Mitsui O.S.K. Lines Ltd. Annual Report 2024

Plain-text annual report

Year ended March 31st, 2024 MOL REPORT 2024 01 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction Osaka Shosen Kaisha (OSK Line) is founded. Mitsui Steamship Co., Ltd. (Mitsui Line) is founded. OSK Line and Mitsui Line merge to form Mitsui O.S.K. Lines, Ltd (MOL). Japan’s ﬁrst specialized car carrier, The Oppama Maru, enters service. 1965 1884 1942 1964 Japan’s ﬁrst methanol carrier, the Kohzan Maru, enters service. Navix Line, Ltd. (Navix Line) is established by the merger of Japan Line , Ltd and Yamashita-Shinnihon Steamship Co. , Ltd Crew training school is established in Manila, Philippines. New Mitsui O.S.K. Lines is established through the merger of MOL and Navix Line. 1983 1989 1993 1999 Daibiru Corporation becomes a consolidated subsidiary of MOL. Container shipping joint venture, Ocean Network Express Pte. Ltd. (ONE), starts business operations. The Shofu Maru, world’s ﬁrst cargo Vessel equipped with ‘Wind Challenger’, Hard sail, is delivered. 140th anniversary. 2004 2018 2022 2024 Becoming a Global Social Infrastructure Company History and Future of the MOL Group MOL marked its 140th anniversary in May 2024, counting back from the founding of its predecessor, Osaka Shosen Kaisha (OSK Line). The MOL Group’s brand power and strengths, which we have built up by overcoming numerous challenges and diﬃculties, represent invaluable assets as we move forward. In 1964, OSK Line and Mitsui Line merged to form Mitsui O.S.K. Lines, Ltd. (MOL), as a result of the shipping industry consolidation that was in progress at the time. Then, in 1999, MOL and Navix Line merged, establishing the new “Mitsui O.S.K. Lines, Ltd.” Our history is a series of mergers, but we could say that this is where the MOL Group’s brand power is reﬂected. At the heart of this brand power is a unique foundation that keeps moving forward, adapting to changes with ﬂexibility and resiliency. It was the eﬀorts of our many predecessors who became one by fearlessly meeting the challenge of change to overcome huge diﬀerences in corporate cultures and come together as one resilient company. Let’s learn from each other’s strong points, engage in friendly competition and bickering, and somehow become one. This is the meaning of the phrase “Don’t be afraid of conﬂict!”, which President Masaharu Ikuta said at the time of the merger with Navix Line. We could say that we have been practicing diversity throughout our long history, and it is in MOL’s DNA to continue to change ﬂexibly while keeping a ﬁrm grasp not only of organizational changes but also of major shifts in the global economy while engaging in lively discussions. In the spirit of “Don’t be afraid of conﬂict!”, we will strive to create corporate value by conducting our business activities while valuing our corporate culture of “have an eye to the big picture, think globally, act locally.” This year marks the 140th anniversary of our founding. The MOL Group’s brand power and strengths which the MOL Group has built up. 140TH ANNIVERSARY MOL REPORT 2024 02 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction What is MOL aiming for in the years to come? 01 SECTION RESILIENT GLOBAL ENTERPRISE Becoming a Resilient Global Enterprise by balancing growth and stable management We will develop a variety of social infrastructure businesses in addition to traditional shipping businesses, and will meet evolving social needs, including environmental conservation, with innovative technology and services. We aim to be a strong and resilient corporate group that provides new value to all stakeholders and grows globally. MOL’s Visions ➡ P.07–13 MOL REPORT 2024 03 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction FOCUS ISSUES Creating a sustainable and resilient earnings structure Building a business portfolio that ensures proﬁtability even when shipping markets are in a downturn and enjoys the upside when the market conditions are favorable Growth through deepening regional strategy Utilizing initiatives to address sustainability issues as drivers for business growth By solving sustainability issues, we will increase the Group’s proﬁtability at the same time Securing and developing human resources and organizations capable of advancing projects globally Becoming a ﬁrst mover to promote environmental initiatives MOL’s Challenges ➡ P.14–20 What are the challenges in realizing this? 02 SECTION MOL REPORT 2024 04 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction TRANSFORM Determination to innovate toward the future The MOL Group corporate management plan BLUE ACTION 2035 centers on “Three Core Strategies”, namely the Portfolio Strategy, Regional Strategy, and Environmental Strategy, and ﬁve “Initiatives to Sustainability Issues”: Environment, Safety, Human Capital, Digital Transformation (DX), and Governance. Three Core Strategies Portfolio Strategy ➡ P.21 Regional Strategy ➡ P.29 Environmental Strategy ➡ P.33 Initiatives to Five Sustainability Issues 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 Environment Conservation for marine and global environment Innovation Innovation for development in marine technology Governance Governance and compliance to support businesses Addressing Sustainability Issues ➡ P.37 What measures can we take to break the status quo? 03 SECTION MOL REPORT 2024 05 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction CONTENTS MOL’s Visions 07 Top Message 1 2 Value Creation Model (Story) 1 3 Value Creation Model (Diagram) 01 SECTION 03 SECTION MOL’s Challenges 14 Progress Corporate Management Plan 1 7 CFO Message 20 TOPIC： Advanced Business Management 02 SECTION 07 Top Message 17 CFO Message MOL’s Measures 21 Portfolio Strategy 29 Regional Strategy 33 Environmental Strategy 37 Eﬀorts to Resolve Sustainability Issues 21 Portfolio Strategy 29 Regional Strategy DATA SECTION 56 Summary of Financial Data 57 Summary of Non-Financial Data 58 Information Disclosure and External Recognition 59 MOL Group’s Global Network 60 Shareholder Information 33 Environmental Strategy MOL REPORT 2024 06 MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Introduction EDITORIAL POLICY In producing this year’s MOL REPORT, we focused on the following three key points while remaining aware of communicating throughout the report what our Vision is, what the challenges are to achieving this, and what actions we are taking to address those challenges. (1) Further clarifying our position and characteristics within the shipping industry to convey “the unique characteristics and strengths of the MOL Group.” (2) Eliminating conceptual complexity as much as possible and, through presentations of our initiatives, giving a clear sense of how management is trying to create value. (3) Explaining clearer and more speciﬁcally how we will integrate initiatives for sustainability issues into management strategies. The aim of an integrated report is not its production and publication but its utilization to enhance dialogue with shareholders, investors, and other stakeholders. We look forward to having constructive conversations and hearing your unreserved opinions. Investor Relations Team, MOL Report 2024 Upon Publication of MOL REPORT 2024 Scope of the Report The MOL Group, comprising Mitsui O.S.K. Lines, Ltd., 422 consolidated subsidiaries, 123 equity-method aﬃliated, 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 of June, 2024, unless otherwise speciﬁed. Vessel on the Cover Delivered in July 2024, the wood chip carrier Green Winds will follow the Shofu Maru as the second vessel equipped with the Wind Challenger hard sail wind power propulsion system. By installing Wind Challenger, We expect Green Winds to achieve fuel savings of approximately 7-16% and produce a GHG reduction eﬀect, depending on the route and other factors. Under our Environmental Strategy, we aim to have 25 Wind Challenger-equipped vessels in service by 2030 and 80 by 2035 and have already decided to own nine vessels equipped with the system. Moving forward, we will give added impetus to reducing GHG emissions by increasing the proportion of Wind Challenger- equipped vessels in our ﬂeet, thereby contributing to realizing a low-carbon and decarbonized society. Referenced Guidelines • “Integrated Reporting Framework,” IFRS Foundation • “Guidance for Collaborative Value Creation,” Ministry of Economy, Trade and Industry Index for Reverse Lookup of Topics in the Guidance for Collaborative Value Creation Values P.12-13 Business Model P.12-13 Sustainability and Growth P.21-56 1 2 3 Strategy P.14-36 Growth (Performance) and Key Performance Indicators (KPIs) P.13, 15-16, 22, 58-59 Governance P.46-54 4 5 6 MOL REPORT 2024 07 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions President & CEO Our Challenge Fiscal 2023 was not an easy business environment. There were several destabilizing factors worldwide including uncertainty over the outlook for the Russia-Ukraine war and outbreak of conﬂict between Palestine and Israel. Fortunately, however, the shipping market remained relatively strong, and the MOL Group’s corporate management plan, BLUE ACTION 2035, which we launched in April 2023, has enabled us to be even bolder than before in making future-oriented investments. Although we have outlined an ambitious growth strategy, I believe we have made tremendous progress, especially in terms of investing in new businesses and environmental measures. In addition, the measures we have implemented in our environmental and regional strategies, which represent our growth strategies, have been met with highly positive feedback from our overseas customers. I am conﬁdent that the direction we have set out in BLUE ACTION 2035 is the right one. My Mission: Achieving Growth Together with Stable Management in a Highly Volatile Industry TOP MESSAGE MOL REPORT 2024 08 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions build new vessels actively. Despite this, the global demand for logistics is projected to grow at a steady, if gradual pace, and the supply of shipping capacity should eventually increase. However, the number of vessels will not simply continue to rise̶vessels that have been in service for a long time will need to be scrapped progressively each year. Due to this, I believe that few factors could trigger a signiﬁcant collapse in the supply-demand balance over the medium to long term. As business conditions in the past two to three years have been robust, many new containerships and LNG carriers have been ordered and are just starting to enter the market. Containership cargo volumes will grow over the long term, even if demand ﬂuctuates from year to year due to transient factors. Given these circumstances, I expect the shipping industry to continue e enjoying a relatively stable market environment. In the past, the factors that led to failure in the shipping industry were apparent̶it was the mismatch between the wave of market conditions and the investment cycle. When the global economy starts to improve, existing shipping capacity is no longer suﬃcient to transport the required volume of cargo, causing market rates to surge. Then, as shipping companies’ cash ﬂow grows, they begin to build new vessels. However, when these vessels are delivered, cargo volumes have tapered oﬀ, and the market has softened. This extra capacity causes a collapse in the supply-demand balance and the market slumps. When this happens, shipping companies scrap their vessels to adjust the supply-demand equilibrium, leading to a cycle of gradual restoration in the supply-demand balance. As for the best way to navigate this environment, one eﬀective approach is to systematically accumulate the ﬁnancial strength to maintain our ﬂeet at a certain size, to hold back on investments when market conditions and ship prices rise to extremes, and then to invest more aggressively when market conditions worsen. To develop the foundation for this approach, we are working on a portfolio strategy (P.21) that allows us to maintain certain proﬁtability even during a downturn in the shipping market. We are placing a particular focus on restructuring our business portfolio to ensure stable cash ﬂow This was also a year in which we keenly realized the diﬃculty in strengthening our organization and human capital. Although we have always been aware of just how challenging a task this is, securing and developing talented personnel is vital for executing our strategy. Our regional and environmental strategies require talented personnel who understand new technologies and environmental policies, combined with the ability to link this knowledge to our business. In addition, to achieve success in our new business challenges outside Japan, it is imperative that our Japanese staﬀ and locally-hired employees work together as a uniﬁed team. We secure the resources required for new business development through mid-career hiring, recruiting talented personnel outside Japan, collaborating with our business partners, and conducting M&A activity. Through these diverse members, we must develop human resources with strong leadership capabilities on an ongoing basis to drive the overall project forward. In summary, we are resolved to take on the diﬃcult challenge of developing new businesses while fostering our talent base, and given the current business environment, We feel that the second year of the plan and beyond represents a critical phase for MOL to become a resilient global enterprise. Surviving and Thriving in the Competitive Global Shipping Industry I view the medium- to long-term business environment outlook as bright. As the business environment of the shipping industry is highly inﬂuenced by market conditions, the supply-demand balance determines the prevailing situation. Looking at the current demand environment ﬁrst, despite current geopolitical risks and other uncertainties, growth in the global economy will accelerate in the future. On the supply side, in a situation in which it remains diﬃcult to predict which alternative fuels will become mainstream in the long term to address environmental issues, it continues to be diﬃcult to We are resolved to take on the diﬃcult challenge of developing new businesses while fostering our talent base. TOP MESSAGE MOL REPORT 2024 09 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions severe. Meanwhile, on the supply side, the Middle East, which has close historical ties with India, is a potential option. I believe that demand for logistics will grow in the Global South, such as shipping to India from the Middle East or from Brazil, which has abundant resources and food supplies, and we want to focus on these countries as priority areas. To capture business opportunities in these key economic regions in a swift manner, we will delegate authority to our regional organizations and achieve an optimal balance with top-down management. Thus far, the heads of each region and the management team at head oﬃce, including myself and members such as our COO and CFO, have been constantly reviewing current developments in each region and industry sector and focusing on priority areas while maintaining a global perspective. By shifting to our current regional structure, we now have more information on the challenges that must be addressed at each location, and a better understanding of the priorities, including related timeframes. To advance to the next stage while continuing to delegate authority to each region, we will encourage the regions and head oﬃce to communicate more closely with each other to quickly identify changes in the global situation based on information gathered by the head oﬃce’s management team and achieve agile decision making on priority areas. Our Determination as a First Mover Despite the global trend toward decarbonization, the shipping industry will remain polarized for some time as to whether or not to address environmental issues. This is because customer needs are divided between those accepting higher costs to an extent in favor of environmental friendliness and others who prioritize low-cost solutions over environmental initiatives. Amidst this trend, we must decide whether to lead the environmental initiatives or to follow from behind. As the world takes serious steps toward a decarbonized society, I believe by diversifying our investments in non-shipping businesses, including the real property business, oﬀshore businesses, and the cruise business. With environmental regulations set to become stricter, new orders for conventional heavy fuel oil vessels will decrease across the industry . Instead, there will be more LNG, methanol, or ammonia-fueled vessels, which are more expensive than conventional models, due in part to the technological diﬃculties involved. Consequently, companies that lack the ﬁnancial strength to invest on an ongoing basis will be forced out of the market, and the pool of competitors will decrease. Our policy is to decisively continue to make investments by strengthening our capital base and building ﬁnancial strength when the market is buoyant while developing a portfolio via which our non-shipping businesses can support us in the event of a downturn in the shipping business. This approach will be the key that will enable us to survive and thrive in the shipping industry over the long term. Capturing Business Opportunities On a Global Scale As we implement our portfolio strategy, narrowing down the countries and regions we focus on is important since political and economic inﬂuences can change conditions at any given time. For example, Russia has rich natural gas and oil reserves and low production costs, and we were previously considering expanding our business in the country due to the high upside potential. However, given the current political conditions, it is not possible to expand at present. From a demand-side perspective, we are focusing on India as one of the most appropriate markets for the immediate future. India has an extremely high demand for energy and has historically met its energy needs through domestically produced coal. However, the country’s natural gas and oil imports are projected to rise in the coming years as environmental challenges become increasingly We have realigned our portfolio to enable us to survive and thrive in the shipping industry, and will decisively continue to make investments even if the market conditions deteriorate. TOP MESSAGE MOL REPORT 2024 10 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions the regional heads and the head oﬃce’s management team to check regional characteristics related to environmental awareness as they conduct their business. Please see below for details on our participation in the 28th Conference of the Parties of the UNFCCC (COP28). https://www.mol.co.jp/en/pr/2023/23122.html Please see below for details on our participation in the World Economic Forum. https://www.mol.co.jp/en/pr/2023/23088.html Providing Social Infrastructure On a Global Scale Our investments are progressing steadily in the non-shipping businesses, and we are making bold steps to expand our scale. However, MOL’s oﬀshore wind power generation and real property businesses are currently considered low-risk, low- return businesses. While there is little risk involved in operating in Japan, we cannot expect high returns from these businesses. Although we want to develop these businesses in Japan to a certain extent, going forward we will aim to leverage the human resources and expertise we have accumulated to take on high- risk, high-return projects such as real property, oﬀshore, and logistics businesses in the growth regions of India, Brazil, and Africa, as well as oﬀshore wind power generation businesses in countries and regions such as Taiwan. We have already launched real estate investments in India and an oﬀshore wind power generation business in Taiwan, and our medium- to long-term goal is to accelerate our expansion further and establish a business model that generates comparatively high returns. The MOL Group Vision outlines our goal of developing social infrastructure businesses centered around our shipping businesses. When we deﬁned MOL as “a company that operates social infrastructure businesses,” we aimed to expand our scope as a service provider beyond shipping to provide there is a high likelihood that we will see the advent of an age in which CO2 emissions are taxed, as we are already beginning to see in some parts of the world. It is a very diﬃcult choice, as the strategy on which we position our approach will determine our future success or failure. However, we have decided to be a ﬁrst mover and to play a pioneering role in environmental investment. From an economic perspective, if our priority were to maximize proﬁts over a year, for example, it would be most eﬃcient to operate inexpensive vessels that run on inexpensive fuel sources, without considering the environment. However, such a strategy would not succeed for more than a few years. In order to maximize proﬁts ﬁve or ten years in the future, I believe the most rational approach is to optimize the business early by being the ﬁrst movers in promoting environmental initiatives. As it is essential to gather information from a variety of perspectives and exchange opinions in order to implement our environmental strategy, during ﬁscal 2023 we participated in COP28 held in Dubai as well as the World Economic Forum. We are now in a winner-takes-all era, where companies who move in the right direction at the right time gain momentum, while those that are late to act are left by the wayside. The IT industry is a prominent example of this. I have a strong sense of crisis that failing to adapt to changing times may put us in a position from which we are unable to recover. While responding to environmental challenges is a pressing task, we cannot aﬀord to make errors in our judgment. To correctly process the large amount of information we have gathered and link this to correct decision-making, I think it is important that we remain committed to the COP, World Economic Forum, and other forums. While our environmental strategy represents our basic approach, in order to implement this strategy on a global scale, we must consider each region’s unique characteristics . Some regions are more focused on economic growth than the environment, while others will reject companies that lack environmental awareness, and there is also the risk of not being able to do business without taking national policies and other factors into consideration. That is why it is essential for Pursuing high-risk, high-return businesses in growth regions. TOP MESSAGE MOL REPORT 2024 11 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Phase 1, and we are devoting our full eﬀorts . Once this goal is in sight, we intend to reset the minimum dividend and increase shareholder returns in Phase 2 (ﬁscal 2026~ﬁscal 2030). A Management Approach that Ensures Stable, Continuous Growth in a Volatile Industry MOL’s business has been highly volatile in the past, particularly in terms of ﬁnancial performance, and investors might have the impression that MOL is a high-risk, high-return company. Due to the nature of the shipping industry, investments take a long time to pay oﬀ. For example, investments made today may take three or ﬁve years to deliver results, meaning that the business must be managed with a medium- to long-term outlook. For this reason, we aim to transform our business into one capable of achieving stable, continuous growth through the strategies we are currently working to implement. In the current era, referred to as “stakeholder capitalism,” the most important role of management is to build stable, long-term relationships with all stakeholders, including shareholders, customers, business partners, employees, and local communities. To achieve this stable management style, we have stated that “we want MOL to be viewed as an excellent company in every aspect.” Going forward, we will continue striving to be a corporate group that is valued and trusted by all stakeholders in all regards, including our response to sustainability challenges, improvement of our service quality, proﬁtability, human resources, technological capabilities, and employee engagement. We ask for your continued support for the MOL Group as we work to become a company that is trusted by society over the long term. infrastructure that beneﬁts society and people while maintaining a focus on our core shipping businesses. Outside Japan, in particular, we aspire to expand beyond shipping to grow our real property, power generation, oﬀshore, and other businesses as social infrastructure. A Management Phase in which We Demonstrate Our Commitment to Future Growth Today, companies must operate their businesses with a ﬁrm awareness of the cost of capital and stock price, which is a key priority for MOL’s management. In the past, business performance in the shipping industry has ﬂuctuated dramatically, so I suspect many people look at our current position and may be skeptical about whether our strong results will continue. In BLUE ACTION 2035, we aim to maintain our target ROE at 9%‒10% in the future and to gradually increase proﬁt before tax to ¥400.0 billion by ﬁscal 2035, the ﬁnal year of the plan. In particular, over the coming two to three years, we are determined to continue delivering strong ﬁnancial results to win the trust of our stakeholders and dispel this past image. At the same time, we are aware of the need to increase the quality and quantity of the information we disclose and for high management transparency, so that our stakeholders can better understand what is currently happening at MOL. By sustaining these initiatives, we aim to bring our P/B ratio back above 1 and enter a new management phase in which we can capture future growth opportunities to deliver a P/B ratio of 1 or higher. We are also working to deliver shareholder returns by making proactive investment plans for the future. In line with this focus, we have set a dividend payout ratio of 30% and a minimum dividend of ¥150 per share during Phase 1 of BLUE ACTION 2035 (ﬁscal 2023~ﬁscal 2025). This is a situation in which we ask our shareholders to understand our 30% return policy for the near future. Our top priority is to achieve the objectives set in We want MOL to be viewed as an excellent company in every aspect. TOP MESSAGE MOL REPORT 2024 12 Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions VALUE CREATION MODEL (STORY) “From the blue oceans, we sustain people’s lives and ensure a prosperous future.” The MOL Group’s value creation is based on the Group Corporate Mission, which incorporates the following value creation story. MOL GROUP CORPORATE MISSION MOL marked its 140th anniversary in 2024. By bearing responsibility for marine transportation, which is essential for resource-limited Japan, we provide social value as infrastructure that supports people’s lives and receive rewards for them. The pride we have in this business started by our forebears has remained unchanged, even as our business scope and scale has expanded globally. In conducting our business, all Group employees globally, who hold such pride, uphold the Values and Code of Conduct (MOL CHARTS), which serves as the basis for our decision-making and consolidates and enhances the MOL Group’s collective strengths. The Group’s various strengths and capitals, including diverse human resources (human capital); advanced maritime, technical, and project management capabilities (intellectual capital); and strong partnerships with customers and society (social and relational capital) that we have cultivated in this way, represent our source of value creation. The Group’s corporate management plan BLUE ACTION 2035 focuses on Three Core Strategies of the Portfolio Strategy, Regional Strategy, and Environmental Strategy, together with the Five Sustainability Issues (Materiality), representing important issues we must address to achieve sustainable development together with society. By addressing the opportunities and risks these bring across the Group, we will not only improve short-term proﬁtability but also ensure sustainable corporate development. Shipping Business In the shipping business, we will strategically capture high proﬁts during favorable market conditions, underpinned by stable earnings from long-term contracts. We are also building a decarbonized supply chain business model and leading the industry as a ﬁrst mover in order to be chosen as the green partner of choice to realize a decarbonized society and establish a competitive advantage in new markets. Strategy/Actions Source of Value Creation Non-Shipping Business In the non-shipping business, such as oﬀshore businesses, oﬀshore wind power, cruises, and real property, we will leverage MOL’s strengths, including network and project management know-how cultivated in the shipping business to date, to capture diverse stakeholder needs and opportunities, such as decarbonization and people’s well-being and lifestyles, and aim to ensure stable earnings. In carrying out the above, we will establish a more global business driving force and optimize our business mix to transform our business portfolio into one that can maintain proﬁtability even during shipping market downturns. By utilizing our initiatives on Sustainability Issues as a driver of business growth, we will also improve proﬁtability, lower our medium- to long-term cost of capital, and increase our growth potential as a Company. Outcome Activity Input Through this strategy, we aim to create economic value and make our source of value creation stronger and more resilient and at the same time create social value as the MOL Group’s mission and responsibility to society, establishing a virtuous cycle of value creation. By providing the value we create in this way to all stakeholders, we will increase our corporate value and realize the MOL Group Vision as a social infrastructure company that is growing globally beyond the shipping business. Created Value VALUE CREATION MODEL (DIAGRAM) We will realize the MOL Group Vision by building a sustainable value creation process through sustainability management that leverages our strengths. 