and efforts to become a department of overseas business. As well, the goal meet the United Nations (UN) Sustainable Development Goals of earning 10.0% of our operating profit overseas, which (SDGs). Going forward, we will make more use of experience initially seemed a distant prospect, is now within sight. and insights gained from the overseas business in this way to DAIBIRU acquires office buildings in prime locations and then enhance domestic businesses. devotes a great deal of time and care to enhance them. I am Developing as a MOL Group Member In the process of entering overseas markets, being a MOL the DAIBIRU brand is not yet well known in overseas markets, Group company has been a major asset. For companies in the company has been able to conduct business negotiations Japan that do not have their own networks, establishing foot- and gather information in various countries by taking advan- holds in overseas markets is extremely challenging. It requires tage of MOL’s brand name recognition and connections. The a great deal of time and effort to, for example, find and engage recent conversion into a wholly owned subsidiary of MOL will consultants to take such basic initial steps as grasping under- enable DAIBIRU to further develop overseas businesses by standing of the locality and carrying out inspection tours. In this leveraging MOL’s brand name and local networks. At the same respect, DAIBIRU has been able to use MOL offices around the time, we will benefit MOL’s businesses by providing access to world as bases for inspections and information hubs to obtain information, customers, and business partners that we have local information from resident MOL employees. Further, while acquired locally through the real property business. Evolving DAIBIRU Even Further When I joined DAIBIRU about 20 years ago, the possibility of an overseas business was not even considered. I joined DAIBIRU because I wanted to work in Tokyo or Osaka. Never for a moment did I imagine that I would be consistently engaged in an overseas business. DAIBIRU has solid business foundations in Osaka and Tokyo. Accordingly, employees tend to focus on stability, but I feel that the development of the overseas business has gradually changed this in-house cul- ture. Nowadays, some employees even join the company because they want to work overseas. Having as many employ- ees as possible gain overseas experience will make us even more robust as a real estate company. While continuing to evolve further by combining experi- ence as an office leasing company with its unique position as part of a major shipping group, DAIBIRU will also contribute by playing key roles in the MOL Group’s strategies. Hiroshi Kumada Managing Director Daibiru Australia Pty Ltd 36 37 275 George Street, Sydney, Australia (the building with a gold exterior cladding in the background on the right) MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Special Feature Expanding Our Boundaries: Case 2 Participating in the Carbon Business Since January 2022, the MOL Group has been participating in a blue carbon project that is regenerating and conserving mangrove forests in South Sumatra, Indonesia. Over a period of 30 years, this project aims to remove and store CO2 by planting mangroves on approximately 9,500 hectares of bare land and prevent the emission by conserving 14,000 hectares of existing mangrove forest, which amount to approximately 11 million tons of CO2 in total. In accordance with MOL Group Environmental Vision 2.1, we will use a range of means to reduce GHG emissions as much as possible while advancing initiatives that create negative emission sources. South Sumatra, Indonesia Find an Intersection of Social, Corporate, and Personal Priorities When studying for a master of business administration quali- Currently, we are advancing the project based on a part- fication with corporate sponsorship, I mulled over the fields nership with YL Forest Co., Ltd., which has a track record of where society’s expectations, the Company’s business, and mangrove forest conservation in Indonesia. We were intro- my own purpose intersect, and which of those fields promised duced to the company by a mangrove expert who helped us the greatest synergy benefits. I concluded that a blue carbon with environmental restoration efforts in Mauritius following project was a promising option. Taking into account the the WAKASHIO accident in 2020. Our commitment to meeting decisive importance of this decade for society in terms of social responsibilities has led to our relationship with YL climate change, MOL’s strong affinity with the ocean and the Forest, which is an asset that we value. highly public nature of the Company’s business fields, as well as my desire to help realize a society that coexists with nature, I drafted a proposal and submitted it via the corporate venturing program for suggesting new business ideas. In the process of preparing the proposal, I consulted with personnel at various levels of the Company. I found many coworkers with business acumen who understood that the proposal was not simply a corporate social responsibility initiative but rather an initiative in which social benefits and business overlap. Finding these supporters was a major driver of commercial- ization. Another source of support has been MOL’s corporate culture, which commends personnel who, when confronted with uncertainties, determine how much risk can be assumed and then move forward with courage and self-belief. An on-site inspection in Indonesia Blue Carbon Blue carbon is carbon that is absorbed and stored through the photosynthesis of mangrove forests, salt marshes, and seagrass meadows in coastal waters. Negative Emissions “Negative emissions” refers to the removal and storage of CO2 from the atmosphere and can be divided into two types. Nature-based solutions include forests, blue carbon, and other natural means to increase CO2 absorption, whereas technology-based solutions use chemical engineering technologies to remove CO2 from the atmosphere. Utilize Our Frontline Capabilities The project is tasked with restoring approximately 1,000 hect- on the ground. I believe that this commitment was a key factor ares annually over the coming 10 years. At the same time, the in YL Forest’s decision to accept us as a partner. In the long project will conduct ongoing activities to conserve existing run, I believe that our approach will differentiate us from mangrove forests. At present, we are holding in-depth meet- other companies. ings with YL Forest in preparation for tree planting. The com- In parallel with the preparation for tree planting, we are pany’s main business was originally timber importing. Since preparing to conduct a social impact assessment. With the transforming into a forest restoration and conservation busi- help of external experts, we plan to finalize overall evaluation ness in 2004, however, the company has rapidly established methods and target indicators by the end of 2022. When an impressive track record and developed various local net- measuring the value produced by mangrove forests, carbon works. Therefore, YL Forest will lead local tree-planting activ- storage is currently the most readily understandable indicator, ities. However, we will contribute not only as a sponsor but but these forests have long been a source of a wider range of also in relation to project management and negotiations with social value that includes contribution to biodiversity and certification organizations for the issuance of carbon credits, disaster prevention benefits. For the time being, we will work which is another key component of the project. together with local communities on restoration and protection Currently, companies from a range of industries are of mangroves while utilizing the economic incentives of attempting to participate in blue carbon projects. However, carbon credits. In the future, we would also like to introduce many such companies seem to be approaching projects to symbiotic aquafarming to the mangrove forests so that local receive carbon credits in return for investing funds as if they residents can enjoy tangible benefits from nature. I hope that were merely financial transactions. By contrast, as a company this project helps create a society where people coexist with with various frontline operations as well as operating bases in and voluntarily take care of mangrove forests based on a countries worldwide including marine transport businesses, renewed appreciation of their value. MOL intends to participate in the project alongside partners Remain Needed by Society Already looking beyond the blue carbon project, the Carbon Business & Project Team, to which I belong, is exploring new projects. We will draw on knowledge garnered from the project in Indonesia, such as the critical aspects of methodologies used in managing blue carbon projects as well as an under- standing of mangroves and afforestation, to accurately identify projects with a strong likelihood of succeeding. In addition, our goal is to conduct not only projects that use nature-based solutions but also projects engaged in the development of negative emission technologies that contribute directly to decarbonization through the removal and storage of CO2 from the atmosphere. We truly want to be a company that remains needed by society far into the future. To this end, we will meet our responsibility as a social infrastructure provider by moving forward with initiatives focused on decarbonization—one of the most pressing issues the world faces today—and by leading the way for the marine transport industry and for Japan’s private sector as a whole. As the MOL Group forges ahead with such initiatives, I hope our team can perform a useful role. Kazura Koda Carbon Business & Project Team Energy Business Strategy Division 38 39 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Sustainability Initiatives A Message from the Chief Environment and Sustainability Officer (CESO) Sustainability Issues Overview We have identified five Sustainability Issues (Materiality), which comprise the social issues our businesses should give priority to addressing. With the ongoing enhancement of Governance as a premise of business management, the Group will tackle the Sustainability Issues of Safety & Value and Environment while enabling reciprocal benefits among initiatives focused on Innovation and Human & Community. By advancing such initiatives, we will realize the MOL Group Vision, thereby enhancing corporate value and helping to build a sustainable society. Conceptual Diagram of Sustainability Issues Contributions to address social issues Contributions to address social issues Sustainability Issues Realize MOL Group Vision Realize MOL Group Vision Safety & Value Environment Innovation Human & Community Governance Enhancement of management foundation Safety & Value Provide added value through safe transportation and our social infrastructure business Environment Conservation for marine and global environment Human & Community Contributing to the growth and development of people and communities Innovation Innovation for development in marine technology Governance Governance and compliance to support businesses Materiality Identification Process In fiscal 2019, we initially identified Sustainability Issues (Materiality) by forming an internal team with cross-divisional Sustainability Issues Revision and MOL Sustainability Plan Formulation In fiscal 2021, we revised our Sustainability Issues to reflect membership, the Sustainability Promotion Project Team, developments in relation to climate change, human rights which analyzed the negative and positive social impacts of our issues, and other aspects of the social environment as well business activities and then categorized the impacts based on as changes in our business environment during the two their relationships to social issues. In light of this analysis and years since we had first identified Sustainability Issues. categorization, we used two axes—impact on society To accelerate initiatives focused on addressing the and impact on the MOL Group’s businesses—to condense Sustainability Issues, we established targets, KPIs, and action these social issues into five Sustainability Issues. plans for each issue and formulated the MOL Sustainability Plan in April 2022. We will steadily implement this plan, mea- sure its effectiveness, and make improvements as appropriate. Before review After review Value-Added Transport Services Human Resource Cultivation and Community Development Safety & Value Provide added value through safe transportation and our social infrastructure business Human & Community Contributing to the growth and development of people and communities • Clarify commitment to safety initiatives • Empower not only executives and employees of the MOL • Expand scope to cover not only transport but also social Group but also everyone involved in its businesses and infrastructure businesses such as offshore businesses seek coexistence with all stakeholders Purpose of the MOL Sustainability Plan The worldwide trend toward decarbonization has become clearer since the 26th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, which was held in fall 2021. In addition, society is increasingly focusing on biodiversity, human rights, and other matters as pressing issues. The MOL Group has advanced initiatives to achieve respective goals based on the Sustainability Issues (Materiality) identified in fiscal 2019, and the Group needs to accelerate these initiatives even further. Meanwhile, as CESO I have taken great pains to instill the Sustainability Issues in all employees. I realized that, as the Sustainability Issues are highly abstract, employees grasped the concepts but additional steps were needed to encourage them to take ownership of the issues, incorporate them into daily work, and change behavior. Accordingly, the recently released MOL Sustainability Plan (MSP) makes the Sustainability Issues more concrete, understandable, and easy to put into practice for employees and a range of other stakeholders. In relation to each Sustainability Issue, the plan establishes clear KPIs and action plans. We have also included such design features as the creation of icons for each issue. Guided by the MSP, we will step up the pace of efforts to address our Sustainability Issues. In an organization like ours, where employees of various nationalities work in regions worldwide, setting out a clear road map is essential. For example, in the environmental field, the fiscal 2021 announcement of MOL Group Environmental Vision 2.1 ahead of the MSP has boosted the progress of concrete initiatives. We have begun a project tasked with introducing for contracts with U.S. customers dry bulkers that incorporate two environmental technologies: Wind Challenger hard sail system and Rotor Sail. We have also decided to introduce LNG-fueled car carriers. Moreover, the Group has seen the emergence of self-starting efforts to advance environmental strategies. The personnel of our London base have launched Green Circle, an inter- departmental team that is conducting such activities as gath- ering information from universities and research institutions and exploring involvement in measures aimed at making U.K. ports carbon neutral. As for non-environmental Sustainability Issues, I hope that the KPIs and action plans established when preparing the MSP will provide reference points for employees and encourage them to make positive changes in business activities. Integration of the MSP and Business Plans to Enhance Corporate Value With our sights set on advancing the MSP in an even more effective manner, we are considering its integration with respective divisions’ business plans in the new management plan scheduled for release in fiscal 2023. We believe that these integrated plans will enable employees to better understand the connections between their jobs and the Sustainability Issues while advancing business plans vigor- ously and achieving results. Unlike sales divisions, divisions involved in corporate services, such as human resources and technology, tend to be less able to see the connection between the work at hand and society due to the nature of their operations. I will do my utmost as the CESO to persua- sively demonstrate the value of integrating the Sustainability Issues into operations, thereby instilling an understanding of our initiatives among all employees, regardless of their division. In fiscal 2021, we revised the MOL Group Corporate Mission and the MOL Group Vision, while in fiscal 2022 we have formulated the MSP. In line with new commitments that have resulted, we will improve services and create new busi- nesses while fulfilling social responsibilities. By pursuing this integrated approach to create a cycle of improvement and innovation and by communicating our efforts to society in a clear, readily understandable way, we will heighten both our brand value and corporate value. Toshiaki Tanaka Representative Director, Executive Vice President Executive Officer Chief Environment and Sustainability Officer (CESO) 40 41 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Implement strategies set forth in Rolling Plan 2022 marine technical specialists. Safety & Value Provide Added Value through Safe Transportation and Our Social Infrastructure Business MOL aims to promote sustainability and prosperity in people’s everyday lives and in industries around the world, by transporting energy, commodities, and finished products safely, reliably, and cost-effectively. The MOL Group continuously aims to expand its social infrastructure business, centered primarily on marine transport. Initiative Focus Targets KPIs Fiscal 2022 Action Plans Value through Our Core Business Safety Levels Provide sustainable value through marine transport and social infra- structure businesses Numerical Targets Achieve fiscal 2027 profit and financial targets set out in Rolling Plan 2022 Ordinary profit: ¥200.0 billion ROE: 9.0%–10.0% Net gearing ratio (times): <1.0 Rigorously ensure safe operation and eliminate accidents Numerical Targets • Achieve 4 ZEROES: — Zero serious marine incidents — Zero serious cargo damage — Zero oil pollution — Zero fatal accidents • Lost time injury frequency*1: 0.50 • Average downtime*2: 24.00 hours per ship per year • Downtime frequency rate*3: 1.00 incident per ship per year • Ordinary profit • ROE • Net gearing ratio • Transport volume (ton-mile) • Number of days with zero serious marine incidents • Number of days with zero serious cargo damage • Number of days with zero oil pollution • Number of days with zero fatal accidents • Lost time injury frequency • Average downtime • Downtime frequency rate Implement activities to heighten safety awareness — Conduct safety events such as Safety Campaign and Safety Conferences and disclose safety level indicators Strengthen ICT-enabled support of safe operation — Utilize vessel movement monitoring system and FOCUS Project initiatives and reinforce monitoring of weather and navigation risks Creation of New Added Value Create services that meet social needs • Track record of new services that cater to society’s sustainability- related needs • Number of projects commercialized through the MOL Incubation Bridge, system for employee-inspired proposals for new businesses Steadily promote existing projects and explore new service opportunities — Advance clean energy transport businesses, employ- ment agency businesses that recruit personnel outside Japan, and blue carbon businesses, etc. Continuously commercializing new businesses proposed by employees *1 The number of work-related accidents per one million hours worked; the scope of calculation includes any workplace illness or injury that prevents a worker from resum- ing normal duties or light duties on the day the illness or injury occurs, regardless of whether the illness or injury requires disembarkation. *2 The amount of downtime due to mechanical malfunctions or incidents per ship per year *3 The number of mechanical malfunctions or incidents that result in downtime per ship per year 4 ZEROES*4 Lost Time Injury Frequency*5 (Number of accidents) 6 4 2 0 5 3 2 2 1 2017 2018 2019 2020 2021 (FY) Average Downtime*5 / Downtime Frequency Rate*5 (Hours per ship per year) 発生率 (Number of incidents per ship per year) 2.50 2.00 1.50 1.00 0.50 0.00 Average among all industries in 2021 (2.09) Average in water transport industry in 2021 (0.68) MOL’s target since fiscal 2020 (≤0.50) MOL’s target from fiscal 2015 to fiscal 2019 (≤0.70) MOL’s LTIF track record 2017 2018 2019 2020 2021 (FY) 40 30 20 10 0 MOLʼs target for average downtime per ship (≤24 hours) MOLʼs target for downtime frequency rate (≤1.00) 2017 2018 2019 2020 2021 (FY) 2.00 1.50 1.00 0.50 0.00 Serious marine incidents Fatal accidents Oil pollution Serious cargo damage Source of reference values: Overview of Results of the 2021 Survey on Industrial Accidents, Ministry of Health, Labour and Welfare Average downtime (left) Downtime frequency rate (right) *4 Including chartered vessels. If it affects more than one KPI, an accident is counted as one accident under each one of them in this graph. *5 Beginning from fiscal 2021, the scope of KPI calculation for safety levels was extended from MOL-owned and managed vessels to cover all operating vessels of the MOL Group, including chartered vessels. Offshore businesses were also newly included. Value through Our Core Business For details on initiatives under Rolling Plan 2022, please see pages 12 to 23. For details on initiatives in each business headquarters, please see pages 30 to 35. Safety Levels Organizational Structure Supporting Safe Operation The Operational Safety Committee, which is a subordinate organization of the Executive Committee, conducts analysis and deliberations on and ensures the rigorous enforcement of the safe operation of all Group vessels. In addition, the Group has estab- lished the position of chief safety officer, who is delegated by the CEO to supervise strategy planning and policy implementation to make sure safety is maintained throughout the MOL Group’s businesses and provide necessary advice to the director generals of business headquarters and executive officers. The Headquarters of Safety Operations is responsible for the formulation and imple- mentation of measures related to Groupwide safe operation. In addition, within this headquarters we have established the Global Maritime Resources Division, which is responsible for international policy on crew members and the utilization of non-Japanese Organizational Structure Supporting Safe Operation (Fiscal 2022) Operational Safety Committee Headquarters of Safety Operations Chair: Chief safety officer, who is the managing executive officer serving as the director general of the Headquarters of Safety Operations Members: Eight executive officers including the CEO Observer: Chairman executive officer Marine Safety Division Global Maritime Resources Division Marine Technical Management Division Offshore Technical Division Smart Shipping Division Liquefied Gas Ship Management Strategies Division MOL Ship Management Co., Ltd. MOL LNG Transport Co., Ltd. Implement Activities to Heighten Safety Awareness Emergency Response Tabletop Drills We continuously conduct various drills to ensure that we are ready for and respond appropriately to emergencies and problems. Onboard vessels, we regularly conduct emergency response drills for a range of scenarios, such as fire and flooding. Also, Group companies engaged in ferry and cruise ship businesses give first priority to passenger safety and conduct periodic drills with an emphasis on evacuation guidance. At the Head Office, executive officers up to and including the rank of CEO, related divisions and departments, and ship manage- ment companies annually collaborate in emergency response tabletop drills that simulate a serious marine accident, with the coop- eration of authorities and the media. As well as raising safety awareness, the simulation of such accidents verifies the ability of organizations to respond appropriately and communicate information accurately and smoothly. Safety Campaigns With the aim of cohesively heightening safety awareness among offshore and onshore employees and thereby further developing our safety culture, we conduct annual safety campaigns in which crew members onboard vessels and onshore officers and employees discuss their opinions on safety. In fiscal 2021, due to the COVID-19 pandemic we conducted a safety campaign that connected ves- sels and offices through an online format. During the campaign period, approximately 2,300 employees participated, including 693 onshore officers and employees and the crew members of 79 vessels. With “Overcome rough seas with MOL CHARTS!” as a theme, the fiscal 2021 safety campaign provided opportunities to consider and discuss how best to raise safety awareness in light of the lessons learned from a serious accident that occurred in fiscal 2020. Information and suggestions received from crew members are being widely shared in-house and among vessels and used to further strengthen safe operation capabilities. Also, the campaign increased the safety awareness of onshore officers and employees by enabling them to speak directly with crew members and gain insights into frontline operations. Launch of SOSC CHANNEL Informational Videos for Employees To disseminate a variety of informational videos on safe operation, the Safety Operation Supporting Center (SOSC) (→page 44) used an intranet portal to launch the SOSC CHANNEL at the end of March 2021. This in-house channel comprises five-minute videos featuring explanations by officers of fog, typhoons, and other weather and sea conditions as well as waters where care is required with respect to piracy and other risks. The videos also give examples of how risks have been avoided by following the SOSC’s advice. As well as providing valuable information on safe operation to many employees, the channel helps make the SOSC more familiar and approachable. 