05 Strengthen and Circulate Reinforcement of Capital and Circulation 04 Outcome Value Created 03 Output Results 02 Activity Strategy /Actions Code of Conduct Challenge Honesty Accoun- tability Reliability Teamwork Safety Financial Capital ● Strong ﬁnancial base to support business sustainability Provision of social infrastructure services Social Value ‒To all stakeholders Manufactured Capital ● A ﬂeet of over 800 vessels responding to diverse needs Intellectual Capital ● Advanced maritime capabilities in vessel operations and cargo handling ● Innovation-generating technical capabilities ● Project management capabilities for discovering needs and commercializing ideas Human Capital ● Approximately 14,000 diverse personnel (employees and seafarers) who share the MOL CHARTS values Social and Relationship Capital ● Global network spanning over 100 countries ● Partnerships with customers and society built on 140 years of history and track record Natural Capital ● The ocean, the foundation of our business ● Fuel resources BLUE ACTION 2035 Corporate Management Plan Sustainability Issues (Materiality) Key issues for sustainable growth with society Safety & Value Human & Community Environment Innovation Governance ● Advance business by leveraging strengths cultivated in shipping ● Reinforce stable revenue base by diversifying revenue sources ● Strategic high earnings during favorable market conditions underpinned by stable revenues ● Build own decarbonization business model as a ﬁrst mover Shipping strengths Three Core Strategies Respond to opportunities/ risks on a Groupwide basis *1 An equity-method aﬃliate responsible for containership business management. *2 Interest-bearing liabilities is assumed to include oﬀ-balance sheet assets (approx. ¥900.0 billion), such as future charter fees, which must be factored in after IFRS is adopted. *3 4 Zero = Zero serious marine incidents, oil pollution, fatal accidents, and serious cargo damage. *4 MOL Group Key Positions. Designated as a position in the MOL Group or on a global basis equivalent to General Manager in Head Oﬃce. Iron ore transport volume Approx. 6,740 million tons LNG transport volume Approx. 73.0 million tons (Excluding voyages conducted by time charter-out vessels) Number of MOL voyages completed Approx. 3,050 Number of automobiles transported Approx. 3.2 million units Container transport volume by ONE*1 Approx. 12 million units Total ﬂoor area of DAIBIRU-owned properties Approx. 720,000 m2 Conversion rate to value creation and safety work (cumulative) 5.0% 30% DX Core KPI Financial KPI Proﬁt before tax ¥295.4 billion ¥400.0 billion Net gearing ratio*2 0.88 0.9-1.0 ROE 12.2% 9-10% Fiscal 2035 Targets Fiscal 2023 Results Non-Financial KPI GHG emissions intensity reduction rate (Compared to 2019) -7.2% -45% Environment Safety 4 ZERO*3 (One fatal accident) Achieve Unachieved Human Capital New value Provision of social infrastructure centered on shipping Decarbonization, natural capital, etc. Economic Value ‒Stronger, more resilient (Main driver) Lower capital cost ( Mitigate market condition risks from non-shipping business) Enhance growth potential ( Strengthen non-ﬁnancial capital such as intellectual and human capital) Improve Corporate Value Realize MOL Group Vision Improve proﬁtability ( Strengthen shipping business) Non- Shipping Sustainability Issues Shipping Environment: Reduce own/society’s GHG emissions, primarily through Groupwide adoption of clean energy Human capital: Maximize individual and organizational capabilities by promoting diverse global opportunities and enhancing employee engagement DX: Transform our business and culture by optimizing our operations and organization via digital technology Governance: Enhance overall governance to support realization of the Group’s Vision Environmental Make upfront investments for medium- to long-term returns Regional Establish global promotion structure Portfolio Optimize business portfolio 01 Input Source of Value Creation Safety: Groupwide initiatives spanning people (safety awareness), work (technology utilization), and organization (safety management systems) Fiscal 2035 Targets Fiscal 2023 Results Percentage of women in managerial positions 11.3% 15% Percentage of MGKP*4 incumbents Women 5.5% 8% Non-HQ 20.1% 30% Under 50 14.8% 15% Fiscal 2025 Targets *Set new targets by the end of ﬁscal 2025 MOL REPORT 2024 13 (as of the end of ﬁscal 2023) Introduction MOL’s Challenges 02 MOL’s Measures 03 Data Section 01 MOL’s Visions Non-Shipping Shipping MOL REPORT 2024 14 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section In ﬁscal 2023, the MOL Group formulated the Group corporate management plan BLUE ACTION 2035 (BA2035), working toward realizing the vision for 2035 (Group Vision). In light of long-term changes in the external environment and the Group's strengths, the main scenario of BA2035 is to transform of the business portfolio toward the Group Vision. The implementation strategy for BA2035 focuses on the ﬁve most important items of the “Initiatives to Sustainability Issues,” which is regarded as the foundation for the “3 Core Strategies” consisting of the Portfolio Strategy, Regional Strategy, and Environmental Strategy. We aim to achieve high proﬁt levels during booms in shipping, while continuing to generate certain proﬁt levels even during a shipping recession. This will enable sustainable growth and achieve stable shareholder returns. In ﬁscal 2023, the ﬁrst year of the plan, proﬁt before tax was ¥295.4 billion, signiﬁcantly exceeding the ¥240 billion target set for ﬁscal 2025, the ﬁnal year of Phase 1 of BA2035. PROGRESS OF CORPORATE MANAGEMENT PLAN Please visit our website for details on BLUE ACTION 2035 https://ir.mol.co.jp/en/ir/management/plan.html Overview of BLUE ACTION 2035 Progress Monitoring Policy The MOL Group has set Core KPIs consisting of three ﬁnancial KPIs and ﬁve non-ﬁnancial KPIs as milestones toward realizing our vision for 2035 (Group Vision). We will continue to monitor the progress of our Core KPIs and annually update the action plan. The action plan for ﬁscal 2024 largely follows the original plan. Please see our “Business Performance in FY2023 And Outlook for FY2024” for further details. https://ir.mol.co.jp/en/ir/main/00/teaserItems1/00/linkList/00/link/(E)2023.4Q%20Business%20Performance%20.pdf MOL Group Corporate Management Plan Progress of Phase 1 (2023–20 5) Group Vision Core KPI Vision for 2035 Rebalancing Plan Proﬁt Projection and Investment Plan Financial Plan and Shareholder Return Policy Business Portfolio Reform toward 2035 More detailed action plan “MOL Sustainability Plan”(MSP) Our Group’s Strengths Long-term Changes in External Environment Initiatives toSustainability Issues (Materiality) 3 Core Strategies Portfolio Region Environment Safety Human Capital Digital Transformation Governance 2023 2024 2025 2030 2035 (FY) Phase 1 FY2023 to FY2025 speciﬁc action plan Phase 2 FY2026 to FY2030 Continue the same framework after review Annual update of action plan Set action plan for Phase 2 in FY2025 (the last year of Phase 1) Complete BLUE ACTION 2035 and prepare for the next stage Phase 3 FY2031 to FY2035 MOL REPORT 2024 15 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section Progress of Core KPIs Business Portfolio Reform toward 2035 PROGRESS OF CORPORATE MANAGEMENT PLAN First Year of BA2035 Oﬀ to a Smooth Start In ﬁscal 2023, all ﬁnancial KPIs exceeded our ﬁscal 2025 targets. However, in non-ﬁnancial KPIs, we failed to achieve our safety KPI after a fatal accident. In human capital and DX KPIs, we are on track to achieve our targets for the end of ﬁscal 2025. For environmental KPI, the GHG emission intensity reduction rate was 7.2%. Overall, we believe that the ﬁrst year of BA2035 has gotten oﬀ to a smooth start. We will not change the targets for ﬁscal 2025 and beyond, the ﬁnal year of Phase 1, and will proceed with our corporate management plan to achieve our Group Vision. *1 Interest-bearing liabilities is assumed to include oﬀ-balance sheet assets (approx. ¥900 billion), such as future charter fees, which must be factored in after IFRS is adopted. These ﬁgures are estimates based on certain assumptions made by the Company and may diﬀer from ﬁgures calculated when IFRS is oﬃcially applied. *2 4 Zero = Zero serious marine incidents, oil pollution, fatal accidents, and serious cargo damage. *3 MOL Group Key Positions. Designated as a position in the MOL Group or on a global basis equivalent to General Manager in Head Oﬃce. *4 Reduction rate in work hours when ﬁscal 2022 is used as the base year. Increased Assets of Stable Revenue and Non-Shipping Businesses BA2035 sets forth, “reform to a portfolio that can maintain proﬁtability even during a shipping recession” and “pursue both investment for growth and a yield that meets shareholders’ expectations” as what we want to achieve. In ﬁscal 2035, we plan to increase total assets to ¥7.5 trillion and increase the asset ratio of our stable revenue and non-shipping businesses. In ﬁscal 2023, we allocated cash from our market driven businesses to invest in the Energy Business and Real Property Businesses, resulting in a steady increase in the asset ratio of our stable revenue and non-shipping businesses. *1 Market Driven Business: Businesses with relatively short contract terms and high- performance correlation with the volatile shipping market, speciﬁcally the containership business and the car carrier business, and a portion of the dry bulk and tanker business. *2 Stable Revenue Business: Businesses with relatively long contract terms that are not aﬀected by shipping market volatility, and non-shipping businesses that are inﬂuenced by market conditions diﬀerent from those of the shipping market. KPI Proﬁt before tax (unit: JPY) 819.1 bil 295.4 bil 245.0 bil 240.0 bil 340.0 bil 400.0 bil Net Gearing Ratio*1 1.01 0.88 0.9 0.9～1.0 ROE 49.8% 12.2% 9% 9～10% Environment GHG emission intensity reduction rate (Compared to 2019) 5.0% 7.2% ̶ ̶ ̶ 45% Safety 4 Zero*2 Unachieved （One fatal accident） Unachieved （One fatal accident） Achieve Human Capital Percentage of female employees in managerial positions (Oﬃce workers, non-consolidated) 9.2% 11.3% ̶ 15% [TBA by the end of Phase 1] Percentage of MGKP*3 incumbents (Female/Non-HQ/Under 40s) 4.7%/18.3%/ 9.5% 5.5%/20.1%/ 14.8% ̶ 8％/30%/ 15% DX Conversion rate to value creation and safety work (cumulative) ̶ 5.0% 8% 10% 20% 30% Total Assets (unit: JPY) 4.7 tn 5.1 tn 7.5 tn (Asset ratio) 50 : 50 45 : 55 40 : 60 （Reference） Shipping ： Non-Shipping 75 : 25 70 : 30 60 : 40 Field Our Business Correlation with Shipping market Shipping Containership, Car Carrier Market Driven Business (Highly correlated) = High volatility Dry Bulk, Tanker Stable Revenue Business (Low correlation) = Low volatility Liqueﬁed Gas Carrier Non- Shipping Oﬀshore Business, Oﬀshore Wind Power, Alternative Fuel Business, Logistics, Real Property, Ferries, Cruises Rebalancing Plan No Changes from BA2035 Financial KPI Non- Financial KPI FY2022 Actual FY2035 Plan FY2023 Actual Market Driven Business Stable Revenue Business ： FY2022 Actual Phase 2 FY2030 FY2024 Forecast FY2023 Actual Phase 3 FY2035 Phase 1 FY2025 MOL REPORT 2024 16 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section Business Portfolio Reform toward 2035 PROGRESS OF CORPORATE MANAGEMENT PLAN In terms of the progress of the investment plan, out of the ¥1.2 trillion investment plan up to ﬁscal 2025, we have made commitments to invest ¥1.1 trillion as a result of additional new building orders for various vessel types such as dry bulk carriers, LNG carriers, LPG carriers, and car carriers; M&A deals with Fairﬁeld Chemical Carriers, a chemical tanker company, and Hokutaku Co., Ltd., a wind turbine maintenance company; and overseas real estate investments. In addition, actions taken in ﬁscal 2023 are steadily bearing fruit, including an order for the construction of a new ﬂoating storage and regasiﬁcation unit (FSRU) with Poland’s Gaz System through a collaboration between regional and sales organizations. By steadily implementing the investment plan, we will accumulate the proﬁts of each business in a stable manner and aim to achieve the proﬁt projections for each business headquarters at the end of each Phase as shown in the table on the left. We aim to increase proﬁts in the stable revenue businesses from ¥88.6 billion in ﬁscal 2023 to ¥160 billion in ﬁscal 2035, more than 1.8 times the current proﬁt level. For the non- shipping businesses, we aim to increase proﬁt from ¥47.0 billion in ﬁscal 2023 to ¥120 billion in ﬁscal 2035, 2.6 times the result of ﬁscal 2023, thereby raising to 30% of the total proﬁt. “Projected Total Assets,” shown in bold blue letters on the left hand side of the table, factors in our independent calculation of oﬀ-balance sheet assets such as future charter fees, assuming the future introduction of the IFRS and the application of new lease accounting under J-GAAP. We are aiming for an ROA of over 5.3%, assuming that oﬀ-balance sheet assets are included in total assets. The action plan for ﬁscal 2024 is for each business headquarters to acquire new businesses through the businesses we have cultivated so far, and to accelerate the development of new businesses, including M&A. Investment Progress for Phase 1 (FY2023-FY2025) Proﬁt Projection for Phase 1 (FY2023-2025) (Proﬁt before tax) Investment Progress Amount by Business Units (On a cash-out basis. M&A, including deals led by regional organizations.) Market Driven Business Stable Revenue Business Total Investment aligned with Environmental Strategy Original Plan Dry Bulk Business 57.0 41.0 98.0 70.0 110.0 Energy Business 125.0 532.0 657.0 468.0 530.0 Product Transportation Business 110.0 32.0 142.0 99.0 280.0 Wellbeing Lifestyle Business ̶ 210.0 210.0 21.0 275.0 Others ̶ ̶ 23.0 — 5.0 Total 292.0 815.0 1,130.0 658.0 1,200.0 Dry Bulk Business 48.6 25.0 29.0 31.0 Energy Business*1 72.5 70.0 84.0 96.0 Product Transportation Business 142.8 124.0 195.0 225.0 Of which, containership business 54.1 67.0 140.0 160.0 Wellbeing LifestyleBusiness 9.6 19.0 29.0 45.0 Associated Business and Others 21.9 2.0 3.0 3.0 Total (A) 295.4 240.0 340.0 400.0 Projected Total Assets*2 (B) 5,020.5 5,400.0 6,400.0 7,500.0 ROA (A)/(B) 5.9% 4.4% 5.3% 5.3% Proﬁt from Stable Revenue Business/Ratio Proﬁt from Non-Shipping Business/Ratio (Reference) 88.6/30% 47.0/16% 96.0/40% 54.0/22% 136.0/40% 86.0/25% 160.0/40% 120.0/30% *Applies to deals for which investment decisions have been made by March 31, 2024. *Not including reinvestment by equity method aﬃliates and cash-in from sale of vessels when delivered. *Includes investments which have been already decided (approx. ¥540 billion) at the start of BLUE Action 2035. *1 The thermal power fuel transportation business and the chemical tanker business, both of which belong to multiple business units, are included in the “Energy Business.” *2 Oﬀ-balance sheet assets under J-GAAP such as future charter fees are provisionally calculated and factored-in. Precise calculation in accordance with IFRS will be veriﬁed later. (Unit: billions of yen) (Unit: billions of yen) FY2035 FY2030 FY2025 FY2023 Results MOL REPORT 2024 17 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section Fiscal 2023 Review In ﬁscal 2023, ended March 31, 2024, MOL posted proﬁt attributable to owners of parent of ¥261.6 billion. As a result, shareholders’ equity increased to ¥2.3 trillion, and we paid a dividend of ¥220.0 per share, an increase of ¥40.0 per share over our initial forecast. Although the containership business, which enjoyed an unprecedented boom in ﬁscal 2021 and 2022, returned to a normal trajectory, strong performance in other segments such as the Energy Business contributed to proﬁt. Our investments to date are yielding positive results with steady growth in each of our businesses. BLUE ACTION 2035 Investment Plan and Progress The shipping industry, our core business, is highly volatile and inﬂuenced signiﬁcantly by market conditions. In addition to expanding the scale of our business, we are working to transform ourselves into a global service provider of not only shipping services but also social infrastructure, enabling us to secure stable proﬁts even when shipping markets are in a downturn. Through this transformation, we aim to increase the ratio of assets in non-shipping and stable revenue businesses to maintain a reliable level of proﬁtability while capturing the upside from the shipping business and other market driven businesses. As a result of our ¥815.0 billion investments in stable revenue businesses from ﬁscal 2023 to 2025, primarily in the energy and real property businesses, the ratio of stable revenue assets in ﬁscal 2023 grew to 55% of our total assets. We will continue to focus our investments primarily on stable revenue businesses in ﬁscal 2024 and beyond. Director, Senior Managing Executive Oﬃcer Chief Financial Oﬃcer (CFO) Kazuya Hamazaki Maximize Corporate and Shareholder Value by Integrating the MOL Group's Strengths in Value Creation with Our Financial and Non-ﬁnancial Strategy. CFO MESSAGE MOL REPORT 2024 18 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section Cash Allocation and Optimal Capital Structure MOL will pursue investments within its cash allocation framework through eﬀective use of external borrowing while maintaining an optimal capital structure, and maintaining ﬁnancial discipline by achieving a net gearing ratio between 0.9 and 1.0. During Phase 1 of BLUE ACTION 2035, we originally planned to invest a total of ¥1.2 trillion over a three-year period. However, due to an increase in our cumulative operating cash ﬂow based on our ﬁnancial performance in ﬁscal 2023 and forecast for ﬁscal 2024, as well as the fact that our investment execution progressed more rapidly than expected in the ﬁrst year of the plan, we have increased our investment limit by ¥140.0 billion to ¥1.34 trillion. In Phase 1, we will place priority on building up investments in environmentally friendly vessels, in line with our environmental strategy, and also in non-shipping businesses with relatively low volatility in ﬁnancial performance. As of the end of ﬁscal 2023, our equity ratio is 47%, assuming that leased assets are included Investing to Generate Corporate and Shareholder Value For business transformation investments, we are mindful of the cost of capital and pay careful consideration to whether such investments will generate and increase our corporate and shareholder value. In implementing these investments, maintaining ﬁnancial discipline is, of course, imperative. We base our investment decisions on the amount of ﬁnancial and strategic return the investment will generate, as well as the extent that incorporating the investment into the Group’s portfolio will create synergies or reduce risk and the extent to which it will enhance the corporate and shareholder value of the Company as a whole. For individual investment decisions, we adopt a comprehensive approach that considers multiple metrics, including contribution to future proﬁts, internal rate of return (IRR) versus hurdle rate, and payback period. In addition, under BLUE ACTION 2035 we are also managing the ﬁnancial return generated by investments using portfolio-speciﬁc ROA and ROA Cost of Capital as metrics. Investments in stable revenue businesses are less volatile and require a relatively small ROA, while investments in market driven businesses require a higher ROA. At a company-wide level, we will continue pursuing investments that deliver ROA that exceeds ROA Cost of Capital. Another important consideration when making investment decisions is whether the investment in question resonates with the MOL Group’s strengths, as well as the extent to which it can generate synergies. For example, I have spent a large part of my career in the LNG Division, and have seen how the strengths that are not shown on our balance sheet, our non-ﬁnancial capital, has tied into our investment eﬀorts, enabled us to accomplish diﬃcult projects, and generated signiﬁcant value. Our non-ﬁnancial capital is namely the intellectual, human, social, and relational capital, including the global network we have built over the years, the trust relationships we have established with our customers and partners, and the knowledge and experience of our staﬀ, including commercial, engineering, marine, and ﬁnancial professionals who implement our projects. Similarly, in terms of business type, our expansion from LNG carrier business to related infrastructure businesses such as FSRUs and Powerships is another way in which we are creating new value. Reassigning staﬀ who have developed their skills through these projects to other divisions within the Company, where they are currently working to develop completely new business ﬁelds such as wind power generation, represents another example of our eﬀorts to create new value. In this manner, we have leveraged our non-ﬁnancial capital to expand our business ﬁelds and generate new and increased corporate and shareholder value through bold investments. As CFO, I believe that one of my most important roles is to help support investments that lead to increased corporate and shareholder value while remaining vigilant of the risks involved. CFO MESSAGE CF from Operating Activities ¥930 bil Asset Replacement ¥170 bil External Financing* ¥440 bil Low/ Decarbonization Energy Business ¥408 bil Reduction of our Group’s GHG Emissions ¥250 bil Low/ Decarbonization Energy Business ¥300 bil Reduction of our Group’s GHG Emissions ¥350 bil Investment ¥1,200 bil Dividend ¥190 bil Investment (Already decided) ¥1,130 bil Dividend ¥200 bil Investment (Undecided) ¥70 bil ¥658 bil ¥650 bil Further investment are planned in future. Additional Investment Capacity ¥140 bil Cash-in Cash-in Cash-out Cash-out Investment aligned with Environmental Strategy Investment aligned with Environmental Strategy BLUE ACTION 2035 Original Plan Projection as of Apr. 2024 CF from Operating Activities ¥780 bil Asset Replacement ¥150 bil External Financing* ¥460 bil ¥1,540 bil ¥1,540 bil ¥1,390 bil ¥1,390 bil Cash Allocation FY2024・FY2025 ONE special dividend total ¥80 bil for 2 years *External ﬁnancing includes cash inﬂows from chartering and lease arrangements. MOL REPORT 2024 19 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section value, as we recognize that we are currently in an important phase for ensuring sustainable growth going forward. It is true that we have received questions as to why we do not conduct share buybacks in light of the fact that our market capitalization is below a P/B ratio of 1.0. However, we believe it is important to focus on growth investments from a mid- to long-term perspective and quantitatively demonstrate the results of the investments we have already implemented through further information disclosure. In this way, we aim to communicate to our shareholders how we are increasing corporate value and shareholder value through BLUE ACTION 2035, and then increase our market capitalization to above a P/B ratio of 1.0. During ﬁscal 2025, the ﬁnal year of Phase 1, we will keep a close eye on MOL’s management positions, the progress of our investments, and the probability of achieving our future revenue plans and use those conditions in determining our shareholder return policy for Phase 2, starting from ﬁscal 2026. We will strive to further grow MOL’s business in order to deliver greater shareholder returns during Phase 2. Introduction of International Financial Reporting Standards (IFRS) We have established an internal project team to study the adoption of International Financial Reporting Standards (IFRS). In ﬁscal 2024, we will commence full-scale eﬀorts toward IFRS adoption. Our goal is to adopt IFRS as soon as possible from Phase 2 onward to ensure that the MOL Group’s global operations have ﬁnancial information with higher reliability and better international comparability, along with further reﬁning our global Group management. This project carries an important mission of serving as a compass that will guide the MOL Group into the future, and as project owner, I am dedicated to making this endeavor a success. Toward the MOL Group’s Transformation Fiscal 2023, the ﬁrst year of BLUE ACTION 2035 Phase 1, marked a positive start to the plan’s implementation. However, the path to achieving the transformation we envision has only just begun. I am committed to fulﬁlling my responsibility as CFO by strategically integrating the Group’s strengths in value creation, which cannot be measured by ﬁnancial metrics alone, with our ﬁnancial strategies to maximize the MOL Group’s corporate and shareholder value. In order to achieve these goals, we will place importance on dialogue with our shareholders and investors. We appreciate your continued understanding and support for the MOL Group as we continue working toward this transformation. on our balance sheet. Although we do not consider our equity ratio to be excessive at present, we will think carefully about the optimal debt : equity ratio by considering future investment progress and proﬁt plans. We will also control our capital with a focus on a target ROE of 9-10%, including returning any surplus earnings to shareholders when applicable. Shareholder Returns We have announced a dividend of ¥180.0 per share for ﬁscal 2024, assuming that the budget we set at the outset of the ﬁscal year is achieved, which represents a payout ratio of 30.0%. However, if performance exceeds our forecast, we plan to revise the dividend amount in line with a 30.0% payout ratio. Regarding additional shareholder returns such as share buybacks, our current priority is to allocate free cash ﬂow to fund future growth and enhance our mid- to long-term corporate CFO MESSAGE Shareholder Return Policy Ideas behind return policy Promote active investments with accumulated proﬁts, which will lead to proﬁt expansion and corporate value increase Increase payout ratio to 30% and return the outcome of growth to shareholders Introduce minimum dividend to prevent underpayments even if lower shipping market cycles occur When proﬁts exceed original expectations, capital controls such as additional shareholder return may be implemented with 9-10% of ROE target in mind The current shareholder return policy is maintained and expect a dividend of 180 yen per share for FY2024. (initial budget assumption as of Apr. 2024) Divined per share * to the ﬁgures after the stock split converted （Yen per share） (FY) Policy in Phase 1 of BLUE ACTION 2035 Payout ratio: 30% Minimum dividend: 150 yen per share Potential share buybacks subject to business environment 2020 2019 2025 2024 2023 2022 2021 560 220 50 22 400 180 Minimum 150 No Changes from BA2035 Payout ratio 20% 25% 30% (Minimum：150 yen) MOL REPORT 2024 20 Introduction MOL’s Measures 03 01 MOL’s Visions MOL’s Challenges 02 Data Section Awareness of Issues and Strategy Toward realizing the Group Vision set forth in BLUE ACTION 2035, we are advancing our business portfolio strategy. In addition to our core shipping businesses, we aim to stabilize our proﬁt base by diversifying investments into other, non-shipping businesses . However, the business management system that has supported our Group up to now has been cultivated over our long history in the shipping industry, and as our business has expanded into non-shipping businesses, it has become necessary to develop new management indicators and monitoring processes for each business sector with diﬀerent characteristics. To set up new regional headquarters in Asia/Oceania, Europe/ Africa, North/South America, etc., and to make swift investment decisions while transferring authority, it has also become important to standardize our business management structures globally. We therefore became aware of the need to restructure the management base of our entire Group, which operates both domestically and overseas, and to make our business management system more advanced to bring it up to the global level. Accordingly, the Ａccounting Division, Corporate Planning Division, and IT Division have come together to set up a specialized team and are working on internal reforms. Speciﬁcally, our CFO serves as the global project owner and works with Group companies both in Japan and overseas to promote “criteria standardization for accounting rules, investment standards, etc. through the introduction of IFRS” and the “standardization and systemization of business processes” with the aim of making our business management more advanced. Criteria Standardization through the Introduction of IFRS 1 Providing ﬁnancial statements prepared using a common set of accounting standards The number of companies around the world adopting IFRS is increasing rapidly. Through the adoption of IFRS, we will improve the international comparability and usability of our ﬁnancial information and promote communication with investors and customers not only in Japan but also overseas. 