42 43 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Strengthen ICT-Enabled Support of Safe Operation Established at the Head Office to monitor and support from shore the safe operation of vessels 24 hours a day, 365 days a year, the Safety Operation Supporting Center (SOSC) realizes its role by combining the expertise and experience of two on-duty personnel—one of whom is a captain—and information obtained from a range of systems and external sources. Based on advances in digital technolo- gies and lessons learned from accidents, the SOSC is upgrading systems and increasing safety even further. SPIRIT Vessel Movement Monitoring System Introduced in January 2021, the SPIRIT (Sustainable Platform with Intellectual Resource and Innovative Technology) system enables us to monitor where our approximately 800 vessels are around the world and what kind of weather and sea conditions they are experiencing at any given time. Moreover, while tracking the movements of individual vessels, the system allows us to conduct multifaceted risk assessments by combining information on piracy, military exercises, and a range of other information. In April 2022, the functions of the system were upgraded even further so that it can incorporate the voyage plans of each vessel. The system is used not only by the SOSC but also by vessel operators and other related in- house personnel to provide support to vessels in operation. Navigation Risk Monitoring System Developed as a measure to prevent a recurrence of the WAKASHIO grounding accident, which occurred on July 25, 2020, our naviga- tion risk monitoring system began full-scale operation at the end of January 2022. The system constantly monitors many different types of data, including data on vessel positions and water depths as well as information from the Electronic Chart Display and Information System. If vessels are about to enter waters where there is a high risk of grounding, the system alerts the SOSC, which continuously observes this system and, if necessary, initiates measures by telephoning captains directly to alert them. A Message from the Chief Safety Officer Mitsuhisa Tanimoto Managing Executive Officer Chief Safety Officer Director General, Headquarters of Safety Operations MOL is engaged in a wide range of businesses around the world. The Company operates approximately 800 vessels and offshore plants, and these vessels and plants are of many different types. In addition to established measures for the management of operating vessels’ safety and the prevention of accident recurrence, we are further bolstering our ability to manage safety levels by backcasting from target profiles and implementing initiatives accordingly. In ensuring safety and advancing our businesses going forward, personnel development is essential. To build reliable capabilities for safe operation, we will utilize not only the Japanese personnel who form the core of our marine technical divisions but also marine technical spe- cialists from all over the world. Within the Headquarters of Safety Operations, we have estab- lished the Global Maritime Resources Division to lead our international policy on assignment of seafarers in various nations and the utilization of non-Japanese marine technical special- ists. Moreover, we have appointed a non-Japanese marine technical specialist to serve as the general manager of the new division. We will continue developing as a corporate group in which diverse personnel play active roles. Through our safety campaign and other initiatives, we are fostering a safety culture that is common to all Group personnel, regardless of their profession or job. In addition, we will promote safe operation through measures focused on both technologies and human factors. Specifically, we will utilize information and communications technology (ICT) and DX to support vessels from shore and conduct training and drills for crew members. As chief safety officer, I am committed to raising the safety levels of the MOL Group even higher while helping to improve the safety of marine transport through collaborative initiatives that involve industry peers and related organizations. Creation of New Added Value Marine Renewable Energy Business Initiatives Foraying into all offshore power generation-related business fields, including transport, power generation, and peripheral businesses Marine renewable energy comprises five types of power generation: offshore wind, wave power, tidal power, ocean current, and ocean thermal energy conversion (OTEC). By utilizing the inexhaustible supply of seawater and waves as an energy source, the realization of power supplies that are stable and particularly resilient to stormy weather is possible. We are involved in offshore wind, wave power, tidal power, and OTEC power generation. Wave Power Generation In 2020, we began participating in the management of Bombora Wave Power Pty Ltd, a British developer and manufacturer of wave power generation equipment. Bombora Wave Power is pursuing the early commercialization and widespread use of this type of power generation through the development of generation that uses the company’s mWave™*1 membrane-type wave energy converter. Moreover, the company is developing the InSPIRE™ floating platform, which integrates mWave™ with floating wind turbines. Demonstration tests of a full-size 1.5 MW mWave™ converter are scheduled to begin off the coast of Pembroke, Wales, in the second half of 2022. Meanwhile, the company plans to conduct demonstration tests of a large-scale InSPIRE™ platform around 2025. As a Bombora Wave Power shareholder, the MOL Group will help the company to advance its business. We will also provide the company with such practical support as assistance with the selection of suitable sites and finding local partners in Japan and Mauritius. When the company’s wave power generation becomes commercially viable, we will establish synergistic relationships between it and our projects related to the offshore wind power generation business. The mWave™ membrane- type wave energy converter A rendering of the InSPIRE™ concept whereby mWave™ wave energy converters are integrated with the bases of floating wind turbines *1 Pressure fluctuations below the water surface move rubber membranes in a pumping motion, creating flows of air within the energy conversion system that are used to generate power. The system is installed on the seafloors of coastal waters that are between eight and 20 meters deep. The system can operate 24 hours a day and is not easily affected by weather conditions as it is installed below the water surface. Ocean Thermal Energy Conversion (OTEC) OTEC uses temperature differences of around 20°C between surface water and water at depths of between 750 meters and 1,000 meters to evaporate ammonia and other media with low boiling points. The resulting steam turns the turbines of genera- tors, producing electricity. The principle was first proposed in France in 1881, and the development of OTEC has been underway since the 1970s. Waters with high surface temperatures, such as those in the vicinity of Okinawa in Japan and equatorial regions, are suitable for OTEC. Due to the growing expectations for renewable energy in recent years, development activities have been gathering momentum in Japan, the United States, France, and other countries. Since April 2022, we have been col- laborating with our partners Saga University and Xenesys Inc. to participate in the operation of a 100 kW-class OTEC demonstra- tion facility in Kumejima, Okinawa. Owned by Okinawa Prefecture, the facility was established in 2013. We are advancing efforts with a view to introducing the world’s first 1 MW-class OTEC facility to Okinawa around 2025. We also aim to realize a floating OTEC facility in the future. Initiatives in Mauritius The government of Mauritius aims to meet 60.0% of the country’s energy needs through renewables by 2030 and has offi- cially recognized wave power generation as a future power source. Also, past studies have confirmed that conditions in the country are highly compatible with the introduction of OTEC. With the cooperation of Japan’s government, the MOL Group is verifying suitable sites for wave power generation in the coastal areas of Mauritius. We are also analyzing the introduction of OTEC to the country. By introducing to Mauritius the Kumejima model,*2 which utilizes deep ocean water from the seas near Kumejima in Okinawa Prefecture, we will not only establish a power generation business but also contribute to the creation and development of a wide range of industries. *2 In this model, deep ocean water is actively used for secondary purposes. After being used for power generation, the water is of sufficiently low temperature for use in air-conditioning and industrial applications. In addition, the nutrients in the water can be utilized for aquaculture, agriculture, and the manufacture of beauty products. In Mauritius, the water is expected to be used as coolant for data centers and the air-conditioning of accommodation facilities. 44 45 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Environment Conservation for Marine and Global Environment MOL aims to minimize the negative impacts of its business activities (marine environmental pollution, air pollution, reduction of biodiversity, climate change, etc.) and to ensure a sus- tainable world for everyone. Initiative Focus Targets KPIs Fiscal 2022 Action Plans Achieve net zero GHG emissions for the entire Group by 2050 Numerical Targets • Achieve an approximately 45.0% reduction in the GHG emissions intensity of transport by 2035 (compared to that of 2019) • Reduce GHG emissions intensity by 1.4% per year (average up to 2030) • GHG emissions and emissions intensity • Amount of environmental investment in climate change countermeasures Implement strategies set forth in MOL Group Environmental Vision 2.1 Set Scope 2 targets Increase and enhance disclosure based on TCFD recom- mendations (→page 48) Strengthen collaboration with Group companies Reduce negative impact on the marine environment and biodiversity • Number of vessels equipped with ballast water management systems • Progress in establishment of methods for collecting related data Consider methods of managing data on waste and wastewater Comply with the Taskforce on Nature-related Financial Disclosures and other international guidelines Climate Change Countermeasures Preservation of Marine Environments Protection of Biodiversity Prevention of Air Pollution Reduce air pollutants emitted from vessels • NOx and SOx emissions • NOx and SOx emissions intensity Set quantitative target for SOx emission reduction Promote shift to clean alternative fuels Environmental Management Enhance an environmental manage- ment system incorporating measures for compliance with environmental regulations • Progress in the enhancement and operation of the environmental management system Comply with laws and environmental regulations Improve the operation of the environmental management system Conduct initiatives to improve environmental literacy For the MOL Group’s environmental initiatives, please also see MOL Group Environmental Vision 2.1. https://www.mol.co.jp/en/sustainability/environment/vision/index.html Climate Change Countermeasures: Progress of MOL Group Environmental Vision 2.1 Strategies Strategy 1 Adopt Clean Alternative Fuels With our sights set on acquiring approximately 90 LNG-fueled vessels by 2030, we have already decided on investments in 16 LNG-fueled oceangoing vessels in the form of eight car carriers, six dry bulkers, and two tankers as of the end of August 2022. Further, the introduction of many different types of LNG- fueled oceangoing vessels is under consideration. In addition, two LNG-fueled coastal ships have commenced service, and we have decided to invest in four LNG-fueled ferries. Given that using LNG fuel emits less GHG than using conventional bunker oil and that LNG has been used for many years as a vessel fuel, the MOL Group is advancing the intro- duction of LNG-fueled vessels as an immediately realizable way of reducing GHG emissions. In parallel with these initiatives, we are studying the introduction of vessels fueled by ammonia and hydrogen, Projected Composition of the MOL Oceangoing Fleet by Fuel Type*1 (Vessels) Leading role for LNG in the 2020s Increased use of synthetic methane, shifting from LNG Increased use of ammonia and hydrogen 2020 2035 2050 Oil fuels Biodiesel Ammonia and hydrogen LNG Synthetic methane *1 Only includes vessels operated by MOL that fall under Scope 1 emissions which are strong candidates to become carbon-free fuels of the future. However, the establishment of marine engines and other technologies compatible with these new fuels as well as the building of fuel supply infrastructures globally will take a considerable amount of time. Continuing to use only conventional bunker oil until then would be inappropriate for us from a carbon budget*2 perspective. In our view, proactive introduction of LNG-fueled vessels will immediately contribute to the reduction of GHG emissions, thereby lowering our cumulative GHG emissions until new fuels become widely available and helping us address the global issue of climate change. Moreover, compared with the use of conventional bunker oil, the use of LNG fuel is likely to reduce the CO2 emission costs aris- ing from restrictions and taxes on emissions, which are expected to be imposed on international marine transport in the near future. The introduction of LNG-fueled vessels ahead of other companies will give us a competitive advantage. At present, our LNG-fueled vessels use natural gas, which is a fossil fuel. Going forward, however, we will significantly reduce GHG emissions by replacing this type of LNG with bio-LNG, which is made from organic waste, and with synthetic methane, which is produced through the use of renewable energy sources. *2 A carbon budget sets the upper limit of permissible cumulative GHG emissions during a specified period that spans the past and future if the rise in global temperatures is to be limited to a certain level. The carbon budget approach views humanity as being in the process of using this budget. For details on initiatives related to ammonia, methanol, batteries, and liquefied hydrogen, please see page 19. Strategy 2 Enhance Energy-Saving Technologies October 2022 is scheduled for the completion of the first vessel equipped with the Wind Challenger hard sail wind propulsion system, which is expected to reduce GHG emissions by roughly 8.0% on routes between Japan and the West Coast of North America. Further, plans have been finalized for the building of a second vessel equipped with the system by 2024. Our initiatives also include studies on the introduction of wind propulsion systems enabled by other technologies, such as Rotor Sail and Delta Sails. Strategy 3 Boost Vessel Operating Efficiency (→page 19) Strategy 4 Build Business Models That Enable Net Zero GHG Emissions We are moving forward with a range of initiatives to establish business models that enable net zero emissions. For example, in fiscal 2021 we introduced internal carbon pricing (→page 19) as a mechanism to facilitate investment decisions that advance us toward achieving net zero emissions. In addition, we are acquiring carbon credits through afforestation that absorbs and fixes CO2 (→page 38), and we are jointly purchasing verified CO2 removals from a range of technology-enabled projects, such as those engaged in the GHG,* NOx, and SOx Emissions (g/Ton-mile) (g/Ton-mile) Number and Percentage of MOL-Owned Vessels Equipped with Ballast Water Management Systems (Vessels) (%) Number of Environment-Friendly Vessels in Operation (Vessels) removal of CO2 from the atmosphere. 18 15 12 9 6 3 0 0.5 0.4 0.3 0.2 0.1 0.0 (FY) 300 240 180 120 60 0 100 80 60 40 20 0 (FY) 18 15 12 9 6 3 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 17 13 11 11 9 Strategy 5 Expand Low- and Zero-Emission Energy Businesses through the Use of the MOL Group’s Concentrated Strengths Aiming to deepen our involvement in the production, transport, storage, and supply stages of clean energy supply chains, we are tackling a variety of initiatives, such as a liquefied CO2 marine transport business, demonstration tests under the Wind Hunter Project, and a concept study on an FSRU for ammonia fuel. Also, with the aim of reducing GHG emissions by promoting the prolifera- tion of offshore wind and wave power generation, we have acquired an equity interest in an offshore wind power generation business 2017 2018 2019 2020 2021 (FY) in Taiwan (→page 17) and invested in a wave power generation equipment developer in the United Kingdom. GHG emissions (left) NOx emissions (right) SOx emissions (right) Number of vessels equipped at fiscal year-end (left) Percentage of vessels equipped at fiscal year-end (right) LNG bunkering related Renewable energy related Alternative fuel related * Data presented beginning from fiscal 2019, when aggregation commenced. 46 47 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Endorsement of TCFD Recommendations and Conduct of Scenario Analysis MOL conducts scenario analysis using the TCFD framework to identify risks and opportunities that may arise from climate change. With reference to the new TCFD guidance released in October 2021, we are further enhancing analysis and significantly increasing disclosure. For example, in fiscal 2022 we added 1.5°C scenarios to the range of scenarios that we use for analysis, which includes well-below 2.0°C scenarios, among others. Please visit our website for details on our disclosure in line with TCFD recommendations. https://www.mol.co.jp/en/sustainability/environment/tcfd/ determines basic policies on climate change-related matters. Environment & Sustainability Committee* Governance To advance initiatives for the Group’s environmental strategies and sustainability issues in a manner that is integrated with management plans, MOL has established the Environment & Sustainability Committee as a subordinate committee of the Executive Committee. The former committee deliberates and Following its deliberations, particularly important matters are reported to the Executive Committee and the Board of Directors for discussion and approval. Formulation of Environment and Sustainability Policies and the Supervision of Their Implementation Board of Directors Report Supervise and direct Executive Committee Report Supervise and direct * Chaired by the CESO; attended by the CEO, the chairman executive officer, the CFO, the CDO, the CTO, and other principal execu- tive officers; and convened 11 times in fiscal 2021 Environment & Sustainability Strategy Division Corporate Planning Division Coordinate Headquarters of Technology Innovations Strategy We conduct scenario analysis-based assessments of climate change impacts to identify the long-term risks and opportunities asso- ciated with climate change, understand the impacts on our businesses, and incorporate appropriate measures into our management plans. In addition to the existing well-below 2.0°C scenario and the 2.6°C scenario, we conducted analysis using a 1.5°C scenario in fiscal 2022. Using 2050 as a target year, we assessed the quantitative financial impact of each risk and opportunity. At the same time, we verified that in all scenarios the transition plan set out in MOL Group Environmental Vision 2.1 will function appropriately as a mitigation measure and realize sufficient resilience. Particularly Significant Risks and Opportunities Identified through Scenario Analysis Projected effects on profit through 2050 under the 1.5°C scenario Specific measures in the transition plan of MOL Group Environmental Vision 2.1 and the effect on ordinary profit in 2050 Change in marine cargo movements – ¥10.0 billion Introduction of carbon tax – ¥270.0 billion* Change in fuel costs + ¥40.0 billion Introduction of clean alternative fuels Mitigation of the carbon tax impact through emission reductions Expansion of low- and zero-emission energy businesses Offshore wind power generation-related busi- nesses and ammonia and hydrogen transport, etc. Reflection of higher costs in freight rates Introduction of energy-saving technologies Boosting of vessel operating efficiency + ¥120.0 billion + ¥30.0 billion + ¥110.0 billion + Further improvement of profits Ensuring resilience to climate change-related risks by implementing the mitigation measures set forth in MOL Group Environmental Vision 2.1 * Monetary impact if all vessels continued to use oil fuels until 2050 Risk Management By classifying major risks related to our overall businesses and mapping these risks based on their impact level and likelihood of occurrence, we are preparing to identify important issues. Identified as a major risk through this process, climate change is being further classified and assessed by the Environment & Sustainability Committee (→pages 72 to 77). Indicators and Targets MOL conducts management based on a variety of indicators and targets. For example, we disclose emissions intensity and Scope 1, 2, and 3 GHG emissions, and we have incorporated these indicators into the medium- and long-term targets set out in MOL Group Environmental Vision 2.1. Also, we set quantitative targets in management plans for investments in low-carbon and decarbonization fields and conduct related performance management. Further, our decisions on investments reflect carbon prices that are calcu- lated by using internal carbon pricing. Preservation of Marine Environments and Protection of Biodiversity Ballast Water Management Carried out when loading cargo, the discharge of ballast water by vessels can negatively impact marine ecosystems by transferring foreign marine organisms across borders. Before the 2017 enforcement of the Ballast Water Management Convention, in 2014 the MOL Group established and began implementing a Groupwide policy of equipping vessels with ballast water treatment systems. As of June 2022, we have equipped 233 existing vessels and vessels under construction with these systems. Management of Hull Biofouling To prevent the adverse effect on biodiversity resulting from the transborder movement of marine organisms attached to hulls (hull biofouling), the International Maritime Organization (IMO) has adopted various regulatory guidelines, which are currently being revised. Our involvement in the revision of international guidelines on hull biofouling entails offering our opinions as a business operator through industry associations. Prevention of Marine Pollution An international convention requires that vessel fuel tanks and tankers have double hulls, and the MOL Group complies with all related conventions and laws. Based on the MARPOL Convention, we prepare onboard waste management plans