2 Autonomy and transparency improvements in our business management We believe that unifying our management standards will lead to strategic resource allocation and eﬃcient M&A execution led by each region as well as accelerated corporate growth. In addition, this will facilitate uniﬁed Group-wide risk management and enhance global governance. 3 Raising of management resources (people, goods, and money) to global levels By unifying accounting practices across the Group under IFRS, we believe that the ﬁnancial impact of time charter contracts and operating lease contracts, which are oﬀ-balance sheet items under J-GAAP, will be more accurately recognized. Viewing this series of changes as an excellent opportunity to develop future management talent, we will also use it to foster skills and mindsets with a global perspective. Standardization and Systemization of Business Processes 4 Shifting of resources to advanced tasks To realize advanced business management, it is necessary to improve the work eﬃciency of administrative tasks, particularly accounting procedures, across the entire Group. In conjunction with the digital transformation initiatives being implemented in parallel under BA2035, we will eliminate tasks that are highly dependent on individuals and improve productivity on a global basis. 5 Maximized utilization of integrated data infrastructure By standardizing management criteria and business processes on a global basis, accounting data will become more standardized, and the scope of data utilization will be expanded more than ever before. By making maximum use of digital tools, we will seamlessly connect data scattered around the world and simultaneously improve the speed and quality of data management in our business management. ADVANCED BUSINESS MANAGEMENT: Towards a “Resilient Global Enterprise” Advanced Business Management to Build Group Management Base That a “Resilient Global Enterprise” Should Have Promoting Business Portfolio Reforms to Realize Group Vision Set Forth in BLUE ACTION 2035 Improve comparative weight of stable revenue and non-shipping businesses that can maintain proﬁtability even during a shipping recession Regional strategy geared toward evolving into a global social infrastructure business group Innovative technologies and services to meet evolving social needs, including environmental conservation Criteria Standardization through the Introduction of IFRS 1 Providing ﬁnancial statements prepared using a common set of accounting standards 2 Autonomy and transparency improvements 4 Shifting of resources to advanced tasks 5 Maximized utilization of integrated data infrastructure Standardization and Systemization of Business Processes 3 Raising of management resources to global levels TOPIC MOL REPORT 2024 21 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Fleet*1, 2 Businesses Main Transported Cargo *1 The number of vessels including our consolidated subsidiaries. *2 Partial ownership of a vessel is counted as one vessel. *3 For dry bulkers, the number of vessels and DWT ﬁgures include equity-method aﬃliated companies’ ﬂeets. *4 LNG carrier and tanker numbers primarily include equity-method aﬃliated companies' ﬂeets based on the vessel types and the extent of our involvement in procurement, construction, and ﬁnancing. *5 ONE’s containership ﬂeet is shown. PORTFOLIO STRATEGY Main Aﬃliates Headquarters of Energy Business Tanker business LNG carrier business Thermal power fuel carrier business Oﬀshore businesses Wind power business Crude oil Petroleum products Chemical products LNG Steam coal 5th in the world (By DWT) Tankers: Fleet*4 186 vessels 13,982 k dwt 1st in the world (By no. of vessels) LNG carriers: Fleet*4 97 vessels Headquarters of Dry Bulk Business Dry bulker business Iron ore Coking coal Wood chips Grain 5th in the world (By DWT) Dry bulkers: Fleet*3 330 vessels 24,482 k dwt Headquarters of Product Transport Business Car carrier business Containership business Terminal and logistics business Automobiles Container cargoes Construction machinery Containerships: Fleet (ONE) *5 2,354 k TEU 6th in the world (By TEU) Car carriers: Fleet 95 vessels 2nd in the world (By no. of vessels) Headquarters of Wellbeing & Lifestyle Business Real property business Ferry and coastal RoRo ships business Cruise business Yaesu Daibiru (Tokyo) Midosuji Daibiru (Osaka) 275 George Street (Australia) Saigon Tower (Vietnam) Main properties No. of properties owned 35 Ferry and coastal RoRo ships: 14 Cruise ships: 2 Shipping Non-Shipping PORTFOLIO STRATEGY Portfolio Reform to Achieve Stable Growth with Shipping Business as the Core Taking into account the growth potential and the alignment with our environmental strategy for each business, we will proceed with asset rebalance so that the proﬁtability of the entire Company exceeds the volatility, and achieves both risk taking through increased investment and a business portfolio that can maintain proﬁtability even during downturns in the shipping market. Please refer to P.22-P.28 for initiatives by Business Headquarters. MOL REPORT 2024 22 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Headquarters of Dry Bulk Business Toward reduction of GHG emissions, we decided to install wind propulsion systems on nine dry bulkers, and the Group’s second vessel equipped with the Wind Challenger, the M/V GREEN WINDS, which was delivered in July 2024. We are implementing a range of low-carbon initiatives, including the development of LNG and methanol dual-fuel vessels, participation in demonstration experiments for ammonia and hydrogen fuels, the implementation of CO2 emission oﬀset voyages, and the adoption of green steel that reduces CO2 emissions for newly built vessels. Amid heightening customer awareness of environment-friendly ships due to cost reductions through improved fuel eﬃciency and in response to societal demands, we will not miss an opportunity that will lead to the expansion of our business. Lead the environmental response through advanced low-carbon measures and become the customers’ company of choice As cargoes for which demand is expected to increase as we head toward a decarbonized society, we have newly acquired, for example, grains and fertilizers. In contrast, however, we need to catch up to some targets, such as for the transportation of hot briquetted iron (HBI), and are working to strengthen targeted cargo sales continuously. In terms of the development of environment-friendly vessels, we will advance preparations for the placing of orders and deliveries of dual-fuel vessels (such as LNG and methanol) and vessels equipped with wind propulsion systems to further strengthen our marketing to customers and promote the expansion and upgrading of our ﬂeet for the next generation. We will promote ﬂeet development, primarily of our own ﬂeet, and take on appropriate market exposure. At the same time, we will exercise risk management, swift market judgments, cost reductions, and optimal vessel allocations as we aim to maximize returns. Awareness of Issues and Strategy Opportunities and Risks Opportunities Short-term Long-term Limited pressures to supply newly built vessels Selection of operators will become stricter due to quality and environmental requirements Creation of new transport demand (CO2, ammonia, etc.) not limited to dry bulk cargoes caused by decarbonization, and changes in trade ﬂows (HBI, scrap, etc.) Increased demand for dry bulk cargoes and changes in trade structure due to population and economic growth in Southeast Asia, India, Africa, etc. Risks Short-term Long-term The direction of next-generation marine fuels has not been decided, and supply chain is underdeveloped Rising ship prices due to inﬂation and labor shortages Regulatory changes and intensiﬁcation of environmental measures Decreasing cargo movements due to contracting economic activity in China Decreasing demand for transporting the major bulk cargoes, iron ore and coal, due to decarbonization, changes in demand structure, and other factors Smaller lots of dry bulk cargo and shorter transport distances due to advances in reuse and recycling Competition for food and energy. Emergence of geopolitical risks in food sector Executive Vice President Executive Oﬃcer Director General, Headquarters of Dry Bulk Business Hirofumi Kuwata DRY BULK Direction Toward Fiscal 2035 Proﬁt Projection (proﬁt before tax) Investment Plan (Phase 1) Of which, aligned with Environmental Strategy: ¥88.0 billion (Original plan) ¥110.0 billion * Based on ordinary proﬁt for ﬁscal 2024 only. Extraordinary income and extraordinary losses are not factored in. Of which, aligned with Environmental Strategy: ¥70.0 billion (Investments already decided) ¥98.0 billion FY2023 (Result) FY2024 (Forecast)* FY2025 FY2030 (Forecast under management plan) FY2035 48.6 20.0 25.0 29.0 31.0 (¥ billion) Phase 3 Phase 2 Phase 1 PORTFOLIO STRATEGY MOL REPORT 2024 23 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section PORTFOLIO STRATEGY Headquarters of Energy Business In the expansion of business, not only in the ﬁeld of shipping businesses such as LNG transportation, but also in the ﬁeld of non-shipping businesses such as wind power business, sales tasks, operations, capital investment/asset management, project management/operation, etc., are expanding. In both ﬁelds, there is an urgent need to develop professional human capital to maximize project management and the eﬀects of M&A and business integration. To achieve the right people in the right places across the entire Group, we will strengthen our talent management system ahead of other businesses by identifying the skills of each individual and clarifying the skill requirements of each business, and by planning and executing key human resource strategies to ensure the realization of our business strategies. Securing specialists and developing human capital to support M&A and business integration are keys to business expansion ENERGY Direction Toward Fiscal 2035 Proﬁt Projection (proﬁt before tax) Investment Plan (Phase 1) Of which, the environmental investment budget: ¥440.0 billion (Original plan) ¥530.0 billion * Based on ordinary proﬁt for ﬁscal 2024 only. Extraordinary income and extraordinary losses are not factored in. Of which, the environmental investment budget: ¥468.0 billion (Investments already decided) ¥657.0 billion Phase 3 Phase 2 Phase 1 72.5 77.0 70.0 84.0 96.0 FY2023 (Result) FY2024 (Forecast)* FY2025 FY2030 (Forecast under management plan) FY2035 (¥ billion) We will continue to lead the Group’s growth strategy by steadily upgrading our ﬂeet of LNG carriers, the acquisition of Fairﬁeld Chemical Carriers by MOL Chemical Tankers, and the capital alliance with Hokutaku, Japan’s largest wind turbine maintenance company. In addition to transportation services by our world-class ﬂeet for liqueﬁed gas and chemical products, we will accelerate our eﬀorts in carbon solution projects, which will be a milestone for the future. By establishing a new division specializing in carbon removal, next-generation energy, and carbon capture and storage (CCS) -related businesses, we will take a pioneering position in the industry and seize business opportunities by quickly identifying the decarbonization needs of our customers and society. Awareness of Issues and Strategy Senior Managing Executive Oﬃcer Director General, Headquarters of Energy Business Hisashi Umemura Opportunities and Risks Opportunities Short-term Long-term Increasing global demand for LNG Progress and expansion of legal reforms and subsidy systems relating to renewable and new energy Economic growth in India and emerging economies Progress in decarbonization (development and expansion of introduction of new energy sources, such as ammonia and hydrogen; spread of carbon recycling) Risks Short-term Long-term Red Sea tensions; protracted war between Russia and Ukraine Slowdown in Chinese economic growth Lack of supply infrastructure for alternative fuel bunkering Further heightening of geopolitical risks Persistently high costs of environmental measures Delays in establishing environmental value trading through market mechanisms MOL REPORT 2024 24 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Headquarters of Product Transport Business PRODUCT TRANSPORT Direction Toward Fiscal 2035 Proﬁt Projection (proﬁt before tax) Investment Plan (Phase 1) Of which, aligned with Environmental Strategy: ¥100.0 billion (Original plan) ¥280.0 billion * Based on ordinary proﬁt for ﬁscal 2024 only. Extraordinary income and extraordinary losses are not factored in. Of which, aligned with Environmental Strategy: ¥99.0 billion (Investments already decided) ¥142.0 billion Phase 3 Phase 2 Phase 1 142.8 135.0 124.0 195.0 225.0 FY2023 (Result) FY2024 (Forecast)* FY2025 FY2030 (Forecast under management plan) FY2035 (¥ billion) PORTFOLIO STRATEGY Issues and Strategies for the Containership Busines P.25 Managing Executive Oﬃcer Director General, Headquarters of Product Transport Business Osamu Sakurada By promoting DX, including the utilization of the J-CARPS system (reﬂection of count data in vessel loading plans) in operations and loading operations and the installation of cameras and AI systems that detect smoke inside cargo holds, we have improved transport and operational eﬃciency as well as safety. By digitizing paper document exchanges with customers, such as the issuance of electronic bills of lading, we will also reduce the environmental impact and improve customer convenience. By strengthening our interactions with customers, we will build long-term stable partnerships that will lead to business stability. Building long-term, stable partnerships with major shippers through safety and environmental strategies To respond to diversifying product logistics needs and increasingly complex trade patterns, we will strengthen our global network and seek to seize growth opportunities. In the car carrier business, we are implementing the construction of LNG dual-fuel vessels ahead of schedule to achieve the GHG reduction required in the marine transport sector, which is leading to long-term partnerships with customers. With a large number of new ships due to be delivered in 2024-2025, in the containership business we want to ensure a certain level of proﬁt by responding ﬂexibly to circumstances and working to make our operations more eﬃcient. In the logistics business, we are devising ways to expand and upgrade distinctive services, such as transporting chemicals and heavy goods. Awareness of Issues and Strategy Opportunities and Risks Opportunities Short-term Long-term Expansion of commercial rights through ﬂexible responses to increasingly complex trade patterns Building long-term, stable partnerships with major shippers through environmental strategies Solid demand for goods due to population growth (even as growth rates slow) Improvements in land and onboard operations by giving added depth to digital technologies Risks Short-term Long-term Worsening situations in Ukraine and Israel, trade friction between the United States and China, and the EV tariﬀ war are increasing trade risks Increased shipping capacity due to the delivery of a large number of new ships Contraction of the global economy due to geopolitical risks, risk of global recession Slowdown in long-term growth rate of demand for goods Stable procurement of alternative fuel ships and of the alternative fuels themselves MOL REPORT 2024 25 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section on board. Couple this with the free competition in the international shipping industry, and you will see freight rates soar when there is a shortage of containerships and price competition ensue when there is an oversupply. This results in a business model in which freight rates rise and fall dramatically, despite the business having a highly public nature as a transportation system. Matsuda: As with freight rates, the price of containerships has also ﬂuctuated in recent years. One point that has become very clear through my research is that the most important factor in achieving growth in the shipping industry, and particularly in the containership business, is investment. If the amount invested in vessels themselves can be kept to a minimum, this directly translates into greater competitiveness due to lower costs. I therefore believe that in order to attain sustainable growth, it is essential to secure shippers and increase the number of vessels while at the same time controlling investment outlay. Tamura: Continuing to develop our containership ﬂeet is one of our top priorities as we work to expand our business, and ONE will continue to make strategic investments in this area. In addition to placing planned orders for new vessels, we also made an investment last ﬁscal year in Atlas, a major containership- owning company. Keeping a close eye on environmental issues and the regrouping of global shipping operators Matsuda: One key change occurring in the containership market is the growing environmental awareness of both shipping companies and shippers. Around 10 years ago, I remember being told by a major foreign shipping company that time, cost, and carbon footprint were the three biggest factors in deciding a shipping route. Services for calculating CO2 emissions were not as advanced at that time as they are today, so I listened with a somewhat skeptical ear̶but today shippers have a keen awareness of environmental issues as a matter of course. Tamura: That’s right. At the societal level, there is a growing debate about how the costs associated with environmental preservation PORTFOLIO STRATEGY DIALOGUE In today’s volatile market, investment plans are the most important factor Tamura: The shipping industry, especially the containership market, has historically been extremely volatile, with ﬂuctuations in freight rates. What do you believe are the factors behind this? Matsuda: I attribute the high volatility to two factors. First, amid sharply ﬂuctuating freight rates, there is a lag between the market peak and the timing at which new vessels are deployed. A gap of approximately two years occurs between the decision to invest and the actual completion of new vessels. Second, containerships are expected to operate according to a ﬁxed schedule, regardless of ﬂuctuations in cargo volumes due to economic conditions or other factors. Tamura: I guess you could say that containerships are the route buses of the ocean. As they operate on a regular schedule, there are both times when some seats are left empty and times when there is no more room Ask the Expert: Current State of the Containership Market Ocean Network Express (ONE), established through the merger of the liner container shipping businesses of MOL, NYK, and KLINE, began service in April 2018. Having achieved record proﬁts despite ongoing volatile conditions in the container shipping industry, ONE is looking ahead to the next stage of sustainable growth. We spoke with Professor Takuma Matsuda, an expert in shipping economics and logistics, about the challenges the company must tackle in the future. Professor, Faculty of Commerce, Department of International Business, Takushoku University Takuma Matsuda Senior Managing Executive Oﬃcer Responsible for Containership Business Division, East Asia, South East Asia and Oceania Area Chairman, Ocean Network Express Holdings, Ltd. Jotaro Tamura CLOSE UP MOL REPORT 2024 26 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section necessary in order to secure a strong network and oﬀer better service to customers. The challenge will be how to win customers for these services, so I am keen to see how these plans will materialize going forward. Strong execution and supervision by ONE and its three parent companies, with each committed to their own roles, will lead to ONE’s future growth Matsuda: I previously published a book on the process through which ONE was established and grew. In it, I referred to the company as a “Dejima organization.” A Dejima organization refers to an entity established separately from the main body of a large organization for the purpose of creating something new. As ONE was created through a merger of the container shipping divisions of three Japanese shipping companies, I believe that ONE could have opted to locate its head oﬃce in Tokyo, for example. Despite this, the company took the bold decision to locate its head oﬃce in Singapore and began operations as a Dejima organization, physically separate from its parent organizations. This step was taken with the aim of achieving quick decision- making, which is a distinctive feature of ONE. Tamura: Looking back at ONE’s foundation, we placed the greatest emphasis on ﬁrstly making the merger itself a success as we prepared to launch the new company in 2018. I believe that our focus on accomplishing this goal from our base in Singapore contributed to the successes we are seeing today. What ONE must do going forward is to increase the independence of its management and achieve sustainable growth. Meanwhile, I believe ONE’s three parent companies must play a supervisory role in the execution of its business while providing full support in terms of allocation of managerial resources so that the operational side can evolve and reach its ideal state. What is important is that the three parent companies and ONE work together and support each other in pursuit of a clear, shared vision of where ONE is headed and what the company’s objectives are. Matsuda: Having a shared objective is also important among the three parent companies. As the three companies are also competitors, their expectations of ONE will diﬀer. However, the three will maintain a shared objective and fulﬁll their supervisory responsibilities, entrusting the execution to ONE, while keeping in mind their responsibilities to their respective shareholders. This is the type of relationship you should strive to maintain. Tamura: In parallel with the creation of ONE’s management plan, ONE 2030, the three parent companies have also held deep discussions regarding the future oversight of the company. Going forward, I expect that each parent company will play a supervisory role in line with the direction established through these discussions. should be borne. Of the cargoes transported by containership, the product groups that are closer to the end-user tend to have smaller marginal transportation costs per unit, and I feel that shippers are relatively understanding of the cost burden in light of the growing environmental awareness of end users. Matsuda: Another change we are seeing in the containership market is that the number of major operators has shrunk to around 10. The Global Financial Crisis triggered by the collapse of Lehman Brothers represented a major juncture for the industry, and from the 2010s onward, a sustained gap between supply and demand saw freight rates remain at very low levels. At this time, there was excessive competition in the market, with around 20 companies competing for business. Matsuda: In addition to the price competition, vessels were becoming increasingly larger. As demand was not growing fast enough to keep up with supply, shipping companies were forced to adapt by expanding in scale and achieving cost competitiveness through mergers and restructuring. Tamura: While the market players have reorganized in such a way, the reconﬁguration of shipping networks has also been advancing recently through the formation of global alliances. ONE is a member of THE Alliance, one of the three major shipping alliances. Matsuda: That’s right. There is also a lot of talk about the new shipping alliance Gemini Corporation, which is to be formed in 2025 by Maersk and Hapag-Lloyd, a