requiring the separation, collection, storage, and disposal of onboard waste. Further, designated managers ensure all crew members are thoroughly apprised of these plans. We also appropriately dispose of onboard waste oil and water. CASE 1: Participating in the Ocean180 Marine Biodiversity Big Data Project MOL participates in Ocean180, an industry–academia–government project led by Professor Yasuhiro Kubota of the University of the Ryukyus and tasked with protecting marine biodiversity. To this end, the long-term project is using big data on marine life, statistical modeling, and artificial intelligence to render ocean ecosystems visible. The project’s name reflects a commitment to turning around the ongoing deterioration in marine biodiversity. The MOL Group contributes to the project by providing the operational data from its vessels. At the same time, we are using the information and knowledge gained from this project in other initiatives aimed at protecting marine biodiversity. CASE 2: Collecting and Investigating Marine Microplastic and Debris As of 2022, five of our owned vessels have installed a device jointly developed by MOL and Miura Co., Ltd. for collecting microplastic, which refers to plastic grains measuring 5 mm or less. In Southeast Asia, where the problem of marine debris is becoming increas- ingly severe, we are conducting an investigation with the aim of establishing and introducing a marine debris collection system that suits local conditions and uses a specialized vessel to collect marine debris. Also, in the 2019–2020 Japan-Palau Goodwill Yacht Race, we cooperated with the Japan Agency for Marine-Earth Science and Technology in an ocean plastics observation project. Prevention of Air Pollution SOx emissions countermeasures • Utilizing compliant fuel with sulfur content of 0.50% • Equipping vessels with SOx scrubbers • Switching to alternative fuels Planning to set quantitative reduction targets for SOx emissions NOx emissions countermeasures • Installing onboard SCR (selective catalytic reduction) systems • Installing onboard EGR (exhaust gas recirculation) systems Environmental Management Since 2001, we have been developing and operating our own environmental management system, and the system has obtained certification under the ISO 14001 international standard. We will steadily reinforce and improve the operation of this system in line with our Environmental Strategy, which is one of the three pillars of our management plan. 48 49 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Human & Community Contributing to the Growth and Development of People and Communities MOL aims to achieve successful coexistence among everyone involved in the MOL group busi- nesses and the sustainable growth and development of communities through its activities as a corporate group that respects diverse personalities and that can maximize the capabilities of every employee. Initiative Focus Targets KPIs Fiscal 2022 Action Plans Foster personnel who embody MOL CHARTS Human Resource Development • Results of activities to instill MOL CHARTS Groupwide • Training investment and number of training days • Results of the One MOL Management School and the One MOL Global Management College training programs for the next generation Secure and develop highly skilled crew members • Results of training and e-earning for crew members • Percentage reduction in overtime hours • Percentage of paid leave taken Conduct activities to instill MOL CHARTS Groupwide Expand and enhance rank-based training and career support programs Strengthen the operation of the talent management system Implement training programs for the next generation Regularly conduct training programs Operate our maritime academy in the Philippines and produce high-quality graduates Introduce a telecommuting system and improve office environments Further reinforce infrastructure for DX Set new KPIs as well as division-specific KPIs Work-Style Reforms Diversity & Inclusion Health and Productivity Management Stakeholder Engagement Improve human resource competitive- ness and realize innovation through a corporate culture that enables employees to work with vitality and enthusiasm Realize a work environment in which diverse personnel can play active roles Numerical Targets • Percentage of women in managerial positions by fiscal 2025: — All managerial positions 7.0% — Land-based managerial positions 10.0% — Land-based Team Leader class managerial positions 20.0% Encourage employees to take the initiative in improving their own health Numerical Targets • Percentage of employees receiving regular health checks: 100.0% • Percentage of employees receiving stress checks: 90.0% • Percentage of employees who smoke: 10.0% by fiscal 2025 Enhance dialogue with major stake- holders and reflect their concerns in business management • Percentage of women in respective employee ranks • Percentage of non-Japanese officers at overseas subsidiaries • Use of the reemployment system • Percentage of mid-career hires Upgrade and expand the childcare leave system Hold dialogues for female employees of domestic Group companies Promote the recruitment of local employees at overseas subsidiaries Upgrade and expand the reemployment system • Percentage of employees receiving regular health checks • Percentage of employees receiving stress checks • Percentage of employees who smoke Rigorously ensure that employees receive regular health checks and strengthen post-check follow-ups Rigorously ensure that employees receive stress checks Conduct interviews with employees assigned overseas Hold seminars on health Advancement of Local Communities Increase activities that contribute to the development of the local communities where we conduct business activities • Results of corporate citizenship activities • Progress of activities benefiting local communities in Mauritius Conduct corporate citizenship activities Conduct activities benefiting local communities in Mauritius Number and Percentage of Women in Managerial Positions Number and Percentage of Mid-Career Hires among Land-Based Employees Health and Productivity Management Indicators (Women) (People) 30 25 20 15 10 5 0 (%) 20 15 10 250 200 150 100 50 0 (%) 25 20 15 10 (%) 100 80 60 40 20 0 2017 2018 2019 2020 2021 (FY) 2017 2018 2019 2020 2021 (FY) 5 0 2017 2018 2019 2020 2021 (FY) 5 0 Number of women in land-based and sea-based managerial positions (left) Percentage of women in land-based and sea-based managerial positions (right) Percentage of women in land-based managerial positions (right) Percentage of women in land-based Team Leader class managerial positions (right) Number of mid-career hires in land-based positions (cumulative total) (left) Percentage of mid-career hires among land- based employees (right) Percentage of employees receiving regular health checks Percentage of employees receiving stress checks Percentage of employees who smoke Human Resource Development Instillment of MOL CHARTS Groupwide Revised in April 2021, the acronym CHARTS stands for challenge, honesty, accountability, reliability, teamwork, and safety and encapsulates a set of values shared by Group employees worldwide. We established the values in their current form by adding an “S” to the MOL CHART values originally established in 2015. We have promoted the new CHARTS by conducting the activities out- lined in the table below. Fiscal 2021 Initiatives for the Instillment of MOL CHARTS Groupwide Overseas Japan In Japan and overseas, conferences aimed at furthering understanding of the MOL Group Corporate Mission, the MOL Group Vision, and MOL CHARTS were held. In 15 countries, subsidiaries held workshops in which 573 participants deepened their understanding of MOL CHARTS by giving presentations on personal interpreta- tions of the values to fellow participants. To provide individual participants with opportunities to consider the significance of MOL CHARTS in relation to their particular position, we held approximately 100 CHARTS TALK sessions under a range of formats, including discussions among executive officers and sessions focused on specific topics and divisions. Training Programs for the Next Generation In addition to the use of external training programs, we are expanding and enhancing our original training programs for those personnel who are candidates to become the officers responsible for business management in the coming generation. At the core of these in-house programs are the One MOL Management School and the One MOL Global Management College (MGMC). Held since fiscal 2000, One MOL Management School gives trainees the fundamental skills needed for business management. Since fiscal 2021, the school has been focusing on creative leadership that recognizes the nature of innovation and inspires originality in organizations. In fiscal 2006, we launched the MGMC, which improves the management skills that leaders of global- ized operations require to unite and mobilize diverse organizations. In fiscal 2021, due to restrictions resulting from the COVID-19 pandemic, we held the school and college programs entirely online, and the programs were mainly par- ticipated partnered in by personnel from overseas subsidiaries worldwide. MOL Group Senior Executives One MOL Management School One MOL Global Management College (MGMC) Domestic Group company employees MOL employees Overseas Group company employees Work-Style Reforms Maximizing Job Satisfaction, Employee-Friendliness, and Group Performance reforms, workplace reforms, productivity improvements, and corporate culture reforms. Our personnel system reforms included the introduction of a telecommuting system in March 2020 in response to the COVID-19 pandemic. Following multifaceted analysis of work styles, we introduced a permanent telecommuting system in July 2022. The new system is aimed at maximizing job satisfaction and employee-friendliness. At the same time, the system is designed to boost the MOL Group’s performance as an organization by facilitating collaboration. In introducing the system, we have organized seminars on telecommuting that are conducted by an outside company and offered employees a range of telecommuting advice through an email magazine. In conjunction with the introduction of telecommuting and as part of workplace reforms, we will remodel our Head Office to further develop safety awareness, improve work efficiency, deepen communication, and strengthen team building. Based on the insights gained from a pilot office established on the 5th floor, which has already been remodeled, the new-look Head Office will be an interconnected space that constantly and seamlessly integrates office work with working from home and that heightens safety awareness by locating sales divisions near the Safety Operations Headquarters. We will phase in the use of the remodeled parts of the Head Office beginning fall 2022. Also in fiscal 2022, we will advance work-style reforms for sea-based employees. As with land- based employees, we will take a range of measures to promote job satisfaction and employee-friendliness. We will create attractive, comfortable workplaces and actively improve offices and living quarters on vessels. Further, through initiatives aimed at empower- ing female employees, we will develop employee-friendly, rewarding environments not only for female employees but for all sea- based employees. To improve productivity, we will enhance the quality of meetings, streamline and clarify duties, and utilize tools such as robotic process automation. As for corporate culture reforms, we will expand and enhance engagement surveys and 360- degree evaluations and utilize corporate culture assessments. • Results of stakeholder engagement Increase opportunities for dialogue with major stakeholders innovative ideas and new concepts, the MOL Group is pursuing work-style reforms focused on four main areas: personnel system Aiming to increase employee productivity and fulfillment and thereby establish an environment that encourages the emergence of 50 51 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Diversity & Inclusion Stakeholder Engagement In April 2021, we established the Diversity & Inclusion Management Basic Policy, which identifies the advancement of diversity & Recognizing that our important stakeholders include shareholders and investors, customers, business partners, employees, govern- inclusion as a new driver of growth. With this policy forming the core of its human resource strategy, the MOL Group will build ment agencies, local communities, and nongovernmental organizations (NGOs), we engage in the various forms of stakeholder frameworks for combining the diverse talents and attributes of Group employees around the world and thereby enabling the creation dialogue shown in the table below. By utilizing the valuable opinions obtained through these dialogues in management, we will of new value. advance business activities in line with the needs of society and help address a range of social issues. Empowerment of Women The empowerment of female employees is essential in promoting diversity & inclusion. As a company that excels at promoting women in the workplace, we earned selection as a “Nadeshiko Brand” company in fiscal 2020 and fiscal 2021. As well as existing support that helps employees meet work and childcare responsibilities, we will raise the percentage of women in managerial posi- tions by empowering women in line with an action plan based on the Act on Promotion of Women’s Participation and Advancement in the Workplace. As part of these efforts, on International Women’s Day we will partner with other companies to hold joint events focused on career development and self-development. Mid-Career Hires Since 2001, we have been conducting mid-career hiring to attract and develop a diverse workforce. As a result, about a quarter of our land-based employees in career-track and managerial positions are mid-career hires. By welcoming into our workforce people with many different types of individuality and attributes—such as experience, personal qualities, skills, and values—we are achieving diversity & inclusion. Employment of People with Disabilities With a diverse workforce as a premise, the MOL Group is creating workplace environments that enable all employees to utilize their abilities and fostering an organizational culture that encourages mutual understanding among the various individuals in the Group. In accordance with these efforts, since April 2021 we have been employing people with disabilities through the MOL RAISE in-house farm program, which operates in Koshigaya in Saitama Prefecture. By enabling Head Office employees and officers to visit the farm and participate in cultivation and harvesting and by using the farm’s fresh vegetables as ingredients at the Head Office cafeteria, we encourage a wide range of employees and officers to think about those different from themselves, helping create an organization based on respect for diversity. Health and Productivity Management In April 2021, we formulated the Declaration on Health and Productivity Management. Viewing the enhancement of employee health as an important management task, we are further developing initiatives aimed at the Groupwide dissemination and promotion of the values set out in the declaration. Since becoming the first shipping company selected as a Health & Productivity Stock by the Tokyo Stock Exchange and the Ministry of Economy, Trade and Industry, we have earned this recognition for a second consecutive year. The Human Resources Division plays a central role in providing tailored support and encouragement to employees in coordina- tion with MOL’s health insurance association and with a team of industrial health personnel consisting of industrial doctors, internal medicine doctors, psychiatrists, certified psychologists, health nurses, and massage therapists. Through training and various other measures, we are raising employees’ awareness of health management. Also, we are rigorously ensuring that employees receive regular health checks and increasing the percentage of employees that receive stress checks to prevent mental health disorders. Other initiatives include a smoking cessation support program, which is reducing the percentage of employees who smoke. A Message from the Chief Human Resource Officer In addition to conventional marine transport, the MOL Group is developing various social infra- structure businesses and taking on new challenges to meet society’s changing needs with respect to such issues as environmental protection. In all of these businesses, personnel are the driving force of initiatives. As the Chief Human Resource Officer, I would like to contribute to the initiatives of each business. Given that securing and developing diverse human resources is an urgent issue for the Group, which aims to achieve global growth by leveraging its comprehensive capabilities, we will create an environment that enables individuals to demonstrate their talents and play active roles. Junko Moro Managing Executive Officer Chief Human Resource Officer Responsible for the Human Resources Division Important Stakeholders Shareholders and Investors Main Types of Dialogue (Frequency) • General meetings of shareholders (once a year), financial results • Small meetings with the CEO (general version: four times a year, briefings (four times a year, two of which are conducted by the CEO) • Investor relations meetings in Japan and overseas (approximately 200 times a year), stakeholder relations meetings (approximately 20 times a year) • Business briefings for investors and ESG briefings (once or twice a year) • Company briefings for individual investors (several times a year) ESG version: once a year) • Small meetings with outside directors (planned for fiscal 2022) • Various reports (securities report, corporate governance report, integrated report, and investor guidebook, each once a year) Customers • Sales activities (year-round) • Website and social networking services (year-round) • MOL service website and inquiry desk (as needed) • Vessel visits (cargo-handling tours, as needed) • Customer satisfaction surveys (irregular) • Various seminars and exhibitions (irregular) Business Partners • Shipowner meetings (once a year) • Safe operation liaison meetings with shipowners (once a year) • Agency and stevedore meetings (once or twice a year) • Safe operation campaigns (once a year) • Various seminars and exhibitions (irregular) Employees and Crews • Personnel evaluation meetings (four times a year) • Organizational culture assessments (every two years) • Labor–management consultations (as needed) • Advisory service desks (as needed) • In-house magazines (printed and online, as needed) • Business performance and management presentations (four times a year) • Dialogues between management and employees (at least 10 times a year) • Seafarer Family Days (once a year) • Safety Conferences (three times a year) Government Agencies • Dialogue with government agencies and municipal authorities (as needed) • Cooperation in surveys and questionnaires (as needed) Local Communities and NGOs • NGO round-table discussions (once a year) • Social contribution activities in Mauritius (throughout the year) • Beach cleanup activities (several times a year) • Cargo-handling and terminal tours (irregular) • Workplace visits by students and events that explain businesses (as needed) • Sending of instructors to lectures and training programs (as needed) Advancement of Local Communities The MOL Group has engaged in restoration and preservation of the natural environ- ment and contribution to local communities in Mauritius since an oil spill resulting from the running aground of chartered vessel the WAKASHIO in 2020. We established the MOL Charitable Trust in June 2021 and the MOL Mauritius International Fund for Natural Environment Recovery and Sustainability in November 2021. The trust and fund are in the process of steadily disbursing a total of approxi- mately ¥800.0 million. In December 2021, 26 projects were selected to receive grants from the trust, while in May 2022 it was decided to provide grants to 11 projects from the fund. Offering support to local fishermen in Mauritius Through the trust and fund, we will provide long-term support focused on the restoration and conservation of the rich natural environment and ecosystems of Mauritius, including mangrove forests and coral reefs; protection and research activi- ties for wild birds and migratory birds, including indigenous species; the development of fisheries, tourism, and cultural activities, which form the foundations of the Mauritian economy; and the training of local personnel to support all of these activi- ties. Also, we aim to contribute to the sustainable economic development of the coun- try. To this end, we are conducting feasibility studies on the introduction of such marine renewable energy as wave power generation and ocean thermal energy conversion generation. For details on our other initiatives for local communities, please visit the Social Contribution Activities section of our website. https://www.mol.co.jp/en/sustainability/human/society/index.html For details on our activities in Mauritius, please visit the MOL for Mauritius website. https://www.mol.co.jp/en/formauritius/ Conducting a mangrove monitoring survey 52 53 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Innovation Innovation for Development in Marine Technology MOL aims to enhance its business through advanced technologies using clean energy and ICT and to help address various social issues. This will also help the Group to provide added value through safe transportation and our social infrastructure business and achieve its goal of con- servation for marine and global environment. Initiative Focus Targets KPIs Fiscal 2022 Action Plans • Number of alternative clean energy fueled vessels ordered and com- pleted and progress in developing these vessels Promote the development of related technologies — Ammonia-fueled vessels, vessels that use hydrogen as fuel, and Wind Hunter Increase the introduction of LNG-fueled vessels Collect basic information on new alternative fuels Groupwide Adoption of Clean Energy Introduce and increase the use of clean alternative fuels for vessels Numerical Targets • Deploy commercial net zero GHG emissions oceangoing vessels in the 2020s • Deploy 90 LNG-fueled vessels by 2030 • Deploy approximately 110 net zero GHG emissions oceangoing vessels by 2035 Develop technologies that contribute to the spread of clean energy in society Increasing the Energy Efficiency of Vessels Use natural energy and establish and promote energy-saving technologies that help improve propulsion performance • Progress in developing clean energy carriers • Number of LNG and ammonia bunkering vessels ordered and completed • Number of vessels equipped with wind propulsion systems such as Wind Challenger • Progress in introducing and promot- ing other existing energy-saving technologies ICT Utilization for Safe, Efficient Operation Advancement of Technology Development and DX Upgrade, expand, and establish platforms using vessel-related big data (the FOCUS Project) • Progress of the FOCUS Project • Number of vessels equipped with Fleet Transfer*1 Establish technologies for autonomous vessel navigation • Progress in developing technologies for autonomous vessel navigation Establish an organizational structure that sustains technology innovation • R&D expenditures Establish an organizational structure that promotes the realization of DX • Amount of DX-related investment • Number of DX-related personnel Promote the development of relevant technologies — Liquefied CO2 carriers and liquefied hydrogen carriers Conduct a study on the development of LNG and ammonia bunkering vessels Introduce lighter sails designed for commercialization Conduct a study with a view to the installation of a cylindri- cal rotor sail Introduce and adopt energy-saving technologies — Propeller Boss Cap Fins and the Optimal Trim System Upgrade FOCUS Project initiatives Promote the introduction of Fleet Transfer to chartered vessels Conduct data analysis with a view to economizing on fuel Develop technologies for the diagnosis of equipment defect precursors Formulate a development plan in light of sea trials Select partners and conduct verification with a view to installation Enhance organizational structure for technology development Launch new development projects that will lead to benefits in relation to environmental protection, safety, and labor- saving technologies Strengthen collaboration among MOL and Group companies Establish the MOL DX Vision Promote various DX projects such as quantitative evalua- tions of the quality of shipowners and ship management Establish a DX training and recruitment policy and imple- ment measures Progress of the FOCUS Project Initiating the project in phases Fleet Tour*2 Fleet Performance*3 Fleet Viewer*4 Fleet Transfer 2017 2018 2019 2020 2021 (FY) Number and Percentage of Vessels Equipped with Fleet Transfer (Vessels) (%) Number of Clean Alternative Energy Fueled Vessels Ordered (Vessels) 200 160 120 80 40 0 60 50 40 30 20 10 0 (FY) 10 8 6 4 2 0 2017 2018 2019 2020 2021 Number of equipped vessels at fiscal year-end (left) As a percentage of target for number of equipped vessels (right) 2017 2018 2019 2020 2021 (FY) *1 A system that collects IoT big data from vessels in real time and sends it to shoreside platforms *2 An application for virtual tours of vessels *3 An application for the analysis of vessel propulsion performance *4 An application for the advanced monitoring of ship data Groupwide Adoption of Clean Energy Initiatives for Ammonia-Fueled Vessels We are developing technologies related to ammonia fuel, a promising next-generation clean alternative to LNG fuel. Although ammonia-fueled marine engines have yet to be commercialized, we have launched a pilot project by concluding a memorandum of understanding with MAN Energy Solutions and Mitsui E&S Machinery, Ltd., with a view to ordering vessel main engines that are primarily fueled by ammonia. Further, aiming to build an ammonia-fueled oceangoing ammonia carrier, we have begun joint development with Tsuneishi Shipbuilding Co., Ltd. and Mitsui E&S Shipbuilding Co., Ltd. The envisioned vessel is a mid-size ammonia carrier that achieves net zero CO2 emissions while underway by using some of its ammonia cargo as fuel. Moreover, the project is tasked with designing a highly versatile vessel that can call at the major ammonia loading and receiving ports and be deployed on a wide variety of routes. We will proceed with joint development aimed at the comple- tion and service commencement of an inaugural commercial net zero GHG emis- sions oceangoing vessel around 2026, thereby progressing toward one of the targets set out in MOL Group Environmental Vision 2.1. Development of Liquefied CO₂ Carriers In March 2021, MOL began participating in the liquefied CO₂ ocean transport business by investing in Norway’s Larvik Shipping AS, which has managed industrial liquefied CO₂ carriers in Europe for more than 30 years. Further, with our sights set on future growth in transport demand, we are developing specialized carriers. Envisioning a range of transport needs, we completed a concept study on multiple vessel types with Mitsubishi Shipbuilding Co., Ltd. in November 2021. Liquefied CO₂ carriers will play an important role in the carbon capture, utiliza- tion, and storage value chain, attracting attention as a means of realizing a low- carbon or carbon-free society. For MOL, demand for the transport of liquefied CO₂ has the potential to replace demand for the transport of fossil energy resources, which is expected to gradually decline. Although issues remain to be resolved before liquefied CO₂ carriers can be commercialized, we will continue utilizing a wide range of internal and external expertise to advance development initiatives. Wind Hunter Project Following on from the Wind Challenger Project (→page 56), which is developing a hard sail that enables wind-power propulsion, since November 2020 we have been working on the Wind Hunter Project to achieve zero emissions through the use of wind power, hydrogen, and fuel cells. In November 2021, we successfully completed stage one sea trials using the yacht WINZ MARU equipped with a small power generation plant in Omura Bay, Nagasaki Prefecture. At sea, a cycle was completed in the following order: ocean wind-based power generation, hydrogen production, hydrogen storage, use of the stored hydrogen for fuel cell power generation, and propulsion by an electric propeller. In stage two, we will build a 60-meter-long sailing vessel by 2024. Stage three will entail developing and building a large zero-emissions carrier by 2030. A sea trial using the yacht WINZ MARU in Omura Bay, Nagasaki WINZ MARU sailing on electricity generated by wind power A rendering of the vessel to be built in stage two 54 55 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Increasing the Energy Efficiency of Vessels Wind Power Utilization MOL is engaged in a range of initiatives aimed at exploiting the power of wind, an important energy-saving solution. One such initia- tive is the Wind Challenger Project, which is tasked with reducing the fossil fuel consumption and environmental impact of large commercial vessels by converting wind power into propulsion through the use of a hard sail. A single hard sail is estimated to reduce GHG emissions by roughly 5.0% on routes between Japan and Australia and 8.0% on routes between Japan and the West Coast of North America. We aim to achieve even greater benefits by installing multiple hard sails and using them in combination with other GHG emission reduction measures. A new coal carrier—which will become the first vessel equipped with the hard sail—is currently in the final stages of construction and is scheduled for completion in October 2022. Further, we have concluded a contract for the construction of a second hard sail equipped vessel, which is for Enviva Partners, LP, a major global company in the wood biomass energy field. We will become a leading company in the use of wind power by introducing technologies optimally suited to particular vessel sizes, cargoes, and routes. In addition to the Wind Challenger hard sail, we will introduce a cylindrical Rotor Sail, which utilizes the Magnus effect for propulsion, and a delta sail, which is mounted on cargo handling cranes. Wind Challenger concept video (in Japanese only) https://www.youtube.com/watch?v=OuDP-Flmemk Full-sail Wind Challenger Lowered-sail Wind Challenger ICT Utilization for Safe, Efficient Operation Use of Digital Twin Technology The rapid development of big data, the Internet of Things (IoT), and other ICT is increasing the possibilities for using ICT at sea and between vessels and land. Our core initiative for the exploitation of ICT is the FOCUS Project, which was launched in fiscal 2018. We utilize detailed voyage and engine data on operation in actual seas, which is collected from approximately 10,000 sensors installed in each vessel. Roughly 180 operating vessels were equipped with sensors as of the end of March 2022. After being stored on a cloud- computing data platform, the data is utilized for advanced operational monitoring as well as the analysis of propulsive performance. As part of the FOCUS Project, we are taking advantage of digital twin technology, which digitally reproduces real-world events in real time. In a virtual space, a copy of reality is constructed on a digital system, and various simulations are then performed. The analysis of simulation results enables us to optimize real-world actions. The MOL Group is advancing development initiatives under the themes shown in the table below. Hull Structure Based on the stress that has been placed on a hull since its completion, structural fatigue is precisely estimated, and hull maintenance work is optimized during periodic docking. Main Engine Operation With a high level of precision, engines’ operating conditions and degree of deterioration over time are estimated and engine characteristics are analyzed through the visualization of main engine scavenging and exhaust gas heat, which are difficult to measure during navigation. The results are used to prevent engine overload (torque rich) and curb torque fluctuations during opera- tion in stormy weather, thereby facilitating optimal, safe operation. Route Recommendation Based on the analysis of a vessel’s propulsion performance in actual seas and weather and sea forecast information, the optimal route and propulsion output for reducing GHG emissions while ensuring safety and punctuality are selected and recommended. Autonomous Vessel Navigation With the aims of enhancing safety levels and lightening the workloads of crew members, the MOL Group is working on the develop- ment and introduction of technologies for autonomous vessel navigation. Given that about 80% of navigation accidents are attribut- able to human error, we will reduce the risk of accidents by using technologies for autonomous vessel navigation to perform tasks currently performed by crews. In fiscal 2021, MOL participated in the MEGURI 2040, a project led by the Nippon Foundation that is focused on the unmanned operation of vessels. Under the project, a consortium of six companies conducted successful sea trials of the unmanned operation of the coastal car ferry Sunflower Shiretoko on the approximately 400-nautical-mile route between Tomakomai Port in Hokkaido and Oarai Port in Ibaraki Prefecture and of the coastal containership Mikage on the approximately 145-nautical-mile route between Tsuruga Port in Fukui Prefecture and Sakai Port in Tottori Prefecture. The ferry is owned and operated by MOL Ferry Co., Ltd., while the containership is owned by Imoto Ship Company and operated by Imoto Lines, Ltd. In the aforementioned sea trials, an autono- mous vessel operation control system, developed by Mitsui E&S Shipbuilding, realized autonomous vessel navigation by referring to accurate analysis of vessel location information; wind, tides, currents, and various other external factors; vessel-specific attributes such as maneuverability, acceleration and deceleration performance, and equipment configuration; and rules applied to vessels. If there were other ships, obstacles, or debris on the set routes, the vessels safely navigated along avoidance routes based on informa- tion gathered and provided by a vessel peripheral information integration system developed by Furuno Electric Co., Ltd. Berthing and unberthing, which require especially delicate handling, were realized by enabling the autonomous vessel operation control system to use information from berthing and unberthing support sensors developed by Furuno Electric. When mooring a vessel in port, an onboard crew member normally passes a heaving line to a worker on the pier by throwing the line. In these sea trials, how- ever, an automatic flight drone, which was developed by A.L.I. Technologies Inc., was used to carry the line to piers. In addition to participating in the initiatives of the aforementioned consortium, the MOL Group is developing elemental technolo- gies with the aim of realizing automated watch-keeping and the automated creation of routes that avoid collisions with other ves- sels. We will continue devising and introducing technologies to heighten safety levels and reduce the workload of crews. Advancement of Technology Development and DX A Message from the Chief Technical Officer Makoto Yamaguchi Executive Officer Chief Technical Officer (CTO) Director General, Headquarters of Technology Innovations 2022 2016 2009 In April 2022, we established a new slogan for technology development: One Mile Ahead. This slogan continues the themes of the Senpaku ISHIN Project and ISHIN NEXT–MOL SMART SHIP PROJECT, which were launched in 2009 and 2016, respectively, as symbols of technological innovation aimed at advancing the safety and environment-friendliness of vessel operations. The new slogan for technology development expresses our determination to steadily move forward “one mile” at a time in the way that a vessel voyaging in stormy weather heads toward its destination no matter how rough the seas. Further, the slogan represents our commitment as an industry-leading corporate group to always pursue tech- nologies that are “one mile” ahead. Announced in June 2021, MOL Group Environmental Vision 2.1 calls on us to achieve net zero GHG emissions for the entire Group by 2050. The advancement of our strategies, which involve numerous technological innovations, is a mission we must fulfill to help address the environ- mental issues that the world is facing. Given the major changes that the entire logistics industry is undergoing as DX progresses, technical personnel will play integral roles in technology development and innovation initiatives. At the core of such initiatives is the Headquarters of Technology Innovations, which comprises the Technical Division, the Offshore Technical Division, and the Smart Shipping Division. As well as being assigned roles in these divisions and related sales divisions, our technical personnel are responsible for supervision and vessel management in relation to the shipbuilding projects of Group companies. Currently, we have 80 technical personnel in Japan and 14 technical personnel assigned to overseas bases. Going forward, the Headquarters of Technology Innovations will concentrate on three goals. • Resolving various issues in the marine transport industry by using leading-edge ICT • Reducing environmental impact by lowering GHG emissions through the utilization of wind power as a renewable energy and the introduction of clean alternative fuels • Benefiting society as a whole not only through vessels but also by promoting marine environ- mental conservation, FSRUs, offshore wind power generation-related businesses, and lique- fied CO2 marine transport. In addition to augmenting our technical teams in Japan and overseas, we will strengthen partnerships with external organizations. Under our new slogan for technology development, we will make a concerted drive toward our target profile, focusing efforts on the development of unique technologies that leverage both hardware in the form of elemental technologies and software in the form of IT. 56 57 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Governance Governance and Compliance to Support Businesses Through enhancement of corporate governance and thorough compliance, MOL aims to ensure transparency in Groupwide management, build foundations for its initiatives on social issues through business activities, and establish sustainable value chains based on consideration for human rights, safety, and the environment. Initiative Focus Targets KPIs Fiscal 2022 Action Plans Management Transparency Strengthen corporate governance capabilities with a view to enhancing corporate value Enhance the content of corporate governance related disclosure • Results of effectiveness external evaluations to measure effectiveness of the Board of Directors • Progress of deliberations of the Corporate Governance Council Establish and disclose policy and plan for enhancing the skills of directors and Audit & Supervisory Board members Establish and disclose policy for cross-shareholdings and engagement with shareholders Rebuild the skills matrix for directors and Audit & Supervisory Board members Information Security Reduce information security risks • Number of serious ICT incidents • E-learning track record in relation to information security Revise internal rules and ensure all employees are informed about them Establish a policy on ransomware countermeasures Conduct drills for responding to serious ICT incidents Conduct e-learning on information security Strengthen collaboration with Group companies Identify and reduce risks related to the environment, safety, and human rights throughout supply chains • Progress of initiatives to establish a monitoring scheme • Track record on human rights training Announce related policies Conduct monitoring and implement improvement measures Promote initiatives on ESG-driven vessel recycling Conduct human rights-related training Responsible Procurement Respect for Human Rights Fair Trade Numerical Targets • Zero compliance violations Bribery Prevention • Number of compliance violations • Number of consultations received by compliance advisory service desks • Track record on compliance training and e-learning Establish policy on corruption prevention Expand compliance training and e-learning Hold a compliance awareness month Conduct various audits and implement improvement measures Total Number of Directors and Number and Percentage of Outside Directors (Directors) (%) Number of ICT Security Incidents (Incidents) 10 8 6 4 2 0 50 40 30 20 10 0 (FY) 60 48 36 24 12 0 2017 2018 2019 2020 2021 2017 2018 2019 2020 2021 (FY) Total number of directors (left) Number of outside directors (left) Percentage of outside directors (right) Total number of incidents Number of serious incidents* Number of Consultations Received by Internal and External Compliance Advisory Service Desks (Consultations) 40 32 24 16 8 0 30 12 8 15 7 2017 2018 2019 2020 2021 (FY) Consultations about violations of laws and regulations Consultations about harassment Consultations about violations of internal rules * Incidents are defined as threats, failures, and other events that damage ICT systems or information assets. Incidents are classified into four levels according to severity. Incidents corresponding to the highest level of severity are classified as serious incidents and are reported to management when they occur. Revision of the Director Remuneration Plan In regard to its governance system, MOL is a company with an Audit & Supervisory Board, and the Board of Directors has both exec- utive and supervisory functions. With the aim of realizing appropriate management decisions and sound governance, outside direc- tors and Audit & Supervisory Board members focus on supervision and participate in discussions with internal directors, who also serve as executive officers, that reflect internal and external perspectives. The remuneration plan is one of the most important means of ensuring highly effective governance. Balance and fairness are required to establish and maintain a remuneration plan that exercises a certain degree of control over directors while motivating them to increase corporate value. For this reason, the Remuneration Advisory Committee, a majority of whose members are outside directors, and which is chaired by an outside director, takes the lead in development of the Company’s governance system. In fiscal 2021, the director remuneration plan was significantly revised based on the recommendations of the Remuneration Advisory Committee and following the approval of the General Meeting of Shareholders convened in June 2021. Under the new system, to further promote the establishment of shared interests between executive directors and shareholders, performance- linked remuneration in the form of restricted stock is granted commensurate with contribution to long-term targets. Also, the new system clarifies and discloses the evaluation indicators for single fiscal year performance-based monetary remuneration. Further, safety has been incorporated as a component of ESG indicators to reflect the paramount importance of safety to the Company. As well as the revision of the remuneration plan in fiscal 2021, in June 2022 the General Meeting of Shareholders approved the introduction of non-performance-linked remuneration in the form of restricted stock for non-executive directors and higher remu- neration of Audit & Supervisory Board members to reflect their increased responsibilities and duties in recent years. While advancing management in accordance with the new remuneration plan, the Remuneration Advisory Committee will con- stantly verify whether the system is contributing to effective governance, highly transparent management, and the Company’s sus- tained growth. For details on the remuneration plan, please see page 70. Revitalization Revision of the Skills Matrix The basic policy of the Company is to appoint directors based on the recommendations of the Nomination Advisory Committee and to establish a Board of Directors that comprises internal directors who can contribute to the enhancement of the Company’s corpo- rate value—based on a wealth of experience, expertise, and skills as well as an ability to make decisions on global management in light of broad perspectives and farsightedness—and outside directors who can realize supervisory functions—based on objective viewpoints, extensive experience, and high levels of expertise. Since fiscal 2019, the Company has stipulated the experience, expertise, and skills that members of the Board of Directors should possess. Following in-depth discussions aimed at identifying and selecting the particular types of experience, expertise, and skill needed to realize the Company’s target corporate profile, however, the Nomination Advisory Committee made the following revisions. Main Features of the Revisions • With respect to experience, expertise, and skills, a general classification of the five types that are universally important in corporate management as well as the four types that are particularly important for a provider of social infrastructure • Addition of human resource diversity as a fundamental component of sustainability • Addition of safety as the most important foundation of businesses • Addition of technology as an essential factor in fields central to the Company’s future growth, including decarbonization businesses, safe and efficient operation, and DX The short-listing and selection of candidates for the position of CEO and other director positions is conducted with reference to whether candidates possess the experience, expertise, and skills identified as necessary in the skills matrix. Meanwhile, given that these attributes may change as the business environment evolves, the Company will continue reviewing the content of the skills matrix. In addition to providing opportunities for directors to broaden their experience, expertise, and skills through training and development, the Company will appoint advisors to enhance the functions of the Board of Directors as required. 