member of THE Alliance. I believe the key to success will be how shipping companies move to capture the vacant spaces created by the reconﬁguration of these networks. Tamura: Speaking generally, I believe that the regrouping of alliances presents both risks and opportunities. ONE has been a member of the same East-West shipping alliance as Hapag-Lloyd for many years, and we intend now to capitalize on new opportunities while addressing potential risks. Although there will be changes in the network, we are determined to enhance the services that ONE oﬀers, and going forward I am conﬁdent that we will continue to meet the collective requirements of our customers. ONE is aiming to improve both the quality and scale of its operations Matsuda: ONE2030, ONE’s management plan announced in March 2024, stood out to me for its even greater focus on growth in size than previously. As the company’s success thus far has come from generating proﬁts through eﬃcient operations, the challenge going forward will be how to achieve a balance between eﬃciency and scale. Tamura: When we founded ONE, our motto was “not too large and not too small.” With the merger of the three Japanese shipping companies, the company can no longer be considered too small. At the same time, keeping in mind our motto of not being too large, we will work to win the trust of our customers by developing services that are tailored to their needs. In the future, we plan to further reﬁne the business model we have established through the successful merger by integrating our individual strategies, such as our digital technology and human resources strategies, in order to achieve further scale while maintaining and enhancing the quality of the services we deliver. Matsuda: As THE Alliance is slightly smaller than the other major shipping alliances, expanding scale to a certain extent is Please see below for details on Ocean Network Express Pte. Ltd.’s medium-term management plan “ONE2030.” https://ir.mol.co.jp/en/ir/library/bsm/main/01/ teaserItems1/01/linkList/0/link/ONE%20 2030(E).pdf PORTFOLIO STRATEGY DIALOGUE MOL REPORT 2024 27 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Headquarters of Wellbeing & Lifestyle Business Real Property Business While developing solid business through our participation in domestic projects and leveraging that experience and know-how, we are aiming to expand our earnings overseas. In Japan, although there is a risk of rising costs such as real estate prices, construction costs, and interest rates, we will expand our business by making new investments, rebuilding, and developing our asset types, responding ﬂexibly to diversifying work styles and sustainability issues. Over the medium to long term, we aim to improve proﬁtability by addressing inﬂation. Overseas, in addition to Vietnam and Australia, where we have already expanded, we plan to lay the foundations for future business expansion by strengthening cooperation with the MOL Group in Asian markets where demand is expected to grow, especially in India. Ferry and Coastal RoRo Ships Business We view the increase in cargo transportation demand brought about by the modal shift caused by the 2024 problem and the recovery in passenger transport demand after the COVID-19 pandemic as opportunities for our business. We are working to set ourselves apart from other companies through new customer development, improvements in DX-driven customer service, and the development of new vessels that are environment-friendly while also expanding truck loading capacity and providing more comfortable cabins. In the meantime, it will be necessary for us to take into account business risks, such as rising prices, labor shortages due to population decline, changes in transportation needs in the short to medium term, and the possibility of the next modal shift due to technological innovation in the long term. Proactive business investment and technological response capabilities, such as innovation in vessel technology and the introduction of alternative fuels, are required. We will integrate the ferry and coastal RoRo ships business and leverage the Group’s economies of scale to establish a system that enables us to respond to changes in the business environment autonomously. Cruise Business Following the debut cruise of the MITSUI OCEAN FUJI in December 2024, we will have a two-vessel service system with NIPPON MARU and aim to oﬀer a wide range of attractive vacation options. The cruise market in Japan is also expanding due to the recovery and increase in domestic and inbound demand following the COVID-19 pandemic. We see this situation as an excellent opportunity to promote our new “Beautiful Japan Cruises” brand value to the market. We are implementing a growth strategy for our cruise business by making timely investments in human resources and ﬂeet expansion. WELLBEING & LIFESTYLE Direction Toward Fiscal 2035 Proﬁt Projection (proﬁt before tax) Investment Plan (Phase 1) Of which, the environmental investment budget: ¥22.0 billion (Original plan) ¥275.0 billion Of which, aligned with Environmental Strategy: ¥21.0 billion (Investments already decided) ¥210.0 billion * Based on ordinary proﬁt for ﬁscal 2024 only. Extraordinary income and extraordinary losses are not factored in. Phase 3 Phase 2 Phase 1 9.6 6.0 19.0 29.0 45.0 FY2023 (Result) FY2024 (Forecast)* FY2025 FY2030 (Forecast under management plan) FY2035 (¥ billion) PORTFOLIO STRATEGY The Wellbeing & Lifestyle Business is a “people-focused business” that is B-to-C (for general consumers) and is closely tied to local communities within Japan. Also, it consists of businesses that play a central role in the stable revenue business that forms a part of “transforming the portfolio into a proﬁtable one, even when the shipping markets are in a downturn,” as stated in BA2035. Having built our foundation in each business̶including the real property business, ferries and coastal RoRo ship business, cruise business, global human resources consulting business, and new businesses̶we are moving toward our common goals of achieving sustainable growth and improving customer satisfaction while expanding our proﬁt scale. Awareness of Issues and Strategy Managing Executive Oﬃcer Director General, Headquarters of Wellbeing & Lifestyle Business Tsunemichi Mukai MOL REPORT 2024 28 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Aiming for sustainable growth and enhancing customer satisfaction while expanding the proﬁt scale PORTFOLIO STRATEGY WELLBEING & LIFESTYLE 63 Ly Thai To Corner Stone Building MOL’s real property arm, Daibiru, acquired an equity interest in 63 Ly Thai To, an oﬃce building in central Hanoi, Vietnam. The building is also near the Cornerstone Building, which is owned and operated by Daibiru in the same area, and the company aims to share the high-level building operation and management know-how it has built up over the years to improve services. Daibiru's expansion into Hanoi was made possible by utilizing MOL’s name value and personal network, which has extensive business experience in the country. As MOL expands into further emerging countries in the years to come, the two companies will leverage their mutual connections to beneﬁt MOL's business by sharing local information and relationships with customers and business partners gained through the real property business, thereby working together to develop their overseas business further. Real Property Business Sunﬂower Kamuy Sunﬂower Kurenai MOL’s ferry and coastal RoRo shipping arm, MOL Sunﬂower, is promoting the introduction of LNG-fueled ferries that reduce GHG emissions and have a low environmental impact. In ﬁscal 2025, the ﬂeet is scheduled to consist of four vessels, including the Sunﬂower Kamuy, one of two currently under construction, and the Sunﬂower Kurenai and Sunﬂower Murasaki (already in service), which were the ﬁrst of their kind in Japan. The 2024 problem in logistics poses particularly major challenges for long- distance truck transport companies, and we will steadily provide space on ferry and RoRo ship routes to meet that demand. In addition to expanded cargo space, the new ships oﬀer signiﬁcantly more passenger cabins for truck drivers. Ferry and Coastal RoRo Ships Business MITSUI OCEAN FUJI Nippon Maru Under the new cruise brand MITSUI OCEAN CRUISES, MOL’s cruise business arm, MOL Cruises, will commence a wide range of services with two ships in December 2024. Pursuing the heartfelt “hospitality” that it has cultivated over the years, we will work to set itself apart from other shipping companies by adopting the concept of "FUNATABI-beautiful encounters with Japan" and is expecting to welcome on board not only Japanese but also overseas guests. The newly launched MITSUI OCEAN FUJI will oﬀer guests carefully-selected port experiences, spacious time on board, and a choice of dining locations and menus to suit their moods. To make the cruise business one of our growth pillars, we will promote a business strategy that balances tradition and innovation by investing in human resources, such as having headquarters executives serve as presidents of operating companies, making extensive use of the Group’s talent pool, hiring specialists both domestically and internationally in key positions, and restructuring our employee training programs. Cruise Business MOL REPORT 2024 29 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Reasons behind the Restructuring of Regional Commercial Activity In 2022, we began an initiative to expand our business by strengthening the execution structure of our regional organizations, using India as a model case for promoting our regional strategy. In 2023, we expanded on this by dividing the world, excluding Japan, into ﬁve regions (East Asia; Southeast Asia and Oceania; South Asia and Middle East; Europe and Africa; and the Americas) and appointing dedicated executive oﬃcers for each region. In addition, we appointed a head of marketing and corporate functions in each region, and established a system to improve the quality and speed of decision-making within regional organizations. Also, we have increased the number of CxOs who oversee the corporate functions of the entire Group and put in place a system by which each CxO will carry out cross-sectional activities (support/control) for regional organizations from the perspective of overall optimization. There are large diﬀerences in the stage of economic development between regions, and the growth areas and business opportunities also vary greatly. To further enhance the eﬀectiveness of the sales strategies that regional organizations have developed in accordance with the characteristics of each economic zone, in 2024 the COO will lead communications with head oﬃce management to align the regional strategy with the strategies of the entire Group. Progress of Phase 1 (2023-2025) (Extract) Entered into long-term Time Charter Party agreement covering new-build FSRU for Poland’s GAZ-SYSTEM S.A. Strategic partnership with GCS Velogic, a major logistics company serving East Africa Participation in oﬃce building development project in Melbourne, Australia Joined Oﬃce Building Development Project in India, near Delhi Established MOL Switch with aim of investing in decarbonization technologies Acquiring human capital via new routes through collaborations with academia Signed CTV time charter agreement with Brazilian state-owned oil company Petrobras Participation in frozen and refrigerated warehouse development project in Singapore Commenced operations of the LNG Import Project (FSRU) in Hong Kong A case the regional oﬃce took a leadership role in project development and management P.30 Regional strategy dialogue between TotalEnergies and Suryan, regional head of marketing in charge of Europe and Africa P.31 Regional Strategy Implementation Structure Executive oﬃcers Regional organizations Executive oﬃcers Head oﬃce business organizations CxO Corporate organizations COO to lead communications to increase eﬀectiveness Working to achieve Group’s overall optimization through constructive friction Board of Directors/Executive Committee Regional projects (strengthening competitiveness and growth of shipping businesses, new business development focused on non-shipping businesses) REGIONAL STRATEGY REGIONAL STRATEGY Enable MOL Group’s Growth in the Key Economic Regions of the World Having positioned regional strategy as one of the three core strategies under BLUE ACTION 2035, we are working so that we will be able to demonstrate our presence in the global market as a global social infrastructure business group. We have reviewed our business promotion structure to strengthen the competitiveness and growth of our shipping businesses in each region and to expand our business through new business development focused on non-shipping businesses. Having concentrated our eﬀorts in the markets where we already have a presence, we are beginning to see results in the higher quality and speed of our decision-making. MOL REPORT 2024 30 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section REGIONAL STRATEGY MOL’s European regional oﬃce, MOL (Europe Africa) Ltd. (MOLEA) based in London, has achieved a signiﬁcant milestone with the award of a long-term Time Charter Party (TCP) Agreement for a Floating Storage and Regasiﬁcation Unit (FSRU) with Polish Gas Transmission System Operator, GAZ-SYSTEM S.A. The MOLEA Technical Team has been diligently overseeing the technical aspects of the project’s bidding process. The team has played a crucial role in navigating the complexities of the project, ensuring that all technical requirements were met, and deadlines adhered to during the bidding process. Prior to the bid, we heavily focused on understanding the intricate technical demands and speciﬁc needs of our client. This proactive engagement allowed us to tailor our technical solutions precisely, enhancing our proposal's competitiveness. Running business development and international bids from our regional oﬃce enabled us to develop a deeper understanding of the clients' demands and regional market dynamics, ensuring that our solutions are not only technically robust but also highly aligned with the speciﬁc needs of our clients. Moreover, having the autonomy to drive business development and project execution locally has facilitated faster decision-making, closer client relationships, and a more agile response to emerging opportunities and challenges. However, operating through the regional oﬃce has not been without its challenges. Navigating the diverse regulatory landscapes across diﬀerent European countries, managing logistical complexities, and ensuring seamless communication between various stakeholders both internally and externally have posed signiﬁcant. Additionally, coordinating the technical and commercial aspects of the bid while adhering to stringent deadlines required meticulous planning and execution. Despite these challenges, our team's dedication and expertise have been instrumental in overcoming these obstacles and securing this project. This achievement aligns with MOL's strategic shift towards greater independence for regional oﬃces, enabling us to drive business development and project execution autonomously. Winning this major project is not only a testament to our technical expertise but also a signiﬁcant step in enhancing regional activity in Europe. This FSRU project is a cornerstone of our regional strategy, setting a benchmark for future projects and reinforcing our commitment to sustainable development and energy security in Europe. Main Dimensions Length 294.00m; Width 46.00m LNG Storage Capacity 170,000m3 Shipyard Hyundai Heavy Industries Scheduled Completion Date 2027 Please visit the website for more information on MOL and Gaz System enter into agreement on FSRU project in Gdańsk, Poland. https://www.mol.co.jp/en/pr/2024/24060.html FSRU Outline Technical Manager Kei Fujiwara Senior Technical Manager Stephanie Wong Technical Graduate Isaac Fernandes Head of Technology & Projects Song Wang FSRU image (FSRU on right) REGIONAL STRATEGY Members of Energy, Decarbonisation and Oﬀshore Business Europe, Americas and Africa Empowering Regional Strategy Regional Oﬃce Taking a Leadership Role in Project Development and Management MOL REPORT 2024 31 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section were, which presented numerous communication challenges and delays which resulted in substandard service. Suryan: Yes, I remember that episode, and MOL (Europe Africa) eventually took control of operations to improve service. That experience was a key reason why we said that if a vessel is to be operated in a certain region while the customer’s operation is also in that region, we cannot manage large time zones and expect to communicate eﬀectively. This is a good example of a successful regional strategy, and we should move to localize operations more in the future. Jérôme: Yes, I agree. TotalEnergies also learned from this experience by establishing an operational presence in Singapore for ships that primarily trade in the Far East, bringing us much closer to our energy customers. Suryan: I also cannot overemphasize the importance of eﬀective communication and regional presence when reporting safety issues. Regionalizing safety discussions involves people with diﬀerent perspectives on the same challenges, and it removes the burden on headquarters, allowing issues to be resolved more quickly at regional oﬃces. Being transparent about the fact that incidents do occur, and by sharing our experiences, we can raise awareness and ensure that mistakes are not repeated. Jérôme: I will add that MOL is very transparent and forthcoming about safety matters. For example, when a problem occurred with an LNG vessel, I vividly recall MOL’s top management visiting TotalEnergies Paris oﬃce to explain what had happened. Although TotalEnergies did not charter the vessel, I was impressed by MOL’s clear explanation of what went wrong and the lessons to take going forward as an industry. I also noticed the same systematic approach used in the Promote Regional Strategy through Transparent Communication and Regional Presence Suryan: Transparent communication and regional presence are crucial for successful business operations. MOL’s regional strategy has been successful at concentrating people with similar industry experiences and cultures in speciﬁc regions and oﬃces, allowing them to understand one another while improving communication through daily face-to-face conversations, which helps to overcome certain language barriers. Jérôme and I also communicate closely, both formally and informally, thanks to working in the same time zone and sharing similar language backgrounds, which allows us to tackle challenges more eﬃciently. Jérôme: I think MOL is taking a wise approach by having autonomous regional oﬃces to push businesses forward by being as close to customers as possible. It is critical for a company of MOL’s size to have a local presence and proximity to shipping partners, especially as the trading and shipping industries are undergoing big transitions. With the market evolving so quickly, a signiﬁcant shift in mindset and business practices is required, so regional proximity is essential to understanding global market dynamics. Speciﬁcally, as MOL is a major player in the energy commodity shipping markets, it should be as close as possible to the commodity trading and shipping hubs like Singapore, Houston, Geneva, and London. The importance of regional proximity reminds me of that time when an LNG carrier was sub-chartered to TotalEnergies despite operating out of Tokyo and serving Japanese utility customers. This meant that the ship was primarly trading in the Atlantic Basin rather than in Japan, where the customers REGIONAL STRATEGY DIALOGUE Senior Vice President of Shipping at TotalEnergies Jérôme Cousin Ask the Customer: Expectations and Demands for MOL Executive Oﬃcer, Regional Head of Marketing in charge of Europe and Africa (Energy Related Business) at Mitsui O.S.K. Lines, Ltd. Suryan Wirya-Simunovic CLOSE UP REGIONAL STRATEGY MOL REPORT 2024 32 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section projects that have explored new markets and developed innovative technologies. For example, one of the earliest joint ventures between MOL and Total was developing the global LNG market by pioneering LNG shipping and LNG production and marketing, respectively. Our collaboration in the LNG bunkering space and promotion of LNG as a marine fuel bears fruit today, as we see increasing LNG dual fuel vessels in service, indicating that our eﬀorts have contributed signiﬁcantly to the shipping industry’s energy transition. Suryan: MOL wanted to lead the way in supporting the creation of an LNG fuel market because one of our goals is to use more low-GHG emission fuels. With TotalEnergies, we succeeded and established ourselves as a leading LNG carrier players. Jérôme: As major players, MOL and TotalEnergies are responsible for continuing to drive innovation in new technologies like wind-assisted propulsion, because we have the resources to propose and test new solutions, even if every technology trialled may not turn into commercial success. We must remain courageous and pioneer new technical solutions, which will beneﬁt not only both companies, but also the industry as a whole. Suryan: I agree. MOL has realized that it is a much larger global player than before, and we must take the initiative to see how we can improve and progress the industry. This is why we invest more in R&D to develop better vessels that address environmental sustainability and circular economy requirements like wind-assisted propulsion, FSRU conversions, and CO2 capture technology. These are excellent segments in which we can collaborate, add signiﬁcant value, and provide competitive services. Jérôme: This pioneering spirit is why we enjoy working with MOL. We have found a very strong partner with whom to trailblaze new projects in new geographies that competitors will not touch due to their complexities. Even in conventional transportation, I am pleased to work with a ship owner who is willing to commit to new technologies while remaining cost competitive. Not all ship owners are like this. Suryan: I am delighted to hear that. MOL also looks forward to continuing to work with TotalEnergies because you enjoy tackling diﬃcult challenges and communicating your thoughts and ideas to us. This strong relationship ensures that we go much further in what is required in these complex projects, thereby maintaining our position as industry leaders. Wakashio grounding incident. TotalEnergies has Safety as a core value, and the handling of these two incidents demonstrates that MOL does as well. Suryan: I am glad to hear you appreciate our openness about safety. Moving forward, communication with TotalEnergies will become even more important as MOL expands into new business areas like marine-related energy infrastructure and engages with TotalEnergies upstream projects in emerging regions like Brazil and Africa, where the technology is not as straightforward and involves big technical components with non-standardized shipping language. Value of Localizing Technical Expertise and Diversity for Regional Strategy Suryan: As MOL’s projects become more complex, it is critical that we retain and hire local technical, operational and commercial talent who are at the forefront of new product and technology solutions, especially due to the diﬀerences in needs and practices between Asia, Europe, and the U.S. Historically, MOL consisted of naval architects and mechanical engineers. Nowadays, we need other specialized talent, like process engineers, who are more commonly found in Europe than Japan. Therefore, our technical oﬃces in Europe are frequently split two-thirds local and one-third Japanese. The beneﬁt of hiring local talent is that they bring skillsets that we have not fully developed internally at our Tokyo HQ. Jérôme: Having local technical expertise in regional oﬃces is also important strategically for TotalEnergies, especially since there are only a limited number of good naval architects, so we want to ensure that we are maximizing their abilities and deploying them in the most appropriate regions to improve the business and make the right technological choices to tackle complex projects and stay ahead of industry trends. Suryan: Attracting diverse talent is just as important for bringing new ideas and perspectives to the table. MOL’s diverse talent pool is growing, not only in terms of the mix of Japanese and non-Japanese talent, but also in terms of female representation, especially in the Tokyo and London oﬃces. On both local talent and diversity fronts, I believe MOL is in a good position as one of the few companies that still localize ship management. Jérôme: Diversity is critical to understanding the challenges facing our industry, and after seeing how truly diverse MOL’s London oﬃce is, I agree that MOL is well-positioned to address the energy transition. Continue to be Pioneers of New Markets and Technologies Moving Forward Jérôme: MOL and TotalEnergies can be proud of making the global energy market what it is today through a long history of REGIONAL STRATEGY DIALOGUE * TotalEnergies is a world-leading multinational energy company headquartered in France that produces and supplies oil, biofuels, natural gas, green gas, renewable energy, and electricity. TotalEnergies employs more than 100,000 people in the energy business to bring aﬀordable, environmentally friendly energy to the masses. In more than 130 countries, TotalEnergies is engaged in projects committed to sustainable development, contributing to prosperous, sustainable lives for everyone. REGIONAL STRATEGY MOL REPORT 2024 33 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Aims of Our Environmental Strategy Our environmental strategy is to promote eﬀorts to address one of our Sustainability Issues (Materiality)̶Environment: Conservation of marine and global environment̶and at the same time to link this to the expansion of our business. In addition to the preservation of the marine environment, protection of biodiversity, and prevention of air pollution, to tackle climate change with utmost urgency, the MOL Group will make a concerted eﬀort to achieve “net zero GHG emissions by 2050.” Decarbonization is a path down which our Company and the entire world aim to advance. As a ﬁrst mover in this direction, we will establish a solid position in terms of environmental response and link this to the growth of MOL’s businesses by advancing our investment strategy to promote our business. Addressing Climate Change as a Growth Opportunity While it remains unclear what will become mainstream as alternative energy sources, the world is steadily moving toward a decarbonized society, and overcoming environmental challenges, as exempliﬁed by measures to combat climate change, will be essential factors in corporate growth and future proﬁts. Although the Company is part of the shipping industry, which is one of the hard-to-abate sectors where reducing CO2 emissions is considered to be beset with diﬃculties, it is for that very reason that we need to, by all means, aim for net zero GHG emissions to survive in this environment. Seeing this as a growth opportunity, we will continue proactively promoting environmental investments, utilizing internal carbon pricing (ICP), and building a solid ﬁnancial base to support them. Please visit our website for details on marine and global environmental conservation. https://www.mol.co.jp/en/sustainability/environment/ Please see P.35 for a conversation between Rob van Riet, Interim Head, First Movers Coalition and our Chief Environment and Sustainability Oﬃcer (CSuO) Tatsuro Watanabe. Environmental Investment Progress Under the MOL Group corporate management plan BLUE ACTION 2035, which was formulated in ﬁscal 2023, of the ¥1.2 trillion investment budget for Phase 1 from ﬁscal 2023 to ﬁscal 2025, we allocated ¥650.0 billion to environmental investments. Having steadily accumulated investments, including 2 Wind Challenger-equipped ships and orders for 38 LNG/Methanol -fueled vessels, as of the end of ﬁscal 2023, of the total investment amount of ¥1.1 trillion that had already been decided upon, environmental investments accounted for ¥658.0 billion. For information on major investment projects, please refer to the table below. Participation in First Movers Coalition Launched jointly by the World Economic Forum (WEF) and U.S. Special Presidential Envoy for Climate, John Kerry, the First Movers Coalition (FMC) is a procurement-focused initiative that has as its aim accelerating the spread of advanced technologies and products by creating demand toward achieving “net zero GHG emissions by 2050.” Having been the ﬁrst Japanese company to join the FMC in 2022, MOL was appointed its shipping sector champion in 2023. By sending staﬀ members to FMC and cooperating with governments and participating companies, we are leading discussions toward the widespread use of zero-emission fuels, which is necessary to achieve net-zero GHG emissions by 2050. Even among the shipping companies that operate in the hard-to-abate sector, there is a signiﬁcance in MOL leading the industry as a full-line marine transport company that operates vessels of all sizes and applications where decarbonization represents a major challenge. ENVIRONMENTAL STRATEGY ENVIRONMENTAL STRATEGY Reduction of Our Group’s GHG Emissions Low-Carbon and Decarbonization Energy Projects ●LNG-fueled Capesize bulkers ●LNG-fueled thermal power fuel carrier ●LNG-fueled crude oil tankers ●LNG-fueled car carriers ●LNG-fueled ferries ●LPG-fueled LPG and ammonia carriers ●Wind Challenger-equipped bulkers ●LNG Carriers ●FSRU projects in Poland Major Investments aligned with Environmental Strategy MOL REPORT 2024 34 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section In April 2024, we established the Carbon Solution Development Unit within the Headquarters of Energy Business. This unit consolidates businesses related to carbon capture, utilization, and storage (CCUS), carbon removal, and next-generation energy to give added impetus to our eﬀorts. Amid the ongoing shift from fossil fuels to next-generation energy sources, including hydrogen, ammonia, and methanol, that emit either zero or less carbon dioxide (CO2), CCUS and carbon dioxide removal (CDR) as well as the development of businesses along the next-generation energy value chain, from upstream to downstream and including some upstream use of CO2, are becoming increasingly important in the years to come. We had been working on business development through diﬀerent commercial arms. As gradual progress has been made with these projects, we have consolidated these eﬀorts, including some concurrent roles, into the Carbon Solution Development Unit. This will facilitate collaboration with the relevant organizations and regions within the Group while promoting business development in a centralized manner. As shown in the diagram on the right, CO2 will be captured and transported, then stored, or such CO2 will be utilized to produce synthetic fuels, becoming one of the next-generation energy. Such energy will be transported and distributed for marine use. Since the two are correlated, we hope to be involved in both the CO2 value chain and the next-generation energy value chain to strengthen our competitiveness, meet our customers’ needs, and reach net zero emissions for the Group, creating synergy. ENVIRONMENTAL STRATEGY We are investing and participating in a clean ammonia production and transportation project, which is expected to beneﬁt society as a safe, inexpensive, low-carbon/decarbonized energy source for the shipping, power, and steel industries. The clean ammonia produced will be exported in ammonia carriers operated by MOL and others. Through our investment in this project, we will contribute to the clean energy supply chain, from upstream to downstream. To proactively respond to the major trend of the energy shift and contribute to reducing not only our own GHG emissions but also those from society as a whole, we will leverage the Group’s collective strengths in engaging in the clean energy business. Participation in Next-Generation Energy Production Business CCUS Value Chain A means of eﬃciently transporting captured and liqueﬁed CO2 to storage sites or sites for eﬀective utilization, liqueﬁed CO2 carriers lie in the midstream of the CCUS value chain, making this a business ﬁeld where the Group can demonstrate its strengths to its best advantage. As the global volume of CO2 transported by sea is expected to increase toward 2050, feasibility studies looking into CO2 marine transportation are underway worldwide. To respond more ﬂexibly to customer transportation needs, we will work to consider dual-purpose vessels that can also be used to transport next-generation energy sources. As a means of entry into the transportation of liqueﬁed CO2, the Group will actively participate in businesses other than transportation in the supply chain, such as CO2 storage and recycling, thereby contributing to the building of the supply chain as a whole. TOPIC TOPIC Environmental Strategy Progress Establishment of Carbon Solution Development Unit Please visit our website for details on our investment in the clean ammonia production and transportation project. https://www.mol.co.jp/en/ pr/2023/23080.html Areas of Responsibility CO2 transportation FSRU, fuel purchase/ use, bunkering business, etc. Transportation Energy production (not necessarily limited to cases where CO2 is used) Each sales organization, relevant organization/region Next-generation energy value chain CO2 Value Chain Downstream Midstream Upstream Downstream Midstream Upstream CO2 storage Carbon Removal Team Carbon Recycle Business Development Team Next-Generation Energy Development Team CCUS Business Development Team Fossil fuel (Industry, energy)- derived CO2 capture Natural and atmospheric CO2 capture (including technical systems) ENVIRONMENTAL STRATEGY CO2 utilization ( Synthetic fuels , raw materials, etc.) MOL REPORT 2024 35 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section then the Shipping Sector. Rob: MOL has exceeded our expectations by actively participating in FMC’s quarterly working groups, group sessions, and events. As Champion for the shipping sector, MOL has also seconded an employee working as a Fellow with the team in Geneva, notably on the shipping decarbonization workstream, and is an invaluable member of the team. This way, MOL is providing value to all members of FMC’s shipping sector. Tatsuro: We are particularly proud of our decision to participate in the Shipping Sector, as it is one of the hard-to-abate sectors. Although we recognize that achieving net zero with our business model is a considerable hurdle, it is one that needs to be overcome, and we believe that taking advantage of being a ﬁrst mover with the FMC, especially in the medium to long term, will help us get there. Rob: I am very impressed with MOL’s participation in a hard-to-abate sector and the CDR Sector because you are making very ambitious commitments to buy a speciﬁc portion of veriﬁed CDR for which currently there is a very limited markets, with supply not amply available, and often with a very high green premiums. For now, what we can do is generate a credible demand signal and determine which companies are genuine in driving the development of sustainable solutions. I sympathize with MOL’s challenge as a big company to pursue such ambitious goals, as I can only imagine the internal challenge committing to these products and the diﬃculties of working across functions in new and unforeseen ways to achieve them. Tatsuro: MOL is willing to be an early mover and pay a premium for new sustainable products and technologies for several reasons. First, we want to be chosen as a green partner for future projects by global companies that are concerned about sustainability. Second, we want to gain and maintain a competitive edge over shipping competitors and free riders by accumulating skill and experience in this diﬃcult ﬁeld. Third, to attract young talent so that MOL can maintain and advance its business sustainability. Rob: These are excellent reasons. By joining FMC, MOL is building its reputation as a future green partner by collaborating with fellow members, including customers, and therefore gaining a competitive advantage in tomorrow’s low carbon economy by making future business deals easier. Moreover, as MOL is very active in the climate space, it is developing the necessary skills and experience in-house to deal procuring in a diﬀerently structured market and supply landscape as well as ongoing development in net zero initiatives that will emerge in coming years. Attracting talent interested in sustainability initiatives or with knowledge on those matters will further strengthen MOL’s ability to navigate their sustainability voyage. By engaging in initiatives like FMC, MOL is accumulating valuable knowledge and attracting a skillset that will really pay oﬀ in the long run. Signiﬁcance of MOL’s Participation in FMC and First Mover Advantages Tatsuro: MOL’s involvement with the First Movers Coalition (FMC) began after the World Economic Forum (WEF) approached us following the publication of Environmental Vision 2.1 in June 2021, in which we laid out our ambitious targets for achieving zero GHG emissions by 2050, far ahead of the International Maritime Organization and other Japanese shipping companies. We deepened our presence in the WEF by ﬁrst participating in the FMC’s Carbon Dioxide Removal (CDR) Sector and Executive Oﬃcer, Chief Sustainability Oﬃcer, Responsible for Corporate Marketing Division, and Environment & Sustainability Strategy Division Tatsuro Watanabe Ask the Partner: Expectations and Demands for MOL Interim Head, First Movers Coalition, World Economic Forum Rob van Riet CLOSE UP ENVIRONMENTAL STRATEGY ENVIRONMENTAL STRATEGY DIALOGUE MOL REPORT 2024 36 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section shipping operator with a global ﬂeet of merchant vessels of various types, shapes, and sizes, so we have a wide range of needs and practices. To address shipping decarbonization from all angles, we must therefore encourage both long-term and short-term decarbonization solutions to meet FMC commitments. Because there are a diversity of ship types and routes, especially in Asia and the global south, where MOL is actively developing its business, it is important that we address this diversity and the variety of shipping decarbonization solutions if we are to achieve our goal. Because we must respect the carbon budget and produce a limited amount of GHG emissions, we must consider short-term solutions outside the FMC’s scope, like LNG dual- fuel and Wind Challenger vessels. However, we are also addressing long- term solutions by looking to deploy commercial ammonia-burning ships this decade. We must promote a mix of short- and long-term decarbonization solutions rather than focusing solely on one. Rob: Tatsuro raises an important point that comes up in many of our discussions. Because we set such aggressive technology and product thresholds, there is sometimes a misunderstanding that the FMC is only concerned with emission-free fuels and products like e-ammonia, e-methanol, and zero-emission steel. While we do focus on deep decarbonized solutions, as it’s these products, technologies and services for which we need to build a credible early demand signal so they can commercialize faster, we recognize that companies also need to tackle reducing emissions now through eﬃciency measures and that these will be fundamental for using less fuel in a long-term perspective as well as work with solutions that are outside of FMC’s scope. Companies like MOL do not have the luxury of focusing on just in-scope solutions when servicing diﬀerent types of vessels. Continued Commitment to Shipping Decarbonization Eﬀorts Tatsuro: The engagement with FMC has accelerated MOL's passion and commitment to work together with likeminded partners towards the sustainability of our industry. MOL will continue to maintain an active presence at international conferences and forums on sustainability and decarbonization, as well a support the international framework. Rob: I hope MOL remains as engaged in the FMC as they have been to date. In my role at the FMC, I am also constantly thinking of ways to provide value to MOL and other members, such as cross-sector enablers, e.g., chain of custody models to help channel investments into sustainable supply-side solutions, so that they stand the best chance possible of meeting their commitments. Collaboration and Diverse Strategies Are Key to Addressing Shipping Decarbonization Tatsuro: The FMC provides a good framework for MOL to form eﬀective collaborations within the international shipping sector, especially in the areas of the environment and sustainability. Because we cannot make signiﬁcant contributions on our own, utilizing the FMC framework ensures that MOL can participate in corrective actions related to decarbonization. Thanks to the FMC framework, we have established new relationships with other members to seek shipping decarbonization solutions, such as with Yara International and Rio Tinto, and I am conﬁdent that similar business deals will be concluded in the future through the framework. Rob: This is encouraging to hear because it means we are doing our job of acting as a facilitator, bringing like-minded companies together to share experiences and insights and ﬁnd new ways to collaborate, such as joint statements. Tatsuro: Join statements is something that I observed at COP28 last year, where numerous international shipping companies called for respecting the diversity of their peers’ businesses while also collaborating as a team, since a single company cannot contribute much to the environmental eﬀort on its own. Using the WEF framework, we delivered a joint statement with A.P. Moller Maersk on decarbonizing the shipping industry, despite diﬀering business models and mindsets to shipping decarbonization solutions. This was an outstanding experience for MOL, and we hope to deliver further joint statements in the future. Rob: It is true that no single company can tackle decarbonization alone. To illustrate, in order to meet its shipping commitments, MOL must source zero-emission fuels that fall within the scope of the FMC shipping sector. Because the fuels have a potentially prohibitively high premium and limited availability, MOL’s ability to meet its commitments is heavily dependent on what others are doing in the shipping ecosystem. We need shipping companies, engine builders, fuel producers, and port operators to collaborate to develop deep decarbonized solutions, and I think what distinguishes the Shipping Sector from other sectors is the presence of such a diverse range of companies, each holding a small piece of the decarbonization challenge puzzle, that can collaborate and make deals. Therefore, I believe that FMC adds value by allowing members to collaborate with peers across the value chain in the maritime sector, ﬁrst movers in other heavy emitting sectors, as well as government partners to absorb and spread risks and costs. However, I appreciate that MOL faces additional challenges due to the nature of its business operating in several segments within the shipping sector. Tatsuro: Rob’s point about how the nature of MOL’s business makes things harder is important. MOL is a multimodal ocean ENVIRONMENTAL STRATEGY DIALOGUE ENVIRONMENTAL STRATEGY MOL REPORT 2024 37 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section EFFORTS TO RESOLVE SUSTAINABILITY ISSUES We have identiﬁed ﬁve “Sustainability Issues” (materiality), which are social issues that should be prioritized throughout our business. This was identiﬁed with an awareness of two aspects (double materiality): not only the impact that the environment and society have on the Group, but also the impact that the Group has on the environment and society. In BLUE ACTION 2035, we have positioned “Safety,” “Environment,” “Human Capital,” “DX,” and “Governance” as the ﬁve most important Sustainability Issues to further promote our eﬀorts to address Sustainability Issues and have formulated a Vision that deﬁnes our basic approach and the desired image. By integrally promoting corporate management plans and addressing issues, we will strive to improve the Group’s corporate value through the realization of the Group Vision and contribute to the realization of a sustainable society. Please refer to out sustainability website for details. https://www.mol.co.jp/en/sustainability/ management/issues/ Sustainability Issues 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 Environment Conservation of marine and global environment Innovation Innovation for development in marine technology Governance Governance and compliance to support businesses Initiative themes ● Value through our core business ● Safety levels ● Creation of new added value Initiative themes ● Climate change countermeasures ● Preservation of marine environment ● Protection of biodiversity ● Prevention of air pollution Initiative themes ● Diversity, Equity & Inclusion ● Mutually empowered ● Highly engaged ● Growing together with local communities Initiative themes ● Groupwide adoption of clean energy ● Increasing the energy eﬃciency of vessels ● ICT utilization for safe, eﬃcient operation ● Digital transformation (DX) Initiative themes ● Management transparency ● Information security ● Responsible procurement ● Respect for human rights ● Fair trade ● Bribery prevention MOL Group Safety Vision MOL Group Environmental Vision 2.2 MOL Group Human Capital Vision MOL Group DX Vision MOL Group Corporate Governance Policy Sustainability Plan We have developed a sustainability plan, “MOL Sustainability Plan,” which sets targets, KPIs, and action plans for each sustainability challenge. By addressing Sustainability Issues and incorporating speciﬁc action plans as part of the corporate management plan, we are working to further integrate our sustainability initiatives into management. By steadily implementing the “MOL Sustainability Plan,” we will strengthen our eﬀorts to resolve Sustainability Issues, appropriately measure the eﬀectiveness of our eﬀorts, and implement appropriate improvement activities. SUSTAINABILITY MOL REPORT 2024 38 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Formulating the Safety Vision https://www.mol.co.jp/en/pr/2024/img/MOLGroup_Safety_Vision.pdf To date, the MOL Group has pursued the world’s highest level of safety and quality, primarily in the shipping business. Under the management plan BA2035, we are now developing and expanding various social infrastructure businesses, and the scope of safety and quality is also expanding. Under these circumstances, we aim to ensure the stable provision of services to customers and society and deliver new growth, with safety remaining at the core of what we do. Safety Vision sets out the blueprint for safety in the MOL Group. The vision was formulated to support the “Safety & Value” (sustainability issue) and to reinforce the “S (Safety)” aspect in the “MOL CHARTS,” which sets out the values and Code of Conduct of the Group. We have also established an action plan (Safety Action 1.0) as a major initiative to realize the blueprint. Centered on the Safety Vision and Safety Action 1.0, the MOL Group will respond to sustainability issues by further reinforcing our safety-related initiatives, and raising safety and quality to the next level. Safety Vision Framework The Safety Vision consists of a roof section that sets out our "safety goals" and "what we ought to be," underpinned by support pillars and foundations, which consist of "safety measures" and "safety infrastructure" (collectively, "Safety Action 1.0" = Action Plan). The approach is to achieve "safety goals" and "what we ought to be" by implementing the action plan. Speciﬁcally, the safety goals and what we ought to be are “In order to ensure that the MOL Group can continue to protect precious people, property, and the environment, and be trusted, the Group shall continue to support people's day-to-day fundamentals as part of its safety-focused operations as a responsible custodian of a social infrastructure business.” “Leading in Safety” is the catchphrase of our Safety Vision. This phrase embodies our commitment to driving forward safety levels across all industries by having each company within the MOL Group strive to ensure the world’s highest level of safety and quality in their respective business ﬁelds. Moreover, the phrase also embodies our determination that each individual, not only executives and employees working on-site but also those in the oﬃce, will actively lead on safety issues. The Safety Vision consists of a roof section that sets out our safety goals and what we ought to be, underpinned by support pillars and foundations based on which we take action. Please visit our website for details on providing added value through safe transportation and our social infrastructure business. https://www.mol.co.jp/en/sustainability/safety/ Promote the active participation of human capital to help ensure safety Develop safety infrastructure centered on technology Preemptive management of risk and danger the Group shall continue to support people’s day-to-day fundamentals as part of its safety-focused operations as a responsible custodian of a social infrastructure business. People (executives, employees) Aware of risk, act safely Work (work environment, processes) Risk is properly controlled Organization (systems, functions) Able to anticipate and ﬂexibly respond to risk and danger Reform safety awareness through mutual enlightenment Pursuit of the ideal organizational structure and business processes Safety goals Unwavering ultimate goals KPI① Safety measures Initiatives to make ourselves what we ought to be Safety infrastructure Eﬀorts to promote Group-wide measures Safety Action 1.0 What we ought to be State of goal achievement KPI② Leading in Safety Protecting People, Property and the Environment In order to ensure that the MOL Group can continue to protect precious people, property, and the environment, and be trusted, Provide added value through safe transportation and our social infrastructure business Safety & Value In order to ensure that the MOL Group can continue to protect precious people, property, and the environment, and be trusted, the Group shall continue to support people’s day-to-day fundamentals as part of its safety-focused operations as a responsible custodian of a social infrastructure business. What We Want to Achieve for 2035 EFFORTS TO RESOLVE SUSTAINABILITY ISSUES MOL REPORT 2024 39 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Safety Action 1.0 sets out our primary action plan up to 2025. The action plan consists of ﬁve elements (three safety measures and two safety infrastructure), each of which is further subdivided into action plans. Safety Action 1.0 focuses on promoting the actions set out in safety infrastructure (eﬀorts to promote Group-wide measures), while also addressing the actions set out in safety measures. Speciﬁc action examples are shown below. We have set KPIs (and leading indicators) for the safety goals under the Safety Vision and KPIs for what we ought to be. This is predicated on the idea that our safety goals will ultimately be achieved by aiming to achieve KPIs for leading indicators and what we ought to be. Safety Action 1.0 and KPI Framework Safety & Value Speciﬁc Action Examples Safety & Value Primary Action Plan Up to the end of FY2025 Safety infrastructure Eﬀorts to promote Group-wide measures Safety measures Initiatives to make ourselves what we ought to be Building and updating of a skill matrix Promote the active participation of human capital to help ensure safety Improving of work environments Building of an information-sharing infrastructure and a communications environment to facilitate communication Introduction of new technologies to help ensure safe operations Development of safety infrastructure centered on technology Digitization of business operations Strengthening of cyber security measures Increased sophistication of accident prevention PDCA Preemptive management of risk and danger Strengthening of safety support systems Information gathering and scenario planning in preparation for emergency situations ❶ Safety goal (protecting precious people, property, and the environment) KPIs ❷ Thinking and approach to KPIs for what we ought to be: Up to the end of FY2025 KPI① KPI② Leading indicators 1) Lost-time injury frequency (LTIF*1) Leading indicators = SPI*2 1) LTIF 2) Average downtime 3) Downtime frequency rate • All executives and employees feel a sense of responsibility with regard to safety and are able to take the initiative • A plan for improving work environments has been formulated and is being rolled out *1 Deﬁne and set for each business segment in the MOL Group *2 Safety Performance Indicator. The current targets (FY2025, FY2030, FY2035) are as follows: 1) 0.5 or less/0.4 or less/0.3 or less; 2) 24 or less/22 or less/20 or less; 3) 1.0 or less/0.8 or less/0.6 or less • Safety Awareness Indicator: 95% • Environment-improvement trial runs: 3 or more (e.g., improvements to on-board accommodation environment) People Executives, employees • Key advanced technologies have been introduced to reduce remaining risk • The impact of planned operations (conclusion of new projects, etc.) on safety is clariﬁed and understood • Trial runs of advanced technologies: 10 or more (e.g., engine diagnostic system) • Establishment of systems driven method for visualizing risk • Dissemination of visualized risk to the relevant departments and discussion of responses Work Working environment, processes • Inter-business safety management systems have been built • A system for investigating accidents has been put in place, and an accident prevention cycle that includes planning operations has been implemented • Response scenarios for major risks have been prepared, and a system for evaluating our response to emergency situations has been established • Organizational restructuring and completion of Group-wide emergency management system • Completion of the expansion of preliminary inspection and accident investigation system • Completion of scenario planning for responding to anticipated high-risk incidents • Completion of emergency response evaluation indicators Organization Systems, functions Reform safety awareness through mutual enlightenment (safety infrastructure action) Our current approach is the visualization of safety awareness. Speciﬁcally, we are planning to implement pulse surveys to quantitatively measure the safety awareness of every MOL Group executive and employee. Upon establishing a system to quantitatively assess safety awareness levels, we plan to implement various measures to raise safety awareness. As one of these measures, we will work to enhance our existing safety awareness activities. Pursuit of the ideal