58 59 InnovationMITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceValue Creation StoryRolling Plan (Management Plan)Sustainability Strategy Financial and Corporate Information Dialogue between the Chairman and an Outside Director Aiming to Enhance Corporate Value through Tireless Improvement of Governance Over the past few years, the MOL Group has accelerated governance reforms through such measures as revising the director remuneration plan and the formulation of succession plans. What have these reforms achieved? What are the remaining issues? How should governance evolve to reflect the Group’s ongoing advance into a different growth phase? To address such questions, a dialogue was held between Junichiro Ikeda, MOL’s representative director and chairman executive officer, and Etsuko Katsu, one of the Company’s outside directors. (The dialogue was held in April 2022.) Junichiro Ikeda Representative Director Chairman Executive Officer Governance Improvement through the Active Involvement of Outside Directors such as those stemming from revisions to Japan’s Corporate Governance Code. I recognize that proactively responding to these expectations remains extremely important. Katsu Looking back on the years since I assumed the position of outside director, I believe that MOL has made great strides in governance. From the outset, I felt that both board market system and the creation of the Prime Market in April identified; and request that the Nomination Advisory 2022, I believe that in-house awareness of the need to take Committee and the Remuneration Advisory Committee hold the initiative in advancing reform is stronger than ever. further discussions on certain issues. Ikeda As an example of how the opinions of outside direc- Katsu As the number of topics requiring discussion at tors have dictated the direction of the Group, our discussions Board meetings increased, I also felt that the time available when formulating MOL Group Environmental Vision 2.1, which for discussing governance was becoming limited in Board was announced by the Company in 2021, left a particularly meetings. In addition, I think holding discussions at a venue strong impression on me. The vision calls on us to achieve net separate from Board meetings is conducive to the creation of zero GHG emissions for the entire Group by 2050. The goal an atmosphere in which opinions can be exchanged among initially proposed by executive officers was less ambitious. both internal and outside directors more freely than before. However, the unequivocal statements of an outside director to Further, we have designed the administration of the council the effect that the proposed goal was inappropriate for the so that it functions practically, rather than just being a venue current era and that we must be more committed marked a for exchanges of opinions. turning point in discussions. In the end, the decision reached A company’s overall target profile for corporate gover- was that MOL, ahead of industry peers, would aim to achieve nance represents, in a sense, the corporate profile to which net zero GHG emissions for the entire Group by 2050. the entity should aspire. The Nomination Advisory Committee Realization of this goal will require hardware that does and the Remuneration Advisory Committee have consistently not yet exist, including technologies and supply infrastructure engaged in substantive discussions on their respective fields, for alternative fuels. Such feasibility issues inevitably made but the Corporate Governance Council encompasses all executive officers hesitant. Nonetheless, with the support of governance-related themes, including topics discussed by objective, big-picture viewpoints from outside the Company these committees and the Board as well as topics related to that looked ahead to the profile MOL should be pursuing, we auditing and internal control. I believe that the facilitation of were able to reach a momentous decision. Similarly, when we systematic discussions on MOL’s governance through the were formulating succession plans and revising the director establishment of the council was a major achievement of remuneration plan, recommendations from outside directors fiscal 2021. The council also had fruitful discussions on such led to more substantive, highly transparent decisions that governance-related topics as cross-shareholdings, how included detailed provisions. outside directors should engage in dialogue with investors, and the training of directors. Katsu As you mentioned, the role of an outside director is to present independent opinions incorporating the viewpoints of investors and shareholders, have them reflected in busi- ness management, and appropriately present the results to the outside world. Further, ensuring engagement with society is extremely important. In particular, environmental, social, and governance (ESG) issues are areas that outside directors are becoming increasingly conscious of. In the process of formulating MOL Group Environmental Vision 2.1, the MOL Sustainability Plan, and Rolling Plan 2022, various opinions were put forward. By having Executive Committee members take these opinions into consideration, I believe that we were able to present the vision and plans to society in a more favor- Ikeda We have been focusing on governance reform over members and MOL itself were determined to advance able light. the past few years. Also, recent structural reforms of the reforms. Particularly in the past few years, tangible results containership business and various other businesses have have been emerging, mainly with respect to the Board of reached favorable trajectories, and the Company as a whole is Directors’ greater effectiveness. Through the discussions of in very good shape. Moreover, I feel that governance reform the Nomination Advisory Committee and the Remuneration has supported these structural reforms. Going forward, as we Advisory Committee, we have achieved significant results, continue transforming ourselves into a social infrastructure such as the formulation of a CEO succession plan and the group centered on marine transport, I believe that we should revision of the director remuneration plan. In addition, various further evolve governance in a manner corresponding to this efforts have freed up time to discuss management issues transformation. from a long-term perspective. So, I feel that the Board is As well as the sincere opinions received from outside increasingly becoming a body that is focused on performing a directors and outside Audit & Supervisory Board members in supervisory role and examining and determining strategies. various forums, there are external expectations in this regard, Coupled with the changes in the Tokyo Stock Exchange Ikeda At Board meetings, outside directors made recom- mendations that helped strengthen governance, but time constraints prevented extensive discussions. Therefore, in fiscal 2021 we established and began the operations of a new body called the Corporate Governance Council, which focuses Etsuko Katsu Outside Director exclusively on matters related to strengthening governance. As the council has only been in existence for a year, we are still finding our way to some extent. However, we have been using the council to elicit frank opinions from council mem- bers; categorize issues; seek proposals from Executive Committee members, depending on the type of issues 60 MOL REPORT 2022 61 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Dialogue between the Chairman and an Outside Director We will further evolve governance to support MOL’s major transition from a marine transport company to a social infrastructure group. sustained enhancement of corporate value. I think just for- Katsu I endorse this plan. The roles of MOL’s Board are mally including indicators does not mean anything. While becoming increasingly focused on supervision and the exami- managing the MOL Sustainability Plan, announced in April nation and determination of strategy, and I think discussions 2022, I would like to spend a little more time assessing which on the type of governance that MOL should pursue, including Junichiro Ikeda type of indicators are appropriate. optimal institutional design, will be extremely meaningful. I also strongly feel the need to further increase the opportuni- Reasons for and Aims of the Revisions of the Skills Matrix and the Director Remuneration Plan Of course, simply preparing a skills matrix is not the aim. Forming a Board that contributes to the sustainable growth of MOL is the key goal. For this reason, skills matrixes and succession plans overlap to a large degree. Currently, the Company has a succession plan for the CEO, but there are no clear succession plans for members of the Board and outside directors. Therefore, the Nomination Advisory Committee Katsu The composition of the Board is one of the funda- should discuss an officer appointment system that is linked mental elements of governance. The Company has recently to the skills matrix. revised its skills matrix for directors. The Nomination Advisory Committee and the Corporate Governance Council Ikeda You mentioned the need for succession plans for were able to hold thorough discussions regarding the type of Board members. As well as utilizing the skills matrix in the expertise that is lacking in the current Board and, with an eye appointment of Board members beginning from fiscal 2023 Katsu With respect to both the skills matrix and the direc- ties for in-depth discussions on medium- to long-term tor remuneration plan, reaching decisions does not mean that strategies. the matters are closed. I think the key is to constantly monitor The recent changes in MOL and its business environment systems as the times and the Company should flexibly analyze are one of the reasons why discussions on management the systems and explore various possibilities. strategies must be enhanced. Thanks to favorable business Creation of a Board of Directors That Functions Even More Favorably Ikeda At the beginning of our conversation, I mentioned the importance of further evolving governance as the results in fiscal 2020 and fiscal 2021, the Group has accumu- lated a tremendous amount of cash. I believe that outside observers will be paying very close attention to how this cash is invested going forward and how the results of investments are monitored. In addition, environmental strategies are entering a critical phase. Given the numerous items that require analysis from a broad perspective—such as the out- look for global energy supply and demand, the wide range of alternative energy sources, and the reduction of CO2 emis- sions—I think furthering discussions on environmental strate- on the Company’s target profile, the type of expertise the onward, we will cohesively manage succession plans in con- Company enters a new phase of growth. One of the issues gies, with reference to expert opinions, is necessary. Board should possess. Moreover, I believe that these initia- junction with a range of measures, including the training of related to this evolution is the position and role of the Board in tives were extremely effective in enhancing the transparency existing directors and the development of future management the Company. To give one specific example, due to its institu- Ikeda Lastly, in enabling the Company to continue evolving of MOL from an external viewpoint. personnel. tional design, MOL has a Board that has for some time played its governance, I believe that my role as chairman of the a major role in execution. Consequently, the Board spends Board is to manage it in ways that encourage lively discus- Ikeda In revising the skills matrix for directors recently, Katsu As succession plans are managed in such a way, I considerable time deliberating decisions on individual proj- sions on long-term strategies. Further, I see my role as we advanced our approach by clearly separating and discuss- hope that the diversification of directors will also progress in ects. On the other hand, I believe that we should strengthen ensuring that the opinions expressed in these discussions are ing experience and knowledge universally required in corpo- terms of nationality, gender, age, and experience. In particu- the Board’s primary roles, such as discussing the formulation properly conveyed to Executive Committee members, that rate management and experience and knowledge required in lar, the fundamental ideas about corporate management of of medium- to long-term strategies, the monitoring of invest- appropriate action is taken based on these opinions, and that the management of a company that provides marine trans- non-Japanese executives are varied, and I think being ment progress, and Companywide risk management. feedback is provided to the Board on the results of these port, which is a highly specialized industry. The previous skills exposed to opinions based on overseas perspectives will lead To secure time for such discussions and enhance the actions. To these ends, open communication between the matrix for directors did not differentiate clearly between these to new ideas. Board’s effectiveness, we have been conducting Deliberation Board and Executive Committee members is indispensable. two types of experience and knowledge. As a result, we were Moving on to the revision of the director remuneration on Corporate Strategy and Vision (→ page 69) and transfer- Accordingly, I will actively play a bridging role between the two able to renew our common understanding of the types of plan in fiscal 2021, the incorporation into the evaluation ring authority to the Executive Committee and below. groups. I will also endeavor to improve the governance of the experience and knowledge that are truly needed by the senior system of highly transparent financial indicators for single However, I feel that these measures are reaching the limit of Company with reference to the recommendations you have management team of MOL as a social infrastructure group fiscal year performance-based remuneration and long-term their usefulness. Although this is not an issue on which we provided today. centered on marine transport. target contribution-based remuneration was a major achieve- We also deepened discussions on the types of knowledge ment. On the other hand, we spent considerable time discuss- can reach a conclusion immediately, we plan to proceed with discussions at the Corporate Governance Council including a that the Board should acquire going forward. Experience and ing how to incorporate ESG indicators into the director review of institutional design. knowledge are notably lacking in relation to technologies, remuneration plan in fiscal 2021, but this issue has been left including IT and DX skills. unresolved. I hope that the Remuneration Advisory Committee will continue to discuss the issue in fiscal 2022. Katsu Looking at the examples provided by other compa- nies, some have chief digital officers on their boards of direc- Ikeda When we were discussing revision of the director tors. Technologies and data analysis will be indispensable for remuneration plan, initially some suggested that we should the evolution of the Company’s customer services. Also, incorporate ESG indicators. In fact, we included safety indica- having a Board that comprises members with different attri- tors in the director remuneration plan ahead of time. butes and fields of activity is very good in the sense that dis- Meanwhile, an essential concept underpinning the director cussions cover a range of opinions. remuneration plan is that the adopted indicators must be closely linked to MOL’s business performance and the I feel that the Board of Directors is increasingly becoming a body that is focused on performing a supervisory role and examining and determining strategies. Etsuko Katsu 62 63 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Board of Directors and Audit & Supervisory Board Members (As of June 22, 2022) Internal Directors Nomination Advisory Committee member Remuneration Advisory Committee member * Only important concurrent positions and certification registration years have been included in the resumes of outside directors and outside Audit & Supervisory Board members. Internal Audit & Supervisory Board Members Outside Audit & Supervisory Board Members Representative Director Junichiro Ikeda Born 1956 Number of the Company’s shares held: 96,300 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Director: 9 years Apr. 1979 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2004 General Manager of Human Resources Division Jun. 2007 General Manager of Liner Division Jun. 2008 Executive Officer Jun. 2010 Managing Executive Officer Jun. 2013 Director, Senior Managing Executive Officer Jun. 2015 Representative Director, President, Chief Executive Officer Apr. 2021 Representative Director, Chairman Executive Officer (to present) Representative Director Takeshi Hashimoto Born 1957 Number of the Company’s shares held: 44,700 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Director: 7 years Apr. 1982 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2008 General Manager of LNG Carrier Division Jun. 2009 Executive Officer, General Manager of LNG Carrier Division Jun. 2011 Executive Officer Jun. 2012 Managing Executive Officer Jun. 2015 Director, Managing Executive Officer Apr. 2016 Director, Senior Managing Executive Officer Apr. 2019 Representative Director, Executive Vice President Executive Officer Representative Director Toshiaki Tanaka Born 1960 Number of the Company’s shares held: 27,900 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Director: 2 years Apr. 1984 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2011 General Manager of Iron Ore & Coal Carrier Division Jun. 2014 Executive Officer, General Manager of Iron Ore & Coal Carrier Division Jun. 2015 Executive Officer Apr. 2017 Managing Executive Officer Jun. 2020 Director, Managing Executive Officer Apr. 2021 Director, Senior Managing Executive Officer Apr. 2022 Representative Director, Executive Vice President Apr. 2021 Representative Director, President, Chief Executive Officer (to present) Executive Officer (to present) Director Kenta Matsuzaka Born 1961 Number of the Company’s shares held: 32,100 shares Attendance at the Board of Directors’ meetings: 15 of 15 (Attendance rate: 100%) Number of years as Director: 1 year Apr. 1984 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2014 General Manager of LNG Carrier Division Jun. 2015 Executive Officer, General Manager of LNG Carrier Division Apr. 2017 Executive Officer Apr. 2018 Managing Executive Officer Apr. 2021 Senior Managing Executive Officer Jun. 2021 Director, Senior Managing Executive Officer (to present) Outside Directors Director Yutaka Hinooka Born 1961 Number of the Company’s shares held: 19,500 shares Attendance at the Board of Directors’ meetings: 15 of 15 (Attendance rate: 100%) Number of years as Director: 1 year Apr. 1985 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2012 General Manager of Liner Division Apr. 2016 Executive Officer, General Manager of Liner Division Apr. 2018 Executive Officer Apr. 2019 Managing Executive Officer Jun. 2021 Director, Managing Executive Officer Apr. 2022 Director, Senior Managing Executive Officer (to present) Outside Director (Independent Officer) Hideto Fujii Number of the Company’s shares held: 6,600 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Outside Director: 6 years Jun. 2015 Adviser, Sumitomo Corporation Jun. 2016 Outside Director, Mitsui O.S.K. Lines, Ltd. Outside Director (Independent Officer) Etsuko Katsu Number of the Company’s shares held: 12,600 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Outside Director: 6 years Outside Director (Independent Officer) Masaru Onishi Number of the Company’s shares held: 9,000 shares Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Number of years as Outside Director: 3 years Apr. 2003 Professor, School of Political Science and Apr. 2013 Trustee, KEIZAI DOYUKAI (Japan Association of Economics, Meiji University Corporate Executives) Jun. 2016 Outside Director, Mitsui O.S.K. Lines, Ltd. Nov. 2016 Administrative Board Member, International Association of Universities (IAU) Apr. 2018 Chairman of Fund Management Advisory Committee, The Japan Foundation Mar. 2019 Outside Director (Audit and Supervisory Committee Member), Dentsu Group Inc. Jun. 2015 Trustee, International University of Japan Jul. 2018 Visiting Professor, Toyo University Jun. 2019 Outside Director, TEIJIN LIMITED Jun. 2019 Outside Director, Mitsui O.S.K. Lines, Ltd. Feb. 2021 Senior Advisor, Alton Aviation Consultancy Japan Co.,Ltd. Jun. 2021 Outside Director, Kadoya Sesame Mills inc. Please visit our website for details on the positions and duties of executive officers and Group executive officers. https://www.mol.co.jp/en/corporate/executive/index.html Audit & Supervisory Board Member Toshiaki Takeda Born 1964 Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Attendance at the Audit & Supervisory Board Members’ meetings: 11 of 11 (Attendance rate: 100%) Number of years as Audit & Supervisory Board Member: 3 years Audit & Supervisory Board Member Masanori Kato Born 1961 Attendance at the Board of Directors’ meetings: 15 of 15 (Attendance rate: 100%) Attendance at the Audit & Supervisory Board Members’ meetings: 9 of 9 (Attendance rate: 100%) Number of years as Audit & Supervisory Board Member: 1 year Outside Audit & Supervisory Board Member (Independent Officer) Junko Imura Attendance at the Board of Directors’ meetings: 18 of 18 (Attendance rate: 100%) Attendance at the Audit & Supervisory Board Members’ meetings: 11 of 11 (Attendance rate: 100%) Number of years as Outside Audit & Supervisory Board Member: 3 years Outside Audit & Supervisory Board Member (Independent Officer) Satoru Mitsumori Attendance at the Board of Directors’ meetings: – Attendance at the Audit & Supervisory Board Members’ meetings: – Number of years as Outside Audit & Supervisory Board Member: – Apr. 1986 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2015 General Manager of General Nov. 1985 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2013 General Manager of Marine Affairs Division Apr. 2018 General Manager of Secretaries & General Affairs Division Jun. 2019 Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Safety Division Apr. 2016 Executive Officer Apr. 2017 Managing Executive Officer Apr. 2021 Adviser Jun. 2021 Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Aug. 1994 Registered as a certified public Apr. 1993 Registered as an attorney at law accountant Sep. 2015 Visiting Professor, Tama Graduate School of Business Jul. 2018 Established Imura Accounting Office Jun. 2019 Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. Dec. 2019 Outside Audit & Supervisory Board Member, T. HASEGAWA CO., LTD. at Daini Tokyo Bar Association Joined Asahi Law Offices (currently serves as Managing Partner) Apr. 2008 Family Affairs Conciliator, Tokyo Family Court Oct. 2011 Extraordinary Member, Government Panel Addressing Disputes Over Compensation for Nuclear Accidents Apr. 2018 Audit & Supervisory Board Jun. 2020 Outside Director, Audit and Member, Kur & Hotel Co., Ltd. Supervisory Committee Member, Mitsubishi UFJ Trust and Banking Corporation Jun. 2022 Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. Specific Experience, Expertise, and Skills Expected of Members of the Board of Directors (For details on revisions implemented at the end of fiscal 2021, please refer to page 59.) Experience, etc., considered important for corporations Experience, etc., considered important for corporations supporting social infrastructure Corporate management Finance / Accounting Legal affairs / Risk management ESG Human resources / Diversity Safety Technology Marketing / Business strategy Global business Junichiro Ikeda Representative Director Takeshi Hashimoto Representative Director Toshiaki Tanaka Representative Director Kenta Matsuzaka Director Yutaka Hinooka Director Hideto Fujii Outside Director Etsuko Katsu Outside Director Masaru Onishi Outside Director Toshiaki Takeda Audit & Supervisory Board Member Masanori Kato Audit & Supervisory Board Member Junko Imura Audit & Supervisory Board Member Satoru Mitsumori Audit & Supervisory Board Member l a n r e t n I e d i s t u O l a n r e t n I e d i s t u O s r o t c e r i D f o d r a o B s r e b m e m d r a o B y r o s i v r e p u S & t i d u A ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● ● 64 65 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information for facilitating unrestricted discussion and incorporating Audit & Supervisory Board Corporate Governance Corporate Governance as the Foundation of Business Management At the same time as being one of the MOL Group’s five the Board of Directors, the Executive Committee, and other Sustainability Issues, corporate governance provides a foun- bodies and councils to fulfill required functions and roles, dation for the other four Sustainability Issues and for the such as establishing Companywide strategies, identifying implementation of Rolling Plan 2022. In recent years, the fields for new forays, determining resource allocation, Company’s business structure has become more complex. In screening individual investments and businesses, and manag- addition to its simple, long-standing business model of trans- ing and monitoring risk as well as ensuring that the initiatives porting goods from one point to another, the Company has implemented in relation to such matters help address the entered into such upstream and downstream areas as FPSOs Sustainability Issues. and FSRUs. The Company is building a system that enables Corporate Governance Structure In addition to the audit functions performed by the Audit & Supervisory Board, which is independent from the Board of outside knowledge with respect to overall issues related to Directors, the Board of Directors comprises internal directors, the enhancement and strengthening of the corporate gover- who are also responsible for the execution of business opera- nance structure. The council is helping to improve the effec- tions, and outside directors, who specialize in supervisory tiveness of the Board of Directors by providing it with reports functions. MOL realizes operations that are legally compliant, and recommendations. Further, the Company complies with appropriate, and efficient by ensuring that the supervisory all principles of Japan’s Corporate Governance Code. capabilities of the Board of Directors are effective. In fiscal 2021, the Corporate Governance Council was established under the Board of Directors to serve as a forum For details, please refer to the corporate governance report https://www.mol.co.jp/en/sustainability/governance/corporate/report/ pdf/governance.pdf?v=0622 Corporate Governance Organization (As of June 22, 2022) Chairman Male Female General Meeting of Shareholders Elect and appoint / Dismiss Board of Directors (Total: 8) Business audit / Accounting audit Elect and appoint / Dismiss Audit & Supervisory Board (Total: 4) Internal members: 2 Outside members: 2 Collaborate Elect and appoint / Dismiss Accounting Auditors Report Internal directors: 5 Outside directors: 3 Accounting audit Audit & Supervisory Board Manager Elect and appoint / Supervise Elect and appoint / Supervise Submit basic management policies and other issues for discussion Executive Committee (Total: 13) CEO Executive directors: 5 (including the CEO) Executive officers: 8 Report Report Nomination Advisory Committee (Total: 5) Chair of committee: Hideto Fujii Remuneration Advisory Committee (Total: 5) Chair of committee: Etsuko Katsu Outside directors: 3 Internal directors: 2 Report / Advise Corporate Governance Council (Total: 10) Chair of council: Masaru Onishi Outside directors: 3 Internal directors: 2 Outside directors: 3 Audit plan / Audit report Internal directors: 3 Provide direction on important business issues Submit to the Executive Committee after preliminary deliberations Submit for discussion and/or report on important business and other issues Executive Officers (Total: 28) Committees under the Executive Committee Rolling Plan Special Committee, Investment and Finance Committee, Environment & Sustainability Committee, Improvement of Work Efficiency Committee, Operational Safety Committee, Compliance Committee Outside Audit & Supervisory Board members: 2 Internal Audit & Supervisory Board members: 2 Submit for discussion and / or report on important business and other issues Business audit / Accounting audit Instruct Report Collaborate Corporate Audit Division Executive directors: 5 Executive officers: 18 Group executive officers: 5 Divisions / Branches / Vessels / Group companies Major Organizations Board of Directors As the central decision-making body of the Company, the Board directors, outside directors, and outside Audit & Supervisory of Directors deliberates and adopts resolutions on basic poli- Board members participate in a free exchange of opinions. (For cies and the most important matters in relation to the business details on the main agenda items discussed, please see page management of the MOL Group. The Board of Directors is 69.) These exchanges of opinions are utilized in the formulation focused on supervision and the analysis of strategy, with delib- of each fiscal year’s management plan. Moreover, since fiscal eration and decisions on individual issues delegated to the 2018 Board member discussion sessions have been held as Executive Committee as much as possible. Specifically, one required after meetings of the Board of Directors to provide an hour of each three-hour meeting of the Board of Directors is opportunity for early information sharing and discussion on devoted to Deliberation on Corporate Strategy and Vision, in important matters that have yet to reach the stage of being which one topic related to management strategy, the long-term formally submitted as agenda items. vision, or general management is discussed, and internal The Audit & Supervisory Board draws up audit plans and deliberation and decision-making processes. By combining reports and shares the results of audits. All Audit & the information held by the full-time members with the high Supervisory Board members attend meetings of the Board level of specialized expertise of the outside members, MOL of Directors, and full-time members also attend Executive has created a system that ensures the active exercise of Committee and other committee meetings to audit the authority from an objective standpoint. Nomination Advisory Committee and Remuneration Advisory Committee The Nomination Advisory and Remuneration Advisory com- three outside directors, the chairman, and the CEO. The mittees have been voluntarily established as organizations Nomination Advisory Committee deliberates the election, under the Board of Directors. Nominating candidates for the appointment, and dismissal of directors and executive position of director and formulating proposals on remunera- officers. From an objective standpoint, the Remuneration tion are fundamental corporate governance functions, and the Advisory Committee examines director remuneration, establishment of these organizations is intended to facilitate including incentives for the long-term enhancement of in-depth deliberations by expert committees. Both commit- corporate value. tees are chaired by outside directors and are composed of Main Agenda Items Deliberated by the Advisory Committees in Fiscal 2021 Nomination Advisory Committee (convened six times) Chair of committee: Masaru Onishi (outside director) Main Agenda Items Remuneration Advisory Committee (convened nine times) Chair of committee: Hideto Fujii (outside director) Main Agenda Items • Target profile, composition, and skills matrix of the Board of Directors • Selection of the next CEO based on the succession plan for the CEO and the method of selecting a successor in the event of an emergency • Appointment of fiscal 2022 directors, Audit & Supervisory Board members, and executive officers • Election, appointment, and dismissal of Audit & Supervisory Board members and other matters • Fiscal 2020 director bonuses and fiscal 2021 director remuneration • Revision of the remuneration plan for non-executive directors • Analysis of the peer group to ensure the appropriateness of remuneration levels • Policy for decisions on such matters as the remuneration of individual directors and other matters Corporate Governance Council With the aim of enhancing and strengthening the corporate governance structure, the Corporate Governance Council was established under the Board of Directors in fiscal 2021 to serve as a forum for facilitating specialized ongoing discussions on corporate governance that incorporate outside knowledge. Appointed by the Board of Directors, the council’s members comprise three internal directors, all three outside directors, and all four Audit & Supervisory Board members. The council has a high degree of expertise and objectivity. In addition to being chaired by an outside director, the council is able to appoint outside experts and have them participate in deliberations. Main Agenda Items Deliberated by the Corporate Governance Council (convened four times in fiscal 2021) Chair of council: Etsuko Katsu (outside director) • Role of the Corporate Governance Council and selection of topics for deliberation • Identification of corporate governance issues in the MOL Group in light of revisions to Japan’s Corporate Governance Code • Revision of internal rules to secure time for deliberations by the Board of Directors • Various issues (cross-shareholdings and improvement of the skills of directors and Audit & Supervisory Board members) and other matters Executive Committee and Committees under the Executive Committee Within the scope of the basic policy approved by the Board of Directors, MOL transfers a significant amount of authority to conduct businesses to the Executive Committee. This helps to expedite decision-making on individual matters. Six committees exist under the Executive Committee to study and deliberate particularly important matters which are brought to the Executive Committee, as well as cross-divisional propositions. 66 67 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Corporate Governance Appointment and Dismissal Procedures of Directors and Audit & Supervisory Board Members The Nomination Advisory Committee has been established to With due consideration for the reports submitted by the heighten the objectivity, transparency, and accountability of Nomination Advisory Committee, the Board of Directors the selection procedures of directors and Audit & Supervisory determines candidate directors and candidate Audit & Board members. The committee submits reports to the Board Supervisory Board members. of Directors after selecting candidates in light of standards established by the committee on gender equality and other issues as well as the experience, expertise, and skills deemed desirable for members of the Board of Directors, which were identified in the form of a renewed skills matrix at the end of fiscal 2021. (Reports on candidates for the position of Audit & Supervisory Board member are submitted upon receiving the consent of the Audit & Supervisory Board.) To strengthen audit functions, outside Audit & Supervisory Board members also attend meetings of the Nomination Advisory Committee and can state opinions. CEO Succession Plan To ensure the appointment of a suitable CEO in a timely and Standards for Appointing Directors a) Personnel who are able to contribute to enhancement of the corpo- rate value of the Company based on a wealth of experience and knowledge b) Personnel who are able to make management decisions globally from a broad-ranged perspective and foresight c) Personnel with high ethical standards and solid common sense Standards for Appointing Audit & Supervisory Board Members a) Personnel who have an appropriate set of experience, qualification, ability, and expertise b) Personnel who possess a high degree of financial and accounting knowledge (more than one member) the re-appointment and dismissal of the incumbent CEO, and appropriate manner, in fiscal 2019 the Company formulated submits reports to the Board of Directors. a CEO succession plan that establishes the requirements and Based on the aforementioned plan, in fiscal 2021 the selection process in relation to the position of CEO as well Nomination Advisory Committee deliberated the selection of as a development plan for successor candidates. candidates for the next CEO and selection reasons, a develop- Based on the succession plan, the Nomination Advisory ment strategy, and a method of selecting a successor in the Committee deliberates proposals for the next CEO, including event of an emergency. Independence Criteria for Outside Officers The Company has established the following criteria for the independence of outside directors and outside Audit & Supervisory Board members. With reference to said criteria, all incumbent outside directors and outside Audit & Supervisory Board members are deemed to have independence. Independence Criteria The Company deems a person to have independence if none of the following items of the independence criteria is applicable to them. 1 A person who is an executing person of the Company or its subsidiar- ies or a person who has served as an executing person of the Company or its subsidiaries during the past 10 years 8 A person who is an accounting auditor of the MOL Group; an employee of such an accounting auditor; or a person who has fallen under either category during the past three years 2 A current major shareholder of the Company; an executing person of such a shareholder; or a person who has fallen under either category during the past three years 3 An executing person of a company in which the MOL Group directly or indirectly holds 10.0% or more of the total voting rights or a person who has fallen under this category during the past three years 4 An executing person of a company that has accepted a director from the MOL Group; an executing person of the parent company or a subsidiary of such a company; or a person who was an executing person of any such company during the past three years 5 An executing person of a financial institution or other major creditor that is essential to the MOL Group’s financing to the extent of being irreplaceable or an executing person of the parent company or a major subsidiary of such a financial institution or other major creditor 6 A party for whom the MOL Group is a major business partner; if the party is a company, an executing person of the company or of its parent company or major subsidiary; or a person who was an executing person of any such company during the past three years 7 A major business partner of the MOL Group; if the business partner is a company, an executing person of the company or of its parent company or major subsidiary; or a person who was an executing person of any such company during the past three years 9 A consultant, an accounting professional, or a legal professional to whom the MOL Group provides remuneration that is in the form of significant sums of money or other assets and does not include the remuneration of directors or a person who has fallen under any of these categories during the past three years 10 A person to whom the MOL Group provides donations or grants exceeding a certain amount or a person who has fallen under this category during the past three years 11 A close relative of a person to whom any of the aforementioned items 1 through 10 is applicable 12 Any other person who may have a conflict of interest with general share- holders and whose circumstances can reasonably be deemed to prevent the person from fulfilling duties as an independent outside officer For details on Independence Criteria for Outside Officers, please refer to the following. Criteria for Outside Officers, page 19, Notice of Convocation of the Ordinary General Meeting of Shareholders for fiscal 2021 https://www.mol.co.jp/en/ir/stock/gms/pdf/notice22.pdf Initiatives for the Realization of the Functions of Outside Directors and Outside Audit & Supervisory Board Members Support provided to outside directors and outside Audit & Supervisory Board members in fiscal 2021 • Implementation of training for officers • Provision of prior explanations in person or in writing of matters to be dis- cussed by or reported to the Board of Directors as well as the acceptance of questions from directors and Audit & Supervisory Board members and the provision in advance of responses from the executive officers in charge Major activities of outside directors and outside Audit & Supervisory Board members in fiscal 2021 • Lectures and discussions at management schools • Participation in naming and delivery ceremonies for new vessels • Participation in the safe operation campaign Initiatives to Enhance the Effectiveness of the Board of Directors Evaluation of the Effectiveness of the Board of Directors With the aim of further increasing the effectiveness of the Board of Directors and its subordinate committees—namely, the Nomination Advisory and Remuneration Advisory committees and the Corporate Governance Council—the Company conducts an annual survey, which seeks self-evaluations from each director and Audit & Supervisory Board member regarding the content of agenda items and deliberations, the contribution of each member of the Board of Directors, and the management and administra- tion of its activities. The results of this analysis and evaluation as well as the identification of issues and the analysis and implemen- tation of improvement measures are incorporated into a one-year schedule. Respondents 13 officers, comprising all directors (six internal directors and three outside directors) and all Audit & Supervisory Board members (two full-time Audit & Supervisory Board members and two outside Audit & Supervisory Board members) Summary of Survey Implementation Implementation and Evaluation Method February 2022 April 2022 April 2022 Provision of effectiveness evaluation survey to all directors and Audit & Supervisory Board members Discussion at the Corporate Governance Council based on the results At a meeting of the Board of Directors, separate reports and discussions on items for which effectiveness was established, on items identified as issues, and on items to be addressed in fiscal 2022 Main Items in Self-Assessment Survey • Overall assessment of the Board of Directors (composi- tion, administration, management plans, risk manage- ment system, internal control, compliance, sustainability-related items, nomination, and remuneration) • Content of fiscal 2021 initiatives ― Effectiveness of Deliberation on Corporate Strategy and Vision ― Effectiveness of the Nomination Advisory and Remuneration Advisory committees ― Effectiveness of the Corporate Governance Council ― Mutual supervision and monitoring among directors and Audit & Supervisory Board members Results of Fiscal 2021 Evaluation Items for Which Effectiveness Was Established 1 The Board of Directors deliberated individual issues based on the MOL Group Corporate Mission, the MOL Group Vision, and the MOL CHARTS values as well as the general goals of the management plan. Also, in Deliberation on Corporate Strategy and Vision, sufficient time for the discussion of management strategies and individual business strate- gies was secured, and the Board of Directors played an effective role in the execution of respective strategies. 2 The deliberations of the Nomination Advisory and Remuneration Advisory committees were reported in a transparent and objective manner to the Board of Directors. In addition, both advisory committees and the Corporate Governance Council convened with an appropriate frequency and certain progress was achieved. 3 Supervision was appropriate, including mutual monitoring and checks among directors and Audit & Supervisory Board members. Issues Recognized by the Board of Directors 1 Ongoing initiatives that are based on discussion of the new skills matrix which ensure the skills and diversity needed for the Board of Directors 2 Selection of issues that really need discussion by the Board of Directors and measures to secure the time for the deliberation of such issues (need for continuous discussion on the management and administra- tion of the activities of the Board of Directors as well as the delegation of authority and organizational design) 3 Clarification of approach to the cost of capital and continuous discus- sion on the allocation of resources, including human capital, intellec- tual property, and safety management 4 Continuous discussion on the Groupwide governance structure, risk mapping, and internal control Fiscal 2022 Initiatives 1 Use the Corporate Governance Council as a forum to fully discuss the selection of issues that should really be discussed at meetings of the Board of Directors (Deliberation on Corporate Strategy and Vision) 2 Make structural improvements that help enhance deliberations (delegation of authority, organizational design, and enhancement of the participation and contribution of each director and Audit & Supervisory Board member) 3 Establish a road map for the realization of a Board of Directors whose composition is based on the new skills matrix 4 Establish a basic policy on corporate governance for the MOL Group Deliberation on Corporate Strategy and Vision Beginning in fiscal 2021, the agenda items shown in the table below were selected and deliberated. The deliberation at meetings of the Board of Directors of overall issues related to the management plan and the MOL Group Vision facilitates effective deliberation of individual business issues. In light of deliberations at meetings of the Board of Directors, Nomination Advisory and Remuneration Advisory committees, and Corporate Governance Council, the Company establishes appropriate topics and ensures that Deliberation on Corporate Strategy and Vision contributes to the enhancement of corporate value. Main Agenda Items of Deliberation on Corporate Strategy and Vision Conducted by the Board of Directors in Fiscal 2021 Month and Year Agenda Item Month and Year Agenda Item April 2021 Outlook for the containership business October 2021 Strategy of the dry bulk business May 2021 July 2021 Outlook for the real property business December 2021 Goals of the next management plan Plans for the domestic terminal business January 2022 General assessment of overall risks (risk mapping) September 2021 Portfolio and investment strategy April 2022 Diversity of human resources 68 69 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Corporate Governance Remuneration Plan for Directors and Audit & Supervisory Board Members Remuneration of Executive Directors Given the business characteristics of marine transport, contribution to the enhancement of both short-term performance and medium- to long-term performance is expected. Accordingly, the remuneration of executive directors comprises monthly remunera- tion, single fiscal year performance-based remuneration, and long-term target contribution-based remuneration. (The Company changed to the current remuneration plan in fiscal 2021.) Model Remuneration Assuming Achievement of Performance Targets Fixed remuneration 60% Variable remuneration 40% Monthly remuneration (cash) 60% Single fiscal year performance-based remuneration (cash) 20% Long-term target contribution-based remuneration (stock) 20% Note: The above diagram is an approximation that has been calculated premised on certain Company performance and share price levels. The above percentages change in accordance with the Company’s business performance and share price. Monthly Remuneration (Cash) Single Fiscal Year Performance-Based Remuneration (Cash) Monthly remuneration is paid as a fixed remuneration based on responsibilities to encourage robust business execution. Single fiscal year performance-based remuneration links remuneration to consolidated ordinary profit, which is a performance indicator set out in the Rolling Plan, thereby incentivizing achievement of the plan’s goals. This type of remuneration also links remuneration to the safe opera- tions KPI and the 4 ZEROES benchmark, thereby reflecting safety in evaluations and fostering a greater awareness of safety. In addition, to provide an incentive for directors to improve the performance of the business divisions for which they are responsible, in addition to Companywide performance the degree of achievement of the profit targets of respective business divisions is reflected in the amount paid. Long-Term Target Contribution-Based Remuneration (Stock) MOL has introduced a performance-linked stock remuneration system with the objective of aligning the interests of directors more closely with those of shareholders by increasing the number of Company shares that directors own and with the objective of linking remuneration to the Company’s medium- to long-term share price and performance. Under this system, stock is granted based on the degree of achievement of predetermined share price indicators as well as earnings benchmarks and targets over a certain time frame. A portion of this remuneration is paid in cash as a source of funds for income tax payments by the director. Remuneration of Non-Executive Directors Upon receiving the approval of the General Meeting of Shareholders convened in June 2022, in fiscal 2022 the Company began pro- viding remuneration in the form of Company stock to non-executive directors, including outside directors. Aim of the Revision Main Features of the Revision To incentivize sustained enhancement of the Company’s corporate value and further align the interests of directors with those of shareholders Number of shares granted not linked to business performance Restriction on transfer of shares until retirement Before revision After revision Fixed cash remuneration (100.0%) Fixed cash remuneration (90.0%) Note: The above diagram is an approximation of the remuneration breakdown premised on a certain Company share price level. Restricted stock remuneration (10.0%) Fiscal 2022 Stock Remuneration Shares of common stock 1,485 ¥3,030.00 per share Total stock remuneration ¥4,499,550 Remuneration of Audit & Supervisory Board Members The breadth of knowledge required of Audit & Supervisory Board members and the gravity of their responsibilities are increasing due to the expansion of the Company’s business domain from traditional marine transport to encompass non-marine transport businesses—including offshore, logistics, and real property businesses—and due to changes in quality and quantity of the Company’s risk exposure, which reflects a rise in the levels of social responsibility that corporations are expected to meet. Against this backdrop, the Company has increased the remuneration limit of Audit & Supervisory Board members from ¥9.0 million per month to ¥12.0 million per month, the first time this limit has been changed in 17 years. In fiscal 2021, the degrees of achievement of KPIs, which were used as the basis of the calculation of single fiscal year performance- based remuneration and long-term target contribution-based remuneration, were as shown in the table below. Remuneration for Directors and Audit & Supervisory Board Members in Fiscal 2021 Calculation Results and Total Payment ¥656.0 million KPI Weight Targets and KPIs of Rolling Plan 2021 and the MOL Sustainability Plan Fiscal 2021 Results (A) Consolidated ordinary profit (loss) (B) Ordinary profit (loss) by division (C) Degree of achieve- ment of safe opera- tions indicators Total shareholder return* (growth rate versus TOPIX and growth rate of total shareholder return versus competitors) Calculation through comprehensive consideration of factors (A), (B), and (C) • ¥100.0 billion • ¥721.7 billion • Dry bulk business: ¥13.0 billion • ¥43.2 billion • Energy and offshore businesses: ¥26.0 billion • ¥19.8 billion • Product transport business: ¥55.0 billion • ¥662.9 billion • Associated businesses: ¥10.0 billion • ¥7.4 billion • 4 ZEROES violations: 0 • 5 (violations accompanying 3 accidents) • Downtime frequency rate: 1.00 incident per ship per year • 0.29 • Average downtime: 24.00 hours per ship per year • 25.34 • Lost time injury frequency: 0.50 injuries • 0.19 30% — • Growth rate versus TOPIX: 208.7% ROE 40% • Fiscal 2021 (initial projection): 15.0% • Fiscal 2027 (target): 10.0–12.0% • 76.5% ¥157.0 million Targets for individual directors 30% — • Execution of Rolling Plan 2021 • Improvement of financial strength • Conversion of DAIBIRU and Utoc into wholly owned subsidiaries Etc. (set according to each director’s field of responsibility) Single Fiscal Year Performance- Based Remuneration Long-Term Target Contribution- Based Remuneration * The total of capital gains and dividends 70 Category Number of people Total remuneration, by type (millions of yen) Total remuneration (millions of yen) Basic remuneration Monthly remuneration (cash) Performance-based remuneration Single fiscal year performance-based remuneration (cash) Non-monetary remuneration Performance-linked stock remuneration (stock-based) Directors (of whom outside directors) Audit & Supervisory Board members (of whom outside Audit & Supervisory Board members) Total (of whom outside direc- tors or outside Audit & Supervisory Board members) 9 (3) 1,175 (41) 362 (41) 656 (0) 157 (0) 5 (2) 95 (24) 95 (24) ― (―) ― (―) 14 (5) 1,270 (65) 457 (65) 656 (0) 157 (0) Notes: 1. The above remuneration includes remuneration related to one Audit & Supervisory Board member who was not an outside Audit & Supervisory Board member and who resigned at the conclusion of the Ordinary General Meeting of Shareholders convened on June 22, 2021. 