organizational structure and business processes (safety infrastructure action) We plan to consider and implement organizational structure reforms by reviewing the current safety management systems. As the MOL Group, we need to integrate and strengthen risk management across a wide scope. We are also aiming to build an organizational structure that pursues and ensures high cross- organizational safety and quality. In addition to organizational structure, we aim to build new systems and business processes (e.g., investigation and inspection systems to maintain and improve safety and quality). Development of safety infrastructure centered on technology (safety measure action) We aim to improve safety and quality through the digitization of business operations, which until now depended on on-site employees, and the development of infrastructure (hard aspect) that contributes to safety. We are also considering utilizing advanced technologies such as generative AI to reduce accidents. We will also promote actions in collaboration with the MOL Group DX Vision initiatives. Visualization and personalization of safety awareness through pulse surveys Reform safety awareness through mutual enlightenment Enhancement of safety awareness activities Organizational change to promote safety and encourage mutually complementary relationships Pursuit of the ideal organizational structure and business processes Consideration of cross-organizational investigation systems Group-wide KPIs for the MOL Group 1) Number of fatal accidents: 0 2) Number of serious accidents*1: 0 1) Number of serious marine incidents: 0 2) Number of ocean oil pollution: 0 3) Number of fatal accidents: 0 4) Number of serious cargo damage: 0 Safe operations KPI = 4 ZEROS MOL REPORT 2024 40 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Please visit our website for details on marine and global environmental conservation. https://www.mol.co.jp/en/sustainability/environment/ EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Environment-Related Development and KPI Progress We are making steady progress toward achieving the targets and milestones set out in the MOL Group Environmental Vision 2.2. Reduction of the Group’s GHG Emissions We promoted eﬃcient vessel operation by proactively promoting the DarWIN project, which aims to improve fuel eﬃciency, and by steadily implementing a process for checking progress on fuel eﬃciency results every six months. Developing alternative fuel vessels and using the alternative fuels on vessels will become necessary to further promote reductions in GHG emissions in the years to come. Promoting this shift to alternative fuels while continuing to provide economical and sustainable maritime transport services will necessitate the regulations and the building of momentum throughout society to encourage the use of clean energy. Reducing GHG emissions from vessels will contribute to the decarbonization of the supply chains of client companies that use our marine transport services and, ultimately, to society. We are therefore promoting activities to deepen understanding of the cost burden to society at large, and also actively involving and lobbying policymakers and industry associations. Please visit our website for details on risks and opportunities related to climate change. https://www.mol.co.jp/en/sustainability/environment/tcfd/ Expansion of Low- and Zero-Carbon Businesses Leveraging the technological capabilities we have cultivated through our existing businesses, we are promoting low- and zero-carbon business initiatives, such as the oﬀshore wind power generation business. As the world builds a new clean energy supply chain, we will encourage social implementation through speciﬁc businesses at each layer of that supply chain while working to promote initiatives that will enable this business to become a pillar of future proﬁts. Conservation of marine and global environment Environment Challenges and Measures Toward Realizing Our Vision Improvements in the reduction of GHG emissions intensity and fuel eﬃciency progressed, and the fuel eﬃciency improvement rate reached a milestone ahead of schedule. By building a decarbonized business model for the supply chain and driving the industry as a ﬁrst mover, we will establish a competitive advantage in new markets and continue to be the customers’ company of choice. * In May 2024, we decided to install the Wind Challenger on one new thermal power fuel carrier and six dry bulk carriers (for a total of nine vessels). KPI Target Value FY2023 Results 2020s No. of net zero emission ocean-going vessels to start operations 1 vessels 0 vessels 2035 GHG emissions intensity reduction rate (compared with 2019) -45% -7.2% 2050 GHG total emissions reduction rate (compared with 2019) -90% -8% 2023-2025 Cumulative Environmental investment ¥650 billion Cumulative total ¥658 billion (of which ¥259.5 billion in FY2023) 2030 Total GHG emissions reduction rate (compared with 2019) -23% -10% 2030 No. of LNG/methanol-fueled ocean-going vessels 90 vessels 38 vessels LNG: 37 vessels (six already in service) Methanol: One vessel 2035 No. of net zero emission ocean-going vessels 130 vessels 0 vessels 2030 Ratio of zero-emission fuel used 5% 0% 2030 Ratio of power from renewable energy for Scope 2 100% 56% 2030 No. of Wind Challenger-equipped vessels 25 vessels Two vessels (one already in service)* 2025 Fuel eﬃciency improvement rate (compared with 2019) 5% 6.90% 2030 Amount of absorption/removal-type carbon credits amortized/ used 2.2 million tons 0 tons Targets Milestones Work collaboratively with our partners and stakeholders with creativity to resolve environmental issues What We Want to Achieve for 2035 MOL REPORT 2024 41 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Examples of Speciﬁc Actions Taken Environment Wind Challenger Having developed Wind Challenger, which directly converts oﬀshore wind energy into propulsion power for ships, we installed it for the ﬁrst time on a vessel we own and operate, the Shofu Maru, in 2022. We have been able to conﬁrm fuel savings and GHG reductions of up to 17% per day. Under MOL Group Environmental Vision 2.2, our environmental policy, we also position wind power utilization including Wind Challenger, as an important action that we can take now to reduce GHG emissions and set out the quantitative milestones of equipping 25 vessels by 2030 and 80 vessels by 2035. MOL Drybulk has decided to install the Wind Challenger on six new bulk carriers and Ventfoil, a wind propulsion system, on one of its new multipurpose vessels slated for delivery in 2025 and operated under a time charter. We are mobilizing the collective strength of the Group to make steady progress toward achieving these milestones. Once again, focusing on wind as a clean and inexhaustible source of energy, we aim to mass-produce Wind Challenger to bring about a modern-day revival of the sailing ship with a completely new concept. By spreading the use of other new technologies, such as wind propulsion systems, we will not only reduce GHG emissions from our own Group but also contribute to a low-carbon and decarbonized society while remaining the long-term and sustainable company of choice by customers. DarWIN Project Based on the analysis of the vast amount of voyage data received from our vessels, we pursue optimal routes and output in our navigational operations. We are also working to improve fuel eﬃciency and reduce GHG emissions in our existing ﬂeet by proactively introducing and installing energy-saving technologies to improve energy eﬃciency, such as retroﬁtting propellers with propeller boss cap ﬁn (PBCF) devices when vessels are in dock. Under MOL Group Environmental Vision 2.2, our environmental policy, we set a milestone of “improve fuel eﬃciency by 5% in 2025 (compared to 2019).” However, measures such as accelerating the introduction of energy-saving devices and conducting reduced-speed voyages proved eﬀective and led to a 6.9% improvement in fuel eﬃciency by the end of ﬁscal 2023, and we achieved the milestone approximately one year ahead of schedule. Rather than pursuing short-term proﬁt alone, we will proactively work toward decarbonization and promote sustainable initiatives with an eye to the future by responding to the needs of our wide range of stakeholders, which will lead to securing stable proﬁts in the future. Natural Capital/Biodiversity Initiatives MOL Group Environmental Vision 2.2 also sets forth our natural capital and biodiversity initiatives. To advance the analysis and disclosure of information on natural capital and biodiversity, we have registered as a TNFD Early Adopter and are conducting research directed toward the ﬁscal 2025 disclosure of ﬁscal 2024 nature-related ﬁnancial information. We aim to ascertain the various anticipated risks and opportunities and disclose them externally via the TNFD framework. We named this project after Darwin’s theory of evolution, to reﬂect how our initiatives are constantly evolving and adapting to a dramatically changing environment. Digital Approach to Reduce GHG With Integrated Network What Is Wind Challenger? A wind propulsion system developed by MOL Delivered in 2022, ﬁrst vessel achieved fuel savings of up to 17% per day and an average of 5% to 8% per voyage Second vessel was delivered in July 2024 MOL REPORT 2024 42 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Please visit our website for details on contributing to the growth and development of people and communities https://www.mol.co.jp/en/sustainability/human/ Contributing to the growth and development of people and communities Human & Community EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Actions toward Our Vision To acquire more diversity in human capital and realize transformation in our businesses and organizations, we ﬁrst designated the general managers at headquarters important positions with equivalent authority and responsibility within the Group as MOL GROUP KEY POSITIONS (MGKP). Heading organizational units that are important to the Group’s management, MGKP oversee the operations for which they are responsible and also play leadership roles in spearheading organizational and business transformation. In this way, we are aiming to increase the diversity of the leadership team and, through their successes, instill a movement for change throughout the organization. We have set the target MGKP composition ratio as a KPI in FY2025. However, we recognize that achieving the diversity of MGKP is not just about meeting a quota but about making fundamental changes in our business and organization. When appointing an MGKP, we consider not only the KPI elements but also their expertise, management skills, and mindset which embodies MOLCHARTS, the Group Code of Conduct. (These elements comprise the Skills Matrix in the following section.). Human Capital (HC) Vision Based on the three basic principles of "Diversity, Equity & Inclusion," “Mutually Empowered,” and “Highly Engaged,” our HC Vision sets out the fundamental thinking behind the Group’s human capital policies. To implement the three Core Strategies of BLUE ACTION 2035 (Portfolio Strategy, Environmental Strategy, and Regional Strategy), it will be necessary to raise our organizational and human capital capabilities. Changes are also required in how the Group’s businesses and organizations are run, as well as in the ideas and actions of employees. We recognize that to realize such rapid transformation, it is essential to welcome an even more diverse range of human capital into the Group and to continue fair communication from multiple perspectives. By turning the new ideas and concepts generated in this way into innovation, we will take on the challenges and “provide new value to all stakeholders”, as set forth in the Group Vision as a social infrastructure company centered on the shipping industry. As part of the Group-wide human capital policy promotion, we are strengthening our system for collecting human capital information from the Group employees while considering human rights and personal information protection. The main pillar of this process is the information that serves as the basis for a skills matrix. Human Capital Skills Matrix Human & Community MGKP Composition Ratio: FY2025 Targets and FY2023 Status (2) Percentage who are not from headquarters (1) Percentage who are women (3) Percentage who are in their 40s or younger Approx. 20% Approx. 5% Approx. 10% Approx. 25% Approx. 5% Approx. 15% 30% 8% 15% MGKP Composition Ratio Number of posts: 163 End of FY2022 June FY2024 (On this occasion) Achievement target (FY2025) We will welcome even more diverse human capital into the Group and continue fair communication from multiple perspectives. What We Want to Achieve for 2035 MOL REPORT 2024 43 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Conceptual Diagram of Skills Matrix We conduct skills matrix-based self-assessments speciﬁcally targeting managers both in Japan and overseas. In ﬁscal 2023, we collected information on approximately 800 people. This information will be the supporting data for realizing “the right people in the right place” assignments across the Group, including in MGKP. At the same time, however, we will connect the data to analyses of trends in skill areas and level trends and reﬂect this in policies, such as in conducting education and training, reskilling, and in the creation of human capital plans that take a bird’s-eye view of the entire Group. We have also built a Group talent management system as a tool for safely and eﬃciently collecting and storing this human capital information. This system commenced operations in April 2024. Please visit our website for details on our talent management system https://www.mol.co.jp/en/sustainability/human/ Diversity, one of the basic principles set out in the HC Vision, is not limited to being a KPI item in terms of the MGKP composition ratio. We are currently identifying factors such as the number of personnel required to realize BLUE ACTION 2035 as well as the required expertise, skills, and experience across the entire Group, including overseas. By using those results in bringing the workforce planning to fruition, and by comparing and contrasting them with information on our current human capital, collected based on the skills matrix, we will build a system that can ascertain any shortfalls between plans and reality and ﬂexibly implement eﬀorts to rectify them. At the same time, we are discussing a reform of the Head Oﬃce personnel system, which is scheduled to be implemented in ﬁscal 2025. The goal is to assign “the right people in the right place,” realizing a compensation system based on contributions and results, and acquiring advanced expertise that meets global standards. Acquiring/Retaining Diverse Human Capital Human & Community As our organizations and businesses undergo signiﬁcant transformations, regularly monitoring how employees feel about the current state and future of the Group, and whether they are carrying out their work with pride and empathy, will form an important human resource measure. Having placed importance on engagement surveys, we have set participation and improvement rates as KPIs. Targeting the headquarters and Group companies in Japan, we conducted the ﬁrst survey in ﬁscal 2022. In ﬁscal 2023, we conducted the second survey, and the scope expanded to include overseas Group companies. After a survey has been conducted, the results for each organization, along with overall trends, are shared with the organizations in question. Through communication based on the insights gained, we are promoting initiatives to utilize these insights to create a better organization. Engagement Improvements Human & Community Town hall meetings were held in Japan and all ﬁve of the Group’s overseas regions to instill awareness of the HC Vision and HC Action 1.0. In addition to formal brieﬁngs on the Vision and Action, the events provided great opportunities to engage in casual, direct communication and to come into contact with the frank opinions and enthusiasm from each region at ﬁrst hand. We will continue to place importance on such global dialogue activities moving forward. Town Hall Meetings Held We are hosting a training program called MOL Global Management College (MGMC) Growth with the aim to nurture the next generation of leaders with the skills and mindset necessary to lead a diverse organization. In ﬁscal 2023, 20 Group employees from 11 countries, including Japan, participated in the six-month program, with Tokyo, Singapore, and London as hosts. On the ﬁnal day, each participant gave a presentation to top management, including the CEO, entitled “What should we do to realize, implement & execute BLUE ACTION 2035?” MOL Global Management College (MGMC) Growth Sessions Held MGMC participants (Singapore) Exchanging opinions at town hall meeting (India) Accounting Lv.5 Lv.4 Lv.2 Lv.3 Lv.1 IT Sales ... Technical skills Lv.5 Lv.4 Lv.2 Lv.3 Lv.1 Leadership ... ... Organizational growth Management skills Lv.1 Lv.5 Lv.4 Lv.2 Lv.3 Challenge/ Transformation Safety Awareness Mindset MOL REPORT 2024 44 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Phase 3 FY2035 Phase 2 FY2030 Phase 1 FY2025 FY2023 Results Establishment of the Headquarters of Technological & Digital Transformation In November 2023, our Group integrated the Technology Innovation Unit and DX Co-creation Unit to establish the “Headquarters of Technological & Digital Transformation.” Our commitment to “Innovation,” one of our Group's sustainability challenges (materiality), involves actively adopting advanced technologies. This initiative aims to bring innovation to our business, contributing to the resolution of various societal challenges related to “providing added value through safe transportation and our social infrastructure business” and “conserving the marine and global environment.” We have consolidated the organizations responsible for this initiative under the newly formed headquarters to strengthen the driving force. We will also accelerate the pace of transformation by sharing the insights nurtured by each division and working toward the realization of the various strategies set out in “BLUE ACTION 2035.” Actions Toward Our Vision The Group is promoting digital transformation (DX) as the foundation to support BLUE ACTION 2035. In March 2023, we formulated the MOL Group DX Vision as an expression of what we want to be and its execution plan, the MOL Group DX Action 1.0. We aim to create the future of society by digitizing to improve company productivity and optimize processes, and convert the time saved through these improvements into value-creation work as well as safety and environment- related initiatives. Please visit our website for details on innovation for development in marine technology https://www.mol.co.jp/en/sustainability/innovation/ Innovation for development in marine technology DX EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Technical Unit Oﬀshore Technical Unit Technological DX Co-Creation Unit Maritime DX Co-Creation Unit MOL Information Systems, Ltd. Digital Technology & Digital Integration Unit Headquarter-controlled Headquarters of Technological & Digital Transformation Toward our vision, the Group has set a Core KPI for reduced working hours rate* through DX as the “conversion rate to value creation and safety work.” With MOL PEARL, the Group’s integrated data platform, and FOCUS, a vessel data platform at its core, we are steadily advancing transformation by improving business processes and enhancing business management. We will further promote digital optimization for onboard operations as well as land-based operations, and drive transformation to achieve our Core KPI. *The reduced working hours rate with ﬁscal 2022 as the base year, when the Core KPI was established. Conversion rate to value creation and safety work (cumulative) 5% 10% 20% 30% DX Target Value Creation, Safety Decision Making Routine Tasks Current Shipping and connected ﬁelds Value Creation, Safety Decision Making Routine Tasks Future A leading company that creates the future of society Create new values and the future of society DX Be a leading company using digital power to address social issues not limited to shipping What We Want to Achieve for 2035 MOL REPORT 2024 45 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section To promote Group-wide DX, the Headquarters of Technological & Digital Transformation has the DX Co-Creation Unit in charge of planning and promoting DX strategies, the Maritime DX Co- Creation Unit in charge of onboard ICT, and subsidiary MOL Information Systems, Ltd. in charge of Group-wide IT support. Together, these three organizations will lead DX promotion. Moreover, to promote DX and ICT projects globally, we co-create with MOL-IT*1, an oﬀshore development base in Hong Kong and India, to secure DX specialist personnel with specialized skills such as data science and share mutual knowledge through talent exchange. To promote change through digital technology, IT and digital literacy are required not only for the digital division but also for all employees. As a result, we provide training programs for all employees to nurture Change Leaders*2 for the future of business transformation. We have deﬁned the skills necessary to promote digital transformation and prepared a three-level curriculum that started nurturing talent in ﬁscal 2022. We have also deﬁned Level 3 Change Leaders as those who are able to lead changes in his/her own division, and we aim to train 75 people by the end of ﬁscal 2024. In addition to top-down eﬀorts to improve business processes and enhance business management across organizations and divisions, we also encourage each division to promote bottom-up changes, thereby promoting Group-wide transformation. Promoting and Nurturing Talent Toward Our Vision DX Actions Taken DX EFFORTS TO RESOLVE SUSTAINABILITY ISSUES *1 MOL INFORMATION TECHNOLOGY INDIA PVT. LTD. *2 A person who understands business and process issues, and promotes changes in corporate culture, etc. Able to see our vision from business processes and business models, and lead the change. Level 3 Experienced Level 2 Foundation Level 1 Entry Workshop + Practice Able to lead changes in his/her own division (75 employees in FY2024) Able to promote changes with the support of higher-ups Acquired a basic knowledge (all employees) Training Low earth orbit satellite Internet Low earth orbit satellite system Smartphones, etc. Onboard network Laptops, etc. User terminal (antenna) Low earth orbit satellite ground station Innovating onboard experiences and business processes by introducing low earth orbit satellite communications We have introduced low earth orbit satellite communications for our MOL Group-managed vessels to promote onboard digitization. Using low earth orbit satellite communications services that enable high-speed and low latency connections at sea has dramatically improved the communication environment, which is signiﬁcantly inferior to the land-based communication environment. This improvement has made it possible to make video calls with family members and watch videos, which were previously diﬃcult, and therefore signiﬁcantly improving the wellbeing of seafarers. We are also promoting the introduction of low earth orbit satellite communications services on MOL Group-operated ferries and cruise ships with the aim of creating new customer experiences through comfortable Internet access during voyages. In addition, based on the improved onboard communications environment, we are promoting the design and digitization of new business processes at sea to optimize onboard operations and improve safety. We will further promote onboard operations DX by improving operational eﬃciency through real-time shore-vessel information sharing, providing full support from the shore in the event of trouble onboard, and promoting safety measures utilizing onboard communication networks. MOL REPORT 2024 46 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Our Basic Concept of Corporate Governance Under the slogan of “Taking the leap to becoming a global social infrastructure company,” the Group management, whose goal is to expand its footprint in a variety of business domains beyond its conventional shipping business, must adeptly set our course by accurately grasping the business environment, confronting risks appropriately, and eﬀectively utilizing our management resources by maintaining our oﬀense-defense balance. We believe that the essentials of corporate governance are fostering sustainable growth and enhancing our corporate value by making decisions promptly and boldly, guided by appropriate risk management, while ensuring the transparency and fairness of management by carefully considering the viewpoints of our diverse stakeholders and other various social requests. Based on this belief, MOL has adopted, and announced to its shareholders, investors, customers, and all other stakeholders, the “MOL Group Three Basic Principles of Corporate Governance,” which are described below. These Basic Principles indicate the MOL Group’s basic policy on corporate governance and matters that it considers universally important as behavioral guidelines. MOL has also adopted the MOL Group Corporate Governance Policy, which systematically describes policies on speciﬁc initiatives based on the spirit of the Basic Principles. In addition, we see “governance and compliance to support businesses” as one of our Five “Sustainability Issues” (materiality). In doing this, we aim to ensure transparency in Groupwide management through enhancement of corporate governance and thorough compliance, 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. Such eﬀorts are important in that they serve as a foundation for tackling other sustainability issues. In accordance with our belief that putting our corporate management plan into action, supported by the Group’s Corporate Mission and Group Values, will help lead to the resolution of Sustainability Issues, which, in turn, will improve our corporate value and help us realize the Group Vision, we will continue to make proactive eﬀorts to improve corporate governance moving forward. MOL Group Three Basic Principles of Corporate Governance Article 1 (Framework and Operation) Based on the MOL Group Corporate Mission, the MOL Group Vision, and the MOL Group Values, Code of conducts (MOL CHARTS), we, the MOL Group, grow globally by enhancing corporate governance and leveraging the collective strengths of the MOL Group. Article 2 (System) We, the MOL Group, have established a highly eﬀective corporate governance system beﬁtting a strong and resilient corporate group that is growing globally to increase corporate value over the medium and long term. Article 3 (Dialogue) We, the MOL Group, provide new value through highly transparent dialogue with all of our stakeholders, including shareholders, investors, employees, and customers. Corporate Governance Organizational Structure We believe that the appropriate form of governance should achieve legality, appropriateness, and eﬃciency of business operations by ensuring an eﬀective supervisory framework for the Board of Directors. This is accomplished by having a mutual supervision and check mechanism among inside directors (three out of ﬁve inside directors also serve as executive oﬃcers as of June 25, 2024) who carry out business operations and by forming a Board of Directors that consists of inside directors who also carry out business operations and non-executive inside directors and outside directors who specialize in strategy deliberation functions and supervisory functions. The structure also secures the audit function of the Audit & Supervisory Board, which is independent of the Board of Directors. Based on this view, MOL has become a company with an Audit & Supervisory Board as prescribed in the Companies Act. The Board of Directors, by its resolution, has established a basic policy for developing a system to secure the properness of operations (internal control system). The MOL Group’s oﬃcers and employees, under the president serving as the chief executive oﬃcer for management, carry out business operations in accordance with the management policy set by the Board of Directors and the above-mentioned basic policy, while being subject to supervision by the Board of Directors and audits by the Audit & Supervisory Board. Please visit our website for details on our basic concept of corporate governance. https://www.mol.co.jp/en/sustainability/governance/corporate/policy/pdf/governance-policy.pdf Governance and compliance to support businesses Governance EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Corporate Governance Governance MOL REPORT 2024 47 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Corporate Governance Organization (as of June 25, 2024) Chairman Male Female Elect and appoint/Dismiss Elect and appoint/ Dismiss Elect and appoint/ Dismiss Recommend Recommend Instruct Collaborate Report Submit/report basic management policies and other issues for discussion Submit for discussion and/or report on important business and other issues Submit to the Executive Committee after preliminary deliberations Business audit/Accounting audit Submit for discussion and/or report on important business and other issues Provide direction on important business issues Accounting audit Report / Advise Business audit/ Accounting audit Elect and appoint/Dismiss Elect and appoint/Dismiss Collaborate Report Audit & Supervisory Board Members’ Oﬃce Accounting Auditor Audit & Supervisory Board (Total: 4) Internal members: 2, Outside members: 2 Executive Committee (Total: 9) Executive directors: 3 (including the CEO) Executive oﬃcers: 6 General Meeting of Shareholders Corporate Governance Council (Total: 12) Chair of council: Junichiro Ikeda Internal directors: 4 Outside directors: 4 Internal Audit & Supervisory Board members: 2 Outside Audit & Supervisory Board members: 2 CEO Executive oﬃcers (Total: 33) Divisions/Branches/Vessels/Group companies Executive directors: 3 Executive oﬃcers: 24 Group executive oﬃcers: 6 Committees under the Executive Committee BLUE ACTION Committee, Investment & Strategy Committee, Environment & Sustainability Committee, Improvement of Work Eﬃciency Committee, Operational Safety Committee, Compliance Committee Nomination Advisory Committee (Total: 6) Outside directors: 4 Chair of committee: Masaru Onishi Internal directors: 2 Remuneration Advisory Committee (Total: 6) Outside directors: 4 Chair of committee: Etsuko Katsu Internal directors: 2 Corporate Audit Division Board of Directors (Total: 9) Internal directors: 5 Outside directors: 4 GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Audit plan/Audit report MOL REPORT 2024 48 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section (From left to right) Outside Director (Independent Oﬃcer) Atsushi Toyonaga (Newly appointed) Outside Director (Independent Oﬃcer) Etsuko Katsu Outside Director (Independent Oﬃcer) Masaru Onishi Outside Director (Independent Oﬃcer) Yumi Yamaguchi (Newly appointed) (From left to right) Audit & Supervisory Board Member Masanori Kato Outside Audit & Supervisory Board Member (Independent Oﬃcer) Satoru Mitsumori Outside Audit & Supervisory Board Member (Independent Oﬃcer) Fumiko Takeda Audit & Supervisory Board Member Yutaka Hinooka (From left to right) Director Junko Moro Director, Chairman of the Board Junichiro Ikeda Representative Director Takeshi Hashimoto Representative Director Toshiaki Tanaka Director Kazuya Hamazaki GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Board of Directors and Audit & Supervisory Board Members (as of June 25, 2024) MOL REPORT 2024 49 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Internal Directors Name Junichiro Ikeda Takeshi Hashimoto Toshiaki Tanaka Junko Moro Kazuya Hamazaki Position Director, Chairman of the Board Representative Director Representative Director Director Director Number of the Company’s shares held: 147,934 shares 91,332 shares 52,008 shares 36,190 shares 14,511 shares Attendance at the Board of Directors’ meetings 12 of 12 (Attendance rate: 100%) 12 of 12 (Attendance rate: 100%) 12 of 12 (Attendance rate: 100%) 10 of 10 (Attendance rate: 100%) ̶ Number of years as Director 11 years 9 years 4 years 1 year ̶ Career summary 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 Apr. 2023 Director, Chairman of the Board (to present) 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 Apr. 2021 Representative Director, President, Chief Executive Oﬃcer (to present) 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 Executive Oﬃcer (to present) Apr. 1986 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2014 General Manager of Secretaries Oﬃce Apr. 2017 Associate General Manager of Corporate Planning Division and General Manager of One MOL Business Strategy Execution Oﬃce, Corporate Planning Division Apr. 2018 General Manager of Corporate Marketing Division Apr. 2019 Executive Oﬃcer Apr. 2021 Managing Executive Oﬃcer Apr. 2023 Adviser Jun. 2023 Director (to present) Apr. 1992 Joined Mitsui O.S.K. Lines, Ltd. Apr. 2020 General Manager of LNG Carrier Division Apr. 2021 Executive Oﬃcer Apr. 2023 Managing Executive Oﬃcer Apr. 2024 Senior Managing Executive Oﬃcer (to present) Outside Directors Name Etsuko Katsu Masaru Onishi Atsushi Toyonaga Yumi Yamaguchi Position Outside Director (Independent Oﬃcer) Outside Director (Independent Oﬃcer) Outside Director (Independent Oﬃcer) Outside Director (Independent Oﬃcer) Number of the Company’s shares held: 32,658 shares 10,658 shares ̶ ̶ Attendance at the Board of Directors’ meetings 12 of 12 (Attendance rate: 100%) 12 of 12 (Attendance rate: 100%) ̶ ̶ Number of years as Director 8 years 5 years ̶ ̶ Career summary Apr. 2003 Professor, School of Political Science and Economics, Meiji University (to present) Feb. 2015 Member, Council for Science, Technology and Innovation, Ministry of Education, Culture, Sports, Science and Technology (to present) Jun. 2016 Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Apr. 2018 Chairman of Fund Management Advisory Committee, The Japan Foundation (to present) Mar. 2019 Outside Director (Audit and Supervisory Committee Member), Dentsu Group Inc. Apr. 2013 Trustee, KEIZAI DOYUKAI (Japan Association of Corporate Executives) (to present) Jun. 2015 Trustee, International University of Japan (to present) Jul. 2018 Visiting Professor, Toyo University (to present) Jun. 2019 Outside Director, TEIJIN LIMITED (to present) Jun. 2019 Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Feb. 2021 Senior Advisor, Alton Aviation Consultancy Japan Co., Ltd. Jun. 2021 Outside Director, Kadoya Sesame Mills inc. Jun. 2022 Outside Director, Benesse Holdings, Inc. Jun. 2013 Representative Director, Senior Managing Director and General Manager, Small and Medium Enterprise Business Division, Japan Finance Corporation Jul. 2015 Commissioner, Small and Medium Enterprise Agency Nov. 2016 Advisor, Mizuho Bank, Ltd. Apr. 2019 Chairman & CEO, Organization for Small & Medium Enterprises and Regional Innovation Japan Jun. 2024 President, GS1 Japan (to present) Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Jul. 2014 Senior Vice Commissioner, Japan Tourism Agency, Ministry of Land, Infrastructure, Transport and Tourism Oct. 2015 Executive Advisor, Corporate Planning Department, Mitsui & Co., Ltd. Apr. 2016 Executive Oﬃcer, Mitsui & Co., Ltd., President & CEO, Mitsui & Co. Global Strategic Studies Institute Jul. 2020 Executive Oﬃcer, Mitsui & Co., Ltd., Assistant to Chief Strategy Oﬃcer and Assistant to Chief Digital Information Oﬃcer Apr. 2023 Executive Advisor, Mitsui & Co., Ltd. (to present) Jun. 2024 Outside Director, Nichirei Corporation (to present) Outside Director, Mitsui O.S.K. Lines, Ltd. (to present) Internal Audit & Supervisory Board Members Name Masanori Kato Yutaka Hinooka Position Audit & Supervisory Board Member Audit & Supervisory Board Member Attendance at the Board of Directors’ meetings 12 of 12 (Attendance rate: 100%) 12 of 12 (Attendance rate: 100%) Attendance at the Audit & Supervisory Board Members’ Meetings 12 of 12 (Attendance rate: 100%) 10 of 10 (Attendance rate: 100%) Number of years as Audit & Supervisory Board Member 3 years 1 year Career summary Nov. 1985 Joined Mitsui O.S.K. Lines, Ltd. Jun. 2013 General Manager of Marine 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) 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 Apr. 2023 Director Jun. 2023 Audit & Supervisory Board Member (to present) Outside Audit & Supervisory Board Members Name Satoru Mitsumori Fumiko Takeda Position Outside Audit & Supervisory Board Outside Audit & Supervisory Board Attendance at the Board of Directors’ meetings Member (Independent Oﬃcer) Member (Independent Oﬃcer) Attendance at the Audit & Supervisory Board Members’ Meetings 12 of 12 (Attendance rate: 100%) 10 of 10 (Attendance rate: 100%) Number of years as Audit & Supervisory Board Member 2 years 1 year Career summary Apr. 1993 Registered as an attorney at law at Daini Tokyo Bar Association Joined Asahi Law Oﬃces (currently serves as Managing Partner) Apr. 2008 Family Aﬀairs Conciliator, Tokyo Family Court May 2009 Director, Japan Association for Business Recovery (to present) May 2016 Director, AZABU GAKUEN (to present) Jun. 2022 Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) Apr. 2022 Professor, Graduate School of Business Administration, Keio University (to present) Sep. 2022 Member, Antitrust Association, Japan Fair Trade Commission (to present) Jun 2023 Outside Audit & Supervisory Board Member, Mitsui O.S.K. Lines, Ltd. (to present) GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES MOL REPORT 2024 50 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Nomination Advisory Committee and Remuneration Advisory Committee The Nomination Advisory Committee and the Remuneration Advisory Committee are established as arbitrary organizations under the Board of Directors. Both Committees are chaired by an outside director and consist of all four outside directors, the chairman and the president, with outside directors making up the majority, to make the supervision of the executive directors by the outside directors more eﬀective. The Nomination Advisory Committee deliberates on the election and appointment and dismissal of directors and executive oﬃcers, as well as the necessary criteria for their determination and proposals for the next President based on the succession plan (including reappointment and dismissal of the incumbent President), thereby increasing the objectivity and transparency of the processes. The Remuneration Advisory Committee appropriately reviews the remuneration plan for directors and executive oﬃcers, and determines appropriate levels of remuneration for directors, including incentives for long-term enhancement of corporate value from an objective standpoint, while putting a high priority on the stakeholders’ perspective. In addition to both Advisory Committee members, the outside Audit & Supervisory Board members may also attend meetings of the respective committees to gain an understanding of the deliberation process and provide their opinions. The Board of Directors passes the necessary resolutions by respecting the contents of the reports submitted by both Advisory Committees. Corporate Governance Council The Corporate Governance Council has been established under the Board of Directors to serve as a forum for facilitating unrestricted discussion while incorporating outside knowledge with respect to the overall direction of the entire MOL corporate governance. By taking into account the perspectives from independent outside directors and independent outside Audit & Supervisory Board members, the Council examines the status and direction of corporate governance of the entire MOL Group and veriﬁcation of the eﬀectiveness of the Board of Directors, and provides reports and advice to the Board of Directors. Policy on Cross-Shareholdings MOL Group may hold shares for the purpose of maintaining and strengthening relationships with important business partners or to contribute to the increase in MOL Group's corporate value and sustainable growth over the medium and long term. To determine the appropriateness of holding each stock, the Board of Directors annually evaluates and veriﬁes the appropriateness of the purposes MOL Group has for holding each stock and the proﬁtability of continuing to hold each stock based on the cost of capital. When the Board identiﬁes stock where the policy of continuing to hold the stock is not considered reasonable, MOL Group will reduce or terminate its holding of that stock. Across the period ﬁscal 2019 through ﬁscal 2023, the Company reduced its holdings of 30 stocks, equivalent to ¥44.4 billion. As of March 31, 2024, the Company holds approximately 37 cross-shareholdings, equivalent to approximately ¥110.0 billion. However, as a result of quantitative evaluation (beneﬁts associated with shareholdings, including dividends) and qualitative evaluation (veriﬁcation of meaning of holding shares based on transaction status), the Board of Directors has resolved to sequentially sell approximately ¥6.7 billion of these shareholdings in accordance with market trends. Main Agenda Items Deliberated by the Advisory Committees in Fiscal 2023 Nomination Advisory Committee (convened seven times) Chair of committee : Etsuko Katsu (Outside Director) Main Agenda Items: Board succession plan; Requirements of the next President and measures to develop the next generation of managerial talent; Election of directors and executive oﬃcers for ﬁscal 2024; and other matters Remuneration Advisory Committee (convened seven times) Chair of committee : Masaru Onishi (Outside Director) Main Agenda Items: Inclusion of Core KPIs from the BLUE ACTION 2035 management plan in the remuneration plan for directors; Single ﬁscal year performance-based compensation for directors in ﬁscal 2023 and long-term target contribution-based compensation; Peer group review to ensure the appropriateness of remuneration levels; and other matters Main Agenda Items Deliberated by the Corporate Governance Council (convened ﬁve times in ﬁscal 2023) Chair of council : Hideto Fujii (Outside Director) Main Agenda Items: Review of BLUE ACTION 2035 management plan; Roles of Audit & Supervisory Board; The Company’s ESG ratings; and other matters Corporate Governance Council GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES MOL REPORT 2024 51 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Standards for Appointing Directors and Audit & Supervisory Board Members The Nomination Advisory Committee has been established to heighten the objectivity, transparency, and accountability of the selection procedures of directors and Audit & Supervisory Board members. The committee submits reports to the Board 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 skills matrix. (Reports on candidates for positions in the Audit & Supervisory Board are submitted upon receiving the consent of the Audit & Supervisory Board.) With due consideration for the reports submitted by the Nomination Advisory Committee, the Board of Directors determines candidate directors and candidate Audit & Supervisory Board members. Furthermore, upon the formulation and disclosure of standards for determining independence, independent outside directors are then selected based on factors including the status of any concurrent positions they may hold with other listed companies. The Board of Directors is comprised of an appropriate selection of independent outside directors and non-executive directors. CEO Succession Plan The Company has drawn up president and CEO (hereinafter “president”) succession plans consisting of the position’s requirements, selection process, and plan for training successor candidates, with the aim of selecting a president who is appropriate for the Company. In ﬁscal 2023, based on said plan, the Nomination Advisory Committee deliberated on the requirements for the next president and the measures to develop the next generation of managerial talent. Speciﬁc Experience, Knowledge, and Capability Expected of Members of the Board of Directors The Company positions the skills matrix as a framework for the experience, knowledge, and capability that the Board of Directors should possess, and has selected ﬁve items in “Experience, etc., considered important for corporations” that are universal to corporate management, and four items in “Experience, etc., considered important for corporations supporting social infrastructure” that the Company believes should be particularly important in the management of the MOL Group. “Human resources/Diversity,” a fundamental component of sustainability, was included as an item that is universally applicable to corporate management. Furthermore, as priority items for the Company’s management, in addition to “Marketing/Business strategy” and “Global business,” which are backed by the Company’s knowledge in the growth areas of energy transport and international logistics designated in the corporate management plan, we have included “Safety,” which is the most important foundation for business, and “Technology,” which is an essential area for the future growth of the Company in terms of decarbonization of business activities, safe and eﬃcient operation of vessels, and Digital Transformation (DX), etc. In order to fully demonstrate its governance function, the Board of Directors will adequately maintain the Experience, etc., and will continue to review the Experience, etc., in accordance with the changes in the business environment. Advisory Board The Company established an Advisory Board under the president eﬀective April 2024, with the aim of obtaining opinions from outside experts on priority areas from the perspective of examining and supervising management strategies and responding to emerging risks. The Advisory Board members are experts in areas such as geopolitics, sustainability, and DX, and provide advice as required by the Company’s management and contribute to the support system for advanced and speedy decision-making. Standards for Appointing Directors a. Personnel who are able to contribute to enhancement of the corporate 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, qualiﬁcations, ability, and expertise b. Personnel who possess a high degree of ﬁnancial and accounting knowledge (more than one member) Please click below for details on the Independence Criteria for Outside Oﬃcers. ［Independence Criteria for Outside Oﬃcers (page 18-19) of the Notice of Convocation of the Ordinary General Meeting of Shareholders for the Fiscal Year 2023］ https://ir.mol.co.jp/en/ir/stock/gms/main/00/teaserItems1/0/linkList/01/link/notice24.pdf Name Position Experience, etc., considered important for corporations Experience, etc., considered important for corporations supporting social infrastructure Corporate manage- ment Finance / Accounting Legal aﬀairs /Risk manage- ment ESG Human resources / Diversity Safety Technology Marketing / Business strategy Global business Junichiro Ikeda Director, Chairman of the Board ● ● ● ● ● ● ● Takeshi Hashimoto Representative Director ● ● ● ● ● ● ● ● Toshiaki Tanaka Representative Director ● ● ● ● ● ● ● Junko Moro Director ● ● ● ● Kazuya Hamazaki Director ● ● ● ● ● Etsuko Katsu Outside Director (Independent Oﬃcer) ● ● ● ● Masaru Onishi Outside Director (Independent Oﬃcer) ● ● ● ● Atsushi Toyonaga Outside Director (Independent Oﬃcer) ● ● ● ● Yumi Yamaguchi Outside Director (Independent Oﬃcer) ● ● ● ● Masanori Kato Audit & Supervisory Board Member ● ● ● ● Yutaka Hinooka Audit & Supervisory Board Member ● ● ● ● ● Satoru Mitsumori Outside Audit & Supervisory Board Member (Independent Oﬃcer) ● ● ● ● Fumiko Takeda Outside Audit & Supervisory Board Member (Independent Oﬃcer) ● ● ● ● ● GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES MOL REPORT 2024 52 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Initiatives to Enhance the Eﬀectiveness of the Board of Directors With the aim of further increasing the eﬀectiveness of the Board of Directors and its subordinate committees̶namely, the Nomination Advisory and Remuneration Advisory Committees and the Corporate Governance Council̶the 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 administration of its activities. The results of this analysis and evaluation as well as the identiﬁcation of issues and the analysis and implementation of improvement measures are considered in making the next year’s programs. Deliberation on Corporate Strategy and Vision The Company’s Board of Directors deliberates overall issues related to the corporate management plan and the MOL Group Vision as Deliberation on Corporate Strategy and Vision at Board meetings, thus ensuring that individual issues are executed in accordance with management policy and setting the direction of businesses/projects. The Company formulates agenda items based on the most important management challenges identiﬁed through discussions of the Board of Directors, the Nomination Advisory and Remuneration Advisory Committees, and the Corporate Governance Council. (1) Eﬀorts to boost diversity at the newly established “Deliberation on Sustainability” sessions. (2) Revision of the remuneration plan and formulation of emergency succession plans and board succession plans to incentivize the sustainable enhancement of corporate value. (3) Expansion of discussions on management with cost of capital in mind and on resource allocation, including the Group’s human resources portfolio to achieve BLUE ACTION 2035 targets. (4) Identify risks and plan and execute risk reduction measures based on Group company risk assessments. Identiﬁcation of risks and planning and execution of risk reduction measures based on Group company risk assessments. Main Agenda Items of Deliberation on Corporate Strategy and Vision Conducted by the Board of Directors in Fiscal 2023 Month and Year Agenda Item 2023 April Company-wide in-depth risk management project: Geopolitical risks May Progress monitoring of management plan July Evaluation of BLUE ACTION 2035 monitoring (I) August Company-wide in-depth risk management project: Decoupling (diversiﬁcation) scenario September Progress of regional strategies November Evaluation of BLUE ACTION 2035 monitoring (II) 2024 January Super Megatrend Project 2024 February Oil-related business strategies February Ammonia business policy Respondents Fiscal 2023 13 oﬃcers, comprising all directors (ﬁve internal directors and four independent outside directors) and all Audit & Supervisory Board members (two full-time Audit & Supervisory Board members and two independent outside Audit & Supervisory Board members) Implementation and Evaluation Method February 2024 Provision of eﬀectiveness evaluation survey to all directors and Audit & Supervisory Board members, receipt of responses from all respondents. April 2024 Discussion at the Corporate Governance Council based on the results. April 2024 At a meeting of the Board of Directors, items for which eﬀectiveness was established, items identiﬁed as issues, and items to be addressed in ﬁscal 2024 were formulated and reported, details of which were conﬁrmed by the directors and Audit & Supervisory Board members. Main Items in Self-Assessment Survey Overall assessment of the Board of Directors (composition, administration, management plans, overall risk, nomination/remuneration, etc.), eﬀectiveness of deliberation on corporate strategy and vision, eﬀectiveness of the Nomination Advisory and Remuneration Advisory Committees and the Corporate Governance Council, and mutual supervision and monitoring among directors and Audit & Supervisory Board members. Items for Which Eﬀectiveness Was Conﬁrmed (1) Deliberation of 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 corporate management plan. (2) Appropriate operational structure of the administrative oﬃce, including provision of information to allow directors and Audit & Supervisory Board members to perform their roles. (3) Transparency and objectiveness of deliberations and reports of the Nomination Advisory and Remuneration Advisory Committees. In addition, the appropriate frequency and progress of both advisory committees and the Corporate Governance Council. (4) Appropriate involvement in fair and equitable disclosure of ﬁnancial and non-ﬁnancial corporate information through communication with shareholders and investors. In addition, engages in highly transparent dialogue with all stakeholders by providing appropriate information and responses based on feedback to employees, seafarers, customers, business partners, governmental bodies, and/or local communities. Issues Recognized by the Board of Directors (1) Ensuring the diversity of the Group and Board of Directors. (2) Establishment of appropriate themes for the Nomination Advisory and Remuneration Advisory Committees. (3) Active discussions related to medium- to long-term targets and capital policy. (4) Involvement of the Board of Directors in improving group governance. GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Summary of Survey Implementation Results of Fiscal 2023 Evaluation Fiscal 2024 Initiatives MOL REPORT 2024 53 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section Remuneration of Executive and Non-Executive Directors Remuneration for Directors and Audit & Supervisory Board Members in Fiscal 2023 Details and Aim of the Revision of Executive Remuneration System Applied from Fiscal 2024 MOL has adopted a new executive remuneration system in ﬁscal 2024. This new system incorporates the evaluation of the Core KPIs outlined in BLUE ACTION 2035 into the executive remuneration system as follows. By revising the remuneration system, MOL will increase the linkage between the executive remuneration system and corporate management plan, and if MOL achieves the proﬁt level targeted in the BLUE ACTION 2035 corporate management plan, we will restructure the remuneration system so that the remuneration level is commensurate with the results achieved. MOL will continuously monitor whether this remuneration system is functioning eﬀectively, and review the system in a timely and appropriate manner to enhance corporate value while taking into account objective remuneration market survey data from outside professional organizations and trends in other companies’ remuneration systems. Category Number of people Total remuneration (millions of yen) Total remuneration, by type (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) Non-monetary remuneration Non-performance- linked stock remuneration (stock-based) Directors (of whom outside directors) 11 (4) 523 (55) 293 (50) 132 (̶) 72 (̶) 33 (5) Audit & Supervisory Board members (of whom outside Audit & Supervisory Board members) 6 (3) 98 (26) 98 (26) ̶ ̶ ̶ Total (of whom outside directors or outside Audit & Supervisory Board members) 17 (7) 621 (81) 391 (76) 132 (̶) 72 (̶) 33 (5) Notes: 1. The above includes remuneration related to two directors (who were not outside directors) and two Audit & Supervisory Board members (one of them was an outside Audit & Supervisory Board member) who resigned at the conclusion of the Ordinary General Meeting of Shareholders held on June 20, 2023. 