2. Amounts of less than ¥1.0 million have been rounded down to the nearest ¥1.0 million. 71 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Risk Management For more details on our risk management, please visit our website. https://www.mol.co.jp/en/ir/management/risk/index.html Overview of Risk Management As a company engaged in a wide range of operations around through hedging and the transfer of risk through insurance. the world, MOL is exposed to a variety of risks. In addition to In normal times, relevant business divisions submit proposals overseeing a risk management system, the Board of Directors and reports on individual measures to the Executive identifies new risks that need to be better managed and for- Committee and its subordinate committees, which enables mulates risk-related policies through the Corporate an understanding of and decision-making in relation to risks Governance Council and through Deliberation on Corporate throughout the Company. In the event of an emergency, Strategy and Vision. the CEO serves as director general, establishes a response As shown in the table below, divisions are assigned to headquarters that comprises the core members of the each individual risk, and pursuant with specific internal rules Executive Committee as well as related executive officers and and regulations each risk is quantified and risk mitigation general managers, and ensures an appropriate and prompt measures are taken, including the reduction of exposure response to the situation. Major Risks in Business Operations Risk Responsible Division Key Management Rules and Guidelines Operational risks Marine Safety Division Marine Technical Management Division Liquefied Gas Ship Management Strategies Division Legal Division Rules for Headquarters of Crisis Control, Rules for Headquarters of Emergency Control for Serious Marine Incidents, and manuals established by respective ship management companies Shipping market fluctuation risks, customer credit risks, and country risks Corporate Planning Division Asset Risk Control, Market risk management rules Exchange rate, interest rate, and bunker price fluctuation risks Climate change risks Finance Division (exchange rates, interest rates) Bunker Business Division (bunker prices) Environment & Sustainability Strategy Division Market risk management rules MOL Group Environmental Policy Statement, MOL Group Environmental Vision 2.1 Cybersecurity risks MOL Information Systems, Ltd. ICT governance rules, ICT security rules, and Critical ICT Incident Response Team Regulations Natural disaster and epidemic risks Secretaries & General Affairs Division and Marine Safety Division Rules for Crisis Management Office, Rules for Headquarters of Emergency Control for Disaster and Pandemic, and MOL BCP summary Compliance risks Corporate Audit Division Divisions responsible for Group company management Compliance rules, Group company management rules, Internal audit rules Risks related to human rights and various risks in the value chain Environment & Sustainability Strategy Division Human Resources Division MOL Group Human Rights Policy, MOL Group Basic Procurement Policy, MOL Group Supplier Procurement Guidelines, Declaration of Harassment Prevention, Compliance rules, and Rules of Conduct Measures to Upgrade Risk Management MOL faces risks stemming from changes in the value of its Control in the event of the actualization of a risk event that assets, which are the source of the Company’s business could significantly impact the business activities of the Group. returns, due to fluctuations in the shipping market. With such In such a contingency, this headquarters will strive to ensure risks in mind, in fiscal 2014 we introduced a framework for the continuity of the Group’s businesses, maintain corporate Total Risk Control, renamed Asset Risk Control in fiscal 2022. value, and implement appropriate countermeasures based on Under the framework, quantitative evaluations of risk are due consideration for social impact. We have also launched an conducted by verifying the adequacy of shareholders’ equity endeavor focused on establishing a risk assessment process levels relative to the amount of value at risk (VaR). Moreover, for the periodic identification and evaluation of the risks faced the Board of Directors and the Executive Committee regularly by certain Group companies. review these evaluations. (For details, please see page 27 as In addition, we aim to introduce a system that enables well as “Shipping Market Fluctuation Risks, Customer Credit overall analysis of geopolitical risks and sustainability-related Risks, and Country Risks” on the opposite page.) risks—both of which are becoming increasingly important due Further, we are continuing to upgrade administration to changes in the external environment—and produces results systems for risks related to project and ship management, the that can be used in management decision-making. In 2022, business continuity plan (BCP), and compliance. Based on the the Board of Directors conducted deliberations focused on an experience of responding to an oil spill off Mauritius caused in overall assessment of risks and began exploring the estab- August 2020 by the chartered vessel WAKASHIO, in 2021 we lishment of Companywide risk mapping. stipulated the establishment of a Headquarters of Crisis Risk Management-Strengthening Measures to Date Fiscal 2014 • Introduced Total Risk Control (now named Asset Risk Control) Fiscal 2017– Fiscal 2018 • Revised Total Risk Control (Increased the consistency of investment criteria) Fiscal 2018 • Introduced risk summary sheets for delibera- tions of the Board of Directors Fiscal 2019 • Promoted the introduction of a fuel surcharge in preparation for stricter SOx regulations • Prepared MOL Group Environmental Vision 2.1 • Introduced internal carbon pricing • Established a crisis response framework • Began strengthening initiatives for chartered Fiscal 2021 vessel owners • Began analysis aimed at upgrading Companywide risk management*1 • Began analysis with a view to strengthening Group company risk management *1 Risk mapping designed to identify overall risks and prioritize responses Summary of Major Risks and Countermeasures Risks Associated with Operations Centered on marine transport, MOL operates roughly 800 sufficient training, putting in place precise operational rules, vessels and offshore plants, and these vessels and plants are of providing support from our Head Office, and installing neces- many different types. As a company that provides social infra- sary facilities. structure, some of the most serious risks we face are damage Even in the event of an accident that could not be avoided to ships and cargo or injury to crew members caused by vessel despite our best efforts, involving damage to MOL or related collisions, ships running aground, fires and other accidents, as parties, the Company is prepared with insurance policies that well as environmental pollution from leakage of cargo oil and have the necessary amount of coverage (general liability insur- bunker oil (oil spills). To prevent accidents from occurring, ance, hull and machinery insurance, war-risk insurance, loss of without regard to owned vessels or chartered vessels, MOL’s hire insurance) in order to secure adequate funds for any com- Headquarters of Safety Operations, sales divisions, shipowners pensation and to avoid a major impact on the Company’s busi- (for chartered vessels), and ship management companies work ness performance. closely together on tangible and intangible aspects of safety, To mitigate reputational risk, MOL implements emergency from training and supervising crew members to adoption of response training once a year for major maritime accidents, safety standard specifications which effectively maintain the responding to the media and disclosing information about the safety of our vessels. We also make a variety of preparations to accident. Media consultants are hired when necessary. counter the dangers of piracy and terrorism by providing Shipping Market Fluctuation Risks, Customer Credit Risks, and Country Risks Another fundamental risk on a par with accidents in the To disperse risk, we use portfolio management that devel- marine transport business is the risk of fluctuations in the ops a fleet comprising diverse types of vessels subject to shipping market. To prevent excessive market risks, we different patterns of market fluctuation. This approach helps manage risks by (1) limiting the total amount of risks, (2) us to balance market risk across divisions, compensating for dispersing risks, and (3) reducing the amount of risks during peaks and troughs. each fiscal year. Last, we reduce the amount of risks during each fiscal To limit total risk exposure, we take steps to obtain year by using freight forwarding agreements (FFAs) to hedge medium- to long-term contracts with domestic and overseas risk on vessel types such as Capesize bulkers and VLCCs. customers that are highly creditworthy. In addition to narrowing We secure stable profits by reducing market exposure during down the portion of the fleet that is exposed to the market, we each fiscal year. work to minimize risks by setting vessel charter periods from We manage our total amount of shipping market risks shipowners to coincide with periods of contracts with custom- with a method we uniquely developed, called Asset Risk ers, thus neutralizing our exposure to market fluctuation. When Control (→ page 27), to periodically measure and control risks investing in vessels not allocated under medium- to long-term so that it does not become excessive in comparison with agreements, we carefully monitor future vessel supply–demand shareholders’ equity. balance and selectively execute such investments. 72 73 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Risk Management Exchange Rate, Interest Rate, and Bunker Price Fluctuation Risks Natural Disaster and Epidemic Risks Exchange Rates While the revenues of the Group’s core oceangoing marine Bunker Prices Bunker costs represent a large portion of ship operating To keep vessels operating even in the event of major earth- executive vice president. We implemented a range of mea- quakes or other natural disasters and to fulfill our social role sures to simultaneously ensure (1) securing the safety of transport business are mostly in U.S. dollars, some costs and costs, and in the past, price fluctuations had a significant of maintaining supply chains, we have formulated a BCP related parties, and reducing the risk of spreading the infec- borrowings are on a Japanese yen basis, presenting an impact on the MOL Group’s profits. However, currently, most manual and introduced satellite offices and backup systems, tion, and (2) fulfilling MOL’s mission to serve as social infra- exchange rate risk. MOL strives to limit its exposure by dollar- medium- to long-term contracts with customers contain and also provide ample training. We have completed the structure. We transitioned to full-time teleworking and rapidly izing costs and borrowings. To reduce this risk further, we bunker adjustment factor or bunker price surcharge clauses distribution of notebook PCs to all executives and employees identified any impacts on operating vessels and took neces- also flexibly employ foreign exchange hedging to limit profit that have the customer shoulder the risk of bunker price and put remote working environments in place that use sary measures. As a result, we have successfully maintained sensitivity. Interest Rates The MOL Group is constantly investing capital to build new fluctuations. For short-term contracts, we work out freight rates reflecting bunker prices at the time, or employ a formula to adjust freight rates that take into account changes in bunker prices. For the remaining exposure, we work to reduce the ships and replace existing ones. When securing long-term risk amount by using bunker forward trading. With these funding for capital investment, in principle we hedge interest countermeasures, the impact of bunker price fluctuations on rate risk by using fixed-rate loans or interest rate swaps. profit and loss is now very limited. Climate Change Risks cloud-based tools. In response to the ongoing COVID-19 business operations without any major disruptions, with the pandemic that started at the outset of 2020, in February 2020 exception of challenges for crew member changes due to MOL quickly launched a response headquarters led by an restrictions on travel between countries. Compliance Risks Compliance Initiatives In 2014, the Japan Fair Trade Commission (JFTC) found reports and consultations strictly confidential and ensure that personnel, including those cooperating with an investigation, that the MOL Group had violated Article 3 of the Japanese are not treated unfairly. We also welcome compliance-related Antimonopoly Act in certain car carrier shipping trades. In inquiries through our website from external parties, including By causing more severe weather and sea events, climate disclosed a road map for achieving this goal, and is now in the response, the MOL Group has updated its compliance rules, customers and suppliers both domestic and international. change such as global warming can present a danger to safe process of introducing clean alternative fuels and energy- which determine the scope and Rules of Conduct of its execu- ship operations. The movement toward decarbonization to saving technologies while increasing the sophistication of tives and employees, and provided ongoing training to ensure Initiatives to Comply with Antitrust Laws and Prevent combat climate change has the potential to drastically change efficient fleet operations. By developing and providing solu- the business environment for MOL, which requires large tions for alternative fuel transportation and low-carbon or that the importance of compliance—as the major premise of all corporate activities—is etched deeply into the minds of all Corruption The MOL Group takes rigorous measures to ensure compli- volumes of bunker oil and transports various kinds of fossil decarbonization technology, MOL views this change as a executives and employees, and make it the linchpin of deci- ance with the Antitrust Act and prevent corruption. We have energy as a main cargo, in the context of higher costs to business opportunity as decarbonization stimulates new sions in daily business operations. The Compliance an Antimonopoly Act Compliance Code and an Anti-Corruption comply with public regulations and a structural reduction demand. The MOL Group uses a TCFD framework to visualize Committee convenes every three months to discuss compli- (Anti-Bribery) Policy, as well as a Do’s & Don’ts Guide, which in transport demand. its climate change risks and formulate related policies. ance matters within the Group and respond to any violation provides a set of more specific guidelines. We also implement Under MOL Group Environmental Vision 2.1, which is in tune with these trends, MOL aims to achieve net zero GHG emissions by 2050. The Company has formulated and Cybersecurity Risks For details, please see “Conservation for Marine and Global Environment” on pages 46 to 49. MOL aims to prevent security incidents by implementing the following measures to counter cybersecurity risks that have increased in recent years. In the event one occurs, we will take steps to minimize any adverse effects. incidents. Further, the number and details of compliance a range of training sessions to keep all employees informed events are disclosed within the Company to raise awareness by providing them with overviews and points to note in relation among all executives and employees. to domestic and international laws and regulations. Compliance Advisory Service Desks The MOL Group has established internal and external compli- With respect to corruption prevention, in fiscal 2022 we formulated a new Anti-Corruption Policy. As an addition to the Groupwide coverage of existing anti-bribery rules, the new ance advisory service desks available in Japanese and policy calls on business partners involved in MOL’s business English. These service desks can be used by officers, employ- activities to comply with the rules. Further, to reflect the ees, and temporary staff of MOL and its Group companies. growing expectations of society in recent years, we have pre- The external advisory service desk is entrusted to an outside pared a version of the policy in English and posted the policy ❶ Create organization dedicated to cybersecurity, and establish a response system for serious ICT incidents (strengthen collabora- attorney to run. The attorney transmits reports and consulta- on our website. Moreover, the formulation of the policy is part tion across worldwide Group companies, including operating vessels) ❷ Standardizing internal regulations, security tools, IoT environment updates, and operations within the Group ❸ Assess Groupwide cyber risks and execute countermeasures ❹ Implement e-learning and targeted email training to improve security awareness and literacy of executives and employees ❺ To quickly gather information, coordinate with National Center of Incident Readiness and Strategy for Cybersecurity (NISC), JPCERT, Tokyo Metropolitan Police Department, Transportation ISAC Japan, and Nippon CSIRT Association ❻ Other: Build a cybersecurity management system (CSMS) for operating vessels that complies with international rules, strengthen network security with cloud security services, and assess and devise countermeasures for ransomware tions received to the Compliance Committee and continues to of an action plan under the “anti-bribery” initiative focus of serve as a liaison between the Company and people submit- the “governance and compliance to support businesses” ting reports or seeking consultations. Both service desks keep Sustainability Issue set out in the MOL Sustainability Plan. For details on information security, please visit our website. https://www.mol.co.jp/en/sustainability/governance/security/index.html For details on compliance, please visit our website. https://www.mol.co.jp/en/sustainability/governance/compliance/index.html 74 75 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Risk Management Risks Related to Human Rights and the Value Chain The MOL Group is stepping up measures related to respect for internal and external stakeholders, these policies and guide- human rights and responsible procurement, which are initia- lines underscore our commitment to human rights. Also, we tive focuses set out under the “governance and compliance to are reaching out to business partners to seek their under- support businesses” Sustainability Issue. In March 2022, we standing of and cooperation with the policies and guidelines newly established the MOL Group Human Rights Policy and so that together we can build a sustainable value chain based the MOL Group Supplier Procurement Guidelines and revised on due consideration for human rights, safety, and the the existing MOL Group Basic Procurement Policy. Targeting environment. Human Rights and Value Chain Policies and Guidelines MOL Group Human Rights Policy MOL Group Basic Procurement Policy MOL Group Supplier Procurement Guidelines Newly established Revised Newly established The policy reiterates the Group’s com- mitment to eliminating any violations of human rights in business activities as well as to advancing appropriate initia- tives to this end. The policy summarizes issues that must be taken into consideration in the pro- curement of the goods and services required by the Group for business activities. The recent revision clarifies the Group’s commitment to human rights. While the MOL Group Basic Procurement Policy cover the issues that the Group must take into consider- ation, the guidelines summarize issues on which the Group would like coopera- tion from business partners. Value Chain Management Having established and developed policies and guidelines, we related to the environment, human rights, and governance. will build a value chain management system while strength- Beginning from fiscal 2023, MOL will conduct activities aimed ening related in-house measures. By following the steps at reducing the risks identified while disclosing details of shown below, in fiscal 2022 we will formulate and introduce a initiatives in a timely and appropriate manner to ensure value chain monitoring system that incorporates human accountability to stakeholders. rights due diligence and ascertain the actual status of risks Steps That Will Establish Value Chain Management 00 Policy establishment 01 Implementation monitoring 00 Policy establishment Establishment of a human rights policy, basic procurement policy, and supplier procurement guidelines; periodic revision; and the explana- tion to suppliers of the purpose and details of policies and guidelines 01 Implementation monitoring Implementation of written and on-site surveys to confirm that policies and guidelines are being appropriately reflected in the value chain 04 Information dissemination Human rights due diligence 02 Issue identification 02 Issue identification Based on the clarification of actual and potential risks in the value chain through monitoring, identification of issues related to human rights, safety, and the environment that must be resolved 03 Improvement activities 03 Improvement activities 04 Information dissemination Improvement of initiatives that are aimed at addressing the identified issues and verification of the effectiveness of the improvements through monitoring conducted in the following fiscal year Steady dissemination of information on the Company’s initiatives to ensure their transparency For details on the MOL Group Basic Procurement Policy and the MOL Group Supplier Procurement Guidelines, please visit our website. https://www.mol.co.jp/en/sustainability/governance/procurement/index.html For details on the MOL Group Human Rights Policy and human rights due diligence initiatives, please visit our website. https://www.mol.co.jp/en/sustainability/governance/human/ Initiatives for Specific Business Partners The MOL Group’s Value Chain Owned vessels Shipbuilding Crew manning Bunker oil supply Marine transport Cargo handling (loading and unloading) Vessel maintenance Vessel sale and recycling Related stakeholders Shipyards Ship management companies Crew manning companies Bunker oil suppliers Stevedores Repair yards Vessel purchasers Vessel recycling yards Chartered vessels Delivery Bunker oil supply Marine transport Cargo handling (loading and unloading Redelivery Initiatives in Partnership with Chartered Vessel Owners Initiatives in Partnership with Vessel Recycling Yards To ensure high levels of safety throughout our fleet, we not Upon reaching the end of their service lives, vessels must be only apply the MOL Safety Standard Specifications to our scrapped (recycled) to ensure the safe operation of fleets and owned vessels but also to vessels procured under medium- marine environmental protection. By weight, approximately to long-term charter contracts. An additional aspect of our 95.0% of a vessel is recyclable, and we have our owned ves- efforts to heighten safety levels involves actively sharing sels recycled by selling them to companies that specialize in safety awareness and exchanging information and opinions vessel purchasing. Meanwhile, as vessel recycling is a labor- with shipowners through visits to their vessels and offices as intensive industry, the major vessel recycling yards are well as the holding of periodic liaison meetings with shipown- located in developing countries. At these yards, the manage- ers. Through such activities, we detect problems at an early ment of hazardous substances, environmental impact, and stage and take prompt countermeasures. Also, we revise the the occupational health and safety of laborers have become MOL Safety Standard Specifications whenever necessary. matters of international concern. To address such vessel In 2020, an accident off Mauritius—in which the recycling-related issues, the Hong Kong Convention for the WAKASHIO, a bulker chartered by MOL, ran aground and Safe and Environmentally Sound Recycling of Ships (the Hong spilled oil—had a considerable impact on the local communi- Kong Convention) was adopted by the International Maritime ties and the natural environment. Even though shipowners Organization in May 2009, and countries are advancing their are legally liable for accidents involving chartered vessels, respective ratification processes with a view to effectuation of we understand the social responsibility that we have to take the convention. The convention prohibits or limits the loading measures aimed at preventing the recurrence of such and use of hazardous materials on board vessels and requires an accident. In response to the WAKASHIO accident we are the preparation and updating of inventory lists that record the strengthening measures to ensure the safety levels of char- quantities and locations of hazardous materials on board. tered vessels. To further enhance the effectiveness of these Ultimately, this information must be provided to vessel recy- measures, in relation to safety levels, we will establish KPIs, cling yards. Further, the convention obligates vessel recycling develop databases, expand and enhance management and yards to establish appropriate management systems for support systems, and introduce new safety technologies. personnel safety and waste disposal. Partnering with shipowners, we will advance initiatives with a view to realizing world-leading safety levels. MOL Group Vessel Recycling Policy In realizing more-sustainable vessel recycling, we believe that vessel recycling yards must not only protect the environment and prevent occupational safety issues but also respect the human rights of workers. • We only select vessel recycling yards that have received third-party certification from Nippon Kaiji Kyokai, commonly known as ClassNK, for compliance with the Hong Kong Convention as well as prescribed environmental, safety, and labor standards. • Even after vessels have been sold to companies that specialize in vessel purchasing and delivered to vessel recycling yards, we visit the yards to check the progress of vessel breaking work and require yards to provide us with detailed reports. Environment Sustainable recycling of vessels Human Rights Safety 76 77 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceSustainability Strategy Value Creation StoryRolling Plan (Management Plan)Financial and Corporate Information Financial and Non-Financial Highlights For the year Shipping and other revenues Shipping and other expenses Selling, general and administrative expenses Operating profit (loss) Ordinary profit (loss) Income (loss) before income taxes and non-controlling interests 90,885 (24,459) (24,320) 92,946 (15,766) (28,568) (33,516) (137,938) 100,458 116,024 41,092 54,985 71,710 57,393 (25,615) 94,255 17,249 51,330 58,332 42,356 (66,656) 92,494 Profit (loss) attributable to owners of parent (26,009) (178,846) Free cash flow [(a) + (b)] Cash flows from operating activities (a) (129,298) 5,014 (25,285) 78,955 Cash flows from investing activities (b) (134,312) (104,240) (119,870) (159,150) Depreciation and amortization 85,624 94,685 83,983 87,803 GEAR UP! MOL RISE 2013 STEER FOR 2020 ROLLING PLAN 2012/3 2013/3 2014/3 2015/3 2016/3 2017/3 2018/3 2019/3 2020/3 2021/3 2022/3 (Millions of yen) ¥1,435,220 ¥1,509,194 ¥1,729,452 ¥1,817,069 ¥1,712,222 ¥1,504,373 ¥1,652,393 ¥1,234,077 ¥1,155,404 ¥ 991,426 ¥1,269,310 1,368,794 1,432,014 1,587,902 1,683,795 1,594,568 1,388,264 1,513,736 1,094,915 1,035,771 911,055 1,117,405 115,330 2,323 36,267 (154,385) (170,447) 182,508 209,189 (26,681) 92,771 113,551 2,558 25,426 23,303 5,257 (56,318) 17,623 (73,941) 87,190 115,972 22,684 31,473 (28,709) (47,380) (2,471) 98,380 101,442 37,718 38,574 46,778 26,875 (143,093) 55,248 (100,851) (198,341) 86,629 90,138 95,852 23,779 55,090 47,130 32,623 (6,527) 100,723 (107,250) 87,765 85,674 (5,303) 96,899 55,005 133,604 721,779 100,313 732,993 90,052 44,238 98,898 (54,660) 85,798 708,819 200,187 307,637 (107,450) 86,399 At year-end Total assets ¥1,946,161 ¥2,164,611 ¥2,364,695 ¥2,624,049 ¥2,219,587 ¥2,217,528 ¥2,225,096 ¥2,134,477 ¥2,098,717 ¥2,095,559 ¥2,686,701 Total tangible fixed assets 1,293,802 1,303,967 1,379,244 1,498,028 1,376,431 1,323,665 1,290,929 1,193,910 1,201,698 1,099,458 Total investments and other assets Interest-bearing debt Net assets Shareholders’ equity Amounts per share of common stock*1 249,228 869,619 717,909 637,422 323,468 422,426 577,157 1,046,865 1,094,081 1,183,401 619,492 535,422 783,549 679,160 892,435 782,556 353,197 381,097 425,300 524,411 533,320 637,736 1,044,980 1,122,400 1,118,089 1,105,873 1,096,685 1,026,994 646,924 540,951 683,621 571,983 628,044 511,242 651,607 525,064 641,235 513,335 699,150 577,782 1,111,152 1,187,472 1,000,697 1,334,866 1,274,570 Profit (loss) attributable to owners of parent (Yen) ¥ (72.53) ¥ (498.57) ¥ 159.97 ¥ 118.07 ¥ (475.00) ¥ 14.65 ¥ (132.05) ¥ 74.91 ¥ 90.93 ¥ 250.99 ¥ 1,970.16 Net assets (Yen) 1,777.57 1,492.53 1,893.00 2,180.87 1,507.60 1,594.08 1,424.94 1,463.46 1,430.77 1,610.04 Cash dividends applicable to the year (Yen) 16.67 0.00 16.67 23.33 16.67 6.67 6.67 15.00 21.67 50.00 Management indicators Gearing ratio (Times) Net gearing ratio (Times) Equity ratio (%) ROA (%) ROE (%) Dividend payout ratio (%) 1.36 1.23 32.8 (1.3) (4.0) ― 1.96 1.58 24.7 (1.4) (30.5) ― 1.61 1.35 28.7 2.4 9.5 10.4 1.51 1.35 29.8 2.1 5.8 19.8 CO2 emissions of MOL Group*2 fleet (Thousand tons) Number of MOL Group*3 employees 19,660 9,431 18,876 9,465 17,810 10,289 18,803 10,508 Note: Rounded down to the nearest one million yen *1 The Company consolidated its common shares on the basis of one (1) share for every ten (10) shares effective October 1, 2017. Also, the Company split its common shares on the basis of three (3) shares for every one (1) share effective April 1, 2022. Figures have been calculated based on the supposition that said share consolidation and share split were implemented at the beginning of the fiscal year ended March 31, 2012. *2 The Company and its consolidated subsidiaries. The emissions of the containership operating company Ocean Network Express Pte. Ltd. (ONE), which began operations in fiscal 2018, are not included. (Since the issuance of MOL Report 2021, the emissions of ONE have been retroactively deducted from past figures to unify the scope of calculation.) *3 The Company and its consolidated subsidiaries 1.93 1.64 24.4 1.5 (25.8) ― 1.96 1.64 25.8 1.1 0.9 45.5 2.19 1.82 23.0 1.4 (8.7) ― 2.11 1.88 24.6 1.8 5.2 20.0 2.14 1.94 24.5 2.6 6.3 23.8 18,676 10,500 18,203 10,794 17,774 10,828 12,199 8,941 11,137 8,931 1.78 1.63 27.6 6.4 16.5 19.9 9,831 8,571 3,532.32 400.00 0.78 0.71 47.4 30.2 76.5 20.3 10,112 8,547 78 79 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceFinancial and Corporate InformationSustainability Strategy Value Creation StoryRolling Plan (Management Plan) The MOL Group’s Global Network United Kingdom Japan India Singapore ■ Headquarters and Chief Executive Representative Offices Chief Country / Regional Representative Offices Group company (50% stake or more) offices Countries and Regions with Group Offices (As of April 30, 2022) Europe / Africa United Kingdom Italy Netherlands Denmark Germany France Belgium Czech Republic Poland Russia Turkey Kenya Republic of South Africa Mozambique Republic of Mauritius East Asia / Southeast Asia / Oceania Vietnam Malaysia Myanmar Australia New Zealand Japan Republic of Korea China Taiwan Hong Kong Indonesia Thailand Philippines Singapore South Asia / Middle East Sultanate of Oman Qatar United Arab Emirates India Sri Lanka North America / Central America / The Caribbean United States of America Canada Mexico Panama United States of America Brazil South America Brazil Chile Colombia History of the MOL Group Building trust by anticipating customer needs and the demands of the times 1884 1964 2010 Osaka Shosen Kaisha (O.S.K. Line) is established by a union of small- and medium-sized shipown- ers in the Kansai region. 1890 O.S.K. Line launches its first overseas route service between Osaka and Busan. 1909 O.S.K. Line launches its first long-distance ocean service between Hong Kong and Tacoma. 1930 KINAI MARU, a high-speed cargo ship, travels from Yokohama to New York in 25 days, 17 hours, and 30 minutes (advanced ships at the time averaged 35 days back then). 1939 ARGENTINA MARU and BRASIL MARU, two leading cargo-passenger ships in prewar Japan, ply routes to South America. 1942 Mitsui & Co., Ltd. spins off its shipping department to create Mitsui Steamship Co., Ltd. (Mitsui Line). Industry restructuring through consolidation of marine transport companies O.S.K Line and Mitsui Line merge to form Mitsui O.S.K. Lines, Ltd. 1965 MOL launches Japan’s first specialized car carrier, the OPPAMA MARU. 1968 Service of full containership the AMERICA MARU begins. 1993 Crew training school is established in the Philippines. 1995 World’s first marine transport alliance called The Global Alliance (TGA) is formed with two over- seas shipping companies. 1999 New Mitsui O.S.K. Lines is established through the merger of MOL and Navix Line. 2004 DAIBIRU CORPORATION becomes a consolidated subsidiary of MOL. First participation in FPSO project 2017 Becomes the first company to own an FSRU in Asia 2018 Container shipping joint venture of three Japanese companies, Ocean Network Express Pte. Ltd. (ONE), starts business operations. Establishment of maritime academy in the Philippines Accomplishing the Company’s first natural gas transportation in the Arctic Ocean eastward route using an ice-breaking LNG carrier 2020 MOL’s first LNG bunkering vessel is delivered. 2022 DAIBIRU CORPORATION and Utoc Corporation become wholly owned subsidiaries of MOL. Information Disclosure and External Recognition Promoting Information Disclosure and Engagement Given that we have positioned contributing to the growth and In recent years, MOL has implemented an array of initia- development of people and communities as one of our tives to show the positioning of management goals and improve Sustainability Issues (→page 53), we consider engagement governance, including the revision of the Group’s corporate with investors, shareholders, and other stakeholders to be an mission and long-term vision, the formulation of MOL Group important management task. Environmental Vision 2.1 and the MOL Sustainability Plan, the At MOL, senior management is committed to taking the resolution of the issue of parent–subsidiary listings, the intro- lead in investor relations (IR) activities. The CEO is accountable duction of a stock remuneration system, and the establishment to stakeholders and expresses key ideas in his own words by of a CEO succession plan. We are also moving forward with participating in interim and full-year financial results briefings many different industry-leading measures in terms of busi- as well as individual and group meetings with domestic and ness, such as the building of vessels equipped with Wind overseas investors. Further, fully appreciating the importance Challenger hard sail system and various types of LNG-fueled of fair disclosure, we disclose financial highlights, business vessels as well as participation in projects related to the off- performance briefing materials, integrated reports, and other shore wind power generation business and the carbon busi- core IR tools in both Japanese and English. Moreover, in fiscal ness. The aforementioned initiatives are by no means solely the 2021 we began providing online videos of financial results result of our aspirations but rather reflect the opinions of briefings for analysts and institutional investors. investors, shareholders, and a range of other stakeholders. In addition to the dissemination of information, we place Through continued in-depth communication with our particular emphasis on the in-house feedback of opinions stakeholders, we will elevate our corporate value even further. obtained through dialogue with stakeholders. Feedback obtained from meetings with investors is compiled and reported regularly to the Board of Directors and the Executive Committee. When more-specific opinions on management plans and the Sustainability Issues are received, the Corporate Communication Division, which is in charge of IR, directly communicates the feedback to the relevant divisions and encourages them to incorporate and reflect it not only in the enhancement of disclosure but also in the implementation of measures. Policies and Measures That Reflect External Feedback • Revision of corporate mission and long-term vision • Formulation of MOL Group Environmental Vision 2.1 and the MOL Sustainability Plan • Resolution of the issue of parent–subsidiary listings • Revision of the director remuneration plan • Introduction of a CEO succession plan • Raising of the dividend payout ratio IR Activities in Fiscal 2021 IR Materials (Available on MOL’s website) Activity Frequency Detail Material Japanese English For securities analysts and institutional investors For overseas institutional investors Financial results briefings 4 times Quarterly results / forecasts Small meetings with the CEO 5 times Two held each in spring and autumn, once for responsible investment managers Overseas investor road shows 2 times Held online (once in Europe, Asia) Conferences held by securities companies 6 times Participation in online conference (individual meetings) For individual investors Corporate presentations for individual investors 1 time Participation in online seminars for individual investors Stock exchange filings (financial highlights, etc.) Business performance briefing materials (including summaries of Q&A sessions) Business performance results briefing video Integrated report Securities reports (“Yuho”) Quarterly reports Business reports for shareholders Investor guidebook Market data Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes ―*1 ― ―*2 Yes Yes *1 Abridged version posted as Financial Statements *2 Posted as Business Report External Recognition 80 81 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceFinancial and Corporate InformationSustainability Strategy Value Creation StoryRolling Plan (Management Plan) Glossary (In alphabetical order) Shareholder Information ■ CCS (Carbon Capture and Storage) ■ CCU (Carbon Capture and Utilization) CCS is a technology for capturing and storing carbon dioxide before it is released into the atmosphere at plants and power stations. CCU is a technology for using captured carbon dioxide to make fuel and chemicals. Combining these two technologies is called CCUS (Carbon Capture, Utilization, and Storage). ■ Chemical Tankers Tankers fitted with multiple tanks to transport many different types of liquid chemical cargo at the same time. These tankers have complex design specifications, as they are equipped with independent pipe- lines, cargo pumps, and temperature-regulating functions for each tank, in addition to dedicated facilities for cleaning and other features. ■ Clean Ammonia This is ammonia produced using technologies that do not emit GHG. Clean ammonia is broadly classified into two types: blue and green. Blue ammonia is produced from fossil fuels, but the CO2 generated is captured and stored. Green ammonia is derived from renewable energy sources. The use of clean ammonia technologies in combina- tion with ammonia-fueled vessels, which are currently under develop- ment, promises to advance low-carbon marine transport. ■ FPSO (Floating Production, Storage and Offloading System) An FPSO is a floating facility that produces, stores and offloads oil and gas. Crude oil produced and stored offshore is directly loaded into shuttle tankers for transport. ■ FSRU (Floating Storage and Regasification Unit) ■ FSU (Floating Storage Unit) An FSU is a floating facility for storing LNG offshore. An FSRU has the same structure as an FSU with an additional function for regasification of LNG onboard, with which it can send out vaporized natural gas to land through a pipeline. FSRUs and FSUs are being adopted for a growing number of projects to establish LNG receiving terminals all over the world because of their advantages, including a shorter lead time and lower costs compared to conventional onshore receiving terminals. ■ ICP (Internal Carbon Pricing) ICP is a system that sets a fixed in-house price for GHG emissions. The system enables the quantification of GHG emission reductions as positive economic impacts. Therefore, it promotes low-carbon invest- ments that would otherwise generally be viewed as cost-increasing factors. ICP is also expected to mitigate carbon tax and other future charges on GHG emissions. ■ IMO (International Maritime Organization) A United Nations specialized agency that promotes intergovernmental cooperation on technical and legal issues affecting international ship- ping, such as maritime safety, navigation efficiency, and prevention of marine pollution. It also creates a regulatory framework for the ship- ping industry that is fair and effective, universally adopted, and univer- sally implemented. ■ LNG Carriers Tankers designed for the transportation of liquefied natural gas (LNG). To transport LNG which has been cooled to –162°C, LNG carriers make use of a wide variety of technologies in various ship parts, including specialized tanks that can withstand extremely cold temperatures and emergency shut-off devices to prevent accidents in cargo operation. ■ NOx Nitrogen oxide (NOx) is a cause of atmospheric pollution, and it is created when nitrogen combines with oxygen in the air under high temperatures, like when fuel is combusted inside engines. NOx emissions from ships are regulated by IMO rules, and the third set of NOx regulations went into effect in 2016. ■ PBCFs (Propeller Boss Cap Fins) Developed by MOL in collaboration with two other companies in 1987, these energy-saving devices are attached to the propeller shafts of vessel propulsion engines. Propeller blade rotation generates vortices that lead to energy loss. By eliminating these vortices, PBCFs reduce fuel consumption by approximately 5.0%. As of April 2022, our PBCFs have been installed in approximately 3,700 vessels of all types. Moreover, in 2021 PBCFs were certified as the “Best-selling Energy- Saving Ship Appendage Brand” by Guinness World Records. ■ RoRo (Roll-on / Roll-off) Ships These ships have rampways that allow vehicles to be driven on and off the ship. They can also transport trucks and trailers loaded with cargo. Some ships equipped with RoRo systems are pure car carri- ers, which mainly transport vehicles that are not loaded with cargo and construction machines. Other RoRo ships are ferries that trans- port cargo vehicles, passengers, and privately owned vehicles. ■ Small- and Medium-Sized Bulkers Panamax, Handymax, and Handysize dry bulkers that mainly trans- port general bulk cargo, such as coal, grain, salt, cement, and steel products. ■ SOx SOx encompasses sulfur dioxide (SO2) and other sulfur oxides, which are substances that pollute the atmosphere when oil, coal, and other fossil fuels that contain sulfur is incinerated. In the shipping industry, SOx emissions in the exhaust gas of ships are regulated, and in January 2020, regulations were tightened, greatly reducing the allowable sulfur content in bunker fuel from 3.5% to less than 0.5% (general sea areas). ■ Subsea Support Vessels Vessels designed for installation and maintenance of subsea facili- ties during production and exploitation of offshore oil and gas fields. ■ Synthetic Methane/Methanation This is methane produced from CO2 and hydrogen. Like natural gas, synthetic methane can be used as a marine fuel. Methanation is the process used to produce synthetic methane. By using CO2 from the atmosphere and hydrogen derived from renewable energy sources as raw materials, CO2 can be cyclically used. This process can sig- nificantly lower GHG emissions, which contribute to global warming. ■ TCFD (Task Force on Climate-related Financial Disclosures) A disclosure framework specializing in climate-related information. It encourages companies to disclose the financial impact climate change has on their business. ■ Trim This refers to the lengthwise inclination of a vessel’s hull, which results from the difference between the bow and aft drafts. Normally, trim by aft, where the aft is deeper than the bow, tends to be preferred for ease of vessel handling. However, joint research by MOL and Akishima Laboratories (Mitsui Zosen) Inc. demonstrated that optimum trim by bow improves propulsion efficiency. MOL is endeavoring to improve fuel efficiency by developing and introducing to vessels software that analyzes the optimum trim for each vessel depending on its draft, speed, and route as well as such factors as weather conditions. 82 For further information, please contact: Investor Relations Team Corporate Communication Division Mitsui O.S.K. Lines, Ltd. 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan EMAIL iromo@molgroup.com WEB https://www.mol.co.jp/en/ Capital Head Office ¥65,400,351,028 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan Number of MOL employees 1,098 Number of MOL Group employees (The parent company and consolidated subsidiaries) 8,547 Total number of shares authorized 946,200,000* Number of shares issued 361,885,833* Number of shareholders 137,413 Shares listed on Tokyo Stock Exchange Share transfer agent (Contact information) Sumitomo Mitsui Trust Bank, Limited Stock Transfer Agency Business Planning Department 8-4, Izumi 2-chome, Suginami-ku, Tokyo 168-0063, Japan Communication materials MOL Report Investor Guidebook Market Data Website YouTube Official Channel (As of March 31, 2022) Stock Price (Tokyo Stock Exchange) and Volume of Stock Trade* Fiscal 2019 Fiscal 2020 Fiscal 2021 High Low ¥1,052 ¥496 High Low ¥1,462 ¥534 High Low ¥3,880 ¥1,247 (¥) 4,000 3,000 2,000 1,000 0 (Million shares) 800 4 5 2019 6 7 8 9 10 11 12 1 2 2020 3 4 5 6 7 8 9 10 11 12 1 2 2021 3 4 5 6 7 8 9 10 11 12 1 2 2022 3 4 5 6 7 8 * Figures have been calculated based on the number of shares after the Company split its common shares on the basis of three (3) shares for every one (1) share effective April 1, 2022. 640 480 320 160 0 83 MITSUI O.S.K. LINES MOL REPORT 2022Corporate GovernanceFinancial and Corporate InformationSustainability Strategy Value Creation StoryRolling Plan (Management Plan)