2. Out of the above, the total amount of remuneration, etc., paid to the seven outside oﬃcers is ¥81.0 million. 3. Recorded ﬁgures less than one million yen are rounded down to the nearest million yen. 4. The share price and certain indicators used in the calculation of “Performance- linked stock remuneration (stock-based)” are current estimates. *1 Evaluated based on the ordinary proﬁt to planned value ratio, considering the degree of achievement of safe operations KPI. For directors in charge of Business Headquarters and Headquarters’ business divisions, this ﬁgure also reﬂects the Business Headquarters’ or business division’s rate of achievement of the ordinary proﬁt to planned value ratio. *2 Fiscal 2023 initial forecast *3 The “Portfolio Strategy,” “Regional Strategy,” “Environmental Strategy,” “Safety,” “Human Capital,” “DX,” and “Governance,” which are the focus of the corporate management plan BLUE ACTION 2035, set according to each director’s area of responsibility. Model Remuneration Assuming Achievement of Performance Targets Model Remuneration Assuming Achievement of Performance Targets (Executive Directors) (Non-Executive Directors) 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. Long-term target contribution-based remuneration (stock) 20% Single ﬁscal year performance-based remuneration (cash) 20% Monthly remuneration (cash) 60% Variable remuneration 40% Fixed remuneration 60% Restricted stock remuneration 10% Note: The ratio of restricted stock remuneration for the Chairman of the Board of Directors will be a little less than 30%. Fixed cash remuneration 90% GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES KPI Weight Targets and KPIs of BLUE ACTION 2035 Fiscal 2023 Results Calculation Results and Total Payment (A) Consolidated ordinary proﬁt (loss) *1 ● ¥200.0 billion*2 ● ¥258.9 billion ¥132.0 million (B) Ordinary proﬁt (loss) by segment ● Dry Bulk Business: ¥23.0 billion*2 ● ¥37.2 billion ● Energy Business: ¥44.0 billion*2 ● ¥66.9 billion ● Product Transport Business: ¥128.0 billion*2 ● ¥125.5 billion ● Wellbeing & Lifestyle Business: ¥8.5 billion*2 ● ¥9.0 billion ● Associated businesses: ¥1.0 billion*2 ● ¥2.9 billion (C) Degree of achievement of safe operations indicators ● 4 ZERO violations: 0 ● 1 ● Downtime frequency rate: ≤1.00 incidents per ship per year ● 0.40 incidents per ship per year ● Average downtime: ≤24 hours per ship per year ● 24.46 hours per ship per year ● Lost time injury frequency: ≤0.50 injuries ● 0.26 Total shareholder return (TSR)*1 (Growth rate versus TOPIX and TSR growth rate versus competitors) 30% ̶ ● Growth rate versus TOPIX: 108.53% ¥72.0 million ROE 40% ● Fiscal 2023 (initial projection): 9-10% ● Fiscal 2025 (target): 9-10% ● 12.2% Targets for individual investors*3 30% ̶ Active investment toward business portfolio transformation, including the Energy Business centered on environmental investments, real property business with stable earnings potential, and businesses that diﬀerentiate MOL from competitors. Formulation of visions and policies for the Environment, Safety, Human Capital, DX, and Governance, and enhancement of their eﬀectiveness through system and structural transformations, including reorganization. Single Fiscal Year Performance-Based Remuneration Long-Term Target Contribution-Based Remuneration KPI Targets Details ① Consolidated proﬁt before tax Fiscal 2025 target: ¥240.0 billion Fiscal 2035 target: ¥400.0 billion In line with the Core KPI of the corporate management plan, the proﬁt target linked to the single ﬁscal year performance-based remuneration will be changed from “consolidated ordinary proﬁt basis” to “consolidated proﬁt before tax.” ② Net gearing ratio 0.9‒1.0 The single ﬁscal year performance-based remuneration is increased or decreased by a certain multiplier depending on whether the target net gearing ratio at the end of the ﬁscal year has been achieved or not. ③ ROE 9.0‒10.0% Already incorporated into the performance evaluation item of the long-term target contribution-based remuneration, no change. ④ [Environment] GHG emissions intensity reduction rate (Compared to 2019) Fiscal 2035 target: 45% reduction To meet the ﬁscal 2035 reduction target for the GHG emissions intensity reduction rate, the single ﬁscal year performance-based remuneration is increased or decreased by a certain multiplier depending on whether the target value for the relevant ﬁscal year has been achieved or not. ⑤ [Safety] 4 ZERO Zero serious marine incidents, oil pollution, fatal accidents, and serious cargo damage Already incorporated into the performance evaluation item of the single-year performance remuneration, no change. ⑥ [Human Capital] Head Oﬃce land-based employees: Percentage of women in managerial positions/Percentage of MGKP incumbents Female/non-headquarters origin/ In their 40s or youngerFiscal Since these targets ultimately result in increased employee engagement, the degree of improvement in the engagement of all employees, including those of Group companies, is measured as a comprehensive KPI for human capital, and the target value is to have more than 70% of the organizations with improved measured KPI scores. The single ﬁscal year performance-based remuneration is increased or decreased by a certain multiplier depending on whether the target value has been achieved or not. ⑦ [DX] Conversion rate to value creation and safety operations 2025 target: 10%, Fiscal 2035 target: 30% To achieve the ﬁscal 2035 target for the conversion rate to value creation and safety operations, the single ﬁscal year performance-based remuneration is increased or decreased by a certain multiplier depending on whether the target value for the relevant ﬁscal year has been achieved or not. Financial KPI Non-Financial KPI MOL REPORT 2024 54 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section *1 Country risk: We have established a framework to periodically monitor the total amount of invested capital (total amount of related assets) by country and region with signiﬁcant risk potential every six months at the Board of Directors and the Executive Committee, as in the case of “asset risk control” (mentioned above). Regarding Russia-related business, where geopolitical risks remain apparent at present, 15 LNG carriers and one condensate tanker are either currently engaged in charter contracts or have yet to commence charter contracts. Of these, seven vessels (total investment amount of approximately ¥194.6 billion*2) have special speciﬁcations, such as icebreaking capabilities, and will be diﬃcult to convert to other businesses. In the event that the contracts cannot be renewed, the asset value may decrease, although maximum measures will be taken, such as selling the vessels to relevant parties. However, as this represents a small proportion of our shareholder’s equity, the impact is considered to be limited. *2 The sum of the investment balance of ¥93.2 billion at the end of the consolidated ﬁscal year under review and ¥101.4 billion in remaining planned future investments, with calculations including the portion equivalent to the Company’s equity held by aﬃliates. Vessel numbers include those owned by aﬃliated companies. Risk Category Risks Examples of Fiscal 2023 Initiatives Fiscal 2024 Initiatives (Action Plans) Emerging Risks Geopolitical risks Climate change risks ● Discussion at the Board of Directors on the theme “impact on our business due to the global economy’s multipolarization” ● Establishment of an Advisory Board for management strategies and risk management ● Establishment of a “sustainability” discussion forum at the Board of Directors (introduction of sustainability discussions) ● In-depth megatrend analysis for BLUE ACTION 2035 Phase 2 ● Materiality review, discussion on creation of decarbonization transition scenarios in our businesses (Board of Directors, sustainability discussions) ● Study groups on “geopolitics” (Advisory Board) Business Execution Risks Operational risks ● Formulation of “MOL Group Safety Vision” and action plan “Safety Action 1.0” ● Workshops to instill MOL Group Safety Vision within the Company ● Strengthening of SOSC functions in accordance with head oﬃce renovations ● Tabletop drill for serious marine incident (scenario of an oil spill from a chemical tanker oﬀ Japanese coast) ● Implementation of Safety Action 1.0 ● Organizational change to promote safety and encourage mutually complementary relationships, construction of inter-business safety management systems ● Implementation of Group-wide safety awareness activities Cybersecurity risks ● Information security survey of 171 domestic and overseas Group companies ● e-Learning for 135 domestic and overseas Group companies ● Targeted email attack drills for 32 domestic and overseas Group companies ● Study groups on “DX and technological innovation” (Advisory Board) ● Establishment of a dedicated team at head oﬃce to enhance ICT governance, and strengthen governance systems across domestic and overseas Group companies Natural disaster and epidemic risks ● Evacuation drills at head oﬃce building, satellite oﬃce transfers (Consolidation and strengthening of BCP bases such as training facilities.) ● Safety conﬁrmation system drills for all Group employees (Achieved average participation rate of over 90%) ● e-Learning on disaster preparedness ● Start of new satellite oﬃce operations ● Tabletop drills in anticipation of a major disaster ● Formulation of BCP for unexpected events and emergencies Group governance risks ● Group company risk assessments and discussions of results (Board of Directors) ● Discussion on addressing labor management at MOL Cruises, Ltd. (Board of Directors) ● Implementation of governance strengthening activities for each local organization ● Dissemination of Group company risk assessment results and discussion of countermeasures (Group Executive Committee) ● Identiﬁcation of risks by each CxO based on Group company risk assessments and the planning and implementation of risk reduction measures Risks related to human rights and various risks in the value chain ● Publication of Explanatory Document to Suppliers Procurement Guidelines ● Interviews with shipowners (eight companies in total) on value chain management (VCM) ● Distribution of VCM questionnaires to shipowners and shipyards (approx. 90 companies) ● Ship recycling yard surveys in India and Turkey (21 companies in total) ● Implementation of written human rights surveys for logistics businesses and seafarers ● Discussions on human rights in our human capital portfolio and value chain (Board of Directors, sustainability discussions) ● Progress in development of internal systems and data infrastructure in Group company chartered vessel procurement, deepening of strategic business relationships with shipowners Market ﬂuctuation and country risks*1 ● Regular reporting to the Board of Directors (Conﬁrmation that total market ﬂuctuation and country risks of approximately ¥800 billion and broad total risk of approximately ¥1.1 trillion, taking into account country exposure, are managed within the scope of shareholders’ equity) ● Same as on the left ● Veriﬁcation of optimal business portfolio, taking into account total risk Exchange rate, interest rate, and bunker price risks ● Regular reporting to the Executive Committee ● Deliberations on ﬁnancial strategies at the Executive Committee (Discussion on countermeasures in light of future ﬁnancial conditions) ● Same as on the left Review of market risk management rules in light of ﬁnancial conditions, and formulation and implementation of foreign exchange and interest rate hedging measures GOVERNANCE EFFORTS TO RESOLVE SUSTAINABILITY ISSUES In the corporate management plan, Blue Action 2035, MOL aims to expand its footprint in a variety of business domains beyond its conventional marine transport business under the slogan of “Taking the leap to becoming a global social infrastructure company.” Having adopted such a grand vision, for the Group to maintain an appropriate level of ﬁnancial soundness and to lead to sustainable increases in corporate value, it will be essential that we not only venture into new ﬁelds and take risks but also give added depth to an appropriate risk management system. The Group has classiﬁed the various risks to which each of its businesses is exposed into two categories: “emerging risks” and “business execution risks.” This section explains the progress made in the initiatives relating to the Group’s risk management initiatives. Please refer to our website for more information regarding the Group’s risk management system, as well as the emerging risks and individual business execution risks. https://www.mol.co.jp/en/sustainability/governance/risk/ Overview of Risk Management Governance MOL REPORT 2024 55 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section EFFORTS TO RESOLVE SUSTAINABILITY ISSUES Initiatives with Ship Recycling Yards An international treaty (the Ship Recycling Convention), which takes into consideration occupational health and safety, environmental conservation, and other factors, will come into eﬀect in June 2025. The MOL Group has traditionally been assigning work to ship recycling yards that meet the standards stipulated by the treaty. However, in response to growing social demands concerning the environment and human rights, we visit the sites to ascertain the actual conditions and to become more aware of what we can and should do. To face up to our user responsibilities, which are not limited to legal obligation, we formulated and implemented our Superior Ship- recycling Standards (SSS) for selecting ship recycling yards in 2023. Our SSS system is backed by a third-party inspection organization known for its reliability and proven track record. Under SSS, we implement the content of the Ship Recycling Convention more stringently and have added our unique screening items, selecting the yards to be used ourselves and proactively fulﬁlling our user responsibilities until the very end of a ship’s service life. In SSS, employee human rights, working environments and conditions, ship recycling yard corporate governance systems, and corporate citizenship activities are added to the assessment criteria, aiming to promote more sustainable ship recycling and to contribute to the improvement of local communities and the industry as a whole. In conducting SSS screening activities, our Tokyo Head Oﬃce and our subsidiary in India are working together to enable us to carry out regular follow- up screenings of selected yards with a broader scope and to update our selected yards by ensuring easier access to ship recycling centers. When a ship is scrapped, we send our staﬀ or a third-party contractor to the site to ensure that the dismantling work is carried out to our standards. MOL aims to use this opportunity to deepen dialogue with shipowners further, strengthen mutual sustainability initiatives, and enhance the entire value chain’s merits. Please visit our website for details on responsible procurement. https://www.mol.co.jp/en/sustainability/governance/procurement/ Initiatives with Chartered Vessel Shipowners The MOL Group's ﬂeet, which is essential for the Group, partly consists of vessels chartered by ship owners. Shipowners are core partners in our value chain, and we have built up long-term relationships with them based on trust and proven track records. In response to the grounding and oil spill accident involving the MOL-chartered bulk carrier Wakashio oﬀ the coast of Mauritius in 2020, we have elevated our safety and quality standards and ship maintenance policies to higher levels and stepped up our eﬀorts to strengthen quality, working closely with shipowners. Under the value chain management (partnership initiatives) introduced in ﬁscal 2022, we have deepened dialogue with shipowners to an unprecedented extent. With regard to a broad range of sustainability initiatives, including climate change measures, human rights for seafarers, and anti-corruption measures, we have provided the background to and highlighted the signiﬁcance of the issues as well as given speciﬁc examples of risks in the value chain. At the same time, we have deepened shipowners’ understanding and engaged in repeated dialogue with them through information exchanges and questionnaires. For some shipowners, we have provided guidance, such as implementing human rights due diligence and establishing redress mechanisms, and also conducted e-learning courses to improve their basic understanding of business and human rights. Shipowners have provided us with positive feedback that they understand the importance of sustainability initiatives, saying that they would move forward with initiatives where they can. GOVERNANCE To realize sustainable business activities, the MOL Group is enhancing risk management for sustainability related to the environment, society, governance, etc., along its value chain. We will strive to enhance the entire value chain’s merits by cooperating with our business partners to promote sustainability initiatives. Value Chain Management –MOL Group Partnership Initiatives– Governance MOL REPORT 2024 56 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section SUMMARY OF FINANCIAL DATA ROLLING PLAN BLUE ACTION 2035 2018/3 2019/3 2020/3 2021/3 2022/3 2023/3 2024/3 For the year Shipping and other revenues ¥1,652,393 ¥1,234,077 ¥1,155,404 ¥ 991,426 ¥1,269,310 ¥1,611,984 ¥1,627,912 Shipping and other expenses 1,513,736 1,094,915 1,035,771 911,055 1,117,405 1,376,504 1,378,965 Selling, general and administrative expenses 115,972 101,442 95,852 85,674 96,899 126,770 145,814 Operating proﬁt (loss) 22,684 37,718 23,779 (5,303) 55,005 108,709 103,132 Ordinary proﬁt (loss) 31,473 38,574 55,090 133,604 721,779 811,589 258,986 Income (loss) before income taxes and non-controlling interests (28,709) 46,778 47,130 100,313 732,993 819,160 295,417 Proﬁt (loss) attributable to owners of parent (47,380) 26,875 32,623 90,052 708,819 796,060 261,651 Free cash ﬂow {(a) + (b)} (2,471) (143,093) (6,527) 44,238 200,187 267,930 (41,037) Cash ﬂows from operating activities (a) 98,380 55,248 100,723 98,898 307,637 549,925 314,202 Cash ﬂows from investing activities (b) (100,851) (198,341) (107,250) (54,660) (107,450) (281,995) (355,239) Depreciation and amortization 86,629 90,138 87,765 85,798 86,399 94,660 102,473 At year-end Total assets ¥2,225,096 ¥2,134,477 ¥2,098,717 ¥2,095,559 ¥2,686,701 ¥3,564,247 ¥4,120,552 Total tangible ﬁxed assets 1,290,929 1,193,910 1,201,698 1,099,458 1,111,152 1,342,240 1,654,521 Total investments and other assets 425,300 524,411 533,320 637,736 1,187,472 1,746,726 1,931,034 Interest-bearing debt 1,118,089 1,105,873 1,096,685 1,026,994 1,000,697 1,153,448 1,304,700 Net assets 628,044 651,607 641,235 699,150 1,334,866 1,937,621 2,369,682 Shareholders’ equity 511,242 525,064 513,335 577,782 1,274,570 1,925,346 2,353,860 Amounts per share of common stock* Proﬁt (loss) attributable to owners of the parent (Yen) ¥ (132.05) ¥ 74.91 ¥ 90.93 ¥ 250.99 ¥ 1,970.16 ¥ 2,204.04 ¥ 722.85 Net assets (Yen) 1,424.94 1,463.46 1,430.77 1,610.04 3,532.32 5,322.35 6,496.19 Cash dividends applicable to the year (Yen) 6.67 15.00 21.67 50.00 400.00 560.00 220.00 Management indicators Gearing ratio (Times) 2.19 2.11 2.14 1.78 0.78 0.60 0.55 Net gearing ratio (Times) 1.82 1.88 1.94 1.63 0.71 0.55 0.51 Shareholders’ equity ratio (%) 23.0 24.6 24.5 27.6 47.4 54.0 57.1 ROA(%) (1.3) 2.1 2.2 4.8 30.7 26.2 7.7 ROE(%) (8.7) 5.2 6.3 16.5 76.5 49.8 12.2 Dividend payout ratio (%) ̶ 20.0 23.8 19.9 20.3 25.4 30.4 Note: Rounded down to the nearest one million yen. *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, 2018. (millions of yen) MOL REPORT 2024 57 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section SUMMARY OF NON-FINANCIAL DATA GHG Emissions Number of Employees (Non-consolidated) 1,243 Composition of People Filling MGKP* Number of Mid-Career Hires/Ratio Women Not from headquarters In their 40s or younger Non-Consolidated Land-Based Workers Percentage of managerial positions ﬁlled by women Actual 11.3% Target for 2025 15% 80 29.9%* GHG Emissions Intensity Environmental Investment 13,980 thousand tons Down 8.0% compared to 2019 Number of Directors 9 Of which, outside directors (percentage) 4 (44.4%) Of which, female directors (percentage) 3 (33.3%) Number of Audit & Supervisory Board Members 4 Of which, outside Audit & Supervisory Board Members (percentage) 5 (50%) Number of independent oﬃcers (including Audit & Supervisory Board Members) 6 FY2023 Number of Board of Directors Meetings Convened/Attendance Rate 12/99% 11.25 g/ton-mile Down 7.2% compared to 2019 FY2021 ¥76.1 billion FY2022 ¥206.6 billion FY2023 ¥259.5 billion FY2023-FY2025 Cumulative ¥658.0 billion (Thousand tons) (CY) 0 5,000 10,000 15,000 2020 2019 2021 2022 2023 2030 12,250 14,300 12,60013,33013,980 Down 23% compared to 2019 0 5 10 15 2020 2019 2021 2022 2023 2030 11.65 11.68 11.59 12.12 11.25 Down 45% compared to 2019 (g/ton-mile) (CY) 0 100 200 300 (Billions of yen) (CY) 206.6 2021 2020 2022 2023 2024 2025 259.5 76.1 55.8 *The parent company and consolidated subsidiaries * MOL Group Key Positions. Designated as a position in the MOL Group or on a global basis equivalent to General manager in Head Oﬃce. * Percentage of mid-career hires (non-consolidated, cumulative) among land-based employees. 5.5% 20.1% 14.8% ENVIRONMENTAL (FY2023 results) (FY2023 results) SOCIAL GOVERNANCE Number of Employees (Group*) 9,795 IR Website Renewal MOL REPORT 2024 58 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section INFORMATION DISCLOSURE AND EXTERNAL RECOGNITION Promoting Information Disclosure and Engagement Given that the MOL Group Three Basic Principles of Corporate Governance state that we shall engage in a highly transparent dialogue, we consider engagement with all stakeholders, including investors and shareholders to be an essentialmanagement task. In IR activities conducted by the president and CFO, rather than simply responding in a way that does not allow for any comeback or is superﬁcial in its content, we strive to deepen mutual understanding with all shareholders and investors by focusing on setting creative agendas and allowing for longer meetings for more accessible discussions to take place. In terms of disclosure, we emphasize the importance of fair disclosure by disclosing core IR tools and online videos of ﬁnancial results brieﬁngs for analysts and institutional investors in Japanese and English. We are also enhancing disclosure for individual investors and released several videos targeting individual investors on our website in the last ﬁnancial year. In addition to disseminating information, we emphasize on the in-house feedback of opinions obtained through stakeholder dialogue, and feedback obtained from investor meetings is compiled and reported regularly to the Board of Directors and the Executive Committee. Speciﬁc opinions on corporate management plans and Sustainability Issues are directly communicated by the division in charge of IR to the relevant divisions and encourage them to reﬂect the views in the implementation of measures. We have implemented an array of initiatives to show the positioning of management goals and improve governance, including the formulation of BLUE ACTION 2035, Environmental Vision 2.2, and a corporate governance policy. We are also moving forward with many diﬀerent industry- leading measures in pursuit of a low-carbon and decarbonized society, including the building of vessels equipped with Wind Challenger and various types of LNG-fueled vessels as well as planning a variety of recommendations and initiatives through our participation in the World Economic Forum. The aforementioned initiatives reﬂect the opinions of investors, shareholders, and a range of other stakeholders. Through continued in-depth communication with our stakeholders, we will elevate our corporate value even further. IR Activities in Fiscal 2023 Policies and Measures that Reﬂect External Feedback ● MOL Group Corporate Management Plan BLUE ACTION 2035 ● Formulation of MOL Group Safety Vision, MOL Group Environmental Vision 2.2, MOL Group Human Capital Vision, and MOL Group DX Vision ● Formulation of MOL Group Corporate Governance Policy ● Raising of the payout ratio and introduction of a minimum dividend Activity Frequency Details For securities analysts and institutional investors Financial results brieﬁngs 4 times Quarterly results/forecasts Small meetings with the CEO 5 times Twice held each in spring and autumn, once for responsible investment managers For overseas institutional investors Overseas investor road shows 8 times Held visits (twice in North America, twice in Europe, three times in Asia, and once in Australia) Conference held by securities companies 8 times Participation in domestic and international in-person conferences For individual investors Corporate presentations for individual investors Twice Participation in online and in-person events for individual investors External Recognition THE INCLUSION OF Mitsui O.S.K. Lines, Ltd. IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Mitsui O.S.K. Lines, Ltd. BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES. IR Materials (Available on MOL’s website) Material 和文英文 Stock exchange ﬁlings (ﬁnancial highlights, etc.) 〇〇 Business performance results brieﬁngs (including summaries of Q&A sessions) 〇〇 Business performance results brieﬁng video 〇〇 Integrated report 〇〇 Securities reports “Yuho”) 〇－*1 Quarterly reports 〇－ Business reports for shareholders 〇－*2 Investor Guidebook 〇〇 Market data 〇〇 Sustainability Fact Book 〇〇 *1 Abridged version posted as Financial Statements *2 Posted as Business Report We renewed our IR website on January 15, 2024. Please take a look and explore its much improved usability. https://ir.mol.co.jp/en/ir.html MOL REPORT 2024 59 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section MOL GROUP’S GLOBAL NETWORK East Asia Europe / Africa South Asia / Middle East Southeast Asia / Oceania Japan Americas Principal Business Oﬃces (As of March 31, 2024) the Philippines Vietnam Singapore Malaysia Indonesia Thailand Myanmar Australia New Zealand Southeast Asia / Oceania India United Arab Emirates South Asia / Middle East United States of America Mexico Brazil Chile Americas China Taiwan Republic of Korea East Asia United Kingdom Germany Netherlands Belgium Norway Turkey South Africa Kenya Europe / Africa *Circle size indicates base size in each region. MOL REPORT 2024 60 Introduction 01 MOL’s Visions MOL’s Challenges 02 MOL’s Measures 03 Data Section SHAREHOLDER INFORMATION (As of March 31, 2024) Capital ¥66,001,697,121 Head Oﬃce 1-1, Toranomon 2-chome, Minato-ku, Tokyo 105-8688, Japan Number of MOL employees 1,243 Number of MOL Group employees (The parent company and consolidated subsidiaries) 9,795 Total number of shares authorized 946,200,000 Number of shares issued 362,386,058 Number of shareholders 303,578 Shares listed on Tokyo Stock Exchange ‒ Prime Market Share transfer agent Sumitomo Mitsui Trust Bank, Limited 4-1, Marunouchi 1-chome, Chiyoda-ku, Tokyo, 100-0005, Japan 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 https://ir.mol.co.jp/en/ir/library/ integrated_report.html Investor Guidebook https://ir.mol.co.jp/en/ir/library/ig.html Market Data https://ir.mol.co.jp/en/ir/library/market.html Website https://www.mol.co.jp/en/ YouTube Oﬃcial Channel https://www.youtube.com/ @moloﬃcialchannelenglish9003 Glossary https://www.mol-service.com/glossary_top

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